The comments come after the latest minerals industry report revealed both rising profits and increased operating costs.
The 2006 survey released this week is a joint study between the Minerals Council of Australia and professional services group PricewaterhouseCoopers.
Despite reference to the current “good times”, the MCA says the minerals industry has “been under considerable financial strain”, citing increased operating costs as a key concern.
Whilst net profits for the 2006 resource sector have skyrocketed by 74% compared with last year’s net profits, the report put average profit margins at approximately 8%, down from last year’s 19.9% record. This reflects increased industry expenses.
MCA chief executive Mitchell Hooke warned against “the dangers of reform complacency” and said the challenges faced by the resources industry included the significant rise in operating costs, skills shortages, infrastructure issues and regulations relating to safety and project approval.
Operating costs are of particular importance with 2006 operating costs representing around 70% of total costs, compared with approximately 40% in 1977-78. Overall increases in total expenses jumped by 16% to reach $43 billion in the last year.
The report made a number of recommendations designed to improve the industry and address rising costs.
With the costs of doing business on the up, the report recommended changes to business taxation to improve Australia’s investment attractiveness, and reforms to laws relating to export corridor access.
In addition to backing the Government’s industrial relations WorkChoices legislation, the MCA called for improved vocational and training systems to address the professional and trade skills shortages.
The MCA said there should be national standardisation of regulations governing project approval processes and occupational health and safety. It also said public sector research and development should better align itself with industry needs.
Reforms to promote increased exploration investment included a recommendation involving a shares scheme.
The annual survey has been running for 30 years with the latest report revealing the extent to which the industry has transformed itself over the last 30 years in order to remain internationally competitive.
By Charlotte Dudley
