Global macroeconomy tops the list of CEOs concerns, about factors that will adversely affect economic, environmental and social objectives in the resource sector, according to the Queensland Resources Council’s CEO (QRC) Sentiment Index, released for the March quarter 2014.
The QRC CEO Sentiment Index is a survey of the QRC’s full member company chief executives, covering the majority of mining, minerals processing, contracting, exploration, electricity generation and oil and gas extraction activity in Queensland.
Resource sector CEOs have indicated that over the next 12 months continued global economic uncertainty and weak economic conditions, especially slowing growth in China and India, are at the top of the concern list, as the continued oversupply in some markets is depressing commodity prices.
Second on the concern list, raising capital on the debt and equity markets remains difficult given low commodity prices, regulatory burden and perceived sovereign risk.
Securing internal funding within the larger organisations is also difficult as shareholders request larger dividends.
Uncertainty within regulation continues to worry the CEOs, for despite continued political rhetoric about red and green tape reduction, the regulatory approvals process, both state and federal remains complex and uncertain.
Next are high input costs caused by the Australian dollar increasing against the US dollar, combined with apparently high effective tax and royalty burdens and the general increase in the array of increased government charges, high labour costs, high energy costs increasing mainly on account of network and green costs and domestic gas scarcity, and productivity challenges that stem from resources depletion.
The fifth biggest concern for CEOs regards social licence to operate, as the mobilisation of the environmental activist groups includes claims about the potential impacts of resources extraction, such as ship movements and anchoring and dredge spoil on the health of the Great Barrier Reef.
Concern number six is that there are insufficient government resources, that the fiscal repair task of state and federal governments is depleting the policy and regulatory capacities of key government agencies.