Resource World Magazine

62 www.resourceworld.com J U N E / J U L Y 2 0 1 8 Epilogue by David Duval C anadians opposing resource devel- opment, including pipelines to access foreign markets, might well take note that resource-rich Australia hasn't endured a recession in over 25 years. Cities such as Melbourne consistently rank among the most livable in the world. While our two economies are different in many ways, export markets remain an integral part of both economies and our economic futures will become increasingly dependent upon them. Australian economists note that the nation's long stretch of expansion was sup - ported by economic reforms in the 1980s and 1990s such as floating of the local cur- rency, a flexible labour market, financial sector and capital markets deregulation, and lower tariffs – a foundation that is obviously a prerequisite to any trade-based economy. Underpinning its economic growth over this period is the fact that the country is endowed with world class resources, most notably iron ore, coal, base metals, mineral sands, natural gas and other exportable commodities. In addition, Australia finds itself in competitively favourable proxim - ity to fast growing markets in Asia – China being the largest market – where demand for commodities appears almost insatiable. Strong demand for commodities has also put a bid under the Australian dollar at the expense of manufacturing indus - tries, including its almost decimated auto sector which is more competitive with a lower valued currency. Not all of the nation's citizens accept the fact that Australia's greatest strength is its bountiful resources, the exploita- tion of which has long been aligned with industrial growth rates in the develop- ing world. Strong environmental lobbies continue to influence government policies and the disastrous results – at least on the "clean energy" side with power blackouts in major cities and escalating energy costs – follows a familiar pattern in many of the world's largest economies. Look at Ontario where heavily subsi - dized green energy (wind/solar) policies have created "energy poverty" among a large segment of the provincial population. It has also reduced the economic viability of the province's industrial base, forcing many companies to move to jurisdictions with lower energy prices. Germany has spent billions weaning itself off nuclear power and fossil fuels, the main result being that the country is nowhere near meetings its 2020 climate goals. In fact, coal-generated electrical energy still accounts for 40% of its energy require - ments. Many German households grapple with ever more expensive electricity prices, bearing the cost of shuttering nuclear power plants early and building up renewables. Like Canada, Australia's booming econ- omy has created a predictable wealth effect with home prices now beyond the reach of first time owners and personal debt at record highs. Foreign investment in the housing market – at least at the high end – has prompted the Australian government to introduce foreign ownership taxes and tighter lending restrictions. This is similar to what was adopted in BC and Ontario even though that ownership segment is relatively small compared to that created by local (read millennial) housing demand. High levels of immigration – perhaps following the Canadian model – have also contributed to the economic expansion although Australia's former Foreign Affairs Minister, Bob Carr, recently called for Australia to cut its immigration rate in half, declaring that the country's experiment of running the fastest rate of immigration in the world was "an experiment that was failing." Governments in both nations seem determined to make housing more afford - able for the masses but they'd best be careful what they wished for. Many home- owner mortgages in Canada are up for renewal this year and they face the pros- pect of renewing at much higher interest rates. That being the case, housing prices could head significantly lower and esca- lating mortgage rates on a lower principal will hardly constitute a bargain for anyone. Although the Canadian dollar has benefited from higher prices for some com- modities, a lack of pipeline capacity has forced Alberta oil producers to sell their production below world prices, mostly to the benefit of the US refining sector. As a result, the Canadian economy – and the Loonie for that matter – has not fully bene- fited from the sharp increase in production from Alberta's increasingly landlocked oil sands producers. Compounding matters further for all consumers is the government's imposition of carbon taxes which will do absolutely nothing to alleviate climate change and is nothing less than a tax that will go into government revenues. This, along with the imposition of higher corporate and per - sonal taxes on just about everything, will put Canada at a competitive disadvantage with the United States which fiscally is heading in the opposite direction. In my view the biggest single economic issue Canada faces today is the inability of our national leadership to get the federally- approved Kinder Morgan pipeline from Alberta built to the west coast. Emboldened by a victory with Kinder Morgan you can bet that every other industrial project in BC will face similar resistance. n Resource sector in Canada and Australia face similar economic hurdles

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