TRY hailing a taxi or ordering a meal in a restaurant in Perth these days and you may be in for a long wait. The capital of Western Australia (WA) is suffering a labour shortage, as young people head north to make real money from a mining boom. China's insatiable demand for WA's minerals is driving it, and helping China displace Japan as Australia's biggest trading partner. But Australia has also to balance its mining windfalls against clashes with China over human rights.
The Pilbara, a desert region about 1,300km (800 miles) north of Perth, is the main focus. BHP Billiton and Rio Tinto, two of the world's biggest resource companies, roughly share the Pilbara's iron-ore deposits that feed China's flourishing steel industry. China takes about half their exports. They can barely dig it out fast enough to meet demand.
Rio Tinto plans to double its 2007 iron-ore production (160m tonnes) in four years. Last year iron ore earned the company $8.8 billion, mostly from the Pilbara. The region is rich in more than minerals. Archaeologists have reportedly found ancient aboriginal tools at Hope Downs. Rio Tinto jointly controls this iron-ore mine with Gina Rinehart, daughter of the late Lang Hancock, a pioneer Pilbara tycoon.
The West is Australia's largest state, with just one-tenth of the country's population. Thanks to the mining boom, it now underwrites much of the country's economic growth. Last year the state's economy grew by 6.3%, almost double the national rate. Eric Ripper, WA's treasurer (finance minister), says his state “struggled” to post an A$9m ($8.3m) surplus seven years ago, before China's boom took off; the surplus last year was A$2 billion.
The “wild west”, as WA is sometimes known, has seen other booms end in tears. Alan Birchmore, a veteran of some, and on the board of United Minerals, a company with a Pilbara iron-ore lease, reckons this one is different: it has “depth”. “China”, he says, “is showing that it takes some stopping once people get a taste for consumption.” Some forecasts back him up. In a report for Rio Tinto and the Australian National University, Ross Garnaut and Ligang Song, two economists, argue that by 2020 China's demand for metals may increase by the equivalent of the industrial world's annual total demand now.
Meanwhile, the Pilbara's miners are wrangling with their biggest customer. After three years of successive price rises, BHP Billiton and Rio Tinto are reported to be seeking a 70% increase in contract prices this year. Chinese buyers are unhappy that both companies have made a killing selling some iron ore on the spot market; they are demanding that more be sold under lower-priced, long-term contracts. The Australian companies believe they have an advantage: their costs of shipping iron ore to China are about one-third those of Brazil, their main competitor.
Rather than jeopardise a huge trading relationship, Australian governments have tended to tread softly in their dealings with China over human rights. After nearly five months as Labor prime minister, Kevin Rudd was less constrained in a speech in Beijing on April 9th, referring to problems in Tibet. And he has banned Chinese security guards from accompanying the Olympic torch on its scheduled run through Canberra on April 24th.
China's bottomless need for Australia's resources is likely to override any political offence it may take from this. The boom's conflicts are closer to home. Mr Ripper says 500 people are arriving in WA each week to fill jobs for a bonanza whose scale took everyone by surprise. Rio Tinto's answer is a plan to move ore from mines to ports on a fleet of driverless trucks and trains, starting in 2010. But jobs will not disappear completely. People in Perth will give the “intelligent” vehicles their instructions by remote control.
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