Mining and the Australian economy: the Australian Government's priorities for the mining sector
12 November 2015
Introductory remarks and acknowledgements
Distinguished guests, ladies and gentlemen. I’d like to acknowledge the representatives from nine different governments who are participating in this conference. I look forward to meeting many of you later today.
Before I start, I wish to acknowledge the major mine incident that has unfolded in Brazil. Our thoughts are with the victims, their families and local communities at this time. I am pleased to see the initial efforts to help the towns and peoples affected by this tragic incident.
It’s great to join you in Melbourne for IMARC 2015 and I’d like to congratulate AusIMM and Austmine on another successful conference.
It’s fitting that IMARC has brought together the global mining community here in my home state of Victoria, the birthplace of Australia’s mining industry.
Following the gold rushes of the 1850s, Victoria evolved into a major hub for mining and mining services, as well as a financial centre for the resources industry.
Today, many of the big names in mining— Alumina, BHP Billiton, MMG Ltd, Newcrest Mining, OceanaGold and Orica—call Melbourne home.
Today I want to talk about three things:
- the contribution of the resources sector to the Australian economy;
- the challenges and opportunities faced by the sector; and
- the Australian Government’s role in ensuring the sector realises its enormous potential for decades to come.
Contribution of resources to the Australian economy
Since being appointed Minister for Resources, Energy and Northern Australia I have:
- met with many of my international counterparts at the G20 Energy Ministers’ meeting in Turkey and also at the APEC Energy ministers’ meeting in the Philippines;
- travelled to Japan to hold discussions with government Ministers, officials and senior business leaders with significant investments in Australia; and
- undertaken numerous site visits across Western Australia, Queensland and the Northern Territory.
These early experiences have highlighted:
- the national significance of the sector;
- the importance of building on Australia’s strong international reputation as a reliable energy and commodity supplier and attractive place to invest; and
- the wonderful optimism and resilience of people working in the sector –particularly those living in regional mining communities.
I am committed to the success of our resources sector and I’m very optimistic about its long term prospects. I understand the enormous contribution mining makes to the prosperity of Australia and many other countries around the world.
From 2003 to 2014, over $400 billion of resources projects were initiated in Australia.
Mining contributes about 8 per cent to Australia’s GDP and around 60 per cent of exports.
In the last financial year, export earnings from resource and energy commodities totalled $174 billion.
Australia is the world’s largest exporter of iron ore, accounting for 53 per cent of world trade in 2014.
We are also the second largest exporter of coal, our leading energy export.
Australia is also a major exporter of aluminium, copper, gold, uranium and zinc.
One of the great benefits of having such a strong mining industry is the job creation it facilitates.
Mining directly employs more than 200,000 people in Australia, with many more people benefiting indirectly, and is particularly important to the economic and social wellbeing of our regional and Indigenous communities.
In addition to creating much–needed high skilled and high paid jobs for regional Australians, it helps build careers and ensures more young people stay in regional communities.
It also supports regional economic activity, including supporting local small businesses through sourcing supplies locally.
Mining offers significant employment opportunities to Indigenous populations and has been at the forefront in the recognition of Indigenous Australians’ rights and special connections to land and waters.
Taxes and royalties from mining are a major source of income for the national, state and territory governments, with approximately $25 billion in taxes and royalties received in the 2013-2014 financial year.
They help us deliver infrastructure and services to our communities, including roads, schools and hospitals.
And beyond our shores, Australia’s resource and energy commodities are supporting the development of nations in the Asia–Pacific region.
Simply having abundant resources does not of itself guarantee this prosperity. Attracting private investment is crucial.
Since the gold rushes in the mid to late 1800s, when London and New York invested in Bendigo, here in Victoria and Coolgardie in Western Australia, Australia has welcomed foreign investment in resource projects from around the world.
As at 2014, the level of foreign direct investment in Australian mining and related activities was $265 billion, representing 38 per cent of all foreign direct investment in Australia.
In 2013–14 alone, the Foreign Investment Review Board approved over $22 billion in proposed investments in mineral exploration and development.
That investment has come from investors in Canada, the United Kingdom andthe United States, and increasingly from our key commodity trading partners like China, Japan, Korea and India. Australia has also experienced considerable investment from countries such as Switzerland, Brazil and South Africa.
We have a strong history of welcoming foreign investment in the resources sector and the Australian Government is committed to maintaining an investment policy regime that is transparent, predictable and non-discriminatory.
The fact is, in the absence of this investment, Australian resources would remain under-developed – with employment, national income and tax revenues lower as a consequence.
Challenges and opportunities
As you all know, investing in the resources sector is not without challenges.
This sector understands better than almost any other that markets move in cycles -the decade-long commodity price surge has ended and investment in new resource projects is winding back to more normalised levels.
A global oversupply of key commodities is forecast to lead to subdued prices over the medium term.
But such times also present an excellent opportunity for industry and Government to work together – be it supporting innovation or opening new markets for Australian resources.
And we need to remember that despite the current challenging market conditions, the outlook for the industry is positive and the benefits of the production phase of the resources boom will continue well into the future.
While I am talking about challenges and opportunities, let me also say that no-one is more aware than I am that the sector’s social license to operate is increasingly being challenged.
Responding to this challenge requires industry and government to work together to ensure the community is well informed, not just at the local level concerning individual projects, but also more widely.
The challenge is to go beyond winning the trust of local communities. Increasingly, the industry must also convince communities with no direct connection to the resources sector of the benefits of mining to Australia and all Australians. The fact is, the mining boom delivered a huge boost to living standards of ordinary Australians, not just those that worked in the sector. Across the economy to 2013 wages grew by 6 per cent more than they otherwise would have done, while household spending was 11 per cent higher – equal to over $100 per week for the average household.
As the Minister for Resources, it is my role to work with the industry to ensure that any debate is supported by the facts. Only by genuinely working together can we address misperceptions about the sector and respond to concerted campaigns that seek to erode the industry’s license to operate.
The Government’s priorities: supporting the resources industry
I now want to turn to the role the Government can play in facilitating the sector’s ongoing success.
Our focus is on creating a business environment that facilitates investment and improves productivity.
We have abolished the mining tax and carbon tax.
We are committed to cutting red-tape to reduce project delays and costs through a streamlining of approval processes for major resource projects.
We continue to work to remove duplication between the Australian Government and the state and territory governments with a one-stop shop for environmental assessment and approvals.
We are also expanding our Major Projects Approval Agency to provide a simpler, faster assessment and approval process for major projects.
Together, these initiatives remove duplication, reduce costs and create greater certainty for investors.
We recognise that exploration underpins the long-term future of Australia’s mining industry. We have established a $100 million Exploration Development Incentive to support greenfields explorations through tax offsets.
We recognise the importance of infrastructure in improving productivity at existing mines and opening up new mining provinces. Across the nation we are investing in record levels of infrastructure. A $5 billion concessional loan facility will support private sector investment in economic infrastructure in Australia’s north, where much of our resources wealth is based.
Your industry is already at the cutting edge of innovation, but we need to keep pushing the boundaries.
We are establishing industry think tanks—known as Industry Growth Centres—which target the growth sectors of the Australian economy.
They will connect firms more closely with our scientists and researchers to solve problems, innovate and facilitate access to global supply chains.
Two of these centres are dedicated to the resources sector.
One is for the METS industry—or mining equipment, technology and services; the other is for oil, gas and energy resources.
As you will know, Australia has one of the best METS industries in the world.
Over 50 per cent of companies in Australia’s $90 billion METS sector export their goods and services, with current exports exceeding $27 billion or approximately 30 per cent of the sector’s revenues.
60 per cent of the world’s mining related software is written in Australia.
I have been very impressed by the role your sector plays in a modern economy as an innovative, technology and science-based sector.
The METS Growth Centre, METS Ignited, was launched last month to help improve the competitiveness of the resources industry.
I’m not surprised it is already a lead sponsor of this conference.
Elizabeth Lewis-Gray, who was a part of the panel discussion before my speech, is the Chair of METS Ignited.
Elizabeth is well known to many of you from her former role as Chair of Austmine and I’m sure the industry will have productive engagement with Elizabeth and the centre.
The Oil, Gas and Energy Resources Growth Centre is also expected to be up and running by early 2016.
It is part of a suite of energy initiatives being delivered through an integrated national energy policy, which is set out in the Government’s Energy White Paper.
The white paper provides a framework to ensure future investment in Australia’s energy resources and enable competitively priced and reliable energy supply.
Australia’s free trade agreements are also important for our resources sector.
We now have free trade agreements with the US, Japan and South Korea, and will soon complete all actions so the China FTA will come into force from 1 January next year.
We have also lead efforts to enter into the twelve-country Trans-Pacific Partnership Agreement. This agreement further builds on our earlier achievements – covering close to 30 per cent, or almost $47 billion, of total Australian exports of resources and energy products.
Through these agreements, we are looking to increase trade and investment opportunities in our energy and mining sectors, which will also contribute to sustainable economic growth and energy security in our region.
Australia’s world class resource base and expertise in exploration, mining and processing are a great asset for the nation.
They’re also important for the development of countries in the Asia–Pacific region.
Australia remains well placed to meet the growing global demand for many resources and energy products driven by the continuing industrialisation of these countries.
As commodity markets adjust, we’re preparing for a new wave of investment in exploration and mining.
It remains the Government’s priority that Australia continue to have an investment-friendly environment that facilitates business and your industry’s success.