Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

Australia has been doing very well in recent years due to good governance from the current federal government and fuelled by huge demand from India and China. That demand is nowhere more evident than in the mining, minerals processing and heavy industries. Where I come from in the north of Queensland, there has been enormous economic growth as a result of mining and mineral processing. I have my office in Townsville and live in the little country town of Ayr a bit south of Townsville. Townsville has certainly done very well in recent years on the back of activity from Queensland Nickel, QNI. They now import their raw material from overseas, bring it into Townsville, process it with a hugely-upgraded and expanded metals processing plant just north of Townsville at Yabulu, and then ship the product out.

As well as that, Townsville is fortunate because it has the copper refinery, currently owned by Xstrata, the big international mining company that has huge mining activity in Mount Isa and elsewhere in North Queensland. And of course, since the advent of the Howard government, there is now the Sun Metals—as it is now called or originally Korea Zinc—processing plant in Townsville. It is probably appropriate to mention Korea Zinc, or Sun Metals, today in view of the fact that His Excellency, the President of the Republic of Korea, is in town on an official state visit. Companies such as Sun Metals and Hyundai have built a very close economic link between Australia and Korea and, from my point of view, between the Townsville region and Korea.

On the back of that expansion, a lot of things have happened. There is a lot of fly in, fly out from major coastal cities into the inland. That is not something I agree with; there are problems with it. But it does have advantages to the mining companies such as, amongst other things, better industrial relations. Townsville is one of the places along the Queensland coast that has benefited from fly in, fly out and so has Mount Isa. Huge economic growth, particularly in the housing and construction market, followed the fly in, fly out emanating from Townsville and Cairns.

Townsville is also lucky in that it is the home of Australia’s largest military base. All of our fabulous soldiers, fine young Australians—both male and female—are deployed from Townsville to many overseas posts. Quite properly, they get well paid when they are working overseas. But, from an economic point of view, when they come back to Townsville after their deployment has finished they have substantial ready cash, which they spend—usually wisely—on vehicles, housing and in other ways. So Townsville has progressed very well in recent years.

It raises the question, though—and some are considering this question—of just how long this economic boom will continue. There is some concern that a fall-off in China or India in the immediate future may cause some cutback, which would have an impact on the local economy of North Queensland. I was mentioning this concern to Nicole Johnson from Leighton Holdings and she indicated that Leighton Holdings had done some research on this. She kindly sent me some of the material that Leighton Holdings publish. I will quote from some of the figures that Leighton produced in relation to mining and heavy industry in Australia.

Recent figures for 2005/06 exports, mining infrastructure expenditure, and profits of resource-related stocks have achieved record levels and are still growing. New capital expenditure in 2005/06 is now expected to reach $16 billion, a 60% increase from the previous year and 2006/07 capital expenditure should approach $18 billion. Forward looking indicators, such as resources demand—

and this is the interesting point—

and new projects in the pipeline suggests the industry will continue expanding in the short term whilst sustaining similar levels of activity across the medium term.

It is also interesting that exploration investment has also picked up and is expected to be six per cent higher, at $2.3 billion, than the average spent over the previous 25 years. ABARE predict that, in order to continue sectoral growth over the longer term, average annual levels of exploration will need to remain equivalent to these levels.

While the mining industry is propelling the economy along, it is also adding to inflationary effects. The ABS recorded an annual increase of 13.5 per cent in the cost of materials used, for example, in open-cut mining, with even greater effects reportedly being felt in isolated areas and trades, particularly in Western Australia.

The outlook for commodity prices is for continued strength but greater volatility. With respect to coal, thermal spot prices have fallen. However, metallurgical coal prices remain strong. Nickel, gold and zinc prices are all enjoying record highs and, despite the volatility from day to day, they are hovering well above previous long-term averages. Iron ore of course is doing very well.

Thermal coal is particularly important to North Queensland and Northern Australia. Demand is primarily driven by power consumption, which is at an all-time high in Australia and across Asia. Despite China producing 2.1 billion tonnes of thermal coal in 2005, they imported approximately 26 million tonnes of better-quality thermal coal in the year to March 2006—an increase of 144 per cent. That represents about 10 per cent of Australia’s export market. India has similar statistics. It is the world’s third largest producer. However, it imported an additional 20 million tonnes of thermal coal in 2005 and it is still experiencing power shortages.

I might say in passing that these figures, showing a huge increase in the use of coal in China and India, again confirm that, without having China and India in any Kyoto type agreement, the world is simply wasting its time. The increase in imports overwhelmingly demonstrates the population growth and the industrialisation occurring in both China and India and, as electricity is an essential service, underlying demand for thermal coal has reached new heights. Prices have risen recently, again, as the volatility of oil and gas prices makes coal a more economic fuel source. But, in the longer term, demand will largely depend on how well India and China reform their coalmining and power industries, and there is considerable room for improvement in production efficiencies.

While coal is currently relatively abundant and economic compared to other fuels, it is a finite resource and it is damaging to the environment. Alternative fuels, such as gas and nuclear, and renewable energies have significant benefits and are already contributing to the world’s power generation. I want to indicate that Norway, Austria and Canada generate over 70 per cent of their electricity through hydro power, something that we in Australia have not been able to do in recent times, because for some reason the Greens seem to be opposed to hydro power; to me it seems to be one of the cleaner forms of energy. France, of course, produces 80 per cent of its energy from nuclear reactors. So, when people like the Greens hold Europe up as a shining example of reductions in greenhouse gas emissions, they never seem to acknowledge that 80 per cent of France’s energy comes from nuclear reactors.

Nickel, which, as I mentioned, is very important to my home town of Townsville, is a key input to stainless steel and is another mineral profiting from record rises in world consumption and prices, spurred on by China. Stocks are extremely low and world production is forecast to rise by six per cent to 1.42 million tonnes to try to meet growth in world consumption of eight per cent in 2006 and a further six per cent in 2007. Australia’s exports are forecast to rise by 14 per cent next financial year, with BHP Billiton’s Ravensthorpe mine expected to commence production in late 2006. I should also mention the Gladstone Pacific Nickel project, which the federal government recently designated as a project of national interest, the first stage being worth around $1.5 billion.

Gold is very important to Australia. A lot of mining exploration is done in North Queensland. Charters Towers, which helped with the Queensland economy way back when Queensland first became a self-governing state, has had a resurgence of interest in gold in recent years. Gold is the traditional hedge investment in the face of worldwide inflationary pressures and political instability. There is so much more exploration going on now. Places like Charters Towers, which were thought to have been mined out of gold, are now attracting a lot of new miners. There is a lot of new production in that area, going down into Collinsville and the Mount Coolon area and into Ravenswood, just west of the town where I live. In Australia the gold price has already increased by 40 per cent since mid-2005, and this makes feasible a number of smaller projects for the development of short-term exploration and the construction of mines, which is very good for the Australian economy.

We are all interested in Australia’s economy, because the wealthier we are as a nation, the better we are able to look after those in our society not as well off as the rest of us and the better we are able to participate in world forums to try to help in so many ways, including with greenhouse gas emissions, to make the world a better place. There are those who thought there may have been some slowdown in mineral processing, particularly in northern Australia; that does not seem to be the case from the forecasts that I have mentioned. We are fortunate—Australia is indeed the Lucky Country—to have natural mineral resources that bring such wealth and prosperity to all Australians and have helped Australia achieve some very significant social policy advances since the Howard government was elected in 1996.

I look forward to a continuation of sound, sustainable mineral exploration and production, carefully managed, as it is by us and by all of the states—they have the principal carriage of production in these mines. It does seem to suggest that Australia is on line for a continued period of growth in the years ahead of us.