RESOURCES SECTOR FINALLY TOUGHENS UP
Written on the 29 July 2015 by Nick Nichols
THE severe bashing received by the resources sector over the past few years appears to be toughening the resolve of mining bosses with indications that confidence may be turning, according to a new report.
Last year, the Mining Business Outlook Report found confidence among 50 industry leaders had reached a five-year low, but now it says they are taking tough market conditions in their stride.
With expectations that commodity prices will stabilise over the next 12 months, the latest report released today by Newport Consulting, shows early signs of adjustment to the new reality by the mining sector.
The report says miners are more cautious with a strong focus on becoming globally competitive after a period of large-scale cutbacks and redundancies.
The report found 16 per cent of respondents were cautiously optimistic about their growth prospects over the next year, or more than double the number recorded a year ago.
However, the most telling sign that recovery is some time away is the scale of capital expenditure cutbacks across the board, with 78 per cent of respondents planning to cut back spending over the next 12 months, up from just 44 per cent a year ago.
"Miners are doing it tough but for the first time in three years there are green shoots, a flicker of life in the sector," says David Hand, managing director of Newport Consulting.
"They are fighting back to remain competitive. Some are reducing the number of mines operating as they focus on becoming more efficient and productive while they wage war against the tough economics of doing business in Australia."
According to Peter Harris, chairman of the Productivity Commission, the biggest challenge for the sector remains productivity recovery.
"One opportunity is addressing the flexibility of resource allocation at the national, state and local planning levels," Harris writes in the report.
He says productivity issues in Australia are being compounded by falling labour participation rates due to an ageing population.
"This trend has potentially serious implications for nations such as ours," he says. "One way to offset this is encouraging businesses not to discard older workers, and there are other important steps as well."
The report found 32 per cent of respondents were challenged by productivity, while other key issues facing the industry were competitiveness (17 per cent), tax and unions (14 per cent) and volatile commodity prices (14 per cent).
As for advice to Canberra, the mining industry report has found little to complain about - a marked turnaround from a 70 per cent disapproval for the Abbott Government a year ago when the industry expected major improvements from the new government.
The report says the industry appears more prepared to shoulder its own challenges this year.
"Yet for the industry to capitalise on the glimmers of opportunity that have shown up on the mining horizon, stronger partnerships with the government will remain crucial as will the government's role in delivering on their promise," the report says.
"The criticisms that remain, then, focus on two main areas industrial relations law and the unions.
"A majority of the mining leaders interviewed this year called for either more flexible industrial relations laws (53 per cent) or limited union power (47 per cent), to place Australia on a level playing-field with other countries.
"Missing from the agenda is the strengthening of national infrastructure, which had appeared on the advice agenda for the last couple of years."
Author: Nick Nichols