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Interview with 2GB Breakfast

9 January 2017

Interviewer: 
Steve Price

Subject: Record resource and energy exports; gas industry; energy policy, entitlements reform

E&OE

STEVE PRICE:                                                                                                     

Some good news for the Government, front page of The Australian newspaper today: the mining and energy sector are set to hit a record $204 billion this year. Now this is said to possibly help in retaining our AAA credit rating.

Senator Matt Canavan is the Minister for Resources and Northern Australia. Senator, happy new year to you.

MINISTER CANAVAN:

Happy new year to you too, Steve.

STEVE PRICE:

Good for the Government to get some good economic news. Is this a passing blip, or is this a long term trend?

MINISTER CANAVAN:

Well it's good news for the country Steve, not just for the Government. Our mining sector's still incredibly important to our nation. And look, in some respects it won't be temporary because of the volumes that underpin this. We're now exporting - in some of the sectors - more than double than we did ten years ago. We're employing more than twice the people in our resources sector than we did ten years ago. And that's because of all the investments that were made over the last ten years.

So there's been a lot of commentary that the mining boom has ended. Well, what has ended is those large capital projects that were going while prices were very high. But the production of mining commodities, of coal, of iron ore, of LNG soon as well, has never been higher in this country. And it's never employed more people than it does today. And where I'm talking to you from - I'm up in Central Queensland - we need jobs. Our unemployment rates in some of my towns around here are more than ten per cent. And this is really good news for the mining sector. [Prices] are very high too. They may not stay as high, but we'll still be producing a lot and that still means jobs.

STEVE PRICE:

How important is coal?

MINISTER CANAVAN:

Well for our sector it's the lifeline of Central Queensland and Northern Queensland, but it's also incredibly important for our country. It's still the second biggest export in our nation. It produces so much wealth for us. And it has also helped power large parts of our world. We should be incredibly proud about how our commodities, coal and iron ore have helped bring hundreds of millions of people out of poverty in Japan and Korea and China. And that's been a great boom for our part of the world. It's then underpinned other exports and other industries, and now agriculture - it's really taking off in this country thanks to that demand from middle class Chinese and Japanese and other consumers.

STEVE PRICE:

You must shake your head at these anti-coal activists. They don't live in the real world.

MINISTER CANAVAN:

Well it's really frustrating for people up here in particular, because we live and breathe it. I live in a town where there's lots of drive-in drive-out coal mine workers. So we understand that we need this industry to give people the money they need to put their kids in a good school, or own their own home. It's just what we need to do to make a buck. That's the real world, that's real life. But you get a lot of commentaries sometimes - particularly from people who live a long way from where these mines are - suggesting that we can just get rid of it and move on as if nothing has changed. Well if we did that, if we shut down our mining sector, hundreds of thousands of people would lose their jobs, and then there'd be massive flow-on effects of course as well, because we just had a trade balance in the country positive for the first time for a long time - almost exclusively thanks to these higher prices in our commodity industry.

STEVE PRICE:

We talked last week on the program about the problems that the gas industry is facing with state governments in particular in Victoria banning any onshore exploration for gas. You've got restrictions in New South Wales. South Australia, well they've just gone completely nuts, blowing up coal-fired power stations and blacking out half their population. On the gas issue, how are we going to resolve the fact that these gas contracts have signed up with our main trading partners, and yet we're looking like having a shortage of gas for industry in our own country?

MINISTER CANAVAN:

Yeah, look it's a really important point, Steve. One thing we should say though, is that we have enough gas in this country, there's not a shortage of gas as such. What there is a shortage of is projects to extract it. There's gas there under the ground. Now the projects you're talking about in Queensland - not far from where I am today, that export out of Gladstone - they're only there because of that export market. If it wasn't for the demand that came from Japan or Korea, there's no way coal seam gas in Queensland would have been developed like it has been. Because it's pretty high cost. But those higher prices that people are willing to pay overseas has allowed that gas to be developed and supplied.

Now we can't really then turn around years later and say, oh actually we're not going to let you sell that gas overseas, we want to just keep it domestically. I mean they wouldn't have made the investments if it wasn't for those overseas markets in the first place.

STEVE PRICE:

So how do we solve that local problem?

MINISTER CANAVAN:

Well what we need to do is to develop those resources in other areas. I mean you mentioned Victoria, they have a ban at the moment or a moratorium on conventional gas …

STEVE PRICE:

It's madness.

MINISTER CANAVAN:

This is not coal seam gas, this is not anything to do with hydraulic fracturing or fracking; this is just your conventional, run of the mill put a pipe down, use of natural pressure to get the gas out. That's happened for obviously hundreds of years and Victoria have a moratorium on it right now. Now I'll be a little parochial here as a Queenslander - I'm not exactly going to sign up to a situation with Victoria and not allowing that to happen where they are, and then they say Queensland we want you to give us your gas from up there to bail us out from our stupid policies. Well, I think their stupid policies need to be exposed first and foremost. They have enough gas in Victoria, they have enough gas in the Bass Strait, they need to get off their backsides and develop it.

STEVE PRICE:

But it's a bit like the electricity argument isn't it, with South Australia, where you've got the Premier Jay Weatherill trying to force South Australians into using expensive solar and wind power, and yet when the wind doesn't blow and the sun doesn't shine and they have a storm, they demand that they can extract electricity out of the grid from Victoria because of their dumb mistakes themselves. I mean at some point Victoria's going go see you later boys, we're not going to send it to you.

MINISTER CANAVAN:

Exactly and the vast majority of electricity in Victoria is generated by brown coal that the South Australians then use, it's the only way they can keep their lights on at the moment - because they have a giant power plug to Victoria. They want to make a bigger power plug, they want another transmission line there to Victoria - another interconnector to connect up to more coal, but won't use the same resource themselves. And this is hypocrisy, it's really annoying. Because if South Australia could balance their budget – and they're going to have a balanced budget thanks to the GST redistribution system, a lot of that money comes from the development from the resources sector, from coal seam gas, from coal. It gets redistributed to other states like South Australia.

So they're happy to take that money, they're happy to take the money that comes from exporting coal to Japan and China and Korea, but they don't want to develop the same resource here. It's just - it's almost a definition of insanity Steve, that we would send our resource over to Japan, Korea and China for them to develop their economies, but not use the same resource - coal or gas - here in our economies. It is mad and it's going to economically hurt us unless we can wake up to the fact that we have these great resources in this country, we should be a low cost energy superpower in the world, because we have coal and gas.

STEVE PRICE:

How do you explain to the Victorians that it would be silly to shut down Hazelwood?

MINISTER CANAVAN:

Well it's not a decision for the Victorian Government…

STEVE PRICE:

I know, it's a private operator, but I mean surely they've got to make it viable to keep it open. We saw the South Australians blow up the Thomas Playford coal power station.

MINISTER CANAVAN:

Yeah, look I mean, Steve, I'm not going to say every coal-fired power station in the country must be kept open and running. Hazelwood is decades old and does require hundreds of millions of dollars of investment to potentially keep going. So while I don't have all the numbers in front of me - it's a private investment decision obviously - I can understand from time to time we're going to shut down old coal-fired power stations. What we should be looking at is making sure we can build, have the incentives in place to build new power stations, whatever they may be, and I'm not saying it has to be coal or anything, I just want cheap power, I want affordable power, I want reliable power. I want power that is increasingly better for the environment as well. And so renewables will be part of that, but we shouldn't turn our back on coal. And in Japan and China right now, they're building ultra-supercritical coal-fired power stations which will help them meet their Paris climate change targets. They're 40 per cent more efficient in terms of carbon emissions. They use our high quality black coal to generate these outcomes. Well we shouldn't be turning our back on those options. We don't have those type of plants here in Australia yet. But as our old coal-fired power stations retire that's certainly something we should look at in my view.

STEVE PRICE:

Your ministerial colleague, Sussan Ley, is under pressure over expenses. Do MPs need, Senator, to be a lot more careful about what they claim?

MINISTER CANAVAN:

Well we should always be careful and I'm sure Sussan is very disappointed that she has not met the high expectations that are required. I should stress from what I've seen I don't think rules have been formally broken but we should hold ourselves to a higher standard, we are all representatives. It should not be about nit-picking about rules, it should be about what the public expects of us and Sussan has not met those requirements in this case obviously and she'd be disappointed about that. But she is a hard-working, well-performing Minister and I'm sure she'll bounce back from these mistakes. I think it's also the case that the system does need reform. The Government accepts that. There's a report that was finalised last year which outlined significant changes. There are about 12 parliamentary acts right now that cover this system, for work expenses for politicians. It needs to be streamlined, it needs significant change and the Government will be working on that this year.

STEVE PRICE:

Thanks for your time. Appreciate it.

MINISTER CANAVAN:

No worries Steve. Have a good day mate.

STEVE PRICE:

Senator Matt Canavan there, the Resources Minister. 131 873 is our number. His message there; don't turn your back on coal. It is something that is going to keep this country competitive.