- Page 1
Growth in China's economy is continuing and will offer ongoing long-term opportunities for Australia, according to the Managing Director, China, Rio Tinto, Mr Ian Bauert.
Mr Bauert told delegates at today's In the Zone conference at The University of Western Australia that speculation that China's growth story is over was highly questionable.
He said commentators generally pointed to a series of major challenges for China: the leadership transition, income disparities, rampant corruption, migrant workers' status, social unrest, environmental degradation and vested interests opposing reform.
"These are undoubtedly real issues ... but to somehow assume that the leadership will suddenly drop the ball ignores the fact that they have faced many such tough issues over the last 30 years and have still managed to pull hundreds of millions of people out of poverty faster than the world has seen before," Mr Bauert said.
"Urbanisation tells a large part of the China demand story, not just for iron ore but across a range of commodities. The numbers are staggering. A total of 690 million people, more than half of China's population, now live in cities, up from 460 million in 2000."
Mr Bauert predicted growth in steel demand would be substantial in coming years, albeit not at the blistering pace of the past decade.
"The urbanisation of China still has a long way to run," Mr Bauert said. "New and replacement housing and accompanying infrastructure will be required to underpin developments. Other policy imperatives such as the development of western China and the move to value-added manufacturing also support minerals and metals demand."
Mr Bauert described the Australian Government's Asian Century White Paper as a great aspirational document that all Australians should stand behind.
However he said that if Australia was to have any hope of realising these aspirations, it needed to be serious about addressing current shortcomings. "And on the economic front, chief among these is our growing lack of competitiveness," he said.
"How can we fulfil our potential in Asia if cost structures have become uncompetitive, if productivity is declining, if we lack the necessary infrastructure to export, if we cannot attract adequate foreign capital, if we discriminate against certain types of investors, if we add charges and taxes that our competitors don't have, and if we lag in R&D and innovation? It is instructive that five years ago Australia was considered the cheapest place for Rio Tinto to do business, now it is the most expensive."
Mr Roy Krzywosinski, Managing Director, Chevron Australia, said Australia needed to be prepared to take advantage of what was fast becoming the global age of natural gas.
He said that Australia's world-class resources and proximity to resources was not enough to guarantee success, and that an improvement in long-term competitiveness was crucial if producers were to grasp new opportunities.
"Our current fiscal and high-cost environment erodes Australia's international competitiveness and diminishes investor confidence," Mr Krzywosinski said.
He said government policies must support investment and improved workforce productivity, and at the same time the energy industry must work smarter, more innovatively and develop its leaders.
"Perth is well-placed to be the centre of a major energy hub - it will require vision and leadership," Mr Krzywosinski said. " Our challenge in the Asian century is to ensure that we are prepared."
The Emeritus Chairman of the Japan-based multi-national engineering and construction company JGC Group, Mr Yoshihiro Shigehisa, encouraged Australian-based companies to look to Japan for project opportunities and said he saw many opportunities for his company to work in Western Australia.
Mr Bauert said the development of economies such as Japan and Korea lay behind the emergence of Western Australia's resources industry in the 1960s and 1970s.
He said that over the past 50 years Rio Tinto had had to re-invent itself many times in order to face changing circumstances, and this was something that the resources industry more broadly would have to continue to do in the Asian century.
"As we look ahead to the challenges facing the minerals sector in coming decades, it is clear that we cannot resolve them by simply doing what we have done before," Mr Bauert said. "To remain competitive in this environment we must think differently and adopt new solutions. The challenges facing the resources industry are indeed considerable. Rapidly rising costs, volatile markets and prices, more difficult ore bodies, declining grades, more complex geopolitical environments, resource nationalism, more demanding environmental and social standards, lengthy approval processes, shortages of skills, capital constraints, less patient shareholders, an uncertain carbon-constrained future, the list goes on.
"The resource companies who will excel this century will be those who can reconfigure themselves to best manage these varying pressures bearing down upon them. Different dynamics are at play in creating these pressures. For example, rising costs and shortages of talent are a direct outcome of the industry's recent frenzied growth. Resource nationalism has also risen rapidly with commodity prices."
"Weathering volatility and ensuring profitability through the whole business cycle will be a key measure of competitiveness in the years ahead."
In the Zone is an intensive meeting of national and international leaders from the business, government and academic sectors.
With the theme ‘The Geography of Global Prosperity', the conference provides an opportunity for discussion and debate about the increasingly complex global neighbourhood and key policy questions facing Australia and the region.
- Page 1