With the mining industry's fortunes improving, now is a good time to revisit the mistakes of the last boom.
If there was one clear message from this year’s Diggers and Dealers in Kalgoorlie, it’s that mining is back. The industry is consolidating — mergers and acquisitions are underway — billions of dollars are being invested in a solid pipeline of projects and future projects, and once again we’re seeing a serious shortage of skilled labour.
It feels like the boom is back — but this time it feels different. In part, that’s probably to do with the pandemic and hard border closures, which have limited opportunities for employs to FIFO from interstate and worsened the skills shortage. But perhaps it’s also because this time the industry has tried hard to avoid the mistakes made during the last boom, including runaway salary inflation.
But as the skills shortage worsens, that’s becoming harder to manage. As we look down the barrel of the next boom, what are the lessons of the decade since the last boom ended, and how can we prepare for a softer landing when this boom also comes to its inevitable end?
What lessons were learnt from the last 10 years?
In years gone by when commodity prices slumped, the impact was felt mostly in the often-remote mining towns that relied on the mines for their populations and income.
These days the mining workforce is predominantly FIFO, so downturns like the last one end up affecting entire states, particularly WA, NT and Queensland. During the last downturn, states previously awash with money (and perhaps spending like drunken sailors, thinking the rivers of gold would never dry up) were suddenly left borrowing billions to cover huge debts they’d accrued.
Many will argue the money spent during the last boom represented an investment in the future. But there are alternatives to a feast or famine approach to government spending that’s dictated by the mining industry’s boom and bust cycle.
Norway, for example — which is rich from the revenue of its offshore oilfields — has created the world’s biggest sovereign wealth fund with some of its boom-time cash reserves. Without getting too technical, Norway has converted every krone of its US$1.3 trillion wealth fund into a foreign currency, which is basically a giant hedge against times of downturn. And it has worked. Norway is using the fund to buy assets and make investments to ensure the ongoing wealth and prosperity of the nation.
What about the lessons for mining industry workers?
What works on the national level also works on the personal level. Although a few people working in mining on generous salaries made a small fortune through smart investments, good timing or exceptional luck, when the downturn eventually came, others lost everything.
Many people used to $100,000-plus annual salaries were suddenly without incomes but were encumbered with unserviceable levels of personal debt. Utes and jetskis were sold, mortgages were foreclosed on (30% of Australians are just six paydays away from homelessness), and tales of personal financial tragedy were everywhere.
The lesson for anyone working in mining is to not waste the riches flowing into your bank account today, because they might not be there when you need them tomorrow. Have a financial plan. Seek professional advice on how to set yourself up to be financially resilient.
The grass isn’t always greener on the other side
There’s one more lesson from the last boom that’s worth sharing.
During the boom, job vacancies were abundant and skilled people were in short supply. Salaries skyrocketed and mining companies ended up in bidding wars for the same people.
We ended up in a situation where many people were changing roles for ludicrous reasons, simply because the power imbalance in the supply-and-demand equation for skilled labour allowed them to do so.
We all heard stories of employees leaving for more money (even $1000 or $2000 a year), better facilities or the notion that “it’ll be better there”. Most of the time, they didn’t use the facilities or “it wasn’t any better at all”. Ultimately, what happened was, when the downturn came, loyalty and longevity were rewarded and job-hoppers found themselves out of work.
As the next boom bites, where to from here?
As the new boom in mining takes hold it’s worth remembering that booms don’t last forever. If you’re in the lucky position to be able to take advantage of the wonderful opportunities from this boom, then think long-term and think strategically.
Don’t just think about your current role; think about what you want your career to look like. Can the boom boost your opportunities? How can you position yourself for a long and successful career?
And, if you’re lucky enough to be enjoying the good salaries the mining industry offers, then how will you invest that income so it benefits you long into the future — ensuring you’re able to comfortably ride out the next downturn, whenever it happens?
Our governments might not do that, but you sure can.
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