It was a devastating blow for the Illawarra. The closing of blast furnace 6 at BlueScope Steel’s iconic Port Kembla steel works brings to end steel exports from Wollongong and means 1,100 job losses.
Last week it was Qantas, announcing 1,000 job cuts despite a $250 million dollar profit.
Both companies blamed the high Australian dollar and fierce overseas competition for their decisions. And what’s causing the high Australian dollar? It’s the mining boom, stupid.
The crux of the issue is of course those sky-high commodity prices. With Australia’s terms of trade (the ratio of the price of our exports to the price of our imports) at their highest levels since the gold rush of the 1850s, Australian consumers have never found it easier to buy overseas goods.
Those terms of trade are driving up Australia’s currency, and making it desperately hard for export industries like BlueScope’s steel exports or Australia’s universities and English-language colleges to compete. The disease affects not just pure exporters, but also businesses that compete with imports, like manufacturers of solar cells for the domestic market. As Tim Colebatch observed pointedly today in The Age, the resources boom forces Australians to confront the question “does it matter to Australia if we have a steel industry or not?”
The consequences of the mining boom are in fact felt most keenly in those parts of the country which play host to huge mining developments. It’s not just the crazy rents and incipient social problems of places like Port Hedland, or the difficulties that nurses and ambulance drivers have finding affordable accomodation in Perth. Australians are also beginning to realise that the mining boom will necessarily involve a level of economic restructuring that few of us were ever asked about.
As a result, many of us are waking up to the fact that the huge resources projects going ahead in Queensland and Western Australia may mean real pain ahead for the many workers and small businesses caught in the cross-fire of a soaring dollar and uncompetitive local industries. As Mark Bahnisch blogged yesterday, “what we will no doubt continue to see is far from some sort of painless and necessary ‘structural adjustment’ — unless our destiny in a globalised economy is indeed to be a quarry. That’s very far from the vision of value-added manufacturing, innovation and smart services that accompanied the opening up of Australia’s economy by Labor in the 1980s and 90s.”
One thing’s for sure: when push comes to shove, ordinary workers will miss out long before any executives are forced to walk the plank. BlueScope CEO Paul O’Malley, for instance, received a $720,000 bonus for the year to June — the same year that BlueScope lost a billion dollars in the run up to the decision to lay off 1,100 workers. A BlueScope spokesperson told the Illawarra Mercury that one reason for O’Malley’s bonus was “the retention of cost reductions achieved in 2010”. Rewarding a CEO for “cost reductions” is a nice way to spin a bonus for retrenching workers.