As Australia’s mining boom turns to bust, Towns are Dying the Death of a Thousand Cuts as Miners Leave in Droves.
Locals say the main street of Dalby resembles a ghost town these days – a sad indication of a mining boom ending too soon for some.
Things have taken a turn for the worse since the glory days of the mining construction boom, with companies responding to falling commodity prices by pulling the plug on new projects and laying off workers across the Surat Basin.
The increasing exodus of workers, investment and money from the mining towns has left houses empty and businesses struggling, with many of those left behind wondering what to do next.
Di Reilly, owner of Mary’s Commercial Hotel on Dalby’s Cunningham St, said much had changed since 2013 when thirsty miners packed into the pub every Friday and Saturday night.
“We used to open the old bar up and the whole place would be chock-a-block,” she said.
Things were going so well that Ms Reilly began a revamp of the pub before the numbers tapered off, leaving her with a half-renovated bar and plummeting income.
The old bar now sits unrenovated and empty, a dusty reminder of plans gone awry.
“They were saying it was going to last 10 years but it hasn’t,” she said.
“I was going to do the whole pub up, so I was banking on it that they would be here a little longer than they were, but it just stopped all of a sudden. It just got cut off.”
The impact on her bottom line has been astonishing, with turnover last December down $100,000, slashed in half from the previous year.
Down the road, electronics retailer Colin Fountain speaks of the boom in the past tense.
“I’ve definitely noticed a slowdown. Sometimes when you look down the street you’d think you were in a ghost town,” he said.
Further west in Chinchilla, the effects of the mining construction boom have mainly been felt in the real estate sector, where rents and house prices doubled from cashed-up workers arriving in the town.
Long-term residents said many pensioners had been forced to leave because of high housing prices and now that prices had fallen some weren’t coming back.
One real estate agent said “a hell of a lot” of property was on the market – about 400 houses were for rent or sale and buyers were scarce.
Record Low Interest Rates
On February 3, and in response to tumbling oil and mineral prices, and irrational deflation worries, Australia Cut Interest Rates to Record Low.
Australia cut its benchmark interest rate to a record low of 2.25% Tuesday, joining a procession of central banks that have eased policy settings this year in response to the deflationary impact of tumbling oil prices.
The 0.25-percentage-point cut represents a dramatic shift for the Reserve Bank of Australia—which ended 2014 with a message to financial markets that interest-rate stability was likely to feature again in 2015, to help underpin certainty for businesses and support the economy as a mining-investment boom fizzles out.
The Australian dollar fell sharply on the announcement of a cut, dropping to a fresh 5½-year low, while the stock market surged to the highest level since May 2008.
The Reserve Bank of Australia joins the Monetary Authority of Singapore, Reserve Bank of New Zealand, European Central Bank, Bank of Canada and the central banks of India, Denmark and Switzerland in either announcing substantial policy shifts or easing monetary settings—in some cases dramatically—since Jan. 1.
Throughout last year, Australia’s central bank repeatedly stressed it would be appropriate for rates to remain stable for some time. It removed that reference on Tuesday, leaving open the door to more cuts.
In Tuesday’s statement, Mr. Stevens said the jobless rate—currently 6.1%—would likely peak a little higher than had been anticipated.
I need a definition of “little” and also a definition what had been “anticipated“.
The statement made by Stevens can literally mean anything. Most likely, little really means little. And given that central bankers are totally clueless, it’s highly likely what had been anticipated was far too low.
Thus, vagueness aside, I will bet on the “over” line, “way over” in fact. With no recession in 23 years, and with wages and prices of goods dramatically out of line with the rest of the world, and with one of the world’s biggest property bubbles, the upcoming recession in Australia will be a doozie.
Expect Interest Rate “Shock and Awe”
Australia has room for 9 quarter point cuts before zero is hit. But cuts won’t happen that way. Accompanied by some sort of shock-and-awe statement, I expect Australia to cut rates 100 basis points or more at some point.
Addendum – “Houses and Holes” – Tweet from Steve Keen
Shortly after finishing the above, I heard from Steve Keen who emailed …
“Good read mate–I’ve tweeted it. It’s rather weird to watch my home country as an observer from England now. A colleague describes Australia’s economic policies as ‘Houses and Holes’, and that about sums it up. Now all that’s left is a property bubble and flogging our real estate to overseas borrowers–which coincidentally pretty much describes economic policy in the UK as well.“
Mike “Mish” Shedlock