SUBMISSION TO THE PRODUCTIVITY COMMISSION’S INITIAL REPORT ON TRANSITIONING REGIONAL ECONOMIES

The Minerals Council of Australia welcomes the Productivity Commission’s initial report on transitioning regional economies. The report confirms that Australian regions continue to benefit substantially from the resources sector and refutes the notion that the Australian economy is transitioning away from mining. It also notes that the large resource base of many resource regions, combined with the expansion of capacity generated during the mining investment boom, are likely to provide economic and employment opportunities for decades to come.

The Productivity Commission makes a number of critical findings that should inform policymakers at all levels of government:

  • Most resource regions have high adaptive capacity and are continuing to grow in terms of employment, population and value of production
  • Regions whose base is large-scale mining have generally had the highest employment growth
  • Total employment in mining is more than double what it was before the mining boom
  • Average wages are generally higher (and have grown faster) in mining-intensive regions than in other parts of the country
  • Labour mobility allows the mining industry to support many workers who do not live in mining regions, thereby spreading the income and employment benefits of mining well beyond where resource extraction occurs
  • Fewer than five mining areas are classified in the least adaptive category, and all of them are located in remote and sparsely populated areas
  • The economic and employment benefits of mining are not limited to particular phases of the commodity cycle, but are sustainable in the longer term.

The Productivity Commission’s findings are consistent with a report by Deloitte Access Economics (commissioned by the MCA) on the combined economic contribution of mining and mining equipment, technology and services (METS). The report found that the total economic contribution of Australia’s mining and METS sector was $236.8 billion in 2015-16 – equivalent to around 15 per cent of the Australia’s gross domestic product (GDP).

Mining and METS activities support 484,100 full-time-equivalent jobs directly and a further 655,700 indirectly – amounting to approximately 10 per cent of total employment. (NB that Deloitte’s estimates include exploration, minerals extraction and metal refining, but exclude oil & gas.)

While the benefits of mining and METS activities are distributed across Australia, there are a number of regional areas where the sector makes a particularly significant economic contribution:

  • The Pilbara region (WA), with a total economic contribution of $37.8 billion (88 per cent of total regional economic activity) and 93,800 jobs (direct and indirect)
  • The Bowen-Surat region (Queensland), with a total economic contribution of $18.6 billion (63 per cent of total regional economic activity) and 99,700 jobs (direct and indirect)
  • The Hunter region (NSW), with a total economic contribution of $15.2 billion (34 per cent of total regional economic activity) and 93,600 jobs (direct and indirect).

In addition, Deloitte Access Economics has estimated the total economic contribution of mining and METS to Victoria, South Australia and the Northern Territory in 2015-16:

  • Victoria – $13.6 billion in value added (4 per cent of total state activity) and 121,700 jobs
  • South Australia – $8.9 billion in value added (8 per cent of total state activity) and 69,800 jobs
  • Northern Territory – $3.2 billion (10 per cent of total Territory activity) and 23,500 jobs.

Further, individual minerals companies make significant contributions to the economies and communities of particular regions. A number of examples are provided in this submission.

The Productivity Commission’s initial report also makes sensible policy recommendations for encouraging regional growth and development. The MCA agrees with the Productivity Commission that industry diversification should not be pursued as an end in itself, and that all regional communities would benefit from removing regulatory obstacles to market opportunities and entrepreneurship. The Productivity Commission is right to emphasise that deregulation is a ‘no regrets’ policy and that implementation of its previous recommendations for microeconomic reform has been ‘patchy and slow’.

In particular, the maintenance of duplicative and unnecessary environmental approvals imposes a significant opportunity cost on regions that would otherwise benefit from the income and employment that major projects deliver. A survey of MCA members has identified required areas of policy focus to improve the industry’s productivity performance. Project approvals processes was nominated as the area of greatest concern, followed (with equal frequency) by workplace relations and taxes and royalties.

The submission details reform priorities for national and regional growth and development.

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