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BUSINESS TAX WORKING GROUP DISCUSSION PAPER

The mining and minerals processing industry is Australia’s principal export earner and most globalised industry. It has been a major driver of growth, investment and higher living standards in Australia over the last decade.

Keynote Address: 2012 Kevin McCann Energy and Resources Lecture

Australia is entering stormy waters. Indeed, there are all the ingredients of another “perfect storm”. Unlike the confluence of events that precipitated the global financial crisis, this time key factors are of our own making. The “mining boom” is not over. It is different. The underlying fundamentals of demand have not materially changed, just evolved. It is the supply side and Australia’s capacity to compete for global custom that has markedly and acutely changed. Supply has caught up with, even exceeded, demand. Commodity prices are easing, and margins shrinking in the face of escalating costs. As the industry necessarily shifts from an era of price-led growth to volume-led growth, Australia is found wanting, increasingly vulnerable to competition from resource-rich emerging economies.

REGAINING OUR COMPETITIVENESS

Today the MCA is releasing a new report commissioned from Port Jackson Partners that gauges the extent of Australia’s costs crisis, the opportunity cost of declining competitiveness and the policies needed to regain Australia’s position as a premier global supplier of minerals. Over recent years, the Minerals Council of Australia has being warning of the structural deficits in our economy that have been masked by historically high terms of trade. As the value drivers of the “mining boom” shift from price-led to volume-led growth, Australia is increasingly vulnerable to competition from resource-rich emerging economies.

Opportunity at risk - Regaining our competitive edge in minerals resources

The developing world’s economic transformation continues to offer sustained demand growth for Australia’s commodity exports. The fundamental drivers of minerals demand growth, urbanisation and industrialisation, will exist for the next 20 years or more. Neither weaknesses in developed world economies nor a temporary deceleration in China will dampen these long-term trends. For Australia, maintaining our current minerals market shares would add $121 billion per annum to resource sector revenues by 2031. This is a 65% increase for a sector already twice the size it was in 2006. The benefits of this growth would be large and widespread.

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