By Tania Constable, Chief Executive Officer of the Minerals Council of Australia
Australia is at risk of ceding its advantage to global competitors as the world’s economies jockey for prime position in the emerging clean energy mining boom.
The Mineral Council of Australia’s (MCA) recently released report Future Critical: Meeting the minerals investment challenge highlights that Australia is at risk of dealing itself out of trillion- dollar critical minerals markets unless it gets serious about addressing rising costs, declining productivity and increased policy risks.
Deepening investment uncertainty, exhaustive delays in environmental approvals and the proposed introduction of rigid and costly industrial relations laws are combining to blunt Australia’s ability to fully capitalise on this once-in-multiple- generations mining boom.
All-industry productivity has halved since the Hawke-Keating reforms of the 1990s and mining capital stock has plateaued at $933 billion over the last five years. In addition to this, Australia has the third highest company income tax rate among Organisation for Economic Co-operation and Development (OECD) countries.
The MCA report highlights the crucial role minerals and resources play in Australia’s economy and communities, as well as their inherent connection to Australia’s long-run prosperity and the funding of government services, and the risks of missing an impending golden opportunity to secure the nation’s prosperity for decades to come.
Over the last 20 years, mining has been either the first or second largest contributor to Australia’s economic growth.
From 2012-13 to 2021-22, mining companies have paid $252billion in wages to hard working Australians, on top of $295 billion in taxes and royalties that help fund hospitals, schools, aged care, childcare and infrastructure.
The mining industry’s strong links across the entire economy has resulted in benefits from its activities being widely distributed – spending on domestic goods and services by mining companies accounts for five per cent of the total intermediate use by all industries across the Australian economy.
The MCA report shows that for every new job created in mining, 6.14 new jobs are created across all industries.
If a major expansion of mining were to occur – similar to the previous mining boom earlier this century – households would be $11,700 better off, real wages would be 9.4 per cent higher and the economy $290 billion larger by 2030.
However, time is running out for Australia to catch the wave of mining investment needed to achieve the collective global pursuit of net zero emissions.
Catching the mining investment wave
As global demand for minerals and metals intensifies, Australia’s global competitors are responding rapidly. Governments in other mineral-rich nations are clearing the path, enticing investment with targeted policies, streamlining approvals, breaking down barriers and embracing this opportunity.
The pathway to delivering global net zero emissions is uncertain, but current policy settings are minerals-intensive.
Astronomical volumes of minerals and metals will be required to achieve net zero emissions by 2050. The International Energy Agency estimates that by 2030 alone, 50 new lithium mines, 60 new nickel mines and 17 new cobalt mines will beneeded to supply the materials required to meet demand for battery storage.
Business management consultant McKinsey estimates that up to US$4 trillion in investment in mining, refining and smelting will be required by 2030 to hit net zero targets. For mining alone, that represents an increase of US$160 billion a year to 2050 – more than double current levels of investment.
The challenge is immense.
Although the sustainability of the Federal Government’s fiscal position depends on the mining industry’s profitability and mining has been consistently at the forefront and is a critical driver of Australia’s productivity growth, Australia’s labour productivity and investment growth are in severe decline.
Capital investment has traditionally played a central role in Australia’s productivity growth, including the flow of foreign capital, but remains under siege due to increased competition from global competitors.
Of great concern, the report shows that the mining industry’s net capital stock is plateauing at a time when it should be accelerating to take advantage of the boom in critical mineral production, a further dent to the nation’s lagging productivity.
While Australia has the attributes, the workforce, the expertise, and the array of deposits required to be a leading global supplier of the critical minerals, governments have a critical role to play.
Stepping stones for governments
The push to unlock this opportunity must be supported with enabling government policy that improves Australia’s competitiveness in attracting investment, clears regulatory impediments, and boosts productivity.
Government must aim to eliminate existing policy impediments to mining activity in Australia that include:
- Regulations that seek to address environmental, heritage, culture or safety issues but create excess regulatory burden without benefits
- Policies that affect decisions about whether to explore for new reserves, change production plans, and expand or develop new mines
- Under-provision of public goods such as transport infrastructure, national security and cyber security that impair the mining industry’s ability to operate
- Political factors that present difficulties in gaining community support for projects, as well as the political process delaying or preventing investment
As the report clearly argues, maintaining Australia’s competitive edge in mining will require immediate and coordinated action by governments to ensure a prosperous future for all Australians.
The report provides a key message to federal, state and territory governments; the opportunity is there for the taking.
Future Critical: Meeting the minerals investment challenge can be viewed in full on the MCA website: https://minerals.org.au/resources/future-critical