What’s in it for miners? #election2013

Whether you’re an avid Labor supporter, a loyal blue ribbon Liberal voter, a ‘swinger’ or a minority party advocate, as Australians get ready to go to the polls its important for miners to consider what the industry will look like under a Coalition or a Labor led government.

One thing is for sure miners will be carefully watching to see how each side of politics values the sector.

And as an industry credited with protecting the country from the depths of the Global Financial Crisis, the demands are loud and the list is long.

The Minerals Council of Australia recently highlighted policy that has the capacity to impact the sectors capacity to grow and create jobs includes budget policy and tax, energy and climate change, land access and environmental approvals, and infrastructure policy.

“As Australia’s most export orientated, globalised industry, we simply cannot continue to bear the unproductive burden of a progressive shift of economic policy from the productive to the distributive side of the economy,” former Minerals Council chairman Peter Johnston said.

In other words, as former resources minister Martin Ferguson has told parliament you’ve got to build the economic pie before you can distribute it.

“Those charged with policy need to have a clear understanding of what’s at stake if they continue along the path of high cost, low productivity and more regulation,” Johnston said.

In short, government needs to create the conditions for business to be successful and Australia needs to have a conversation about what it needs to be done to regain its competitive edge so the nation continues to be regarded as not only the lucky country but also the land of opportunity.


gary-gray-2.jpgIndustry man and Labor’s mining minister Gary Gray

Current mining minister and former Woodside executive Gary Gray recognises the importance of the mining sector, declaring at last month’s MCA Minerals Week that it isintegral to the development of Australia's hinterland, our communities, our people and our settlement patterns” but being careful to highlight that the industry “is not a meal ticket”.

In his address to the Minerals Week delegation he outlined how mining has evolved over the past decade.

“In 2003 commodity prices were low and committed investment in the sector was around $20 billion,” he said.

“Today prices are much higher, so investment has multiplied too.

“High commodity prices have driven mining investment on a scale the world has not previously seen, and a scale that Australia may never see again.

“Committed resource sector investment today stands at $268 billion.”

Gray explained that focussing on increasing volume is not enough.

“The resources sector needs to better manage those things that it has the power to control; mastering the new ways our commodities are traded; smart allocation and discipline with capital, improving productivity, and management of shareholder expectations,” he said.

In a bid to take advantage of high commodity prices miners have undergone rapid expansion efforts but this has come at the cost of productivity.

“It is time now to renew our focus on productivity, at mine, business and government levels,” he said.

He hit back at commentators who he says have “unfairly described Australia as being hostile to investment due to high wages, taxation, over-regulation and sovereignty concerns”.

“This criticism is plainly wrong,” Gray said.

Instead he pointed to the recent Behre Dolbear report and the 2012-12 Fraser Institute reports which rank Australia as one of the safest countries for mining investment.

“The reality is a combination of factors influence the decision to invest, and when all of those factors are weighed up, on any objective assessment, Australia remains at the top of the list of attractive investment destinations,” he said.

Speaking to Australian mining’s top tier representatives Gray didn’t say anything the room didn’t already know, he didn’t make election promises, nor did he outline a plan for the sector amidst challenging times.

He did however explain that the role of government is to provide the best possible outcomes for the community – from employment, to tax, to the environment”.


ian-macfarlane.jpgLong-time Liberal Ian Macfarlane

Shadow mining minister Ian Macfarlane used his address to the Minerals Week cohort to outline the Coalition’s plan for energy and resources.

MacFarlane said under a Coalition Government the mining tax would be repealed as a priority and the country could expect a return to the Howard years with less sudden change.

He too recognised just how important the sector is to the national economy and took aim at the Labor government’s recent policy initiatives saying the resources industry “can’t continue to bear the brunt of a Government that sees it as a quick source of cash”.

“Government policy should not hinder the process of extracting those (natural) resources, or burden the industry with new costs,” Macfarlane said.

“Both the carbon tax and the Minerals Resource Rent Tax are a drag on the Australian energy sector and make investments less attractive than in other countries where these taxes don’t apply.”

He said changing the rules for investment have jeopardised Australia’s sovereign risk profile and undercut resource companies’ competitiveness.

“Australian energy and resources companies, who now have to compete with international competitors who don’t face this tax burden,” Macfarlane said.

The shadow minister also recognised current approvals processes are strangled by duplication and bureaucracy and said the Coalition “wants to work with State Governments to remove much of the red and green tape that bogs down project applications and development”.

“There’s too much duplication in this area and that has the effect of driving up costs and causing extensive delays, in some cases adding months and years to project development,” he said.

He said the Coalition would launch a “one-stop-shop” for mining approvals; yet many in the room were sceptical.

Getting local, state, and federal government aligned without risking social and environmental aspects of the approvals process is not an easy feat to tackle.


Mining’s policy wish list

The mining sectors message to its representatives in government is nothing if not clear.

To win over the mining vote the industry is calling for a stable taxation regime, clear-cut approvals processes, improved minerals education, and employment arrangements that recognise and reward improvements in productivity.

“Prime Minister Rudd (or if there is a change of Government, Prime Minister Tony Abbott) and our state leaders have a long to-do list, but, as unsexy as it sounds, reform of green tape must be near the top,” Minerals Council chief Mitch Hooke recently said.

So what does that all mean?

Stable and competitive tax and royalty arrangements

The implementation of the mining tax has caused some bad blood within the sector, with mining’s leaders calling for a dose of realism.

“Capital and operating costs are soaring while new taxes in a range of forms skim whatever margins may be left to developers,” Anglo American chief executive Mark Cutifani said at the recent MCA event.

“Australia’s mining productivity and costs have borne the brunt of regressive industrial taxation policies.”

Cutifani called for policy stability and predictability, saying they are the “pre-requisites for our long term investment decisions”.

“As a country we’ve got it badly wrong and we have created substantial uncertainty and investment barriers that were not here ten years ago,” Cutifani said.

He called for the planning and regulatory environment to be reshaped to better support investment.

A spokesperson for the MCA said the industry wants a stable, predictable, efficient and internationally competitive taxation system.

“Notwithstanding significant reforms to Australia’s taxation system over several decades, it remains complex, economically inefficient and administratively complex across all aspects,” the spokesperson said.


Streamlining approval processes

Prolonged, duplicated, and costly approvals processes pushes development costs up, delay prospective projects, and has long been a bug-bear of the sector.

“Access to grounds for exploration is being constrained,” Cutifani said.

“Resource developments are being strangled by duplicated bureaucratic processes and red tape.”

Instead Cutifani suggested the planning and approval process requires clear rules and “no shifting of the goal post half way through the game”.

He explained that current approvals systems at a state and federal level “needlessly delay projects, costs companies millions and threaten job losses”.

Cutifani called for the “turf wars” between federal, state, and local governments to be ended.

“We can no longer handle having three levels of government telling us what to do or banning things from us in way of federal taxes that devalue Australia’s mineral assets or regulatory regimes that suffocate investment,” Cutifani said.

“Our industry responds to price signals set internationally so our ability to get production to customers without delay is absolutely critical.”

Hooke recently weighed into the approvals debate saying the process has moved on from a “major issue to a full blown crisis”.

“Every Australian mining company has a list of projects beset by unnecessary regulatory delay; bound-up in state and federal green tape,” he said.

“Much of the delay can be attributed to the duplication of state and federal approvals processes. This is not only creating significant and unnecessary delays but also adding massive extra costs.”

Hooke called for a single assessment and approvals process which covers both State and Commonwealth environmental matters that is bound to statutory timeframes.

“The Commonwealth should be the standard setter and the states the deliverer. The Commonwealth should assume an auditing and enforcing role against an agreed set of standards for state approvals, not run a parallel process,” he said.

The Coalition’s plans to establish a “one-stop-shop” for environmental approvals has already garnered support from industry groups including the NSW Minerals Council.

“It’s encouraging therefore, that the Federal Coalition has committed to establishing a one-stop-shop for environmental approvals and undertaking an audit of all environmental legislation and regulation at state and federal levels,” NSW Minerals Council CEO, Stephen Galilee said.

WDS Limited managing director Terry Chapman explained there is opportunity for government to streamline regulation in the sector.

"Improved certainty in the approval process will stimulate more projects and consequently that results in more opportunities for the construction sector, as well as local jobs," Chapman said.


Workplace arrangements that reward for higher productivity

Union involvement, high labour costs, and falling productivity are all making Australia’s mining sector a tough one for human resource managers to navigate.

Some sites even list industrial relations issues as a higher business risk than safety.

Many miners are also calling for co-operative and industrial structures which provide flexibility to scale up and down workforces.

"Regulation, red tape, and workplace flexibility are all factors in the success of what is an embryonic industry with huge potential to advantage the nation," Chapman said.

The MCA is calling for workplace arrangements that are flexible for both employers and employees and have criticised the Federal Government’s Fair Work Act which it says contains “substantial flaws” including restrictive individual agreements, covers matter beyond what is directly relevant to employment arrangements, affords unions expanded right of entry “that goes beyond worker interest to union claims of coverage”, and “broader than necessary” good faith bargaining rules.



In terms of mining’s contribution to the economy Cutifani said Australia’s political leadership either didn’t care or didn’t understand.

 “Our relationship with our political leaders is even more disconnected,” Cutifani said.

Australian Mining loves to hear from our audience; with this in mind what mining policy agendas would win your vote?


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