Australia, a nation built on the back of its rich natural resources, is at a crossroads. The mining industry, which has long been a cornerstone of the Australian economy, is facing a stark warning: adapt or face decline. This warning, issued by BHP, one of the country’s largest miners, suggests that Australia is losing its competitive edge in traditional commodities like coal and iron ore.
The call to action is clear – Australia must innovate and diversify to remain a key player in the global market, especially as the world transitions to greener energy sources.
The mining giant has highlighted several areas that require immediate attention. Skills shortages, underinvestment in technology, and a lack of innovation are all cited as critical issues that need to be addressed. However, the advice to focus on these areas may not be entirely applicable to the mining sector itself. Australia doesn’t have significant reserves of copper, a metal crucial for the net-zero transition, and while it does have considerable lithium reserves, the market is already capitalising on this.
The real opportunity for Australia lies in its potential to become a leader in green metals transformation. The country’s abundant renewable energy resources, such as solar and wind, could be harnessed to produce metals embedded with this clean energy for export. This is particularly relevant for steel and aluminium, where green production methods, such as using green hydrogen in place of coking coal for steel smelting, could revolutionise the industry.
However, Australia’s progress in this area has been slow, hindered by global market dynamics. China, a major player in the steel industry, has made commitments to decarbonise but has yet to make significant strides. Its ongoing property crisis has led to the dumping of traditional heavy-carbon steel on the global market, making it difficult for investments in green steel to take off without substantial carbon pricing measures.
So, what should Australia do in response to this looming crisis?
BHP’s advice to increase competitiveness is sound, but it requires a strategic approach. The mining sector, which has contributed to the phenomenon known as Dutch Disease – where other sectors struggle to compete internationally due to high domestic costs driven by mining – needs reform. Increasing taxes on mining companies like BHP and reducing them for other sectors could be a start.
Moreover, tackling the mismanagement of natural gas is crucial. The West Coast’s minimal royalties and the East Coast’s export cartel have led to an energy crisis, contributing to inflation and preventing the Reserve Bank from cutting interest rates. Addressing these issues through higher taxes on gas extractors in the West and export levies in the East could provide much-needed revenue to support other non-mining sectors.
Additionally, policies aimed at reducing immigration to encourage local training and skills development, as well as ending the reliance on population growth, could help to rebuild the economy. These measures would also likely lead to lower inflation, interest rates, and a more competitive currency, benefiting non-mining export and import-competing sectors.
As we consider the future of Australia’s economy, it’s clear that the mining sector cannot rest on its laurels. The country must become ‘leaner, meaner, and smarter,’ as BHP suggests.
Australia’s mining sector is evolving, and there’s a lot to consider. What do you think could be done to ensure a sustainable and prosperous future? Let us know your thoughts in the comments!
Also read: CSIRO reaffirms nuclear power likely to cost twice as much as renewables
If it is not internationally tradeable or import-displacing, it does not add to the riches of the nation. Taking in each others’ washing (or the modern equivalent – making each others’ coffee and meals) does not cut it. Government needs to step out of the way of progress to bring back manufacturing. We are grossly over-regulated and getting a major industrial project (or a 50 story block of units) is not worth the effort these days. Environmental assessments need to be on the balance of benefits, NOT on no harm to anything anywhere – to make omelettes, sometimes eggs need to be broken. The recent fuss over 8 worthless skates in Macquarie harbour vs a major salmon farming operation is a prime example. Nuclear power is another one … quite a number of proven designs installed close to major cities overseas should be sufficient to allow one of those designs to be approved with no further study. The fact of a safely operating plant is far more persuasive than any number of desk studies. Minimal approval cost, minimal design cost (only foundations and connections) will lead to a low cost solution which should be replicated EXACTLY in multiple locations. And on the subject of climate change, whatever you may think of the theory, China makes up 35% of world emissions, increasing rapidly and installing around 2 major coal fired power plants EACH WEEK. The US is 11%, decreasing, India is 8% increasing, Russia is 5%. Australia is 1.3%, so anything we do on solar, wind etc., makes NO DIFFERENCE to world temperatures. We are killing our industry, our economy and household budgets to be pious. Industrial competitiveness is driven by low energy costs and Australia is very rich in coal, natural gas and Uranium. Cheap energy should be a given ,,, we are squandering the opportunity to be the richest country in the world by far.
this is one of the more informative and balanced articles I have read on this issue for a while – a viable mining industry alongside renewables as an energy source for both power, processing and manufacturing. And adaption is the key, for all sectors. To make sure that climate change is not exacerbated further. I also like the flow on/links with other issues.
One statement I take issue with is the one that about copper reserves. Australia has the third largest copper reserves in the world.
There is too much credible research eg CSIRO, that does not support the development of nuclear energy for Australia.
Neither the minerals or petroleum sectors pay nearly enough tax. Australia currently exports 80% of its gas, either as natural gas or liquefied natural gas. It does so because the former Federal government allowed that to happen. The price of gas has increased since the Ukraine war and the global price has increased. Australian domestic gas is therefore at the mercy of the global gas prices. it is not renewables that have driven up the price of domestic electricity.
I encourage all readers to ensure they read widely on these issues. Thanks for getting the ball rolling with a sensible piece.
PS I’m a geologist and have worked for the resources industry and continue to monitor what is going on.
It has always puzzled me why we export iron ore (because we have heaps of it) and black coal (because we have heaps of it) but do not to any great extent go to the next step and refine the iron ore to pig iron or better and sell at a better price. Logical or not?