Saturday, May 26, 2012

Saturday Morning Musings - QANTAS, FIFO & the changing patterns of Australian life

It's quite a fascinating time in Australia just at present.

In August last year in Visitor 120,000, structural change and QANTAS, I looked at the challenges facing Australia's best known airline. In the months since, QANTAS has continued to wrestle with its basic strategic challenges. Many of the initiatives announced by CEO Joyce simply haven't worked. Now QANTAS has turned its loss making international QANTAS brand into a separate business unit to try to achieve a better business focus.

One thing that I hadn't sufficiently focused on in my earlier analysis is the importance of FIFO, or fly-in, fly out workers. The sheer size of the Australian mining boom, the unwillingness of Australians to relocate, the limited facilities in many regional areas, has combined to create a most remarkable FIFO boom. I gave a small New England example in Narrabri wrestles with fly in, fly out workers. There the small local airport has gone from from 13 to 52 flights a week!

I don't have hard numbers, but the sheer scale is indicated by the Narrabri numbers. To put a European perspective on it, imagine the logistics involved in shifting a 100,000 workers per week from their home in London to work in Turkey for a few weeks and then back.

QANTAS's regional business has moved from a relatively small ad-on in traffic terms to a major profit centre. When the Australian Government forcibly merged QANTAS as the international carrier with domestic carrier Australian Airlines, QANTAS was far larger. How the world has changed.

The mining boom has all sorts of flow-on effects.

Last year Federal cabinet agreed on a policy to introduce Enterprise Migration Agreements, a category of 457 visas that would allow the importation of skilled labour for specific projects. 457 visas have been quite an issue in this country, for they allow the importation of skilled workers to meet specific needs. Some like them, many don't.

I like them, but you need to be aware of the sheer complexity of Australia's migration policy, something that @MikeDJeremy tweets about often. In Jessica Irvine's memory loss, a post that has attracted quite remarkable visitor traffic, I tried to explain why so many Australians were negative at present. That should not conceal the fact, however, that this country is doing very well by global standards. Very well indeed.

At a time of global economic gloom, Australia is recruiting skilled workers around the world. However, this creates its own problems.

The Australian Government has just announced and Enterprise Migration Agreement that will allow a Gina Rinehart company to import more than 1700 foreign workers to help build a massive iron ore project in Western Australia.

Mrs Rinehart, now the wealthiest person in Australia by a large margin and the wealthiest woman in the world by an equally large margin, is a controversial figure here. The Agreement itself is perfectly consistent with policy and did not require Cabinet approval. The problem is that PM Gillard was not consulted. This has blown up into a political storm. The Union movement is upset, very upset indeed.

Australians love their real estate. The mild decline in Australian housing prices has created a degree of consternation. I quote from another newspaper story:

THE sluggish housing market has sparked predictions that the latest generation of home owners will be unable to rely on their home as a key source of higher wealth, as many baby boomers did.

Instead, analysts say people who joined the housing market in the last few years are unlikely to experience the ''magic money machine'' effect of bumper rises in the equity in their homes.

In the late 1990s and early 2000s, house prices more than doubled, a trend that benefited even highly indebted owners.

The growth in Australian real estate prices was absurd, a bubble. But the comment in the first paragraph is equally absurd. Over time, there is a close relationship between rents and house prices. During the bubble, the rental yield collapsed. Yet Australia is just not building a lot of new houses. So rents have really ramped up in recent times, huge increases. It's only a matter of time before house prices follow.

In the meantime, and at least in Sydney, new apartment developments in good areas are being snapped up by Chinese buyers. This story is actually worth reading in full, for it brings out some of the changing dynamics of Australian life.

I have run out of time. The agents have a house inspection here this morning, and I need to tidy up!    


Evan said...

George Megalogenis thinks that the major benefit to Australia of migrants is their children, and that recruiting the highly skilled means recruiting those on their way through to the US. This makes some sense I think.

Did you see that millionaires are now to get special treatment for migration? Class warfare indeed!

Imagine me thinking that industry could train workers as an investment in its own future. I guess neither our industry leaders or government would have such terrible thoughts.

Jim Belshaw said...

The millionaire one isn't really new. Australia has long given preferential treatment to those coming to establish businesses.

One of the difficulties with relying just on industry to train its own workers lies in the free rider problem. Firms that don't invest in training get benefits from those that do without having to pay for them. This leads to under investment despite the rhetoric.