Martin Ferguson (Batman, Australian Labor Party, Minister for Resources and Energy) Share this | Hansard source

I thank the House for the opportunity to address the very strong state of the Australian mining and petroleum industry at this point in time. I remind the House that that is what the MPI is about. It goes to the influence of government policy on the state of the mining industry in Australia. Let us deal with a few hard facts.

In the last 12 months, we have created an additional 27,700 new jobs in the mining industry. The reason we have created those jobs is that we are part and parcel of one of the most attractive nations for investment in the world when it comes to the petroleum and mining sectors. I was fortunate enough last Friday to be part of a further major announcement about where we are going as a nation. That was the Shell announcement concerning the construction of Prelude, the biggest ever floating LNG plant in the history of the world. That announcement effectively means that we now have the capacity to open up parts of the petroleum sector which were historically perceived as being stranded because of their distant nature in Australian waters—not Western Australian waters. Those petroleum products are to be developed for the benefit of all Australians, not just Western Australians.

In the development of the petroleum sector, 90 per cent of Australian projects are in Commonwealth waters. It is therefore our responsibility to continue to work with petroleum companies such as Shell to guarantee that we remain attractive and, in doing so, to create real jobs akin to the 27,700 new jobs created in the sector over the last 12 months.

When you think about the attractiveness of Australia, think about some of the key investments over the last three years. Think about the Gorgon plant, a $43 billion investment, the biggest ever single investment in the history of the petroleum sector in Australia. At the same time and side by side with the Barrow Island development, we are almost at the completion of Pluto 1, a Woodside project, an investment of the order of $15 billion to $20 billion, with gas to be produced in the second half of this calendar year, opening up further LNG contracts for Australia.

We also have the capacity in the foreseeable future to see the final investment decisions going to the Wheatstone project, a Chevron project at Onslow, and potentially the Browse project at James Price Point north of Broome. It is just not in Western Australia any longer; it is also in Northern Australia where Conoco-Philips at the moment has one gas train. There are opportunities to hopefully develop the Impex project—a development investment decision by Impex in association with Total, prior to the end of this calendar year, another investment of the order of $20 to $30 billion. Then we go to the east coast of Australia—investments in the first LNG exports in the world from the coal seam methane sector, a $31 billion new investment which will make Gladstone a major industrial centre in Australia, but that is just the petroleum sector.

Let us go to a couple of other key commodities because in my opinion not only does the coal seam methane export industry have great potential for Australia over the next 10 to 20 years but so do the coal sector and the iron ore sector. And this is despite the best endeavours of the Greens to undermine and destroy the coal seam methane, LNG and coal industries in Australia. The coal industry and the coal seam methane industry in Australia have a bright future of investment and the creation of real jobs and training opportunities and, side by side with that, a capacity to create real export earnings for Australia, strengthening the overall foundations of the Australian economy.

Let us have a look at a couple of those investments over the last six to 12 months. On 25 March this year alone BHP Billiton, at one board meeting held in London, invested $400 million in the thermal coal industry in New South Wales, $5 billion in the coking coal industry in Queensland and then, when we go to Western Australia in the important iron ore industry, something of the order of $7 billion—that is, over $12 billion invested in the resources sector in Australia by one company at one board meeting in March this year. That is only a small example of a range of investment decisions going to the strength of the mining sector in Australia over the last six to 12 months.

We could go to the decision by Fortescue Metals on 10 November last year to invest another $8.4 billion in the iron ore sector in the north-west of Western Australia. That investment decision is very important. That company is now out raising capital for further investment opportunities in Australia. The decision of the Western Australia government last Thursday to increase mining royalties in Western Australia does not augur well in terms of that company's capacity to promote Australia as a safe haven for investment at this very important time in this investment cycle. We go also to other major investors. We go to Xstrata and the Ulan West underground project in New South Wales on 3 August, last year—$1.1 billion. We go to Xstrata and a range of other coking coal and thermal coal decisions around Australia. We should also not forget Rio Tinto, which on 20 October last year made an investment of $3.1 billion in a further expansion of its iron ore operations in north-west Western Australia.

The truth of the matter is that the mining and petroleum industry in Australia, be it in New South Wales, South Australia, Queensland, Western Australia, Tasmania or Victoria, is in a very sound position at this moment. We are strong on investment. Our real challenge is to actually manage the investment pipeline in relation to a shortage of skilled labour in Australia.

What we have really got in Western Australia—and this is what the Deputy Leader of the Opposition wanted to talk about today—is a dogs breakfast when it comes to royalties and the understanding of the industry as to where the Western Australia government is going with the royalties regime not only over the last 12 months but also in the future. Let us look at what the Western Australian government has said about royalties since April last year. It is relatively recent history. Firstly, it was out there talking about increases in gold royalties that would occur in the May 2010 budget. As a result of a campaign by the coalition in the upper house, the Western Australian Premier backed off from that and abandoned the plan in the May 2010 budget. Norman Moore, the Minister for Mines and Petroleum, took the Western Australian Treasurer and Premier on and forced them to back off from a potential increase in gold royalties.

Then we had a proposal, over the last 12 months, to review the magnetite royalties paid in Western Australia. There was an expectation in the industry that they would be reduced. I say 'reduced', because the Argus-Ferguson report into the federal profits based tax showed that, where the magnetite industry exists in Australia in competitive terms compared with other states, the royalties rates in Western Australia were relatively high and made Western Australia uncompetitive.

We go to the question of iron ore royalties. Following the budget last year, and a proposed joint venture operation between BHP and Rio Tinto, the Western Australian government reopened the state development agreements with the purpose of trying to increase the royalty take to assist the Western Australian community. That was agreed to by BHP and Rio Tinto, because they expected major synergies and improvements in efficiency arising from the proposed joint-venture operation. The joint-venture operation fell over, yet BHP and Rio Tinto continue to pay those increased royalties without gaining necessary efficiencies. As a result of the renegotiation of that agreement, they contributed about $350 million per year to the Western Australian state coffers. In addition, they made a one-off contribution of the order of $350 million to the Western Australian budget processes for the purposes of developing a new hospital in Perth.

Following that announcement, if I remember correctly, in June of last year, we had very bold and clear statements by the Western Australian Premier as to what he intended to do on royalties in the future. I refer to his statement that was reported in the West Australian newspaper of 20 October 2010. He said:

The State has no intention of increasing royalties, but we will certainly preserve the right to do so …

The mining industry took the Western Australian Premier at his word. Since October 2010 until more recently, not only was Mr Barnett the Premier of Western Australia but also he was its Treasurer. That is why the mining industry took him at his word. They regarded his statements as being set in stone. It is therefore not a surprise to see a range of media statements issued by the mining industry on Thursday of last week clearly nailing the Western Australian government for a lack of consultation with the industry on the recently announced increases in royalties. That is reflected, for example, in statements by the Chamber of Minerals and Energy of Western Australia and by the Association of Mining and Exploration Companies. The statement by AMEC, which was posted on 19 May 2011, said:

AMEC is extremely disappointed that industry bodies and individual companies have not been consulted in respect of the WA Government’s decision to increase the royalty rate on iron ore fines.

That sentiment is also reflected in a statement issued by the Chamber of Minerals and Energy on Thursday of last week. Its statement first referred to the endeavour by the Western Australian government to create a sense that this is just an anomaly. So when the coalition increases royalties in Australia it is an anomaly, but when you actually want to put in place at a federal level what the industry wanted—a profits based tax—then it is a major tax grab. After stating that the chamber is not opposed to reform, the chamber's statement continued:

We support genuine economic reform that protects against sovereign risk, improves the international competitiveness of the resources sector as an investment destination and promotes economic growth.

It has really become clear what it is that the Western Australian government was really about on Thursday of last week. It was focused on a mere short-term endeavour in order to have a political stoush with the Commonwealth government. If members have any doubts about that, I refer them to the comments of the Western Australian Premier today—and this goes to the issue of an own goal. He said:

Yes, we knew that we would get less funding by raising our royalties under the current arrangements.

That is what it is all about: a short-term political stoush. That position is also reflected in comments by the resources minister Norman Moore that were reported in the business pages of the Sunday Age and detailed today by the Treasurer in the House. Those comments referred to the fact that Mr Norman Moore advised journalist Michael Pascoe early last year that the last thing the Western Australian government should do is increase royalties because it would have a major impact on their GST grants under the Commonwealth-state grants system.

I therefore suggest to the House that the Western Australian government has potentially created an environment that will strangle the future of the resources sector in Western Australia. The Commonwealth government will stand by its agreement with the resources sector—both the petroleum and the mining components. We will credit the increase in royalties in accordance with our undertakings to industry. But the truth of the matter is that, in terms of royalties as against a profits based tax, royalties are paid in both good and bad times. The Commonwealth will only increase its revenue take under the mining tax on super profits during very good commodity price times.

In essence, in the future, from here on in as of last Thursday and as of June last year, the resources sector in Western Australia will confront a substantial increase in royalties. There have been two increases in royalties in the last 12 months that will have to be paid in both good and bad times—irrespective of the state of commodity prices. So not only have they kicked an own goal in terms of the potential loss of GST revenue, which they admitted today they had knowledge of, but they have also potentially set up an environment that will strangle the small and start-up companies which are so central to the future of the mining sector in Australia.

In conclusion, I simply say that the mining and petroleum sectors have never been better positioned. We are working with them on labour supply issues, opening up further opportunities for migration to assist them to make sure that their investment delivers further wealth and prosperity to Australia. The real problem in the resources sector in Australia is the lack of policy and understanding on the other side of the House. As we all appreciate, the leader of the coalition finds economics boring and has no interest in decent policy development in Australia, as reflected in the stoush reported in the newspapers of last weekend between the shadow Treasurer and the coalition leader. (Time expired)

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