Australians frequently refer to their nation’s “two speed” economy, which emphasises the commodities boom that has kept recession away for 20 years and counting. It also helps to explain the rising importance of the mining economies of Western Australia and Queensland in a country long dominated by the ‘old’ south eastern cities of Sydney and Melbourne, and the capital Canberra.
Perhaps nothing better illustrates this historic shift in the country’s power balance than the news that the richest person in Australia is not James Packer, nor Rupert Murdoch nor Westfield founder Frank Lowy. Instead, for the first time, the richest Australian is a woman from the Western Australia capital of Perth who is hardly known outside Australia. But, make no mistake, the world and not just Australia will be hearing a lot more about Gina Rinehart.
Huge exports of iron ore
Australia’s BRW magazine put the 57 year old , twice-married Rinehart top of its Rich List this week and commentators reckoned she is now one of the 10 wealthiest people in the world with a A$10bn fortune that has doubled in the past year. Given that growth rate, it is believed that she will soon enough catch up with the world’s richest men Mexico’s Carlos Slim and America’s Bill Gates, each currently worth four times as much as her. Rinehart’s fortune has zoomed from the export of coal and iron ore to the voracious steelmakers of China and India. Those endless iron ore shipments have turbo-charged Gina Rinehart’s wealth: back in 2002, the 1.25% royalty she receives from every tonne of iron ore sold by Rio Tinto was giving her company Hancock Prospecting about $10 million a year. Rising commodity prices have pushed those earnings now to almost A$200 million. And that’s just one slice of her assets, the roots of which are to be found in an inheritance from her colourful father Lang Hancock. His own description of how (two years before Gina was born) he discovered what became the world’s largest iron ore mines in the Pilbara region of North West Australia, is something straight out of folklore:
“In November 1952, I was flying down south with my wife Hope, and we left a bit later than usual and by the time we got over the Hamersley Ranges, the clouds had formed and the ceiling got lower and lower. I got into the Turner River, knowing full well if I followed it through, I would come out into the Ashburton. On going through a gorge in the Turner River, I noticed that the walls looked to me to be solid iron and was particularly alerted by the rusty looking colour of it, it showed to me to be oxidised iron.”
That discovery was made in an Australia then thought (believe it or not) to have relatively few mineral resources. As a result, there had been a long-standing ban on iron ore exports. But Lang Hancock was not just a lucky man. He worked hard privately to test and prove the enormous mines he had chanced on and then campaigned for an end to the export prohibition, only revealing his discovery after the government lifted the ban in 1961, a full nine years after his fortuitous flight across the Pilbara.
Accusing her stepmother
But, for all the fact that Lang Hancock himself was once known as Australia’s richest person, daughter Gina seemingly inherited almost nothing – a business in chaos and debt when he died in 1992. Hancock’s personal life was as chaotic as his business. His second marriage (not long after the death of Gina’s mother) in the last years of his life to Rose Porteous his Philippine-born maid (39 years his junior) became the subject of litigation that lasted a full decade after his death. It was a story straight out of media heaven with Gina screaming through headlines and court proceedings, accusing the fiery young widow of causing her elderly father’s death – by nagging or worse. The abortive court case filled the gossip columns for years. More recently, Australians have found it difficult to reconcile the image of Lang Hancock’s strident, screaming 30-something daughter with that of today’s billionaire who has transformed her inheritance. But, then, she still does not quite look the part. The Australian newspaper this week described her as resembling a well-heeled rancher’s wife more than a fabulously wealthy businesswoman. But this woman who pursued her stepmother with such determination is the one who has recently launched massive legal claims against her partner Rio Tinto. There is nothing restrained, cautious or quiet-spoken about Gina Rinehart, the woman from the gossip magazines of the 1990s but older and much, much richer – and flexing her economic muscles like never before.
Now, although this is a fascinating story of a woman who has been hugely successful (perhaps against the odds, but of course inheriting the right resources just ahead of the right time in world economic history), what possible interest is Gina Rinehart to the rest of the world?
Well, that is all to do with what Mrs Rinehart might do next.
Next, a media queen?
In some ways, you have to assume that political power in Australia will shift over the coming decades to reflect the relatively new (and still growing) economic weight of West Australia and Queensland. It may difficult to forecast exactly what that will mean for the country’s eastern elites but the protest against the minority Labour Government’s clumsily-launched mining tax saw Gina Rinehart becoming more publicly loud than she had been since striding out of a court accusing her stepmother of something close to murder. And that muscling by mining interests generally is thought likely to constrain any ‘climate change’ sensitivities of future Australian governments, a major change for an unspoiled country that had come to the forefront of environmental concern.
But it is Gina Rinehart’s investment strategy that is likely to capture the interest of people well beyond the sunshine shores of Australia. That sense of new ambition has already started.
Earlier this year and out of nowhere, she stepped in to acquire a 10% share of the country’s troubled Channel Ten television network. That move, which abruptly blocked media heirs James Packer and Lachlan Murdoch from gaining control, stunned her co-shareholders and looked like a public demonstration that Australia’s richest person is preparing to invest more widely in ‘new’ sectors. She followed the TV move by snapping up a 5% stake in the country’s huge but hobbling Fairfax newspaper and online group. She would not, of course, be the first business person to consider that media ownership could be useful in advancing her influence; and some are now expecting her to launch a takeover bid for Fairfax, publishers of Australia’s leading daily newspapers and also the BRW magazine which crowned her this month. But she might be more attracted by the former Kerry Packer-owned Channel Nine, the TV network now reluctantly controlled by a hurting private equity group CVC, victim of a good-times A$5.5bn purchase from James Packer. (It was Channel Nine, incidentally, that brought down another, quite different Perth-based tycoon, one Alan Bond, in the faraway 1980s: the Packers were good at selling Channel Nine).
On a practical level, Gina Rinehart has made her initial A$300m media investments at a time when she believes that the interests of her state and her industry are under represented in Australia’s corridors of power. But what her first big business steps on Australia’s east coast have emphasised are two truths of the two speed economy: that assets in the “other half” of Australia are relatively cheap; and that diversifying her multiplying wealth into prominent sectors can be a very heady experience for the woman who has felt patronised by her mostly male peers among the ranks of Australia’s wealthy elite.
Unnamed Rinehart friends have been quoted as saying her next investment targets will be in media and casinos. Is it a coincidence that these industries in Australia are so strongly associated with the fortunes and influence of the Murdoch and Packer families? And, now the mining billionairess has made her first moves to invest her cash beyond where she has been earning it, investment banks are falling over themselves to tempt further adventures in South America, Europe and, of course, China.
Watch out for more sparks, surprises (and, yes, flashes and flames) from the blunt talking, feisty woman who is determined to be seen and heard. Gina Rinehart is coming to an economy near you.Have you signed up? http://flashesandflames.com Media Fortune, Fame & Folly