TIMELINES & FAULTLINES chronicles the saga of a mining geologist, John Hugh Hill. His life has spanned the turbulent 20th Century and into the fraught decades of the 21st Century, from the rise of militant Nazi fascism, the implosion of the Soviet Union and to the rise of militant Islam. He lives in non-retirement in New South Wales, Australia.
This fascinating book is published by Austen Macauley, London and is available from Amazon and major bookshops.
British Solomon Islands Protectorate, Western Pacific, 1957-1959.
In the mid-1950s Japanese war wrecks littered the coast of Guadalcanal. Americans bombed the retreating Japanese troops, rather than sinking at sea vessels were beached to avoid death in shark infested water.
Interior of Guadalcanal. Women returning from jungle gardens. In early missionary years Melanesians were encouraged to resettle along malaria infested coastlines, endemic malaria and malnutrition was a continuing problem.
CYCLONE DEBBIE – AN EXERCISE IN TREND ANALYSIS Trend Analysis is a technique used to estimate and predict future climate.
CYCLONE DEBBIE – THEOI METEORO
The return of the Greek Gods of Sky and Weather, Theoi Meteoroi, have spawned Cyclone Debbie, a category 5 storm which crossed the Queensland coast in March 2017. Considered in isolation, this was no more than an aberrant destructive event, however, considered as an emerging sequence of devastating cyclones, it raises serious implications for stable long term economic development. A review of significant cyclones in north-east Queensland is instructive. Over the past thirty four years two patterns of damaging cyclones are discernible. The Table summarises destructive cyclones since 1986, that is, seventeen years either side of 2000 AD.
TABLE – Destructive Cyclones
1983 - 2000
2000 - 2017
NAME - CATEGORY
NAME - CATEGORY
JUSTIN - C2
DEBBIE - C5
BOBBY - C4
MARIA - C5
ORSEN - C5
ITA - C4
WINIFRED - C3
YASI - C4
Summarising, in the seventeen years prior to 2000 there were four significant cyclones; in the following seventeen years to 2017 there were five devastating cyclones. In the past four years Queensland has been lashed by three cyclones. Estimated damage costs to the public and private sector over this period exceeds $5 billion. The cost to the national economy will have an adverse ripple effect although the reconstruction of thousands of buildings and infrastructure will produce a spike in the local economy. This is unfortunately ‘dead’ money that cannot be used to produce export oriented income. Agriculture and tourism projects will be destroyed, some permanently.
TRENDS IN OCEAN TEMPERATURES
The National Oceanic and Atmospheric Administration (NOAA) has published data showing global sea surface temperature increase from the 1880s base line is 0.6°C and is trending higher. There is a disturbing corroboration of ‘amazing records’ from the Coral Sea lapping the Queensland coast. Temperatures of 0.7°C ( in places as high as 2°C) above the average temperature of 29.16°C have been obtained. (SMH, April 2015)Global Sea Surface temperature trend – 1880-2015 (NOAA)
Recent data from the Coral Sea lapping north Queensland have recorded sea surface temperatures of 0.73°C above recent average temperatures. (The Conversation, April 2016) The historical and inexorable rise in sea surface temperatures compiled by the BOM was recently published by The Conversation. (April 2016)
TRENDS IN GREEN HOUSE GAS CONCENTRATIONS
Green house gas concentrations, carbon dioxide and methane in the atmosphere, prevent global heat loss, hence global warming. For the past 800,000 years atmospheric carbon dioxide levels have not exceeded 300 ppm. Due to the expansion of the Industrial Revolution, the 1950s, carbon dioxide levels now exceed 400 ppm and are trending higher. (United States Environmental Protection Agency)
The trend in global temperature increase entered a critical phase in 1990. Between 1990 and 2013, NOAA established that the ‘radiative force’ (which is the warming effect caused by green house gases) has risen by 34% on the previous measured period. (The Guardian, September 2014)
CLIMACTIC FUTURE Homo sapiens has created its own unique, but probably damned, geological era – the Anthropecene. The International Panel on Climate Change (IPCC) has warned that, if this species does not drastically reduce greenhouse gas emissions from fossil fuels, it will take around fifty years to stabilise the emerging climate. Irrespective, global temperatures will still rise by an estimated 0.6°C thus aggregating to about a 1.3°C increase. This is approaching the catastrophic 2°C level.
Current carbon dioxide concentrations will remain in the atmosphere for thousands of years and, after millennia, the gas would be laid down as carbonate rocks on the sea floor of Mother Earth. (The Conversation, IPCC, December 2014)
The bottom line emanating from Cyclone Debbie is that, if fossil fuels continue to be utilised at the current rate, global warming will rise closer towards 2°C by the mid-2030s, thus crossing the threshold that will harm human civilisation. ( R E Mann, Scientific American, April 2014)
0 DEUS, NOS NISI, NOSTRAE TIBI PECCAVIMUS Oh God, save us, for we have sinned.
TIMELINES & FAULTLINES chronicles the saga of a mining geologist, John Hill. His life has spanned the turbulent 20th Century and into the early fraught decades of the 21st Century; from the rise and fall of militant Nazi fascism to the rise of militant Islam. He lives in non-retirement in New South Wales.
BOOK COVER – TIMELINES & FAULTLINES
RUSSIAN FEDERATION – PHOENIX RISING
During the 1990s, John Hill experienced the implosion of a decayed Soviet Union and the rise of cowboy capitalism in a flawed Russian Federation riven by obscene wealth and death in winter snowdrifts.
The Moscow State University dominates the Moscow skyline. It was built by German prisoners of war under the whiphand of Joseph Stalin (Iosif Vissarionovich Dzhugashvili). It was here, while lecturing in mining economics, that I joined in vodka and black caviar sessions and virulent political discussions.
THE MASK OF SORROW – Gulag Memorial, Magadan
The ‘Mask of Sorrow’ overlooks the port of Magadan on the Sea of Okhotsk. Through this port passed thousands of political prisoners on their way to terrible deaths on the Kolyma goldfields. Hundreds of kilometres north of Magadan I worked in freezing conditions and experienced the Russian banya (Turkish baths), flagellation with branches, vodka toasts and more violent political discussion.
This fascinating book is published by Austin Macauley, London, and is available now from Amazon and major book shops.
Sunset, Tanami Desert, Central Australia, 1988
TIMELINES & FAULTLINES chronicles the saga of mining geologist, John Hugh Hill, which includes: Antarctic whaling; the Witwatersrand Gold Mines; Solomon Islands’ jungle; the ethnic cauldron of Malaya; the flesh spots of South East Asia; the deserts of Australia; Siberian gulag country and Brazilian garimpeiros.
Ulu Terengganu, Malaya, 1963
Life in the Malayan jungle comprised a mélange of leeches, tigers, elephants, scorpions, snakes, the remnants of the Chinese guerilla insurgency, everlasting damp and rain. Jungle travel was by
panga-cleared tracks or by bamboo rafts.
Terenggan River transport: Bamboo Rafts 1963
Published by Austin Macauley, London. Available from Amazon, Kindle and major bookshops.
THE WORLD ECONOMIC FORUM, DAVOS & THE A50 ECONOMIC FORUM, SYDNEY
Preamble Two recent events, vital to Australia’s hazy future, have run their course for another year: the first in January, the World Economic Forum, Davos, Switzerland and the second in February, the A50 Economic Forum (dubbed the mini-Davos) at the Sydney Opera House.
Davos was an international collective of powerful global CEOs and major political decision makers. Their final communiqué was one of dire warning. The A50 meeting in Sydney was a Federal Government initiative to invite fifty potential foreign investors overseeing $17 billion of investment funds, part of which might find their way to Australia. There are economic headwinds and navigational hazards to be negotiated before investors can reach a decision. (AFR Weekend, 8 Feb. 2017)
The World Economic Forum, Davos To return to Davos – the final communique warned that, as technological, demographic and climate pressures intensify, there is a danger of systems failure (SA energy crisis and NSW partial power crisis). Competition between world powers and fragmentation of security efforts will put collective prosperity and survival at risk. There are three specific concerns, none of which are of an economic issue (Future Finance, 15 Jan. 2017):
proliferation and use of weapons of mass destruction,
rise of nationalism and declining cooperation between world powers,
climate change leading to crisis and disaster.
The Forum did emphasise the moral and ethical dilemmas of the Fourth Industrial Revolution. To date the Homosapiens Revolutions through the Anthropocene have been:
First – from agrarian to coal/steam power,
Second – urbanisation, electricity and mass production,
Third – digital and mass travel,
Fourth – internet, robotics and artificial intelligence.
An urgent problem of the current Revolution is the need to invest in young people and the increasing risk of rising inequality between the techno-super rich and the rising underclass. Concerning the construction and application or artificial intelligence (robots), it was recorded that Australian business is not ready to embrace Artificial Intelligence. Participants in a seminar involving USA, UK, Canada, Australia, China, France, India and Germany concluded Australia was trailing in skills uptake and risks becoming uncompetitive due to a poor grasp of STEM subjects. (The Guardian, 25 Jan, 2017)
The take-home message from the World Economic Forum for Australia is:
Australia is lagging in its preparation for Artificial Intelligence due to inadequate STEM skills,
The seeds of social instability are starting to germinate due to loss of industry to Asia, unaffordable housing and under employment,
Australia’s relative decline in GDP (corroborated by CSIRO electricity consumption forecasts) is partly due to small population. Unlike Canada, Australia does not have the United States as an adjacent trading partner.
The A50 Economic Forum, Sydney In early February, hard on the heels of the debilitating Davos findings, Australia hosted an investment seminar for fifty principals responsible for $17 trillion of investment funds. The purpose was to assess Australia’s economy (infrastructure and property markets) for investment opportunities and to determine the probability of economic survival following the resources slow-down and the fragmentation of the global trading patterns. These giants of the financial world will arrive at their own conclusions aware Australia is facing economic uncertainty due to several factors:
Credit Ratings The credit rating agencies, Standard & Poor’s, Fitch, Moody’s, have warned Australia that its AAA credit rating might be down graded if the budget situation does not improve.
Corporate Tax Rate The Government’s intention to reduce industry tax rate from 30% to 25% over four years may be too little too late and may not impress investors. The tax rates of Australia’s competitors are comparable to that of the Australian proposal e.g. Korea 24%, Malaysia 25%, Thailand 20%, Canada 15-25%, India 30% and Japan 32% . A potential bomb shell is that if the USA reduces the tax rate to 15% and boosts infrastructure spending, there will be a flight of capital to the USA from Australia. This would be a bad outcome for Australia.
Imputation and GST Although some nations have a higher tax rate than Australia, its Achilles Heel is the dividend imputation and the 10% GST. Since Australia does not tax dividends the Government will suffer a huge revenue loss when combined with the reduced income when the lower corporate tax kicks in. Industrialised countries normally do not provide this tax free wind fall to shareholders. Without the burden of imputation corporate tax rate would fall to 19%. The rational policy would be to remove imputation – politically this is not possible. With GST the sensible option would be to increase this to 15% to provide the Government with extra income – politically this does not appear possible either. GST for other industrialised nations are Germany 19%, New Zealand 15%, United Kingdom 20%, Japan 8%. (Weekend Australian, 25 Feb. 2017)
Sovereign Risk A50 investors may seek explanation of why the Australian Government rejected a bid for NSW Ausgrid by CK Infrastructure Holdings, Hong Kong, in 2016. Among discussion points it is possible that the expanding role of Chinese investment in the Australian energy industry will become a topic for conversation. An approximation of Chinese investment in this industry is:
– NSW Energy Australia is partly owned by Chinese Light and Power,
– ACT 50% of power distribution is owned by Singapore Power International,
– VIC CK Infrastructure, Hong Kong, owns 51% of Citi Power. CK Infrastructure has also bid $7.6 billion for Duet Energy
which controls gas pipelines in Victoria and Western Australia,
– SA CK Infrastructure owns 51% of SA Power Networks.
Extreme Events Confidence in the Australian power industry may have suffered by recent power failures in South Australia and New South Wales. In both cases, there were extensive power failures and heavy industry was required to cut power consumption, or lost power to major industrial complexes, namely – the BHP Cu-U Olympic Dam project, the Arrium steel mill, Whyalla, and the AGL Tomago aluminium smelter, Newcastle. If the violent winds and high temperatures have already caused these problems so early in the Anthropocene then far worse extreme weather may be expected in the period 2020 to 2030.
Australia’s Growth Projections The Australian Electricity Market Report to 2020 and 2030 provides an estimate of future power consumption. Two growth scenarios are suggested. The first estimate suggests an annual growth rate between zero and 2.5% with a declining rate over time reflecting slow population growth. Uncertainties for this prognosis are exchange rates and manufacturing competitiveness, household energy use and the relative balance of centralised, on-site and off-site electricity generation. The second estimate considers consumption growth will be below 2% a year which is below the projected national economy growth rate. (CSIRO, EP141067,2014)
The messages for Australia from Davos and Sydney are:
A Davos panel considers Australian business is less prepared for the Fourth Revolution than other industrialised nations.
The threat of a downgrade to Australia’s AAA credit rating exists.
The Government is facing a significant revenue loss from the combined effects of a lower tax rate, dividend imputation and a low GST.
Australia is regarded as a stable investment platform but investors may require an explanation on the nature of Chinese investment and control in the National energy industry.
The effect of recent extreme weather events on Australian power security will be scrutinised.
Investors require stable growing markets – the growth projections for population and energy consumption will be closely scrutinised.
For some weeks a Government Social Engineering Department has subjected Australians to the message “We may celebrate Australia Day any way we wish”. This supine edict provides no focus, no theme, no ethos, no sense of common unity or heritage, like children in a nursery school we are to enjoy ourselves for no apparent reason.
With in fortnight of our National Day two young Muslim girls wearing hijabs appeared on a Victorian bill board extending a message of warmth and harmony for Australia Day. Following an objection by a member of the ‘public’ the Victorian Government apparently did not resist the removal of this image from the public domain. Enter Dee Madigan, creative director and author, who immediately crowd funded over $130,000 (The Guardian). This image will now appear round Australia. Like women leaders of yore and up to the present (Boudicca, Golda Meir, Thatcher and Merkel) Dee Madigan has ridden rough shod over the equivalent of Thatcher’s ‘vegetables’ to ensure this image of multicultural Australia will encourage peace, good will and understanding.
Hopefully the image of these two immigrants (as we all are) will promote discussion on the wider significance of Australia Day, unless Australia verges more toward authoritarianism the hijab will become as unremarkable as the national foot ware , the thong.
The Australian Government likes to define our place in the global order. Of the six nations that owe their origin to 18th and 19th century colonial powers, Australia is the outlier, the ugly duckling, the black sheep in terms of National Day origin. Nations with a comparable heritage are Canada, New Zealand, America , Brazil and Argentina.
Canada. On July 1st 1867 the embryonic Dominion of Canada came together to counter French influence under a constitution that joined Nova Scotia, New Brunswick and the Province of Canada. This national holiday is one is one of festivity in Ottawa and the regions. There is occasional friction with French Canadians and the native people.
New Zealand. On the 6th February 1840 the British Colonial Government and the Maori tribes met at Waitangi, North Island, to produce a unifying constitutional document. New Zealand did not commence celebrating Waitangi Day until 1934. Since that time there has been frequent Maori agitation for amendments to the Constitution.
America. On the 4th July 1776 the thirteen American colonies promulgated their independence from Great Britain principally due to the restrictive Mercantilist laws. July the Fourth is a National holiday. The Government arranges patriotic displays along with the festivities.
Brazil. Brazil achieved independence from the United Kingdom of Portugal following a twelve year war from 1808 – 1822. Each year September 7th is commemorated with festivities and celebrations.
Argentina. The Spanish colony of Rio de la Plata won independence after a bitter eight year war, 1810 – 1818. Independence was declared on 9th July 1816. Each year this National day is celebrated with patriotic events and family reunions.
Australia. The nation is the odd polity. Among the ex-colonial nations only New Zealand attempted an early integration of the indigenous people under a Constitution. Canada sought to counter a French threat by closer ties of several territories. America, `Argentina and Brazil fought bloody wars to earn independence. All these nations fought ‘frontier wars’, this was normal. Australia, by contrast, celebrates its National Day to coincide with the establishment of a penal colony on Australia Felix, not Australia Nullius on the 26th January 1788.
The origin of Australia i Day is indeed curious. Before WW2 the 26th January was was celebrated as Anniversary Day with a Regatta on Pitt Water. The rest of Australia was not involved. After WW2 the politicians considered it necessary to instil a sense of national unity into the new immigrants arriving from Europe. A pride was fostered in the in the arrival at Sydney Cove, the leadership of Captain Phillip and the achievement of the early settlers. Like topsy the Australia Day has finally been massaged into ‘Enjoy Australia Day any way you like’, with no sense of how this nation was created.
The sensible option would be to consider a National Day commemorating Federation on the 1st January 1901 or Aboriginal suffrage on the 18th July 1962. Entrenched petty politics and commercial avarice would attempt to founder a logical alternative. In addition, there could be a reluctance for Australian people to ‘call Canberra Home’ untill respect for our political system improves.
Australia’s early Colonial history is no different the other nations, the difference now is that these other nations have relegated to history their ‘Frontier Wars’ while Australia still celebrates a period prior to their commencement, namely the possession of Terra Nullius for King George and Empire. We are not accountable for the past but we have inherited the aftermath. In the words of L P Hartley “The past is a foreign country, they do things differently there”. (The Go-Between )
Education of Australian youth is veering towards crisis. Catalysts for this opinion are the poor position of Australia in the OECD Program for International Student Assessment (PISA) and the observation by the Human Rights Commissioner, Dr Gillian Triggs, to the effect that “Our parliamentarians are usually seriously ill-informed and under- educated”. (Age, 23 April, 2016) Australian politicians are the product of a failing Australian education system as illustrated by the following data. The parlous state of Australian education is revealed in the PISA rankings below. Top ranked are Singapore, Hong Kong, South Korea and Taiwan.
Australian ranking is 14 – below Poland 11, Vietnam 12 and Germany 13.
Australia ranks19 for secondary school enrolments behind USA, UK and UAE.
Australia ranks 17 for having the highest share of students who lack basic skills.
Concerning the science, technology, engineering and maths (STEM) subjects, Australian standards are falling.
The PISA test results for 2000 and 2012 are:
OECD PISA RANKINGS for AUSTRALIA 2000 and 2012
The OECD report suggests that if PISA results improved by 25 points Australian GDP would improve by 7.2% by2095. (Education Policy in Australia , OECD, June 2013) Clearly, Australian education policy must improve – but how? Examples of education policy in South Korea (PISA 3) and Finland (PISA 6) should be a guide. The OECD makes the point that it is not the wealthiest countries that perform best but it is those nations that value education the most.
SOUTH KOREA, EAST ASIA, Ranking 3.
The driving imperative for East Asians is for educational excellence as a means of improving ‘their lot’ in the harsh competitive reality of their lives. The quality of this education system depends upon the expectation and demands of the parents. The national culture of Korea has produced an ingrained drive for intense study with the objective of improving socio-economic status and mobility. Students acquire q clear objective and a sense of purpose at an early age. South Korean parents arrange after-school tuition as a matter of common practice; in this context Koreans prize effort above an inherently high IQ. East Asian children have about fifteen hours of homework each week while Australia students apparently have around nine hours. This pressure in South Korea produces suicide among the fifteen to thirty year olds but, despite this lurking danger, students persist with a vigorous education to improve their prospects. (South Korean Education, The Conversation, March, 2015)
FINLAND, EUROPE, Ranking 6 (Leads Europe)
The successful Finnish system is totally different from the East Asian model and from Australia.
Summarised, the Finnish model results are:
PISA rankings for maths and science are 1 Singapore, 5 Taiwan,
6 Finland, 7 Estonia, 14 Australia.
In 2000, Finland’s PISA ranking for reading was the best in the world.
In 2003, Finland lead in maths.
By 2006, Finland’s rankings were science second, reading third and maths sixth
The end product is that 93% of Finnish youth graduate to professional or vocational careers.
Reasons for Finland’s educational success, in an approximation to importance, are:
The nation values education such that teachers have the same social status as lawyers and doctors.
Professional staff have progressed to a five year Masters degree or higher.
Teaching staff are selected from the top 10% of the nation’s graduates.
The teaching profession is totally dedicated to education.
Education is about education, not tests.
Teachers spend coaching time with students outside school hours – human interaction is the key.
Set homework is minimal.
In sixth grade students may sit for district-wide exams (with teacher approval). Results are not published, but are discussed between student and teacher.
During school years there is only one final exam for for university entrance.
Finland has a single unified State school system.
There are no comparisons between schools or regions and the education system is not run on statistics.
Education inspectors have been abolished and the schools are run by academic staff. Politicians are banned from oversight.
By contrast, nearby Norway follows the United States education system –its PISA rankings have stagnated whereas Australia’s have declined.
AUSTRALIA AND THE TYRANNY OF CULTURE DISTANCE
Culturally and historically Australia differs from South Korea and Finland. Australia enters 2017 with an education problem. Australia, dangling off the southern extremity of south-east Asia, is the poor country cousin in terms of PISA rankings compared to its northern neighbours.
The East Asian nations, due to population pressure, have struggled hard for their livelihoods, By contrast, the few in sparsely populated Australia where ‘Our lands abound with nature’s gifts and boundless plains to share’ Australians have never had to fight and struggle for survival as have peasant communities to our north. The East Asians peasant poverty has generated an iron will to improve their lives, to generate an income or starve. Australians, en masse, have never suffered the same problems. For far too long it has been ‘Too Easy – No Worries – She’ll be Right’. This observation does not denigrate the hardship and achievement of our early settlers.
It is clear Australia does not value education to the same degree as East Asians or Northern Europeans. Australia’s PISA rankings are 14 and falling further away from our Asian trading partners. The 3, 5, 7 and 9 NAPLAN test results were described by the Federal Education Minister in August 2016 as ‘flat lining’ over the past three years. Combined, the PISA and NAPLAN results constitute a serious problem.
The Gonski Review Report (2012) identified concerning trends in Australian education – performance has declined over the past decade. Gonski stressed the need for equitable school funding with extra funding to disadvantaged students (a move toward the Finnish model). The original funding program was subsequently reduced by $30 billion by the Abbott Government (SMH 2 Dec. 2014). Subsequently, the Turnbull Government announced it will ‘re-invest’ $1.2 billion into education, this apparently still leaves a shortfall of $28.8 billion. As announced by Treasurer Morrison the Federal education package over the forward estimates is $73.6 billion.
Under the current situation, Australian youth are in a public education system that leaves them trailing students in East Asia and Northern Europe. Initial suggestions to remedy this situation are:
Australia must change its culture and value education more highly. Our political elite will have to set an example.
The status of teachers must be raised.
Academic teacher levels must be improved to Masters qualification.
Teachers to spend more time with students after school hours.
There must be a single unified Federal education system.
On 24 March 2015, the Australian Financial Review resurrected a warning by the Singapore Prime Minister, Lee Kuan Yew. In 1980, Australia was warned “It could become the white trash of Asia if it did not reform”. That comment was taken on board by the then Labor Shadow Minister Hawke who concurred with the observation. Unless Australia improves its education system perhaps another Asian leader will repeat the epithet. Already, Australia is at a disadvantage. Both the Federal Minister for Education (Hon. Simon Birmingham) and the NSW Minister for Education (Hon. Adrian Piccoli) have no hands-on education experience; culture change must start at the top.
Is Australia prepared to fully participate in the Asian century or will indifferent education condemn future generations to education rankings below our neighbourhood nations? If our Australian children do not improve their education levels then responsibility can fall squarely on National culture and on politicians that are not prepared to enforce change.
Returning to the opening comment by Commissioner Triggs, she is not alone in her opinion on Parliamentary educational levels. Mr Barry Jones, polymath and ex-MP (Australian Inspiration) has opined that “much of Australian leadership has been and continues to be mediocre”. In a swingeing comment (ABC RN, 16 Dec. 2016), Dr Ric Charlesworth, AO, indicated “meritocracy in our political system is in short supply, it is diluted by party hacks”.
Australian youth will continue to be disadvantaged unless we, the people, improve our culture, Our new mantra should be:
The Situation. The result of this election will reverberate with Western developed economies for some time to come. In one way the election result can be partly attributable to the Judaeo-Christian practice of capitalism.
Senator Clinton secured the East and West coast urbanised better educated and more fully employed states (41.7% popular vote) while Mr Trump prevailed in the less educated Central and Southern states with higher unemployment (41.5% popular vote). The Electoral votes were Trump 279 and Clinton 228. (nor.com, 9 Nov.)
This election result has resonance for the UK Brexit where 51% of the Leave vote was centred round the disadvantaged industrial Midlands while the southern British literati were left spluttering into warm beer with 49% of the Remain vote.
The recent election in Australia produced a comparable knife edge result, whereby better educated and more fully employed urbanites, by the narrowest margin, prevailed over urban and regional centres suffering under employment and unemployment
Painful History. Once again, history warns but never repeats itself identically. The Great Unrest (1910-14) in the United Kingdom is instructive. From the mid 1800s, the Industrial Revolution powered along. A depression in the mid-1890s dented progress but then manufacturing growth continued into the first decade of the 20th century. To increase profits, the industrial elite reduced operating costs by cutting wages and replacing workers with more efficient machines. The working class revolted. there was mayhem on the streets until the First World War was declared when thousands of workers were sent to the trenches to be slaughtered. In passing, it is curious to note that the painful 1929 Crash and the turbulent later years were ended in 1939 by the Second World War when thousands of men were called up.
Fast Forward. One hundred years later there is a cracked mirror reflection of a comparable situation. The boom years of the later 20th century were interrupted by the GFC hiccup and a hesitant recovery which evaporated around the turn of this century. For the past decade, blue collar workers and the middle class has been squeezed by stagnant wages, employer exploitation, declining living standards, unemployment and under-employment. Machines – robots – are fast replacing workers as in 1910. One situation has made this situation worse, Western industrialists have established manufacturing companies in the Developing World which has meant unemployment for millions of Americans and others. Meanwhile, the wealth gap widens for Americans and Australians who are developing increasing contempt and distrust for the established political elite. This problem is facing the Western democracies; it is unsurprising Mr Trump has prevailed.
A New Order? Perhaps the Western brand of capitalism was only able to flourish utilising a low-cost working class in a world dominated by empire and colonies; a prerequisite was an inexhaustible supply of cheap raw material and a ready market with little manufacturing capacity. This situation no longer exists, perhaps this is the Achilles Heel of Western commerce.
The more philosophical might ponder on today’s economic conditions where chronic under-employment and flash points around the globe resemble the situations in 1914 and 1939.
In 1991 Mt, Pinatubo, Luzon, Philippines erupted with devastating results, in addition to the appalling loss of life the eruption altered the Pacific balance of power and the course of history. The volcano destroyed two critical American military bases, the Clark Air Force Base and the Subic Bay Naval Base, both enormous military arsenals. America withdrew its assets to Alaska and Hawaii and immediately created a military vacuum. Within months of this withdrawal the Chinese Government promulgated a far reaching decree., “The Law on the Territorial Waters and their Contiguous Areas”. From this all else follows.
With the rise of China manifested by the Chinese Dream and the One Belt One Road aspiration contemporaneously with the Australian mining boom, it is interesting to dwell on the concepts of Foreign Investment versus Foreign Acquisition as they apply to Australian assets.
Germaine to this discussion are four factors relevant to Australian and Chinese commercial and strategic imperatives. (Professor Bath, Chinese and International Law, Sydney University)
Australia sees itself as a reliable supplier of minerals and agricultural products; China encourages the acquisition of natural resources to service national growth and its millions of citizens.
Australian companies invest for a commercial return; Chinese companies, some with links to Government agencies, are required to supply imports necessary for Chinese growth, profit for the overseas entities is less important.
Australia’s capitalist ethos requires returns to shareholders; China’s objective is to sustain growth over generations, profit is secondary. Three year political cycles and associated budgetary gymnastics are viewed with contempt.
The Australian government maintains a foreign investment oversight via the Foreign Investment Review Board (FIRB) on media, banking, airlines, airports and telecommunications. In Australia, China is making significant acquisitions in ports, power companies as well as mining and agricultural projects These are also subject to FIRB scrutiny with value or national security implications. China’s acquisition of Darwin port or south east Australian power companies appear to have other objectives than purely commercial.
Within informed society, Australia’s relationship with China is an important issue. For China, Australia is only a pawn in a grand expansionist strategy. Integral to the Chinese Dream are the commercial imperatives of the One Belt One Road policy. This policy is to revive trade and commerce along the ancient Silk Road linking China to western Europe augmented by the maritime trading routes that linked East Asia, East Africa, the Arab Middle East and thence to Venice.
This initiative has been dubbed China’s ‘Marshall Plan’ as it will promote trading links with countries along the transport corridors. This initiative will tend to reduce the importance of the North West Passage as Arctic sea ice retreats. In this grand scheme, Australia appears to be relegated to a ‘colonial ‘ source of minerals and agricultural products specifically for Chinese consumption.
It has been noted by Professor Hugh White, Strategic Studies Institute, Australian National University, that the acquisition of Darwin Port by the aptly named Landbridge company, with links to the Chinese government, may be a clue to Chinese ambition for Australia. The urban population of Shanghai is around twenty-two million; Australians must come to terms with the fact that, with a population around twenty-four million, a projection of national influence will be difficult.
Chinese Iron Ore Acquisition
Superficially, the foreign acquisition of iron ore mines in Western Australia appears to be a complex of large and small producers jostling for sales contracts; the reality is more sinister. The big picture reduces to a Chinese determination to break the monopoly held by Rio Tinto, BHP/Billiton and Vale de Rio Doce in Brazil. In 2013-14 Chinese steel mills imported 850 million tonnes of iron ore. Australian production was around 610 mt.
To force lower prices, Chinese companies acquired mines with only a modest production of five to fifteen million tonnes. These high cost operations tend to run close to break-even or a small loss. Falling iron ore prices thus means lower feedstock prices to the Chinese steel industry. For every $10 drop in iron ore prices the Chinese economy saves $8.5 billion. The $70/tonne drop in iron ore prices since 2013 has saved the Chinese economy more than $40 billion. (The Conversation, Canberra. May, 2014)
The Chinese government is astute enough to realise that:
increasing supply in an inelastic market, mine revenue will fall but buyers will receive more for less money.
upstream investment from unprofitable mine production makes economic sense. This is another form of transfer pricing beloved by multi-national foreign investors.
new production onto an oversupplied market is warranted under a Chinese procurement policy, but would not be considered rational by investors not involved into a vertically integrated process.
At any time, production from mines can be halted and the plant mothballed or restarted by a Chinese controlled Australian work force. The concern for the Australian Government is the future of infrastructure, population stability and employment continuity if Chinese state funded entities are investing in new production to force down prices rather than develop a profitable mining venture.
The economic politics of the West Australian iron ore industry, like a good strip tease, has been laid bare. The State Government will extend its Magnetite Financial Assistance Program for another year to two wealthy Chinese companies in an effort to preserve Australian mining jobs. The government will pay a $41 million subsidy to keep the 1000 strong work force in employment. The Chinese companies, Citic (profit $7.3 billion) and Ansteel operate the Pilbara Sino Ore and Karara magnetite deposits. Gindalbie Metals Ltd is the minority Australian partner. It appears Chinese mineral acquisition policy has engineered the Australian political system to subsidise local mining operations that ensures low operating costs that maximises profits in China by ensuring low cost feed stock for Chinese steel mills. (The Australian, 13 May, 2016)
Despite the reliability of Western Australia iron ore industry, there are warnings on the horizon. The Chinese objective is to diversify away from Australia and to a lesser extent Brazil as pre-eminent suppliers of iron ore, there may be a myopic tendency to regard Western Australia as an unassailable source of iron ore. There are monster deposits awaiting exploitation in sunburnt or freezing country in Guinea, Liberia, Mongolia and Brazil. (Fortune, Connected Logistics, February, 2016)
Concerning Brazil, it is a stirring giant. By 2018, Vale de Rio Doce is slated to exceed the combined production of Rio Tinto and BHP/Billiton in Western Australia. Currently, China is contributing $5 billion to Vale for the construction of five high tonnage iron ore carriers. (Investing News, November 2015; SMH, January 2014)
A conclusion that may be drawn from Chinese acquisition in the Australian iron ore industry, is that economic production in Australia is less important than the ability to source low cost feed stock for Chinese steel mills. This import policy will drive prices down.
In the frenetic fish bowl that small Australian mining entrepreneurs inhabit, the public are encouraged to support Initial Public Offerings (IPOs). Subsequent joint ventures with Chinese acquisitors will ultimately drive share prices into the bulldust to ensure low cost mine product. The Pilbara and Hammersley iron ore provinces have competitors overseas.
Chinese Lithium Acquisition
More than one million electric cars were anticipated to be in circulation by the end of 2015 with a planned 500,000 annual production by 2020. Lithium for car batteries are expected to grow by 10% a year. According to the United States Geological Survey (USGS), global reserves of lithium are in very tight supply,. The top four producers are:
TABLE. Lithium Producers
Reserves & Resources (tonnes)
Despite low production costs in Chile and Argentina, China prefers to obtain lithium ore from Australia. Currently, China is the largest lithium consumer- around 50,000 tonnes at a market price of $6,600/t. The price is forecast to rise as demand outstrips supply. (Batteries, Storage and Fuel Cells,.J Hunt, 2015)
In Australia, lithium reserves and resources are mainly confined to Western Australia where they occur in spodumene (lithium aluminium silicate) rich pegmatites. Deposits currently of interest to Chinese industry are (Investing News, July 2015; WestAustralian, September 2015):
Greenbushes. Talison Resources and Chengdu Tianqi Group. This is the world’s largest high grade spodumene deposit running 61.5 mt at 2.8% lithium oxide.
Mt Marion. Reed Industrial Minerals and Jangxi Garfeng. Deposit 14.8 mt at 1.3% lithium oxide.
Mt Cattlin. Galaxy Resources, formerly with Jiensu Lithium Carbonate Plant, now with General Mining, Canada, planning to re-enter the Chinese market. Deposit 9.9 mt at 1.1% lithium oxide.
Very early in Japanese industrial development, the Japanese government decided to preserve its forests and import timber from overseas. With large reserves of lithium, it appears China has adopted the same policy as the Japanese and is seeking off shore deposits. It is significant that the largest hard rock lithium deposit in the world has slipped from Australian to Chinese control.
Foreign investment in the Australian mining industry is necessary., Taxation policy must minimise transfer pricing and market price manipulation.
Chinese Agricultural Production Acquisition
The Chinese imperative for acquisition of Australian agricultural production is driven by a population estimate of 1.4 billion by 2050 which is coinciding with declining soil fertility and increasingly polluted water supplies. A UN report states that by 2050 food supply must increase by 50% and water supply by 30%. To meet this threat, the Chinese government has decreed that three billion dollars must be expended with celerity on overseas agricultural security, (Yahoo 7, June 2015) Target regions for agricultural acquisition and expansion are Africa, South America and Australia.
The acquisition process in Australia has taken on a permanent drip feed character to include all sections of the food chain from crops, animal husbandry to processing plants. These products will not be sold on the domestic market but will be exported to China. The Financial Review (September, 2015) ran the comment that, during the previous two months, agricultural acquisitions had been running at $40 million per fortnight. In the past few years examples of some purchases are:
Cattle Station search. Chongquing. Budget $100 million.
Cattle Station search. New Hope Group. Budget $500 million.
The above and below are a fraction of purchases across the agricultural industry that include:
Fifty dairy farms in Victoria acquired by ?COFCO Group involving 90,000 cows and 500 million litres of milk annually.
Sugar and sorghum development in Western Australia by Shanghai Zongfu. $700 million.
There is a growing trend for wealthy Chinese to enter the wine industry- vineyards are being actively purchased. Australians will soon be come aware of new names in the industry or on the labels, for example, Zhitai Wang, Kuifen Wang, Xin Jin, Yingda Investment Company and Xingfa Ma. The bottom line is -“the Chinese value land and wineries more than the Australians do”. (BBC News, October 2014)
There are two issues that discomfort the Australian people; first the apparent frequency of acquisitions and second, the opaque nature of the arrangements through the use of shelf companies, trust funds and extended settlements. (Daily Telegraph, February 2014) The FIRB is said to examine all foreign investment proposals exceeding $244 million, however, lower value investments do incur scrutiny. The comment ‘selling off the farm’ raises concern but an Australian Bureau of Statistics table (below) shows there is not yet cause for concern.
Agricultural Land %
Agricultural business %
Sheep, Cattle, Grain
TABLE Australian Agricultural Land and Agricultural Business Ownership.
The acquisition of Australian agricultural assets will continue and an increasing number of Australian managers and labour will have to accept instructions from Chinese owners. It was mooted (ABC RN 9 May) that under the Free Trade Agreement with China, Chinese labour might be permitted to work on agricultural projects.
There could be a financial downside to increasing acquisition of agricultural assets by Chinese interests. Currently, Australia sells 58% of its food production overseas; this represents 70% of the sector’s total value. Food exports for 2013-14 were valued at $40 billion. With increasing Chinese ownership, this export income will reduce and will tend to be exacerbated by transfer pricing and suppression of farm gate values by a technique similar to that employed in the iron ore trade. (Future Directions, September 2014)
At the end of May, the Bank of China with the Australian Chamber of Commerce hosted a conference principally on the dairy products industry. Over 600 Chinese delegates attended who are aware of the purchasing power of the anticipated three billion Middle Class in East Asia by 2030. (The World Today, ABC, 23 May) It would be naive to anticipate Chinese foreign investment, rather it will be foreign acquisition of Australian agricultural assets as already exemplified in Victoria and Tasmania. It makes commercial sense for foreign investors to acquire virtually a 100% equity and to create a vertically integrated export industry. An extension of the Mercantilist theory!
Since the Colonial period, Australia has relied heavily on foreign investment and this will continue into the future. What appears to be changing, is the subtle move away from infrastructure investment to natural resource and agricultural product acquisition, which, if carried out to an extreme,will result in the hollowing out of a nation. Foreign investment should ideally include the construction of tollways, railways, ports and mass housing but this appears not to be happening despite the concept of the Public Private Partnership (PPP) being well established. The problem is that the States are short of money and, like the Federal Government, carry unsustainable debt; hence the sale of Darwin port by the Northern Territory government and the sale of power assets in South Australia, Victoria and New South Wales to Chinese interests. The NSW Trans Grid sale of ‘poles and wires’ to China’s State Grid has recently been approved by FIRB, consideration $9 billion. The proceeds will go towards the rebuilding of sports stadiums. Back to the Roman coliseum!! (Daily Telegraph, November 2015)
A trend has been established and, if continued, there, will be significant redistribution of Australian assets. The President of the National Farmers Federation recently pithily remarked “foreign investors have spotted an opportunity domestic investors have shunned”. Of deeper impact is Australia’s destiny in the Chinese Dream.
Introduction. During my career I had the opportunity to observe Chinese culture in Malaya, Indonesia and the Solomon Islands and latterly in Australia. Although domiciled in these host countries the Chinese retained a strong affiliation with China and their heritage.
The Event. In Sydney, on the 12th April, there occurred a significant event supportive of Chinese activities in the South China Sea and by extension the ‘Chinese Dream’. The ‘Dream’ involves the betterment of the Chinese people combined with an aspiration to increase national influence in the East Asian region. On this day sixty people met under the auspices of the Chinese Patriotic Association of Australia to express unequivocal support for Chinese government policy. The principal points being:
A desire to support core interests of the Chinese nation.
A recognition the islands in the South China Sea belong to China.
Australia might be faced with a crisis situation.
These sentiments are the appropriate views of an overseas Chinese elite.
It is significant the Chinese Embassy in Canberra has, apparently, made no public comment but it is certain there would have been tacit approval.
History and Painful Politics. There are historical and current international issues which have logically conspired to promote this action by the Patriotic Association:
Over the past two hundred years China has experienced European aggression, colonialism and commercial exploitation, these yokes are no more.
There is a growing awareness among the Chinese population and the diaspora of 19th and 20th century history and of the dawn of the “Asian Century’.
There is a realisation the ‘Asian Dream’ is gaining momentum which engenders confidence and assertiveness among the rising intelligentsia.
Discussion. The wording of the published communique (SMH, 13 April) presents an exquisite problem for the Australian government vis a vis relations with China and with current multicultural policy. As a dictatorship, guided democracy or a Communist regime there would be a simple solution. As a democracy with enshrined free speech there are clearly more than fifty shades of grey at a time when tensions are increasing. With Australia supporting iAmerica in the right of untrammelled navigation in the South China Sea the comments of the Patriotic Association are unhelpful. Its stance could encourage more Chinese Australians to support its philosophy. Remember the Chinese student demonstrations in Canberra in 2008 involving policy on Tibet. It could take only an inflammatory speech or an emotive cause to mobilise a cast of thousands. It is certain the Chinese government is aware of this anti-Australia stance. It would be noted if if the voice of the Patriotic Front was silenced.
Diplomatic and Trade Mission to China. At the mid-April visit of the Prime Minister to China the Australian desire for peaceful negotiation over the South China Sea disputes was noted. as is the military alliance with America. The response by organs of the Chinese government constituted unveiled threats:
“Concerning the territorial disputes this will be a test of Australian leader’s political wisdom”. (National Institute of International Strategy, Beijing)
“This disagreement would tend to cast a shadow on promising cooperation if such a tendency keeps developing”. (Institute of World Economics and Politics, Beijing)
Such pronouncements from senior Chinese officials could encourage more assertive voices in Australia. The Beijing pronouncements should also be evaluated against the news America is positioning war planes in the Philippines. (SMH, 15 April). By an alliance with America Australia is also involved. An unpalatable conclusion is that support for American activities might damage trade with China as intimated in the above unveiled threats. To this mix add the complication of Chinese control of Port Darwin
The implacability of Chinese negotiation tactics should not be under estimated In 1981 President Deng Xiaping met Prime Minister Margaret Thatcher to discuss the Hong Kong handover in 1997. The talks ended with the comment by Deng Xiaping “I could march into Hong Kong any time and take it over if I wished.” President Xi Jinping cannot be any less forceful.
Multiculturalism. The second issue is the effectiveness of Australia;s multicultural policy in relation to the unpatriotic stance of the Chinese Patriotic Association of Australia. At a security conference in Germany (BBC, February, 2015) the United Kingdom Prime Minister stated multiculturalism had failed. British policy should have included a greater requirement for inculcation of a stronger national identity that could have reduced extremism. Current policy in Britain promotes a sense of separateness not integration.. National ethos that encourages a sense of Britishness is required. A similar logic could apply to Australia. However accommodating multiculturalism might become in Australia it is unlikely the Chinese diaspora will ever forgo their culture or allegiance to their roots.