Keynote Address: 2012 Kevin McCann Energy and Resources Lecture

“Complacency, Backsliding and Envy are the Real Enemies of Sustainable Development”

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.

The strongest terms of trade in 150 years (driven by higher mineral commodity prices) has been masking the emerging structural deficits in Australia’s economic circumstances. An increasing costs structure, declining productivity and a deteriorating sovereign risk reputation are undermining Australia’s competitiveness and attractiveness as a place to do business in a highly globalised industry and world economy.

National complacency, economic policy reform inertia (and in some cases, back-sliding on three decades of pro-market reforms) and the politics of envy focused on the redistributive, rather than the productive, side of the economy, are all contributing to Australia’s vulnerability.

The opportunity cost in constraining Australia’s supply capacity is diminished national prosperity, not so much from my generation’s perspective, but for future generations. This threatens the fundamental tenet of sustainable development – that today’s generation does not compromise the capacity of future generations to prosper.

Few contest the underlying imperative of sustainable development, nor the equanimous consideration of its three fundamental pillars – environmental and social stewardship and economic development. This equation has been popularly and properly viewed through the prism of ensuring that environmental management and social welfare are pillars of equal imperative to economic development. But I suspect few appreciate that the economic pillar similarly needs servicing. It cannot be on auto-pilot, particularly if it is headed in the wrong direction.

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