The Minerals Council of Australia has released a new public policy monograph on rebooting Australia’s mining boom by Henry Ergas, Professor of Infrastructure Economics at the SMART Infrastructure Facility, University of Wollongong, and Senior Economic Adviser, Deloitte Access Economics; and Joe Owen, Research Fellow at the SMART Infrastructure Facility, University of Wollongong. It is available at www.minerals.org.au
Key points include:
Supply-side reforms to labour market institutions, approvals processes, economic infrastructure regulation and fiscal federalism arrangements are critical to rebooting the mining boom. Inefficiencies which developed or were sustained over the high price phase of the boom can no longer be sustained.
The challenge of rebooting the boom has two elements: 1) securing new investment projects beyond 2013; and 2) delivering on projected export volume growth out to 2025 in a much tougher global supply environment. This places a premium on cost control, timeliness, flexibility and adaptability along the full length of the minerals supply chain.
With changed market conditions, there is a danger that policy makers will underestimate the sensitivity of industry performance to government responses.
Workforce strategies based on fly-in, fly-out and Enterprise Migration Agreements are fundamental to securing workforce needs in project construction. And only an evidence-based Productivity Commission inquiry into the Fair Work Act can make Australia’s labour market institutions fit for purpose for the next phase of mining industry growth.
Approvals processes can make the difference between a project that is viable and one that is not. The failure on environmental approvals at COAG has put the next wave of resource investment at even greater risk.
On infrastructure regulation, there remains scope to improve both the directly regulated “open access” facilities and vertically integrated production systems under the scope of Part IIIA of the Competition and Consumer Act. In both cases, better processes for reviewing the need for regulation, and for doing so on a basis genuinely independent of the regulators themselves, are called for.
Current fiscal federalism arrangements, including the treatment of mining revenues, impede the capacity of resource States to meet the infrastructure requirements of resource development. The Commonwealth and the States need to enter a long-term agreement on the division of the revenue base, and to address issues surrounding the interaction of the Minerals Resource Rent Tax and royalties.
The question for Australia is not whether the mining boom is over: clearly, the opportunities remain substantial, but securing them involves a far greater challenge than we have faced to date. Rather, the question is whether we are prepared to do what is required to reboot the boom by achieving and retaining the global cost competitiveness that more demanding environment requires.