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.

Our country’s attractiveness as a place to do business in a highly globalised industry is slipping due to a combination of rising costs, declining productivity and a deteriorating sovereign risk reputation. With commodity prices having fallen from peak levels, complacency and backsliding on economic reform pose a real threat to the minerals sector and to the wider economy.

The Port Jackson Partners’ report is a wake-up call for those who think our mining and minerals processing sector is so resilient it will thrive regardless of the prevailing economic and policy climate. It is the most detailed panorama yet painted of the burgeoning cost environment in Australia, our deteriorating reputation as a place to do business and the threat this poses to our ability to capture market share and future investment.

Within highly-competitive global markets for thermal and coking coal, copper and nickel, more than half of Australia’s mines now have costs above global averages. Even in iron ore, Australia has lost its operating cost advantage for all but established Pilbara projects.

The report demonstrates that Australia is losing global market share to rapidly emerging resource-rich economies. Added to that, a policy focus on the redistributive rather than the productive side of the economy has been pivotal to undermining our competitiveness and attractiveness to investment.

But there is an antidote. As is our signature card, we asked Port Jackson Partners to not only identify the problem, but also the policy solutions in order to test alignment with the MCA’s own policy advocacy.

The report clearly sets out the road map for reform which, it is argued, must begin with the recognition of our eroding structural competitiveness – what the report describes as our ‘burning platform’.

The prize for getting the framework for minerals resource development right is immense, but it will take hard work from both industry and government to secure the economic opportunity that is currently at risk.

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