Editorial courtesy of the Australian
In maintaining operations, the sector is helping the nation The lowering COVID-19 infection rate is turning attention to how and when we will emerge from economic hibernation. The reduction in the rate of new diagnoses is promising, especially compared with the disasters besetting most G20 nations. Lives are being protected because the majority of Australians are doing the right thing, even amid glorious Easter weather. For now, we must continue to do so to avert the risk of a spike in the caseload.
Unemployment figures to be released on Thursday will be an indication of the damage that the shutdowns prompted by coronavirus have done to the economy so far.
However bleak the picture, the public can take confidence from the ongoing success of the nation’s most important export industry – resources. As Dennis Shanahan and Paul Garvey report on Monday, Australia’s economic backbone not only remains intact, it is gaining strength.
Parts of the agriculture and manufacturing sectors, as well as supermarkets, chemists and healthcare are also proving resilient, Josh Frydenberg told The Australian.
Activity in those sectors will be a solid platform in however many months when the economy begins gearing up towards full throttle, allowing business and individual taxpayers to set about generating the wealth that will be needed to pay down the deficit and debt incurred during the pandemic. As The Australian has argued from the outset, when the crisis passes, big government must retreat. The Morrison government will need to be ready, as soon as circumstances permit, to turn off its temporary measures, step out of the way and let business flourish.
Australia is fortunate to have such a dynamic and diverse resources and energy sector that will be central to recovery. Despite much of the world being crippled by COVID-19, resource and energy export earnings are on track for a record $299bn windfall in 2019-20.
That is $18bn more than forecast in December. Strong iron ore prices, a spike in the gold price induced by the virus and a decline in the Australian dollar are driving the increase. The McGowan government’s decision to classify mining as “essential” in Western Australia, allowing it to continue operating through the pandemic, was the right call. Iron ore production and jobs are being maintained, with exports on track to break records. In dollar terms, the iron ore price is higher than at almost any time since early 2014, boosting governments’ depleted coffers.
Australia’s mineral exports are also being boosted by mine closures in South America, Mongolia and South Africa. Coal exports were up 3 per cent in the March quarter over last year.
The efficiency and resilience of the resources sector, which had longstanding contingency plans for global pandemics in place, is working to the benefit of the nation. Border shutdowns and travel limits have cut the number of interstate fly-in, fly-out workers from more than 10,000 to less than 1200 in just three weeks, but work is continuing. Like all industries, however, mining companies must be prudent in their precautions to protect staff from COVID-19. The risk has been highlighted after a BHP Mitsubishi Alliance worker tested positive to COVID-19 at Blackwater in central Queensland. As Geoff Chambers and Joe Kelly write on Monday, Construction Forestry Maritime Mining and Energy Union Queensland president Stephen Smyth points out that mining sites have multiple points of potential cross-contamination.
These include machinery, transport, mess facilities and accommodation.
Unlike competitor nations with mines in shutdown, Australia is well placed to meet our trading partners’ demands when their economies begin to gear up. China’s recovery from coronavirus should drive strong demand, with the Minerals Council of Australia pointing out that iron ore prices have held up in the expectation that China’s forthcoming fiscal stimulus package could offer significant steel-intensive infrastructure spending.
Resources Minister Keith Pitt predicts Australia’s thermal and coking coal “will literally drive the economic recovery of many Asian countries”.
Post-pandemic, nothing would assist the process of Australia’s debt recovery like a sustained minerals boom.
Preoccupied as they are with dealing with the disease, federal and state governments – especially the ministers responsible for mining and infrastructure – should be looking ahead now. The beginning of the economic climb-back is almost certainly months, not years, away. But whatever immediate adjustments need to be made to remove capacity constraints should be in train now. It is also important, as Australia moves into winter, to ensure sufficient gas and electricity supplies are available to meet industrial and domestic demand.
If the process of paying down the cost of the pandemic is to be shortened and the need for tax hikes reduced, governments need to be taking the long-term view of our resources industries. Years of red- and green-tape delays on project approvals must be consigned to the past; Australians need governments to enhance conditions for our strongest industries to draw investment and help rebuild the economy through royalties and taxes.
The resources sector will not be our only path back. But on current performance, it will be the cornerstone of our return to prosperity.
