Labor shortages, a high exchange rate and new taxes are eroding the competitiveness of Australia’s mining industry, a resources lobby group report said yesterday, warning of a hit to growth.
The report, commissioned by the Minerals Council of Australia (MCA), said that more than half of the nation’s copper, coal and nickel mines had costs “above global averages” and that even the key iron ore sector was struggling.
Labor costs were mounting “much more quickly than the national average” and were among the highest in the world due to skills shortages, while the booming Australian dollar was “unnecessarily high,” it added.
In the thermal coal sector the MCA said that the “majority” of proposed investment was at risk and by 2020 iron ore projects outside the established Pilbara region would cost up to 75 percent more to build than in West Africa.
By 2020 it would be cheaper for China to import iron ore from Brazil than from new Australian projects, it said, with the Asian giant’s state-owned enterprises also making “substantial investments” in African mines.
“Australia is losing the battle for market share. While volumes have grown in important commodities, our market shares are at best stagnant, and in some cases declining,” the report said.
“The modelling suggests that, without improvements in our competitiveness, real GDP in 2040 [will be] 5.3 percent lower than it would be under [a more] competitive scenario,” it added, calling for the abolition of new taxes on iron ore and coal profits and corporate pollution.
The report said 75 percent of the US$500 billion in proposed mining sector investment remained uncommitted and projects stood to be lost offshore to cheaper nations, including Mongolia and Mozambique.
Australian Resources Minister Martin Ferguson acknowledged the need for Australia to remain attractive to investors.
“The opportunity is still there for the wave of investment to continue, but we have to keep the cost of delivering these projects down,” Ferguson said.
“Our future earnings will not be based on record commodity prices, rather on increased volumes resulting from our being able to deliver projects in a cost-effective manner,” he added. “To maximize our opportunities we must ensure we maintain an environment which continues to attract investment to the benefit of the whole community.”
The MCA report warned that labor shortages were driving up mining sector wages, with construction worker salaries booming 9 percent every year between 2001 and last year, creating a threat of “labor cost super-inflation.”
Skilled workers needed to be imported to plug the gaps and workers needed to be drafted from the struggling manufacturing industry to be retrained for work in the mining sector, added the MCA, which represents many of the big mining companies.