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Speech to CEDA

30 September 2016

I want to talk today a little about how important mining and resources have been for Northern Australia, especially over the past decade, and how the government plans to further develop the north in coming decades.

Before I do that, though, I have just come here this morning after two days in Adelaide. I was meeting with Parliamentarians at the time the statewide “black event” occurred. It was hard to believe at first that power had been lost to the entire state. It is completely unacceptable that the collapse of transmission towers in the north of one state could cause a whole state to lose power.

Unfortunately for us, this is not just a South Australian issue. In a sense, I have come here today not from Adelaide, but from the future. What is happening in South Australia could be our future if the Queensland State Labor government persists with its certifiably mad ambition to meet a 50 per cent renewable energy target by 2030.

Queensland currently produces 4.4 per cent of its electricity from renewables. It does not have the wind resources of South Australia and large scale solar does not anywhere in the world produce a large proportion of a state’s power supply. We will not produce 50 per cent of our power in Queensland with renewable energy by 2030. It won’t happen. The State Government has no plan for it to happen, they can’t tell you where the power stations will be built, what coal fired power stations will be shut down and how it will impact on the network’s wider reliability.

The Queensland Government may as well promise to build an alpine skiing resort in North Queensland. That has more chance of happening than Labor’s renewable energy target.

This is the typical Labor party approach to management. Shoot first, ask questions later. Promise the dream but deliver the nightmare.

I am sorry to be political but this must now be pointed out. It is not just here in Queensland. The Victorian Labor government has a target of 40 per cent by 2025, while only generating 12 per cent by renewables today. The South Australian Labor Government has a 50 per cent target by 2025 and a 100 per cent target as soon as possible – a target they achieved on Tuesday afternoon. And the Federal Labor party has a target of at least 50 per cent by 2030. No Liberal or National State or Territory government has a state based renewable energy target. We must stop this Labor-Green obsession with unachievable, unrealistic and economically damaging renewable energy targets.

Some say that the event in South Australia had nothing to do with renewable energy. The precise causes of this week’s event is a matter for history; it will be a matter for review.

What we do know now is how costly such an event is. There are already reports of millions of dollars of damage to furnaces and these costs are likely to escalate in coming weeks. And we already knew that South Australia’s over-reliance on intermittent renewable energy increases the risk of such an event.

This is what the Australian Energy Council said earlier this year:

It is the intermittent nature of new renewable electricity that creates challenges for systems and markets that were designed around dispatchable generators such as hydro, nuclear or fossil-fuelled plants. These conventional plant types also have characteristics that allow them to contribute to the stability of the grid, including keeping frequency and voltage levels consistent and being able to restart the system after a major blackout.… At current levels, the intermittency (particularly from wind) is having a material impact on South Australia’s electricity market, as well as the security of the electricity grid.

The key question for any review is not what triggered this week’s event but, instead, if South Australia’s recently mothballed coal and gas fired power stations had been online, could the statewide outage have been avoided?

This has important lessons for Queensland. Right now in Queensland, coal is producing around three-quarters of our electricity supply. But these stations also deliver important network-wide services to the grid. An electricity network is like a water reticulation scheme. To have water on demand when you turn on a tap, there needs to be pressure in the system, there needs to be water in the pipes. Likewise, to turn on your light when you flick a switch, the system must be maintained at a set level of frequency and voltage. The intermittent nature of wind and solar power means that they have an inferior ability to contribute to the stability of the overall network.

Because of this central fact, we are not going to move away from coal-fired power any time soon. To keep the lights on, we need coal. Coal is not like disco: it is far from dead. Queensland has more to lose than anyone if we don’t wake up to the importance of coal soon, yet we have a Queensland government talking down coal, and by doing so they are talking down Queensland.

Countries in our region realise this. Thermal coal prices are up more than 30 per cent over the past year. China and Japan are installing ultra super-critical coal fired power stations, that produce power with a carbon emissions footprint of up to 40 per cent lower than traditional coal fired power stations. We are part of the Asian region and we should be looking to their example and their dynamism - not taking our cues from a South Australian government that is desperately struggling to maintain jobs in manufacturing.

Which brings me to our Northern Australia policy.

That policy is north-focused in a global, not just a domestic sense. We are uniquely positioned in the north to take advantage of the remarkable growth of the middle class of Asia and their demand for bigger cities, better food, higher quality health research and new holiday destinations. The north of Australia can provide all of these things.

But it is important not to think that the north isn't already developed. Northern Australia is not frontier country, it is not economically undeveloped. It already produces 11 per cent of our country’s GDP despite being home to only 6 per cent of our population. It already punches above its economic weight.

Our policy to develop the north is about further developing the north, and that must build on the north’s already clear and natural advantages in agriculture, in tropical health, in tourism and in resources.

The strong position of the north has grown over the past decade thanks to the mining boom. Since 2005, the Northern Australia economy has been growing at an estimated average rate of 5.3 per cent per year, significantly above the 2.8 per cent annual economic growth in the national economy over the same period. In 2013, despite only making up 11.7 per cent of GDP, 30 per cent of Australia’s growth in GDP was driven by Northern Australia.

Average economic output per employee in Northern Australia is a remarkable $369,900, almost double Australia’s economic output per employee of $185,900.

This incredible result is driven heavily by the mining sector. The earnings from the Pilbara – the heart of the West’s iron ore industry - are larger than the individual economies of 119 countries but are generated by only 60,000 people. And central and North Queensland produces 35 per cent more per person than the rest of the state of Queensland.

As a whole, the mining sector represents more than half the economic output of Northern Australia. Continuing to attract investment in resources will be essential to maintain the strong recent economic performance of the north.

With mining representing more than half of Northern Australia’s economic environment, we will not be able to develop the north without a strong mining sector. Opening up new projects and new areas like the Galilee Basin is an important part of securing that growth.

The Galilee Basin would be the first new coal basin opened up in Australia for 40 years and that is an exciting prospect. And it will not damage the environment. We have strict environmental laws and the notion that it will cause global warming has been exposed as nonsense by the decisions of two recent court cases.

If we don’t export coal to Asia, they will get coal from somewhere else, most likely from lower quality sources that will create more carbon emissions and emit more pollutants such as sulphur. If we stop coal mines here it will be another example of us just exporting an environmental problem, not helping solve it.

Projects in the Galilee Basin will have to stand on their own two feet and that will be a challenge with lower commodity prices but the Government has put aside significant funds to invest in infrastructure to open up new areas.

The principal element of that is the Northern Australia Infrastructure Facility, a $5 billion facility to invest in infrastructure across the north.

I was pleased to launch the NAIF in Cairns following the Board’s first meeting in August.

And I would like to thank the Board’s Chairman, Ms Sharon Warburton, and all the members for making significant progress to date.

We are fortunate to have such an experienced board. The mandate we have given to the board is to give preference to projects that use investment in multi-use infrastructure that will benefit a wider economic area.

There is a great need for new infrastructure in the north and there is great interest in the Northern Australia Infrastructure Facility. The NAIF has received more than 70 enquiries from project proponents, more than half of these coming from Queensland:

  • 11 projects (with a value of almost $9 billion) are actively working towards submission of an investment proposal; and
  • 40 projects are in an active enquiry stage that are in the process of providing higher level project information.

Not all of these projects will receive funding and I would encourage others to bring projects forward. The board has been instructed to act in a commercial way.

This is not a government grants program. So it is not accurate to characterise the process as one of receiving “applications” in a formal sense. Instead, the NAIF is discussing proposals with a range of interested parties and there will be an active exchange of information, back and forwards, between the NAIF and proponents.

I would encourage interested investors to make contact with the NAIF and engage in active discussions. We have the interim CEO, Mr David Byrne, here today, so you could do so now.

In addition to the NAIF’s $5 billion in concessional loans, the Commonwealth Government has committed $1.2 billion to delivering road, rail, air and water infrastructure across the region.

This includes a $600 million Northern Australia Roads Program, which is partnering with State and Territory governments to build and upgrade roads in key strategic corridors. During the election, we announced more than $300 million in road funding across the north from this program, including our plans to seal the Hann Highway to create an inland highway link from Cairns to Melbourne.

We have also announced that we will seal the Outback Way over the next decade, creating only the third sealed route from east to west across Australia.

Separately, we’re also investing $100 million in targeted upgrades to roads critical to the north’s cattle industry under the Northern Australia Beef Roads Program. Announcements will be made shortly on successful projects.

The Government has committed $75 million to establish a new Cooperative Research Centre (CRC) for Developing Northern Australia. The CRC will bring together industry, research organisations, all the northern jurisdictions and international partners to tackle barriers facing private investment in the north.

The CRC is to focus initially in the areas of agriculture, food and tropical health, and will be based in Townsville. We have recently received a report on a proposed structure for the CRC from Councillor John Wharton and I thank Sandra Harding from JCU and other universities in the north for their strong cooperation and support of this endeavour.

Water infrastructure such as dams and weirs is crucial for development in Northern Australia. That’s why we have earmarked $200 million to develop the water resources of the north as part of the $500 million National Water Infrastructure Development Fund.

Fifteen water feasibility studies worth $25.5 million have already been approved as part of the fund.

This includes $5 million for the Nullinga Dam on the Walsh River and $2.2 million for Hell’s Gate Dam on the Upper Burdekin.

We have also put aside $130 million to build the Rookwood Weir on the Fitzroy River.

These are major projects that have the potential to create real growth in regional areas. The Rookwood Weir could create more than 2000 jobs, double agricultural production in the Fitzroy and drought-proof Rockhampton and Gladstone.

The whole of the Northern Australia policy is a policy focused on regional growth. All of Northern Australia is in regional Australia.

According to the United Nations, Australia is ranked 8th in the OECD on percentage of urbanisation. Most of the others than rank above us are much smaller, such as Belgium, Iceland, Japan, Israel, the Netherlands and Luxembourg.

Our population is concentrated in just a few capital cities. Our top five mainland capital cities account for more than half our population. The top five cities in the US account for less than a fifth of their population.

The development of the north is important, and not just for the people of the north. It will deliver an economic dividend to the nation that builds on what it does already.

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