T Constable, address to Asialink Business Leaders, Canberra, 19 June 2019
Ladies and gentlemen.
I would like acknowledge the traditional custodians of the land on which we are meeting, the Ngunnawal people.
We acknowledge and respect their continuing culture and the contribution they make to the life of our national capital.
I am particularly delighted to join Asialink Business, as part of the Leadership Program’s five-day intensive workshop on economic and foreign policy along with the current political, diplomatic and trade policy challenges facing our region.
Bringing together the great minds from Australian businesses, governments and not-for-profits to build knowledge of contemporary issues in our region is more important than ever.
If Australia is to continue to build and enhance vital commercial, trade and people-to-people links in the world’s fastest-growing economic zone, we need to promote greater awareness and understanding of the policy challenges and opportunities that are emerging now and into the future.
The Minerals Council of Australia is firmly focused on today’s vital topic – the importance of Australia’s minerals sector to the future of our nation and the value that key Asian nations place on engaging with Australia.
Asia is more critically important to Australia now than it has ever been.
Australia is part of the Asian region.
Asia is part of our history, the engine of much of our present growth and the pathway to continued economic growth and success.
It offers enormous opportunities for the Australian minerals industry and for our trading partners to grow and to create wealth for the entire region.
At home, I am proud to say that Australian mining has supercharged economic performance in the post war era.
Our world-class minerals companies and their workforce continue to do the heavy lifting in generating jobs, export revenue and economic growth.
Mining is the foundation of our national prosperity and underwrites our high standard of living.
When mining is strong, Australia wins.
The resources sector earns more export income for Australia than all other industries combined, generating a record $221 billion in 2017-18, or 55 per cent of total exports.
Iron ore and coal remain Australia's two most valuable exports, contributing $61 billion and $60 billion respectively in 2017-18.
In the same year, gold – Australia's fourth largest export industry – generated $20 billion in revenue for the first time.
Base metals and other minerals contributed a further $38 billion in export earnings, including $13.7 billion of aluminium exports and $8.4 billion of copper exports.
In 2017-18, Australian mining paid $18.6 billion in company tax, higher than the $15.4 billion paid in 2011-12 during the peak of the resources boom.
Mining companies also paid $12 billion in royalties to State Governments in 2017-18 – more than three times the amount paid a decade ago in 2007-08.
Indeed, it is widely acknowledged that the strength of the industry’s performance enabled the re-elected Morrison federal Government to project a budget surplus for 2020-2021.
In preparing for today’s address, I took some time to reflect on the many relationships that have grown and now thrive between a number of Asian nations and Australia.
Whether, it is Japan, China, India, South Korea or ASEAN nations, I am proud to say that mining has been a constant thread that has built and sustained these relationships.
But the development of Australia’s reputation as a global leader in mining and the supplier of choice to the people of Asia is not an accident of luck and location.
It was built on the back of hard work, innovation and above all the partnerships, trust and investment that have funded the exploration for and development of our resources.
The investment and knowhow brought here by customers and partners helped us uncover our resource potential and build the infrastructure we needed to mine, transport and export our minerals to the economies of our region.
Over almost two hundred years, Australia’s relationship with Asia can be viewed through the lens of mining.
The gold rush not only fuelled Australia’s economic growth and prosperity.
It also marked a turning point in the people-to-people connections between Asia and Australia.
It is during this time that Australia was christened the New Gold Mountain in China after the Gold Mountain of California in North America.
Since this mighty period in Australia’s development, our mineral wealth has driven a number of booms and supported the economic growth and expansion of many of our trading partners.
The most notable of course are Japan and China.
Australia’s first post-war resources boom was kicked off by the Menzies Government’s decision to abolish licensing of imports on critical minerals including iron ore in 1960.
It’s hard to imagine that an Australian government once wanted to keep our world-class iron ore onshore!
The relaxation of this export embargo paved the way for the realisation of the lofty ambitions of generations of Australian prospectors, geologists and miners.
It also allowed a post-war Japan to pursue its goal to rebuild its post-war economy and deliver jobs and prosperity for its citizens.
Iron ore emerged as one of Australia’s main mineral exports, rising to become Australia’s leading export in the early twenty-first century.
Its rise to export dominance also heralded a new era in Australia’s trading relationship with Asia, with Japan surpassing the United Kingdom as our major export market in 1967.
The second major post-war boom that has shaped Australia’s minerals industry is our engagement with China.
Today, Australia and China celebrate a firm and transcending modern relationship bound by our historical connection in mining and mineral resources.
Modern Australia is now home to more than 1.2 million people of Chinese descent, with two out of five within that group born in China.
More than 1.4 million Chinese tourists visit Australia every year and more than 166,000 Chinese students were undertaking study at the end of December last year – close to half of the total international student cohort.
This strong and growing bilateral relationship and the opening up of the Chinese economy have undoubtedly contributed to the economic growth and prosperity enjoyed by all Australians over the past two decades.
And the strong demand for resources continues to underpin our economic, trade and commercial relationship.
China is Australia's biggest and most significant trading partner, with coal and iron ore the largest export commodities accounting for over A$13 billion and A$50 billion respectively in 2017-18.
Iron ore and coal help power the People’s Republic, and build its cities, roads and infrastructure.
China’s One Belt, One Road initiative will ensure that the economic benefits of development spread across the region.
Chinese steel production has increased fivefold since 2000.
At the dawn of the new century, China imported 70 million tonnes of iron ore from all global sources.
In 2018, Australia alone exported ten times that amount of iron ore to China – a staggering 700 million tonnes in one year.
Yet Australia’s engagement with the region through mining is much broader and deeper than Japan and China.
India is a growing and energy hungry market that is increasingly turning towards Australia as a reliable source of minerals.
India is now ranked as Australia’s fifth largest trading partner, up from ninth in just five years.
In 2017-18, Australia’s minerals exports were worth more than 70 per cent of the $16.3 billion of merchandise exports to India.
Like Japan and China before them, India’s large-scale industrialisation and urbanisation is boosting demand for Australia’s commodities.
Every minute, 30 people in India move to a city – the equivalent of Australia’s entire population urbanising every 19 months.
With 300 million people in India still not connected to the electricity grid, and 500 million people depending on biomass for cooking, India is expected to add the equivalent of the European Union’s current power generation capacity to meet expected energy demand to 2040.
Coal – mostly steel-making metallurgical coal – was worth $9.9 billion, a growth of 40 per cent in 12 months and an 11 per cent annual growth trend over the past five years.
Indian thermal coal consumption is rising faster than any other major economy because of increased electrification, while domestic supply and demand remains tight because coal sector reform has made limited progress.
That is why investments such as Adani’s Carmichael mine and infrastructure project are important.
To put it simply, the Carmichael mine is a win for Queensland, a win for Australia and a win for India.
Queensland and Australia benefit from thousands of new regional jobs and long-term investment in the mine and rail infrastructure.
More than 8,000 direct and indirect jobs flowing into central Queensland, allowing thousands of Queenslanders to live and work in their communities.
We saw at the recent Federal election just how important those regional jobs are if political parties want to secure the support of those communities.
New global opportunities will also be delivered by helping meet India’s growing demand for energy, as well as strengthening vital trade and commercial opportunities between our two countries.
It’s not just coal that India is looking to Australia to provide.
Gold ($732 million) and copper ($852 million) are also valuable commodities on which Indian industry relies.
India’s rising demand for nuclear energy and the need for imported uranium also provides Australia with new opportunities.
Australia took part in a small trial of exports of uranium to India in 2017.
However, much more needs to be done to unlock the potential of exporting valuable minerals such as uranium.
Australia is also well placed to help meet India’s energy demands, including through supplying coal to India’s high energy, low emissions (HELE) power plants that are rapidly coming on stream in large numbers.
Importantly, this is supporting India in meeting the climate challenge and its Paris Agreement commitments.
More broadly, demand for energy in ASEAN has grown by 60-70 per cent over the past 15 years.
ASEAN’s demand for energy is expected to continue to rise strongly through the 2020s and beyond based on continuing economic growth.
The ASEAN economy is forecast to grow at a weighted average of around 5 per cent per year in the period through the 2020s and to triple in size between 2015 and 2040.
Coal is set to remain a major part of the energy mix, noting that several ASEAN, governments are re-assessing the precise roles of coal-fired generation, gas and renewables.
As this transformation takes place in Asia, we have the knowledge and human capability to help close skills gaps in China, India and other Asian nations.
Australia has developed a world leading mining industry over many years and has become a key supplier of many resources to both Asia and other economies.
But there is still significant potential for further investment in new mines that will supply the copper, rare earth elements and battery minerals a growing world economy will demand in the 21st century.
Australia is a vast country and mostly under explored.
Our mines our concentrated in certain geographic areas and with greater exploration investment we will identify new mineral deposits and continue using our world leading workforce to develop them.
We have expertise in advanced resource extraction, refinery and development of resources, wind and solar.
Australia has expertise in mine rehabilitation, water management, tailings management, environmental conservation and clean energy solutions.
Our brilliant METS businesses have massive capability to support mining with innovation, ingenuity and efficiency.
This expertise is just part of the untapped mutual benefits that could emerge through stronger engagement. It is an opportunity to deepen our partnerships and to learn to work together
While these facts paint a positive picture about the role of Australian mining in the region, there are emerging challenges that confront and colour our relationships.
At the end of 2017, foreign economies had a total of $3.3 trillion invested in Australia.
Foreign investment has funded our nation’s roads, railways, communications, ports, dams, energy and other infrastructure around which we have built our industries and delivered a comfortable and prosperous society.
This huge investment underpinned $401 billion in Australian exports in 2017/18, with resources export income reaching a record of $221 billion.
Foreign direct investment is vital to the mining sector, enabling transfers of technology, skills and capabilities and access to global supply chains and export markets.
According to the Australian National University, the vast majority of Chinese investment between 2014 and 2017 was directed towards mining and real estate.
Two areas often cited as sensitive aspects of the Australia-China relationship – telecommunications and agriculture – accounted for only 2.2 and 3.3 per cent of all Chinese investment in Australia respectively.
Despite China being our largest trading partner, it ranks as only our ninth-largest foreign investor, making up only two per cent of the total.
What has driven those investment flows, and what are the challenges to our continued attractiveness as an investment destination?
Some valuable insights can be found in a report by KPMG and the University of Sydney, Demystifying Chinese Investment in Australia (June 2018), which notes that 2017 was challenging for Chinese direct investment.
While Chinese regulations reduced capital outflows to the world, the recent changes to Australia’s foreign investment regulations for strategic infrastructure assets have had an impact.
In a related survey, senior executives from 45 Chinese companies in Australia were asked about their perceptions of the Australian investment climate and key challenges they face in Australia.
The responses suggested that Chinese investor sentiment has shifted.
This should ring alarm bells for the health of our ongoing relationship and our collective ability to strengthen that relationship for our mutual benefit.
Significantly, there was a 17 per cent fall in Chinese companies feeling welcome in Australia – down to 35 per cent.
70 per cent of respondents stated that the political debate in Australia had made Chinese companies more cautious about investing here.
67 per cent of Chinese investors now view the Federal Government as less supportive than in previous years. State-owned enterprises are particularly apprehensive due to diplomatic tensions and the sense of feeling unwelcome.
In simple terms, there is a higher level of apprehension by Chinese investors towards investing in Australia.
This also echoes concerns being expressed by Indian investors seeking new opportunities in Australia’s resources sector.
The treatment of Adani in Australia is well-known in Indian business and political circles and has received significant media coverage – which shapes perceptions about Australia as investment destination.
In particular, the vilification of this project by activists as being promoted by an “Indian billionaire” is a disgraceful display of racism which has no place in our country.
Today, I want to send a clear message that Australian mining firmly believes in foreign investment and there are many good examples of successful international resources investment in Australia.
Some examples that come to mind are:
- Sinosteel’s iron ore project in Western Australia, which commenced in 1987 and was the first Chinese resources investment project
- Yancoal’s superior handling of coal projects along the East Coast
- Talison Lithium which runs the green bushes lithium mine in Western Australia and is 51 per cent owned by Tianqi
- Centennial Coal attracting investment from Indonesia
- Lion Gold in Ballarat.
There is no doubt that in some instances foreign investment will be sensitive.
Australia should be proud of defending our national interests and sovereignty.
Yet a more sophisticated approach to foreign investment must be adopted to support our national needs as well as the business and trade opportunities through these strategic relationships
Trade and investment should support and deepen our relationships.
It is time for Australian business to talk more often and more broadly to our friends, neighbours and partners.
In concluding today, I would like to say that as a naturally optimistic person, I believe the prospects for the future are positive.
Asia and Australia’s relationship has been shaped by minerals and the mining sector.
Asia’s population growth, urbanisation and the emerging demand for technology drives unprecedented demand for Australia’s minerals and energy.
However, we cannot be complacent.
All of us – business, government and community – need to continue to work harder on growing the important ties that exist between Australia and our Asian partners and neighbours.
That is why Asialink’s work and events such as today are important in promoting greater understanding and awareness of the challenges and opportunities that are unfolding in our region.
Australia has benefited significantly from the growth fuelled by Japan and China.
These relationships have helped transform Australia into a modern, prosperous society with some of the highest living standards in the world.
We must take advantage of our unique position within the region to grow and expand into existing markets as well as developing new partnerships.
Otherwise, we will jeopardise Australia’s future and economic growth and living standards in both Australia and Asia will be placed at risk.