Resources sector productivity boost

The resources sector has dramatically increased productivity in the past year, as lower commodity prices drive a wave of cost cutting across the industry, according to the latest national accounts numbers from the Australian Bureau of Statistics.

Labour productivity, measured by gross value added per hour worked, was more than 22 per cent higher in June 2015 than the same time the previous year.

It was up more than 37 per cent on its low point in 2012.

Chamber of Minerals and Energy of Western Australia deputy chief executive Nicole Roocke said increased labour productivity would be a trend that would continue as companies finished projects and improved operational efficiency.

“Even though the volumes of things like iron ore have increased year on year, what we saw in the last five years was that the workforce grew proportionately more,” Ms Roocke told Business News.

“What we’re only now seeing is the quantity of ore produced per person is only just starting to go up again.

“We (previously) saw such a large capital investment and with that, the size of the construction workforce grew significantly.

“Now the focus of companies is very much on optimisation of assets.”

Unsurprisingly, given the moves towards cost cutting across the sector, the number of hours worked was substantially lower, down 12 per cent, although still about double the level of a decade previously.

Hours worked fell in other sectors, too, including utilities and agriculture, although moves were modest in comparison to mining.

Within the resources sector, iron ore continued to grow its contribution to the economy, with gross value added up around 16.1 per cent to $67.5 billion for the 2014-15 financial year, with almost all this from Western Australia.

Oil and gas extraction was 4.2 per cent higher at $31 billion for the year.

One indicator that might not bode well for the sector is in exploration, however, with a 16 per cent fall in gross value added by exploration and support services.

Ms Roocke said that contract renegotiations and a move towards insourcing had reduced demand for that portion of the industry.

However her major concern was with exploration spending.

“While it has an immediate impact on those companies operating in the exploration sector, the broader impact of that decline will be felt in future years as a consequence of us not having future discoveries to develop,” she said.