Australian Resources: Open for business

Mines and Money Conference

Speech, check against delivery

Hong Kong

27 March 2014

To paraphrase Mark Twain: the reports of the death of Australia’s mining boom have been greatly exaggerated.

The prospects for Australian resources and energy, including gas remain very bright indeed.

As a new Government, our aim is two-fold:

  • To open up new markets or to make us more competitive in existing markets, such as the tariff reductions, including on LNG and minerals, in the recent Korea FTA; and
  • To provide the right environment for the supply side response to flourish, by providing the most competitive and stable environment possible for the sector to operate in.

This gives confidence to investors and will help us lock in new projects which can deliver future decades of prosperity to Australia, and to its export customers.

In effect we can re-boot the mining and energy boom.

To do this we need to deal with some legacy problems left by our predecessors; problems relating to uncompetitive new taxes and costly rule changes.

As I have travelled the world in my role as trade and investment minister, I have detected a sense of disillusionment with the interventionist, big government policy approach adopted by many countries in response to the Global Financial Crisis.

High levels of government debt-fuelled spending, and a propensity to overregulate, have not produced sustainable growth or job creation.

This was the pathway followed by the previous Australian government, along with introduction of damaging new taxes.

In contrast, the Abbott Government is aggressively pursuing trade and investment as key growth drivers.

Our central objective is to displace big government from the centre of economic policy and replace it with robust growth led by the private sector.

There are four key principles guiding our approach.

  1. We will live within our means.
  2. Pursue serious deregulation.
  3. Restore a culture of personal responsibility.
  4. And we will back our strengths, the things we do as well as any and better than most.

To this end we are committed to restoring the budget to health after the build-up of record debt and deficit by our predecessors.

We are pursuing the most aggressive deregulation agenda our country has seen.

Last week we identified some 10,000 laws and regulations for appeal, including costly red and green tape.

We are streamlining and accelerating project approval processes.

Since coming to office we have granted environmental approval to 125 projects worth more than $400 billion. Some of these had been delayed for six years.

We are also removing anti-competitive taxes which have harmed our resources sector – namely the carbon tax and the mining tax.

Importantly, we are also restoring the Australian Building and Construction Commission (ABCC).

This ‘tough cop on the building sector beat’ will boost productivity in the construction industry and help stamp out rogue union behaviour which undermines major projects.

Through our early action we are sending a clear signal that Australia is indeed open for business and welcomes foreign investment.

Backing our strengths

Resources and energy has long been one of our great strengths, along with agriculture, education, tourism and events management, funds management as well as medical research and health services.

In addition, we have an enviable reputation for a range of other services that have developed around our core strengths, such as mining services, engineering and environmental management.

Our country’s strengths align with surging demand of the middle class across the Asia Pacific.

And while it is true that resources prices have come back from their historic highs, demand will remain very strong in the years and decades ahead.

There is a supply response coming down the line from various parts of the world.

To compete on volume and to attract new investment, government’s role is to help get business costs down and to reduce the regulatory burden.

Over the next three to five years, decisions will be made in regard to $250 billion worth of energy investments globally.

This includes a number of companies with a strong presence in Australia.

This investment is up for grabs and Australia can secure more than its fair share.

Just last week finance was confirmed for Roy Hill, the US$7.2 billion iron ore project in Western Australia’s Pilbara.

This is said to be the world’s largest ever financing deal for a land-based mining project.

Iron ore exports are predicted to rise an average of about 10 per cent a year in the next five years.

Many commentators are bearish about thermal coal, but forecasts suggest that between 2014 and 2018, China will import more thermal coal than it has in its entire history.

Several major thermal coal projects, at $10 billion apiece, are planned for the Galilee Basin in north Queensland, including two backed by Indian investors GVK and Adani.

This would be the opening up of Australia’s first new mineral province in 40 years.

In the long sweep of Australia’s mining history, it’s on a par with the opening up of the mighty Bowen Basin, or the Darling Ranges in bauxite.

Australia’s LNG story is set to be phenomenal.

We are already the third largest LNG exporter in the world.

Yet by the end of next year another chapter opens when all three major Gladstone projects in Queensland will be in production – the world’s first LNG export projects sourced from unconventional coal seam gas.

When combined with the developments in offshore LNG in Western Australia, these projects mean that by 2017-18, Australia could overtake Qatar as the world’s largest LNG exporter.

But there’s a lot more still to play for in global LNG, underpinned by growth in Asia’s energy-hungry middle classes.

Between 2016 and 2025, global demand for LNG is tipped to grow by 15 million tonnes per year, every year, above and beyond those already sanctioned or in advanced planning – the equivalent of one Gorgon project each year.

I know the Gorgon project well – a 55 billion endeavour. In a previous life I spent two years working for Chevron on one of their early Gorgon investment teams.

That’s why I know how important it is that, as a government, we ensure we provide a highly competitive and stable investment environment – to restore Australia’s reputation as the gold standard when it comes to sovereign risk.

Shale gas has been a ‘game-changer’ for the US economy, with supplies expected to last for many, many decades.

But, Australia is estimated to have the 7th largest deposits of recoverable shale resources in the world.

This could potentially add another century to our gas resource life, on top of the vast coal seam gas resources we will soon start to export.

Conclusion

Australia is a country that from its beginning has relied on foreign investment to develop the projects and infrastructure that have given us the enviable standard of living we enjoy today.

Resources and energy has been central to this. We are now on the hunt for the next wave of investors to support the next instalment of our mining and energy story.

To support that, I am currently in the process of appointing a group of senior investment specialists, to help drive and facilitate inward investment by the private sector.

The opportunities remain enormous, but the world has options.

That is why as a government we are so determined to do everything we can to ensure shore up Australia’s competitive position when it comes to investment and doing business.

We welcome your interest and support – and I look forward to what the future holds.

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