Speech

Australian Minister for Trade, Mark Vaile

Gold Coast, 7 May 2000

Strengthening Australia's position as the World's Leading Coal Exporter at the opening of the 2000 Australian Coal Conference and Trade Exhibition

Introduction

Thank you Tony Haraldson; good afternoon, ladies and gentlemen. It is a pleasure to be here to officially open the 2000 Australian Coal Conference and Trade Exhibition.

The key role that coal plays in the Australian economy is well understood by this audience. It is perhaps not as well appreciated by the wider Australian public, and that poses a challenge for all of us.

The coal industry employs more than 20,000 Australian workers directly, and many more are employed indirectly.

Our nation simply could not function without coal. Coal provides more than 80 per cent of the energy we use in generating our vital electricity needs.

Coal is our largest merchandise export, worth over $8.4 billion in 1999 - around 10 per cent of Australia's merchandise exports. As you know, however, the trade setting for the industry has been difficult, with the industry having to settle for lower contract prices over the past few years.

Key trends in world markets

While the export task will remain extremely challenging, there are some positive signs. The IMF forecasts that world output will grow by 4.2 per cent in 2000 and 3.9 per cent in 2001. While Japan's economy remains sluggish, many other important markets, including Korea, India and South-East Asian countries, are experiencing stronger growth. East Asia's economic recovery will contribute to stronger regional demand for coal, but Australia will continue to face strong competition from other suppliers.

Through continued improvements in productivity, the Australian coal industry has strengthened its competitiveness in this tough trading environment. According to ABARE, Australian coal exports are projected to increase at an average rate of 3.5 per cent a year in the next five years as cost reductions allow producers to compete successfully.

Modest demand growth for coal is expected to be driven mainly by higher demand for electricity and steel products in Asia, as regional recovery continues. But new challenges are always emerging, such as the growing volume of "spot" trade in coal - a result of abundant coal supplies and greater competition in Asian electricity markets.

The Role of Government

Clearly, fundamental changes in the global trading outlook are inevitable. The Government continues to work hard to create the right policy framework for industry to succeed.

Our economy is strong and soundly-based. Australia is also strategically located, near the recovering markets of Asia.

In the light of Japan's recession and the East Asian financial crisis that slowed global activity over the past two years, Australia's recent performance has been very impressive indeed:

- the latest figures put aggregate growth at 4.5%, which compares very favourably with any other industrialised economy in the world at the present time
- inflation remains at its lowest level since the 1960s, giving savers and investors the confidence to make long-term decisions
- unemployment is at its lowest level in a decade and employment rates are trending upwards
- productivity growth is averaging 1.8%, compared with less than 1% in the 1980s; productivity growth in your industry has been particularly impressive
- interest rates remain near historically low levels, despite recent rises by the Reserve Bank, and these low rates continue to underpin robust business and consumer confidence
- our national budget has been put into very healthy surplus, and the task of reducing Australian Government debt has begun.

The New Business Tax System will provide a substantial boost to Australia's exports. Under the New Tax System, exports will be GST-free, and when taxation currently imposed on exports is lifted, costs to all exporters will be cut by more than $3.5 billion a year. The mining industry will especially benefit from obtaining the full 100% diesel rebate on their eligible mining activities, and also the extension to marine and rail transport use. And reforms in areas such as Capital Gains Tax will add to the attractiveness of Australia as a destination for foreign investment.

In its recent Economic Survey of Australia, the OECD said: ``The resilience of the (Australian) economy in weathering the Asian downturn is largely the result of a judicious mix of sound macroeconomic and structural policies, which brought inflation down to a very low level, strengthened government finances and generated an acceleration in productivity growth".

The Government's workplace reforms have allowed greater workplace flexibility and improved responsiveness to the needs of customers, while ensuring security of supply. Competition reforms will also greatly benefit the industry.

The Australian coal industry has worked hard to take advantage of economic reforms in recent years. Some remarkable productivity gains - an increase of over 17 per cent in 1998 alone - make it well placed to compete internationally.

Creating New Trade Opportunities

The Coalition Government is also working for a fairer international trading framework and new opportunities for Australian coal exporters.

The priorities of the Government's Market Development Task Force include improved access for Australian coal to European and Latin American markets.

Our efforts, along with others, in attacking European Union coal subsidies have already produced results, with the German parliament passing legislation in November 1997 to reduce greatly German coal subsidies. This will create additional opportunities for coal imports into the German market of at least 40 million tonnes a year by 2005.

Elsewhere, the Mexican Government recently eliminated a 10 per cent tariff on coal imports, and the Indian Government decided to reduce tariffs on steaming and coking coal.

Through its lobbying efforts, the Government has succeeded in improving access to these markets. And we are determined to work with industry to capitalise on the opportunities created.

In less than two weeks, I will be leading a trade mission to China, a country with growing importance for global coal trade. Australian mining equipment suppliers will be a key part of the business delegation accompanying me.

On the one hand, China may emerge as a potential competitor to Australia among our Asian customers. But there are also opportunities given China's growth, and the long distances between domestic coal resources and key demand centres. Indeed, exports of steaming coal to China are projected to double in the next few years to around 4 million tonnes.

Environmental Issues

Climate change issues obviously loom large for the coal industry. The Coalition is determined to ensure that the economic impacts of meeting the objectives of the Kyoto Protocol are kept to a minimum.

We have already delivered on the initial limits so that Australia does not bear the burdens unfairly. Australia and other members of the so-called Umbrella Group (the US, Japan, Canada, Russia, Ukraine, New Zealand, Norway and Iceland) are committed to market-based and uncapped emissions trading, and other flexibility mechanisms which will enable industry to reduce greenhouse gas emissions at least cost.

We are actively seeking to include provision for carbon sinks, which are of critical importance to Australia.

The Government is also working to persuade developing countries to adopt emissions targets. A more global approach to reducing greenhouse gas emissions will defend the interests of Australian industry, while enhancing the environmental effectiveness of the Protocol. Substantial progress on these issues will be necessary before Australia is in a position to consider ratification of the Protocol.

To realise our full potential the government will operate a legislative and policy framework for the mining sector which offers high levels of certainty to all stakeholders, in particular existing and potential investors.

We will support the principles of ecologically sustainable development and encourage world best practice in environmental and health and safety management.

The Coalition Government will provide a highly competitive operating environment that supports the efforts of industry to achieve sustained wealth generation and allows industry to respond confidently to international challenges and seize international trade opportunities.

Conclusion

The Australian coal industry's efficiency will help it to remain the global leader, despite competition from a range of other sources.

Being open and responsive to the changing trade setting is crucial. The industry also faces major challenges on the environmental front.
In his paper at the Outlook 2000 Conference earlier this year, Tony Haraldson put it very well; and I quote:

"The challenges for the industry are not only to more effectively communicate the tremendous progress we have made in the efficiency of our operations, our safety performance, our employee relations and so on, but to position coal in the public's mind as having a significant and legitimate role in the balanced energy mix in Australia and the world for many years to come".

In declaring this Conference open, I would urge you to respond to this challenge.

I trust that you find this Conference productive and that it serves to strengthen Australia's position as the world's leading coal exporter.

Thank you.

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