
The Deal Is Simple. Australia Gets Money, China Gets Australia - cwan
http://www.businessweek.com/magazine/content/10_37/b4194044972388.htm
======
nicko
I worked in the Pilbara for one of the big miners in an 'automated' laboratory
for a couple of years after graduating. AMA.

Couple of quick points for anyone tempted to make the move: As an employee you
get to interact with some pretty amazing tech, but most of it is created by
other firms. Direct employees typically end up operating, maintaining and
fixing things when they break. It's a great place to get hands on experience
solving problems under time pressure. If you want to work heavily in the code
base of automated robots/ trucks / trains, find a firm that does the
contracting work to work for.

Secondly, don't do it just for the money, the job becomes your life. The
article wasn't really about employee benefits but they did mention a salary
without saying exactly what it was for.

Michael, after 35 years earns 145,000 p.a. including superannuation.A typical
truck driver on a FIFO (fly in fly out) roster will fly up to the mine and
work 7 12.5 hour day shifts, followed by 7 12.5 hour night shifts, and then
fly back to the city to recover for a week (6 1/2 days). This is repeated
about 17 times a year.

14days * 12.5hour shift * 17 stints = 2975 hours. $145, 000 / 2975 = approx
AU$48 dollars per hour, including super. For that 20 year old on $92,000 it
works out about $31 an hour, assuming the same roster. getting that job is not
exactly easy either. The money is not bad, especially since you have nowhere
to spend it on while at the mine, but the guys who do this long term have it
in their blood and live to work at the mine.

Your social and dating life ( if you have one at all) gets fairly messed up on
that roster, and fatigue from night shift can get to you after awhile.

Fun Fact: The mines tend to prefer female truck drivers as they are more
gentle on the equipment.

~~~
adsyoung
Hi nicko. Do you have an email address I could ping you on. Would love to quiz
you about your experience :)

~~~
nicko
No probs, I just updated my profile with my email.

------
ryanwaggoner
The geopolitics are interesting, of course, but this was _really_ interesting
to me:

 _He now oversees a test project of driverless Komatsu trucks that cart out
300 tons at a time, moving 80,000 tons over two 12-hour shifts. When the
drilling is good, he says, they can shift 120,000 tons in 24 hours. Without
drivers, the trucks are more reliable, with radar sensors stopping them from
crashing. They roll 24 hours a day._

~~~
teyc
some drill rigs are semiautonomous, with GPS. The control systems were priced
around $120k the last time I looked about 10 years ago. Any HN'ers want to
disrupt this? I know some drillers out this way.

~~~
nl
They have similar technology for farming, too.

If you wanted to disrupt this, I suspect you don't want to make it cheaper
(the mining companies have plenty of money), but to do a better job somehow.

(Where are you?)

~~~
w00pla2
> They have similar technology for farming, too.

This is called "Precision agriculture". Tractors and equipment enabled with
this can throw the precise amount of fertilizer/seeds at specific points.
Probably quite a hot topic in farming... Go to any farming show and you will
see this.

<http://en.wikipedia.org/wiki/Precision_agriculture>

------
maxklein
The first page of the article uses various journalistic tricks to make the
Australians seem like nice homely people, while the Chinese seem like faceless
big corporations.

------
barredo
Alternative Title: Chinese (amongst others) companies make money on Australian
soil. Also known as "Multinationals _multinationing_ "

~~~
ww520
Alternative Title: Capitalism at work, trade instead of war, each got what
they want.

~~~
Estragon
I don't think it's that simple. Consider, for example, that the Australian
Prime Minister, Kevin Rudd, lost his leadership largely because mining
companies were upset by his plan to tax them further. From the article:

    
    
      Economic and diplomatic advances, however, have not 
      fueled a warm national glow. Australia's proposal to 
      increase taxes on mining became a national issue, 
      precipitating a three-month barrage of anti-government 
      campaigns paid for by the mining industry, which in part 
      led to the removal in June of Prime Minister Kevin Rudd, 
      a Chinese-speaking former diplomat. In the August federal 
      election, the ruling center-left Australian Labor Party 
      lost its majority due in large part to massive swings  
      against it in the resource-rich states of Western 
      Australia and Queensland. Supporters of the tax argue 
      that the resources are not coming back and that Australia 
      should participate more fully in the outsize profits. 
      Those against include the mine operators and the many who 
      work in the mines; mining salaries are, on average,  
      Australia's highest, according to the Australian Bureau 
      of Statistics.

~~~
brc
There were other factors at work with Rudd's removal. The mining tax was the
last act in a long play of dropping promises, reneging on commitments and
policy backflips.

The mining tax was a disaster and, in it's original form, was reverse
nationalism by stealth. The government was going to tax profits above 6% with
a 40% 'super tax' - terminology straight from a Marxist script. They were then
going to reimburse Miners for losses on projects. In reality, with the
government participating in 40% of the profits and 40% of the losses, it was a
part-nationalisation by stealth.

The reason the mining tax was so rejected, particularly by the mining states,
was that it was to replace state-based mining royalties with a Federal mining
tax. So instead of individual states receiving royalties for mineral wealth -
as per the constitution, the tax money would be funnelled to the Federal
government, which would then have power over where it was spent. The mineral
states stood to lose power over their own revenues, and the non-mining states
stood to gain income from activities that took place entirely outside their
borders.

The tax was beloved by pro-government tax-raising types and lovers of economic
theory and hated by pretty much everyone else.

~~~
nl
_There were other factors at work with Rudd's removal. The mining tax was the
last act in a long play of dropping promises, reneging on commitments and
policy backflips._

I agree with this

 _The mining tax was a disaster and, in it's original form, was reverse
nationalism by stealth. The government was going to tax profits above 6% with
a 40% 'super tax' - terminology straight from a Marxist script. They were then
going to reimburse Miners for losses on projects. In reality, with the
government participating in 40% of the profits and 40% of the losses, it was a
part-nationalisation by stealth._

I agree the mining tax was a disaster, but it wasn't as bad as you are making
out. The 40% thing was always something that got the headlines, but as you
point out it isn't as simple as that because it would have reduced state based
royalties.

 _The reason the mining tax was so rejected, particularly by the mining
states, was that it was to replace state-based mining royalties with a Federal
mining tax._

This is true.

 _The mineral states stood to lose power over their own revenues, and the non-
mining states stood to gain income from activities that took place entirely
outside their borders._

This is also true, but not necessarily a bad thing. Australian urban centres
are a long, long way from the mines and some form of distribution probably
makes sense.

 _The tax was beloved by pro-government tax-raising types and lovers of
economic theory and hated by pretty much everyone else._

I don't think the tax was loved by anyone except Rudd's kitchen cabinet (and
possibly only by 3 out of them too, judging from how quickly Gillard backed
off it).

But the goals of the tax are perhaps more broadly backed. The original article
touched on the fact that many mining companies avoid investing in the
communities (as you'd expect from a profit making entity), and this has caused
some issues. From the article:

 _One of the local councils in the Pilbara, Shire of Ashburton, recently
refused permission to Rio Tinto to expand its camp around the Tom Price mine.
Instead the company has been asked to invest in facilities that will remain
after the mine is closed, to spend $247 million on housing, an air strip, and
other infrastructure at the town of Pannawonica. This kind of investment, and
the employing of locals, is the only move that is going to convince skeptics
like Tony Wiltshire.

"We were at a town meeting the other day when a representative from a mining
company said, 'Come on, we're all up here to make a dollar.' The locals in the
room looked at each other and thought, 'What?' We live here. We can cope with
the hot summers. We're here for the long term. We are actually better for the
multinationals than the contractors they fly in and fly out. We just need them
to wake up to the fact that they, and we, are all in it for the long haul."_

The idea of the tax was to formalize this kind of investment. The way they
went about it was probably the worst planned example of domestic politics in
Australia since WW2, though!

~~~
megablast
The tax was a great idea, and only hated by mining companies and people who
happened to believe everything they see on TV. Most other big mining countries
(Canada, Brazil, etc...) are also thinking about bringing in a mining tax like
this.

All Australians deserve returns from the investment, not just the tiny number
of miners, who earn ridiculous sums of money.

~~~
ShardPhoenix
If more people were willing to do those mining jobs, they wouldn't make so
much money.

~~~
nl
I think he meant the tiny number of mining companies which make all the money
- not the small number of employees who make good but not outrageous money.

------
jakarta
It's pretty interesting to see how intertwined China is with Australia.

If you ever want to short China, your best bet is to target Australia which
already has a bit of a property bubble, mining companies that are dependent on
Chinese demand, and a currency that is buoyed by commodity prices.

If China is indeed a bubble (at least in the medium-term) Australia is going
to experience a world of hurt.

~~~
mrtron
I don't see how China's demand for commodities could be a bubble.

They are building in huge volumes, but they have a huge volume of people.
There is a middle class developing. Check out Hans Rosling's talks about it.

There may be a temporary bubble in the stock market, but China is undergoing
an incredible shift towards becoming North American in every way. Beijing is
the best example of this - the entire city has been bulldozed and redeveloped
in a North American big box way. Shanghai is even further 'ahead'.

Traditionally Chinese have been very conservative with spending, preventing
quick economic growth. Credit cards are almost non-existent. You pre-pay your
bills, even electricity! But for some reason - perhaps the Internets media
influence, perhaps the one child policy, people are now spending money
quickly. Starbucks is extremely popular and more expensive than in Toronto,
NYC or SF! For the price of a coffee you could easily get a great meal with a
few drinks, yet coffee shops are filled.

If all of it is a bubble - it is so firmly entrenched at ground level that the
momentum of this bubble will burst through and last for decades. New
industries are developing rapidly. The insurance industry was almost non-
existent a decade ago, and is growing quickly in different ways there.

One thing is part of what is fuels the growth is international companies
spending a lot of money trying to establish new business in China. These
companies are risking money and bringing expertise into a really unknown
market and often losing money. China in the end benefits as they just sit
their with their vast market and allow foreign companies to try to create new
industries. If anything starts doing really well, the government could always
regulate that industry and take it over themselves.

I don't see anything stopping both China and India both developing a large
middle class. That will snowball growth for decades. Premium brands will
likely dominate - these folks want iPhones and Mercedes.

I think this Australian iron ore example is just the beginning of the scale at
which we will see commodities shifting to China. I expect timber to happen at
an enormous scale as their foresting practices seem quite unsustainable.

~~~
btilly
The first problem that China has right now is that government policy has made
it easier to bring money in than to take it out. This has caused a significant
asset bubble. If that asset bubble pops, it will be painful. That's exactly
what happened to the Japanese juggernaut that everyone was scared about 20
years ago.

The longer term problems are demographic. The one-child policy means that the
upcoming generation is smaller than the previous. Their work-force will soon
be shrinking. Furthermore many parents chose to abort girls to make their one
child a son. But a generation with a significant surplus of men is bound to
have interesting social problems.

If I had to bet, I'd bet that 30 years out we'll be hearing more about India
than China.

~~~
riffer
_30 years out we'll be hearing more about India than China_

I have that bet on, and in good size

Everything we know about top-down vs. bottom-up design says that China is
supposed to appear to be doing better than India, until eventually it suddenly
becomes clear that it is not.

------
adrianwaj
The key issue for me here is that Australia's not getting the same
infrastructure projects that China's African resource partners are getting (eg
roads, schools, hospitals.) Australia's probably getting more money instead.

For example: "Abuja — The Chinese government has concluded arrangements to
spend about $50 billion on development of infrastructure in Nigeria through
SINOSURE, the Export Credit Guarantee Agency of China."
<http://allafrica.com/stories/200803310705.html>

"Of some 900 projects China built in Africa, more than half are aimed at
improving local people's livelihoods."
[http://www.china.org.cn/opinion/2010-07/04/content_20416315....](http://www.china.org.cn/opinion/2010-07/04/content_20416315.htm)

~~~
etherael
Why would you think that Australia would have the same demand for basic
infrastructure that Africa does, considering the relative economic positions
of the vendors in each instance?

~~~
adrianwaj
_Unpredictability brings anxiety and hope in equal measure to the 8,000
Aborigines in the Pilbara, who hope their third-world living conditions might
be raised by the China boom. Tony Wiltshire, an indigenous mechanic who runs a
guild of Aboriginal businesses and tradesmen in the Pilbara, says the mining
boom's benefits could sidestep the local population._

------
Volscio
I know this is not exactly a new phenomenon for those who live in mining areas
(northwestern Canada, Australia, etc.) but I found it interesting when going
on a trip in the Outback that 3 of the men with us were miners (one from
Canada, one from the UK, one from Australia) who do the tough mining tour of
duty for part of the year and then travel for fun the rest of the year, rinse
repeat.

It's an odd life.

------
cletus
Honestly this kind of article annoys me.

It's split across 5 pages (more page views anyone?) and meanders through
largely meaningless anecdotes without ever really getting to the point.

The whole stream of anecdotes style of journalism is one I abhor. It's lazy,
can easily be abused (you can use anecdotes to prove anything) and is often
just cheap theatre to try and humanize something otherwise without substance.

~~~
bl4k
Blame Malcolm Gladwell and Chris Anderson. Those guys sold a ton of their
books (airport books) and now their style is creeping into journalism.

The stories are not used as supporting evidence, references or as facts to
build an overall conclusion to some new idea - but rather as infotainment,
where the anecdotes are the whole point of the story and there is no real firm
conclusion or over-arching theme that is proven.

The anecdotes are easy to digest and repeat, which helps not smart people
sound smart when they tell the same stories to a group of people.

------
brc
I'm not sure of what the point this article is trying to raise? Is it that
Australia is not in recession? Is it some sort of suggestion of xenophobia on
the part of Australians?

Australians have all seen this before in the 1980's when the Japanese were
buying real estate, companies and generally splashing cash around. I think
this time around most people are more relaxed about it, and a feeling of 'make
hay while the sun shines' is probably the most prevalent.

While the imagery of large parts of Australia being dug up forever are
evocative, it's not very realistic for anyone who has visited this part of the
world to think it's all going to run out soon. It's a massive, virtually
uninhabited area and the ground you walk on is literally red from iron ore.

~~~
zmmmmm
> make hay while the sun shines

If only we were actually making some hay, or put some of what we do make in
the barn instead of gorging on it. I think a better analogy is "let's party
while the champagne is flowing".

Instead of long term investments in permanent infrastructure and educating our
citizens we are largely just padding out the middle class with spurious
welfare benefits. That's almost worse than just throwing the money away
because it is creating an enormous future liability and false expectation
among average folks.

~~~
brc
I mostly agree with this. While I don't think we should increase mining profit
taxes, I do think some of the mineral wealth should be locked away into a
sovereign wealth fund - the type that can't be gotten at by sticky fingered
politicians of any persuasion. The wealth fund could be used for apolitical
purposes, like education funding (scholarships?), national dual lane freeway
construction, large-scale water projects. But only after it reached critical
mass and was throwing off a couple of billion per year in investment returns.

~~~
dejb
Actually wasn't the it called mining 'super' tax becuase it was to fund
superannuation? I know there was to be some increase in funding but I'm
actually not 100% sure because the govt did such a poor job of selling it.

Anyway I think this may be one of those cases where the XX cents we typically
get back from each dollar the govt taxes could be worth it to slow the party
down.

~~~
brc
It was called the MSPT or Mining Super Profits Tax.

Super Profits is a Marxist term (don't know if Marx coined it, or it just
became part of the canon) to reflect anything above a 'reasonable' rate of
return. In this case it was set at the government bond rate. Which makes you
question why any rational investor would invest money into a highly risky
mining venture when they coudl get the same returns from government bonds. I
suspect they thought they could kick off a nasty class war - which people seem
to have forgotten now that Swan was muzzled by Gillard and Rudd deposed. But
at the time Swan and Rudd were talking about 'evil foreign rich miners'. But
it backfired with some good PR from the mining companies, and a higher level
of awareness among the Australian people when someone is being deliberately
obtuse.

It was sleight of hand to link super profits tax with superannuation. In
reality the two have nothing to do with each other because employers pay for
employee superannuation out of their bottom line. The only superannuation the
government pays is for public service employees. The reason they did a poor
job in selling it was because if you actually looked at the details, the tax
and the superannuation actually had nothing to do with each other. Lindsay
Tanner actually quoted as much before changing his tune to the party line.

>slow the party down.

Imagine how much you would be upset if they decided to start taxing you extra
because they thought you were doing too well. It's the ultimate definition of
unfair. The miners struggled for decades - have a period of prosperity and are
whacked with extra taxes. That is not only unfair, it raises sovereign risk
and ultimately reduces foreign investment. You don't improve the economy by
knobbling your best performer.

~~~
zmmmmm
> Imagine how much you would be upset if they decided to start taxing you
> extra because they thought you were doing too well. It's the ultimate
> definition of unfair.

Umm, have you ever noticed how people are actually taxed? It's called a
"marginal" tax rate and it's a feature of just about every tax system in the
world, precisely because it is considered a "fairer" system to have people who
can afford to pay more share more of the tax burden.

One might even argue that the "super profits" tax is fairer than marginal tax
rates because it takes account of the amount of capital you have deployed to
achieve the result (to relate it back to people, if I have a family of 10
people to support I don't get a lower tax rate ... but a company with 10,000
people to achieve the same profit as one with 1000 people will get that taken
into account).

~~~
brc
I take it by those comments you've never actually invested any money? The
number of people employed has zero to do with making decisions about
investment returns. But that's been the problem all along - people with very
little idea about how capital markets and mining investment works deciding
they want some of the pie, and coming up with all types of justifications for
it.

I'm not talking about marginal rates - I'm talking about - hey you! You're
making too much money, I want some of that! Here's an extra 40% tax for you -
no consultation, no transition period, no questions asked. Would you defend
this tax if it was applied to technology startups because they made too much
money?

------
scn
"A 20-year-old off the street can come up to the Pilbara and earn A$92,000 a
year," says Boxy. The median household income in Australia is A$67,000.

Talk about inflationary pressures.

~~~
nl
Those jobs are well paid for a reason.

They are in the middle of nowhere (unless you've been there you have no idea
how isolated the Pilbara is), and the climate is less than ideal:

 _The climate of the Pilbara is semi-arid and arid, with high temperatures and
low irregular rainfall that follows the summer cyclones. During the summer
months, maximum temperatures exceed 32°C (90°F) almost every day, and
temperatures in excess of 45°C (113°F) are not uncommon. The Pilbara town of
Marble Bar set a world record of most consecutive days of maximum temperatures
of 100 degrees Fahrenheit (37.8 degrees Celsius) or more, during a period of
160 such days from 31 October 1923 to 7 April 1924.[5]_
<http://en.wikipedia.org/wiki/Pilbara>

In the non-open cut mines, many jobs are underground and a lot of people don't
seem to cope well with being 1km underground.

A few well-paid jobs don't create inflation on their own. The inflation rate
remains a steady 3%.

~~~
scn
I'm not saying they're easy jobs but two weeks on one off with no expenses for
the two weeks on makes for a lot of disposable income even without those
salaries.

Inflation remains a steady 3% with a cash rate of 4.5% way above comparable
economies, with a high chance of further raises. People not in the mining
industry can't expect to compete with the salaries they're earning and the
high interest rates and Australian dollar are hurting households and other
exports.

Housing prices in Perth: <http://reiwa.com.au/res/res-salesgraph-display.cfm>
Does that look sustainable?

~~~
nl
Our rates aren't high by Australian historical standards:
<http://www.loansense.com.au/historical-rates.html>

Regarding the house price graph, I think you are being misled slightly by the
scale.

If you magnified the 1978-1993 graph it would look very similar - a HUGE ramp
up in the prices in the late 1980's, and then stagnant in the early 1990's.

Compare that to how the current graph looks: HUGE ramp up in 2003-2007, and
then stagnant.

I agree with what you are saying about the inequalities of mining salaries and
the problems with the crowding out effect. I think that contributes more to
the stratification of society rather than inflation, though.

------
helmut_hed
I was struck by this quote (in regards to Rio Tinto): _Until last year, China
was trying to buy more of the company_

As far as I know "China" does not buy things. Their government, maybe. I'd
like to know if a Chinese government entity or connected company was truly
involved in this. If not, the reporter is speaking carelessly...

------
sliverstorm
Exporting all your resources, particularly a staple like iron, seems like a
bad plan for Australia in the long run. Particularly because it is a raw
material.

------
c00p3r
It is better to say - Australia gets all those Treasures (American debt) and
China gets Australia - resources. It is really a good deal!

------
Charuru
A less sensationalist title: Australia gets Chinese Money, China gets
Australian Ore.

------
adrianwaj
_"My total salary and superannuation is A$145,000 a year, and when I'm in the
Pilbara I don't have to put my hand in my pocket. I have a house in the city
and an investment property and a 1972 Falcon pickup. I couldn't have had this
life without mining."_

and devastating the environment (and human and animal health) with all the
land-clearing, power consumption, water consumption, massive pollution and
toxic waste that comes with this and connected industries.

