Australia is missing out on an average $68 billion worth of potential investment every year, with major mining projects increasingly put in the too-hard basket because of the challenging investment environment in Australia.
Today the Minerals Council of Australia released figures that examine the Federal Government’s Resources and Energy Major Projects list and the progression of the project pipeline.
The MCA analysis highlights the enormous number of projects that drop off the list before they move to final investment decisions. This sharp decline in projects shows not only the increasing risk of mining developments, but the considerable wealth Australia is missing out on.
Only 5 per cent of projects at the feasibility stage will move to a favourable financial decision each year. Only twenty per cent of projects that debut on the list are progressed to completion, while 80 per cent of projects are abandoned altogether.
The problem facing the industry is not a shortage of potential projects, but rather the challenging investment environment that has been created by poor policy settings.
These settings are a dead weight on investment, putting an indefinite padlock on investment in critical projects and developments.
That investment isn’t waiting for a rainy day. To Australia’s great detriment, it is heading overseas, where investment settings are conducive to growth, and where mining isn’t taken for granted. Australians should be concerned that a significant chunk of possible mining investment is not being attracted to Australian projects.
Growing the nation’s productive capital stock – the buildings and structures, equipment, machinery and technology – through increasing business investment is the key to achieving growth in incomes, wages and productivity.
Australia’s mining sector is grappling with unprecedented cost pressures, burdened by restrictive policies that are impacting the global competitiveness of our current operations, and thwarting investment in new projects.
The sector is dealing with higher labour costs, higher energy costs, higher transport costs, while being asked to absorb more red tape, more regulation, and more emission-reduction standards.
While there is some merit in timely incentives, the biggest bang for taxpayers’ bucks is simply creating an operating environment that is conducive to growth, and attractive for investment; by lowering the cost of doing business in Australia.
Australia is one of the most expensive countries to do business. This needs urgent redress if we are to realise this enormous opportunity to lead the world through the clean energy transition, fuelled by our critical minerals.
Even a small shift in policy will have a dramatic effect on investment; unlocking the capital Australia needs to progress the countless projects from possibilities to completion.
It already takes 16 years for a mine to move from exploration to production. That is alarming. But there is a genuine concern within the minerals sector that this long lag time will only increase because of the introduction of restrictive workplace policies, more red tape, and a more extensive and risky environmental approvals process.
