Allocating Australia's construction army

Last night’s minor fall in the Australian dollar was a signal of events happening below the surface in Australia. These events will become more important as the year proceeds and the election nears.

The fall in the dollar was mainly a reaction to the market interpretation from the Reserve Bank statement that more rate cuts are ahead. As yet, currency markets do not understand that the rate cuts are surface indicators of deeper, longer problems.

Right now we are in the middle of one of the largest mining construction booms Australia has seen. Money and labour are still pouring in which underpins the dollar. At the same time our stock market rally is also sucking in money from abroad. And hints of rate cuts maintain or increase the quest for yield among equities but lessen the attraction of the dollar.

But then in last week’s KGB interview (KGB: Alan Oster and Tim Toohey, February 1) National Australia Bank’s chief economist Alan Oster pointed out that in mining there is one worker in the operational phase for every four in construction. In LNG it is eight construction workers to one operational.

Goldman Sach’s Tim Toohey says that in the LNG plants "we could only identify about 3000 [jobs] during the operational phase. So these projects are probably the least employment intensive projects on the face of the earth”.

At the same time, according to Oster, Australia produces about 700 million tonnes of thermal coal a year of which about 100 million is produced at a loss.

The LNG construction phase and the loss making coal production are masking a deep underlying problem – Australia’s base productivity has fallen way below the US and in some areas unions are striking to make it worse. The high dollar multiplies the problem. Next year mining investment will fall away followed by that in LNG, so we are going to have an army of unemployed construction workers.

State and federal governments plus the Reserve Bank have a deep looming problem. The Reserve Bank’s only weapon is to lower interest rates – and it is going to use it, affecting the dollar.

The Victorian and NSW governments are trying to fill the gap by reducing the cost of construction by eliminating the sweetheart deals between big builders and unions which slash productivity improvement and boost costs (Australia's shifting industrial relations landscape, December 18).

The federal government is trying to maintain the sweetheart deals to protect its union mates. Tony Abbott’s plan is to work with the states to create one of the largest infrastructure building drives Australia has seen. Gillard is looking at education and disabilities. The electorate will decide which is the best approach.

While I fully understand the need for education and disability help, we will have a huge army of skilled workers returning from the LNG and mining projects. They will be excellent taxi drivers but let’s use their skills in building infrastructure, particularly as our self-managed superannuation funds movement has the money to support good projects.