The coalition are right about one thing, coal is one of Australia’s top earners. Coal brought in roughly AU $46 Billion in the 2013 fiscal year, and is currently our second biggest export; no matter how much we love renewables no one could argue that a fall off in demand could be very damaging for our nations bottom line. But that is exactly what is happening, our 2013 coal revenue, while still quite robust, was actually down by 3.6% from 2012. And while some may posit that this is just a statistical anomaly, (the 5 year growth trend was up 16% until 2012), not everyone is convinced that what we are seeing isn’t just the first dip on a imminent free fall decline.
Coking coal contract prices that peaked in 2011 at $US330 per tonne, have now dropped to below $US120 a tonne, which is threateningly close to the wrong side of a break even price. So, with demand falling, prices dropping, and mines closing it’s not totally ridiculous to assume that things could be about to get worse for those of us heavily invested in the world of coal.
The sign posts are clearly out there for everyone to see. China has banned the building of new coal plants and has begun dismantling those that it already has, (in fact Chinese experts expect Beijing’s coal use to shrink to less than 10 per cent by 2017). That’s about two and half years away; which is, Mr Abbott, (in case you missed it), alarmingly close.
Base load renewables have been advancing at a rapid pace and are set to take over. As of 2011 the Gemasolar project, located in the Spanish province of Andalucia, (the first fully-operational commercial-scale solar farm in the world) has provided base load electricity generation – 24 hours a day. Since then the technology has been improving, and new installations like the 394MW Ivanpah Solar Power Facility are being put on drawing boards across the globe.
The fact is coal is in its death throws, the only question is how fast will it die? While the Coalition clearly think it will stagger on long enough to see out their parliamentary terms (and secure any post parliamentary perks they may be set to receive from their big mining buddies), trying to hold back the tide of change is not likely to be in the best interests of the nation going forward. We will simply be left behind in the wash up.
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It is not enough for the government to scream “budget emergency” and try to cut all of its expenditure on middle and low income earners. We need a plan for how Australia intends to earn its living into the future! Coal, no matter how much the coalition may wish it, is not going to sustain us into the coming century, (and as things look it may not even sustain us as far as the next decade). This is the REAL fiscal emergency, and making pensioners pay at the doctors, or cutting young folk off the dole is not going to come even close to addressing this issue.
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So what are our options? First thing is to look at what we already do well. Education is our third highest export earner, (after iron ore and coal), and unlike iron ore or coal (which we export as raw commodities) the education sector is one in which we do a high level of value adding. It is a sector into which we could expand exponentially. We have so many advantages, from being an English speaking nation, low crime levels, high degree of cultural diversity, and of course a quality product.
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But what is the coalitions vision? Cutting course funding and hiking costs for local students is hardly likely to raise the quality of our educational institutions or their international standing. We have Christopher Pyne disingenuously citing the global league tables for universities, ignoring the fact that the system of academic ranking is weighted heavily toward research institutions, where as our universities are more geared toward teaching and employment outcomes. (Although that said Melbourne University is still ranked in the top 50).
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Infrastructure projects that could bring in off shore students, increase international partnerships, advance research outcomes and encourage course sharing, like an effective NBN, have been scuppered with a heedless disregard for their economic potential or their necessity. Instead we are building more roads and dredging in the Great Barrier reef.
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Which brings me to number six on our list of top exports (or number two on our list of non-mining earners), tourism and travel. Has Greg hunt got rocks in his head? Unlock the pristine Tasmanian wilderness (one of the states greatest tourism assets), dredge the great barrier reef, for a coal port? What the hell is thinking? Tourism’s “brand Australia” is not primarily our cities; we don’t have the museums and galleries full of cultural treasures like London, New York, Paris or Berlin. We can not compete with the ancient ruins of Greece or Rome or Egypt, what we have is pristine wilderness. We have the reef, the rock, the beaches, the forests, kangaroos, kolas and the outback. So why would we put our wining hand in the environmental cross hairs? This is utter madness.
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Another sector that has a great deal of as yet untapped potential is agriculture, (when aggregated Australia’s agricultural exports are actually our third largest earner). Australia is uniquely placed, as an island continent, to provide high demand heirloom agricultural products, that are untainted by GMO and GMO pollen drift, (an issue that has seen much of the USA’s agricultural output banned from sale in the EU and other markets across the globe). It is also an area in which there are huge opportunities for value adding. And yet what is the government doing? Cashing in on the issuing licenses for coal seam gas exploration and extraction across swathes of our best farming land. Recklessly ignoring the issues of ground water contamination, massive releases of the greenhouse gas methane, and post extraction land contamination. They are cynically trying to assuage public opinion by quarantining minute portions of “farmland”, while actually leaving most of our farms up the proverbial polluted creek.
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There are so many things we do well. Scientific research for example; although we don’t even have a science minister at the moment, and the government is trying desparately to cut funding to the CSIRO. Biotech, or retooling the automotive industry toward the burgeoning renewable sector, Australia has a lot of options, but the government appears to be ignoring them all in favor of throwing its support behind the coal and broader mining sectors.
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In spite of Hobbott’s hysterical rhetoric we don’t have a lot of debt, so is it really prudent to put the brakes on the broader economy, and pull large amounts of money out of the system just when are facing seriously declining sales of one of our lead products?
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Granted I am not an economist, (although they seem to get it wrong often as not), but I am someone who has been in business, and I know this much, if the market for what you are selling is falling you need to invest in new product lines, and sooner rather than later. Selling down what you have, not investing in new product lines, and keeping your fingers crossed in the vain hope your customers will return is a sure fire recipe for business failure.
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Just as Christopher Pyne keeps telling us (vis a vis education), those that invest in their future will earn more in the long run; but for some reason the government seems incapable of rationally applying this logic to our nations’ current account. Instead they are trying to convince us the world is not actually moving forwards, and we Aussies will be happily shipping coal for years to come.
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Maybe they are right, and we will all ride the wave of coal fired global warming to infinite wealth and happiness, but just in case that does’t work out for us, I for one would like to know, what’s the plan B? Because simply cutting all government spending is not going to help us if the bottom suddenly drops out of the coal market, and we’ve failed to make other plans.
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So please, tell us Mr Abbott, where’s the vision, and what is the plan?
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