Industry responsible for blow-out in costs: BHP

The mining industry needs to shoulder much of the blame for its shrinking competitiveness, says a BHP Billiton executive.

The mining industry needs to shoulder much of the blame for its shrinking competitiveness, says a BHP Billiton executive.

Mike Henry, BHP's president for health, safety, environment and community, marketing and technology, said that while China's prospects were bright, its demand was shifting toward those commodities in which Australia had less of an advantage.

One was copper, Mr Henry told a Bureau of Resources and Energy Economics conference in Canberra on Thursday.

In the early stages of urbanisation, newly industrialising nations need a lot of steel. As they move into consumption-led growth, they begin to need copper.

Whereas Australia leads the world in its ability to supply iron ore, in copper it is eclipsed by other suppliers including Chile and Peru. In energy, while Australia has abundant gas, it is not as well located as other nations.

"Unfortunately, as hard as we might try, we can't change our geographic position," Mr Henry said.

"[But] we need to be pretty serious about addressing the things that we do control in order to remain competitive.

"Mining is currently one of the highest taxed industries in Australia. We alone, BHP Billiton, paid around $9 billion in taxes and royalties last year, an effective tax rate of greater than 45 per cent.

"I reference taxation, but let me be very clear. Our perspective and that of industry more generally is that the bulk of the responsibility [for costs] lies with industry. A couple of areas we might focus on would be the scheduling of projects and the utilisation of capacity."

Incumbent operators had been competing against each other for scarce resources, bidding up costs.

"There's a lot we can do from within our current businesses to drive better productivity," he said. "We acknowledge the bulk of the responsibility lies with industry. My firm has taken strong action to contain controllable costs, and we have only just begun.

"In the area of tax policy BHP Billiton has previously publicly cautioned against piecemeal measures which create instability and investment uncertainty, but we are quite open to a process of comprehensive tax reform.

"Likewise, there is a need to return the industrial relations pendulum back to the centre."

BHP was expecting Chinese growth of 7.5 per cent per year, enough to expand demand by 75 per cent over next 15 years.

"In many instances it will translate into absolute growth well in excess of what we've already seen over the past 15 years," he said.

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