If you listen to the mining industry Australia is at risk of killing the goose that’s showering us with golden eggs. Australia, they claim, has become a high cost place to do business. Wages are up, the exchange rate is making it more expensive to build new projects and Australia’s low productivity is making everything worse. Put simply we Australians are wrecking the place for mining companies who just want to make us all prosperous.
But before you wander off feeling sorry for our poor mining companies you might want to look a little closer at their claims. The high exchange rate is primarily caused by a massive construction boom in mining projects. Funded mainly from foreign capital, the influx of money is driving up demand for the Australian dollar and hence the exchange rate. Wage rises are also caused by mining companies all wanting to expand at the same time. The limited pool of workers is in huge demand and because of this they can demand higher wages. Finally the mining industry is Australia’s least productive. Because of high commodity prices they are digging deeper and further away than they ever had before.
At the moment all the mining companies want their mines, railway lines and ports finished now, and because of this they’re paying a premium to have it done. But will this lead them to cut back, can projects and following through with their oft repeated threat to take their money to other countries that offer better economic conditions?
The recent announcement by Indian mining company Adani’s $10 billion investment in mining coal in the Galilee basin might shed some light on where the mining industry is actually at. The announcement was important enough to attract the Federal Resource Minister Martin Ferguson and Queensland Premier Campbell Newman. It’s nice to see all the bitterness of party politics can be put aside when it comes to throwing a few more billion dollars of fuel on the white hot mining boom.
Adanti’s new mega project is by no means an isolated event. According to recently released projects list from the Bureau of Resources and Energy Economics, the value of projects at an advanced state, that is money has been approved or work has begun, have expanded again to new highs of $292 billion. The mining industry in Australia has never before had so many new projects on its books. For an industry claiming that things are looking grim they sure have a lot of faith in the future. 292 billion dollars’ worth of faith.
It’s strange that the mining industry is saying one thing but doing another. Maybe they’re just confident of convincing the government to give them more concessions.