On Friday I had the pleasure of addressing WA's Pastoralists and Graziers Association annual conference. The best thing I could tell the assembled membership was, if they were thinking of building another shed, do it now, don't wait for next year.
They're a feisty mob, the PGA, playing a major role in ditching the AWB's dodgy single desk wheat marketing racket and being more economically rational than most industry groups - a long way from the agrarian socialists of old. And I suspect they carry a good deal of clout in WA as I have never seen so many politicians at any industry body's annual conference.
The PGA members also know a lot more about their businesses than I ever will, but with the considerable help of the Australian Bureau of Statistics, I'd like to think I was able to give them one value-adding take-away with that build-your-shed-now line.
No time like the present
And that applies to all businesses - right now probably is the best opportunity you'll have in quite a while to build a shed, or anything else for that matter.
If you wait for the new financial year, you'll find it more expensive and harder to build said shed, unless perhaps you're doing it yourself with whatever's to hand. Trouble is, wattle-and-daub isn't the building material of choice in the bush this century.
Next financial year, it's very likely steel will be more expensive, bolts might be hard to come by and labor, well, depending on where you live, you might have to take a number.
That's the logical conclusion to be drawn from the very, very important but generally under or un-reported private fixed capital investment survey released by the ABS last Thursday. For mine, it was the most important set of statistics in several months - or at least since the last capex survey.
For obvious reasons
The way the capex survey works, each quarter the ABS asks a representative sample of chief financial officers what capital investments they're planning - buildings, sheds, mines, equipment, machinery, trucks, stuff like that.
The further they progress in the financial year, the more accurate the CFOs' forecasts tend to become, for obvious reasons. There is a pattern for the CFOs' first guesses to be conservative and get higher as the year goes on.
The December quarter survey released last week confirmed the very strong business investment that the Reserve Bank and Treasury have been factoring in to their figures for 2010-11 - some $129 billion.
But more importantly, the December survey is the first one that asks the CFOs what they intend to spend in the next financial year, in this case, in 2011-12.
The answer was a bombshell with the CFOs predicting a 30 per cent leap in investment compared with their expectation about 2010-11 at the same time the previous year. And as I mentioned, the early forecasts tend to be conservative compared with what actually happens.
A very big number
Typically, the first estimate of the next year's spend is less than the present year's actual investment. Not this time though - the first estimate is a whopping $133 billion. If the trend of the past half dozen years holds good, we could be looking at a massive $150 billion or so of capital expenditure next financial year. That is a very big number. And remember that's this is the private fixed capital expenditure - on top of which must be added whatever governments are spending on reconstruction and infrastructure and NBNs.
This is the number the RBA has been keen to get ahead of with its interest rate policy, the second leg of the commodities boom beyond the obvious influx of money for what we sell.
The lion's share but by no means all of this investment surge is in the resources industry. WA PGA members already know what it's like competing with the big mines for resources, for labor and engineering services. Someone who can drive a big, high-tech farm machinery has no trouble driving big, high-tech mine machinery - and the pay is much, much higher.
Feeling the pinch
Based on the ABS survey, many more of us will begin to feel the impact of that competition. It provides a great driver for the economy as a whole, providing more well-paid employment opportunities, but it also competes for resources.
Without an active skilled migration program, this surge in demand could prove highly inflationary. Whatever politicians might try to tell you about migration, the simple fact is that we need it - otherwise we could be seriously shed deprived.
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