A recent report from Variant Perception titled ‘Australia: The Unlucky Country’ argues that Australia faces a classic case of Dutch Disease, the erosion of capability that flows from a resources boom and an overvalued exchange rate.
The resources boom has shielded much of the Australian economy from the post GFC era challenges. But how long can this last? Is there too much reliance being placed on the parts of Australia where most of us don't live and where the costs of skills and capital are uncompetitive? Do we have the right enablers and incentives in place to capture Australia's wealth, which would sustain this country for the next 20 years and beyond?
According to several news reports recently, the boom is over, with mineral prices already falling from previous peaks. Whether this is right or wrong, sliding pricing will increase competition among resource rich countries and force mining and resources companies to carefully consider the location of their investment opportunities. The increasing frequency of capital investments in Africa, as an example, should not be surprising.
Over the last decade Australia has lost competitiveness due to high labour, energy and transport costs. Resources projects in Australia are currently amongst the most expensive in the world. If you compare this to Africa, Iron ore projects are up to 75% more expensive and Iron ore from Brazil has become cheaper than Australia's, even though we are geographically closer to China.
So what does this mean for our economy? Australia is a mineral-rich developed country and an attractive place to live compared to other less-developed countries. However, we will not sustain this attractiveness through another round of lengthy capital approval processes if we don’t take dramatic action and become more competitive.
The Business Council of Australia's report, Pipeline or Pipedream: Securing Australia’s Investment Future, proposes many improvements to tackle Australia's lack of competitiveness. I believe we also need to capitalise on the implications of information technology, together with high-speed broadband. A recent study by Phil Ruthven on “Australia’s Digital Future to 2050
” found that this new utility will substantially contribute to increasing Australia’s productivity and reducing costs in the resources industry. Resources, is one area predicted to benefit the most compared to all other industries.
Where skills are expensive, and remote locations spike most other cost categories, the smart use of sensors and machine-to-machine communications plus fast broadband will drive huge productivity benefits. This will mean that both Karratha and Kenya can be operated from downtown Perth, or for that matter from Ballarat or further afield. This has to be a potential game changer for the competitiveness of this industry.
Fantastic news if we are to continue to reap the massive rewards from natural resources in Australia.
Wondering how you can better align your IT Strategy
with the changes in your organisations corporate strategy? IBM can work with your oganisation to gauge the alignment of your current IT strategies, resources
and investments with proposed changes in organisational direction and corporate
strategy. Click Here
to get in touch.
- Australian Financial Review, “Boom under threat from higher costs” Louise Dodson, Jamie Freed and Jacob Greber, published 30th May 2012
- Ruthven, 2012 “Australia’s Digital Future to 2050” IBM Australia