Kwinana’s youth unemployment rate continues to rise, despite resources boom

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The youth unemployment rate is the suburbs surrounding the Kwinana strip continues to rise, according to Australian Bureau of Statistics (ABS) figures released today.

According the ABS, the youth unemployment rate in the South West Metropolitan Region of WA rose from 20.4 per cent in March 2011 to 26.4 per cent in March 2012.  Since March 2009, the number of young people without work in and around Kwinana has increased by about 75 per cent.

Kwinana is the traditional home of Western Australia’s steel fabrication sector and has the largest concentration of steel fabrication businesses in WA.  In previous resources booms, the steel fabrication businesses have boomed as well and local young people have been in strong demand to fill apprenticeships and other positions.  With our major resources companies increasingly sending their skilled fabrication work offshore, local fabricators are not getting the work they would ordinarily and young people are being denied the apprenticeships they need to develop their skills and build a career.

Since the start of last year, our campaign has consistently raised these issues and the State Government has responded with some policy initiatives.  However, with youth unemployment continuing to rise in and around Kwinana, it is clear stronger policies are needed to ensure more skilled work is performed locally for WA’s major resources projects.

Chevon delivering less local work, not more

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Yesterday’s announcement that Japan’s JFE Steel Corporation and Marubeni-Itochu Steel Inc would manufacture 150,000 tonnes of pipeline for Chevron’s Wheatstone LNG project raises serious questions about whether the Barnett Government’s local industry participation policies are working.

This contract comes on top of 159,000 tonnes of other steel fabrication contracts announced for Wheatstone, which have also gone offshore.  These include:

  • Offshore platform – 57,000 tonnes – awarded to Daewoo Shipbuilding, South Korea
  • Onshore LNG processing modules (outer battery limits) – 42,000 tonnes – awarded to Bohia Oil Marine Engineering and Supply, China
  • Onshore LNG processing modules (inner battery limits) – 60,000 tonnes – awarded to Kencana, Malaysia

This means 100 per cent of the steel fabrication contracts for Wheatstone have gone offshore to date, with this representing an even worse performance than Gorgon, which offshored more than 90 per cent of the 300,000 tonnes of fabricated steel required for that project.

Since our campaign started highlighting the increased offshoring of skilled engineering and fabrication work by WA’s major resources projects early last year, the Barnett Government has announced a number of measures it says are designed to address the issue.

However, there is a growing body of evidence that indicates that WA is securing less local work, rather than more, from the resources industry.

In addition to Chevron awarding less work to local steel fabricators from its newest project, the Australian Bureau of Statistics (ABS) continues to confirm what we all know – WA manufacturing jobs are heading offshore.

The ABS has revealed that more than 2,000 manufacturing jobs were lost in the South West Metropolitan suburbs surrounding the Kwinana strip during 2011.

The ABS has also revealed that the youth unemployment rate in and around Kwinana has increased from 21.7 per cent in January 2011 to 28.1 per cent in January 2012.  An even more shameful statistic is that the youth unemployment in and around Kwinana has almost doubled since the election of the Barnett Government.

Given these trends, it is clear much stronger action is needed from government to secure skilled local jobs and apprenticeships from our resources sector.  This need is highlighted by the almost weekly announcements of job losses and closures in the broader manufacturing sector, as the mining boom makes local industry less competitive through high commodity prices, volumes and the resulting upward pressure on the Australian dollar.

When future generations of Western Australians look back at the current era, they will make a judgment about whether we secured the most from the natural resources we were given, or whether we wasted them.  If our manufacturing sector is been completely offshored and deskilled during the resources construction boom, a positive verdict is not likely.

No Need to Look Overseas for Labour Mr Barnett – There’s Plenty Available at Home

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It would appear the state government has an unhealthy obsession with solving the skills shortage in Western Australia by bringing in as many overseas workers as possible rather than up skilling existing talent available now, right here at home.

Last week the Premier Colin Barnett was caught out telling journalists in Singapore that he wanted an overhaul of the Australian immigration system to allow unskilled guest workers to be recruited to get big resources projects underway.

This week we have the Minister for Training Peter Collier blasting the federal government for getting in the way of his plans to bring 150,000 skilled workers to WA from Ireland.

Given the skills shortage we are currently facing in Western Australia, is it too much to ask that the state government look to improving training opportunities here rather than look at Ireland as a de facto employment agency? Continue reading →

Latest Youth Unemployment Figures are Hardly Cause for Celebration

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The Labour Force data for February released this week by the Australian Bureau of Statistics (ABS) shows a seasonally adjusted unemployment rate in Australia of 5.2 per cent.

The unemployment rate in Western Australia is 4 per cent, the lowest in the nation and down from 4.2 per cent previously.  While this paints an apparent picture of prosperous times for all, there is a cohort of the WA community facing alarming levels of unemployment given the unprecedented boom conditions we are experiencing currently.   That cohort is youth aged 15 to 19 years.

The overall full-time unemployment rate in February for youth aged 15 – 19 in the state is 17.9 per cent, down marginally from 18 per cent in January and an increase from the same month in 2011 when the rate was 17.1 per cent.

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Focus on Youth Unemployment Figures this week

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Regional youth unemployment figures being released later this week will provide an interesting insight into whether there’s been any improvement in the rate of youth unemployment in Western Australia since late last year.

ABS data released in January showed the unemployment rate of youth aged 15 – 19 in the south-west region of Western Australia had risen to 27 per cent in December 2012, almost double the rate of 14.6 per cent recorded in December 2008.

Considerable contractions of recent activity in sub-sectors of the manufacturing sector that historically employ apprentices and trainees would suggest youth unemployment figures are not likely to look much better in 2012.

The announcement by Commerce Minister Simon O’Brien recently of a local company being awarded a multi-million dollar contract to provide front-end engineering services for Hess’s prospective Equus offshore gas project is welcome news indeed; however, this is another example of a project that is likely to have little impact on the rate of youth unemployment in areas surrounding southern suburbs of Perth such as Kwinana.

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Slower Expansion in Manufacturing Not Good News for All

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A significant retraction of activity in some areas of the manufacturing sector casts a shadow over a report that shows overall, manufacturing activity in Australia increased somewhat in February.

The recently released, seasonally adjusted Australian Industry Group PwC Australian Performance of Manufacturing Index (Australian PMI) tells a somewhat sobering tale of the state of manufacturing in Australia.

While the report states that manufacturing activity increased in February, albeit at a slightly slower pace than a month ago, the report also states that:

“The increase in manufacturing activity was largely attributed to significant expansions in the clothing and footwear and transport equipment sub-sectors, which more than offset considerable contractions in the wood products and furniture; paper, printing and publishing; fabricated metals; and miscellaneous manufactures sub-sectors.”

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Engineering funding a welcome small step

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The State Government’s announcement of funding to boost the level of engineering and design work performed locally for WA’s major resources projects is a welcome, small step in the right direction.

The $85,000 in funding was announced yesterday by Commerce Minister Simon O’Brien, and will assist the Association of Professional Engineers, Scientists & Managers of Australia (APESMA) and Engineers Australia with staffing costs to, “identify future opportunities” for local engineers to become involved in the early phases of offshore energy projects.

In his statement, the Minister indicated this initiative would also benefit local manufacturers, saying:

“The advantage of utilising local engineering and design expertise include the increased potential for other areas of the State’s economy, such as manufacturing, to become suppliers.”

This has been a consistent position of our campaign, with APESMA State President Zaneta Mascarenhas repeatedly pointing out that, “if our major projects are designed offshore, they are far more likely to be built offshore.”

While this funding is a welcome initiative, much stronger action is needed if we are to make the most of the $180billion worth of projects the State Government says are currently under development in WA.  The front end engineering and design work has long been completed for the massive Gorgon and Wheatstone projects, and the vast majority of steel fabrication and other skilled work has already been sent offshore.

While the funding is designed to influence outcomes for future offshore oil and gas projects, the State Government needs to do more to secure skilled local work now.  Figures released by the Australian Bureau of Statistics yesterday show youth unemployment continues to rise in the south-west metropolitan suburbs surrounding the Kwinana strip, reaching 28.1% in January.

If the State Government needs any other driver for strong action, Mr Barnett and his Ministers should pause and reflect on this week’s news that Rio Tinto was set to introduce driverless trains on its Pilbara iron ore operations.  The jobs and opportunities being generated, both directly and indirectly, during the current resources construction boom have provided statistical and political cover for governments, as many manufacturing operations have been downsizing or closing their doors.

Rio Tinto has clearly sent a signal that they would like to employ fewer people, rather than more, on their operations.  As this trend flows through the rest of the resources sector, both the State and Federal Governments need to reflect on the wisdom of allowing our major resources projects to be built offshore.

So, why we welcome yesterday’s announcement, we urge Mr O’Brien to examine the initiatives of countries as diverse as the United States, Canada, Malaysia, China and the Ukraine, and take much stronger action to support local jobs.

Governments must act to stop the mining boom killing off manufacturing jobs

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At the end of 2008, it was difficult to move in Perth, without bumping into someone who had just been laid off by a mining project.  When meeting someone new, a frequent response to the question, “what do you do,” was, “I used to work on {insert mining project here}”.

At this time, news bulletins were filled with stories of projects closing down or cutting workforces.  The mining industry wasn’t sentimental in its response to the global financial crisis.

Fast forward to 2012 and the tables have turned.  Mining projects, irrespective of the impact of the mining or carbon taxes, are progressing full steam ahead.  And the high value of the Australian dollar, predicated on the high prices of our coal, iron ore and LNG exports, is making all of our secondary industries less competitive with their international competition.

News stories are now dominated by news of one manufacturing operation or another closing, or shifting their operations offshore.  Not limited to manufacturing, we are seeing engineering services shifted offshore, as well service industries like education exports.

This week, we have learned that UGL Rail will shift its rail fabrication operations to India, with unspecified job losses in Australia.  Rumours of more job losses at OneSteelare circulating at the time of writing.  And there are reports Alcoa has offered large incentives to workers at its Geelong plant to work at its new cut-price smelter in Saudi Arabia.

The resources construction boom is delivering a number of benefits to the Australian economy and it underpins the growth and unemployment statistics that governments point to, when spruiking the health of the economy.  However, these statistics mask the qualitative truth that the economy is benefiting from a large number of short term resources construction jobs, and the multiplier effect of these jobs, while there is a steady stream of jobs being lost in long-established secondary industries.

Arguments put forward by right wing economists, that suggest governments should do nothing to support “uncompetitive” industries, ignore the fact that the challenges our secondary industries face are based on the short-medium term impact of the mining boom.

Our State and Federal Governments have a choice.  They can stand by and do nothing, patting themselves on the back, as the mining boom forces our secondary industries offshore to remain competitive.  Or they could do what countries as diverse as the United States, Canada, Malaysia, China and the Ukraine are doing, and take strong action to support local jobs.

Chevron spin doesn’t mask the hollowing out of the WA economy

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Today’s edition of The Australian carries a breakthrough article, in which leading economists and industry figures have finally acknowledged that the resources boom risks hollowing out our economy and leaving Australia in a perilous economic position when the boom is over.

Australian National University professor and former Reserve Bank director Warwick McKibbin is quoted as saying:

“If the nation assumes the resources boom will continue forever, then it should absorb the pain of effectively abandoning manufacturing and other trade-exposed sectors.  However, there has never been a permanent boom in the terms of trade. This means the nation should invest the proceeds of the boom to ensure the non-mining parts of the economy have a future.”

Former WMC chief and Reserve Bank board member Hugh Morgan said:

“There is no escape from the higher dollar and the nation needs to ensure it makes the most of the boom in case commodities prices fell.  Instead of people thrashing themselves with birches and woe, they should be fostering the resource development opportunity this boom offers the nation and pushing it as hard as possible.  There is a real chance it won’t last forever, so one needs to build the country while the chance is available.”

We have consistently made the point over the last year that the Barnett Government’s hands-off approach to ensuring WA’s major resources projects perform their skilled engineering and fabrication work in Western Australia is seeing WA missing out on lasting benefits from the resources boom.

We have seen more evidence of that, this week.

On Sunday, Chevron launched an advertising campaign promoting the $4billion in contracts it had awarded to local business from its Wheatstone LNG project.  Premier Colin Barnett last year encouraged resources companies to promote the contracts it awarded locally, and his Minister, Simon O’Brien issued a media release on Sunday, congratulating Chevron on its campaign.  The Minister, “encouraged other proponents to follow Chevron’s lead in presenting the public with a more complete and factual picture of its investment locally.”

Mr O’Brien issued a further media release yesterday, claiming that resources companies had awarded $14billion in contracts to local companies since the middle of last year.

Instead of being a cheer-squad for the resources industry, the Barnett Government should be working hard to hold proponents to account and secure the best possible outcomes for the Western Australian community.  Instead, we see an approach that seems more interested in managing perceptions, that delivering skilled local work.

The truth is, the $4billion in contracts Chevron says it is awarding locally is a small proportion of the $29billion capital value of the project.  The $14billion of contracts Mr O’Brien says the resources sector has awarded locally is a tiny proportion of the $180billion capital value of projects Mr Barnett’s Department of State Development says are under development around WA.

In addition, Mr Barnett and Mr O’Brien refuse to provide a sector-by-sector breakdown of the type of contracts that are being awarded to WA businesses.  We know that Chevron sourced more than 90 per cent of the 300,000 tonnes of fabricated steel it required for Gorgon for offshore and we know that, of the more than 150,000 tonnes of steel Chevron has awarded for Wheatstone, all of this has gone offshore.  While we welcome all local expenditure by our resources companies, if we kid ourselves into thinking there is a long term economic benefit from earthworks, catering, cleaning, transport, telecommunications, car hire, advertising and corporate hospitality expenditure, then we are very much at risk of the “hollowing-out” effect described above.  We need wealth-generating industries – industries where we earn money from making things, so that service industries can then be supported.

Another interesting point to note is that Mr O’Brien’s own method of identifying what constitutes a “local contract”, as defined in his May 2011 Local Content Report, is to classify a contract as local if more than 50 per cent of its value is added locally.  That means, items can be made offshore, but as long as the cost of installing them locally constitutes more than 50 per cent of the their value, they are counted as 100 per cent local. Effectively, this means the $4billion and $14billion figures Mr O’Brien has trumpeted this week are an over-estimation of the work that is actually occurring in WA.

If Mr Barnett and Mr O’Brien need evidence that their rosy view of the resources sector is not as it seems, they need look no further than Kwinana.  WA is in the middle of the largest resources construction boom we have ever experienced and the demand for the fabricated steel traditionally produced in and around the Kwinana strip is at an all-time high.  The place should be booming.  Instead, the Australian Bureau of Statistics has found that more than 2,000 manufacturing jobs have been lost in that area over the last 12 months and youth unemployment has almost doubled over the last three years, now sitting at 27 per cent.

These are the facts, and no amount of government-encouraged advertising from Chevron or other resources companies is going to change them.  We need strong government action, like we are seeing in countries as diverse as the United States, Canada, Malaysia, China and the Ukraine, to secure skilled local work that delivers lasting economic benefits.  If our governments continue their hand-off approach, our economy will be “hollowed out”, and it is unclear what we will all do for work once the resources construction boom is over.

Reserve Bank: Resources companies dragging down economy by offshoring fabrication work

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The Reserve Bank (RBA) has recognised the role the offshoring of steel fabrication work by Australia’s major resources companies is playing in dragging down the national economy.

In its Monetary Policy Statement, released today, the RBA downgraded growth and inflation projections, saying it was difficult to assess the net benefit of the resources construction boom, with the negative impacts of the resulting high value of the Australian dollar.

In a discussion on local suppliers and resources investment, the RBA said:

“The import intensity of current mining investment projects is also higher than in earlier years. One aspect of this is a global tendency for greater use of off-site ‘modular’ construction processes as opposed to the traditional on-site ‘stick-build’ processes.

Developers of LNG and magnetite iron ore projects are increasingly modularising their processing plants, making it easier for them to be built offshore and then installed in Australia. In addition, a range of inputs to mining projects that have historically been sourced locally are now often being imported.

This includes, for example, rail wagons and track, chemicals, container housing for construction workers, and engineering services. This change in large part reflects the same factors boosting import penetration in the economy more generally – namely, the trend rise in import intensity and the more recent significant decline in the relative price of foreign goods and services as a result of the appreciation of the exchange rate. In addition, the sheer scale of current mining investment projects has meant that local industry does not always have the capacity to service the large contracts being tendered by project managers. Further, the infancy of the LNG industry in Australia has meant that local firms are sometimes at a competitive disadvantage, due to a perception that they lack the same experience as foreign suppliers.”

The RBA’s comments further highlight the need for strong action by the State and Federal Governments to support local steel fabrication businesses and the skilled jobs they provide.  Countries as diverse as the United States, Canada, Malaysia, China and the Ukraine are taking action to support their local manufacturing industries.  It is time our governments took similar action.