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Australian resource sectors must stay competitive

Posted : Wednesday, October 31, 2012

With demand from China flattening, Australia's resource sectors need to stay competitive with skills and taxation reform, Queensland Resources Council, CEO, Michael Roche has told a CEDA forum in Brisbane.

At the forum, on the outlook for the resources industry and factors critical for sustaining advantage, he emphasised Australia doesn't have a God-given right to resources markets in Asia.

We need to get serious about things not covered in the Government's Asian Century White Paper, and more attention needs to be paid to skills reform and taxation reform, he said.

The resources sector contributes vastly to the Queensland economy accounting for $1 in every $5 and is responsible for one in eight jobs, he said.

The resource and energy sector is no stranger to fluctuating cycles of change and uncertainty.

Despite the rising cost of doing business domestically and falling global commodity prices, the sector remains a critical contributor to Australia's economic development.

The industry's focus is now on driving productivity and innovation improvements, as well as ensuring the regulatory environment is right in order to remain globally competitive.

Mr Roche said the industry outlook for the resources sector was downbeat, due to increasing costs and commodities prices.

The adversarial construction of our industrial relations system is a major barrier to productivity growth, said Australian Coal Association, CEO, Dr Nikki Williams.

"Chronic skills shortages such as what we face in Australia combined with sustained and high demand for product has created an environment where unions have the capacity to flex industrial muscle," she said.

"This has extended beyond payment conditions into matters of managerial control of who to employ and how to invest."

Dr Williams said the Fair Work legislation doesn't enhance or promote productive working relationships at an enterprise level, and allowed unions to strike leading to sky rocketing wages and production losses.

She emphasised Australia must do better on industrial relations, adjust within the economy and enter a new phase in our relationship with Asia that fosters innovation, and promotes best practices to allow employees and employers to negotiate terms that underpin the sustainability of business and shop floor harmony.

She told attendees that in Australia there is an inefficient level of regulation and a cumbersome project approval process.

"Each year the completion date of the average thermal coal project is delayed by a further three to four months, with the average (delay) now at 3.1 years compared to 1.8 years for rest of the world," she said.

Another barrier to productivity growth is uncertainty in taxation policy with coal royalties soaring from $2 billion in 2006-07 to $6.3 billion in 2012-13, she said.

The cost of coal mining is escalating and the industry is facing a number of challenges such as vanishing margins and an unsustainable cost base. However, demand remains strong, Dr Williams said.

Although coal will continue to be one of Australia's biggest exports, she warned an honest analysis of growth and a mature debate about solutions is needed.

Futureye, Managing Director, Katherine Teh-White said the resources industry needs to have both a global and national interest when operating their social licence.

She said investors want to invest in organisations that have a world class culture and approach to risk management.

Ms Teh-White said a sign organisations don't understand this can be seen in the way they manage risk.

"Issues the public consider serious are not usually the ones industry see as serious. This leads to risk controversy. If you ignore the public, they then build momentum through the media and politics," she said.

With greater demand for accountability from the public, heighted by social media, she said activists against an issue can drive societal risk and what you can manage is your reaction.

Ms Teh-White advised to take your fear out of the equation by planning and thinking through the options, and taking responsibility for the kind of future you manifest.

GVK Resources, Group Managing Director, Paul Mulder said stakeholder relationships are fundamental and critical to balancing and managing the needs of the community while meeting regulatory requirements.

He said GVK, India's largest infrastructure organisation, chose to invest in Australia because of its sound regulatory framework, stable political system, transparent approval system and low sovereign risk issues.

Mr Mulder said GVK will be constructing the first integrated mine, rail and port supply chain in Australia for the coal industry.

He said this project is positioned to weather all economic climates and will be the best way to move coal in the most cost effective way.