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Published 01 July 2010 06:31, Updated 05 August 2010 07:01
The resource super profits tax may have been the talk of the country, but it has yet to stop mining industry employment from passing its earlier peak of 2008 – leaving the industry to wonder how staffing levels will be met.
Xstrata Zinc recently hired 80 entry-level employees and a similar number of skilled staff on fly-in, fly-out contracts at its Mt Isa operations through employment services group AWX, and AWX chief executive Thomas Strachan is delighted. The mining arm of the employment group is booming, and has increased revenue across the entire company by 10 per cent over the past 12 months.
“There has already been a dramatic tightening of skilled labour in the mining industry,” Strachan says. “A boom in oil and gas is making the industry spread an already thin labour force even further.”
AWX’s success is just one sign that the next boom in demand for Australian resources is already placing pressure on the skills demands of important industries.
World economic activity will achieve growth of 3.9 per cent in both 2010 and 2011, after contracting 0.6 per cent in 2009, figures from the Australian Bureau of Agricultural and Resource Economics (ABARE) show.
China and India are expected to lead much of the growth in the world economy as that of the main Organisation for Economic Co-operation and Development economies, particularly in Europe, remains weak.
Although a debt crisis threatens European countries, including the Russian Federation and Ukraine, its effects on other large world economies, such as those of the United States, China, India and Japan – some of Australia’s largest trading partners – are assumed to be modest at this stage, ABARE’s Australian commodities June quarter (2010) report shows.
The strength of the nation’s Asian trading partners in particular will continue to support the mining boom.
In 2008-09, the European Union was the destination for about 7 per cent of energy exports and 12 per cent of minerals exports. However, about 83 per cent of energy exports and about 72 per cent of minerals exports found their way to Asia, ABARE figures show.
With such a large portion of mining exports flowing to Asian countries, the economic growth in these economies has a direct effect on the output of the Australian mining industry.
A look at the growth forecast for Asian economies shows why the Labor government has decided to target the mining industry for a tax on its super profits.
Economic growth in China accelerated in early 2010, with real gross domestic product expanding at a year-on-year rate of 11.9 per cent in the March quarter of 2010. In the same period, real gross domestic product in Japan rose by an annualised rate of 5 per cent and the Republic of Korea’s gross domestic product rose year on year by 8.1 per cent, after expanding by 6 per cent in the December quarter of 2009.
India is also leading the global economic bounce-back, with economic growth forecast to strengthen to 7.8 per cent in 2010 and 8 per cent in 2011, according to ABARE.
The strong resurgent demand for Australia’s resources hasn’t been unexpected, as was the case in the years prior to the 2006-07 boom, and investment in new projects is increasing after what was a mild and short-lived interruption during 2009.
Industry analyst BIS Shrapnel is forecasting that mining and heavy industry construction activity will boom for the next two years, to be worth about $48 billion to $50 billion.
The mining and heavy industry sector has accounted for 33 per cent of all civil construction work during 2009-10 ($25 billion), up from 13 per cent ($3.7 billion) in 2000, BIS Shrapnel’s latest mining and heavy industry construction in Australia report shows.
The forecaster expects a decline in mining and heavy industry construction activity in 2010-11, the first such decline since 2004, but is quick to point out the weaker outlook for mining and heavy industry construction is not the consequence of the proposed resource super profits tax.
“While the tax has increased uncertainty in the mining sector in the short-term, we believe this is more the result of a lack of effective communication and consultation between the federal government and the mining industry about aspects of the tax – not its fundamental structure,” says Adrian Hart, senior manager for BIS Shrapnel’s infrastructure and mining unit.
Economic modelling by the Chamber of Minerals and Energy Western Australia indicates investment in the sector will result in 38,000 additional employees being required in the minerals and energy sector by 2012.
Hiring intentions in the sector have rebounded from a net employment outlook of minus 6 per cent last year to 31 per cent for the third quarter of 2010, the latest Manpower Employment Outlook Survey shows, and this demand is evident in Australian Bureau of Statistics employment figures.
There was an increase of 9500 in the number of people employed by the sector in the February quarter of 2010, bringing the number of employees in the mining sector to 169,400 – more than the peak of 163,800 employees in November 2008.
The strong resurgent demand for labour is a worrying sign for the sector as skills shortages will return with a vengeance. The best chance for employers is likely to be picking up workers who are being shed by the shrinking manufacturing sector.
However, this also means relocating these workers from capital cities to regional centres, which could prove challenging.
Although the global financial crisis reduced the extent of the skills shortage in 2009, a survey of remuneration trends by the Australasian Institute of Mining Metallurgy shows that about 40 per cent of the professionals who responded experienced some skills shortages within their organisations.
At the same time, demand for degrees in mining engineering, geology and metallurgy – the three crucial professional disciplines for resources – is sliding because prospective students are concerned about employment opportunities when they finish their degrees.
Publicised lay-offs during the global financial crisis and the government’s row with mining companies are partly to blame, says Peter Knights, the BHP Billiton Mitsubishi Alliance chairman of mining engineering at the University of Queensland and executive director of Mining Education Australia.
“This [super tax issue] will further affect young people seeking careers in the minerals industry because what it does is reinforce doubt about job security,” he says.
Oddly enough, the industry’s push to reduce the number of people required on a mine site through the adoption of automated technology could also contribute to its skills headaches, a report from non-profit training advisory body Mining Industry Skills Centre (MISC) shows.
The resources industry will require substantial investment in specialist training as it continues “on an inescapable and unstoppable march towards automation”, MISC’s manager for research and development, Deb Jones, says.
“Many organisations are not prepared for the impact automation would have on their businesses.”
The MISC report, Automation for Success, pinpointed as crucial the role of automation technician. It stated that 1500 workers would be required on mine sites across Australia in that para-professional role within the next 10 years, and that people working in the role will also be in demand in the emerging liquefied natural gas and coal seam gas industries as well as the national broadband rollout.
The report revealed that no current training program had the capacity to develop workers for these roles.