Opportunity at risk - Regaining our competitive edge in minerals resources

Executive summary

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.

Since the onset of China-led developing world growth, demand and price have grown simultaneously. Between 2003 and 2011, iron ore exports more than doubled, as did the price we received. This will not last; a significant supply side response already underway will lead to price stabilisation or declines in coming years. As a result, Australia cannot bank on continued commodity price increases. In the future, growth in export revenues will come from bringing new low cost brownfields and greenfields projects on stream.

Does this mean the mining boom is over? No; but its dynamics have changed and its policy demands are greater and more urgent. Before, higher prices underwrote higher revenues. Now, Australia must do the hard yards of volume growth in order to grow (or even maintain) market share and capture our share of future investment and revenue potential.

Low cost volume growth has been our strength, but a repeat of our past success cannot be assumed. Large market share gains over earlier decades have been replaced by stagnation or share losses – we have lost our competitive edge. Crucially, this has happened at a time when Australia’s competitors are increasing in number and quality.

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