I worked for Qenos for a few years. The recent gas price issues were a big problem for them, but the general climate wasn’t great. They’ve been a loss making business for the majority of the last 20 years, only supported by their Chinese owner constantly throwing money their way.
They dropped a massive pipe onto their cooling tower at Botany, which shut that plant down for a year.
They had to shut half of the Altona operation because Mobil shut down, cutting off their butane and propane supply.
Esso has built a number of ethane to electricity power generators at Longford, which will push up the pricing of ethane feedstock at Altona.
Gas prices are one thing, the other is they were trying to keep two tiny ancient plants operational in a global environment where Asian plants are 20x the scale and far cheaper to operate.
I know the author. My view as stated is that he is not accurate in his assumption, and as @Benny40 points out, QENOS had many other issues. Closing the Mobil Altona Refinery had a dramatic effect as the feedstock for the PE and PP production was taken away and getting it from elsewhere was expensive, plus th eother reasons I had already given. My criticism was of the author not you.
Just to upset @Bacchusfox and for general dissemination and discussion to everyone else… Another article, well interview really, generated from the article writer he doesn’t trust or like.
Australian housing is a “Ponzi scheme”
Leith van Onselen
Friday 4 October 2024
Freelancer CEO, Matt Barrie, was interviewed by the Equity Mates podcast, where he once again demolished Australia’s “ponzi scheme” economy and housing market:
The interview covers a wide range of topics, including:
The challenges facing first home buyers
The economic impact of mass immigration
Why Australia’s housing prices are out of control
What politicians are getting wrong about housing solutions
Below is a short extract of the discussion on immigration.
Edited Transcript:
We’ve been building a lot for a while, and yet the political debate at all levels of government is we’re going to build our way out of this.
They’re [politicians] operating something I’ll describe in a very nice way as a Ponzi scheme. But it is actually worse than a Ponzi scheme. It’s a Ponzi scheme because there’s no economic utility in residential houses at this point in time because the yield generated from rent is way below anything to be able to generate a return.
We, for years, have run a Ponzi scheme in this country because the politicians don’t really know how to grow the economy and really grow industry or do anything other than dig up raw materials out of the ground to ship overseas.
Both the Liberal and Labor party have been running a program that has been focused on easy, relentless growth.
So, as long as house prices gently drift up and as long as wages are gently suppressed, businesses are happy and the citizens are happy.
That’s been running for some time but that’s only facilitated by running a very large immigration program.
So, we are bringing people into the country, which suppresses wages, and then those people need housing.
And so you just gently drift houses up while you gently suppress wages.
When Albanese came in, he put it into full burko mode, where they ramped immigration up to bringing in a Canberra and Darwin per year.
How could we possibly build a Canberra and a Darwin per year? It’s not just housing you have to build. You have to build the infrastructure; you have to build hospitals and schools, roads and transport.
It’s the state governments who pick up the bill for that, and they’ve been on a massive building spree. It is basically driving the states to the point of bankruptcy.
This is only a tiny extract of Matt’s interview. I recommend watching the whole thing. It is brilliant.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs. *And friend to Bacchusfox.
I can’t exactly find the right words for Kyle, but ‘FRO (stolen from RoCo) Kyle’ seems right. They are awful to listen to, so obviously, people aren’t.
Channelling the Liberal Party, blaming Victorian voters for losing their blue ribbon seats, hitting on those educated professional Teal and other Independent MPs, now going into character assassination of the likes of Zoe Daniel in lodging a complaint to the NACC.
Why do we need to be innovative? In the Lucky Country, our pollies are happy to keep digging up and shipping out the country’s nonrenewable resources so that multinationals can make huge profits.
In the 200 and more years there have been great innovations developed in Australia, and if you believe Dark Emu like I do then our First Peoples were also innovative and creative.
Both you and I know the great pioneers in medicine, science, engineering, agriculture and so on. Sad fact is that as a Nation we are too farking dumb to give recognition and support to these great people. Most go overseas and get little fame here, sound familiar Prof ?
In my journey I have been there when IVF first happened at St Vincents and when Graeme Clarke developed the cochlear, Company I worked for developed electrostatic photocopying and gave it to Xerox and they also developed the first video camera and off it went to Sony. The list of Aussie invention leaving our shores is endless, and I have been lucky enough to see many.
On one level, I blame our Universities who do not do enough to foster the great innovators, and the conga-line of dikkhead Science Ministers who have had no farking idea. Even with our little invention that came out of CSIRO technology, Austrade advice was to take it to China for commercialisation.
Do a list of the genius Aussies you have worked with and got the recognition they deserved! Lots of very clever and great people no doubt, including yourself, but few get anything.
The real problem is with our business “leaders”. They are the ones who are afraid of innovation and will not invest in new technologies unless they are guaranteed of getting multiples of ROI within 2 years. As a result, most Australian inventions get lost in the “valley of death” between government funded research and commercialization.
Perhaps, but I would argue that Universities and Governments need to make it easier for Business to work with them.
Universities in particular see Business as a cash cow and they want more than a pint of blood, usually leaving the Innovator with the dikk in the hand.
Sorry Bacchus but I’m quoting your favourite writer again.
I don’t agree about burning coal, but the rest of the article content, criticizing Australian govenment policy and taxation as well as Australian and International businesses operating here is on the mark.
Australia should be the richest nation on earth
Leith van Onselen
Monday 7 October 2024
Freelancer CEO Matt Barrie was interviewed by the Equity Mates podcast, where he argued that “Australia has all the resources and potential to be the wealthiest country in the world”.
However, policymakers have instead delivered a “cost of living crisis instead”.
For a while, Australia was a great place to live and we had manufacturing, for example, as a substantial portion of the GDP of this country.
We made cars, we made a bunch of different things. We had whole supply chains for various things. And then we just went into this path of just easy relentless growth where it was just house prices drifting up and shipping iron ore, coal, gas and gold overseas.
You would think that a country with 12200 years of coal supply would be an energy superpower.
You would think a country with 28% of the world’s uranium reserves would be an energy superpower.
You would think a country with 20% of the world’s gas exports, sometimes number one in the world for gas exports, sometimes number two, would be an energy superpower.
You would think a country with 3.46 people per square kilometer would have cheap land and cheap housing.
You would think a country that is third in the world for production of cobalt, has 47% of the world’s lithium production, we are sixth in the world for production of copper, fifth in the world for the production of nickel, would be an energy and electronic and mechanical engineering superpower.
We control 56% of the world’s iron or exports. You would think that we would be a steel superpower.
We have cheap energy, we have abundant iron ore, and we should be turning that into elaborately transformed materials.
We should have become an export powerhouse . We should be the richest country in the world, full stop. We have everything.
But instead we have the greatest erosion of wealth in the developed world. We have a cost living crisis that is the mother of all cost of living crisis…
We have an energy crisis because we stupidly are going down this path of, “well what about the environment”?
We can’t burn coal, etc, But every single thing we’re digging out of the ground is being burned by China, or is being burned by Japan. It’s all being shipped overseas and burned.
We are deluding ourselves by thinking that we are doing anything by not burning it here.
The gas we send overseas in many cases is being re-exported.
Now we’re actually going to import gas in the Eastern Seaboard, which is ludicrous because we don’t have a gas reservation scheme.
So, we have a cost of living crisis caused by input costs. We have an energy crisis through very poor energy policy where we’ll export all the raw materials to build renewable generators.
They are energy negative on the energy that’s consumed to get the materials out of the ground, which ship back to us and are unreliable.
As a result, we can’t run a reliable manufacturing industry in this country. Our manufacturing as a percentage of gross value is 5.39%, which is on par with Botswana.
This country is going to hell on a hand basket. We are 93rd in the Harvard economic complexity index in terms of the complexity of things that we produce, how sophisticated they are, and how much people can replicate them.
Our economy in terms of sophistication and complexity is on par with Equatorial Guinea, where they don’t have a cinema in the entire country.
It is all being caused by government policy, which can be turned around on a dime.
As illustrated in the following chart, Australia has benefited the most from global commodity prices over the last 20 years:
Almost all of Australia’s natural gas is exported, which has caused an artificial domestic gas shortage on the East Coast, where no domestic reservation policy exists, and internationally high gas and electricity costs.
The surge in LNG exports, which is reflected in the unprecedented rise in Australia’s terms of trade, has created massive profits for foreign-owned oil and gas companies.
However, Australia’s tax revenues from this boom have stagnated:
Norway has invested its oil and gas windfall in a sovereign wealth fund that is the world’s largest and valued at approximately US$290,000 per Norwegian resident:
Norway’s oil and gas wealth has made Norwegians the richest people on the planet, a title that Australia would have claimed if we properly taxed our resources.
Instead, we did the opposite and taxed our resources lightly.
We then grew the nation’s population aggressively via immigration, which has diluted our mineral wealth.
Qataris have also benefited financially by correctly taxing their resources.
As Matt Barrie himself explained earlier this year, “Qatar generates enough wealth from this trade that residents pay zero income tax, zero property tax, zero corporate income tax, have free healthcare, free education, have subsidised housing and plentiful access to cheap electricity and petrol”.
By contrast, “in Australia, most of our export facilities pay no royalties at all to the state or federal government”.
In other words, Matt Barrie is right. Australians should be the richest people on earth.
Instead, we have impoverished ourselves by engineering an artificial gas shortage, driving up domestic gas and electricity prices, while also diluting the nation’s mineral wealth via mass immigration.
Here’s Norway’s petroleum tax, 27% corporate tax plus 51% petroleum taxe. Refunds for exploration and abandonment costs.
Australia has a 40% Petroleum Resource Rent Tax.
This has been actioned by the Albanese government:
“The Government’s PRRT reforms are expected to increase tax receipts by $2.4 billion over the forward estimates from 2023–24.”
From the ATO there’s a few examples, but basically the exploration and operating costs are massively offsetting the revenues of these projects. There’s likely some accounting magic being performed, but once these setup costs are paid for, the tax revenues will increase.
But to avoid the most obvious misunderstanding that the Norway tax is on the extracted oil value, the tax is on net income both for Australia and Norway. Both countries give deductions for exploration and abandonment. Norway has been operating longer, so most of their exploration deductions have been used up. Norway is taxing the industry at 78% including corporate tax, whereas Australia taxes at 40% and then doesn’t add corporate tax.
So we are doing something in this space, but we’ve definitely given the industry an attractive deal to encourage investment. I would prefer a domestic allocation for the east coast like what fuels the WA mining industry rather than a tax hike for the sector.
I only read the first few paragraphs, but he’s an idiot or a troll, right? Australian manufacturing was in its hey day in the decades following WW2. When our competitors other than the USA had literally had their cities and manufacturing bases bombed to the ground. Shen we’d invested heavily in ours due to the war effort. When China wasn’t yet a player. That is his point of comparison???
And then to say we’ve got so much land, why is housing expensive! I mean, why bother reading further if his intellectual vigour is that bad or biased?
Reserve would be exempt from Resource Tax (but not Corporate - although, I don’t think the export should either), and sold on a Cost + basis.
Isn’t it a state owned company, in Norway, that overseas most of the field exploration and drilling? Possibly means that much of their capital offsets sit outside of the Revenue generation.
I remember the Norwegian government invested substantially in the oil boom, but I couldn’t find a source to back that up. So probably?
The big problem with tax hikes on existing projects is the business case for them was based on the original agreement. If you crank up taxes after billions of dollars of investment, then you are very unlikely to get any foreign investment from then on.
Government risk is a serious consideration for where capital is invested, they are looking for reliable and consistent policy. It’s been one of the main impediments to the renewable rollout in Australia.
Oh for sure it’s not quite as simple as saying “from tomorrow XYZ”.
Although, as soon as the numbers are crunched, I do think you could get close to saying “from tomorrow, no new licenses unless … domestic reserve”. Details being allowances for domestic reserve amounts on new projects, amounts already reserved in market etc.
As for the scaring off of investment. Yes, technically agree, particularly with rapid large regulatory changes.
In general, they’ll chase the easiest and/or greatest profit first and fastest. Ultimately though, greed can be trusted and an opportunity for profit won’t be ignored.
Just on this specifically.
Given the profits being touted for this industry, I’m not sure there’s a whole lot that would stop them participating or expanding.
Australia Institute analysis has the windfall profits (unusual yes) for Australian oil and gas at 26-40 billion dollars for the 2021-22 fin year.
Even with the massive 78% Government profit share in Norway, there’s still 10’s of billions in private profit every year.
At the minute, it seems like we’re being taken to the cleaners and that massive tax changes are warranted.
Oh they would ■■■■■ and moan no doubt, and probably spend 10’s to 100’s of millions of dollars campaigning against it in the media and fighting it in court.
