The contemporary export coal industry, coal pricing arrangements and cost competitiveness

I  Introduction

Ladies and gentlemen

It is a pleasure to be invited here today to contribute to this workshop.

I have been asked to discuss the Australian black coal industry; how it fits into the Australian economy and into global coal markets; and how we can better understand the competitiveness challenges it faces. Without such understanding, economic research and policy formulation are unlikely to focus on what is important. Neither are they likely to be able to leverage Australia’s comparative advantage in coal resources and advance Australia’s future prosperity.

Over the past decade we have witnessed the rise of China, the Global Financial Crisis (or, more accurately, the North Atlantic financial crisis), continued rapid development of new information and communications technologies, increased globalisation of production – including bulk commodity – markets, and increasing demand by society for equitable and sustainable outcomes. These events have contributed to more competitive markets, to toughened competition and to making the managing of economies and businesses even more challenging.

In these circumstances, it is clear Australia cannot take its high standard of living for granted. This must be earned by improving competitiveness. Moreover, a well-diversified, well-managed economy is in everyone’s best interest. While some in society oppose coal mining outright and others raise legitimate concerns they wish addressed, successful societies are good at managing trade-offs once the costs of alternative paths are established and understood.

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