May 2011

There’s been a lot of “patchwork” babble lately. Read on for the plain English translation…

Right now some parts of the economy are rockin’ while other bits are being rolled.

In the rockin’ corner we have the Aussie diggers and drillers who are filling up tankers bound for nation-building projects in Asia. The diggers and drillers are announcing record profits and it don’t look like stopping anytime soon, folks.

Meanwhile, Resources Boom Mark II is pumping the dollar big time. Last week some pointy head at St George went out on a limb and speculated the AUD could hit $US1.15 in the next few months.

Sounds great but the rising AUD renders the globally exposed, non-resources bits of our economy too expensive for overseas markets. We’re talking sectors like education, tourism, farm exports and manufacturing.

And remember the Queensland floods and cyclones have disrupted about 10% of businesses nationally, and 25% of businesses in Queensland. The flow-on effects have, in some way, impacted 60% of all Australian businesses.

So it’s rockin’ over there and rollin’ here and there. It’s a bit all over the shop. It’s a bit patchy.

Some pundits call this phenomenon a two-speed or multi-speed economy. Wayne and Julia call it “patchwork” because they reckon the differences aren’t just between states or towns or industries. They see variation at a micro level between businesses, households and individuals.

Here’s another way of perceiving this mish-mashy muddle: the benefits of the mining boom haven’t reached everyone.

Looking ahead, Mining Boom Mark II might not be as lucrative as Mark I. The rocketing AUD, already high terms of trade that are likely to taper off, and the higher levels of investment needed this time round will all eat into profits.

And interest rates? The patchwork is taking the heat out of the economy, giving the RBA board cause to pause. For now.

In other news… the UN now projects the world population, long expected to stabilize at 9 billion by 2050, will instead keep rising to hit 10.1 billion by 2100. One of the main causes will be Africa; its population is expected to triple. Oh and give yourself a pat on the back: we humans are expected to pass 7 billion in late October. Hmm, methinks that sixth wave of innovation can’t start soon enough.

Posted by Andrew Pegler on May 04, 2011

There’s a brave new world coming and it wants your leftover pizza.

We live in a wasteful world. But imagine if all this waste was not only useful but a driver of the global economy. Well you’ve just glimpsed the future, according to the writings of James Bradfield Moody and Bianca Nogrady in The Sixth Wave.

Since the Industrial Revolution, the economy has surged forward in waves of innovation, known as Kondratiev waves after the Russian economist who first identified them in the early 1900s. Kondratiev waves are periods of time – an age if you like – characterised by massive changes in technology and in the markets that fuel and fund it. Five waves of innovation have occurred, starting with the Industrial Revolution:

• The Industrial Revolution – 1771
• The Railways – 1829
• Electricity – 1875
• Oil – 1908
• Information and Telecommunications – 1971

These waves usually start in a time of turmoil, inspired by the need to solve a problem. They usher in a period of stability and prosperity before entering a final stage characterised by global economic downturn. According to the authors, we are now moving towards the end of the communications innovation wave.

And the sixth wave is…

The perfect storm of climate change and dwindling resources is driving the sixth wave, which will be about doing more with less, i.e. resource efficiency.

Speaking of efficiency, did you know only 15% of the fuel energy in your car actually goes into running it? The rest is lost as heat, pressure and noise. Whatever your politics, most agree the days are numbered for carbon belching into the atmosphere uncontested. Right now the smartest kids in the room are throwing lots of cash at renewable energy technologies – (a lithium miner in WA just won an award for its groundbreaking project using solar PV and wind in a hybrid model to reduce its reliance on diesel). Amongst other projects, investors are also funding ways to extract value from landfill waste and to control water evaporation from dams.

With the world’s population expected to hit eight billion by the end of the decade, and a developing world keen to enjoy the high life, the future must lie the clever use of our dwindling resources.