Ellen Fanning:
If you’re asked about the financial health of your family, how would you respond? You’re likely feeling in a bit of a defensive crouch. Inflation chewing up your buying power, no prospects of further rate relief this year. Getting your family into the economic fast lane – out of those doldrums involves pulling a lever called productivity; no, no, no, it doesn’t mean working harder, just the opposite. The problem is from the mines, to home builders, to those working in an office this afternoon, our productivity has dropped off a cliff.
Andrew Leigh is the Assistant Minister for Productivity and Treasury. Thanks for joining us Dr Leigh. You spoke at the Energy Minerals Tax Conference in Brisbane last week – productivity was the issue. Part of what you were saying was that mining productivity has dropped between 2019 and this year by 23 per cent. They were supposed to be a productive sector. What’s going wrong?
Andrew Leigh:
Well, thanks Ellen for having me on the program, and I love the way you framed up productivity at the start because I think it’s gotten a bit of a bad rap. People conceive of it as working harder, but in fact it’s working smarter. Mining’s still got the highest productivity of any sector in the economy. In other words, total output per labour hour worked is much higher than anything else. But it does go through these big ebbs and flows as you say.
So, we saw a surge in mining productivity from about 2011 to about 2017 and then we saw a bit of a drop from about 2019 onwards. Some of that’s to do with what they’re mining, some of it’s to do with global supply chains and input costs, but I think there’s something that we can learn from mining as well about how they’re using technology and also how they’re adapting to the renewables world.
Fanning:
Dr Andrew Leigh with you. What about the fact that the Queensland Resources Council complains that it can take up to 16 years to get out of the ground due to duplication and excessive regulation. They say in the approvals process 16 years from go to whoa to get a mine going. Again not productive, you’d think.
Leigh:
Well, the slow nos, even the slow yeses are one of the big complaints we hear from the resource sector. People don’t necessarily want to reduce the scrutiny that’s being applied but what they do want to do is improve the time to approval. And part of the reason for that is that our environmental laws aren’t fit‑for‑purpose.
Graeme Samuel identified that 5 years ago when he did a report for Sussan Ley when she was Environment Minister. And that’s what Murray Watt is getting on with the job of putting in place; better environmental laws. And so we have proper scrutiny but also we’re able to get to a quick decision because slow decisions don’t help anyone.
Fanning:
And would that be ditto for wind farms? We seem to be getting a fair number of solar arrays built in this country – sometimes batteries, but wind farms just don’t seem to be going anywhere. The LNP here in Queensland have cancelled 2 fully‑approved wind farms?
Leigh:
Yeah, and a couple of years ago the Victorian Civil and Administrative Tribunal had some $80 billion worth of renewables projects tied up in appeal. Again, that’s a danger for the renewables transition. We know for the sake of the planet that we need to get more renewables built and yet some of those renewables projects are getting caught up in needless delays and processes.
The European Union’s got a fast‑track for renewables projects on the basis that you don’t want environmental approvals to slow down what’s good for the planet and the work that we’re doing on the environmental laws will also help with that as well.
We’re ticking off environmental approvals for renewables projects faster and faster. And interestingly, we started with the mining sector – you’re also seeing renewable energy as a major source of electricity for sites like BHP’s Mount Keith and Leinster sites.
Fanning:
Yeah. And so does that go into productivity if you can get cheaper renewable energy, which presumably won’t come for a while Minister because we’ve got to build all these new pylons and high‑energy lines to get from where we’re generating the energy to where we need it?
Leigh:
Yeah, we’ve got to improve the grid, we’ve also got to improve the energy sources. Madeleine King – the Minister for Resources – likes to say that the path to net zero runs through Australia’s resources sector. The world’s going to need copper for transmission networks, nickel and lithium for batteries, rare earth elements for permanent magnet motors and wind turbines, high‑purity aluminum and silicon for solar and semi‑conductor manufacturing.
So, we’ve got huge potential to be contributing to the world’s transition to net zero and be what Ross Garnaut has dubbed a ‘clean energy superpower’.
Fanning:
Yeah, it’s gunna, gunna, gunna the whole time isn’t it? And meanwhile, the Queensland Government is spending – I can’t remember if it’s $1.6 or $1.8 billion on ongoing maintenance for decades on our coal‑fired power stations. Now is that productive? I mean they say it’s necessary, but is it productive?
Leigh:
We’d have to be bringing the coal‑fired power stations to the end of their life regardless of what’s happening with the renewables transition. The fact is they were built half a century ago and most are getting to end of their useful life. So then you ask the question, ‘well what’s the most efficient form of energy generation to be building?’ and the answer from the experts comes back that that’s renewables, firmed by batteries and sometimes gas.
That’s the future of the electricity grid and so, using the point in time that we’re at, where we need to build something else to replace the coal assets, it’s natural to move to renewables because the marginal cost is zero. The wind and sun don’t send a bill, so we’re able to bring down that wholesale cost of electricity as has been happening over the last year.
Fanning:
Dr Andrew Leigh, Assistant Minister for Productivity and Treasury. And then when you come to issues like the care sector, and there’s hundreds of thousands of people work in the care sector. You know, if you look at pink jobs, so‑called, and they’re not necessarily women but they tend to be female professions – there are more pink‑collar jobs in Australia than there are blue‑collar jobs and that’s a change in the last decade. But how do you measure productivity of an aged care worker? How do you measure increased productivity of a teacher?
Leigh:
Yeah, the answer is not very well. So at the moment we’re doing it based on sort of bums on seats in the classroom and beds in the aged care sector. But we’re not doing a great job of capturing the quality of jobs, and the quality of care.
So when we, for example, improve the number of minutes of care that you get in aged care centres, put nurses back into aged care, improve the quality of the food – that doesn’t always show up in the productivity statistics in the way in which it should.
So I think we need to do a better job there. And look, I can’t help Ellen, but want to push back a little on your characterisation of ‘pink‑collar jobs’. There’s an acronym I like which is HEAL – health, education, administration and literacy. And just as I think we need to get more women into STEM, I think we need to get more men into the HEAL occupations because there’s such a fast‑growing sector and it’s important to move away from those gender stereotypes as to who cares.
Fanning:
Say it again. HEAL, what’s that?
Leigh:
HEAL. Health, education, administration and literacy.
Fanning:
HEAL. H‑E‑A‑L. Very good. All right, one final one and this kind of keeps me up at nights. Maybe I’m just an insomniac, minister, but the Australia Institute estimates state and federal governments have missed out on about $13.3 billion of royalty revenue that could have been charged on gas exports during the past 4 years. Sometimes it’s cheaper to buy our LNG in Japan than it is in Queensland.
Now we’re moving to the next frontier, the next big boom is of course the critical minerals, and we’ve got those in spades in Queensland. Can we be absolutely sure that the folks in power are going to make sure that we get what we’re owed for our minerals?
Leigh:
Yeah, we’ve done important reforms in terms of changing the Petroleum Resource Rent Tax so that the west coast projects pay Petroleum Resource Rent Tax this decade. Previously they’ve been able to write off all of their expenses against their PRRT obligation, which meant they weren’t due to be paying it until the 2030s. Treasurer Chalmers has put in place reforms which have seen them paying tax now.
That’s important, it’s part of their social obligation and the Australian Domestic Gas Security Mechanism ensures that they’re contributing back to the local grid. Western Australia’s long had its gas reservation policy, but now on the East Coast the Domestic Gas Security Mechanism plays a similar role.
Fanning:
So are we going to get what we’re owed for our critical minerals? Is somebody going to put together a royalty structure that ensures that when these minerals come out of the ground that everybody in the world needs, we actually do get decent royalties on them rather than endless write‑offs where they say, ‘Gosh, look at that, we don’t owe you anything’?
Leigh:
They’re certainly going to be paying royalties and the exploration costs in many of these cases are lower, and so it won’t be so far in the future that the exploration costs are exhausted. But it’s also just a great opportunity for Australia to be part of these critical supply chains, to be engaging on a national security basis with countries that need critical minerals certainty. It makes us a power player in the world, and it also allows us to contribute so strongly to the clean energy transition the world is going through.
Fanning:
Andrew Leigh, great to talk to you.
Leigh:
Likewise Ellen, thank you.
Fanning:
Dr Andrew Leigh MP, he is an assistant minister in the Albanese federal government.