Mining the boom and finding a bubble in the land down under

I

Outside is warmer than the air-conditioned car and my feet begin to thaw as I cross the dirt-road with camera in hand.  The sign reading ‘wedding’, a wooden plank shaped into an arrow and adorned by a glass bottle dangling from a nail, points to a ramshackle barn with rusted corrugated iron roof standing next to some scattered trees.  Behind this I can just make out the substantially more salubrious premises within which, presumably, said weddings are to take place.  My companion has pulled over the car so that I can get a shot of what she assures me is a pretty regular sight in this part of Australia.  We have been driving around the Hunter Region of New South Wales, an area that extends from 120 km to 310 km north of Sydney.  The Hunter Valley is famed for, amongst other things, horse breeding and wine production, and we are currently on a stretch dominated by the latter.  While many notable Australian wine brands are still produced in the region, since the 1990s a co-dependent tourist industry has been developed around the vineyards, attracting streams of Sydneysiders north for weekend breaks that encompass wine tasting in carefully sculpted landscapes of rolling hills, winding dirt roads, and miles of vines housing upmarket hotels, along with faux-rustic venues like the one that I have stopped to photograph.

The Australian summer has been tentatively announcing its presence this year and today is cloudy but warm.  I finish photographing and we resume our journey, the air-conditioner summarily resuming to freeze my feet. We’ve been driving through ‘blink and you miss it’ towns filled with detached houses, convenience stores that have seen better days, and oddly ubiquitous hotels that all look like replicas of Wild West Saloons.   We pass through the sanitised vineyard territory into the slightly less manicured landscape of smaller growers.  These too peel away to reveal a stretch of highway through the bush, upon which road-kill kangaroo carcases are strewn every hundred meters of so, and we are marveling at the levels of carnage when the Hunter’s other defining feature creeps up on us unawares: as we turn a bend on the road an open-cut coal mine comes into view.

The Hunter has its history in coal, but the successive closure of mines in the region from the 1960s onwards has meant that the area has had to expand into new economic sectors.  In the last number of years, however, coal mining activity, made profitable again through technological advancements and new markets opened up through Australia’s trading relationships with China, has been resurgent.  The mine that we’ve come across extends across both sides of the road.  The ground is cut away to reveal a gradient depression, upon which we can see in the distance, like busy little ants, a constant stream of trucks transporting the excavated coal.  From our cursory reconnaissance via Google Earth prior to our departure, this looks to be one of the smaller mines – in the north Hunter there are some that look like cities from the satellite images – but it nevertheless cuts a stark impression on the landscape.  Such an impression is not disproportionate.  For, while other sectors play a substantial role, it is undoubtedly the mining industry that continues to drive Australia’s economy.

II

In marked contrast to Ireland at present, the Australian economy is visibly booming.  The national unemployment rate currently stands at 5.4 per cent.  Australia’s Government debt to GDP is 30 per cent (in contrast to Ireland’s 106 per cent) and it remains one of only eight countries worldwide to hold AAA sovereign debt ratings from the three main, albeit now dubiously judicious, rating agencies.  As the Sydney Morning Herald puts it, Australia is the “…picture of envy of many other industrial nations, particularly in Europe, where huge public debt is causing concerns that there will be another global financial and economic crisis.  But the big picture masks a patchy reality”.

This ‘patchy reality’ refers is the widening gap between those employed in the mining industry and those employed in other sectors.  Incomes for workers in the resource and mining sector have increased dramatically and although mining jobs only account for 2% of total employment, the wealth generated by the industry has caused significant spikes in property prices, levels of inflation, and most significantly, the value of the AU Dollar on international currency markets.  This has resulted in what many are calling a “two speed” economy in Australia, whereby sectors such as manufacturing and tourism are struggling to remain globally competitive and locally viable in the face of these pressures.

The Guardian reports that in 2012 “the minerals and resources industry will account for 8.5% of Australia’s GDP, compared with the long-term average of less than 2%.  It will make up more than half of the country’s export income”.  Australia is currently the world’s largest exporter of coal and iron ore and the fourth largest producer.  Much of this is concentrated of Western Australia, which in 2011 had $170billion worth of projects either under construction or waiting confirmation.  Due to the remote location of many of the mines, there has been increasing use made of Fly-In-Fly-Out (FIFO) commuting arrangements, whereby workers temporarily reside away from home in accommodation within close proximity to the actual working site and, through a combination of long shifts and compressed hours, work for a number of weeks at a time and then go home for a week.   According to the Australian Bureau of statistics, Western Australia mining industry employs 54,000 people, 45% of whom use FIFO commuting.  In the last twenty years Western Australia FIFO employees have increased by 400% and it is now thought that these workers are coming from more distant places, such as the eastern states.  FIFO brings with it a series of problems.  For host regions, mining activity does not necessarily translate into local jobs although the cost of living tends to skyrocket, whilst regions supplying FIFO workers suffer from a unique form of brain drain.  Perhaps more worrying, is the suggestion that information given by workers applying for FIFO jobs is kept in a database, which is passed on to third parties, and can be subsequently used by other prospective employers to weed out trade union members and other workers deemed ‘undesirable’.  Finally, the detrimental impact on the personal and family lives of the workers has also been noted.

Furthermore, while the economic spinoffs from mining are difficult to pinpoint, there are presumably many.  The NSW Mineral Council estimates that “for every person directly employed in the mining industry more than four jobs are created in supporting businesses”.  Sectors such as construction and business services have obvious linkages to mining activity, but the free-flowing wealth currently lubricating Australia’s consumer economy is also an indirect result of the wages paid and profits accrued through resource extraction.  All of this becomes tricky to manage in a context where the economic geography of individual regions is increasingly complex and difficult to measure and predict.

In short, Australia’s economy is intrinsically, and precariously, tied to mining.  This also has had the effect of providing the mining companies with a dominant position that has proved increasingly knotty to dislodge.  Thus, it is proving very difficult for various groups to oppose the expansion of the industry or its use of controversial coal-seam-gas (or fracking) methods of exploration.  Similarly, despite an ongoing inquiry by a House of Representatives special committee into its practices, the use of FIFO continues to expand into new extremes.  This was demonstrated in May when Australia’s wealthiest miner, Gina Rinehart, “won the right to bring in 1,700 foreign workers for the construction of an iron ore mine in Pilbara”.  The dominance of the mining industry has forced the Australian Government into an unenviable position where it seems to be either unable or unwilling to effectively regulate the activities of the sector.  This was most readily demonstrated by the controversy surrounding the introduction of a ‘Minerals Resource Rent Tax’ (renamed ‘Resource Super Profit Tax’).  The proposal to introduce a new high tax levy or 40% on the top portion of profits earned by mining companies (the threshold starting at somewhere between $50 million and $75 million) was originally announced by former Prime Minister Kevin Rudd in May 2010.  The mining sector responded with an ‘ad war’ (reportedly spending $22 million in six weeks) to oppose the tax, which garnered substantial public support and ultimately led to Rudd’s usurpation within his own party, and his replacement by current Prime Minister Julia Gillard.  The latter introduced a substantially watered down version of Rudd’s original proposal, which after much debate was finally passed by the Senate in March of this year.  In the intervening years of course, the mining industry continued to get as much as possible out of the ground.

The sense of urgency that underpins Rudd’s proposal and the industry’s response is partially down to the limited shelf-life that mining invariably has.  Australia’s resource boom is reliant on the continued demand from China.  Any shift in this balance could have a major impact on the sector.  And with China’s rapid industrialisation likely to slow down in the years ahead and its burgeoning resource interests in Africa, this is probable within the next decade.  The problem emerges then: what will happen to the Australian economy once mining goes?  Given the entanglement of mining in most other sectors of the economy, and the blasé attitude of State and Federal Governments to taxation and strategic land-use planning, the sudden evacuation of mining could leave behind complex economic, environmental and social problems.

III

My short trip to Australia was split between the cities of Sydney and Newcastle in New South Wales (NSW).  While not the State most readily associated with the mining boom, NSW is nevertheless fertile ground on which to witness the anxious mix of activities that currently make up Australia’s economy.  Take the aforementioned Hunter Region, for example, in which coal-mining, wine producing, organic agriculture, tourism, and horse-breeding are expected to co-exist within a few kilometres of one-another.  This tenuous land-use balance is further exacerbated by plans to introduce coal-seam-gas exploration in the region.  Meanwhile, the region’s major city, Newcastle, a former steel-town whose major employers now include a teaching hospital and a university, is caught between its industrial and post-industrial identities.  Newcastle’s funky restaurants, cafes and bars are tucked in corners and hidden in infinitesimal pockets parsed between a curious mix of dereliction and porn shops counterpoised by shiny waterfront redevelopments fronting an incongruous vista of colliers – their foghorns a constant aural interruption in the city –lining the quays to transport the region’s coal.  Newcastle extends and blends in low-density ribbon development into a series of former coal towns that have over time amalgamated into a sort of commuter/consumer region underpinned by a ubiquitous car culture.  Driving through this dispersed landscape of shopping malls and retail parks one is confronted by an uncanny resemblance to the culture of consumer confidence that characterised the Celtic Tiger era in Ireland.

To an outsider visiting Australia – especially coming from Ireland where a pervading sense of crisis has been the norm for the past four years – I find the breezy self-confidence that many Australians attach to their economic prospects unnerving.  I am not the first Irish visitor to feel this way.  In a recent piece, David McWilliams comments on a 136 page property supplement in the Sydney Morning Herald, rhetorically posing the question: “Now where have we seen all that before, and what did it signal?”.  In March 2011, the median house price in Sydney was $595,745, and while prices have been levelling off over the last couple of years the cost of property is still uncomfortably inflated.

The mines are far from the image of Sydney as one of the world’s most liveable cities.  But in many ways the city is underpinned by the mining industry also.  Here I stay with a good friend of mine, whom I’ve known for pretty much my whole life.  He’s residing here now, making a good living working in construction.  While showing me the sights he provides me with ample evidence of a seemingly unrelenting wave of new property development.  Pointing in turn to each of the cornucopia of cranes and skyscrapers that populate the city’s skyline, he gives me a potted history of the extensive transformation that Sydney has undergone since he moved here from Cork six years ago.  On the ferry to Manly, I get a good sense of how the city is shaped by the topography of the coastline.  We sit at the rear of the boat and watch as Sydney harbour gives way to the other inlets that make up different neighbourhoods in the city.  My friend points them out as we pass by; “Those apartments are all new”, “Those houses there are worth millions”, “That there is a private beach for the people living in those houses”, he tells me.  “Some wealth in this city at the moment”.  Along the coastline the cranes stand tall, like lighthouse beacons.

As the cranes tower above the city, the consumer economy below swells on every conceivable front.  On my first night here my friend and his partner take me to a Lebanese restaurant so packed to the rafters that the cacophony of different conversations forces everyone to speak a bit louder to be heard over the din.  And this isn’t so much the exception as the rule.  In both Sydney and Newcastle, the morning cafes are filled with pre-work and post-exercise patrons, the shopping centres are slowed to a crawl by ambling consumers with time and money to spend, and the retail parks are caught in a repetitive orbit of cars circulating in and out of their environs.

In the area around Bondi Juntion the Irish predominate.  Walking through the streets here we pass by the open windows of a bar through which a sea of multicoloured GAA jerseys are visible.   We meet my partner’s sister – who has lived in Sydney for two years and hopes to stay longer – at a local snooker club where her friend is playing, before moving on to one of the two big Irish bars in the vicinity.  We are ushered into what, for all intents and purposes, is a foreign country.  It’s not so much the decor – which is replicated the world over – or the beer – which is Australian bog-water of the highest calibre – but the fact that the hundreds of people wheeling and trundling past me are all, as far as I can tell, Irish.  As the night progresses I am more than once overtaken by the uncanny sensation of coming back to myself, realising that I had forgotten momentarily I was in Australia.  There is a duo playing traditional style versions of Irish and other songs.  They sound like any other pub band that can be heard in the thousands of locals in hundreds of towns and villages around Ireland of a Saturday night.  And that is part of the dissimulating affect they produce.  The familiar noise and action, the Irish accents, the tanned but recognisably Irish faces, all blur together to reproduce an atmosphere so redolent of those innocuous aspects of home that you drop your guard and are left wondering how you forgot where you were.

Later a DJ has taken over from the band.  He is doing well to continue this re-creation of your average Irish pub by playing a mix of generic pop and dance tunes.  One of our group, a labourer from Galway, tells me how much he loves this pub.  He is smiling a smile of such bliss and fond reminiscence that is looks as though he is recalling a cherished childhood memory.  He tells me that the village where he is from has a population of only around three hundred, and that thirty of them are here in Australia.  “There were ten of us came out together sure” he elaborates.  But I don’t get the impression that they all came looking for adventure, to see another place and experience another life.  They came for work.  Whilst he likes it here, I also get the sense that he’d be as happy at back in Ireland if he could find a way to make a living there.  And rather than experiencing all that Sydney has to offer, he would prefer to stake out a little corner of it where he can feel at home.  Judging by the crowds here tonight, he’s not alone in this preference.  “Some of these lads here” my friend explains to me later “they don’t want to out in the city where they’re made feel different.  They just want to come here where they don’t have to worry what people think and they can be themselves”.

This is by no means to suggest that all of the Irish here are living under conditions of forced exile.  Most of the Irish I meet during my visit love it here.  They enjoy the fine weather and the beaches, the good food, and the ubiquitous quality of life.  And they also enjoy the opportunities available through Australia’s booming economy.  This is more than just the fact of being able to get ‘a job’.  A number of people tell me that the opportunities they are given here for career advancement and the extent to which the companies they work for are willing to invest in them personally is something they fear would not be matched in Ireland.

But the nature of the Irish adventure in Australia is changing.  Back during the boom Irish people tended to go to Australia with the intention of staying for a couple of years.  Some of those people ended up staying longer, but a sizable proportion followed a similar trajectory: They returned to Ireland to settle down, to have families, to buy a house, to get set up with a good job in the booming Celtic Tiger economy.  Now many of the conditions that justify that return have evaporated.  “In my first few years here” my friend tells me “there was a lot of people coming and going all the time.  But for the last four years pretty much everyone has stayed”.  While there are other factors involved, it is for economic reasons that they stay.  Even from the other side of the world, Ireland’s prospects look bleak.  Yet there are other factors that influence these decisions.  Australia is far away and it is difficult and expensive to get back to visit family and friends in Ireland.  Thus a particularly tense question emerges for the Irish here regarding if and when they should return home.  Of those I talk to over here, almost none can answer this with any degree of certainty.

As it stands then, Australia is one of the places that are potentially warehousing a sizable proportion of Enda Kenny’s dole queues.  As per tradition, emigration does much to mitigate Ireland’s problems with unemployment.  But what happens to the Irish in Australia if Australia’s booming economy ceases to boom is an open question.  Whether people will elect stay in Australia, return to Ireland, or move on somewhere else has perhaps as much to do with variegated geographical conditions in the global economy at the time of any potential downturn as it does issues of personal choice.  Part of the irony here is that Australia is undoubtedly casting a nervous eye on countries like Ireland and thanking its lucky stars that it’s not facing similar challenges.  But this consciousness of how much of the world is mired in crisis must also influence the Government’s reluctance to jeopardise the economic growth they have by putting the regulatory breaks on the mining sector.  Not only is the mining sector developing at a rate that other sectors can’t keep up with, but it has pushed up house prices to unsustainable levels, wreaked havoc on the country’s regional economic geography, and raised serious environmental concerns.  All of these conditions suggest more than a hint of a bubble.  In a world still reeling from the fallout of the 2008 global financial crisis, Australia’s resource boom is managing to insulate the country.  But perversely, it is also the over reliance on this sector that opens Australia up to more severe recession if and when a downturn does happen.

It is wet on the day I leave Australia.  As the plane takes off from Sydney airport a sheet of rain washes the window clean and through it I can see the city’s beaches, golden and sandy and looking incongruous under uncharacteristically grey skies.

Cian O’Callaghan

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