IAS TRALIAN MININC IND) USTRY C. OUNC IL
Speech by the mime Minis-ter, The Rt Hon. W-illiam Mc?' ahon, M. P.
Mr Prbident, Distinguished Guests and Gentlemen,
This occasion offers both to my Government and to your Council,
the chance to exchange views at first hand. The establishment of
the Ki~ ning Industry Council just five years ago showed the importance
you attach t1-o the communication of your views and trends in your
industry to the National Government here in Canberra.
For our part, we have for a considerable time now conducted
regular consultations at the Cabinet level with the organisations
representing the major groups in the economy. Your Council has become
a more important part of these regular economic consultations in recent
years, reflecting the dramatic increase in its conttbution to the
national economy. We consider this direct consultation1 to be an
important two-way stream of communication between the Government and
other component parts of the economy. We want it to continue and
develop, and I am sure you do too. You know the figures relating
to the Mining Industry's contribution to the nation just as well as
I do. Nonetheless, these figures need emphasis to a much wider
audience. Since the mid-sixties the Mining Industry in Aus; tralia
has trebledits performance in both total production and in its share
of our export income. In 1965, the " ex an" value of mineral
production was worth $ 542 million. By 1971, the figure was
$ 1600 million. In 1965, minerals and metals brought us in about
$ 300 million in export income. For 1970-71, the industry earned
$ 1250 million overseas or about 29 per cent of total exports.
These are impressive, and I am told that on present indications,
there could be a further trebling of export earnings from mining and
metals during the seventies to reach $ 3,500 million by 1980. Tib
upsurge in mining activity and production of minerals which those
figures describe has had the most significant effects on the growth
and progress of this nation. Our ' jpattern of trade was transformed
as the export contribution of minerals firstly overtook 1969
wool, and has since continued to overtake the contribution of the
whole of our other rural exports. T~ Iere are those who assert for
example that without the minerals boomt of the late sixties and early
seventies, Australia could have been faced with s _ vece balance of
payments problems.
That is the external picture. At home, there has been a matching
development boom accompanying the great new m~ mmaq projects and
involving new ports, hundreds of miles of new railway lines, and more
than a dozen new towns have been created in remote parts of our
continent.
It is clear from this that the mining industry has contributed
very substantially to the broadening and diversification of the economy.
But in more recent times, your industry has, along with other important
sectors of the economy, suffered from the effects of the world currency
realignmentheoThe Government has been concerned at the effects of this
downturn in/ rate of development of world trade, and in particular, the
effects of mineral production and mineral exports. On the production
side, cost increases, falling demand and prices and currency realignment
have had their effect on iron ore, coal, copper and lead. On the export
side, we have seen the requests by* Companies to reduce below
the quantities specified in contracts, the tonnages of iron ore and
copper for delivery to their mills and smellfrs,.
Now I said the Government was concerned about this situation and
it may be asked,' well, what has the Government done Ve have taken
a number of important initiatives, both to assist the major exporting
industries generally and the mining industry in particular. Firstly,
there was the question of the revaluation of the Australian dollar.
In terms of pure monetary theory there could, of course, have been a
full appreciation to the'dia.-. point of 8.57 per cent in the Australian
dollar as against the American dollar. In reality, there was a
situation where major mineral contracts were affected to the extent
of approximately $ 8 million for each per centage point movement in
the appreai-atioi_ of the Australian dollar; where our other primary
industries faced difficulties in competition with other nations which
had already devalued and where the success of the manufactured
exports drive could have been affected. Above all, there was the
impact on confidence in the community generally to be considered. At
the time, confidence was not particularly strong, although I now
believe that with fresh signs of the recovery showing up, confidence
is being restored.
That brings me to the second point. One of the stimulus measures
we announced at the recent Premiers' Conference was the re-instatement
of the investment allowance which was mentioned so generously here
earlier tonight. As I am sure you are well aware, the Government is
keen to see a greater degree of processing of our minerals, especially
where this is economic and where it represents a rational use of
resources. We have assisted this aim in a number of ways. There is
the re-instatement of the investment allowance, which we believe will
prove to be a big help to the mining industry in establishing
processing and manufacturing plant. There is also our undertaking to
provide about $ 80 million to the Queensland Government for the Gladstone
power station of 1100 megawatts. We regard the establishment of this
large-scale source of power as a catalyst for the further expansion
of mineral processing at Gladstone. We stand ready to provide this
finance, so long as the conditions stipulated are met.
The third area of assistance has been in the decision to continue
the financial assistance provided under the industrial research and
development grants scheme for a further five year period from July.
It is estimated that expenditure on this scheme, which is designed to
encourage manufacturing and mining companies in Australia to increase
the-i research and development spending, will be $ 60 million for the
first five year VeriOd which began in 1967.
Our fourth recent initiative relating to the mining industry
concerned the Japanese requests for a cutback in iron and copper
deliveries which I have already mentioned. The Minister for Tnational
Development made representations to the Japanese Government tc ensure
that our companies were treated no less favourably than companies from
other countries in the negotiations over these requests.
There are, of course, other recent Government decisions and
actions bearing directly on the mining industry. The Government is
looking at the development of our Uranium resources with a view to
achieving the maximum benefit from these resources to Australia. There
may well be benefits in co-ordinated development.
There have already been discussions between Commonwealth and
State officials and the industry on the production and marketing of
Uranium. We recently decided to provide a non-repayable capital grant
of $ 2.5 million to Western Australia for the provision of a new ship
which will help restrain the growth of transport costs in areas where
many major mining projects are located.
I notice that your council has this afternoon released a proposed
five-point mining and conservation plan for consideration by
Governments, both Federal and State. We are all aware of the growing
interest in conservation and environment protection and it is encouraging
to see a major industry group taking a lead to provide positive
proposals. It is a responsible way to approach this question.
Although, the States have the major responsibility in this area, I
know your proposals will be most carefully considered. We are, as
you know, in the process of forming a National Environment Council
The other questbn I would like to mention to you tonight
concerns our policy on overseas investment whichhas been the subject
of some comment recently. First, I must say that overseas capital
has had a great cal to do over the years with the expansion of our
economy and the technological advancement of our industry. It has
provided resources additional to those we have raised fromour domestic
capital markets, and in particular has been highly important in
sustaining our large-scale migration programme and, of course, it
brings with it not only capital resources but also advanced technology,
managerial skills and market connections. It is noteworthy that our
largest mining companies are managed by Australians, men who have a
close interest in the development of this nation.
The other side of this large contribution to our development
has been a significant measure of foreign ownership and control of
our company assets. It has long been the Government's aim to ensure
that Australians have the opportunity to participate in these foreign
operations and I am sure most foreign corporations respect this
attitude. Again, we have stood ready to prevent -specific takeovers
of Australian-controlled companies if such takeovers are seen as
against the national interest. Constraints under our guide lines have
been placed on foreign companies borrowing here, both to conserve
our domestic capital resources and to provide an additonal incentive
to overseas companies to offer equity participation to Australian
interests. There are, too, other causes of potential conflict arising out
of capital inflow. These will be thoroughly investigated in a
document being prepared by the Treasury, and nearing completion.
The very substantial level of inflow in the last two years or so
has created special problems for the successful pursuit of our
national monetary policies. THis issue is al. o being closely examined.
I have the personal belief that as time proceeds, Australians
should undertake more investment opportunities overseas, and particularly
in the Asian and Pacific region. Direct investment overseas,
which for most practical purposes is not restricted,'. has in fact
been increasing in recent years as Australian companies have been
establishing nterprises in many countries overseas, particularly in
/ 4.
New Zealand, South-East Asia and the Pacific, but also in the United
Kingdom, the United States and elsewhere. We will be looking in
particular, at the sharp increase which has recently occurred in the
level of borrowing overseas and its impact on liquidity whether by
Australian-owned or foreign-owned companies in Australia, which has
contributed to the high level of capital inflow. It could be, for
example, that increased borrowings fromlocal sources would help ease ' hany
problems of excess liquidity arising from a level of inflow, and
contribute to greater stability of our domestic economy
In any review of this or other aspects of this important matter
the Government would, of course, take all factors into consideration,
including our over-riding wish to see the continued stable growth
and development of the Australian economy. Many Australian companies
have shown that they have the technical expertise and managerial
knowhow to set up successful ventures abroad. Although the trend has
been upwards in recent years the amounts involved have heen relatively
small. They hive averaged some $ 60 million annually over the past
years or so. I. sincerelyhope that the trends of recent years will
improve. The Treasury at present has in hand an in-depth study on the
whole subject of foreign investment in Australia. I dc not wish in
any way to forecast what, if any, 9hanges in the Government's policy
might eventuate as a result of its consideration of this study. I
can, however, say that one of the aspects we will be looking at will
be whether the very high level of capital inflow we have experienced
over the past couple of years poses difficulties for the domestic
management of the economy and, if so, whether there is need for a
change in policies to forestall any danger of that kind.
We believe the balance of the foreign contribution to our
development has, over the years, been very much in our favour.
Nevertheless, should it be demonstrated that in some measure the
volume and form of the inflow of capital are not, in fact, enhancing
the performance of the economy, we will, of course, review our policies
and announce them in clear and understandable terms. But we will do
so on the basis of fact and detailed analysis and against the philosophy
that what we do will be in the best interests of this country.
CANBERRA March 1972