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Daily Archives: July 24th, 2012


Originally published in

There’s an industry which has confronted sweeping job losses recently, and it’s nothing to do with making cars or aluminium. A Crikey analysis has found that 38,000 jobs have been culled from the state and federal public service over the past few years, and a further 24,000 positions may follow.

Not since 1996 has the public service seen anything like it; as many as 62,000 public servants – in an arc stretching from Queensland to Tasmania via Canberra — losing their jobs. Anecdotes abound of incessant office farewells, of teams reduced to skeleton staff, of bureaucrats reapplying for their jobs while the headcount shrinks.

So is this a case of “public service bashing” as premiers look for the easiest way to tighten their budgets – leaving the public with substandard services? Or is it a justified way to balance the books after a halcyon era of bureaucratic expansion?

James Whelan, research director of the Centre for Policy Development’s public service program, says there’s been nothing like it since John Howard cut a third of the public service in 1996. “There are times when the public service is cut dramatically, this would appear to be one of them,” Whelan told Crikey.

The cuts have hit hardest among state bureaucracies, partly because new conservative governments are seeking to demonstrate their fiscal prudence. NSW has cut an estimated 15,000 jobs, while 7500 have gone in Queensland. South Australia is cutting 5150 jobs, Victoria 4200, and Tasmania just under 2000. (These numbers refer to announced job cuts; not all have been implemented yet.)

Federal cuts are proportionally smaller, with 4200 jobs going in 2012-13 — but the Coalition has pledged to make a further 12,000 bureaucrats redundant over two years if it wins the election, due next year.

Governments say almost all positions have been vacated through natural attrition, non-renewal of contracts and voluntary redundancies. Experts predict some cuts will not be voluntary in the future.

Premiers say they are culling jobs to master deficits in tough financial times; bureaucracies are bloated and must make do with less. Whelan rejects the austerity argument, saying Australia has a low national net debt and sacking public servants won’t stimulate the economy anyway.

Whelan says Australia under-invests in its public service compared to OECD countries, and shrinking the bureaucracy affects government services, program delivery, policy advice, and financial management. He sees it as a counterproductive move stemming from an ideological desire to scale back government — and bureaucrats make an easy target because of the misconception that they don’t do much.

“We’ve probably become a little accustomed to public service bashing,” Whelan said. “It’s like the public sector has few outspoken allies or advocates. To the extent that that’s true, the public sector is vulnerable.”

Geoff Gallop, director of the University of Sydney’s graduate school of government (and former WA premier) says the public service boosts economic development, and cites the importance of having enough departmental staff in the early days of the West’s China-led resources boom. Gallop cautions premiers to think twice about slashing public expenditure as the prospect looms of a Europe-led GFC mark 2.

“It’s just too easy to say ‘let’s cut the public sector’. We need a more sophisticated discussion; we’re not getting it. They’re just slashing, and I don’t think that’s a very sophisticated way to proceed,” Gallop told Crikey.

Unions, perhaps sensitive to a lack of public sympathy for the country’s 1.9 million bureaucrats, are focusing on the impact on services. CPSU national secretary Nadine Flood warns there will be longer waits for services and payments; Centrelink call centres are taking up to 90 minutes to pick up — there are reports of some clients falling asleep on the phone — and the baby bonus can take 70 days to process.

Flood says about 75% of federal staff losses are through attrition, with the rest voluntary redundancies. There have been some forced redundancies at state levels.
“It is a tough time to be a public servant. There is a real fear amongst many areas of our membership about what their future holds,” Flood told Crikey.

The union is worried about jobs in regional areas like Geelong, Wollongong, Hobart, Launceston, Wagga Wagga and regional Queensland. Cuts to specialist areas like the CSIRO is leading to a brain drain overseas.

And unions are gearing up for a fight with the Coalition if it wins the federal election. Flood notes that for the Coalition to balance its books and deliver its promises — scrapping the mining and carbon taxes, posting larger budget surpluses than Labor, etc — it would have to sack more than the 12,000 public servants Joe Hockey talks about.

So how much fat was there to cut? Stephen Bartos, an expert in public policy and governance (and executive director at ACIL Tasman) says the cuts are not necessarily a bad thing. But he concedes public servants get a raw deal when compared to the fuss made of cuts to the automotive and defence manufacturing sectors.

“It generally comes down to a political calculus; if you’re a manufacturing plant in a marginal seat you’re a bit more likely to find yourself getting government assistance. Public sector cuts? Bit different,” Bartos told Crikey. “There is a degree of taxpayer resentment of the public service.”

However, Bartos points out that premiers like Newman have a mandate to shrink the bureaucracy. He says that from time to time the public service needs a clean-out. He cites NSW, where he says the bureaucracy does not currently have a strong reputation for competence.
“There’s a demonstrable need for change,” he said. “These [job cuts] aren’t always bad things … it’s not all negative.”

Bartos points to the concept of “creative destruction” — where some industries have to shrink or die in order to allow new, innovative industries to boom, as part of the inexorable march of capitalism. (The concept does not seem to have been applied in any great rigour to cars or aluminium, mind you.)

And Bartos says with national unemployment sitting just over 5%, many bureaucrats will find new jobs. They are well-trained in skills needed in the services industries IT and communications skills are in high demand, including in regional areas. And there is an increasing amount of movement between the public, private and not-for-profit sectors — that can be a good thing, according to Bartos.
“The days in which the public service was a career for life are probably gone,” he said.

Bartos may be putting on a brave face but he is concerned about the loss of the most capable and employable bureaucrats — who are often first in line for redundancies — and the ensuing loss of talent and corporate memory. A new generation of managers may not know how to handle job losses while managing morale.

Opinions may differ as to the wisdom of culling 38,000 public service jobs (with another 24,000 on the line), but Crikey’s experts agreed on one thing: cuts on this scale are very significant and there should be a full and informed debate about whether the cuts are needed, and the trade-offs that are being made in terms of services and capacity. And the debate should go beyond “public service bashing”.

Public service cuts: where the axe has fallen

A Crikey analysis has found 38,000 public service job cuts have been announced at the federal and state levels over the past few years. A further 24,000 positions are on the line (the federal Coalition says it will cull 12,000 positions, while the Queensland government has hinted at a possible further 12,000-20,000 job losses).
Here’s where the axe has fallen …

Federal government:
Job cuts of 4228 announced in 2012-13 budget, to take effect this financial year (this does not include an additional 1154 jobs for Defence military and reservists, because they are not public servants). Largest cuts are to Treasury, Attorney-General’s, and Human Services. Joe Hockey has said if the Coalition wins government it would make 12,000 public servants redundant over two years. Hockey noted there were 20,000 more federal public servants now than there were in 2007; unions expect the Coalition to sack more than 12,000.
Total: 4228 full-time equivalent jobs to be cut, rising to 16,000 if the Coalition wins.

New South Wales:
Some 5000 voluntary redundancies announced in September 2011 (O’Farrell government).
Additionally, the 2012-13 budget set a 1.2% per annum reduction in labour costs across the public service, which unions say equates to 10,000 jobs. The government says nurses, police officers and school teachers will be quarantined, and concedes there is no cap on the number of jobs to go, so it could be higher than 10,000.
The Labor opposition says Treasury documents show 3600 jobs will be cut from hospitals and 2400 from schools and TAFEs over the next four years.
Total: 15,000 FTE job cuts announced since 2011; that may rise.

In May 2011 the former Labor government announced 3500 voluntary redundancies over three years, extending the program in early 2012 to cover an extra 1500 positions. (An estimated 4500 jobs were cut as a result.)
Additionally, Premier Campbell Newman has said about 3000 jobs have been cut recently (most from non-renewal of temporary contracts). About 2000 jobs are to go from Queensland Rail. More cuts are expected in the September budget; Newman has said the state is employing 20,000 more public servants than it can afford, and significant extra cuts can be implemented without reducing services. (It’s not clear whether Newman’s 20,000 figure includes jobs already cut.)
Total: at least 7500 FTE cuts announced since 2011; more expected.

South Australia:
Some 1000 FTE were cut in the 2012-13 budget (cuts to take effect over three years from 2013-14, through voluntary redundancies and natural attrition). This comes on top of 400 jobs cut in the 2011 budget, and 3750 jobs cut in the 2010 budget.
Total: 5150 FTE cuts announced since 2010.

In December 2011 the government cut 3600 jobs; a further 600 cuts were announced in the 2012 budget. So far, jobs have been cut through attrition and non-renewal of contracts. The government recently announced the number of positions to be cut from each department.
Union sources say the Vertigan Review into state finances recommends cuts of up to 7000 (including jobs already cut).
Total: 4200 FTE cuts announced since 2011.

The 2012-13 budget said 1098 FTE jobs had already been cut. The Health Services Union said the budget indicated another 800 jobs would be cut. Labor says it has quarantined health, police and education.
Total: 1898 FTE cuts announced since 2011.

Northern Territory:
The CPSU says the 2012-13 budget cut $300 million from the public service, with agency budgets cut by between 0.75% and 3%.

Western Australia:
Does not appear to be cutting the public service, although there are reports some agencies do not fill their FTEs.

More information

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  • by: Amy Wilson-Chapman
  • From: PerthNow
  • July 24, 2012 2:00AM




Source: Supplied

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UNDER-INVESTMENT in non-mining sectors and infrastructure could pose a greater risk to Australia than the ongoing economic turmoil in Europe.

That’s the ‘enduring’ warning from Tim Hampton, an economist at BIS Shrapnel, which released its long-term forecasts today .

The “significant under-investment” in non-mining industries could gradually erode the medium-term growth potential of the economy leaving Australia “increasingly sensitive” to large fluctuations in world commodity prices by not diversifying investment, Mr Hampton said.

The organisation forecast “pretty big growth” in the mining industry over the next two years.

And after that, despite reports yesterday the country’s mining boom would be over by 2014, it would plateau at that high level.

“We think commodity prices, even if they fall back a bit, are going to be high enough to kick start the next round of investment projects and that will keep investment at that high level.

“You won’t see more investment, but it will keep investment at that high level,” he said.

As the country’s projects move from construction into production, the nation – particularly WA – would enjoy significant export growth, he said.

That would keep gross domestic product just above 3 per cent for the next five years.

Though the move from construction to production would mean employment growth in the industry might suffer, other industries would flourish.

Mr Hampton said he expected domestically-focused industries such as residential construction to increase – especially with the Reserve Bank of Australia’s recent cuts to the official cash rate.

“When you build a house you employ accountants and lawyers and property managers,” he said, “those industries have really stagnated over a number of years – we’re looking for the growing investment to start picking up late this year.”

The flow on affect of those industries expanding would result in more commercial building as well, he said, helping to provide employment in the construction industry.

And for those industries suffering under a high Australian dollar, such as manufacturing and retail, analysts have more bad news with the currency set to remain a safe haven for investors by remaining strong.

“We’re not looking for the Australian dollar to rise any further,” he said.

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‘So could the best of the resources boom really be behind us? The answer depends on how you choose to measure it.’….So, are we going to pay attention to the retreat from record sale prices, or are we going to pay attentuon to increased long-term sales volume? or the $AUD 500bn of investment currently being converted into new mining capacity and infrastructure? Perhaps some sections of the business community are using the fear of a slowdown in economic growth to soften the public policy debate about IR and tax reform…

July 24, 2012

Reports on the death of the resources sectors may have been exaggerated, writes Peter Ker.

Freight trains continued to roll along their lonely outback railways, and the shiploaders at Port Hedland continued to pour their rivers of rubble into the belly of giant ships bound for China.

Yet far from this scene of productivity and prosperity, Australia’s resources boom was having its eulogy prepared.

Auditing agency Deloitte predicted the resources sector was just two years away from irrelevance and Australian taxpayers would soon need to find another goose to lay golden eggs.

The comments lit a fire of debate across the nation, despite the fact Deloitte were far from first-movers on the idea.

The federal Resources Minister, Martin Ferguson, and BHP Billiton chairman, Jac Nasser, have both warned recently that certain aspects of the boom had seen their headiest days, and any punter watching the sharemarket in recent times will have twigged that something significant is going on.

So could the best of the resources boom really be behind us? The answer depends on how you choose to measure it.

The resources boom has manifested in many ways, from record commodity prices to extraordinary company profits, from huge export volumes to unprecedented job opportunities for Australian (and foreign) workers.

On some of those measures the boom is undoubtedly on the wane, but on others, the best is seemingly yet to come.

Those with fingers on financial pulses have been lamenting the decline of the boom for some time.

What began with weakness in the off-Broadway commodities like nickel and manganese has started to filter through to headline acts like coal and iron ore – the commodities that deliver the biggest revenue hits to the Australian government.

Benchmark iron ore prices famously topped $US180 per tonne in 2011, but have spent much of 2012 in a range between $US125 and $US150 per tonne, as Chinese demand for the steel-making ingredient has cooled.

Similar declines have struck benchmark prices for both thermal coal and coking coal, both of which are now 30 per cent cheaper than they were just months ago.

”From here on in, the premium prices are gone,” said Minister Ferguson on a recent trip to Perth.

The view is shared by mining companies and the analysts that cover them, with almost every major investment bank revising their commodity price forecasts downward in recent weeks.

In JPMorgan’s case, forecast iron ore prices are now typically 10 per cent lower than previous estimates, meaning prices are expected to remain close to $135 per tonne rather than test $US150 per tonne as previously thought.

Widespread agreement that commodity prices have passed their peak has convinced a bearish investment community that share prices should also bid farewell to their dizzy heights.

Despite the fact companies like BHP, Rio Tinto and Fortescue Metals Group plan to significantly increase export volumes, investors have sold them down to share prices not seen for three and four years.

”If you are judging the resources boom by the stockmarket you would be pretty depressed,” said mining industry veteran Warwick Grigor from Canaccord BGF.

”Certainly from the stockmarket’s point of view the curtains are coming down [on the resources boom], but the stockmarket always looks well into the future and it always overshoots.”

Suspicions the boom was past its peak were reinforced earlier this month when China reported a growth rate of 7.6 per cent: well below the double-digit growth rates of recent years.

The fact that China is forecast to import a bigger volume of iron ore – and several other commodities – every year for the next decade, seemed to gain less traction.

Grigor says Australians should remember the boom goes beyond iron ore and coal, with other commodity prices holding up better than the big two.

”You have still got gold going well, you’ve got copper which looks pretty strong and there is still a big boom in gas,” he said, referring to the LNG boom in WA and Queensland.

Out in the suburbs, average Australians with little direct involvement in financial markets might find it harder to believe claims the resources boom has passed its peak.

The Australian dollar remains well above parity, and the bout of ”Dutch disease” brought on by the strength of the resources sector continues to threaten the jobs of those who work in industries like retail, manufacturing and tourism.

An ever-increasing number of Australians are heading towards the mines and offshore rigs for work, and those that aren’t are being seduced in increasingly creative ways.

In April, Rio Tinto launched a campaign to recruit 6000 workers to its diversified operations, while other companies like OZ Minerals are promoting the concept of a mining career with an inner-city lifestyle: filling billboards with images of fly-in fly-out workers enjoying Melbourne’s laneway cafes.

According to the federal employment department, the number of Australians working in the mining sector is expected to grow by 7.5 per cent every year between now and 2017, when the sector is predicted to employ just under 343,000 people.

That forecast could prove overly optimistic if poor economic conditions prompt companies to abandon some of the $230 billion worth of proposed new projects.

Indeed, some cracks have already appeared, such as Rio Tinto flagging redundancies last week at a coal mine in Queensland, and warning that expansion at another is unlikely to proceed.

But with another $270 billion worth of new projects confirmed as going ahead, it’s clear that in terms of workforce participation, the peak of the mining boom is still ahead.

Amid the varying perspectives on whether the boom has passed its peak, what’s clear is that on every measure, the boom is not over.

Even at their newly lower benchmark prices, the major bulk commodities are fetching prices that are much higher than a decade ago.

BHP’s share price – lamented for hitting a three-year low last week – is still three times higher than it was a decade ago.

The boom may be cooling on some measures, but on every measure, it’s still pretty warm out there.

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