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Australian Coal Conference 1992



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A ustralian Coal C on fere nce 1892

Keynote address

By

The H on Sim on C rean MP

M inister fo r P rim ary Ind ustrie s and Energy

10 May 1992

MR CHAIRMAN, DISTINGUISHED GUESTS, VISITORS TO AUSTRALIA, LADIES AND

GENTLEMEN.

THANK YOU FOR YOUR WELCOME TODAY TO THIS THE FIRST, AUSTRALIAN

COAL CONFERENCE SINCE I TOOK OVER RESPONSIBILITY FOR COAL IN THE

COMMONWEALTH GOVERNMENT LAST JUNE.

LET ME ALSO ADD MY WELCOME TO THAT OF THE PRIME MINISTER, TO THE

MANY OVERSEAS VISITORS TO THE CONFERENCE, PARTICULARLY THE

REPRESENTATIVES OF OUR COAL CUSTOMERS, AND THE DELEGATES HERE

FOR THE UNECE CONFERENCE IN SYDNEY NEXT WEEK.

I CONGRATULATE THE AUSTRALIAN COAL ASSOCIATION FOR THE QUALITY OF

THE AGENDA FOR THE CONFERENCE. BY THE TIME YOU CONCLUDE ON

1 COMMONWEALTH

PARLIAMENTARY LIBRARY

- MICAH

THURSDAY, ALL OF THE KEY ISSUES CONFRONTING THE INDUSTRY, AND IT'S

RELATIONSHIP WITH THE COMMUNITY WILL HAVE BEEN COMPREHENSIVELY

CANVASSED,

INTRODUCTION

THE COAL INDUSTRY IN AUSTRALIA IS WITHOUT DOUBT ONE OF THE MOST

EFFICIENT IN THE WORLD. THIS IS AMPLY DEMONSTRATED BY THE FACT THAT

THE AUSTRALIAN COAL INDUSTRY IS THE WORLDS LARGEST EXPORTER AND IS

AUSTRALIA'S SINGLE LARGEST EXPORT EARNER.

WE CAN NOT HOWEVER, AFFORD TO BE COMPLACENT, OR TO STAND STILL, IN

THE FACE OF STRONG WORLD WIDE COMPETITION AND A CHANGING MARKET

ENVIRONMENT.

IT IS MY PURPOSE TODAY TO OUTLINE TO YOU MY VIEWS ON WHAT IS

REQUIRED FROM ALL PARTIES TO MEET THE CHALLENGES OF THE FUTURE.

BY ALL PARTIES 1 MEAN GOVERNMENTS, INDUSTRY, THE WORKFORCE AND THE

BUYERS.

IF WE CAN ESTABLISH A COMMON UNDERSTANDING ON THE ISSUES FOR THE

FUTURE, THEN I AM CONFIDENTTHATTHE NECESSARY PARTNERSHIPS CAN BE

ESTABLISHED TO DEVELOP THIS CRUCIAL ENERGY SOURCE AS A SUSTAINABLE

ENERGY SOURCE BOTH ECONOMICALLY AND ECOLOGICALLY FOR THE LONG

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TERM BENEFIT NOT ONLY OF AUSTRALIA, BUT FOR THE WORLD COMMUNITY.

M ARKET OUTLOOK

THE RECENT STUDY UNDERTAKEN IN AUSTRALIA FOR THE AUSTRALIAN COAL

INDUSTRY COUNCIL CONFIRMS THE PROSPECTTHAT THE EXPORT MARKET FOR

THERMAL COALS WILL EXPAND SIGNIFICANTLY IN THE NEXT DECADE, FROM

LEVELS OF 175 MILLION TONNES TO 320 MILUON TONNES BY THE YEAR 2000.

THE AUSTRALIAN INDUSTRY IS WELL POISED TO PARTICIPATE COMPETITIVELY

IN THIS GROWTH.

THE OUTLOOK FOR COKING COAL IS FOR LESS GROWTH BUT THE QUALITY OF

AUSTRALIAN COAL IS SUCH THAT WE CAN SECURE AN INCREASED SHARE OF

THE MORE LIMITED GROWTH EXPECTED.

THE PROJECTIONS FOR THERMAL COALS ARE REASONABLY ROBUST, BEING

BASED ON SIGNIFICANT COMMITTED GENERATOR CAPACITY INVESTMENTS. TO

MEET THESE REQUIREMENTS SIGNIFICANT SUPPLY EXPANSION AND

THEREFORE INVESTMENT IN AUSTRALIA WILL BE ESSENTIAL

I FIRMLY BELIEVE THE GROWTH IN BOTH DEMAND AND SUPPLY CAN BE FULLY

ACHIEVED, BUT ONLY IF OUTSTANDING IMPEDIMENTS IN THE MARKETING AND

PRODUCTION PROCESSES ARE ADDRESSED.

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HERE IN AUSTRALIA THE GOVERNMENT IS ACTIVELY ADDRESSING THESE

CHALLENGES BUT IT WILL NEED EQUAL EFFORTS BY THE COMMERCIAL

PARTIES AT HOME AND OVERSEAS FOR US TO FULLY REALISE THE POTENTIAL

OF THIS IMPORTANT INDUSTRY. FOR A NUMBER OF REASONS THE OPTIMISTIC

OUTLOOK DOES NOT APPEAR TO BE MATCHED BY CONFIDENCE AT THE

INDUSTRY LEVEL, AND IT IS IMPORTANT FOR US ALL TO PLAY OUR PART IN

ADDRESSING THIS MATTER.

AUSTRALIAN POLICY DEVELOPMENTS

I HAVE EMPHASISED THE NEED TO ADDRESS BOTH INDUSTRY SPECIFIC AND

WIDER ECONOMIC IMPEDIMENTS IN AUSTRALIA

THE AUSTRALIAN GOVERNMENT HAS WORKED CLOSELY WITH BOTH UNION AND

EMPLOYER REPRESENTATIVES TO ESTABLISH THE BASIS AND FRAMEWORK FOR

ENHANCED PRODUCTIVITY AND COMPETITIVENESS.

WE HAVE ESTABLISHED A LOW INFLATION AND ACTIVE INVESTMENT INCENTIVE

ENVIRONMENT IN AUSTRALIA AROUND WHICH WE CAN ACHIEVE OUR GOALS

FOR COAL AND THE ECONOMY. BUT ALL INDUSTRY PARTIES MUST WORK

TOWARDS GROWTH OBJECTIVES WITH SUITABLE LONG TERM MARKET

COMMITMENTS AND INVESTMENT STRATEGIES.

IN THE COAL SECTOR THE RECENT GOVERNMENT COAL POLICY STATEMENT

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HAS AMPLY DEMONSTRATED THAT A CO-OPERATIVE APPROACH BETWEEN

GOVERNMENT AND INDUSTRY CAN RESULT IN SUBSTANTIAL NEW INVESTMENT

COMMITMENTS,

THE COAL EXPORT DUTY HAS BEEN A LONG STANDING CONCERN FOR THE

INDUSTRY WHICH EARUER GOVERNMENTS PROMISED BUT FAILED TO

ADDRESS. THROUGH A CONSTRUCTIVE EXCHANGE WITH AUSTRALIA'S MAJOR

EXPORT COMPANY, THIS GOVERNMENT HAS REMOVED THE COAL EXPORT

DUTY.

IN RETURN THE COMPANY HAS MADE SUBSTANTIAL COMMITMENTS ON

REHABILITATION, RESEARCH AND PROJECT INVESTMENT WITH EXPENDITURES

OF $248 MILLION OVER FIVE YEARS. PRODUCTION, EXPORTS, EMPLOYMENT

AND PROFITABILITY WILL ALL BENEFIT FROM THIS INITIATIVE.

SIMILARLY 1 HAVE AGREED TO SUSPEND THE COAL RESEARCH LEVY IN RETURN

FOR FINANCIAL AND OPERATIONAL COMMITMENTS BY THE INDUSTRY IN

MANAGING ITS OWN RESEARCH PROGRAMMES. WE HAVE UPDATED AND

RATIONALISED THE OPERATIONS OF THE JOINT COAL BOARD TO MEET THE

NEED OF THE NINETIES. WE HAVE ALSO ADDRESSED THE LEGITIMATE

CONCERNS OF THE EMPLOYEES BY ESTABLISHING NEW ARRANGEMENTS FOR

FUNDING COAUNDUSTRY LONG SERVICE LEAVE AND NEGOTIATING THE NEW

SUPERANNUATION ARRANGEMENT FOR THE NSW INDUSTRY.

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WIDER ECONOMIC REFORMS

THE AUSTRALIAN GOVERNMENT IS ALSO DEMONSTRATING ITS DETERMINATION

TO TACKLE THE BROADER ECONOMIC CHALLENGES FOR THE FUTURE.

WE ARE CONTINUING AN ORDERLY AND PHASED PUSH TOWARDS REDUCED

LEVELS OF PROTECTION IN ALL SECTORS OF THE ECONOMY. A MOVE WHICH

CLEARLY BENEFITS THE COAL INDUSTRY NOT JUST IN TERMS OF INPUT COSTS

BUT ALSO IN RELATION TO FURTHER PROCESSING AND DISTRIBUTION.

OUR INFLATION LEVELS IN AUSTRALIA TODAY ARE THE LOWEST FOR 30 YEARS

AND ARE BELOW THOSE OF OUR MAJOR TRADING PARTNERS, AND THE

PROCESS OF MICRO-ECONOMIC REFORM CONTINUES AT ALL STAGES IN THE

PRODUCTION CHAIN.

IT IS NOT ENOUGH TO BE COMPETITIVE AT THE MINE SITE IF WE LOSE THE

ADVANTAGES AT THE TRANSPORT, HANDLING AND PROCESSING STAGES. THE

RECENT IMPRESSIVE PERFORMANCE OF PORT WARATAH COAL SERVICES

ILLUSTRATES WHAT CAN BE ACHIEVED. COAL LOADED PER EMPLOYEE HAS

INCREASED FROM 40,000 TONNES IN 1989 T 0 140,000 TONNES IN 1991 AND THIS

PORT IS NOW ONE OF THE WORLD'S TOP PERFORMERS.

IN PURSUING THE TWIN OBJECTIVES OF MACRO AND MICRO ECONOMIC

REFORM NO GOVERNMENT HAS DONE MORE THAN THIS ONE. THE ACCORD

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HAS BROUGHT REAL WAGE RESTRAINT AND UNPRECEDENTED FALLS IN REAL

UNIT COSTS NOT SEEN SINCE THE LATE 19608. THIS PROCESS IS ONGOING

AND THROUGH ENTERPRISE BARGAINING AND WORKPLACE REFORM THERE

ARE MORE EFFICIENCY GAINS TO COME. WE ARE WITNESSING SIGNIFICANT

RESULTS. IT IS A PROCESS THAT WORKS.

AGAIN THE COAL INDUSTRY EXEMPLIFIES THIS PROGRESS. OUTPUT PER

EMPLOYEE HAS RISEN BY 90% OVER THE LAST 10 YEARS. THE LOST TIME DUE

TO INDUSTRIAL DISPUTES HAS FALLEN BY OVER 60% IN NSW AND QUEENSLAND

OVER THE LAST 2 YEARS.

THE PROCESS OF UNION AMALGAMATIONS AND AWARD RESTRUCTURING IN

THE COAL SECTOR IS LEADING TO A MUCH MORE PRODUCTIVE WORK PLACE.

NEW WORK MODEL AGREEMENTS PROVIDE A BASIS FOR CONFIDENCE IN THE

FUTURE.

MORE RECENTLY THE PRIME MINISTER'S ONE NATION STATEMENT

ILLUSTRATES THE CONTINUING PROCESS OF ECONOMIC REFORM. THESE

MEASURES INCLUDE:

• RELAXATION OF FOREIGN INVESTMENT GUIDE-LINES AND ABOLITION OF

THE 50% EQUITY REQUIREMENT IN NEW MINES.

■ A DEVELOPMENT ALLOWANCE OF 10% FOR CERTAIN PROJECTS

INVOLVING CAPITAL COSTS OF $50 MILLION OR MORE. THIS WILL ALSO

GIVE FURTHER IMPETUS TO OUR ECONOMIC REFORMS AND INVESTMENT

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■

INCENTIVES FOR SIZEABLE PROJECTS.

CHANGES IN DEPRECIATION PROVISIONS TO ENCOURAGE NEW

PROJECTS BY ALLOWING GREATER TAX WRITE-OFFS IN THE EARLY

STAGES OF DEVELOPMENT.

APART FROM THE COST OF CAPITAL REDUCTION TO INDUSTRY THE

DEVELOPMENT ALLOWANCE CAN ALSO BE USED TO DRIVE FURTHER THE

MICRO-ECONOMIC REFORM AGENDA.

INDUSTRY CHALLENGES

DESPITE THESE INITIATIVES AND ONGOING EFFORTS, THE LARGE POTENTIAL

OF THIS COAL SECTOR WILL BE IMPEDED IF THE SUPPLIERS AND BUYERS IN

THE MARKET DO NOT ACT TO RESTORE REASONABLE RETURNS AND

CONFIDENCE.

IT IS COMMON KNOWLEDGE THAT WHILE THE POOR PRICES FOR COAL IN THE

LAST TWO YEARS ARE A REFLECTION OF IMMEDIATE MARKET PRESSURES,

THEY DO NOT ENGENDER A STABLE ENVIRONMENT FOR THE FUTURE. IT IS IN

THE INTERESTS OF BOTH THE PRODUCERS AND USERS THAT THE STABILITY

NECESSARY FOR PRODUCTIVE INVESTMENT AND EXPANSION BE ESTABLISHED

WITH SUITABLE LONG TERM COMMITMENTS BY ALL PARTICIPANTS IN THE

INDUSTRY.

SIMILARLY THE REAL EFFORTS BY OUR COAL UNIONS TO REALISE THE

S

POTENTIAL OF RECENT MARKET FORECASTS DESERVES RECOGNITION WITH

GREATER CERTAINTY AND SECURITY FOR THE FUTURE. WITH RECENT AND

PROSPECTIVE MINE CLOSURES DUE TO INADEQUATE MINE RETURNS, IT IS

DIFFICULT TO ACHIEVE EMPLOYEE CONFIDENCE IN THE PROSPECTS FOR

FUTURE EMPLOYMENT AND REFORM.

I HAVE SPOKEN WITH UNION REPRESENTATIVES TODAY AND THE GOVERNMENT

IS PREPARED TO ADDRESS THEIR CONCERNS OVER LABOUR ADJUSTMENT IN

THE INDUSTRY REALISTICALLY AND WITH UNDERSTANDING. I ASK THE WIDER

INDUSTRY TO DO LIKEWISE AND TO RECOGNISE THE REAL NEED FOR SUITABLE

TRAINING AND DEVELOPMENT PROVISIONS TO FACILITATE MOBILITY IN THE

COAL SECTOR AND THE RETENTION AND IMPROVEMENT OF THE SKILLS OF

OUR WORKFORCE.

WHILE MARKET ISSUES AND PRICES REMAIN MATTERS LARGELY FOR THE

COMMERCIAL PARTIES, I WILL CONTINUE TO STRESS THE IMPORTANCE OF

THESE MATTERS TOGETHER WITH IMPROVED MARKET TRANSPARENCY IN

RELEVANT BILATERAL AND MULTILATERAL FORUMS INVOLVING MINISTERIAL

DIALOGUE. THIS INCLUDES DISCUSSIONS WITH OUR CUSTOMER COUNTRIES

AND THOSE WHICH CONTINUE TO PRACTICE PROTECTION IN THE COAL

MARKET.

CO AL AND THE ENVIRONMENT

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IT IS ESSENTIAL TO ADDRESS THE ENVIRONMENTAL CHALLENGES TO COAL

GIVEN THEIR HIGH NATIONAL AND INTERNATIONAL IMPORTANCE,

THE AUSTRALIAN GOVERNMENT WILL NOT ALLOW THE INTERESTS OF

AUSTRALIA TO BE DAMAGED BY MEASURES WHICH HAVE NET ADVERSE

ECONOMIC IMPACTS, PARTICULARLY IN THE ABSENCE OF SIMILAR ACTION BY

MAJOR GREENHOUSE GAS PRODUCING COUNTRIES AND OUR COMPETITORS.

OUR ECONOMIC REQUIREMENTS ARE KNOWN AND WILL BE SUITABLY

SAFEGUARDED.

AT THE SAME TIME AUSTRALIA MUST FACE THE ENVIRONMENTAL CHALLENGES

AND DEBATE WITH RESPONSIBILITY AND REALISM. WE WILL PLAY OUR PART TO

ASSESS AND ADDRESS THE INTERNATIONAL GREENHOUSE PROBLEM IN A

BALANCED MANNER.

I UNDERSTAND THAT THE INTERNATIONAL NEGOTIATING COMMITTEE IN NEW

YORK HAVE TODAY PREPARED A DRAFT SET OF WORDS FOR THE

INTERNATIONAL CLIMATE CONVENTION. THE GOVERNMENT WILL CONSIDER

THIS TEXT IN THE LEAD UP TO THE UNCED CONFERENCE. I WILL ENSURE THE

COAL INDUSTRY’S VIEWS ARE TAKEN ACCOUNT OF IN THE GOVERNMENTS

RESPONSE.

THE INDUSTRY MUST ALSO CONTINUE TO FACE UP TO THE ENVIRONMENTAL

CHALLENGES AND DEMONSTRATE THE COMMITMENT TO DEVELOP COAL AS A

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MORE ENVIRONMENTALLY ACCEPTABLE PRODUCT. THIS CAN AND WILL BE

DONE IF THE INDUSTRY IS PREPARED TO INVEST FURTHER IN THE PRODUCTION

AND TECHNOLOGICAL RESEARCH ESSENTIAL FOR PROGRESS.

AUSTRALIA HAS SIGNIFICANT ADVANTAGES WITH RELATIVELY CLEAN COALS

AND ADVANCED PREPARATION TECHNOLOGIES. MANY OF OUR OVERSEAS

CUSTOMERS ARE AT THE LEADING EDGE OF UTILIZATION RESEARCH AND

TECHNOLOGY. THERE IS CLEARLY SCOPE FOR GREATER BILATERAL AND

INTERNATIONAL CO-OPERATION IN ENHANCING THE TECHNOLOGICAL BASIS

FOR CLEANER COALS AND THEIR UTILIZATION.

IT IS MY INTENTION TO ACTIVELY WORK TOWARDS ACHIEVING IMPROVED : *

RESEARCH AND TECHNOLOGY CO-OPERATION BOTH WITHIN AUSTRALIA AND i ί

OVERSEASTOIMPROVETHEEFFICIENCYANDENVIRONMENTALACCEPTABILITY ,

OF C O A L

IN AN ENERGY HUNGRY WORLD IT IS ESSENTIAL THAT BOTH GOVERNMENT AND

THE PRIVATE SECTOR INCREASE THEIR EFFORTS WITH INVESTMENT IN CLEAN

COAL TECHNOLOGIES, SCIENTIFIC INNOVATION AND ADOPTION. I HAVE

AGREED TO TRANSFER THE MANAGEMENT OF COAL RESEARCH TO THE

INDUSTRY AND THE INDUSTRY HAS UNDERTAKEN TO WORK IN CO-OPERATION

WITH GOVERNMENT ON R AND D MATTERS. I PROPOSE TO MAKE THIS A

CONSTRUCTIVE PARTNERSHIP AND TO SEEK WIDER INTERNATIONAL

PARTICIPATION.

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CONCLUSION

LADIES AND GENTLEMEN, I HAVE OUTLINED A NUMBER OF ECONOMIC' AND

POLICY PERSPECTIVES FOR THE COAL SECTOR. THE OUTLOOK IS BRIGHT BUT

THE CHALLENGES IN ACHIEVING THE OPPORTUNITIES ARE REAL IT NEEDS

BOTH GOVERNMENT AND INDUSTRY EFFORTS AS WELL AS A LONGER TERM

PERSPECTIVE IN THE MARKET PLACE.

I WILL CONTINUE TO WORK WITH THE INDUSTRY INCLUDING THROUGH THE

AUSTRALIAN COAL INDUSTRY COUNCIL TO ACHIEVE A COMMON

UNDERSTANDING ON FUTURE ACTIONS AS A MEANS OF REALISING OUR

AMBITIONS AND NATIONAL COAL POTENTIAL THE INTERNATIONAL COMMUNITY

CAN BE ASSURED THAT ALL EFFORTS WILL BE MADE TO FURTHER IMPROVE

OUR EFFICIENCY AND RELIABILITY.

I WISH YOU WELL IN YOUR DELIBERATIONS OVER THE NEXT FEW DAYS.

THANK YOU.

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