Say good-bye to Dubai
Written by Julie Bishop Friday, 04 June 2010
Published on www.wangle.com.au
Amid all the disagreement about the Rudd Government’s proposed new super tax on mining, there has been relatively little focus on the long term implications for WA state development.
If the Rudd Government is allowed to impose this punitive tax on mining, it would largely spell the end of the dream held by many West Australians of larger population centres in the north.Former Western Australian premier the late Sir Charles Court was famous for his work in supporting mining development in WA, but he also had a vision of bigger population centres eventually being established in northern parts of the State.
Premier Colin Barnett has also spoken of the need to develop the Pilbara, the Kimberly, the Ord River – with more permanent populations – with his vision of a Dubai in the north.
If it were achieved, a truly international city would open up gateways into Asia and the Indian Ocean rim.
For the dream of larger population centres in the north-west of WA, it is vital that Governments of all persuasions, State and Federal, adopt pro-development policies to encourage people to invest in the region.
There may be a need to establish a special economic development zone, which have worked well in some countries overseas, where business can operate with lower charges and costs.
The feasibility and legality of such a zone would need careful investigation, however all options need to be considered.
We in the West need to think very strategically about our future development.
The ABS reports that WA’s population as at 30 June 2008 was 2.17m, with the State experiencing strong annual population growth over the past 8 years or so.
However, just under 75% of the people live in the greater Perth region and 11% live in the State’s south west.
That leaves just 14% of the population living away from the South West corner.
While there has been some growth in the Pilbara, our mining and resource companies overcome this challenge with fly-in fly-out arrangements.
This has proven to be effective in supporting developments in the north and the North-West Shelf, but I am not convinced the fly-in fly-out arrangements are in the long-term interests of the north-west of WA.
Anyone considering relocating to a northern centre would, of course, need reassurance that the current mining boom will be sustainable and that work will be available into the foreseeable future.
Perth is the most geographically isolated capital city in the world and is closer to Jakarta than to Sydney.
It is a busy hub with 2.6 million international travellers passing through Perth airport in 2008/09.
A significant proportion of that travel would be to destinations to our north and west, both for business and holidays.
Apart from the array of cultures and nations to visit while on holiday, Australia has growing trade and investment relations with the region.
India is now Australia’s 6th largest two-way trading partner, while Indonesia is ranked 13th and South Africa is ranked 22nd.
Of particular interest to many Western Australian mining companies, there is growing interest in resource development in many parts of Africa, but also in Indonesia and other countries around the Indian Ocean.
While investment and trade has been growing, it has lagged growth with many other nations.
One of the conundrums for State Governments over several decades has been how to promote greater growth in the towns and cities of northern WA.
According to the Australian Bureau of Statistics the current population of some of these cities and their surrounding districts are: Mackay 116,000; Rockhampton 114,000; Townsville 182,000; and Gladstone 60,000.
In contrast, currently the major centres of Western Australia’s coastline, north of Perth, are Geraldton with 38,000; Broome 16,000; Port Hedland 14,000 and Karratha 11,000.
It would be overly simplistic to compare the two coastlines, and the reasons for this pattern of development are many, however it has long been a source of concern to many policy makers that Western Australia has not decentralised and developed at least one major city in its north.
In the absence of a deeper global recession and assuming Mr Rudd’s super mining tax is not implemented, its appears likely that Western Australia in particular will experience further growth and development in its minerals and energy sectors.
There are already major skills shortages in this State but further development means there will be a need for many thousands more workers.
We cannot of course predict with any certainty that China will continue to grow at current levels, but any slow down in China, for example, may be offset by increasing demand for our resources from India, Indonesia and other nations of South-East Asia.
And Japan will continue to be one of our biggest trading partners.
According to the Australian Bureau of Resource Economics, exports of iron ore (97% of which come from WA) grew from just over 100 million tonnes per annum in 1989 to 156 million tonnes in 2001.
That is an increase of 50% over 12 years.
Iron ore exports increased to almost 240 million tonnes by 2005, and more than 360 million tonnes in 2009 – an increase of 50% in just 4 years!
It will take some time for the world economy to fully recover from what our Reserve Bank now calls the North Atlantic crisis rather than the Global Financial Crisis, however the demand for infrastructure in China, India and other expanding economies means there will be demand for steel for many years to come.
While the outlook for iron ore appears to have good long-term prospects, the outlook for our energy sector is equally promising.
The International Energy Agency is forecasting strong global growth in demand for energy in coming decades.
It latest World Energy Outlook Report predicts there will be a 40% increase in overall energy demand by 2030, based on current trends.
The report forecasts more than 90% of that increase coming from non-OECD countries, with China and India accounting for the vast bulk of the increase.
The International Energy Agency also predicts that the world will continue to rely on fossil fuels for more than 75% of its energy needs.
Excluding the petroleum sector, it predicts that there will be a 76% increase in demand for electricity.
Demand for coal is forecast to increase by over 50% and demand for natural gas by over 40%.
However, to put this huge expansion in perspective, the IEA forecasts assume that 1.3 billion people worldwide will still not have access to electricity – that figure is currently 1.5 billion people do not have access to electricity.
With billions of people in our Indian Ocean-Asian-Pacific region, we can safely assume that demand for our energy sources will continue to grow for decades at least.
However, Australia cannot take for granted that buyers of commodities will beat a path to our door.
We learned that lesson in the 1970s and 1980s when industrial anarchy in the Pilbara meant Australia was unable to be a reliable supplier of iron ore to Japan, and the massive Vale iron mine in Brazil was developed as a major competitor.
The last thing our mining sector needs is for the Rudd Government to not only threaten to impose a 40% super mining tax, but also launch xenophobic media attacks against foreign investors.
Julie Bishop is the Deputy Leader of the Federal Opposition. She is the Liberal Member for the seat of Curtin.
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