PROPHECIES OF DOOM
A lot of commentators are predicting economic disaster for Australia as a result of reduced demand from China for Australia's iron ore and coal. See e.g. here. But Australia is a diverse modern economy that has long survived ups and downs in commodity income because of the way recurrent drought affects agricultural and pastoral earnings -- so it has a lot of irons in the fire and customarily survives such fluctuations without much overall distress. Below are five good news stories about the Australian economy
Good economic indicators for Australia despite drought and the mining decline
But care needed with assumptions about growth
Australian policymakers may need to adjust their idea of the country's ideal growth rate to account for a slowdown in population growth and other demographic changes, according to Reserve Bank of Australia governor Glenn Stevens.
Mr Stevens told diners at the Anika Foundation lunch in Sydney that better-than-expected unemployment rates and signs that business confidence had picked up over the last 12 months suggested Australia might need to rethink its definition of trend growth, from the 3 to 3.25 per cent "we have assumed for many years".
Growth in gross domestic product comes from expansion in one or all of productivity, population and participation in the workforce.
Australia's aging population and slowing immigration or birth rate means two of these factors could be under pressure. According to some estimates, the number of people in Australia rose almost 400,000 in 2013 and 360,000 last year but only 160,000 so far this year.
Elaborating on one of the central themes of the minutes of the RBA's July board meeting, released on Tuesday, Mr Stevens said the bank had been surprised by the underlying stability of the unemployment rate which, at 6 per cent, is unchanged from a year ago.
He suggested the better-than-expected set of labour market outcomes could be the result of statistical discrepancies, slower population growth, wage restraint or more economic activity than suggested by official data.
"Some or all of [these] possibilities may be at work," he said.
"Time will tell which ones, but a few observations may be worthwhile at this point.
"First, the economy is making the adjustments required, even if it is a bit slower than we would ideally have liked.
"Second, if the slow growth of wages has in fact been a significant saver of jobs, that would appear to indicate a degree of labour market flexibility in operation.
"Third, to the extent that the data are hinting that our assumptions about trend growth may need to be revisited, that will be worth some discussion," the RBA governor said.
Mr Steven said it "need not be the case" that GDP growth per head would be any lower if the slowdown was the result mainly of more sluggish population growth.
However, he added: "If there are assumptions about absolute growth rates embedded in business or fiscal strategies, or retirement income plans, they would need to be re-examined."
Mr Stevens said the bank's two cuts to the cash rate this year appeared to be working to stimulate activity in non-mining industries. However, he again warned of the limits of monetary policy and reiterated that while a further cut was still "on the table", the RBA was loath to move too quickly.
He said the 24-hour media cycle and abundance of high-frequency data, surveys and "obscure indicators" had placed policy-makers under increasing pressure to "respond to events and to deviations of economic performance from what had been anticipated".
"The risk . . . is that this process can lead to a mindset in which policymakers end up responding to quite short-term phenomena, using instruments that take quite some time to have their full effect, including effects that might actually turn out to be adverse," Mr Stevens said.
"This is relevant to our situation.
"A period of somewhat disappointing, even if hardly disastrous, economic growth outcomes, and inflation that has been well contained, has seen interest rates decline to very low levels.
"The question of whether they might be reduced further remains, as I have said before, on the table."
How Australia's drought is boosting beef exports
Australia's dry spell and a strengthening El Nino are proving a boon for US hamburger lovers.
Queensland's most widespread drought ever is sending a near record number of cattle to feedlots as ranchers cull cows at the fastest pace in more than three decades. That's boosting beef exports to an all-time high, including a more than 70 per cent surge in shipments to the US, government data show. Most of that is destined to become burgers.
The US last year overtook Japan as Australia's most important beef export market, while a prolonged drought through Texas saw a four-year slide in American beef output. Supply there will stay constrained even as the herd rebounds from a six-decade low, because it takes about 20 months before cattle are big enough for slaughter. That's seen companies including Chipotle Mexican Grill turn to our shores for beef.
"Feedlots have been pretty much full for the last 12 months," said Paul Deane, an analyst at ANZ Banking Group in Melbourne. "It's been profitable to have cattle on feed here in Australia and process them and sell into the US market."
About 70 per cent of Australian beef shipped to the US is so-called manufacturing beef, used to make hamburgers. Importers include McDonald's, the world's largest restaurant chain, and Carrols Restaurant Group, the largest Burger King franchisee. Chipotle said last year it was sourcing some grass-fed beef from Australia to meet demand, citing the US herd dropping to a 60-year low.
Hamburger chain Carl's Jr. earlier this year started selling an all-natural burger in the US made with Australian beef. The meat is from free-range cattle that are grass fed and not given antibiotics, according to its chief executive, Andy Puzder.
Australia is the top supplier of beef and veal to the US, accounting for 37 per cent of imports last year, US Department of Agriculture data show. Purchases of Australian beef surged 65 per cent in the first five months of 2015 from a year earlier, the data show.
Tourism could be the new mining boom for Australia, says casino boss
Tourists can get experience of an English-speaking country without jetlag. Australia is in roughly the same time zone as East Asia (Japan, China etc.)
Tourism could replace mining as the driver of the Australian economy as new attractions and a plunging dollar increase the country's appeal for Asian visitors.
After his company won the bid to develop part of Brisbane's waterfront into a huge casino and resort complex, Echo Entertainment boss Matt Bekier said on Tuesday that Australia could be seeing the beginning of a tourism boom.
"This is going to be the next mining boom," the Echo chief executive said. "If we look in Asia in terms of the aspiration of where people want to go to, Australia stands out as No 1 in terms of aspiration and desire to go to. But we're about number 14 of the places they actually go to, there's a huge opportunity."
China is Australia's fastest growing tourism market with 918,000 visitors in 2014 - a rise of 21.7% - and second only to New Zealand. Chinese visitors were, however, the biggest spenders in Australia, splurging $5.7bn in 2014, up 19% on the previous year.
The continuing fall in the Aussie dollar, which some experts believe could fall to around US60 cents, is likely to help Bekier's prediction by making tourists' money go further.
The US dollar strengthened again overnight on Monday after James Bullard, who sits on the US Federal Reserve's rate-setting committee, said a rate rise was likely in September.
Combined with the falling price of key commodities such as iron ore, gold and oil, his comments put more pressure on the Aussie which lost ground on Tuesday to sit at US73.51c in afternoon trading.
The minutes of the July meeting of the Reserve Bank of Australia also kept the downward momentum on the currency when they were published on Tuesday.
The bank said the Aussie's drop against the US dollar to six-year lows was not boosting the economy as expected.
"Further depreciation seemed both likely and necessary," the RBA said. However, it noted noted signs of continued improvement in the jobs market, and said inflation remains well contained.
Bekier said Echo, which beat James Packer's Crown Resorts to the Brisbane prize, would be moving its headquarters and 300 staff to the city to oversee the new project.
The Queen's Wharf waterfront precinct includes five hotels, three residential towers, 50 bars and restaurants, a grand ballroom, a cinema and new footbridge to across the river to South Bank.
The Queensland premier, Annastacia Palaszczuk, said the project would attract millions of tourists annually. "The flow-on effects will be felt for decades to come," she added.
Tourism Australia managing director, John O'Sullivan, said that Australia was entering an important economic cycle where its service sectors would play an increasingly important role in driving the country's future success and sustainability.
"With international tourism to Australia continuing to grow to record levels continued investment in new product, including integrated resorts, as well as existing tourism product is critical to ensure we are able to cater to the growing number of visitors," he said.
"Ensuring we have a diverse range of product and experiences to meet the rapid growth and needs of this market in particular will become all the more important," Mr O'Sullivan said.
Construction on the Brisbane project is set to begin in 2017.
A graphite bonanza for Australia?
Australian companies are searching high and low for new graphite deposits, and their hunt is seeing old mines reopen from Port Lincoln to northern Sweden.
Graphite is an important industrial material, used in batteries, laptops, lubricants, construction materials, medicine and, of course, pencils.
Its derivative, graphene, is just a single atom thick, 150 times stronger than steel and more conductive than silicon or copper.
Many of graphene's future applications have not yet made it out of the lab, but some, like its use as an additive to plastics and cement, are already being commercialised.
Graphene has received glowing media attention since its discovery in 2004, but as junior miners rush into the market and talk up their discoveries, some are beginning to question whether the hype matches the reality.
But it is not deterring those companies in the game, with a view to commercialising Australia's ample supplies of graphite.....
The only mine actually producing graphite for the market at the moment lay dormant for many years before Christopher Darby and his Valence Industries team saw its potential.
The Uley site, outside of Port Lincoln on South Australia's Eyre Peninsula, has played an important role in the city's past, and is now supplying high-tech manufacturers both in Australian and abroad with graphite.
Valence recently brought a new customer on board, adding to its list of customers using the company's graphite in batteries, medical applications and a range of materials.
With no open market for graphite, success is dependent on these companies being able to mine the ore and sell as well.
"You really have to understand why a customer needs to use it in that application, and work with them to deliver it in a way that is most effective for them," Darby said.
Valence also 'value-adds' to its graphite in South Australia, raising the purity of the ore it mines to exact specifications before offering it customers.
"You have to prove and qualify your production from your own facility," Mr Darby said.
"That means not only do you have to go through exploration and construction of your plant, you have to deliver production from that plant to the customers, and qualify it before they will really commit to long-term sales.
"That creates a drain on cash, and you need to be able to fill that gap to get you through to filling the pipeline of production."
Big spike in underground water exactly where it is most needed
Outback Australia has always relied heavily on bore water
Experimental NASA satellites from the Gravity Recovery and Climate Experiment (GRACE) continue to provide accurate measurements of Australian groundwater.
Data collected over time indicated water levels of the Great Artesian Basin were declining, but it is not the same story for Central Australia's Amadeus Basin.
Professor Alfredo Huate, from the University of Technology Sydney, said the groundwater measurements were a great outcome, but that it all happened by accident.
Mr Huate said people figured out that the weight of water and in particular groundwater was being sensed by the satellite.
He said the find was significant because getting information on water levels across an entire basin was previously very difficult.
"It's hard to get an idea of how the groundwater might be changing and quite tedious to do so because you would need a lot of bores," he said. "With a satellite you get continuous information."
Mr Huate's colleague, Professor Derek Eamus, wrote recently on the ABC's Drum website about the data from the GRACE satellite indicating that water levels in the Great Artesian Basin were declining.
But Mr Huate said the satellite data indicates the same cannot be said for Central Australia's Amadeus basin. "From 2002 until 2008 there was a statistically significant decline in the groundwater," he said.
"But in 2009 and until the end of 2011 the total water has almost doubled from what it was before the satellite went up in 2002. "It's a tremendous spike in total water now available."
Mr Huate said that water from Central Australia's extreme wet events was not going to get used by plants or evaporate and would therefore replenish the groundwater table.
"It's definitely a good idea to make use of the data sets for [exploratory and developmental purposes]," he said.
NASA, said Mr Huate, are about to launch new satellites that will be more accurate and were specifically designed to measure groundwater.