Holden to stop building cars in Australia in 2017

 
  don_dunstan Minister for Railways

Location: Adelaide proud
Given your handle, I suppose we shouldn't be  surprised by endless biased drivel. Does it get boring to produce, 'cause it certainly gets boring to read?
fzr560
Who is forcing you to read it?

Please feel free to pull on your Ayn Rand mini-skirt and entertain us with interpretive dances about how much better off we'll be in ten or twenty years when our GDP is next to nothing because it's what the free market wanted.

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  northbritish Chief Train Controller

And we wonder why businesses are closing down in Australia - banana republic coming to a town near you.!



ONLY $150 million a year will save Holden? Rubbish. The Holden Enterprise Agreement is the document that has utterly sunk Holden's prospects. It defies belief that someone in the company isn't being held to account for it.

Holden's management masks a union culture beyond most people's comprehension. Employment costs spiralled way beyond community standards long ago. Neither "pay freezes" nor more money will save Holden, but getting the Fair Work Commission to dissolve the agreement and put all workers on the award wage might be a start.



In 1991, the pre-enterprise bargaining award wage of a Holden entry level process worker was $462.80 a week. In 1992, Holden began enterprise bargaining and now a worker at that same classification level has a base rate of $1194.50 a week, a 158 per cent increase, or a compound increase of 4.4 per cent year on year for 22 years. Right now, base wage rates for process workers in the Holden enterprise agreement are in the $60,000 to $80,000 per year range and in recent times, "hardship payments" of $3750 were given to each worker.

The modern award for such workers mandates base rates in the $37,000 to $42,000 range. This means that before we add any of the shift penalties, loadings, 26 allowances and the added cost of productivity restrictions, Holden begins each working day paying its workforce almost double what it should. After you add in the other employment costs, I estimate Holden's workforce costs it somewhere close to triple the amount it should.



Many people who work at Holden don't actually work for Holden; they work for the union. Occupational health and safety people are given 10 days' paid time off a year to be trained by the union. Most companies do not allow unions to train their OH&S people because the knowledge is used to control the workplace to the benefit of the union.



Union delegates are also allowed up to 10 paid days a year for union training in how to be effective union delegates and two of these delegates are entitled to an extra Holden sponsorship of one paid month off to "further their industrial and/or leadership development".

Holden's rules on hiring casuals are shocking and unheard of in today's market. The agreement forbids Holden from hiring casuals except when a "short-term increase in workload, or other unusual circumstances occurs". If this situation arises Holden has to "consult and reach agreement" with the union. Further, "Engagement of the agreed number of casual personnel will be for the agreed specified tasks and the agreed specified periods." If any of this changes, Holden must get union agreement again. After three months of continuous full-time work a casual must be made permanent. It is impossible to run a business like this.



An ex-employee from Adelaide, on condition of anonymity, consented to an interview yesterday. He described the workforce as "over-managed", with one team leader for every six workers on the production line, when one for every 25 workers would suffice.

He said "some of us workers felt it wasn't necessary to get paid what we were getting paid to do the jobs we were doing", adding that their work is probably worth about "20 bucks an hour". A few years back, mates took redundancy packages in the order of "$280k plus". Workers are "like sheep" that blindly follow the union leadership. At induction, new workers are ushered into one-on-one meetings with the union rep who

heavies them into joining. "It is made clear that if you don't join the union you will be sacked," he said. Union representatives "don't actually do any work for Holden", but rather make themselves full-time enforcers of union control.



He says workers are drug tested before hiring, but "only have to stay off it for a few weeks, get in the door and then you'll be right". Workers caught taking drugs or being drug-affected at work are allegedly put on a fully paid rehabilitation program, with special paid time off of about four weeks duration, before being let back into the workforce. Australian workplaces have a zero tolerance for drug use, with instant dismissal the remedy, but at Holden "the union won't let the company sack" any workers caught dealing, taking or being on drugs. "If they did a random drug test tomorrow they'd probably have to sack 40 per cent of the workforce," he adds.



If the Holden scenario were playing out in a privately owned business, proper cost-cutting strategies would be used. If you have the will and can hire the skill, there are many ways to cut labour costs. The workers can be given a couple of years notice of significant wage drops and can receive lump sum payouts of entitlements to help bring down family debt.



Of course, these strategies are only ever used by business people who have no one else to bail them out. It seems Holden would rather leave the country than dissolve its enterprise agreement. The union thinks members are better off jobless than on award wages. Holden's fate seems sealed.



When Holden does leave, workers will receive the most generous redundancy benefits around. Holden says leaving will cost $600m. Most of this will go to staff payouts. The fellow interviewed agrees with my calculation: the average production-line worker will walk away with a redundancy package of between $300k-500k.



So there you have it, some food for thought.
  michaelgm Chief Commissioner

And we wonder why businesses are closing down in Australia - banana republic coming to a town near you.!



ONLY $150 million a year will save Holden? Rubbish. The Holden Enterprise Agreement is the document that has utterly sunk Holden's prospects. It defies belief that someone in the company isn't being held to account for it.

Holden's management masks a union culture beyond most people's comprehension. Employment costs spiralled way beyond community standards long ago. Neither "pay freezes" nor more money will save Holden, but getting the Fair Work Commission to dissolve the agreement and put all workers on the award wage might be a start.



In 1991, the pre-enterprise bargaining award wage of a Holden entry level process worker was $462.80 a week. In 1992, Holden began enterprise bargaining and now a worker at that same classification level has a base rate of $1194.50 a week, a 158 per cent increase, or a compound increase of 4.4 per cent year on year for 22 years. Right now, base wage rates for process workers in the Holden enterprise agreement are in the $60,000 to $80,000 per year range and in recent times, "hardship payments" of $3750 were given to each worker.

The modern award for such workers mandates base rates in the $37,000 to $42,000 range. This means that before we add any of the shift penalties, loadings, 26 allowances and the added cost of productivity restrictions, Holden begins each working day paying its workforce almost double what it should. After you add in the other employment costs, I estimate Holden's workforce costs it somewhere close to triple the amount it should.



Many people who work at Holden don't actually work for Holden; they work for the union. Occupational health and safety people are given 10 days' paid time off a year to be trained by the union. Most companies do not allow unions to train their OH&S people because the knowledge is used to control the workplace to the benefit of the union.



Union delegates are also allowed up to 10 paid days a year for union training in how to be effective union delegates and two of these delegates are entitled to an extra Holden sponsorship of one paid month off to "further their industrial and/or leadership development".

Holden's rules on hiring casuals are shocking and unheard of in today's market. The agreement forbids Holden from hiring casuals except when a "short-term increase in workload, or other unusual circumstances occurs". If this situation arises Holden has to "consult and reach agreement" with the union. Further, "Engagement of the agreed number of casual personnel will be for the agreed specified tasks and the agreed specified periods." If any of this changes, Holden must get union agreement again. After three months of continuous full-time work a casual must be made permanent. It is impossible to run a business like this.



An ex-employee from Adelaide, on condition of anonymity, consented to an interview yesterday. He described the workforce as "over-managed", with one team leader for every six workers on the production line, when one for every 25 workers would suffice.

He said "some of us workers felt it wasn't necessary to get paid what we were getting paid to do the jobs we were doing", adding that their work is probably worth about "20 bucks an hour". A few years back, mates took redundancy packages in the order of "$280k plus". Workers are "like sheep" that blindly follow the union leadership. At induction, new workers are ushered into one-on-one meetings with the union rep who

heavies them into joining. "It is made clear that if you don't join the union you will be sacked," he said. Union representatives "don't actually do any work for Holden", but rather make themselves full-time enforcers of union control.



He says workers are drug tested before hiring, but "only have to stay off it for a few weeks, get in the door and then you'll be right". Workers caught taking drugs or being drug-affected at work are allegedly put on a fully paid rehabilitation program, with special paid time off of about four weeks duration, before being let back into the workforce. Australian workplaces have a zero tolerance for drug use, with instant dismissal the remedy, but at Holden "the union won't let the company sack" any workers caught dealing, taking or being on drugs. "If they did a random drug test tomorrow they'd probably have to sack 40 per cent of the workforce," he adds.



If the Holden scenario were playing out in a privately owned business, proper cost-cutting strategies would be used. If you have the will and can hire the skill, there are many ways to cut labour costs. The workers can be given a couple of years notice of significant wage drops and can receive lump sum payouts of entitlements to help bring down family debt.



Of course, these strategies are only ever used by business people who have no one else to bail them out. It seems Holden would rather leave the country than dissolve its enterprise agreement. The union thinks members are better off jobless than on award wages. Holden's fate seems sealed.



When Holden does leave, workers will receive the most generous redundancy benefits around. Holden says leaving will cost $600m. Most of this will go to staff payouts. The fellow interviewed agrees with my calculation: the average production-line worker will walk away with a redundancy package of between $300k-500k.



So there you have it, some food for thought.
"northbritish"


Here's some additional food for thought, $600m in leaving costs. And assuming the package is $300k, by 2900 employees, equates to $870m, somebody is pulling your leg, or engaged in ill informed union bashing.
Without seeing the EA document, it's had to tell, but chances are it was out of balance.

But the hypocrites on the side line get under my skin, insisting people should take a drop in their pay, but NIMBY.

As for Holden that should be put to bed, done and dusted.
Toyota on the other is a different matter, if they do decide to vary their EA, to give the company a better chance, then I suggest they DO NOT vary their employment conditions, for the purpose of redundancy, because you guys are next.

There or only two effective ways to break a union, in a strong shop,
1) AWA, no bargaining power for the employee, divide and conquer.
2) Close the plant entirely.

Trust me, it happened to me last year.
I was paid all my entitlements, 3 weeks for every year, all unused leave (annual, long service, sick) plus shift loading.
And I was paid better than the average figure that you quoted for the Holden workers($60-$80k) and more than 25 years service, still not even close to $300k mark.
  don_dunstan Minister for Railways

Location: Adelaide proud
That article was written by Grace Collier and appeared in the Australian.  I'm with michaelgm, I'm really not sure of some of those claims she's making there. For instance, Mike Devereux told the government in June this year that the average wage for a production worker at Holdens was about $55,000 including bonuses and penalties.  That compares to that article's claim of a base rate in the $60,000-$80,000 range; this is what she said were 'base wages', not including penalties and overtime.  So which figure is right?

Also, a lot of that article is based on "An ex-employee from Adelaide, on condition of anonymity, consented to an interview yesterday..."  Now I don't know about you but when I read things like that I tend to disregard them as either here say or opinion; there's no way to prove any factual basis to those claims. Grace Collier is not an impartial observer or a journalist - she's actually a consultant who runs her own business specialising in assisting and advising large companies on dismissing employees and removing unions from workplaces; the consultancy is called dismissals.com.au.
  don_dunstan Minister for Railways

Location: Adelaide proud
But the hypocrites on the side line get under my skin, insisting people should take a drop in their pay, but NIMBY.
michaelgm
I was sorry to hear that you lost your job last year.

I agree with you about the NIMBY thing - people who are shouting for cuts in wages of the semi-skilled are never prepared to consider doing this themselves.  There's extraordinary cost pressures on average people living in 21st century Australia.  Consider this: the average house price in Sydney is approaching nine times the median yearly income - that's nine years wages before tax that's required for the average Sydney house.  In the mid-seventies it was three.
  don_dunstan Minister for Railways

Location: Adelaide proud
Peter Costello wrote an interesting article for the Herald-Sun yesterday in which he blamed Holden's demise on the Hawke-Keating government for floating the dollar and progressively removing tariffs as the key cause for Holden's demise.  I think he fundamentally has a point there but it kind of surprises me that he would pin this on the Labor party because really it was a bipartisan policy; if anything Howard was more of the same.

It's also fair enough to note the general point that North British was making above; that the unions were pushing the envelope on wages - I'm not disagreeing with that but then again living in this country is extremely expensive.  And wages alone were not the issue; if they were then they wouldn't be moving production to South Korea where their GM workers actually earn more than ours.

I think the extreme cost of housing in our country is something constantly overlooked.  It's interesting to note that Julia Gillard's house in Altona (the same part of Melbourne as Toyota's manufacturing plant) was bought in 1998 for $140,000 and sold a few weeks ago for $921,000; that's close to a 700 percent appreciation in 15 years; wages have certainly not gone up by anywhere near that amount.  Just imagine being on the assembly line at Toyota with a young family and trying to save up for an average Altona house - it would be damn near impossible.
  waxyzebu Locomotive Driver

That article was written by Grace Collier and appeared in the Australian.  I'm with michaelgm, I'm really not sure of some of those claims she's making there. For instance, Mike Devereux told the government in June this year that the average wage for a production worker at Holdens was about $55,000 including bonuses and penalties.  That compares to that article's claim of a base rate in the $60,000-$80,000 range; this is what she said were 'base wages', not including penalties and overtime.  So which figure is right?

Also, a lot of that article is based on "An ex-employee from Adelaide, on condition of anonymity, consented to an interview yesterday..."  Now I don't know about you but when I read things like that I tend to disregard them as either here say or opinion; there's no way to prove any factual basis to those claims. Grace Collier is not an impartial observer or a journalist - she's actually a consultant who runs her own business specialising in assisting and advising large companies on dismissing employees and removing unions from workplaces; the consultancy is called dismissals.com.au.
don_dunstan
There is some merit in the points made in that article, but it's also clearly union demonisation and should not be read with an unquestioning eye. I like the attempt to boost credibility with the anonymous interview... not.


But the hypocrites on the side line get under my skin, insisting people should take a drop in their pay, but NIMBY.
michaelgm
Oh yeah, exactly...


It's also fair enough to note the general point that North British was making above; that the unions were pushing the envelope on wages - I'm not disagreeing with that but then again living in this country is extremely expensive.
don_dunstan
Yeah, sure they were. Sometimes the unions might go too far, but in reality pushing for better conditions is what unions do, just as management and governments push the other way and ultimately move production offshore. I suspect the factory would have closed even if the workers were being paid less.


I agree with you about the NIMBY thing - people who are shouting for cuts in wages of the semi-skilled are never prepared to consider doing this themselves. There's extraordinary cost pressures on average people living in 21st century Australia. Consider this: the average house price in Sydney is approaching nine times the median yearly income - that's nine years wages before tax that's required for the average Sydney house. In the mid-seventies it was three.
don_dunstan
Yeah, but let's rally the troops against those greedy unionised workers who have managed to get better conditions than the downtrodden majority. No-one's gonna have it better than me (except the rich pricks)... The same thing happened in the US with attacks on unionised public sector workers led by the elite.


Many people who work at Holden don't actually work for Holden; they work for the union. Occupational health and safety people are given 10 days' paid time off a year to be trained by the union. Most companies do not allow unions to train their OH&S people because the knowledge is used to control the workplace to the benefit of the union.

Union delegates are also allowed up to 10 paid days a year for union training in how to be effective union delegates and two of these delegates are entitled to an extra Holden sponsorship of one paid month off to "further their industrial and/or leadership development".
northbritish
Ten days of training and several meetings per year for a small handful of employees means they work for the union, not Holden? Ummm no. Reps have to be trained somehow, and ten days ain't that much... How would the author of that article like it to be? In many other workplaces there are no effective OH&S and union reps at all, in others they are bullied by management for making a stand or isolated and shut out of discussion, framed and sacked, while the rest of the debt-laden workforce looks on, ostensibly confident but quietly terrified.


Peter Costello wrote an interesting article for the Herald-Sun yesterday in which he blamed Holden's demise on the Hawke-Keating government for floating the dollar and progressively removing tariffs as the key cause for Holden's demise. I think he fundamentally has a point there but it kind of surprises me that he would pin this on the Labor party because really it was a bipartisan policy; if anything Howard was more of the same.
don_dunstan
I read that one, too. He said Ben Chifley supposedly knew that Holden could not have competed in an economy without tariff protection, which I also think was a slight twist given that tariffs were the norm back then - were they seriously contemplating removing them at the time? I think not...

Costello also said that the job wasn't done properly, because labour and wages should have been liberalised/deregulated at the same time as the tariffs were removed. From an elite globalist perspective it makes perfect sense but, well, of course he'd say that, wouldn't he? On top of that, while labour was not totally deregulated but the unions did lose power under the Prices and Incomes Accord that followed the globalists' tariff removal - the regulation of trade unions was increased by progressively more restrictive legislation and the conditions of the Accord (but they are still a pack of evil thugs). As for Australian workers, they might not be too well informed on economics but I think it's safe to say they aren't globalists at heart, despite the supposedly increased purchasing power globalisation has brought them as consumers over the past few decades, and probably wouldn't mind a bit of protectionism...
  don_dunstan Minister for Railways

Location: Adelaide proud
I like the attempt to boost credibility with the anonymous interview... not.
waxyzebu
The Australian had an editorial a few weeks ago going bunta because their circulation is through the floor and yet according to them they have the best quality journalism in the country.  Stuff like that Grace Collier article tends to convey the opposite.

As for Australian workers, they might not be too well informed on economics but I think it's safe to say they aren't globalists at heart, despite the supposedly increased purchasing power globalisation has brought them as consumers over the past few decades, and probably wouldn't mind a bit of protectionism...
waxyzebu
We're rapidly approaching an 'end game' after 30+ years of financial deregulation and tariff removals.  Add SPC Ardmona to Qantas and Holden as a company unlikely to survive the next few years - apparently they've been threatening to shut what's left of the old grower's co-operative so you won't be able to get Aussie grown preserved peaches or pears in the supermarket once that happens.

Granted we can't wholesale protect every industry or large employer asking for help but I'm just trying to imagine what the future will look like where the only industries that seem to be doing okay are financial services, real-estate agents and housing construction.  Everything else - everything we used to make or grow for ourselves - seems to be in the toilet right now.  What are we going to do for money in ten or twenty years?

The thing that frustrates the hell out of me is this complete ideological commitment on behalf of both the major parties to a completely unrealistic, imaginary idea - the 'level playing field'.

When Howard signed the Free Trade Agreement with Thailand in 2005 they hailed it as being the saviour of Ford because it would allow Territories to be exported to Thailand.  The fine print was that Thai-made Focuses are landed here at zero tariff but Territories are still subject to a 40 or 50 percent tariff when imported into Thailand because the Thais refused to reciprocate, so they cost about AU$80,000 to buy in Thailand. So how is this actually a free-trade agreement?  And how was that supposed to work in our favour?

You've got to come to the conclusion that for whatever reason our own governments - both major parties - have progressively sold us out.  Why?
  waxyzebu Locomotive Driver

The Australian had an editorial a few weeks ago going bunta because their circulation is through the floor and yet according to them they have the best quality journalism in the country.  Stuff like that Grace Collier article tends to convey the opposite.
don_dunstan

The only reason we should read that paper is to help keep up with the propaganda.


Granted we can't wholesale protect every industry or large employer asking for help but I'm just trying to imagine what the future will look like where the only industries that seem to be doing okay are financial services, real-estate agents and housing construction. Everything else - everything we used to make or grow for ourselves - seems to be in the toilet right now. What are we going to do for money in ten or twenty years?
don_dunstan
I'd say the financial sector and housing are headed for big problems, but they're both part of a false dream that many people are still trying to enjoy. No-one wants to believe it isn't true because they saw how rich some people got when things were on the up and up. People like us get in their way.

At the moment we're being bled dry with few genuinely productive employment options and mountains of debt to keep the party going. In the next few decades, the average Australian worker's standard of living, real income, rights and freedoms might decline enough for the globalists to bring the factories back, assuming there is still enough demand for their products to make it worthwhile. Local manufacturing could also be boosted by a high oil price that made global transport less attractive, but that's a very big "could"...


The thing that frustrates the hell out of me is this complete ideological commitment on behalf of both the major parties to a completely unrealistic, imaginary idea - the 'level playing field'. When Howard signed the Free Trade Agreement with Thailand in 2005 they hailed it as being the saviour of Ford because it would allow Territories to be exported to Thailand. The fine print was that Thai-made Focuses are landed here at zero tariff but Territories are still subject to a 40 or 50 percent tariff when imported into Thailand because the Thais refused to reciprocate, so they cost about AU$80,000 to buy in Thailand. So how is this actually a free-trade agreement? And how was that supposed to work in our favour? You've got to come to the conclusion that for whatever reason our own governments - both major parties - have progressively sold us out. Why?
don_dunstan
Pressure from global(ist) economic forces, with the odd payoff or donation, perhaps?
  don_dunstan Minister for Railways

Location: Adelaide proud
I'd say the financial sector and housing are headed for big problems, but they're both part of a false dream that many people are still trying to enjoy. No-one wants to believe it isn't true because they saw how rich some people got when things were on the up and up. People like us get in their way.

At the moment we're being bled dry with few genuinely productive employment options and mountains of debt to keep the party going. In the next few decades, the average Australian worker's standard of living, real income, rights and freedoms might decline enough for the globalists to bring the factories back, assuming there is still enough demand for their products to make it worthwhile. Local manufacturing could also be boosted by a high oil price that made global transport less attractive, but that's a very big "could"...
waxyzebu
It's been a gross mis-allocation of resources, people and businesses put billions into assets like apartments and residential housing with the aim of making money from the capital appreciation or to use as a tax-shelter if they made enough money to make negative gearing worthwhile.  The problem is that housing is now so expensive that first home-buyers can't get in at the bottom any longer - that in itself should tell you the system has become moribund.  

Instead of legislating for the tax system to favour these speculative investment vehicles, Hawke and Keating should have made investment in innovation and manufacturing/agricultural export excellence the primary national pass-time... it worked for Germany.

Instead we're stuck with our cities the most expensive to live in in the world (who'd have thought that twenty years ago - we've always traditionally been a low-cost nation) and almost no industries outside of mining that can financially support our lifestyle into the future.
  waxyzebu Locomotive Driver

Instead of legislating for the tax system to favour these speculative investment vehicles, Hawke and Keating should have made investment in innovation and manufacturing/agricultural export excellence the primary national pass-time... it worked for Germany.
don_dunstan
It really looks like the decision was made back then that Australia was not going to be a manufacturing country... that value-added production and exports were not required for a robust economy, because there were plenty of new global investment and speculatory products available to take their place... and the magical services sector where few would ever have to get their hands dirty again, and where everyone would multiskill to maximise productivity, unions and strikes would be unnecessary because our bosses would love and respect us... the more I think about the rhetoric of the day, the more it makes me sick.


Instead we're stuck with our cities the most expensive to live in in the world and almost no industries outside of mining that can financially support our lifestyle into the future.
don_dunstan
There is a certain irony to the house price situation given how unproductive we are. However, that irony fades when the rest of the global equation is factored in. Surely, a correction must be on the way, yet there are experts still claiming that it won't happen because, for example, the banking system can continue expanding debt to support demand for it indefinitely. In other words, lending rates can be kept low and banks can continue lending to anyone, no matter how risky it might get, until the mass defaults begin. The trouble is that I can't see the demand for mortgage debt growing in real terms indefinitely because it has already gone too far, and the real incomes of many people are already insecure, stagnant or falling.... and it's not as if people are going to be able to save up the ridiculous lump sums required to support overblown house prices through outright purchases, either, so what exactly will be supporting their continued inflation? Chinese investors? Well, the quality of their Australian housing investments is set to take a hit, too, and maybe hard enough even to deter them. The correction might not happen for a few more years, but in the long term, I can't see how we will escape it. Long term support for >$500/week rents on average suburban townhouses is another issue.

It's interesting to think that there are probably quite a few wealthy property investors out there who want the value of their houses to keep going up, but also support an insecure employment environment in which people are temporary, part time or on contracts that can be terminated easily. I'm not saying it's the main problem, but an insecure employment environment does not necessarily mix well with a strong housing market. There are many people out there whose jobs might pay well while they last, but they could be gone next week and only have a few weeks worth of rent saved up for emergencies like that. That sort of environment does nothing to support overblown house prices, and it is becoming the new norm. Oh, hang on... yes it does mix perfectly well with a strong housing market - one in which 1% of the population owns 99% of the housing stock! How silly of me...
  Groundrelay Chief Commissioner

Location: Surrounded by Trolls!
It really looks like the decision was made back then that Australia was not going to be a manufacturing country...
waxyzebu

Even back in the 80's you didn't need to be an economic genius to see that Asia would make traditional Australian manufacturing more and more challenging. The vision was for IT and innovation (R&D) to take Australia into the 90's. We had a low dollar and an English speaking relatively well educated workforce. Multinationals such as IBM established manufacturing here and our car manufacturers started looking seriously at overseas markets with serious R&D.

Trouble is the world didn't wait. Japan continued advancing in leaps and bounds, China opened up to Western investment, South Korea came from no where and India emerged to fill the gaps. As our dollar rose we started off-shoring which took off under Howard/Costello (not that our governments are particularly interventionist). Now even more countries are competing in the low-cost space e.g. Philippines, Indonesia, Brazil, Mexico and former soviet bloc countries.

Problem here is everyone expects someone else to drop their standard of living Rolling Eyes
  waxyzebu Locomotive Driver

Even back in the 80's you didn't need to be an economic genius to see that Asia would make traditional Australian manufacturing more and more challenging. The vision was for IT and innovation (R&D) to take Australia into the 90's. We had a low dollar and an English speaking relatively well educated workforce. Multinationals such as IBM established manufacturing here and our car manufacturers started looking seriously at overseas markets with serious R&D.

Trouble is the world didn't wait. Japan continued advancing in leaps and bounds, China opened up to Western investment, South Korea came from no where and India emerged to fill the gaps. As our dollar rose we started off-shoring which took off under Howard/Costello (not that our governments are particularly interventionist). Now even more countries are competing in the low-cost space e.g. Philippines, Indonesia, Brazil, Mexico and former soviet bloc countries.

Problem here is everyone expects someone else to drop their standard of living Rolling Eyes
Groundrelay

True, the change certainly wasn't without rational basis, but that doesn't mean it couldn't have been made differently. The transition to the new reality started at least as far back as the early 70s. And everyone did know that expensive Western labour could not compete with cheap Asian labour - especially with one way protectionism (i.e. for them but not us). As for Japan, it's still an advanced economy but its real heyday came to an end by about 1990, it has been in recession for much of the past two decades, and the situation has not been helped by competition from new East Asian high tech manufacturing which also pilfers jobs from Australia. I'm not going to pretend that I like the idea of our standard of living having to fall to third world levels in order for more productive industries to return. We'll see what sort of equilibrium can be reached, if we might be so bold as to call it that.
  don_dunstan Minister for Railways

Location: Adelaide proud
There is a certain irony to the house price situation given how unproductive we are. However, that irony fades when the rest of the global equation is factored in. Surely, a correction must be on the way, yet there are experts still claiming that it won't happen because, for example, the banking system can continue expanding debt to support demand for it indefinitely. In other words, lending rates can be kept low and banks can continue lending to anyone, no matter how risky it might get, until the mass defaults begin. The trouble is that I can't see the demand for mortgage debt growing in real terms indefinitely because it has already gone too far, and the real incomes of many people are already insecure, stagnant or falling.
waxyzebu


The short answer is that there's just too many people involved and the scheme has become 'too big to fail' so governments (of every hue) over the last 15 years have been doing all they can to ensure that there's no crash... at least on their watch.

At the core of the problem, the system has been substantially gamed to ensure that there's an artificial price floor built into housing. There's a number of instruments used to do this and they include high population growth through migration (100,000+ people a year move to Melbourne) combined with restrictive urban development practices on the urban fringe, the tax treatment of investment property and (more recently) the relatively free movement of international investment directly into our domestic housing market combined with self-managed super funds pouring money into these 'investment vehicles'.

As you allude, what could potentially happen might be mass defaults/re-valuations on properties leading to our banks becoming insolvent. It nearly happened to one large Queensland-exposed bank post-GFC in 2009 - they had so many delinquent properties in places like the Sunshine Coast that had been seized and re-valued that at one stage they were skating close to insolvency themselves. It was touch and go for a while but they pulled through by drip-feeding residential properties back onto the market and by taking a softer attitude to delinquencies so they didn't have so many technical seizures on their books. The whole show was kept fairly quiet because bringing it out in the open would have caused a massive dent in confidence and primarily it's the only thing keeping the whole thing going... confidence.

There's signs that things aren't as good as they were though, especially with apartments in Melbourne... we're still building flats like crazy here. A large block of mid-range apartments was completed 12 months ago near my house (600+ units) and the immediate result was that many older rental flats near-by have been empty since then... a situation unheard of five years ago. Ultimately if you can't get $400 a week for your flat that's going to affect the bank valuation and I think that's why many investors opt to leave them empty rather than admit defeat and cut rents to meet the market.
  don_dunstan Minister for Railways

Location: Adelaide proud
It really looks like the decision was made back then that Australia was not going to be a manufacturing country... that value-added production and exports were not required for a robust economy, because there were plenty of new global investment and speculatory products available to take their place... and the magical services sector where few would ever have to get their hands dirty again, and where everyone would multiskill to maximise productivity, unions and strikes would be unnecessary because our bosses would love and respect us... the more I think about the rhetoric of the day, the more it makes me sick.
waxyzebu

The irony of a Labor government inflicting that kind of poorly-planned policy on the masses is not lost.

I well remember being told at school "trades are for losers, get a degree because in the future everyone will need to have one". People that I knew at school who became 'tradie' losers are by far and away the winners in the new economy because there was a massive shift of resources away from practical, skills-based training systems into academia so there was a resulting chronic shortage of people who could do things like install a toilet cistern properly or build a perfect brick wall. I think to some extent there's still people out there who believe that you have to be tertiary qualified to be a 'somebody' but the reality is that in the last twenty or so years many people went to university and got degrees in areas that were of really marginal benefit to themselves and the economy in general... they just weren't necessary or needed.
  waxyzebu Locomotive Driver

I think to some extent there's still people out there who believe that you have to be tertiary qualified to be a 'somebody'
don_dunstan

A view popular among MA and MBA undergrads and grads who have been sucked into the system. We only have to look to America to see how useless many of these postnominals can become when the economy goes down the toilet... the market is flooded with debt-laden graduates who have to flip burgers for a living, and/or just stay at university, getting degree after degree to avoid the reality. An MBA is now as useful as an MBE.


There's signs that things aren't as good as they were though, especially with apartments in Melbourne... we're still building flats like crazy here. A large block of mid-range apartments was completed 12 months ago near my house (600+ units) and the immediate result was that many older rental flats near-by have been empty since then... a situation unheard of five years ago. Ultimately if you can't get $400 a week for your flat that's going to affect the bank valuation and I think that's why many investors opt to leave them empty rather than admit defeat and cut rents to meet the market.

There are definitely signs, but they're often outside the media, which still celebrates sub-inflationary (e.g. well under 1%) growth to help sustain public confidence. I've seen quite a few rents quietly dropped over the past couple of years, in some cases by $40 per week. Obviously those landlords couldn't afford the mortgage on a vacant property.
  Groundrelay Chief Commissioner

Location: Surrounded by Trolls!
A view popular among MA and MBA undergrads and grads who have been sucked into the system. We only have to look to America to see how useless many of these postnominals can become when the economy goes down the toilet... the market is flooded with debt-laden graduates who have to flip burgers for a living, and/or just stay at university, getting degree after degree to avoid the reality. An MBA is now as useful as an MBE....
waxyzebu

And yet the country continues to 'need' skilled migrants. Seems a bit of a disconnect!
  don_dunstan Minister for Railways

Location: Adelaide proud
There are definitely signs, but they're often outside the media, which still celebrates sub-inflationary (e.g. well under 1%) growth to help sustain public confidence. I've seen quite a few rents quietly dropped over the past couple of years, in some cases by $40 per week. Obviously those landlords couldn't afford the mortgage on a vacant property.
waxyzebu

Inflation is the fly in the ointment for property investors because it eats away quickly at the accumulated 'value' stored in the 'investment vehicle'. For example, the median house price in Adelaide has been relatively unchanged for the last five years at (about) $400,000. That means in real terms it's actually eased off a bit.

As you say, long-term vacancies are a complete disaster if you don't have the income or capital to keep servicing the debt. I worked with a lady a few years ago who was making $30 p/h like I was and yet together with her (average income) husband she had an extensive property portfolio of three investment properties in the outer west plus their own mortgaged home... she loved to rub it in the faces of the rest of us in the tea-room about how she was going to be a retired 'property millionaire' by the time she was forty.

Anyway - the last I heard she was pregnant and one of her properties had been vacant for nearly six months so the whole formula (built on wafer-thin margins to begin with) had become very perilous and she was desperately trying to figure out how to avoid bankruptcy. When I heard what had happened I wanted to feel sorry for her and her husband but I really couldn't... they were just plain greedy and had no contingency planning. That's what I consistently find astonishing with these small-time property investors; people have no idea what to do if something goes wrong.
  don_dunstan Minister for Railways

Location: Adelaide proud
I was speaking to a mate of mine the other day who works in civil engineering (mostly construction but some other things too) and he's usually a fairly conservative type of bloke - but by no means loyal to any party.

Anyway, in his opinion he said that higher unemployment would not be a bad thing for the Aussie economy because it would help to drive down the cost of wages and subsequently the cost of doing business here.  His argument was that a larger pool of unemployed would be helpful because it would make the negotiating positions of employees much harder - but he also acknowledged that it would cause a lot of hardship for those who lost their jobs. His thinking was that 20 years without a recession was too long and this was causing all sorts of problems with high costs, inefficient work and business practices; once upon a time I probably would have been vehemently opposed to that idea but maybe he's right, who am I to argue.

He was also bagging out industry assistance for people like Holden because he said that ultimately it was a waste of money.  I do see that point of view as a perfectly valid one but on the other hand he was lamenting the shortage of experienced and skilled engineers in this country (457 visa anyone?)... it's kind-of a catch 22 when we are rapidly losing places like Holden where said engineers might be able to gain experience.

Interesting to hear another point of view anyway.
  waxyzebu Locomotive Driver

I was speaking to a mate of mine the other day who works in civil engineering (mostly construction but some other things too) and he's usually a fairly conservative type of bloke - but by no means loyal to any party.

Anyway, in his opinion he said that higher unemployment would not be a bad thing for the Aussie economy because it would help to drive down the cost of wages and subsequently the cost of doing business here. His argument was that a larger pool of unemployed would be helpful because it would make the negotiating positions of employees much harder - but he also acknowledged that it would cause a lot of hardship for those who lost their jobs. His thinking was that 20 years without a recession was too long and this was causing all sorts of problems with high costs, inefficient work and business practices; once upon a time I probably would have been vehemently opposed to that idea but maybe he's right, who am I to argue.
don_dunstan


I don't think he's right about higher unemployment being "not a bad thing for the economy" at all. In fact, reading that along with his rationale, it seems pretty elitist to me. Either way, higher unemployment is happening.

However, he is right about high unemployment driving down wages and making workers' negotiating positions harder, the hardship it causes etc. The impact on wages is fairly simple - more competition among workers for job vacancies tends to put downward pressure on wages. Globalised competition among workers has seen most factories moved to countries where labour is cheaper. That coupled with the fact that most of what's left here is not overly productive and receives little or no protection from tariffs puts downward pressure on Australian wages. But who does that really benefit - the entire economy? I don't think so. It benefits some people, including the ones who get to pay their staff less and keep more for themselves... It is in the interest of employers to have a large pool of unemployed from which they can pick and choose their workers, and easily replace the ones who perform poorly, "cause trouble" or get killed... While some bosses benefit from mass unemployment, those whose businesses depend on working/middle class consumerism certainly won't. In Australia, that represents a large chunk of the economy. For many working/middle class families, the real surplus required for modern consumerism is drying up, leading to dependence on credit cards, a consumerist financial product. Without that consumerism and credit cards, a lot of things would simply vanish. We have all heard that high wages discourage employers from increasing the size of their workforce. Sure, but so does poor productivity (business viability), stagnant or falling demand and low or negative growth. Some businesses probably don't have a place in the future austere economy, but they will blame the workers on their way down in a desperate bid to survive.

Since the real competition for manufacturing jobs is now a global matter, the value of the AUD is another important factor to consider. If its relative value falls, manufacturing here will probably become more attractive... and it is falling, but we aren't going to get everything back in the near future.

As for "inefficient work practices", there might be room for improvement, but I get suspicious whenever I hear the phrase, so I'd really like some elaboration on that one given how many changes have been made to the industrial relations framework over the past 30 years. "Driving down the cost of doing business" is also common doublespeak among anti-worker elites. To some extent I think he is dodging the unavoidable consequences of global economics, which many ordinary workers are also in the habit of doing. Labour in advanced economies is expensive and without hefty tariffs etc it's hard for it to compete with developing nations where workers are plentiful and have virtually no rights. One way of making us competitive again is by plunging us into the pits of poverty so we'll gratefully accept poor pay and conditions. We might not reach the bottom of the pit, but that is the direction in which we are headed.

Ask an American pilot who has to use food stamps or work a second job to survive what he thinks about a low cost of doing business, or ask a law graduate who earns $8 per hour flipping burgers what he thinks about low wages and high unemployment being good for the economy. These people are working their arses off, but they are more "slave" than "employee". Then ask one of those Irish bankers who was caught joking and laughing about mass defaults etc... that might give a clue as to the identity of the real beneficiaries of the high unemployment scenario mentioned above.
  don_dunstan Minister for Railways

Location: Adelaide proud
It's not necessarily an elitist position - many people are convinced by the conservative line of high wages through actual labour shortages or the influence of unions in this country (as discussed earlier in this thread). People genuinely think that there's a labour shortage causing the problems and they're convinced by people like Gina Rinehardt that the only way we can solve it is to either get greedy unions out of the equation, cool the economy or import skilled workers to do the jobs that Aussies are too fussy or lazy to do.

Take for example the recent push to get more people in on 457 visas to drive heavy articulated trucks in Queensland and WA. The people who were demanding this were claiming that they couldn't get skilled drivers in the locations where they wanted them but when you look a bit closer you tend to see things like really unattractive workplace conditions, long hours and poor rates of pay as being the real reasons behind these 'shortages'. It was the same thing with a push a few years ago by a well-known bakery chain to get 457 workers with their claim that they simply couldn't find skilled people; when you scratch below the surface you find that the subtext was they weren't paying anything like standard industry wages; there's no actual shortage per se, it's more like the same old story of driving down wages to extract bigger profits.

As I've been arguing from the start, we need to look beyond 'greedy workers' as the cause for higher costs in this country and identify the real reasons behind our much higher cost base. The culprits in my opinion are a dollar that's way too high, caused by this international currency war between China and the United States; support infrastructure being inadequate or outdated and not suited to task and finally (in my opinion the core of the problem) the really high cost of housing in our major cities leading to worker shortages and demands for much higher wages.

The really high cost of living in a house in this country has more to do with the demand for larger wages than 'greedy unions' or 'inflexible workplace arrangements', although this is always fingered as the main cause. People who drive taxis or clean offices have to have somewhere to live and in the case of places like Sydney or Melbourne there's very few options available to them that they can actually afford on their unskilled wages. Until we can move from being in the top ten most expensive cities for housing in the world then we've got bugger all hope of addressing the wage pressures that people like my mate complain about constantly.