**Check against delivery
Ladies and gentlemen - let me first say thank you for the opportunity to be here today and I appreciate such a large attendance at the commencement of the Easter holidays.
Wearing my hat as Minister for Tourism, I hope you are all planning to support the Government's "No Leave No Life" campaign - take a break, have a holiday at home, and encourage your employees to do the same.
For the first time since World War II, tourism globally is set to decline in 2009.
Domestic tourism is forecast to remain flat this year and international visitor numbers to Australia are likely to drop by more than 4 per cent.
So, while the global financial crisis has hit the Australian resources sector hard, the thousands of small businesses and half a million workers in our tourism sector are also doing it tough.
Australians have about $33 billion locked up in accrued leave - unlocking part of that for the domestic tourism industry will kick our economy along and help keep tourism-based businesses and jobs safe.
It will also reduce accrued leave liabilities in your industry and ensure leave is taken during the slowdown so all hands are on deck to prepare for recovery.
The resources and energy sector has long been the engine room of the Australian economy and there is no doubt it will make a major contribution to turning things around again.
Those companies which have the foresight to prepare now for the inevitable return to global growth will be in the best position to reap the rewards of the future.
That growth will occur in China, India, the Middle East and other emerging economies as they pursue a modernisation agenda - improving their economic infrastructure and providing the platform for the necessary economic activity to lift hundreds of millions of people out of poverty.
It will occur in our more traditional OECD markets - Japan, Korea, the US and the EU - as there is a rebalancing of debt and equity, together with a healthier approach to risk, reward, real productivity and real value creation.
Therefore, we have to keep our eyes on the longer term and prepare to meet the resource and energy demands of the future, particularly on our doorstep in the Asia Pacific and the Indian rim.
When that demand growth kicks in, Australian businesses have to emerge stronger, tougher and more competitive.
Preparing for economic recovery is also the job of the Australian Government.
It means driving forward with relevant micro-economic reform:
- Taxation reform, through the Henry Review, including consideration of exploration incentives such as a flow through shares scheme and profit-based resource taxes
- Streamlining approval processes, for example, through the Hawke Review of environmental approval processes and the Productivity Commission's review of upstream petroleum regulation
- Nationally consistent safety regulation, in particular, implementation of the National Mine Safety Framework
- Market reform in sectors such as energy and water
- The introduction of climate change policies that do not disadvantage Australia's global competitiveness but prepare us for a carbon-constrained world
Preparing for recovery means lifting investment in our productive capacity to avoid the export bottlenecks and skills shortages of the recent boom - we do not want to be caught short a second time.
And it means continuing to pursue trade and investment liberalisation - working towards open, transparent and properly governed global markets.
This is no time for a retreat to protectionism or xenophobia.
It is the right time to focus on improving our productivity and international competitiveness, and making the most of Australia's competitive advantages and natural assets.
Productivity growth has been in decline since the 1990s, grinding to a halt in 2007, the last year of the Howard Government.
Preparing for recovery means reversing that decline.
The role of the Australian Government is to work with State and Territory Governments to deliver micro-economic reforms that get rid of red tape, reduce the cost of regulation, simplify the tax system, and get the balance right between taxation of production and consumption, investment and savings.
It is to work with the international community to strengthen financial institutions and governance, to promote open, transparent global markets, and to strive for global agreement on climate change policy.
And it is to invest in our productive capacity for the future - in the education, skills and training of our people, in innovation, and in economic infrastructure such as roads, rail, ports and telecommunications.
In this context, I know there are some issues of particular interest to all of you.
Firstly, exploration incentives and resource taxation.
There is nothing more important to the resources industry and Australia's future wealth than to keep the exploration sector strong and build a pipeline of project development opportunities for the next generation.
We went to the election with a commitment to a flow through shares scheme and I will work hard to deliver that commitment in this Parliament, as stated by the Prime Minister at the Minerals Council dinner held in Canberra last year.
It is quite properly the subject of consideration through the Henry Review, along with other exploration incentives and more efficient resource taxation.
The Henry Review has flagged it will consider a resource charging regime to improve the risk-reward balance for resource developments and remove inefficiencies and inconsistencies across the Federation.
With industry facing a range of different royalty regimes that are very important to State Government revenues, there is no doubt reform will be an enormous challenge, but that is not a reason to shy away from it.
My Department is working very closely with the Treasury on these issues and will continue to do so throughout 2009.
Secondly, climate change policies.
Let me say from the outset - we are committed to getting climate change policy right for both the environment and the economy.
There is a genuine consultation process under way with respect to the exposure draft of legislation for the Carbon Pollution Reduction Scheme and the same process will apply to the Renewable Energy Target.
We have set emission reduction targets that are achievable and take into account the level of international agreement that is reached - and therefore - the impact of targets on our international competitiveness.
Importantly, we are making major investments in accelerating the technology that will help industry reduce greenhouse emissions at least cost.
As the world moves to a carbon-constrained future, we want Australian businesses to be at the leading edge of competitiveness - and that will depend on our success in the race to develop and deploy cost-effective, low emission technologies across the economy.
That is why we have invested $500 million in the National Low Emissions Coal Initiative, up to $100 million a year for the Global Carbon Capture and Storage Initiative, and $650 million for renewable and other low emission energy technologies.
We have also introduced the world's first regulatory framework for greenhouse gas storage and released 10 areas offshore Australia for storage assessment purposes.
Thirdly, let me turn to trade and investment liberalisation.
Mature trading relationships also involve investment partnerships.
Interest in Australian resources is predictably high as developing nations seek secure, long-term supply of the commodities required to build their infrastructure and modernise their societies and economies.
China's interest today is no different from Japan's in previous decades.
What we must do, however, is get the investment frameworks right for both countries.
Because, like our long friendship - and trade and investment relationship - with Japan, we will be part of China's development for the long haul.
The Australian Government encourages foreign investment and welcomes proposals when they are in our national interest, and when they facilitate the development of Australia's resources for the benefit of Australians.
Last year the Treasurer released a set of principles explaining how we apply our national interest test to investments by foreign sovereign entities.
This was not a change of policy.
There has always been a national interest test and well-established rules governing company takeovers and mergers, and there has always been the recognition that each proposal is different and must be tested on its merits against national interest criteria.
This was recently demonstrated when the Treasurer consented, with appropriate conditions and undertakings, to Hunan Valin's proposal to purchase 17.55 per cent of Fortescue Metals Group.
Conversely, the Minmetals proposal for Oz Minerals could not be approved if it included the Prominent Hill mine, located in the Woomera Prohibited Area which makes a unique and sensitive contribution to Australia's national defence.
These decisions show that each foreign investment proposal in Australia's resources sector is properly assessed on a case-by-case basis.
And they confirm Australia's commitment to open and transparent trade and investment frameworks, and our willingness to work with our trade and investment partners to get win-win outcomes.
Let me say that we have also built our own strong Australian resource companies that operate around the world - and we should be very proud of that.
Just as we promote foreign investment to develop Australian resources and long-term trading partnerships, we want to continue to build strong and robust Australian companies, underpinned by sound governance - Australian companies that can not only play a major and strategic role in nation-building at home, but also in the world economy.
That is why Australia will continue to work in the international community for trade and investment liberalisation, for open, transparent and properly governed global markets - and against a retreat to isolationism, xenophobia and protectionism.
In closing, let me make the observation that the Commonwealth has a greater direct responsibility for development of offshore petroleum than for any other resource.
It's a responsibility I take very seriously, particularly at a time when we are all looking to pull through major investments that can sustain jobs and exports, and provide revenue.
Developing Australia's offshore gas resources for LNG - underpinned by long-term supply contracts into Japan, China, Korea and Taiwan - is one of our most prospective opportunities to buffer the economy in the near-term and kick-start a new boom in the medium to long-term.
Take Woodside's Pluto LNG project in the Pilbara - Australia's largest ever investment project at around A$12 billion, currently 50 per cent complete, due for start-up at the end of 2010 and with good long-term export contracts in place with Japan to underpin its success.
With about 2000 on site today, the construction workforce will reach up to 4000 by year end, providing opportunities for some of those affected by the slowdown in other parts of the resources sector.
The project is supporting a further 3900 jobs and a spend of nearly A$3 billion across the country this year, helping to shield the economy from the full impact of the global financial crisis.
Later this year, Chevron, Shell and ExxonMobil expect to make a final investment decision on the Gorgon LNG project, also in the Pilbara.
And the race is also on to develop Inpex's Ichthys in Darwin and various coal seam methane-based LNG projects in Queensland.
Recent reports indicate the Gorgon project alone could involve total investment in the order of A$50 billion - that's more than the recent Australian Government stimulus package.
The Gorgon project would be a huge boost to the Australian economy at a time when it is needed most and I am committed to working with the joint venture partners and the WA Government to facilitate its development.
Like other major LNG projects, it will have the advantage of long-term supply contracts that guarantee exports, jobs, and revenue for the long haul, and it will underpin much-needed new domestic gas supply.
Right now, the Australian Government is also working with Woodside, the WA Government and the Kimberley Land Council to establish a site for a new regional LNG hub in the Kimberley to develop Browse Basin gas reserves.
I hope that next week will see the beginning of a landmark partnership between Woodside, the WA Government, the Kimberley Land Council and Traditional Owners to bring this goal closer to reality.
Because this is a project of vital importance for the future economic and social empowerment of Indigenous communities in the Kimberley.
Equally, it is a project of national and state significance - that would generate jobs, exports, revenue and economic growth for the benefit of all Australians.
During 2007, Woodside signed Key Terms Agreements, including price, with PetroChina and CPC Corporation, Taiwan, each for the supply of 2-3 million tonnes of LNG over 15 to 20 years from Browse - so marketing arrangements are well advanced.
This is an opportunity there for the taking, too important to let slip through our hands.
However, despite all the potential of this industry - with almost 160 trillion cubic feet of undeveloped gas reserves off northwest Australia and with ready markets in Asia for this clean energy source - we cannot underestimate the difficulty of bringing these highly capital-intensive projects to fruition.
Even though Pluto will increase Australia's LNG exports by 25 per cent, this will simply enable Australia to maintain a global market share of 8-9 per cent.
After 25 years in the LNG business, the question needs to be asked: how can we do better?
Particularly given current challenges:
- The recent slowdown in global demand and prices
- New supply competition from Qatar, Indonesia, Russia, Yemen and Nigeria, and more coming from Algeria, Angola, Peru and Libya
- Delayed demand in the US as domestic supply options have grown
Many of our international competitors in the LNG industry have benefited considerably from the direct stakeholdings or investment policies of host governments.
Investment timelines are often driven by national oil and gas companies, who have a stake in some 80 per cent of the world's LNG production.
Despite this advantage which some projects enjoy, the Australian Government recognises that the key driver of our resource development must remain the operation of an efficient and transparent market.
Australia's Woodside is one of the few independent companies with an important direct stake in the global LNG industry.
In fact, the Pluto project will make it the largest non-national oil company in the global LNG market and I am pleased to say it is focussed on growing right here in Australia.
Other Australian companies such as BHPBilliton, Santos, Origin and Arrow also have an interest in Australian LNG projects and future proposals.
At the same, our industry benefits from the significant participation of international oil and gas companies - ExxonMobil, BP, Shell, Chevron and ConocoPhillips - with vital capital and know-how.
Likewise, customer investment is important - for example, Mitsui, Mitsubishi, Osaka and Tokyo Gas, CNOOC, Inpex, and others.
The challenge for the Australian Government is to maximise the growth and competitiveness of our LNG industry, provide the right policy settings to increase our share of investment in it, and unlock the wealth of our gas resources for the benefit of the nation.
This is one of the key issues that will be addressed in the Energy White Paper process currently under way within my Department.
I want to ensure the Energy White Paper takes a long-term perspective and provides companies and governments with the information and policy settings needed to promote investment that will:
- Enhance our own energy security
- Increase Australia's productive capacity and exports
- Ensure our ongoing international competitiveness, and
- Transition us to a cleaner energy future
Looking at our regulatory framework is a good place to start.
The Productivity Commission's final report examining the Regulatory Burden on the Upstream Petroleum (Oil and Gas) Sector will soon be arriving on my desk.
In its draft report, the Commission particularly noted the need to expedite approvals processes and reduce unnecessary delays.
The Commission also noted the requirement for State and Commonwealth legislation to be synchronised and streamlined, and the compelling case to establish a single offshore regulator and lead agencies (at the State level) to coordinate petroleum development approvals.
Implementing some of these recommendations will provide a test of our COAG structures but, with the support of industry and cooperation between jurisdictions, I am confident that we can achieve worthwhile reform in this area.
I also recognise that our regulatory framework was designed in an era of smaller-scale oil and gas projects and less complex markets.
Multi-train LNG developments could require more than 20 trillion cubic feet of gas.
That means recognising a number of gas fields may need to be set aside for sequential development over the 30 or 40 year life of a project.
Current title arrangements for retention leases involve five-year reviews of the commerciality of individual gas fields.
On the one hand, this can lead to potential uncertainty of tenure for the sequential fields that may be required for a large LNG project.
On the other, it can lead to the frustration of domestic gas customers or LNG infrastructure owners who require gas and believe individual fields could be commercial earlier or more profitable if developed for other purposes.
Both perspectives have merit and Governments - State and Federal - must consider the arguments very carefully when determining commerciality.
We do not want to strand gas resources indefinitely, particularly when there are alternative economic markets.
Nor do we want to strand sunk investments in LNG and domestic gas infrastructure that still have major economic potential.
Equally we do not want to impede greenfield investments in LNG when they are in the best interests of their proponents and the nation.
Improving the administration of the retention lease system is a further area where I believe we can make significant reforms and improve certainty and clarity for all industry participants.
I see a role for Government in planning for orderly and optimal industry development without stifling the innovation and entrepreneurship that a well-functioning market encourages.
And I will be working closely with industry over the coming year to ensure that Australia maintains and grows its market share of global LNG investment and trade.
Ladies and gentlemen, preparing for a resources-led economic recovery is high on my agenda, and I'm sure, on yours.
It is essential that we work together and move forward with the micro-economic reforms that will help Australian businesses improve their productivity and international competitiveness, and emerge from the global financial crisis stronger.
To this end, I will be working with industry over the coming months to ensure the Australian resources sector is well-placed to reap the benefits of the inevitable return to demand growth, particularly in the developing economies on our doorstep in Asia.
Thank you.