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ACTU Investment Forum 2011 17 June 2011. Managing the Resources Boom. Andrew Vickers General Secretary CFMEU Mining & Energy. Overview. The scale of the boom – a quick recap Profitability Labour demand forecasts The massive turnover problem The Resource Curse?

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managing the resources boom

ACTU Investment Forum 2011

17 June 2011

Managing the Resources Boom

Andrew Vickers

General Secretary

CFMEU Mining & Energy

overview
Overview
  • The scale of the boom – a quick recap
  • Profitability
  • Labour demand forecasts
    • The massive turnover problem
  • The Resource Curse?
  • Major hazards for investors
  • Do the MRRT and CPRS Mk II really matter?
capital investment
Capital investment

ABARES (2011) Minerals and Energy – Major development projects April 2011 listing

profitability
Profitability
  • ABS 8155: Australian mining has profit margin of 33.4% and $1.06m value-added per job – highest of any industry.
  • PricewaterhouseCoopers 2010 - global mining survey:
    • US$435 billion income – up from $325b in 2009
    • Net profit US$110 billion
    • EBITDA margin 43%
    • Net profit margin – 25%
labour demand mining
Labour demand - mining
  • NILS study for MCA 2008:
    • 2010 – 155,000
    • 2015 – 186,000
    • 2020 – 215,000
  • NRSET 2010 study:
    • 2008 – 154,000
    • 2015 – 216,000
  • Each new study has higher forecasts!
the turnover problem
The turnover problem

Long hours, FIFO and social isolation produce high turnover

The Australia Institute (2011): How many jobs is 23,510 really?

the resource curse
The Resource Curse?

High labour turnover in mining may mean that some workers flow back to other industries

But the high A$ is decimating the non-mining export industries – manufacturing, tourism

Significant evidence that flow-on benefits from mining construction are mostly off-shore

we’re better off than the EU or the USA, but we need sustainable long term benefits from mining eg via a SWF

investors beware
Investors beware?

Importing large numbers of temporary migrant workers for resources construction is not a quick fix

The Enterprise Migration Agreements for mega projects ($2 billion +) will probably be abused

A current trickle of cases of illegal underpayment of wages, sub-standard conditions and OHS problems

Will become a flood? Catastrophic incidents? Major litigation, project cost blowouts and insolvency?

mrrt and cprs mk ii
MRRT and CPRS Mk II

Acceleration in ABARES major project listing shows that MRRT and CPRS Mark II are minor imposts on the industry

We think the original RSPT was better but the MRRT is a start on better community returns from a high profit industry

The CPRS Mk II will barely affect most resources. Aluminium, steel and certain gassy coal mines need assistance and should get it.

conclusion
Conclusion

We aren’t really managing the resources boom

It helped saved us from the GFC but, in the absence of a strong MRRT and SWF we aren’t managing mining wealth for the long term

High labour turnover is the result of extreme rosters, social isolation and heavy-handed management unrestrained by any workforce collective voice (outside of coal mining)

Large scale importation of temporary workers is probably an impending train wreck.

We should take the Resource Curse threat seriously