Michael Roarty, Science, Technology, Environment and Resources
Section
Mining has long been a cornerstone of the Australian economy and
the gold rushes were pivotal in the early development of the
country. Australia is presently in the midst of yet another
minerals boom—exhibited by both high prices for, and record
export volumes of mineral commodities, especially iron ore and
coal. This follows previous minerals booms in the early 1960s and
mid-1980s. The present boom is underpinned by high demand for
primary commodities in the industrialising economies of China and
India.
Geologically, Australia is an ancient continent with an abundant
supply of minerals. The known deposits have been relatively easy to
discover and develop. Australia has relatively flat terrain and is
sparsely populated apart from some coastal regions, both aspects
advantaging exploration and mine development. Western Australia and
Queensland are the most resource-rich states. Of Australia’s
roughly 340 mines, almost half are in Western Australia.
Today, the Australian minerals sector accounts for
eight per cent of gross domestic product (GDP). Australia
is among the top five producers of most of the world’s key
mineral commodities, being:
- the world’s leading producer of bauxite, alumina, rutile
and tantalum
- the second largest producer of uranium, lead, ilmenite, zircon
and lithium
- the third largest producer of iron ore, and zinc
- the fourth largest producer of black coal, gold, manganese and
nickel and
- the fifth largest producer of aluminium, brown coal, diamonds,
silver and copper.
Additionally, Australia is the world’s largest exporter of
black coal, iron ore, alumina, lead and zinc and the second largest
exporter of uranium.
Mineral exports
The resources sector (including oil and gas) contributed just
under $160 billion to export earnings in 2008–09,
compared with $35.9 billion for the rural sector and
$38.3 billion for manufacturing. The growth of mineral
commodity exports since 2003–04 has been phenomenal, driven
by strong demand for iron ore and coal. The value of iron ore
exports increased from $5.3 billion in 2003–04 to
$34.2 billion in 2008–09 while metallurgical and thermal
coal increased in value from $6.5 billion to
$36.8 billion and $4.4 billion to $17.9 billion
respectively over the same period. The Australian Bureau of
Statistics showed a trade surplus for the June Quarter 2010 (a rare
phenomenon), largely due to increases in both volume and prices for
exports of iron ore and coal.
Coal
Australia has very large reserves of extremely high quality
thermal coal (used for making steam and generating electricity) and
coking coal (used for steel making) located in New South Wales and
Queensland. The coal industry is the mineral industry’s
largest employer.
Despite the difficulties associated with coal production and use
(concern over carbon dioxide emissions), some 41 per cent
of the world’s electricity is generated using coal and this
proportion is continuing to increase. In Australia, over
80 per cent of our electricity is generated by coal-fired
power stations. In capital-intensive industries, such as power
generation, it is not technologically feasible to achieve rapid
change. A technology involving carbon capture and storage (CCS)
which takes the carbon dioxide emitted from coal-fired power plants
and reinjects it into suitable rock formations underground for
permanent storage, is actively being evaluated. For more on this,
see the brief Climate Change Action: A Multi-faceted
Approach in this book. If CCS is proven to be viable and can
be implemented on a large scale, coal’s environmental
credentials would dramatically improve.
Other aspects
Mining of hydrocarbons (coal, oil and methane gas) faces
controversy because of the greenhouse gas emissions associated with
the combustion of these substances—a fact that is down to
society’s addiction to hydrocarbons rather than mining per
se. It must also be acknowledged, however, that mining of any
commodity, if not properly managed, can cause localised pollution,
soil degradation and release of potential toxins. On the other side
of the ledger, mining employs 133 200 people directly, and
Australian mining companies are major developers, users and
exporters of computer software used to improve the efficiency of
mining operations. The industry is also the largest employer of
environmental scientists in the country.
Australia has developed a capacity to produce far greater
volumes of commodities than are required for domestic consumption.
However, this forces reliance upon the circumstances of the global
market rather than setting prices according to the cost of
production. Commodity prices are set in international markets by
supply and demand fundamentals. In the current settings, commodity
prices are at record highs because of strong world demand. This
circumstance has dramatically improved Australian terms of
trade—that is the ratio of export to import prices. Put
another way, it takes fewer exports of a mineral commodity to
balance the purchase price of, say, car imports. However, commodity
prices can fall because of changing global circumstances such as
falling world demand. Such circumstances lead to a decline in
Australia’s terms of trade.
A major shift from earlier periods in the Australian minerals
sector is that today’s major mining companies have a global
focus and seek the most profitable mining ventures. This means they
have no allegiance to a particular country. However, a vote of
confidence in Australia is illustrated by huge capital investments
currently being undertaken in a number of resource sector projects
across Australia.
Minerals Resource Rent Tax
The most recent issue that has raised considerable interest and
debate in the resources sector was the announcement in the 2010
Budget of the imposition of a Resources Super Profits Tax (RSPT) on
the minerals industry. Shortly after the ALP leadership change it
was announced that the RSPT proposal would be replaced with a
proposed Minerals Resource Rent Tax (MRRT). In contrast to the
RSPT, this would apply only to mined iron ore and coal rather than
to all minerals. The major iron ore and coal producers, namely BHP
Billiton, Rio Tinto and Xstrata, indicated to the Gillard
Government that the newer proposed tax was less likely to reduce
future mine investment. However, smaller mining companies have
shown significant opposition to the MRRT proposal. With both
schemes, the Commonwealth said that it intends to rebate any
forgone mineral royalty income to the states and territories.
Library publications and key documents
Minerals Council of Australia (MCA), The
Australian minerals industry and the Australian economy, MCA,
Canberra, March 2010.
P Knights and M Hood, eds, Coal and the
Commonwealth: the greatness of an Australian resource,
University of Queensland, Brisbane, 2009.