One-speed thinking in a two-speed economy

The debate over the Gillard government's agonised and poorly handled decision to stick with its move to allow 1700 foreign workers to work at Gina Rinehart's $6.5 billion Roy Hill iron ore mine is an omen. It's a sign that we don't yet realise how the mining and LNG booms will profoundly change Australia. In 20 years' time, it's going to be a different place.

Look behind the sub-text of politics, economics and race (Bob Katter's talk about "plum” jobs going to foreigners is evidence that you don't have to scratch deep in Australia) and claims that Rinehart, with her preference for creating special economic zones where companies can bring in temporary workers exempt from workplace laws, is trying to turn this place into another Dubai (yes, she might want that but no government of any persuasion would allow it). The real lesson in this row over enterprise migration agreements is Australia's unwillingness to acknowledge that we are in a period of immense transition.

The last time this happened was in the 80s, when Australia was shifting from a manufacturing-based economy to services. But at least that was happening inside cities and the economy was moving as one. It was a walk in the park compared to this. That was silent, this won't be. The mining boom is no fly-by-night thing. It will change the structure of Australia and we're seeing the first signs of that happening now. There will be more mines and the process will stretch out at least over a decade. Expect to see thousands more special visa workers coming here thanks to enterprise migration agreements.

It's not as if this hasn't happened before. Immigrants worked on the Snowy Mountains Scheme and every mining boom has produced mining camps. But what's different this time is that other industries like retail and manufacturing are in decline and we have a surging resources industry struggling with skills shortages. That makes it different.

The first signs of this change are obvious and have been extensively written about: it's a two speed economy. Every day we read reports of companies closing and laying off workers in the southern and eastern states. But while the south and east are struggling, the real job growth is happening in the north and west. In Queensland, the Newman Government has approved the $6.4 billion Alpha Coal Project in Queensland's Galilee Basin owned by Indian conglomerate GVK and Gina Rinehart's Hancock Coal. The mine is expected to generate 3600 jobs in construction and 990 in operation. There is also plenty of work in Western Australia which has enjoyed a 4 per cent growth in jobs compared with 0.2 per cent for the rest of the country. According to the official statistics, we have a national average of 61.9 per cent of people in the workforce – over in the west, it's 66 per cent.

How do we reconcile the job carnage in the south and east with the jobs boom in the north and the west? Some try to make the connection. ACTU secretary Dave Oliver has blamed the high Australian dollar, driven by the mining boom, for the demise of Hastie Group, ignoring the accounting irregularities, slack auditing and dud buying decisions. Meanwhile Qantas is encouraging its 500 sacked workers to relocate with their families to the Pilbara. But that's unlikely to happen, it's just spin.

The reality is that Australians hate to move, particularly to the west. According to the Australian Bureau of Statistics, 7000 people came to Western Australia from the east in the 12 months last September. Not much when you see that the state has attracted up to 48,000 people from overseas. In other words, for every Australian who goes west, there are seven from overseas. Companies in Perth, particularly accounting firms, are now struggling to recruit and retain talent because they can't compete with mining companies offering salaries 50 per cent over what they can pay and forcing up their costs. But they can't seem to get anyone from the east. The Nullarbor Plain is like the Korean demilitarised zone, people just don't cross it. The last time there was a big movement across the Nullarbor was in the 1890s with the gold rush as workers from Victoria and Tasmania flocked to the west. You can be sure that history won't be repeating itself with this mining boom.

Mining companies say that Australians are just reluctant to move to work, it's something deeply ingrained in our psyche. In America, a kid born in Ohio might finish school and head off to a College in Boston or California. It's a rite of passage. In Australia, a kid born in Melbourne, will finish school and go to university in Melbourne. They'll finish, get a job, head off overseas for a few years and then come back home to Melbourne. The ones from regional towns and from places like Adelaide and Hobart are more adventurous. True, in America there are more towns to choose from. In Australia it's just Sydney and Melbourne, it's just the back blocks everywhere else. But when it comes down to it, Australians are deeply provincial, we like our comfort zones.

But that's being challenged now. According to the National Resources Sector Employment Taskforce, 61,500 new jobs will have to be filled by the minerals sector by 2015. It predicts a shortfall of 1700 mining engineers with five years' experience. If Australians are reluctant to move, they will have to come from somewhere. Enter Gina and the growth of the FIFO (fly-in-fly-out phenomenon).

Both are not without their management challenges. FIFO projects have notoriously high attrition rates of as much as 40 per cent and have sub-optimal productivity in handover times from one shift to the next. There are also questions about the impact on families, communities, occupational health and safety issues and accommodation. While Rinehart's workers have to speak English and be employed under normal conditions of workplace law, it is something that will always to be managed. "If the Australian public, for whatever reason, is worried about the arrival of a few boat arrivals, how will they take to a mono-cultural enclave of say 1500 Chinese arriving in the Pilbara or Port Headland,'' says management consultant Kevin Dwyer who runs the Change Factory. We can also expect to see more questions raised about the nature of enterprise migration agreements, which are not publically available for scrutiny. That might have to change if these arrangements keep generating political heat.

But the big issue really is about public policy. Governments will need to create the infrastructure to accommodate these new arrangements, to encourage people to relocate by building regional airports, schools, hospitals and clinics in these remote parts of the country. That will attract more people.

The Gillard government; racked by division; its leader terrified of offending Paul Howes and the AWU; her tensions with Immigration minister Chris Bowen who is a Rudd supporter; and continuing speculation about her leadership, has failed to take the matter in hand. It remains to be seen whether future governments will be any more effective. All we know is that the mining boom will continue to shape politics, and transform the country.