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Resources sector sales stall

REVENUE growth from WA’s vital minerals and energy has slowed rapidly in the wake of last year’s softer international markets, with confirmation of this trend expected from State Government figures next week.

Resources sector sales are thought to have stalled after a 50 per cent jump in calendar 2000, which was backed up by a gain of almost 30 per cent in the past financial year.

The Department of Mineral and Petroleum Resources would only confirm the figures will be announced on Monday.

However, they are unlikely to show much of a gain on 2000’s $24.9 billion in minerals and energy exports, with pundits suggesting that a 5 or 6 per cent increase would be optimistic.

The bad news for WA is that these figures will incorporate less than three months of poor trade following the economic turmoil in the US and other international markets.

It also comes at a time when two significant industries, alumina and iron ore, are facing threats to their ability to expand production – Alcoa has its community issues and the major iron ore producers have both flagged concerns about industrial relations.

However, there was some good news for WA from Federal forecaster ABARE which predicted an improvement in key export markets by 2002-03 if the US situation improved.

At least one industry observer suggested there was a chance of revenue contraction this financial year, something that would not be unheard of after long a period of protracted growth, but which will not help the State’s finances.

Royalty payments have grown consistently since 1995-96, reflecting the boom in resources development which, along with a weak Australian dollar and strong oil prices, has more than doubled export values in the past decade.

Forward estimates for royalties in the State Budget have factored in a plateauing of non-North West Shelf royalties below the 2000-01 figure of $700 million.



North West Shelf royalties, a separate item due to the Commonwealth’s control of offshore resources, are set to fall off substantially in coming years after hitting $415 million in 2000-01.

Chamber of Commerce and Industry chief economist Nicky Cusworth said the drop off on royalty expectations was not necessarily a long-range forecast but more to do with State Budget convention.

“It is not unusual to have a period of flat growth or even contraction after a strong-performing year,” Ms Cusworth said.

“The indications from production is things are set to pick up, that is more to do

with volumes because prices are anyone’s guess.”

However, Ms Cusworth said productivity gains had underpinned WA’s resource industry growth and any threat to that could hurt future State earnings.

“There is no doubt that changes to IR practices in mining have helped contribute to substantial increases not only in output per employee, but also in terms of reducing volatility and lost time,” she said.

Her comments followed concerns raised by WA’s two iron ore heavyweights at a con-ference last week. In speeches about the challenges that iron faces in, among other things, a low growth world, Rio Tinto Iron Ore chief executive and Hamersley Iron executive chairman Chris Renwick took issue with the proposed “u-turn” in industrial relations.

“It seems difficult to understand that a

state which depends on its international competitiveness for its very existence should be making changes to its industrial relations that will inhibit competitiveness,” Mr Renwick said.

“I don’t think this is in the best interests of WA, its industry, or its people.”

BHP Billiton Iron Ore president Graeme Hunt also raised the issue in his statement: “On the industrial front, like the rest of the industry, we are concerned about the WA government’s new industrial legislation,” Mr Hunt said.

“It is critical that this new legislation is workable and provides the basis for further productivity improvement.”

Another issue potentially impacting export growth is the delay to Alcoa’s planned

$1 billion expansion of Wagerup.

Expected to earn an extra $400 million a year, the project has been stalled in the wake of community concerns over emissions at the company’s sites.

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