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Legislative Council - Fifty-First Parliament, Third Session (51-3)
2008-09-24 Daily Xml
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MINING SECTOR

The Hon. C.V. SCHAEFER (15:06): I seek leave to make a brief explanation before asking the Minister for Mineral Resources Development a question about mining statistics.

Leave granted.

The Hon. D.W. Ridgway interjecting:

The Hon. C.V. SCHAEFER: Indeed, as my leader just said by way of interjection, the minister is often quoting the fact that South Australia is on the cusp of a mining boom. However, statistics provided to me indicate that, in fact, South Australia has just 7,900 people employed in mining, which is just 1 per cent of the state's employment. It has $163.5 million in mining royalties as opposed to $3.6 billion in Queensland and $3.4 billion in Western Australia. Even New South Wales, which makes no great claim to being a mining state, has $920 million in mining royalties. Perhaps the most concerning statistic is that the value of investment committed or under construction into the mining industry in South Australia is just $1.2 billion, as opposed to $52.8 billion in Western Australia, and considerably more in all of the other mining states in Australia. Only Tasmania invests less in mining than does South Australia.

While looking for these statistics I also looked at the PIRSA website and found a quote from the Queensland mining minister, welcoming people to Mining 2008 to be held in Queensland, as follows:

The Queensland government's support for the mining industry is emphasised through a low tax regime, competitive labour costs, electricity prices amongst the lowest in Australia, partnerships in government and industry research, the establishment of world-class ports and decentralised road and rail networks.

My questions are:

1. Does the minister agree that South Australia is a long way from a mining boom?

2. What infrastructure, such as is provided in Queensland, has the government provided to encourage mining instead of just exploration?

The Hon. P. HOLLOWAY (Minister for Mineral Resources Development, Minister for Urban Development and Planning, Minister for Small Business) (15:09): Are we a long way from a mining boom? No, we are not; we are on the verge of it as a result of the actions taken by this government. We have moved from four mines to 10, with at least 30 on the books, and that has come about as a result of a long and detailed program by this government to encourage exploration. If you are going to develop a mine, the first thing you have to do is to look for and discover a resource. The honourable member mentioned Queensland. On the most recent statistics, we are level pegging with Queensland in exploration in this state.

The Hon. C.V. Schaefer interjecting:

The Hon. P. HOLLOWAY: They have been doing it for years, as has New South Wales been digging up coal from the Hunter Valley since before this state was even established. Those states get huge royalties because they have had significant mining operations in their states for many years. We have moved from four to 10, soon to be 11, with another 20, to get up to about 30, in the pipeline.

It is important that the exploration level in this state, if you take mining and petroleum together, is on a par with Queensland. We are still a fair way behind Western Australia, which has 34 per cent, a third of the state, under mining. We have 14 per cent. We have a higher level of the country's share of exploration than our land mass. That means that that exploration will transfer into mining developments, but it will take time.

There is at least a five to 10 year delay from when you discover a resource to when a mine is finally producing. That was the point the Leader of the Opposition asked about in his question on Olympic Dam. It takes many years, particularly when you have to spend four or five years removing the overburden from the mine before you get down to the ore. You do not get royalties until you get to the ore.

To encourage the mining boom, this state has a much more competitive level of mining royalties than does Queensland. Queensland has just significantly boosted its mining royalties, and I do not criticise it for doing that because there have been huge increases in the coking coal that that state exports, and that is why its royalties are at such a high level. Most of it is on the back of coal. What the future of those exports are in the longer term remains to be seen.

In this state we have a royalty regime, which went through this parliament before the last election, involving a rate of 1.5 per cent for the first five years and then it reverts to 3.5 per cent. That 3.5 per cent rate after the first five years of a new mine is very competitive. It is similar to and in about the middle of the royalty levels in other states. The 1.5 per cent for the first five years acknowledges the fact that in this state we have the disadvantage of many of our resources being deep undercover, so there is a long lead time—four to five years in the case of Olympic Dam—from the day you actually start digging dirt before you get down to the ore. You have a huge capital investment in the first few years before you get the ore. We have one of the most competitive regimes in the country through that competitive royalty rate.

Through the PACE program we have seen other states such as Queensland now so worried by the fact that South Australia has been so successful in terms of increasing our share of exploration that they have adopted similar programs to the drilling partnership program we have in this state, as has also the Northern Territory. Indeed, I note that the Nationals in Western Australia put out a press release just before their recent election calling for the adoption of a South Australian-style PACE scheme in Western Australia to lift the level of exploration there. Those states discovered their resources many years ago. They are producing royalties.

But around the world, Australia has slipped to about fifth in the world in regard to mineral exploration. Countries like Canada, which was fifth some years ago, are now first in the world. Our mineral exploration has slipped over the past five to 10 years, and that means that the wealth that we ultimately generate from mineral resources will decline into the future because there is a long lead time. You need a high level of exploration so that five or 10 years down the track you will have these projects coming through.

Obviously, members opposite have some tactic to try to talk down the state's economy and, of course, what better time to do it! At the present time, we are facing what most economic commentators say is the greatest financial challenge since the Great Depression because of what has happened on world financial markets. We have seen in the United States effectively, under a Republican government, the nationalisation of an insurance company, whose turnover is greater than the Australian economy, as well as the loss of a number of banking institutions within the United States. That is going to have an impact on the availability of finance and that, in turn, no doubt, will flow through into the real economy.

We are fortunate in this country that we are better prepared and more isolated than most countries, but it would be naive to think that there will not be some impact that comes through in that respect. Perhaps that is what members opposite are banking on: if they cannot come up with better policies than the government to offer a better alternative to people, they would think, 'Maybe if we knock the good things that are happening, someone might happen to listen to us.' The fact is that much of the growth that we have around Adelaide—the cranes we see on the skyline, for example—is for housing companies involved in the mining industry. A lot of the employment statistics do not tell the full story. Those statistics derive from a very small base, but the reality is that there are so many companies around the place that have been opening offices in South Australia and expanding as a result of the growing mining industry in this state.

The Hon. D.W. Ridgway: What about Mitsubishi? They are closing in South Australia.

The Hon. P. HOLLOWAY: The honourable member said, 'What about Mitsubishi?' Is he really saying that a Liberal government, first, could have saved Mitsubishi or, secondly—

The Hon. D.W. Ridgway: It happened on your watch.

The Hon. P. HOLLOWAY: Yes, it did happen on our watch. Yes, Mitsubishi has gone, but are members opposite saying that the future of this state was going to be building Mitsubishi 380s? Is that what they really think? If that is your policy, go and tell the people, 'We are going to rebuild a car industry in South Australia.' We are trying to work with existing car manufacturers here to ensure that they focus on where the market demand is. We all know where that is. So, the Treasurer is working very hard with the motor vehicle industry to help that industry adjust to making the sort of cars that people want. That is not happening in the US. Our car industry is in a lot better shape than those industries in the United States which owe tens or hundreds of billions of dollars and they are producing vehicles that nobody wants. That is another story.

In relation to mining statistics, the state has a great future to look forward to. Yes, the royalties we now receive are small because of the royalty regime we have and also the fact that we are very much in the exploration phase, but is it not better to have spend more than $350 million a year in exploration in this state? That money pays the wages of people on the drilling rigs around the state. It pays for the services in the town—their accommodation. It is a very effective way of putting that money through the economy of this state—but that is just the start.

When resources are discovered—and some of the best discoveries have been made in this state in recent years—we can look forward in five or 10 years to future governments getting the benefit from the royalties. For the sake of our children, it is something that I am very pleased that we are able to do. Yes; it is a long-term strategy, but it is one in which this state must engage. Our future is not with the sort of mass produced manufacturing that we had in the 1970s or 1980s. We will not be going back to producing white goods and the sort of manufacturing goods which we produced and which sustained us during the 1970s, 1980s and 1990s. Those days are gone. We need new industries.

This government has been developing through the defence industry and mining, as well as consolidating the industries that we have. Our manufacturing industry still has a future, but it has to be a niche industry and must focus on our natural advantages. The mining industry can bring great wealth to the state, and this government is doing everything it can, notwithstanding the knocking opposite, to ensure that we get the benefits of that industry.

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