14/04/2011 - 00:00

Strategic approach to managing growth

14/04/2011 - 00:00

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BACK in 2009, when the Chamber of Minerals & Energy WA released its first set of growth projections for the state’s resources sector, Western Australia was in the shadow of the most serious global financial crisis since the Great Depression.

BACK in 2009, when the Chamber of Minerals & Energy WA released its first set of growth projections for the state’s resources sector, Western Australia was in the shadow of the most serious global financial crisis since the Great Depression.

Despite a drop in commodity prices and the short-term difficulties it created for some projects, overall forecasts still pointed to a robust growth trajectory, with member companies predicting increased pressure on essential and strategic infrastructure, along with demand for workers.

At the time, the CME urged policy makers to play their role. To do nothing would risk pushing up project costs, lead to potential delays and jeopardise future economic opportunities – not to mention add to cost-of-living pressures.

To quote the original research: “The current slowdown in the state’s economy gives some breathing space for these initiatives to be undertaken. The time needs to be used wisely and it is imperative these actions start now.”

More than two years on, and we’ve emerged from the GFC. Commodity prices have recovered and there’s now an estimated $200 billion worth of resource projects in the pipeline. While this is excellent news for the WA and national economies, unfortunately we’re still facing the same challenges.

The only difference is that the growth numbers are bigger and the timeframe to get the policy settings right more acute.

In terms of energy demand, in less than five years total electricity consumption in WA could increase by 70 per cent on 2009 levels, primarily driven by resources projects. While industry requirements will be self-generated – mainly fuelled by gas – potential network capacity constraints need attention now.

It’s a similar story for water, with total demand tipped to increase by 26 per cent from 2009 to 2015.

There’s a desperate need for a coordinated vision to manage these important issues – a cross-industry ‘state infrastructure plan’, which has bipartisan support and moves well beyond the usual electoral cycle.

The other key enabler of growth which remains front and centre for industry is labour supply.

Having already doubled in size during the past decade, the sector’s workforce is fast approaching 100,000 people. Coinciding with peak construction for major projects, our members tell us they will require an additional 44,000 workers between now and the end of 2012.

The areas of highest labour growth will be the Pilbara and Mid West. However, it’s fair to say projects are being progressed the length and breadth of the state – from magnetite and nickel laterite projects on the south coast to major gold projects in the north-eastern Goldfields, and the headline LNG and iron ore developments in the far north.

Based on current Australian Bureau of Statistics population projections and workforce participation rates, the sector is facing a shortfall of workers, of pre-GFC proportions. In the longer term, education and training initiatives, along with the promotion of careers at a secondary school level, will play a significant role in boosting the number of skilled workers.

However, in the immediate future, where local workers with specific skill sets cannot be sourced, industry must be able to draw upon an international workforce, through a targeted, efficient skilled migration program.

Sourcing a skilled workforce from overseas isn’t a cheap solution, but an expensive last resort. Industry has often found itself dragged into the thrust and parry of a broader political debate over population policy.

The federal government’s response to National Resources Employment Taskforce recommendations offers some hope that the issue is finally being recognised at the highest levels of government. Regardless, the effectiveness of initiatives such as Enterprise Migration Agreements will be closely monitored. They must provide practical streamlining of existing skilled migration programs – not additional, onerous requirements on employers.

The release of the chamber’s State Growth Outlook 2011 aims to put tangible numbers behind the issues, crucial to the success of an industry, so important to the long-term sustainable development of the WA community. They are not the only challenges we face.

Of equal importance is managing the ongoing threats to the sector’s international competitiveness.

For example, CME understands the logic for national harmonised workplace safety laws. However, what is proposed by the federal government neither raises the standard of safety nor improves the effectiveness of existing regimes. Rather, it adds red tape and will divert resources from frontline safety and health efforts. Other industries and peak bodies are beginning to share our concerns.

In terms of other potential adverse impacts on trade-exposed industries, the proposed Minerals Resource Rent Tax still requires resolution and there’s emerging serious concern about the government’s pursuit of a carbon tax.

In the 21st century, WA is perfectly positioned to lever off the emerging Asian economies, while strengthening links with our traditional trading partners. Increasingly, WA is regarded as one of the world’s great mining and oil and gas provinces. We possess prospectivity, leading innovators and a heritage of institutional stability – all of which are the envy of our competitors.

Maximising the opportunities – which ultimately means jobs and income for WA – will require the close cooperation of industry, the community and government. And this starts with getting the right policy settings, to support these key enablers of growth. We do not develop these projects in isolation, nor do we have a monopoly over the world’s minerals, oil and gas. At stake is our long-held reputation as a location where projects can be delivered on time and on budget.

• Reg Howard-Smith is chief executive of the Chamber of Minerals and Energy WA.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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