Moving on from the age of confrontation

Because of a lack of investment in infrastructure and its associated technology, as well as little interest in innovation, 45 per cent of revenue that we earn from mining and manufacturing is spent on transport and another 20 per cent on energy. We are not serious about being both productive and competitive. We have become content to run this nation on old world transport systems that price us out of markets. So long as we get more and more royalties to sustain our unrealistic lifestyle, we turn a blind eye to how Australia’s capacity to be a great trading nation is being slowly crippled. One day, instead of being recognised as the trading powerhouse of the Southern Hemisphere, we will be left behind by Africa and South America, and we will deserve it.

Commodity Prices

Mining prospers today because of the generally high commodity prices that prevail on world markets. When those prices drop significantly, as has happened persistently from time to time throughout history, we will experience our next mining bust, when only the efficient and the least indebted will survive.

The recession in Europe could be the catalyst this time, but I can see little evidence that Australia is preparing itself.

The only way to beat falling commodity prices is through increased efficiency, cheaper transport costs and a lower wage structure out in the minefields. We are asleep at the wheel!

Dollars

Without a doubt, mining has been a major force in driving the Australia dollar higher and pricing our exports out of the market — just as happened in the Netherlands when they ‘enjoyed’ the North Sea oil and gas boom that killed off just about every industry that they had. But, mining can’t be blamed for it solely. Economic weakness in the Northern Hemisphere has caused a loss of confidence in the US Dollar, the British Pound, the Euro, and the financial markets that support them. Australia, with its solid economy and reliable dollar, is now regarded as a safe haven, causing a lot of money to flow our way and sending our dollar a bit higher every month. This clearly shows that the excuse being used by our banks for their interest rate rise is less than honest. There is little difficulty in finding money that seeks a home in Australia.

A key element in the problems related to a highly-valued dollar is that the world expects Australia to keep opening new mines at a faster pace than most nations, because of the record of our State Governments in wanting more royalties every year. The dollar will drop in value when Australia makes it clear to the world that we intend to carefully manage the expansion of our mining industry by fostering only the orderly development of top quality mines.

Environment

It is extraordinarily popular to blame mining and the many uses of its mineral production as the cause of the world’s environmental problems. Unfortunately, the debate on pollution is carried out within a realm of very inexact science that will be a matter of controversy for generations to come. Nevertheless, it is best to take the responsible view that appropriate action should be taken progressively to tackle the perceived threats to a clean world, while noting that coal in particular will dominate the world of energy no matter what alternatives are offered.

Wind, solar, hydro, hot rocks, and all forms of renewables are often too costly and have no capacity to become major providers of energy. Gas production creates more environmental problems than coal could ever be accused of doing. Far too little has been invested in the science of clean coal, and there are too many people who want the whole initiative to collapse because they don’t want coal ever to become environmentally respectable.

A massive investment in the science of clean coal is needed right now, about ten times more than is currently being spent. Failure to do this will be irresponsible in the extreme, particularly as the cost can be shared between governments and miners. The same comments apply to the environmental issues surrounding all other minerals.