Beijing
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Introduction
It is a great pleasure to be back in China, one of Australia’s most important trading partners.
Today I want to emphasise the immense resource and energy opportunities in Australia and assure you that Australia is, as it always has been, open to foreign investment.
Investment landscape
First, let’s run through some of the evidence of investment and growth in Australia’s resource sector.
Investment in Australia’s energy and mineral projects is at record levels.
Planned capital investment in Australia’s major energy and mineral projects stands at $173 billion.
Last year, approved investment from China in Australia reached $16 billion.
In 2010, China was Australia’s third-largest investor, and three-quarters of that investment was in mineral resources.
There are currently 94 advanced projects, from offshore LNG to mining, and coal seam gas.
Records keep tumbling, and announcements keep coming at an incredible rate.
Even though Australia’s resources sector is growing so quickly, we have a thirst for even more investment.
Only last month, BHP Billiton approved capital for the first phase of the $30 billion Olympic Dam expansion.
This expansion aims to develop a new copper, uranium and gold mine.
Current estimates are that the Olympic Dam open pit mine will be three kilometres wide and one kilometre deep. It will take five years just to remove the overburden.
Olympic Dam alone has the potential to raise Australian copper production from 180,000 to around 750,000 tonnes a year.
The potential
We estimate Australia has more than 150 trillion cubic feet in demonstrated and inferred coal seam gas resources.
This is almost equal to the offshore conventional gas reserves of western and northern Australia on which our LNG industry was founded.
Already, coal seam gas accounts for nearly a third of domestic gas production in our eastern states, and the potential for LNG exports from this resource is enormous.
After all, LNG can produce the same amount of energy as coal but with up to 55 per cent less carbon dioxide equivalent per megawatt hour than coal-fired generation.
So LNG is an essential part of a global solution to reduce greenhouse-gas emissions while protecting jobs.
China is already the world’s fourth-largest gas consumer.
Gas consumption here has been rising by well over 10 per cent a year on average over the past decade.
I welcome the new infrastructure to receive imports from places like Australia to meet China’s energy needs, including the new or expanded re-gasification terminals in Jiangsu and elsewhere.
The state of Queensland offers a good illustration of the pace of activity in the Australian resources industry.
The Santos LNG project at Gladstone is worth $16 billion.
BG’s project on Curtis Island is worth nearly as much.
Sinopec, meanwhile, has a stake in another huge LNG project at Gladstone.
And more than 50 mining projects are being considered for the Bowen Basin, worth $25 billion between them.
In the past 12 months, $4.7 billion worth of projects have started construction in just that one basin.
In the June quarter, Queensland recorded the largest rise in mineral exploration expenditure of any state in Australia.
Expenditure on coal exploration rose by more than 80 per cent and, again, the largest rise was in Queensland.
Queensland is home to much of the work being done to extract coal seam gas, with huge economic opportunities.
Infrastructure and skills
Infrastructure and skills are vital to Australia’s ability to develop our resource and energy sources.
There is an additional 111 million tonnes a year of new coal terminal port capacity coming on line by 2015.
This will be on top of the 391 million tonnes of export capacity Australia already utilises.
In New South Wales, a Government-owned corporation that leases and operates the Hunter Valley coal rail system is investing $1.4 billion in that network.
We are also investing six billion dollars in a regional infrastructure fund designed to improve infrastructure relevant to our mining industry.
And we are crafting a National Ports Strategy and a National Land Freight Strategy to give the various infrastructure improvements more cohesion.
At the same time, we are conscious of the need to attract many more skilled workers into the resources industry.
Two years ago it was estimated that Australia would need a further 50,000 skilled workers over the next seven years.
The growth has gone well beyond those calculations.
We now estimate we’ll need a further 70,000 workers for major resources projects over the next five years.
The Gorgon and other LNG projects in western and northern Australia, by themselves will need 20,000 construction workers.
In response, co-funding for National Apprenticeships will see 1,000 workers gain full trade qualifications.
Increasing skilled migration is another part of the response.
All resources projects are eligible for fast-track processing of 457 temporary work visas.
And new Enterprise Migration Agreements – available for projects worth more than $2 billion and a peak construction workforce in excess of 1,500 - will improve access to overseas labour for projects that cannot find enough skilled workers from within Australia.
Policy settings
As the mining boom exceeds expectations, it’s all the more important that Australia maintains a sound policy framework that enables the industry to expand to meet world demand.
Stable government, low sovereign risk, transparent laws, incentives to explore and develop resources – all these things make Australia an attractive investment destination.
Much has been said about the new Minerals Resource Rent Tax.
It applies to the mining of iron ore and coal, and the extension of the existing Petroleum Resource Rent Tax to all onshore and offshore oil and gas production.
Since we announced it, resource companies have signed off on billions of dollars worth of new spending.
Of the 42 project announcements we’ve heard since July last year, 20 of them would be liable for the tax.
And one-in-four announcements were for projects valued at more than $1 billion.
The MRRT is a well crafted and balanced tax which does not discourage investment while the money raised ensures that we maximise the benefit of our resource base for future generations.
The Tax does not discourage investment because profits consistent with ordinary commercial rates of return do not attract the tax – only that part of profit that is greater than normal for the resources sector will be taxed under the MRRT.
Out of revenue generated by the MRRT around $6 billion will go into the Government’s Regional Infrastructure Fund.
This fund, among other things, will help pay for some of the infrastructure necessary to support growth of Australia’s mining operations.
Balanced policy equally applies to Australia’s foreign investment framework.
The Australian Government is committed to open and transparent frameworks for trade and investment.
All foreign governments and their related entities need prior approval for direct investment, no matter how valuable the project.
And all proposals are reviewed on a case-by-case basis, no matter who submits them.
All proposals are judged in the context of the national interest, and I cannot think of any nation that does not apply this test, including China.
Australia has always welcomed foreign investment.
In fact, between 2007 and 2010, Australia approved Chinese investment approvals that topped $50 billion.
So despite what you may have seen in the media recently, we continue to welcome foreign investment, including Chinese investment.
Mining services
Finally, I want to make the case for a type of investment that often gets overlooked, especially here in China.
Australia is a world leader in mining technology services.
And yet China has only a five per cent share of Australia’s mining technology services exports.
Barely one-in-20 Australian companies in this sector have an office in China.
Through expertise in mining technology services, Australia can make a positive contribution to Chinese industry.
We have the capacity to increase the safety, efficiency and environmental management of Chinese mines.
I hope to see greater cooperation in this important area.
Conclusion
These are exciting times for trade between China and Australia, with fresh opportunities for investment.
I thank the Oriental Mining Club for the valuable role you play in improving living standards for all our people.