Keeping Australian companies competitive

Prof Quentin Grafton: "There’s been a lot of discussion about competitiveness issues in Australia. Comparisons are made in terms of, the labour costs in Australia vis-à-vis other countries, productivity in Australia vis-à-vis other countries and my view is that it needs to be kept in perspective. So the reason that costs and labour costs have been high, they are high, there’s no question about it relative to some other countries is simply because we are undertaking right now a massive amounts of investment across the country but particularly in Western Australia and Queensland.  So when that happens, you have to draw in skilled labour. Lots of companies are trying to draw on that same skill set of labour in different locations and clearly that has an impact on wage rates. So that has been a function of just a lot of projects, mega projects, and when I mean mega, I mean projects in excess of 5 billion dollars’ expenditure undertaken at pretty much the same time in Australia, in particular LNG projects. There’re 7 LNG projects underway in Australia worth approximately 190 billion dollars.  They’re all under construction at the moment. So that has contributed to higher costs. So that’s clearly an issue. The companies do not need me to tell them about that.  They're around those details and, certainly in the last 12 months, 12 to 18 months, there’s been a I think a refocus by those companies, a range of companies, across the sector about how they can keep their costs, lower their costs or certainly make sure their costs don’t get any higher. So there’s a huge amount of attention being directed to that. I can think of some companies that are doing that right now. Probably all companies are doing it and some have made some very very public statements about what they’re doing.  So I think overall for those companies, as I said, that are on the lower half of the cost curves and those that are not highly leveraged, I think there’s a very bright future for them and for the sector but that said there’s always a challenge in the context that prices are declining or moderating and, if your costs are high, you’ve clearly got to move and you have to make some changes along the way and I have no doubt the companies will be making those changes and trying to ensure that they remain competitive."

Categories: Coal in Australia, Economy, Global Markets, Jobs, Resources & Economy
Author: Prof. Quentin Grafton
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