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I was wrong…

Booms are Good

“I was wrong once. It was when I thought I was wrong, but I was actually right”. It’s a saying I’ve used many times in the past… Unfortunately I don’t know its origin, but I guess it goes hand in hand with a reluctance to admit fault.

Booms are Good

Even when dealing with explosives, we usually perceive Booms as being good. An economic boom such as the one we’ve had over the last couple of decades should be heralded with much fanfare and have set us (Australia and all its citizens) up for a secure financial future. Much of this Boom was in Mining and Construction related industries. Some of my recent articles have focussed on Disruptive Technology, but in this case it was a disruptive industry. My “I was wrong once…” dime dropped when I read Tim Sims (of Pacific Equity Partners) recent explanation of what happened with the mining boom:

“it saw pressure on labour… exchange rates and a number of other factors of doing business that caused most of the rest of the economy to under-achieve in very tough circumstances… If you do the analysis (the boom) generated about $100 billion of gross profit… If you trace things through, $15 billion was taken by truck drivers who knew there was a boom on…. $15 billion went to Treasury (taxes). There’s $70 billion left, and that will have gone to Dividends. And then comes the Ah-ha moment, which is that 82 percent of the dividends from our Mining companies are owned by overseas investors”.

So it’s really no wonder why now many people don’t have a feeling of increased wealth from the boom – we gave most of it away! And then we spent a large chunk of what we earned on Jet ski’s and Government handouts that have no lasting wealth benefits. The main reason we’re not in a worse situation now is that the exchange rate has dropped, which has cushioned the effect for our exporters. New Zealand, UK, Ireland and other countries that didn’t have the commodities boom to help them out had to reform industrial relations practices and find competitive niches and have all now turned the corner.

No wonder that real wages growth is now negative for the first time since at least 1990. And with the deflated Australian dollar, imported goods are now more expensive, so our purchasing power is decreasing. Unless we are content to just work for wages, it should also serve as a good warning to all of us about selling off our future profits to overseas companies.

Must see Financial education

I’m calling the 14th of July Queensland State Budget Must See viewing for all households and business people. I am certainly open to learning new things. In a statement two weeks before handing it down, Treasurer Curtis Pitt has promised a Budget that will:

  • Pay down debt
  • Not sell Assets
  • Have less revenue (Mining Royalties falling $3 billion, and profits at Power companies have dropped leading to less dividends to the Qld Government)
  • But spend significantly more on public services, particularly Health and Education

My perception would be that these goals are terrific, but contradictory. I hope we can all learn from these innovative ideas and the promised genuine reform, so we can learn how to be more successful people by applying it to our own finances. I was wrong once….

As always, onwards and upwards!

Fred Carlsson

General Manager

Think outside the body

RD Williams have had success beyond our expectations with our new Simex products. The most recent success was with a Coal Mining company that saw the advantages in being able to extract coal from areas outside the main coal body. With conventional longwall mining or blasting, it can be difficult to economically extract resources out of pockets, so our customer has purchased a TF3000 twin head cutter to use on an excavator. The cutter will scrape the coal out for it to then be loaded and recovered, rather than being left behind. This is smart thinking, and shows the lengths an increasing number of companies are going to in order to increase productivity and the return from their Assets.