Supply chain impacts growth

Australia has already lost market share to international competitors in the race to meet the strongest global growth in demand for minerals and energy in a generation and could lose more if capacity constraints are not addressed, new research has found.

Australia has already lost market share to international competitors in the race to meet the strongest global growth in demand for minerals and energy in a generation and could lose more if capacity constraints are not addressed, new research has found.

The research by Access Economics which was commissioned by the Minerals Council, showed that if Australia had maintained its global market share between 2002 and 2007, the minerals industry would have earned another $17 billion in today’s prices – the equivalent of 1.6% of nominal national income in 2007.

The benefits of successfully addressing capacity constraints are massive.

The research shows if capacity constraints are overcome and market share expanded, Australia could be $129 billion, or 8.5%, of today’s national income better off by the year 2020.

In order to maintain Australia’s present global market share by the year 2020, Access Economics found that massive increases in minerals production will be required, specifically nickel production will have to grow by more than 120%, iron ore more than 100%, zinc and copper more than 80%, coal and lead by more than 40%, aluminium by more than 20% and gold by around 15%.

The project was commissioned to provide a framework for the future development of the minerals industry and to identify appropriate policies and strategies to build capacity enabling Australia to maintain its position as a premium global supplier of minerals products well into the future.

Minerals Council Chairman Ian Smith said the research findings indicated the current expansion in global demand for minerals will continue into the future.

“This is great news for the industry and great news for Australia. The challenge will be to ensure that the present capacity constraints limiting supply are addressed, this is the economic policy issue of the moment,” he said.

“The speed and extent to which we address supply constraints is increasingly the key determinant of a country’s and an enterprise’s competitiveness. It presents Australian policy makers and the industry with an enormous challenge but also the prospect of great rewards.”

Access Economics found that mining was one of the few industries where Australia is a global productivity leader. One key issue identified by Access was the importance of getting the management of the supply chain right, including resolving issues around infrastructure development, regulation and ongoing management to allow the minerals industry to expand and export as quickly as possible.

The capacity constraints include chronic skills shortages, congested and poorly functioning export corridors, inadequate social and physical infrastructure in remote and regional communities, emerging shortages of energy and water and duplicative and excessive regulations.

Minerals Council of Australia

Ian Smith

Chairman

info@minerals.org.au

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