Canary in Coal Mine Gasps as Australia Resource Jobs Fall
After Mark McGrath lost his job in Sydney in November, he tried to follow the thousands of Australians who headed to the nation’s mines, which have mopped up surplus workers and fueled growth for a decade. Not anymore.Fired by Royal Dutch Shell Plc (RDSA) after 26 years when the oil company shut its Sydney refinery, McGrath put his home in the suburb of Liverpool up for sale to seek a job in the coal mines of the Hunter Valley, 210 kilometers (130 miles) to the north. He couldn’t find work because the boom in demand for coal, iron ore, gold and oil that supported the economy is waning, adding to unemployment swelled by an ailing manufacturing base.
“Companies won’t hire,” McGrath said by phone from the central coast, separated from his family who are packing up the Liverpool home. “They’ve a lot of contractors working in the pits up here,” he said, who are being let go first.
A drop in hiring of support staff by resources companies is one of the first indicators of a broader downturn because each mining position creates four to five contract jobs in related services, said Martin Whetton, an interest-rate strategist at Nomura Holdings Inc. in Sydney.
“Mining service companies are the canary in the coal mine,” said Whetton. “We’re likely to see higher unemployment over the course of the year.”My view:
In this globally interconnected world of trade, exports and imports ebb and flow according to demand from the importing country.
Both Australia and Canada are commodity producing, exporting nations whose growth depends much on trade.
As Australia has now discovered, their economy, so connected to China's, will not grow in perpetuity. The result is higher unemployment and the beginning of a housing bust.
Canada has not experienced this to date in a meaningful way.
Oil prices are still high, and despite a weak US economy, exports are reasonably strong so far.
Yet many signs of trouble brewing in the US and China should give indebted Canadians pause for thought.
Canada's housing bubble has not burst yet, and the idea that houses are a store of value to be drawn upon after retirement remains prevalent.
Low interest rates fed the housing bubble monster, but recent action in the bond market suggests that these levels will soon be history. The low floating rates that Canadians count on are gradually rising.
With oil prices looking like they will drop to the low 80s or even lower, rising interest rates, and slowing exports, look for a sharp slowdown in Canada's housing market in the next 12 months.
While calculating the amount of decline is a complex undertaking, it is my view that we will see declines of 10% in several high value urban markets over the next year.
Given the weakening fundamentals, an accelerated savings plan appears to be a worthy undertaking to buffer against the rough seas ahead.
Comments
Post a Comment