THE CHAMBER OF MINERALS AND ENERGY OF WESTERN AUSTRALIA

Transcription

1 THE CHAMBER OF MINERALS AND ENERGY OF WESTERN AUSTRALIA

2 Contents 1. EXECUTIVE SUMMARY ABOUT CME ABOUT THE WESTERN AUSTRALIAN RESOURCES SECTOR... 5 CONTRIBUTION... 5 EMPLOYMENT... 5 GROWTH... 5 OPERATIONS ECONOMIC MANAGEMENT... 7 COST OF DOING BUSINESS... 7 PRODUCTIVITY... 7 AAA CREDIT RATING... 9 LOCAL INDUSTRY PARTICIPATION... 9 AUSTRALIAN JOBS ACT TAXATION EXPLORATION INCENTIVES GST DISTRIBUTION DISCOUNT MINING REVENUE OTHER RECOGNISED REVENUE MINERALS RESOURCE RENT TAX (MRRT) CARBON PRICING INFRASTRUCTURE INFRASTRUCTURE PLANNING AND INVESTMENT REGIONAL PORTS AVIATION ENERGY WATER ENVIRONMENTAL REFORM APPROVALS AND EPBC ACT REFORM BILATERAL AGREEMENTS SEWPAC RESOURCING ENVIRONMENTAL OFFSETS COST RECOVERY CLEAN ENERGY FUTURES PROGRAM CLIMATE CHANGE AND CARBON REDUCTION MECHANISM PRINCIPLES PROPOSED EARLY MOVE TO EMISSIONS TRADING REPORTING EFFICIENCY AND DUPLICATION INDUSTRY ASSISTANCE DIESEL FUEL REBATE LAND ACCESS MULTIPLE LAND USE FRAMEWORK NATIVE TITLE... 22

3 9. PEOPLE STRATEGIES EDUCATION AND TRAINING REFORMS - SKILLS WORKFORCE INCLUSION EDUCATION POLICY SKILLED MIGRATION FIFO OCCUPATIONAL SAFETY AND HEALTH NATIONAL HARMONISATION OF OCCUPATIONAL SAFETY AND HEALTH LEGISLATION

4 1. Executive Summary In order to ensure the Western Australian resources sector continues to develop and support other sectors, and the state and national economies as a whole, it is imperative to put in place effective measures to arrest the decline in productivity. Workplace reform and implementation of policy to stimulate innovation are necessary by the federal government to ensure economic development. In addition, a focus on reducing the cost of doing business and increasing exploration activity are core requirements to enable the continued growth of the resources sector in Western Australia to drive the state and national economy. According to the Western Australian Department of State Development February 2013 Economic Profile, Western Australia s economy grew 6.7 per cent in real terms in , above its annual average growth of 4.6 per cent over the past five years. This growth was mainly driven by increased business investment in Western Australia s resources sector. The growth is expected to continue within the Western Australian state in although not at the same elevated rate. The state government s pre-election financial projections statement forecasts above-trend growth of 6.0 per cent for , although given current market conditions this would have tapered slightly since its release in February The state accounted for 28 per cent of Australia s business investment in and held 53 per cent of Australia s total value of resource projects under construction or committed in April 2013, according to the Bureau of Resources and Energy Economics. The Chamber of Minerals and Energy of Western Australia (CME) consider the following key recommendations form the basis of an essential platform to underpin a productive and efficient resources sector for the ongoing and future growth of our country: 1. Economic management: Addressing the escalating cost of doing business in Australia must be a key factor across Australian Government policy to ensure Western Australian resources projects remain internationally competitive and continue to spread long term economic benefits across Australia. In order to maintain the AAA rating and reputation of Australia as a place to do business, the government must retain some flexibility within the budget for spending cuts to ensure appropriate debt levels are maintained. CME opposes policies which impose greater regulatory complexity and costs on industry in an effort to strengthen local content participation and seeks greater interaction of state and federal policies. 2. Taxation measures: CME encourages the government to enact policies that will continue to incentivise investment and exploration in the resources sector. This might take the form of a Canadian-style flow through shares arrangement or a minerals exploration tax credit. CME urges the federal government to cooperate and consult with the state governments to establish a more efficient GST distribution system to ensure Western Australia is returned a greater percentage of revenue earned in the state. GST distribution should be included as part of a tax white paper. CME supports genuine, consultative tax reform, but believes the MRRT falls significantly short of delivering tax reform and, in its current form, negatively impacts the international competitiveness of our resources sector. CME s preference is the retention of the current state-based royalty regime. 3. Infrastructure: A transparent process should be established for planning and prioritisation of joint infrastructure with funds committed by the federal government to ensure ongoing economic benefit is able to be delivered by the resources sector. Government must provide substantial investment in the regions of Western Australia, with a strong targeted focus on the provision of economic infrastructure (roads and regional airport infrastructure), followed by supporting social infrastructure and housing, which will in turn facilitate regional development and economic growth. 2

5 The government must take positive steps to support and facilitate investment, both private and public, in infrastructure to ensure much needed capacity constraints are relieved at ports. CME recommends Airservices Australia and the Civil Aviation Safety Authority work with the resources sector and Perth Airport to implement airspace planning and management initiatives which reduce congestion and delays at Perth and regional airports. CME supports continued consultation by the federal government on energy policy development to identify opportunities for market reform. CME encourages further government support for research and development into emerging energy technologies. 4. Environmental reform: CME recommends the federal government immediately progress the development of streamlined assessment and approval of bilateral arrangements, to delegate decision making to the state government, and work towards a set of coordinated environmental offset policies and guidelines. In the absence of a global agreement on carbon reduction, the government should adopt a measured approach incorporating specified principles as outlined in our submission. Consultation on any reform to, or repeal of, the carbon pricing mechanism should be conducted in an open and transparent way, and include genuine consultation with stakeholders. 5. Land Access: CME recommends the federal government ensures the Standing Committee on Energy and Resources Multiple Land Use Framework is advanced in close consultation with industry. CME recommends the federal government ensures any amendments to the Native Title Act occur after consultation with affected stakeholders and delivers on the policy objectives of creating a more equitable, sustainable and timely resolution of native title matters. 6. People Strategies: CME recommends government prioritises the development and implementation of programs that are adequately resourced and well co-ordinated with industry to strengthen workforce diversity, including programs that focus on: the promotion of women into non-traditional industries and into senior management and leadership roles; and the development of foundation skills in Indigenous communities to ensure greater number of Indigenous Australians are work-ready. CME recommends a national overarching curriculum framework be designed with consultation from industry to ensure future skill requirements are adequately addressed. CME urges government to ensure the 457 visa scheme is fair, flexible and free of unnecessary red tape. CME does not support extending existing labour market testing for 457 visa applications. CME recommends any policies relating to FIFO be ground in evidence-based research which allows for a greater understanding of this important and growing work practice. 7. Occupational, Safety and Health: CME supports national harmonisation of OHS laws in principle and acknowledging the delays encountered in the harmonisation process recommends the federal government recommits to finalising the development of supporting model codes of practice and guidelines, embracing principles of best practice that can be adopted by state jurisdictions. CME does not support industrial relations issues being dealt with in safety legislation. CME looks forward to ongoing engagement on these important issues. 3

6 2. About CME The Chamber of Minerals and Energy of Western Australia (CME) is the peak resources sector representative body in Western Australia. CME represents companies directly involved in the resources sector (including mining, oil and gas) or those providing services to it. CME's member companies generate 95 per cent of all mineral and energy production by value and employ more than 80 per cent of the resources sector workforce in the state. Having been in operation since 1901, the role of CME is to champion the Western Australian resources sector and assist it to lead the world in sustainable practice through innovation and to underpin Australia s position in the global economy. CME strives to be a persuasive industry voice, adding value to our member companies in a dynamic and increasingly complex operating environment. In order to achieve this, CME endeavours to: Lead policy development on issues impacting on the resources sector; Promote the value of the sector to the community; Represent the views and advocate the needs of our members; and Provide an avenue through which members and stakeholders are able to collaborate. With policy expertise spanning industry and research activities, occupational safety and health, education and training, the environment, exploration, Indigenous affairs, workforce development, infrastructure, economics and tax, CME provides stakeholders and members with an avenue for undertaking extensive collaboration on all industry matters. The Western Australian resources sector is diverse and complex covering exploration, processing, downstream value adding and refining of over 50 different types of mineral and energy resources. The sector is also a significant generator of power, predominantly for its own use, and identifier and developer of water resources. Besides being the largest private employer in regional and remote Western Australia, the sector is also the largest employer of Indigenous Australians. CME s member companies are the foundation of our operation, their valuable contributions helping build and prioritise our agenda. Their efforts and expertise enables CME to lead policy development on issues impacting on the resources sector, and promote the sector s value to the Western Australian and national communities. 4

7 3. About the Western Australian resources sector Contribution The Western Australian economy makes a significantly larger contribution to Australia s national economy relative to our 10.7 per cent share of population. In , Western Australia s gross state product (GSP) accounted for 16.2 per cent of Australia s gross domestic product (GDP) and 27.6 per cent of national business investment. Looking externally, Western Australia produced 46.1 per cent of national exports and 15 per cent of national imports 1 showing the state is a significant contributor to the export market. Reflecting the strength of the state s economy, in Western Australia was a key driver of population and employment growth at the national level, accounting for 22.1 per cent and 36.8 per cent of national population growth and employment growth respectively. Due primarily to above-average population growth and continued strong growth in business investment the Western Australian economy is continuing to perform at above-trend levels. While both population and economic growth will result in increased taxation revenue, these are also the key factors in demand for infrastructure spending and government services. Employment Unemployment in Western Australia remains below the national average of 5.5 per cent, currently sitting at 5.2 per cent in April 2013, compared with 4.8 per cent in March 2013 and 3.7 per cent 12 months earlier. Despite a 0.3 per cent fall in the past 3 months, overall employment rose a total of 1.6 per cent over the 12 months to April Western Australia s low unemployment is predominantly due to the strength of the resources sector which is a significant direct and indirect employer in the state, with over 110,000 direct mining positions. In 2012, the mining sector was directly employing over 7 per cent of Western Australia s workforce, which compares with 3.5 per cent in The official employment statistics for mining in Western Australia also do not include the indirect percentage of workers who are contractors or work in mining services for example. This is estimated to push to the total employment number in the sector in Western Australia to almost 150,000. Growth The six months to April 2013 saw total committed capital expenditure on major projects in Western Australia actually increase to $141.7 billion from the $141.1 billion at end October This amount is 3.7 per cent lower than the historical peak of $147 billion at end October While the peak of the capital investment expenditure in Western Australia may have passed, the most recent federal data suggests that committed capital expenditure is not falling away rapidly. 1 Department of State Development Western Australia Economic Profile May Department of State Development Western Australia Economic Profile May ABS Cat BREE s Resources and Energy Major Projects, April

8 $million Figure 1: Capital expenditure on major resources projects in Western Australia 160, , , ,000 80,000 60,000 Mineral and energy processing Infrastructure Minerals 40,000 20,000 Energy 0 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 There is $12.5 billion invested in infrastructure projects at the committed stage and over $4.7 billion at the feasibility stage in Western Australia 5. Continued expansion of the iron ore and gas sectors is likely to be the main driver of additional investment in infrastructure in Western Australia. Besides the substantial investment in the gas and iron ore markets, Western Australia has a range of metals and other minerals projects in its investment pipeline. There are 21 of Australia s 36 gold projects in the investment pipeline located in Western Australia, with a value of over $2.8 billion. Although gold projects tend to be smaller in value, in aggregate they remain a valuable source of investment for the state and particularly for the sustainability of these industries 6. Similarly, five of the nine uranium projects identified in the investment pipeline are located in Western Australia. There are a number of new commodities for Western Australia likely to be emerging in coming years; particularly uranium and shale and tight gas. The government must remain committed to a world s best practice uranium mining industry. It should also adopt a science-based policy approach and rigorous and transparent approvals in the management of the shale and tight gas industry. Operations According to CME s 2013 State Growth Outlook 7, Western Australia s mining workforce is forecast to peak in Given the rapid changes in the industry over the last 12 months, it is likely that employment levels have already peaked as we are starting to see more projects transition from the construction phase into operations. As witnessed so far in 2013, mineral producers are increasingly looking to review employment levels amidst rising cost pressures. In addition, the nature of skills required is changing in line with the number of projects moving from construction into operations. The changing demand from construction into operations highlights the importance of ensuring appropriate skills sets are available rather than aggregate labour numbers and this will be a significant challenge for the sector over the coming years. 5 BREE s Resources and Energy Major Projects, April BREE s Resources and Energy Major Projects, April CME s State Growth Outlook 2013, PricewaterhouseCoopers. 6

9 4. Economic Management Cost of Doing Business For a number of years now, the cost of doing business in Western Australia and Australia has escalated. The increase can be attributed to a number of factors including a tight labour market, an increase in red and green tape, a push for cost recovery of government services and the implications of the federal Labor government s policy position of spreading the benefits of the boom. When combined with decreasing ore grades and minerals rich regions emerging around the world, the level of competition in the global resources sector is increasing for Australia, particularly effecting Western Australia. This is both in the attraction of investment capital and the capture and maintenance of market share. Falling commodity prices and Australia s reducing terms of trade have now placed an even greater spotlight on the increasing costs of developing mining and energy projects in Australia. Australia s resources sector is heavily reliant on foreign investment, more so than any other industry. Rising costs for both project development and operations pose a threat to attracting this foreign investment given it can impact significantly on returns. Western Australian resources companies need to remain cost competitive in order to attract investment for new projects and to ensure sustainable operations that can compete against our global rivals. Additional increases in costs in Western Australia include: Imposed business costs including the uncertainty of the timing and settings of the introduction of new and changing taxation imposts such as Mineral Resources Rent Tax and the carbon pricing mechanisms; Productivity challenges for the sector; Project approval processes, duplication, time delays and complexity; Increasing salaries and labour shortages; and Increasing energy demand and rising costs for resource projects. While the Western Australian resources sector has an important foothold in the global industry, it does not dominate any one market. So it remains susceptible to changes in policy that alter its attractiveness against resource sectors in other jurisdictions that compete for market share. The global resources sector will always assess other locations and Australia must remain internationally competitive in order to attract resources investment into the future. Governments must minimise policy, regulatory risk and ensure the efficiency of administrative processes are in place all of which can affect not only the financial performance of the business following individual decisions of the government or regulator, but its future access to capital based on how investors predict subsequent decisions will impact commercial return. Decisions that increase the perception of investment risk will, in a competitive investment environment, redirect capital elsewhere. Addressing the escalating cost of doing business in Australia must be a key factor in all Australian government policy to ensure Western Australian resources projects remain internationally competitive and continue to spread long-term economic benefits across Australia. Productivity Decreasing productivity, particularly in relation to labour productivity, has significant impacts on Australia s international competitiveness. Addressing the causes of this decline is crucial to ensure Australia s resources sector continues to be attractive to international investment. Multifactor productivity (MFP) is a comprehensive measure of productivity that focuses on both labour and capital as inputs, by measuring the amount of output for a given amount of labour and capital input it captures changes in output resulting from improvements in efficiency. In the mining industry, MFP has fallen by an average annual rate of 5 per cent since Over the same period, MFP across all other sectors has remained relatively stable 8. 8 KPMG analysis of ABS 2012 Census data. 7

10 Figure 2. Multifactor productivity index 16 market sector Multifactor productivity index - 16 market sector Multifactor productivity index - mining sector The Productivity Commission Productivity Update May 2013 report confirms MFP growth in the mining industry (including oil and gas) has declined by 40 per cent in the eight years since This equates to businesses using 67 per cent more inputs to produce each individual unit of output in than they did eight years ago. It is worth noting the background and context of the sector when commenting on productivity. The large capital investments currently being made in the Australia mining industry will inevitably create a lag before the benefits of the expansion, being greater production employment and increased output, are realised. However decreasing productivity of this magnitude creates cause for concern. The high commodity prices and rapid output growth of the past decade has contributed to the industry s productivity challenges in three key ways: 1. Large capital investments are made ahead of time as new capacity is being constructed. This leads to a lag before the benefits of the expansion are realised. 2. Higher prices lead to more marginal mines being pursued. These have higher strip ratios and lower ore grades, requiring more labour hours per tonne of output. 3. Rapid employment growth resulting in new workers entering the industry with lower experience and training, reducing average labour productivity 9. The productivity of the mining industry in WA is central to the industry s ability to continue to attract international capital. A recent study by the Business Council of Australia 10 found that the workforce in Australia compared with the US Gulf Coast was generally 35 per cent less productive for resources projects in major cities and 60 per cent less productive for projects in remote locations. This will remain a key challenge for the resources sector in WA and will continue to damage the sectors international reputation relating to costs and project management. In order to maintain our international competitiveness, there must be a combined, renewed focus on arresting the decline in productivity. 9 CME State Growth Outlook 2013 and BCA Study, 2012, Pipeline or Pipe Dream? Securing Australia s Investment Future. 10 BCA Study, 2012, Pipeline or Pipe Dream? Securing Australia s Investment Future. 8

11 AAA credit rating CME is concerned with warnings from major international credit agencies regarding the stability of Australia s AAA rating into the future. Access to global capital remains tight, reinforcing CME s view that strong government policies are necessary to retain Australia s AAA credit rating. Australia s economy has remained resilient with a large degree of fiscal flexibility and the government needs to ensure this continues after the peak resources capital investment phase in our economy. In order to maintain the AAA rating and reputation of Australia as a place to do business, the government must retain some flexibility within the budget for spending cuts to ensure appropriate debt levels are maintained. Local industry participation The opportunity for local business in operations and maintenance spend is very substantial, longlived and often in areas where local suppliers have comparative advantage. Policy development should focus on ways to assist local industry compete at a global level rather than quasi-mandating local content levels in projects or similar methods of protectionism. This will only lead to higher costs for project proponents and ultimately an uncompetitive local industry. There is considerable effort by resource companies to promote local participation. However, there are a number of key factors that influence how contracts are awarded and local firms can be uncompetitive at a range of levels. Proponents consistently list scale, schedule and price as key differentiators between local and international suppliers. Australian Jobs Act 2013 CME supports overall measures that seek to increase productivity in the resources sector, noting the steep increases in the cost of doing business in Western Australia. However, much of the recently passed Australian Jobs Act (June 2013) represents a duplication of initiatives and obligations already initiated by the Western Australian government. With the capital-intensive nature of the mining and energy sector, this Act will add considerable cost with little or no value add at a time when increased costs of doing business are already significantly weighing on future investment plans. There are numerous resource and energy projects in Western Australia that have established successful State Agreements to encourage local content. Further, there continues to be a very high level of local industry participation in spending in the mining sector with the May 2013 Local Content report estimating that over 108,000 local jobs have been created and $43 billion in resource supply contracts awarded since July This equates to an average 77 per cent of local content on resource projects. Current Western Australian requirements for local content are working effectively and transparently and it is unclear what the Act will add in a practical sense to increase local industry participation in the sector. The Act is uncertain in its current form and it will impose unwarranted and unnecessary additional compliance costs and delays on a sector that is already heavily burdened by red tape without any evidence that it will improve local participation on major projects. The Western Australian local content report also raises concerns with federal proposals about duplication and a lack of coordination 11. Alignment of state and federal initiatives in relation to local industry participation is critical. CME believes that it would be of benefit for state and federal governments to align local industry participation initiatives to reduce duplication and achieve traction with a combined, cohesive policy. CME opposes policies which impose greater regulatory complexity and costs on industry in an effort to strengthen local content participation and seeks greater interaction of state and federal policies. 11 Government of Western Australia, Department of Commerce Local Content Report May 2013, pg 10. 9

12 A$Millions 5. Taxation CME continues to support genuine reform at the federal and state levels to provide for an efficient and effective tax regime. Tax reform is an essential function of government and CME believes government fiscal policy must not adversely impact the Australian minerals and energy sector s international competitiveness. Achieving an Australian taxation system that drives increased productivity and economic growth across all industries requires an open, consultative and systematic process. Meaningful consultation on all major tax proposals should be undertaken throughout the development of significant reforms. CME has previously argued for a tax white paper to ensure full consultation on a systematic and consistent approach to tax reform. Exploration incentives Exploration measures the health of the industry. Without new exploration, the national inventory of mineral resources will decline and so will investment in mineral production and of the diverse range of benefits that flow from the development of mining projects in Australia. Figure 3 below, from the CME Resources and Economic Report June 2013, shows that total mineral and petroleum exploration decreased by 22 per cent to $1.14 billion compared to the January-March 2013 quarter. This is the third consecutive quarter that mineral exploration has declined. Compared to the corresponding quarter a year ago, mineral exploration is now 14 per cent lower 12. Figure 3: Mineral and Petroleum Exploration Expenditure in Western Australia Petroleum Uranium Nickel Copper Iron Ore Gold Other Minerals 0 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Australia s share of global exploration for non-bulk commodities has virtually halved from its peak of 21 per cent in 2002 and it now stands at 12 per cent of the total, whereas Canada has increased its share from 14 per cent to 18 per cent over the same period 13. A key factor in exploration is business confidence. International investment and confidence in our policy and laws are critical if Australia s economy is to continue to grow. Continual changes to resources regulation and taxation policy undermines this confidence and will send a clear, negative signal to foreign investors. 12 CME/KPMG June 2013 WA Resources and Economics report 13 Richard Schodde, Pietro Guj, Where are Australia s mines of tomorrow? Centre for Exploration Targeting (CET), The University of Western Australia (UWA) September

13 CME encourages the government to enact policies that will continue to incentivise investment and exploration in the resources sector. We believe that a minerals exploration tax credit could effectively achieve this aim of encouraging investment in the sector to assist in funding future exploration activities. This credit could work in a similar way to the flow through share arrangements in place in Canada. CME encourages the government to enact policies that will continue to incentivise investment and exploration in the resources sector. This might take the form of a Canadian-style flow through shares arrangement or a minerals exploration tax credit. GST distribution In recent decades Western Australia has been a net donor of GST to the Commonwealth, at the expense of timely and strategic investment in infrastructure and services, including roads, ports, energy, water and town development to support the state s considerable economic growth now and into the future. The graph below (provided by WA Treasury) illustrates the extent of the movement. Figure 4. Reduction in WA GST grants 7,000 $ Million 6,000 4,805 5,000 5,242 5,566 5,940 6,321 4,000 3,000 2,000 3,454 2,961 2,357 1,000 0 Equal per capita GST grants 1,805 1,695 Estimated GST grants Returns from resources projects, secured through the state fully underwriting project cost and risk, are being redistributed to other states. Mining revenue comprises around 9 per cent of all state revenue in aggregate, yet represents 85 per cent of the GST redistributed as a result of revenue assessments. Based on the current methodology, Western Australia effectively keeps just 15.9 per cent ($369 million) of royalty income from mining raised in the state, while still having to manage and develop the industry and fund the competing infrastructure demands 14. Getting the balance of equity and efficiency right (together with other key tax reform principles of simplicity, transparency and predictability) is vital for Australia s future prosperity. 14 CCIWA submission to GST Distribution Review interim report, October

14 Discount mining revenue Any reform to GST should include a considerable discount being applied to the mining revenue assessment. In the absence of full reform, CME proposes the discount for the mining assessment be set at 50 per cent, consistent with the Canadian 50 per cent fiscal equalisation system. This position was put forward by both Western Australian and Queensland governments in their submissions to the GST Distribution Review Panel in Discounting the revenue by 50 per cent would enable Western Australia to capture the majority of the gains from resources that are owned by them while, through the GST redistribution mechanism, recognising all jurisdictions should share in the economic benefit from non-renewable resources. GST distribution methodology should be adjusted to ensure there remains a strong and genuine incentive for Western Australia to develop the resources in its state. This should recognise the substantial costs incurred by mining states to support the resources sector (including significant infrastructure costs, physical and social) and costs involved in regulating the industry. A more efficient allocation of GST revenue will deliver longer term benefits to both Western Australia and the nation. CME supports a more equitable distribution of GST to recognise, reward, and support state-based productivity, which in turn will promote broader economic stability. The state should not be penalised in respect to GST receipts for its economic success. Other recognised revenue CME has consistently supported genuine reform of the Australian taxation system and continues to do so to provide for an efficient and effective tax regime. While CME does not consider it appropriate to use GST distribution as a blunt instrument to enforce tax reform in its own right, we do consider modifications to the current system to be a fair and equitable option in the absence of thorough reform. Under the current GST distribution methodology, the treatment of own-source state revenue is inequitable because not all lines of own-source revenue are equalised. While other revenue is assessed it does not affect the overall GST distribution from the Commonwealth Grant Commission. The unequal treatment of revenue streams has created distortions, considering not all states collect revenue from the same sources. Particularly concerning is revenue raised by states from the gambling industry. This income is not included in the distribution methodology yet if it were, would enable a significant increase to grants made to Western Australia. CME strongly encourages immediate reform to GST to include a fair and equitable range of other revenue payments being subject to equalisation. It is important that Western Australia not be adversely penalised for choosing to forego additional revenue from gambling and focusing on development of a strong resources sector. CME urges the federal government to cooperate and consult with the state governments to establish a more efficient GST distribution system to ensure Western Australia is returned a greater percentage of revenue earned in the state. GST distribution should be included as part of a tax white paper. Minerals Resource Rent Tax (MRRT) While CME s preference is for the retention of the current state based royalty regime, it does support genuine taxation reform, following extensive consultation. However, CME strongly believes the MRRT, implemented on 1 July 2012, falls significantly short of delivering this reform. CME has always maintained a strong preference for retention of the current state royalty regime, administered by the state government and with revenues flowing to the state. The state has prime responsibility for resource project approvals and the provision of non-privately owned infrastructure. As such, it is imperative the state government maintains and receives a dividend for Western Australian resources. Central to our concerns, CME maintains the belief the implementation of the MRRT must not adversely impact the Australian resources sector s perceived international competitiveness. The 12

15 significant costs associated with doing business in Western Australia, the instability in recent times of commodity prices, high Australian dollar and development of competitive projects in overseas mining jurisdictions, all mean the resources sector can ill-afford additional taxation measures. CME supports genuine, consultative tax reform, but believes the MRRT falls significantly short of delivering tax reform and in its current form negatively impacts the international competitiveness of our resource sector. CME s preference is the retention of the current statebased royalty regime. Carbon Pricing The recent announcement the Australian Labor Party (ALP) plans to bring forward the move from a fixed price carbon tax to an Emissions Trading Scheme (ETS) from 1 July 2015 to 1 July 2014 does not go far enough towards removing the uncompetitive elements of the Clean Energy Future Plan. Detailed consideration of this matter is given under the Clean Energy Futures Program section on page

16 6. Infrastructure The recent growth of the Western Australian resources sector has delivered economy-wide benefits, but it also poses a series of supply-side challenges in areas such as economic and social infrastructure. A coordinated and proactive response to these challenges is critical if the sector is to secure a sustainable and prosperous future for Western Australia and Australia. Failure to address these challenges will further undermine Western Australia s international competitiveness and attractiveness as a place to live and invest. CME s 2013 State Growth Outlook provides an integrated view of the state s growth profile on the basis of a direct survey of the development plans of the resource sector, focusing on the key growth enablers of people, energy, water and hard and social infrastructure. The findings in these areas provide important context for budget decisions and policy development and planning. Infrastructure Planning and Investment Western Australia s strong economy is placing increasing demands on social and economic infrastructure and it is critical the state receives an appropriate share of the federal government s infrastructure spend. CME s 2013 State Growth Outlook was published at the cusp of a changing phase for the resources sector. It shows that over the next 12 to 18 months the sector will move into an operational phase where production will ramp-up and the full economic benefits will be felt by governments and the wider community. We are now seeing this transition occur which has ongoing implications for long term infrastructure planning and investment in a range of areas including airports, roads, rail, ports and social infrastructure. CME acknowledges the overall infrastructure requirements of the state will exceed the ability of the government to provide all infrastructure required. For a number of years CME has called on governments to develop an infrastructure plan which ensures efficient frameworks are in place to encourage further investment in the resources sector. A transparent process should be established for planning and prioritisation of joint infrastructure with funds committed by the federal government to ensure ongoing economic benefit is able to be delivered by the resources sector. Regional Western Australia s remote regions support the overwhelming majority of the state s resources projects, and consequently produce the overwhelming majority of Western Australia s merchandise exports 15. Figure 5: Value of Minerals and Petroleum based on total production value Goldfields-Esperance 10% Wheatbelt 3% Mid West 3% Peel 5% Other 2% Pilbara 52% Commonwealth Offshore Petroleum 24.7% State Offshore Petroleum 0.5% 14

17 The continued development of regional centres in Western Australia is vital to support the continued growth of the resources sector. The resources sector recommends infrastructure priorities be set out by federal government, aligned with state government strategic documents such as the Mid West Investment Plan, the Pilbara Planning and Infrastructure Framework and the WA Regional Freight Transport Plan, and clear commitments to provide certainty around government infrastructure provision to cater for future growth. Federal government funding for major road projects in the region, including the Great Northern Highway re-alignment in Port Hedland and the duplication of the Dampier Highway in Karratha has been essential to supporting the increasing needs of the road network in the Pilbara. Federal funding has also supported the development of improved freight corridors into our state s ports. Western Australian regions, particularly the Pilbara towns of Port Hedland and Karratha, are continuing to suffer through a severe housing affordability crisis. The inability of the land supply chain to deliver developed land, together with high local building costs has kept the cost of housing extremely high. There is considerable scope and opportunity for the federal government to utilise federal Housing Affordability programs to support housing affordability for service workers across the region. CME considers the current extremely high cost of land and housing remains the largest impediment to population growth and sustainable communities in many regional areas of Western Australia. Government must provide substantial investment in the regions of Western Australia, with a strong targeted focus on the provision of economic infrastructure (roads and regional airport infrastructure), followed by supporting social infrastructure and housing, which will in turn facilitate regional development and economic growth. Ports Capacity at all Western Australian ports needs to be considered as a high priority, with significant constraints being faced at Geraldton, Dampier and Port Hedland and new bulk handling facilities required at Anketell. Immediate decisions on provision and delivery of port infrastructure in Esperance and Bunbury are urgently required to ease pressure on port facilities and to enable increased export and trade capacity. Given port infrastructure is largely funded by industry, with the benefits flowing to the broader community, CME considers government should work closely with industry to meet these immediate needs. The proposed deep water port at Oakajee, in the state's Mid West region, will provide essential export capacity for future mining needs in the region and will maximise value for the community, government and businesses from the development and coordinated operation of an iron ore supply chain, delivering thousands of new jobs during the construction phase and hundreds of ongoing positions. Despite recent commercial decisions from the current project proponents, CME considers development of Oakajee Port through a state and federal funding partnership would bring enormous economic benefits to the government, and importantly give the private sector confidence in future infrastructure projects to further enhance Australia s prosperity. The government must take positive steps to support and facilitate investment, both private and public, in infrastructure to ensure that much needed capacity constraints are relieved at ports. 15 Department of Mines and Petroleum, Statistics Digest Government of Western Australia. 15

18 Aviation The Western Australian resources sector is delivering economy-wide benefits and the provision of efficient aviation services including airport infrastructure and airservices, is imperative to the continued sustainability and growth of the sector and the safety of those working in it. Perth airport is a central hub for future resources sector development. The sector uses a workforce model which combines residential and long distance commuting, primarily fly-in, fly-out. Initiatives to address congestion and delays at Perth Airport will improve productivity and operational management. Addressing the peak capacity problem at Perth Airport will require ongoing cooperation between the airport, industry, and Government. Planning for and managing the high volume of charter flights from Perth Airport would be enhanced if government agency data collection on passenger numbers and aircraft movements was extended to cover these flights. The Gateway WA project must remain a high priority for the federal government. Improving access to the Perth Airport will become increasingly more challenging as passenger movements increase. In addition, CME supports the early fitment of Automatic Dependent Surveillance Broadcast (ADS-B) to aircraft which service the resources sector prior to it becoming a mandatory obligation from CME is confident widespread uptake of ADS-B will improve efficiency and safety of air services for the sector. CME recommends Airservices Australia and the Civil Aviation Safety Authority work with the resources sector and Perth Airport to implement airspace planning and management initiatives which reduce congestion and delays at Perth and regional airports. Energy CME welcomed the release of the Australian Government s Energy White Paper (EWP) in November 2012 and agrees action must be taken to ensure open and transparent markets that allow competitive pricing, efficient resource allocation and innovation. CME is pleased with the direction of key policy statements, including: creating regulation that stimulates competition, innovation and consumer choice; ensuring markets, regulatory frameworks and their institutions operate in the long-term interests of consumers; a whole of government approach to removal of impediments to the development of gas resources; meeting Australia s greenhouse gas emissions targets at the least cost while maintaining energy security; and a whole of government approach to reducing cost of doing business pressures to attract and retain energy resource development investment. While recognising Western Australia s isolation, CME considers there should be alignment between the EWP and the state government s Strategic Energy Initiative. CME considers conflicting state and federal approaches to energy policy will inhibit changes to a more efficient energy market. CME is disappointed nuclear power was not considered as part of the EWP. While understanding the current political sentiment, commencing a discussion on nuclear power is important. According to the 2013 State Growth Outlook, electricity consumption in Western Australia is projected to increase by approximately 52 per cent by 2018, with that increase largely driven by projects in the minerals and energy sector. Figure 6 from the 2013 State Growth Outlook shows electricity demand is forecast to continue to grow steadily through to 2023 with the majority of demand expected to be met through self-generation (95 per cent) and fuelled by natural gas (94 per cent). 16

19 Figure 6: Minerals and Energy Electricity Demand (GWh p.a., Increment above 2012 level) 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, Self Generated Electricity Purchased Electricity Shale and tight gas has the potential to create thousands of new jobs, safeguard Western Australia s energy security and open up new commercial opportunities which will drive the state s economic growth. Preliminary estimates indicate onshore gas resources in Western Australia could be double those of offshore gas. CME supports approaches being undertaken to inform the public and provide greater understanding about hydraulic fracturing processes. As part of this, CME supports rigorous and transparent approvals and management of the onshore gas industry to safeguard the community and environment. CME supports consultation with the resource sector on domestic gas issues including, but not limited to, the study announced by the Federal Minister for Resources and Energy on 27 May Subject to the protection of commercial information, CME supports initiatives to provide better transparency on gas demand and supply. While the study will be eastern states focused, it will also consider the Western Australian market, and may provide valuable context for future policy development in the state. CME supports continued consultation by the federal government on energy policy development to identify opportunities for market reform. CME encourages further government support for research and development into emerging energy technologies. Water The Western Australian resources sector is committed to the responsible use of water resources. Water is a key enabler of growth for the resources sector and the wider economy. In setting policies government should bear in mind mining projects have long development lead times and key decisions, including water supply and surplus water management, are generally taken years ahead of the commencement of operations. CME notes water reform in Western Australia must balance the requirements of the National Water Initiative (NWI) as well as Western Australian conditions. CME supports a water management framework which enables fixed-term and volume licensing alongside a NWI-style market mechanism. This should include an agreed mechanism to transition to a market mechanism if required. This will provide government with the capacity to objectively manage water resources for all situations that may emerge in the future. 17

20 The Western Australian regions requiring the most water are the Pilbara and the Mid West. Resource projects are expected to continue to meet their own demand mostly through self-extracted ground water. However, security of water supply to supporting infrastructure and to facilitate the development of supporting communities and towns remains a high priority and the government is urged to undertake next source planning early, with close industry consultation. 18

21 7. Environmental Reform Approvals and EPBC Act Reform Bilateral Agreements An efficient and effective environmental approvals system is vital to the continued international competitiveness of the resources sector in Western Australia. Minimising duplication in environmental assessment and approvals of resources sector projects by the federal and Western Australian governments is the most significant way this can be achieved. In August 2011, the federal government responded to the Hawke Review recommendations and identified priorities for reform. The Council of Australian Governments (COAG) at its April 2012 meeting further supported the case for reform of the Environment Protection and Biodiversity Conservation Act (EPBC) under the theme of reducing green tape. This reform included a commitment for governments to work together to: fast-track the development of bilateral arrangements for accreditation of state assessment and approval processes, with the frameworks to be agreed by December 2012 and agreements finalised by March 2013; develop environmental risk and outcomes-based standards with states and territories by December 2012; and examine and facilitate removal of unnecessary duplication and reduce business costs for significant projects. The federal government s subsequent reversal of commitments on national green tape reduction at the December 2012 COAG meeting represented a lost opportunity to significantly reduce duplication in state and federal environmental approvals. CME considers the legislative environment in Western Australia already meets many of the standards of accreditation established by the federal government and an environmental assessment and approval bilateral would be both possible and beneficial. SEWPaC Resourcing The resourcing of approval agencies is a key consideration in the conduct of efficient and effective development assessment and approvals processes. The extent to which sufficient resources are available to approval agencies is critical to the timely arrival at approval decisions. The resources sector s general experience with the Department of Sustainability, Environment, Water, Population and Communities (SEWPaC) supports the view there is a lack of adequate staff resources, particularly within state and territory offices, to effectively manage the assessment and approvals process. Too often decisions need to be elevated from the officer level to senior leadership on the grounds of unreasonableness and unfairness. This can often come down to inadequate experience and training of staff at the officer level. Resourcing and inter-governmental co-operation issues could be improved by the redeployment of Canberra staff resources into state and territory branches of SEWPaC. In the situation where an approval and assessment bilateral agreement between the federal government and Western Australia is established, adequate resourcing of Western Australia and SEWPaC officers within the state will continue to be critical to support and audit the state approvals process. Environmental Offsets CME supports enhanced linkages between federal and state environmental offset processes. As per approval processes, the alignment and coordination of environmental offsets is of key importance to the resource sector to avoid overlapping or duplicative requirements. While the federal government and Western Australia differ in environmental focus of offsets, significant benefits in process and time efficiencies can be delivered to both the regulator and proponent if this alignment was to occur. Significant differences also exist around the calculation of offset liability at the state and federal level and the point at which offsets discussions and determinations may take place. These methodological and process differences create inefficiencies, duplication costly delays and uncertainty for industry. 19

22 Cost Recovery CME welcomes the federal Budget decision to defer cost-recovery arrangements under the EPBC Act. However, CME remains concerned by the federal government s intention to implement cost-recovery of Environmental Impact Assessments and other EPBC Act activities after July The resource industry is subject to rising costs of doing business and deterioration in the cost competitiveness of Australian resource projects. In this context, cost recovery can be viewed as an additional disincentive to investment in Australia. CME does not support cost recovery to fund the federal government to carry out its legislative responsibilities under the EPBC Act and this should instead be properly resourced from the government s consolidated revenue. CME recommends the federal government immediately progress the development of streamlined assessment and approval of bilateral arrangements, to delegate decision making to the state government, and work towards a set of co-ordinated environmental offset policies and guidelines. Clean Energy Futures Program Climate Change and Carbon Reduction Mechanism Principles The resources industry acknowledges sustained global action is required to reduce the scale of human induced climate change. CME has consistently argued a comprehensive measured transition to a low emissions global economy requires the alignment of three key policy pillars: 1. A global agreement for greenhouse gas emission abatement that includes emissions reduction commitments from all major emitting nations. 2. Market-based policy measures that promote the abatement of greenhouse gas emissions at the lowest cost without compromising the competitiveness of Australia s internationally traded sector. 3. Substantial investment in a broad range of low emissions technologies and adaptation measures. CME supports a measured transition to a low carbon economy. This can be accomplished by a variety of policy mechanisms integrating all of the following design features: Clear, predictable and long-term price signals ensure carbon price signals influence producers and consumers such that emissions and carbon consumption are reduced, and the focus on low carbon technologies is increased Broad based cover the broadest possible range of greenhouse gas emission sources, sinks and low carbon energy options. Internationally competitive progressively reduce emissions without distorting trade and investment flows or compromising the international trade competitiveness of Australian industry. Revenue neutral the objective is to establish a carbon price signal to change behaviour not raise revenues if revenues are raised, they should be used to provide assistance to individuals and firms adversely affected by the policy measures, not be diverted into general revenue. Simple and effective to achieve sustainable emissions reductions at least economic cost and be simple to implement. Measured, equitable transition avoid adverse economic and social consequences, ensure continued energy security and provide equitable treatment of existing investment and greater certainty to new investment. Transitional measures to maintain trade competitiveness should be non-discriminatory. Technology encourage the adoption of the most efficient low emissions technologies through a carbon price signal and fiscal measures where market failure can be demonstrated. 20

23 Proposed Early Move to Emissions Trading The recent announcement the Australian Labor Party (ALP) plans to bring forward the move from a fixed price carbon tax to an Emissions Trading Scheme (ETS) from 1 July 2015 to 1 July 2014 does not go far enough towards removing the uncompetitive elements of the Clean Energy Future Plan. While an early move to an ETS goes some way in reducing cost pressures for resource projects compared to the current high costs under a fixed carbon price, it remains an additional imposed cost on Australian projects not shared by most of our international competitors. In the absence of a global carbon pricing or trading scheme, the early move to an ETS still does not fit with CME policy principles outlined above. Reporting Efficiency and Duplication CME supports recent efforts to streamline reporting requirements under the National Greenhouse and Energy Reporting scheme (NGERs). However, a significant amount of duplication between NGERS and the reporting requirements of other federal and state government legislation, regulations and programs including non-complementary state based requirements and conditions, has resulted in increased time, complexity and costs for industry. The federal government should work to remove duplication of reporting requirements under Clean Energy Future legislation and related programs, and work with states and territories to remove noncomplementary state-based conditions such as approval conditions relating to greenhouse emissions. Industry Assistance CME was disappointed with the cuts to, and restructuring of, industry assistance programs, including grants and incentives under the Australian Renewable Energy Agency and the Jobs and Competiveness Program following the Budget. In the absence of carbon reduction mechanisms being adopted by our global trading partners and competitors, emissions intensive, trade-exposed industries operating in Australia face a competitive disadvantage. It is unlikely our trading partners will adopt equivalent schemes in the near future and industry assistance programs under the Clean Energy Futures Package need to reflect this reality and provide adequate protection for our industries. The threshold for receiving assistance under the Jobs and Competitiveness Program should be reduced to include all trade-exposed industries. Diesel fuel rebate Transport fuels are a significant input for the Western Australian resources industry, with heavy use of diesel in remote power generation and haulage. The diesel fuel tax credit has already been subject to a reduction as part of the carbon tax impost from on 1 July Any further changes will be significant given that the mining industry is the largest claimant of credit. Additional taxes on resources sector are detrimental to our international competitiveness. CME supports broad-based sector coverage for a carbon pricing mechanism, but with the specific exclusion of sector such as agriculture, fisheries and forestry from the reduction in fuel tax credit for off-road use and generation, the resources sector again faces a further disproportionate burden in emissions reductions and the associated cost. This is inequitable and fails on the federal government s stated commitment to least cost abatement. CME also queries the effectiveness of applying a tax on off-road use of fuel as a means to achieve cost effective abatement. In the absence of a global agreement on carbon reduction, the government should adopt a measured approach incorporating specified principles as outlined in our submission. Consultation on any reform to, or repeal of, the carbon pricing mechanism should be conducted in an open and transparent way, and include genuine consultation with stakeholders. 21

24 8. Land Access Multiple Land Use Framework The Western Australian resources sector supports, and is committed to, sustainable development and support for all stakeholders who have an interest in land. The resources sector in Western Australia has made significant progress in reducing the environmental and biodiversity impacts of its operations and contributing to the economic advancement and independence of Aboriginal people in the state. State approvals and assessment processes should be facilitated by strategic planning based on consultation and comprehensive information, including scientific evidence, regarding the conservation, heritage, social and economic values of a region. Both state and federal governments are increasingly establishing reactionary policies around land use without comprehensive and transparent consultation processes. These policies are creating land access implications for industry. Increasingly, local, state and federal governments are seeking to quarantine areas from exploration and mining without the application of a rigorous evidence-based methodology. This fails to acknowledge the resources sector is a temporary land user and following completion, land can be rehabilitated and used for a wide range of purposes including urban and industrial development, agriculture and conservation. It also overlooks situations where multiple land users can co-exist. CME encourages the government to develop clear, consistent and sustainable policies addressing the requirements of multiple land users within the state. CME notes the Multiple Land Use Framework, developed by the Standing Committee on Energy and Resources, was nationally endorsed in December CME has encouraged the state government to undertake consultation on how the framework will be applied within Western Australia. CME recommends the federal government ensures the Standing Committee on Energy and Resources Multiple Land Use Framework is advanced in close consultation with industry. Native Title CME members are major stakeholders in the native title system in Australia. Many of the projects undertaken by CME members involve future acts under the Native Title Act 1993 (Cth) (NTA), in relation to which procedural rights are afforded to native title holders and registered native title claimants. Western Australia is subject to the highest national volume of future act processes. Since 2000, 75 per cent of the tenement applications and land acquisitions notified under s29 and 87 per cent of future act determination applications occurred in Western Australia. Western Australia also contains the largest area of land where native title has been determined to exist or is under claim. As a result, proposed amendments to the NTA, particularly amendments to future act processes under the NTA, will impact members of the resources industry operating within the state. The timely and transparent resolution of native title claims facilitates the ability of the resources sector to enter into land access agreements with Aboriginal parties to comply with native title and Aboriginal heritage regimes. The resources sector s contribution to Aboriginal economic advancement is significant and should be facilitated through transparent government policy on the settlement of native title claims. Further, to support industry engagement with native title parties post-determination, prescribed bodies corporate should be resourced appropriately. The federal government has proposed a number of reforms to the NTA in recent years and in 2012 introduced proposed changes to the taxation treatment of native title benefits, proposed changes to the negotiation in good faith regime, the extension of the areas to which historical extinguishment could be disregarded, and improving the technical processes related to Indigenous Land Use Agreements. 22

25 CME supports the Attorney-General s intention to improve negotiations between native title parties. However, CME does not consider the proposed Bill on amendments to the NTA delivers on these objectives. The introduction of the Bill in its current form would, instead of achieving its stated objectives, have the effect of creating delays and confusion. CME calls for further consultation on the proposed amendments to ensure the alignment of any amendments with the federal government s stated policy objectives. CME is concerned at the ongoing and uncoordinated modification of the NTA which introduces confusion and uncertainty to the native title system and calls for the government to undertake transparent and open consultation on long-term strategic improvements to the native title legislation and system. CME recommends the federal government ensures any amendments to the Native Title Act occur after consultation with affected stakeholders and that it will deliver on the policy objectives of creating a more equitable, sustainable and timely resolution of native title matters. 23

26 9. People Strategies The resources sector employs people with a wide range of skills, attributes and interests, with CME s People for the Future website featuring over 150 different occupations. Unprecedented growth in the resources industry over the last decade has contributed to increased workforce diversification. A key issue is the risk of ongoing skills shortages impacting on productivity and international competitiveness, due to a limited pool of local skilled labour, especially in occupations requiring a background in science and engineering. To address these issues, CME advocates a three-pillar approach to ensuring that the resources sector has access to appropriately skilled people. This approach can be summarised as follows: Education and Training Educating and training school leavers Up-skilling the existing workforce Training as an entry pathway for new workers Diversify the workforce Women Aboriginal Australians Mature aged workers Migration Interstate International Temporary migration Permanent migration Education and Training Reforms - Skills It is most likely that peak employment numbers for direct resources sector employment have occurred in Overall employment numbers are likely to level out as we transition as a sector from construction into operations. With this transition brings further opportunities for skills development. A highly skilled, productive and adaptive workforce is necessary to ensure that Western Australia s trade-exposed resources sector can remain competitive and resilient in a global economy. Importantly, the transition from construction into operations will also bring a change in the occupational and skills mix of Western Australia s resources sector. For a considerable period of time, publicly funded vocational education and training has largely failed to meet the needs of the resources sector. CME advocates for thorough change to the regulation of vocational education and training providers, through a reformed set of quality arrangements for the vocational education and training system. Vocational education and training is premised on the acquisition of particular skills that have a direct employment outcome. CME considers strong collaborative and partnership arrangements between industry, government and other key stakeholders provide a mechanism through which quality training outcomes can be achieved. The National Workforce Development Fund is an example of a funding mechanism where industry partners with training providers to deliver skill outcomes employers demand and the broader economy needs. Workforce Inclusion The resources sector in Western Australia implements strategies that increase workforce participation in the industry. Key targets for the sector are the employment of previously under-represented groups such as Indigenous Australians and women. Results of the 2012 CME Diversity in the Western Australian Resources Sector Survey show indigenous Australians make up 4.2 per cent of the Western Australia resources sector workforce. This is a strong result when compared to other industries, including the Western Australia public sector s 2.3 per cent. There are a raft of programs, both industry and government, that are proving successful in attracting and retaining an Indigenous workforce, such as work-readiness and pre-employment programs. Industry s key concern is that the multiplicity of agencies involved at both the state and federal 24

27 government levels may be hindering co-operation with industry to ensure further workforce participation. Indigenous training programs must be linked to real jobs. Another industry imperative is to increase gender diversity in the resources sector. CME s diversity survey found the number of women employed in the Western Australia resources sector has grown in the period from 19 per cent to 22 per cent of the total workforce. CME members are facilitating initiatives within industry aimed at improving this figure. There is significant research showing strong links between women in senior roles and increases in company performance. The Western Australian resources industry is implementing programs to improve its performance in this field and supports government programs that will assist to redress the balance of women in leadership roles and other non-traditional roles. CME recommends government prioritises the development and implementation of programs that are adequately resourced and well co-ordinated with industry to strengthen workforce diversity, including programs that focus on: the promotion of women into non-traditional industries and into senior management and leadership roles; and the development of foundation skills in Indigenous communities to ensure greater number of Indigenous Australians are work-ready. Education Policy Ensuring school leavers are equipped to take on careers in the resources industry requires a rethink in the design of the curriculum framework for senior school years. The alarming decrease in uptake of science, technology, engineering and mathematics (STEM) subjects at high school level is of great concern to the resources sector. Industry supports a curriculum that encourages students to enrol in STEM subjects, while ensuring they get the breadth of education required to produce a well-rounded school leaver. The ability of the higher education sector to produce graduates in the professional disciplines required to staff the resources industry into the future, particularly focused on STEM, has not been helped by regressive government policy and recent budget announcements that are unfavourable to higher education. The Minerals Council of Australia has released research showing that on current trends, Australia will not be able to produce sufficient geologists, mining engineers or metallurgists to meet immediate and future project needs. The research also highlights graduates in geoscience between 2010 and 2015 are forecast to meet less than 20 per cent of new and replacement demand and for mining engineering the figure is 40 per cent 16. Given the significant economic and social benefits derived by all Australians from the success of the resources industry, it is vital the government recognise geology, petroleum engineering, mining engineering and metallurgy as disciplines of national importance and resource them appropriately. CME is keen to see the government pursue ongoing reform of the education system to ensure future school leavers and tertiary graduates have the skills and attributes that will markedly increase the pool of skilled labour needed by the industry to increase productivity through innovation and thus remain internationally competitive. CME recommends a national overarching curriculum framework be designed with consultation from industry to ensure future skill requirements are adequately addressed. 16 Minerals Council of Australia, Policy Brief 2012/4 Workforce Skills Education and Training. 25

28 Skilled Migration The demand and supply of suitably qualified personnel in Western Australia has created a skilled labour market that is tight, competitive and reliant upon flexibility and adaptability. The resources sector places a high priority on, and invests heavily in education and training initiatives and improving workforce diversity with more women and Indigenous employees. Indeed, the resources sector in Australia spent just over $1.1 billion on training in the financial year to 30 June 2012, equivalent to 5.5 per cent of total payroll. 98 per cent of this training was directly industry funded. Training initiatives currently underway will assist the sector greatly in developing a workforce in the medium and long term. Due to current challenges in accessing skilled labour in the local market, there is a need for a flexible and responsive skilled migration program. The resources industry is a relatively small user of the 457 visa scheme (3.4 per cent of the national mining workforce), however it is used to fill genuine skills needs that industry experiences in the development and operation of key projects. Recent proposed changes to the skilled migration program are of great concern to CME. It risks adding further administrative burden to industry that will potentially add to delays without any clear benefit. The proposed imposition of labour market testing will add further red tape to an already overly regulated system. CME s priority is to ensure 457 visas remain a flexible and timely response to skills shortages, without being an administrative burden the resources sector must be able to meet specific skilled labour needs in a timely manner. CME urges government to ensure the 457 visa scheme is fair, flexible and free of unnecessary red tape. CME does not support extending existing labour market testing for 457 visa applications. FIFO Along with investing in skills and training, increasing workforce diversity and a flexible skilled migration program, fly-in fly-out employment arrangements (FIFO) play an important role in addressing current and future skill needs in the resource sector. It is estimated 55 per cent of the resources workforce is employed on FIFO arrangements. FIFO employment has become a way of life for more Western Australians, not just those in the resource sector. At the most basic level, FIFO is about providing choice for workers. Unfortunately there has been much uninformed negative commentary around the practice. While critical to the resources industry, FIFO has also been shown to be good for the regions and host communities. A recent KPMG report found that in the mining regions studied, standards of living have generally increased among residential populations with residents reporting higher average incomes, educational attainment and full-time employment levels than those in non-mining regions. CME is concerned some policy proposals put forward by the February 2013 House of Representatives Committee on Regional Australia s report into FIFO could have unintended detrimental consequences to industry and communities in Australia. Of concern to industry is any consideration of amendments to fringe benefits tax provisions which would potentially significantly increase the costs of this flexible work practice of choice. CME recommends any policies relating to FIFO be ground in evidence-based research which allows for a greater understanding of this important and growing work practice. 26

29 10. Occupational Safety and Health National harmonisation of occupational safety and health legislation CME supports the broad principle of national harmonisation of Workplace Health and Safety (WHS) laws, but it also argues for the continuation of state mining specific laws which are consistent with, but do not duplicate, the national general WHS laws. Best practice safety regulation is easily understood, simple to administer and flexible enough to be adapted to different working environments. Duplication, prescription or complexity increases administrative burden without improving safety. A harmonised scheme provides potential benefits including consistent obligations for multi-jurisdiction employers, cost savings and a single system for workplace management of safety. However, CME believes these benefits can be quickly eroded by hasty drafting which can result in flawed legislation imposing onerous obligations. Western Australia must ensure the best elements of the proposed laws are retained while removing duplication, complexity and inefficiencies to extract maximum benefits from the changes. Instead of streamlining the number of requirements, the proposed model Work Health and Safety Act (Cth) has created a complex and bureaucratic process to manage health and safety. This increased complexity and prescription will lead to deterioration in safety as employers and managers spend time trying to interpret the legislation at the expense of activities which make their workplaces safer. The model WHS Act appears to have replicated parts of the Fair Work Act 2009 (Cth), creating the potential for industrial issues to be progressed under the auspices of safety. Creating an industrial relations focus in the model WHS Act increases the potential for frivolous, vexatious or manufactured health and safety concerns. There is considerable evidence one of the impediments to effective consultation and productive WHS outcomes is the profound lack of trust driven by industrial issues that may still exist between management and the workforce. The potential to dilute or damage a safety culture is acute when the legislation has been designed to support industrial agendas. CME believes direct consultation between employers and employees is an essential component of workplace health and safety. The involvement of third parties can turn this into an adversarial process creating additional burdens on industry. The proposed legislative framework does not encourage employers to share remedies where WHS laws may have been breached or harm has occurred. An educative approach to WHS would result in greater WHS improvements by creating working relationships between inspectors and businesses, whereby businesses may be more inclined to contact their peers and inspectors for assistance or advice if a problem arises. CME believes punitive measures subvert the sharing of information. Corrective measures taken after an accident or incidents should be able to be disseminated without fear of prosecution. WHS management systems as a result of the increased legislative requirements will require a significant body of work to identify the gaps and review existing procedures and protocols. Each process then needs to be allocated to a responsible person and communicated, in some cases resulting in the retraining of all the employees. The costs will be significant. CME was disappointed with the lack of rigor in the Federal Regulatory Impact Statement and, contrary to government s estimate of projected savings, believes the cost burden will be significant. CME supports national harmonisation of OHS laws in principle, and acknowledging the delays encountered in the harmonisation process, recommends the federal government recommits to finalising the development of supporting model codes of practice and guidelines, embracing principles of best practice, that can be adopted by state jurisdictions. CME does not support industrial relations issues being dealt with in safety legislation. 27

30 Images courtesy of Rio Tinto Iron Ore and Woodside Energy Ltd