MCA Pre-Budget Submission 2024-25
Read the full submission here: MCA Pre-Budget Submission 2024-25
Australians are facing a cost-of-living crisis, declining living standards and significant threats to their future prosperity. To address these issues, the economy’s growth must be lifted. The global clean energy transition provides Australia with a once in a century opportunity to attract a substantial amount of new investment. However, recent announcements of closures and curtailments in alumina, nickel and lithium operations are symptomatic of the growing international competitive pressures and deteriorating domestic business conditions facing Australian projects.
The problem is Australian mining costs are rising faster than those of competitors. If existing operations are financially unviable, the outlook for new investment is not favourable.
International competition for investment in mining, processing and manufacturing sectors is fierce. Advanced and emerging market economies are implementing comprehensive industrial policies to provide them a competitive edge in attracting investment in supplying clean energy materials and technologies to the world.
Capital investment will flow to projects with the best risk and returns. If these projects do not exist in Australia, capital will flow to where they do. Established and emerging resource-rich countries are taking actions to strengthen and grow their minerals sector. New jurisdictions are opening up in Africa, broader South America, Southeast Asia, India and the Middle East.
Australia’s standard of living will be largely determined by the performance of the minerals industry for decades to come. Without the large capital investment in mining over the last two decades, the sector’s economic contribution would not have been as strong, and the government would have been unable to achieve the first budget surplus in fifteen years. Higher than forecast iron ore and coal prices substantially contributed to last year’s budget surplus and the surplus expected this financial year. The additional company tax from mining has afforded the government more choice in the
amount and type of public goods and services it provides.
Australia needs government to deliver comprehensive policy reform to grow the economy, raise productivity and address the serious cost impacts on mining and mineral processing projects from inefficient policy settings. Failure to act will lead to further announcements of shutdowns, curtailments and job losses. And the anticipated flow of new investment in mining, minerals processing and advanced technologies to support the global clean energy transition will not transpire.
The Minerals Council of Australia continues to call on the Australian government to put business growth and investment at the centre of its policymaking. The actions of government over the past year clearly show that this message is falling on deaf ears.
The mining sectors capital stock, which is the largest contributor to the economy’s growth, has plateaued at just under one trillion dollars over the last seven years. Growth in the sector’s capital stock will not occur unless Australia has the right policy settings. When costs are high policy settings matter. We need to be better than our competitors around the world.
Government’s policy settings are imposing unexpected and inefficient costs on business that will only harm investment growth and hamstring the nation’s economic potential. Current policy settings are impeding investment in mining projects. Australia’s marginal effective tax and royalty rate on mining investment is high and internationally uncompetitive.1 Workplace relations rules are complex, confusing and productivity destroying. Environmental regulations and project approvals processes are inefficient and unnecessarily costly for proponents. Climate change and energy policies risk putting Australian exporters at a competitive disadvantage. And lack of a well-coordinated national workforce plan for the clean energy transition increases the risk of skills shortages across the economy.
The government’s changes to industrial relations legislation provides a clear example. Creating rigidities that reduce the ability of businesses and their employees to respond to changing circumstances and increasing the regulatory burden on the industry simply raises costs, lowers productivity and reduces the incentive to make substantial investments. Within 12 months of the first tranche of industrial relations legislation a union has lodged a multiemployer claim to rope in a
number of mines in specific companies across a state.2 The government emphatically denied that there would be such consequences.
The Australian Government must fully consider the consequences of its policies on the minerals industry to ensure its contribution remains strong. The benefits from mining activities extend widely to supplier industries and their workers, as well as the regions and communities where these businesses are located. Across industries, mining has been consistently at the forefront of productivity growth. Because the sector is extensively woven into the fabric of the economy, its productivity gains spill over to other industries.
For the economy to continue benefiting from the industry’s contribution, government must ensure that:
- Tax settings remain stable and internationally competitive to deliver adequate returns on
- Workplace relations rules do not increase business costs and undermine conditions for
- Environmental policy does not impose greater costs on project proponents without improving
environmental outcomes and considering the broader social and economic impacts
- Climate change and energy policies put business at the front and centre in delivering emissions reductions and energy security without compromising the economy.
While Australia should always be seeking out new and innovative economic opportunities, we should also seek to strengthen and build on the industries we are good at and have a demonstrated international competitive advantage in. Doing otherwise is simply foregoing opportunity and choosing a path to lower living standards.
The government can stack the odds in favour of Australia catching the next wave of global mining and minerals processing investment with the right policy settings. If it does, the benefits will be widespread and durable. If it does not, there are considerable downside risks to the economy.
Policy settings must enable rather than restrain business investment. Alleviating policy impediments to mining activity is critical to retaining Australia’s comparative advantage in mining and mineral exports and expanding activity in minerals processing and mining-related manufacturing.
The MCA has eight recommendations for the 2024-25 Budget that will help government secure the living standards of all Australians by enabling the economy to capture the significant opportunity presented by the global clean energy transition.