Australia's economic growth rate of 4.3 per cent in the year to March, driven by the mining boom, may be at risk of slowing down due to the high cost to complete resources projects in the country.
Newcrest Mining Limited
Latest data from the ‘Mining Industry Major Projects – October 2011’ report of the Bureau of Resources and Energy Economics (BREE) showed committed capital investment into the country’s already booming resources industry grew 34 per cent to A$231.8 billion (US$229.8 billion) in the six months ended Oct. 31. Projects in petroleum, iron ore and coal dominated the investment growth.
The Business Council of Australia (BCA) pointed out that a new study published on Thursday showed it costs 40 per cent more to complete resources ventures in Australia than in the U.S. Gulf Coast. The study blamed the higher cost to higher wages.
In the case of airports, the cost is 90 per cent higher in Australia while for hospitals it is 62 per cent more.
The higher cost places in peril $921 billion worth of investments in mining infrastructure in Australia which could serve as main driver of growth in the next few decades.
"If we cannot deliver the pipeline more efficiently, our standard of living will be reduced," BCA President Tony Shepherd said in a statement.
"We are becoming a high-cost and thus high-risk place to invest, and low labour productivity compared to other nations has reduced the competitiveness of our project delivery," he warned.
BXA recommended that the government ask the Productivity Commission to conduct a comprehensive inquiry into the factors that cause major projects costs and delivery to soar.
He also urged swifter project approvals and better training, and agreed with the need to have more foreign workers.
The report will be presented to Prime Minister Julia Gillard in the Economic Forum in Brisbane next week.
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