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FEATURE ARTICLE 1: THE RESOURCES INDUSTRY IN WESTERN AUSTRALIA 2001–02 TO 2005–06


INTRODUCTION

The resources industry is very important to the economic development of Western Australia, contributing more than one quarter of the state's total production per year and more than half of its exports. At the end of the 1990s, the resources industry was under considerable pressure from falling world mineral and energy prices, as the global economy slowed, particularly in the US and Japan. Many of the state's mining operations were forced to reduce or cease production due to declining commodity prices, while investment expenditure slowed considerably as business expectations diminished.

However, in recent years, rapid industrial growth and infrastructure development in China have boosted world prices for mineral and energy resources to record levels, especially prices of Western Australia's major exports of iron and copper ore, nickel, alumina and liquefied natural gas (LNG). This, in turn, has generated record growth in resource industry investment, as the industry has sought to increase production capacity to secure lucrative long-term supply contracts and take advantage of historically high prices.

NON-RURAL COMMODITY PRICE INDEX, Western Australia

DEFINING THE BROADER VIEW OF MINING - THE "RESOURCES INDUSTRY"

The broader view of the mining industry presented in the 2002 feature article 'The resources industry in Western Australia', defined the industry using the Australian and New Zealand Standard Industry Classification (ANZSIC). It incorporated the 'mining' ANZSIC Division, 'manufacturing' ANZSIC Classes relevant to basic mineral processing, and the 'electricity and gas supply' ANZSIC Subdivision. Due to changes in the ABS business register, following the introduction of the new tax system in 2000, it is no longer possible to obtain the detailed mining-related manufacturing data required to reproduce this view of Western Australia's resources industry. However, an alternative view can be produced using data available at the broader ANZSIC Subdivision level for mining-related manufacturing activity (as outlined in the flow diagram below).

It should be noted that there are other industries active in the extraction and handling of mineral and energy resources, such as the construction and transport industries. However, there are practical difficulties in isolating the mining-related activities of these industries, including the additional burden that would be placed on businesses in providing the breakdown.

VALUING THE RESOURCES INDUSTRY

Contribution to gross state product

The resources industry is by far the largest contributor to the Western Australian economy, ahead of the industries of property and business services, and construction. From 2001-02 to 2005-06, the resources industry contributed an estimated annual average of 26.7% ($25,926 million) to Gross State Product (GSP). This was up from an annual average of 23.5% ($15,698 million) in the period between 1996-97 and 2000-01. Most of the increase occurred in the last three years, with the contribution of the resources industry to GSP rising from 22.5% ($20,787 million) in 2003-04 to 31.7% ($37,734 million) in 2005-06.

ESTIMATED AVERAGE ANNUAL CONTRIBUTION TO GSP, By industry - 2001-02 TO 2005-06

INDUSTRY VALUE ADDED, Resources industry - Western Australia
		2001-02	2002-03	2003-04	2004-05
ANZSIC	Industry	$m	$m	$m	$m
B	Mining(a)	15 240	17 018	16 360	18 175
25	Petroleum, coal, chemical and associated product manufacturing	1 124	1 112	1 223	1 521
27	Metal product manufacturing	2 860	2 701	2 596	2 568
D	Electricity, gas and water supply	1 865	1 890	2 001	2 164
	Total	21 089	22 721	22 180	24 428
(a) Excludes ANZSIC 15 Services to mining.
Mining Operations, Australia, cat. no. 8415.0; Manufacturing Industry, Australia, cat. no. 8221.0; Electricity, Gas, Water and Sewerage Operations, Australia, cat. no. 8226.0.

Sales and service income

Sales and service income comprises income generated by a business from the sale of goods and services, and rent, leasing and hiring. Sales and service income for the resources industry rose by 36.9% ($13,690 million) from 2001-02 to 2004-05. Mining activity accounted for half of the increase ($7,063 million). In annual average terms, the fastest growth came from metal product manufacturing, which grew by 17.4% per year, followed by mining (9.8%) and petroleum, coal, chemical and associated product manufacturing (5.4%).

SALES AND SERVICE INCOME, Resources industry(a) - Western Australia
		2001-02	2002-03	2003-04	2004-05
ANZSIC	Industry	$m	$m	$m	$m
B	Mining(b)	21 719	24 390	24 432	28 782
25	Petroleum, coal, chemical and associated product manufacturing	6 399	6 468	6 929	7 484
27	Metal product manufacturing	8 961	12 951	13 743	14 503
	Total	37 079	43 809	45 104	50 769
(a) Data on ANZSIC D Electricity, gas and water supply is not for publication and does not appear in the table or the total.
(b) Excludes ANZSIC 15 Services to mining.
Mining Operations, Australia, cat. no. 8415.0; Manufacturing Industry, Australia, cat. no. 8221.0; Electricity, Gas, Water and Sewerage Operations, Australia, cat. no. 8226.0.

Operating profit before tax

Operating profit before tax is defined as the profit made by a business before extraordinary items are brought to account and prior to the deduction of income tax and appropriations to owners (eg. dividends). Resource industry profits accounted for over one third (35.0%) of total profits made by Western Australian industries in 2004-05 (excluding agriculture, forestry and fishing, and finance and insurance). Profits in the resources industry rose by 71.0% between 2001-02 and 2004-05, with mining activities accounting for four fifths (83.0%) of the increase (up $5.7 billion or 95.6%). Petroleum, coal, chemical and associated product manufacturing (up $250 million or 58.9%) and electricity, gas and water supply (up $814 million or 33.2%) also recorded substantially higher profits over the period.

OPERATING PROFIT BEFORE TAX, Resources industry - Western Australia
		2001-02	2002-03	2003-04	2004-05
ANZSIC	Industry	$m	$m	$m	$m
B	Mining(a)	5 993	9 909	10 481	11 722
25	Petroleum, coal, chemical and associated product manufacturing	424	425	327	674
27	Metal product manufacturing	851	1 200	927	963
D	Electricity, gas and water supply	2 450	2 744	2 651	3 264
	Total	9 719	14 278	14 386	16 622
(a) Excludes ANZSIC 15 Services to mining
ABS data available on request, Mining Operations, Australia, cat. no. 8415.0; Manufacturing Industry, Australia, cat. no. 8221.0; Electricity, Gas, Water and Sewerage Operations, Australia, cat. no. 8226.0.

Royalties and other taxes

As mineral and energy resources are owned by the community, state and federal governments levy a tax on mining companies in return for the right to explore for and extract these resources. These taxes are commonly referred to as royalties. In Western Australia, the state government receives royalty payments for all land-based minerals, as well as a portion of those royalties paid by the offshore oil and gas operations which are in the federal jurisdiction. The allocation of offshore jurisdictions between the states or territories and the Commonwealth was agreed to in the 1979 Offshore Constitutional Settlement. The agreement assigned to the states and territories responsibility for minerals and petroleum projects within three nautical miles of the coast, while the Commonwealth took responsibility for resource projects beyond the three nautical mile boundary.

WESTERN AUSTRALIAN GOVERNMENT ROYALTY RECEIPTS, By commodity
	2001-02	2002-03	2003-04	2004-05	2005-06
Commodity	$m	$m	$m	$m	$m
Iron ore	276.1	286.7	293.7	380.3	679.6
Petroleum and gas(a)	428.3	488.6	416.3	549.7	678.8
Nickel(b)	49.3	60.0	76.8	93.4	86.7
Gold	79.8	85.4	79.5	72.9	81.6
Alumina	61.4	55.0	50.0	54.6	64.1
Diamonds	62.6	89.3	45.0	32.6	48.2
Minerals sands	25.9	26.7	26.2	26.8	30.8
Other	44.7	47.3	46.1	45.6	66.7
Total	1 028.1	1 139.0	1 033.6	1 255.9	1 736.6
(a) Includes North West Shelf royalties received by the Western Australian Government in the form of a Commonwealth Grant.
(b) Includes cobalt, palladium and platinum.
Western Australian Department of Industry and Resources, Mineral and Petroleum Statistics Digest 2005-06.

Royalties from the resources industry contributed about one tenth of Western Australia's consolidated revenue between 2001-02 and 2005-06. Mining royalties as a component of state general government consolidated revenue varied from 8.0% ($1,034 million) in 2003-04 to 10.7% ($1,737 million) in 2005-06. In 2005-06, iron ore and petroleum each contributed 39.1% of total royalties, while nickel (5.0%) and gold (4.7%) were the other major contributors.

Iron ore mining generated the largest increase in royalty revenue in the last two years, reflecting an increase in iron ore production and a doubling of iron ore export prices over the period. Royalty revenue from iron ore extraction rose from $294 million in 2003-04 to $680 million in 2005-06 (up $386 million or 131.4%), with most of the growth occurring in 2005-06 (up $299 million or 78.7%). Petroleum extraction added a further $251 million (58.5%) to royalty revenue between 2001-02 and 2005-06. Diamond mining was the only major mineral to record a decline in royalties, down $14 million (23.0%) over the five years.

The Australian Government also levies a number of taxes and royalties on the petroleum and gas extraction industry operating off the coast of Western Australia. Petroleum Resource Rent Tax (PRRT) is levied on profits from the extraction of crude oil and gas in Australian Government waters, however, it is not applied to value added projects such as LNG from the North West Shelf project. Instead, the Australian Government Royalty is levied on the value of petroleum and gas production on the North West Shelf. About two thirds of the total value of the royalty is paid back to the Western Australian Government by the Commonwealth each year, a sum of $609 million in 2005-06.

Crude oil excise applies to crude oil extracted from waters off the Western Australian coast, onshore areas, and the North West Shelf project area in Australian waters. In 2005-06, the value of this excise was $291 million. The federal government has waived the Crude Oil Excise on production from Barrow Island, instead receiving 75% of Resource Rent Royalty (RRR) levied by the state government - a figure worth $36 million in 2005-06. The Commonwealth also receives a share of certain Western Australian internal waters royalties from projects pre-dating the Offshore Constitutional Settlement, worth $20 million in the latest year. The value of royalties and taxes received by the Australian Government is summarised in the table below. It includes an estimate of the PRRT received from projects in Commonwealth waters off the Western Australian coast.

AUSTRALIAN GOVERNMENT PETROLEUM AND GAS ROYALTIES AND TAXES, Sourced in Western Australia
	2001-02	2002-03	2003-04	2004-05	2005-06
	$m	$m	$m	$m	$m
Crude Oil Excise	354	368	313	618	291
Petroleum Resource Rent Tax (PRRT)(a)	544	686	467	584	804
Internal Waters Royalty	15	15	16	18	20
Resource Rent Royalty (RRR) - Barrow Island	34	42	23	29	36
North West Shelf Royalty(b)	205	236	200	264	317
Total	1 152	1 347	1 019	1 513	1 468
(a) Estimated based on 40% of total Australian PRRT.
(b) Excludes North West Shelf Royalty remitted to the Western Australian Government.
Western Australian Department of Treasury and Finance; Department of Industry, Tourism and Resources.

LABOUR

Number of employed persons

Despite the enormous contribution the resources industry makes to the Western Australian economy in terms of value added, investment and export revenue, it only ranks as the states seventh largest employer from a total of 17 industries. In 2005-06, 69,650 persons were employed in Western Australia's resources industry, 6.6% of total employment in the state. Nationally, the resources industry employed only 2.7% of Australia's working people.

INDUSTRY CONTRIBUTION TO TOTAL EMPLOYMENT, Western Australia - 2005-06

NUMBER OF EMPLOYED PERSONS, Resources industry - Western Australia
		2001-02	2002-03	2003-04	2004-05	2005-06
ANZSIC	Industry	'000	'000	'000	'000	'000
11	Coal mining	0.8	1.1	0.8	0.9	1.6
12	Oil and gas extraction	1.4	1.6	2.6	2.8	4.5
13	Metal ore mining	19.4	22.1	22.3	20.0	25.1
14	Other mining	2.6	2.0	2.9	3.6	3.3
15	Services to mining	7.5	7.8	9.4	9.3	10.3
	Mining uncategorised(a)	0.4	0.2	0.5	5.6	5.5
251	Petroleum refining	1.7	0.5	0.8	0.7	0.8
271	Iron and steel manufacturing	2.7	2.8	2.6	2.8	4.6
272	Basic non-ferrous metal manufacturing	3.5	6.6	4.5	6.1	8.1
36	Electricity and gas supply	3.4	4.3	3.9	6.2	5.9
	Total	43.4	49.0	50.3	58.0	69.7
(a) Activities which are too broad to be represented within a specific mining classification.
ABS data available on request, Labour Force Survey, Australia, cat. no. 6202.0.

Strong employment growth in the resources industry in recent years has been underpinned by increased investment and production activity, as the industry has responded to accelerating international demand for minerals and energy. Overall, employment in the resources industry grew by 26,225 persons (60.4%) between 2001-02 and 2005-06, with almost half of those jobs created in the last year (11,700 persons or 44.6%). The metal ore mining industry accounted for 5,700 (29.4%) new jobs over the period, while basic non-ferrous metal manufacturing also showed strong growth, with employment increasing by 4,600 persons or 131.4%. The fastest growth in employment was in oil and gas extraction, which gained 3,100 persons, a 221.4% increase between 2001-02 and 2005-06. The only industry to record a decline in the number of employed persons over the period was petroleum refining, falling from 1,700 persons in 2001-02 to 800 persons in 2005-06.

Hours worked

Full-time workers

Full-time employment in Western Australia's resources industry grew by 55.7% (23,200) to 64,825 persons between 2001-02 and 2005-06, which contributed to a 56.7% rise in total weekly hours worked over the same period. With the number of full-time employed persons increasing by less than the total hours worked, the average hours worked by full-time workers in the resources industry rose marginally from 45.2 per week in 2001-02 to 45.5 per week in 2005-06. This was in line with rising production and investment levels, as well as difficulties in filling skilled positions in the industry.

Part-time workers

Growth in part-time employment was strong in Western Australia's resources industry between 2001-02 and 2005-06, rising by almost three times the rate of full-time employment - up 156.0% (2,925) to 4,800 persons. However, although total weekly hours worked by part-time workers almost doubled over the same period (up 97.8%), it was still far short of the rise in part-time employment, and as a consequence, average weekly hours worked by part-time workers fell dramatically, from 19.7 per week in 2001-02 to 15.3 per week in 2005-06.

Total workers

When combining the hours worked by full-time and part-time workers in the resources industry, average weekly hours worked fell slightly, from 44.1 hours in 2001-02 to 43.4 hours in 2005-06. This decline was the result of the large rise in the proportion of part time workers in the resources industry, increasing from 4.3% to 6.9%, mostly in 2005-06. In that year, part-time workers more than doubled from 2,275 to 4,800 (111.0%), while full-time employment rose by only 16.7% from 55,550 to 64,825 persons.

The slight fall in average weekly hours worked in the resources industry was in contrast to a small rise in average weekly hours worked in all other Western Australian industries, from 34.2 in 2001-02 to 34.6 in 2005-06. Despite this, people in the resources industry still worked far greater average weekly hours than in other Western Australian industries. In each year between 2001-02 and 2004-05, average weekly hours worked in the resources industry remained above 43 hours per week, while across all other industries they worked around 35 hours per week.

AVERAGE WEEKLY HOURS WORKED, Total workers - Western Australia

AVERAGE WEEKLY HOURS WORKED, Resources industry - Western Australia
		2001-02	2002-03	2003-04	2004-05	2005-06
ANZSIC	Industry	no.	no.	no.	no.	no.
11	Coal mining	45.3	40.8	43.1	35.8	42.0
12	Oil and gas extraction	40.0	45.2	41.3	51.1	41.6
13	Metal ore mining	46.9	47.8	46.3	47.7	47.4
14	Other mining	42.3	37.4	48.4	48.0	45.6
15	Services to mining	43.7	46.2	46.3	44.9	44.1
	Mining uncategorised(a)	40.9	64.6	62.9	46.6	46.3
251	Petroleum refining	44.1	43.7	39.0	34.9	32.4
271	Iron and steel manufacturing	39.7	44.4	42.2	40.1	39.3
272	Basic non-ferrous metal manufacturing	40.9	36.9	39.1	35.7	36.1
36	Electricity and gas supply	39.1	42.3	38.5	38.4	38.1
	Total	44.1	44.8	44.7	44.4	43.4
(a) Activities which are too broad to be represented within a specific mining classification.
ABS data available on request, Labour Force Survey, Australia, cat. no. 6202.0.

The average weekly hours worked by petroleum refining was the shortest working week in the resources industry at 32.4 hours in 2005-06, while basic non-ferrous metal manufacturing had the second lowest average working week of 36.1 hours.

Average weekly earnings of full-time adults

Average weekly earnings of full-time adults employed in Western Australia's resources industry rose by $277 (23.2%) between 2001-02 and 2005-06. This rise was greater in dollar terms than the state average increase of $204 (23.9%). As a result, resource industry average weekly earnings were $413 (39.0%) higher than state average earnings in 2005-06, $1,473 compared to $1,060.

All of the sectors of Western Australia's resources industry recorded average weekly ordinary time earnings above the state average of $1,060 in 2005-06. Within the industry, the highest earnings were in oil and gas extraction at $2,371 per week, while the lowest earnings were in petroleum, coal, chemical and associated product manufacturing at $1,205 per week.

AVERAGE WEEKLY ORDINARY TIME EARNINGS, Full-time adults - Western Australia
		2001-02	2002-03	2003-04	2004-05	2005-06
ANZSIC	Industry	$	$	$	$	$
11	Coal mining	1 502.75	1 528.00	1 592.90	1 689.43	1 692.90
12	Oil and gas extraction	2 164.83	2 008.65	2 123.33	2 258.20	2 371.30
13	Metal ore mining	1 443.43	1 531.70	1 623.58	1 636.38	1 701.73
14	Other mining	1 028.58	1 281.83	1 345.75	1 484.43	1 622.50
15	Services to mining	1 042.85	1 216.68	1 333.10	1 417.68	1 409.38
25	Petroleum, coal, chemical and associated product manufacturing	908.13	953.40	1 206.80	1 242.18	1 204.70
27	Metal product manufacturing	888.75	944.30	1 016.63	1 125.38	1 298.63
36	Electricity and gas supply	1 070.80	1 122.80	1 190.93	1 239.40	1 337.73
	Total resources industry	1 195.29	1 253.46	1 326.70	1 387.33	1 472.71
	All Industries	855.43	893.65	942.95	999.18	1 059.70
ABS data available on request, Average Weekly Earnings, Australia, cat. no. 6302.0.

The largest increases in average weekly earnings within the resources industry were recorded by other mining, which grew by 57.7% ($594) to $1,622 between 2001-02 and 2005-06, followed by metal product manufacturing with 46.1% ($410) to $1,299. Other mining mainly comprises the activities of gravel and sand quarrying and other construction material mining.

Methods of setting pay

Average hourly cash earnings were much higher in Western Australia's resources industry than across the rest of state economy. The resources industry recorded average hourly cash earnings for non-managerial employees of $34.90 in May 2006, compared to the state average of $26.50. Average hourly cash earnings in the resource industry ranged from a low of $16.00 for employees whose pay was determined by awards to a high of $37.90 for those employees subject to registered individual agreements. The hourly earnings for resource industry employees on awards was lower than the state average of $17.20 in May 2006. For registered individual agreements, resource industry average hourly earnings were higher than the state average of $33.40.

METHODS OF SETTING PAY, Average cash earnings of non-managerial employees(a) - Western Australia
	RESOURCES INDUSTRY			ALL INDUSTRIES
	Average weekly total cash earnings	Average weekly hours paid for	Average hourly cash earnings	Average weekly total cash earnings	Average weekly hours paid for	Average hourly cash earnings
	$	no.	$	$	no.	$
Award only	335.80	21.00	16.00	470.10	27.30	17.20
Registered collective agreements	1 543.10	44.20	34.90	848.00	30.90	27.40
Unregistered collective agreements	np	np	np	898.20	35.50	25.30
Registered individual agreements	1 719.50	45.40	37.90	1 255.80	37.60	33.40
Unregistered individual arrangements	1 423.40	43.50	32.70	945.40	35.40	26.70
All methods of setting pay	1 516.30	43.50	34.90	869.30	32.80	26.50
np not available for publication but included in totals where applicable, unless otherwise indicated
(a) Comprises regular wages and salaries in cash, including amounts salary sacrificed.
ABS data available on request, Employee Earnings and Hours, Australia, cat. no. 6306.0.

Within the resources industry, the highest average hourly cash earnings for non-managerial employees were recorded in mining, with an average of $45.80 in May 2006. Under registered collective agreements, mining employees received an average hourly pay of $49.90, while those subject to individual arrangements received $46.00 under registered agreements and $45.40 under unregistered arrangements. Average hourly cash earnings in petroleum and metal product manufacturing were $40.20, and ranged between $18.50 for award based pay and $42.00 for registered collective agreements. The electricity, gas and water supply industry recorded average hourly cash earnings of $38.40 in May 2006. It should be noted that this analysis is based on the workplace relations environment prior to the introduction of the Workplace Relations Amendment (Work Choices) Act 2005.

Occupational health and safety

As well as the personal cost to individual workers, workplace injuries and diseases are costly to industry through lost production and compensation costs. The Western Australian Department of Consumer and Employment Protection monitors the incidence of workplace injuries and diseases through its Worksafe program. This analysis focusses on occurrences of workplace injury or disease that resulted in a fatality, permanent disability or time lost from work of at least one day or one shift.

In 2004-05, the resources industry in Western Australia reported 2,318 occurrences of lost time injuries or diseases. This represented 11.7% of the total incidents reported in Western Australia in that year. It was a slight improvement on 2002-03, when the resources industry accounted for 11.9% of lost time incidents in the state.

The frequency rate of lost time injuries or diseases, which is defined as the number of lost time injuries or disease incidents for each one million hours worked, shows a relatively high rate of injury or disease for many activities within the resources industry in Western Australia. Metal product manufacturing recorded the highest rate of lost time injuries or diseases in 2004-05 at 37.3 incidents per million hours worked - more than two and a half times the state average of 14.1 incidents per million hours worked. Petroleum, coal, chemical and associated product manufacturing (17.6), other mining (15.7) and services to mining (14.4) were the other industries to record frequency rates above the state average in 2004-05.

FREQUENCY RATE OF LOST TIME INJURIES AND DISEASES(a), Resources industry - Western Australia
		2002-03	2003-04	2004-05
ANZSIC	Industry	no.	no.	no.
11	Coal mining	12.5	14.8	13.8
12	Oil and gas extraction	15.0	7.0	7.5
13	Metal ore mining	7.1	6.4	8.0
14	Other mining	22.0	18.9	15.7
15	Services to mining	15.4	10.7	14.4
25	Petroleum, coal, chemical and associated product manufacturing	13.4	17.2	17.6
27	Metal product manufacturing	33.8	35.4	37.3
36	Electricity and gas supply	5.4	6.3	4.1
	Western Australia	13.6	13.6	14.1
(a) Number of lost time injuries and diseases per one million hours worked.
Western Australian Department of Consumer and Employment Protection.

Half of the sectors within Western Australia's resources industry recorded increases in the frequency rate of lost time injuries or diseases (per million hours worked) between 2002-03 and 2004-05, ranging from a rise of 0.9 incidents in metal ore mining to a rise of 4.2 incidents in petroleum, coal, chemical and associated product manufacturing. The sectors recording decreases in their frequency rate of lost time injuries or diseases, ranged from a decline of 1.0 incidents in services to mining to a decline of 7.5 incidents in oil and gas extraction.

EDUCATION AND TRAINING

Participation in education and training

Due to data limitations, the following analysis of education and training only relates to the mining component of the resources industry.

There have been mixed results in the participation of mining industry workers in education and training in recent times. The proportion of workers who completed work-related training in the mining industry dropped from 76.8% to 72.5% between 2001 and 2005. However, the number of workers completing training rose by 15.0% (3,640) to 27,840 workers. One of the reasons behind the falling proportion of people completing training may have been the rise in workers enrolled to study for an educational qualification, which increased from 11.4% (3,600 workers) to 13.8% (5,299 workers) over the period.

The total number of training hours undertaken by workers in the mining industry also fell, from 1,630,900 hours in 2001 to 899,100 hours in 2005, a drop of 44.9% or 731,800 hours. Despite the falling number of training hours, the number of work-related courses completed increased from 50,000 to 54,900 over the period.

PARTICIPATION IN EDUCATION AND TRAINING, Mining - Western Australia
	2001		2005
	%	no.	%	no.
Completed a work-related training course	76.8	24 200	72.5	27 840
Did not completed a work-related training course	23.2	7 300	27.5	10 560
Enrolled to study for educational qualification	11.4	3 600	13.8	5 299
Did not enrol to study for educational qualification	88.6	27 900	86.2	33 101
Total training hours	. .	1 630 900	. .	899 100
Work-related courses completed	. .	50 000	. .	54 900
. . not applicable
Education and Training Experience, Australia, cat. no. 6278.0.

Apprenticeships and traineeships

The three most prominent occupations in Western Australia's mining industry are intermediate production and transport workers, professionals, and tradespersons and related workers. In 2005-06, nearly two thirds of all mining workers were employed in one of these occupations: 24.6% (12,350) in intermediate production and transport workers, 22.9% (11,492) in professionals and 20.7% (10,402) in tradespersons and related workers.

Two of these occupations were also among the most rapidly growing occupations in the mining industry. Between 2001-02 and 2005-06, people employed as intermediate production and transport workers rose by 67.8% (4,989), while tradespersons and related workers rose by 70.9% (4,314). Growth in mining professionals ranked 5th largest, up by 20.5% (1,958).

In 2005-06, the mining industry in Western Australia employed 13.1% of the state's intermediate production and transport workers, 7.0% of its tradespersons and related workers, and 4.9% of its managers, administrators and professionals. These occupations have shown some of the largest increases in apprentice and trainee numbers in recent years.

Among trades and related occupations, the number of persons commencing apprenticeships increased from 4,200 in 2001-02 to 8,700 in 2005-06. There was also 600 more people commencing apprenticeships and traineeships in managers, administrators and professionals. Commencements of apprenticeships and traineeships fell by 300 in intermediate production and transport between 2001-02 and 2005-06, although there was strong growth in 2005-06 of 500 persons.

More important to the immediate supply of skilled workers to the state economy, apprenticeship and traineeship completions have also risen solidly. Between 2001-02 and 2005-06, the number of people finishing their training rose by 1,100 in the occupation of intermediate production and transport workers. Completions also rose by 300 in tradespersons and related workers and by 200 in managers, administrators and professionals - increases were larger for these two occupations in 2005-06, rising by 400 and 300 people respectively.

APPRENTICES AND TRAINEES, By occupation - Western Australia
	2001-02	2002-03	2003-04	2004-05	2005-06
	no.	no.	no.	no.	no.
COMMENCEMENTS
Managers, administrators and professionals	-	-	100	400	600
Associate professionals	600	500	500	600	700
Tradespersons and related workers	4 200	5 000	5 900	7 400	8 700
Intermediate production and transport workers	2 700	2 000	2 400	1 900	2 400
Labourers and related workers	2 100	2 500	2 500	2 500	2 500
Clerical, sales and service workers	4 700	5 600	6 600	7 200	6 500
COMPLETIONS
Managers, administrators and professionals	100	-	-	-	300
Associate professionals	400	500	300	400	400
Tradespersons and related workers	2 900	2 900	2 900	2 800	3 200
Intermediate production and transport workers	200	300	1 400	1 700	1 300
Labourers and related workers	800	900	1 100	1 400	1 200
Clerical, sales and service workers	2 200	2 500	2 800	3 200	4 600
- nil or rounded to zero (including null cells)
National Centre for Vocational Education Research, Australian Vocational Education and Training Statistics.

Skilled vacancies

Rapid growth in Western Australia's resources industry has increased the demand for skilled labour in the state. Although skilled vacancy counts are not available by industry, it is reasonable to conclude that the resources industry has felt the full effect of the current skills shortage. This is because much of the rise in skilled vacancies has been in occupations with a strong association to the resources industry.

SKILLED VACANCIES, Western Australia

INVESTMENT

Private new capital expenditure

As with the analysis of education and training, business investment data is only available for the mining component of the resources industry.

The value of investment expenditure by Western Australia's mining industry has grown tremendously in recent years, fuelled by the strong demand for resource commodities from Asia. From 2001-02 to 2005-06, new capital investment in the mining sector more than tripled (up $7,642 million or 247.2%) to reach over $10 billion in 2005-06. At the same time, the contribution of mining to total state investment has increased from just over half in 2001-02 (51.6%) to almost two thirds in 2005-06 (65.2%). Investment growth was particularly strong in mining in 2005-06, almost doubling by $5,202 million (94.1%) to $10,733 million.

PRIVATE NEW CAPITAL EXPENDITURE, Mining industry - Western Australia

When analysing the quarterly data, Western Australia's mining investment fell sharply in the September quarter 2006, down 22.0% ($801 million) to $2,847 million, following five quarters of consecutive strong growth between the June quarters of 2005 and 2006. The fall in mining investment was the first since the March quarter 2005 (down $210 million or 14.7%). Anecdotal evidence suggests that much of the slowdown during the quarter was due to delays in completing new projects, and in some cases, the deferment of proposed projects.

The softening in mining investment in the September quarter 2006 centred around the state's increasing shortage of skilled labour and rising labour costs, as well as the higher costs of energy and materials. According to media reports, the cost of BHP Billiton's Ravensthorpe nickel mine more than doubled from its original estimate of around $1 billion, while Chevron's Gorgon liquified natural gas project at Barrow Island was likely to cost a further $5 billion (up to $16 billion). The estimated cost of the fifth train on the North West Shelf increased by 21.3% to $2.4 billion between the June and September quarters of 2006, while Woodside Petroleum's Pluto LNG project could cost twice its initial estimate, up to $10 billion. The final cost of the Boddington gold mine south of Perth almost doubled to $1.8 billion and Fortescue Metals Group confirmed a $1 billion rise in the total cost of its Pilbara iron ore project. BHP has also deferred a proposed $900 million expansion of its Worsley alumina refinery in light of cost pressures. [Western Australian Business News, 14 September 2006, p.17]

However, since these reports were made, Western Australia's mining investment in new capital recovered substantially in the December quarter 2006, increasing by 24.5% ($698 million) to $3,545 million.

Construction

Since the beginning of the commodities boom, Western Australia's resources industry has invested heavily in the development of new infrastructure and productive capacity to meet the growing demand for raw materials. The industry is developing new mines, upgrading existing sites and improving transport capacity in the form of rail, ports and pipelines. It has also expanded its downstream minerals and energy processing plants across the state.

Although it is not possible to completely isolate the resources industry, a number of categories of engineering construction activity are closely related to the resources industry. Much of the 'heavy industry' engineering construction activity (including the construction of production, storage and distribution facilities; refineries; pumping stations; mine sites; chemical plants; blast furnaces; steel mills; other industrial processing plants and ovens) is directly associated with the resources industry, while 'electricity generation, transmission and distribution, etc; and pipelines' and 'bridges, railways and harbours' are also connected.

Heavy industry engineering construction activity increased more than five and a half times in Western Australia, from a value of $1,127 million in 2001-02 to $6,522 million in 2005-06 (up $5,395 million or 478.9%). Coupled with this rise has been a rapid build-up of construction work in the pipeline. The value of heavy industry engineering construction yet to be completed at the end of 2005-06 was $7,770 million, more than six times higher (up $6,550 million or 537.1%) than in 2001-02 ($1,220 million). Much of the increase can be attributed to the rapid pace with which the industry has had to respond to surging global demand for raw materials, as well the constraints of skilled labour and materials shortages.

HEAVY INDUSTRY ENGINEERING CONSTRUCTION ACTIVITY, Western Australia

Major resource-related projects

According to the Western Australian Department of Treasury and Finance, the major resource-related projects undertaken in Western Australia over the last five years have included (from most to least recent):

• BHP Billiton's Ravensthorpe nickel project ($2.7 billion);
• North West Shelf consortium's LNG project and fifth train ($2.4 billion);
• Newmont/AngloGold's expansion of the Boddington gold mine, plus 100 megawatt gas-fired power station ($2.0 billion);
• BHP Billion's iron ore Rapid Growth Project 3 ($1.7 billion);
• North West Shelf Consortium's Angel gas field development ($1.5 billion);
• Hancock Prospecting Hope Downs iron ore project ($1.3 billion);
• Rio Tinto's expansion of Argyle diamond mine ($1.2 billion);
• Hamersley Iron's Yandicoogina iron ore mine and Port of Dampier upgrade ($1.6 billion);
• Woodside's Enfield, Vincent and Laverda oil and gas project ($1.5 billion);
• BHP Billiton's Rapid Growth 2 iron ore expansion ($750 million);
• Burrup Fertilisers' ammonia plant on the Burrup Peninsula ($630 million);
• Alcoa's Pinjarra alumina refinery expansion ($440 million);
• Newcrest's Telfer Deeps (underground phase) gold mine expansion ($424 million);
• HIsmelt pig-iron plant in Kwinana ($400 million);
• Newcrest Mining Telfer Deeps gold mine expansion ($975 million);
• the fourth LNG train expansion on the North West Shelf ($2.4 billion);
• Mining Area C iron ore mine (including associated port and rail infrastructure) ($1.0 billion); and
• Mt Margaret nickel project ($1.3 billion).

Mineral exploration expenditure increased from $381 million in 2001-02 to $606 million in 2004-05, before declining slightly in 2005-06 to $590 million. The overall increase over this time was mainly due to increases of $130 million (517.5%) in iron ore exploration and $76 million (122.5%) in copper, silver-lead-nickel and cobalt exploration. Diamonds were the only commodity to record a fall in exploration expenditure, declining in each year between 2001-02 and 2005-06, to reach $11 million in 2005-06 - a little over half of the level of expenditure recorded in 2001-02. Among mineral commodities, gold attracted the highest level of exploration expenditure over the period, $1,280 million or 51.9% of the total. Gold exploration has declined in the last two years to reach $240 million in 2005-06 - slightly above the $238 million recorded in 2001-02. Petroleum exploration rose by 23.7% ($114 million) to $594 million in Western Australia between 2001-02 and 2005-06.

MINERAL AND PETROLEUM EXPLORATION EXPENDITURE, By selected mineral - Western Australia
	2001-02	2002-03	2003-04	2004-05	2005-06
	$m	$m	$m	$m	$m
Copper, silver-lead-zinc, nickel and cobalt	62.1	72.5	80.0	158.2	138.2
Gold	238.1	265.6	276.7	259.6	240.3
Iron ore	25.2	11.2	19.1	136.9	155.6
Mineral sands	6.6	5.5	10.6	7.2	12.9
Diamonds	21.2	17.7	17.0	15.9	11.1
Total minerals	381.1	423.6	465.8	606.0	590.2
Petroleum	479.8	598.3	670.5	526.5	593.6
Total(a)	860.9	1 021.9	1 136.3	1 132.5	1 183.8
(a) Total includes minerals not listed in the table.
Mineral and Petroleum Exploration, Australia, cat. no. 8412.0.

MINERAL AND PETROLEUM PRODUCTION

Western Australia is one of the world's major producers of mineral and petroleum commodities. According to the Western Australian Department of Industry and Resources, in 2005, the state's share of world output for the following commodities was:

• Iron Ore (18%);
• Alumina (17%);
• Gold (7%);
• Liquefied Natural Gas (LNG) (sea borne trade) (8%);
• Nickel (15%);
• Ilmenite (18%);
• Rutile (26%);
• Zircon (32%);
• Diamonds (mainly industrial grade) (18%); and
• Tantalum (54%).

The annual value of mineral and petroleum production increased from $27 billion in 2001-02 to $43 billion in 2005-06, with most of the increase occurring in the last two years of the period. Almost half of the increase (47.1%) was in iron ore production, which rose by $7,749 million, mostly due to a price rise of 71.5% in 2005. Crude oil (up $1,959 million), LNG (up $1,932 million), Nickel (up $1,783 million) and Alumina (up $527 million) were other major contributors to the increase.

VALUE OF PRODUCTION, By selected commodity - Western Australia
	2001-02	2002-03	2003-04	2004-05	2005-06
	$m	$m	$m	$m	$m
Alumina	3 584.4	3 204.7	3 085.1	3 461.6	4 111.3
Copper metal	122.6	138.8	155.8	243.7	402.5
Lead metal	36.7	31.9	10.6	0.3	86.6
Zinc metal	173.8	173.2	79.6	42.4	332.1
Coal	258.1	272.9	274.3	271.7	297.4
Cobalt	127.4	124.2	213.1	202.4	183.5
Diamonds	489.3	773.3	519.7	na	na
Gold	3 469.0	3 445.3	3 109.6	3 016.4	3 574.0
Iron ore	5 207.6	5 205.3	5 331.5	8 302.3	12 956.3
Nickel	2 002.1	2 482.5	3 031.0	3 503.2	3 785.5
Petroleum condensate	1 680.0	2 046.4	1 747.5	2 203.1	2 791.7
Crude oil	4 198.8	4 258.1	3 773.6	5 146.6	6 157.6
Liquefied natural gas (LNG)	2 970.6	3 130.8	2 775.9	3 953.1	4 902.7
Natural gas	643.3	661.9	694.1	678.7	703.3
Salt	228.0	228.0	179.9	221.3	229.9
Total(a)	26 696.1	27 857.7	26 417.2	33 405.9	43 160.3
na not available
(a) Total includes commodities not listed in the table.
Western Australian Department of Industry and Resources, Mineral and Petroleum Statistics Digest 2005-06.

While increases in global commodity prices have underpinned strong growth in the value of resource commodity production and exports, increases in the volume of output were not as widespread. Shortages of skilled labour, in particular, have been cited as a reason for the failure of the parts of resources industry to sufficiently ramp up production capacity in response to surging world demand. Nevertheless, increases in production were recorded in a number of mining industries between 2001-02 and 2005-06.

Output of LNG increased by 57.6%, from 7.4 million tonnes in 2001-02 to 11.7 million tonnes in 2005-06. This was the result of the commissioning of a fourth processing train on the North West Shelf Venture gas project in September 2004, which added 4.2 million tonnes to annual production capacity. The second highest volume increase over the period was recorded in the iron ore industry. Production increased by 47.9% (78.9 million tonnes) between 2001-02 and 2005-06, to reach 243.5 million tonnes - the highest level on record. Copper (up 37.2%), Salt (up 25.6%) and Cobalt (up 15.9%) also recorded substantial production increases over the period. Nickel output increased by 6.5% to reach 191.2 thousand tonnes in 2005-06, despite recording falls in the two previous years.

Production of crude oil decreased in every year between 2001-02 to 2005-06 by an annual average of 6.4% due to the declining yields of mature oil fields and the impact of recent cyclones in the north-west of the state. Gold production fell in three years over the period to 151.1 tonnes in 2005-06, an overall decrease of 18.3% from 2001-02, continuing a decline from the peak in production of 238 tonnes recorded in 1997-98. The fall is partly due to weakness in the Australian dollar-denominated gold price over much of the period and delays in some projects caused by skills shortages and rising capital costs. Lead (down 21.8 %) and Zinc (down 51.8%) also recorded declines in production volumes between 2001-02 to 2005-06, although both showed slight increases in 2005-06. The decline is largely due to the closure of the Lennard Shelf zinc-lead mine in the Kimberley in 2004.

VOLUME OF PRODUCTION, By selected commodity - Western Australia
	2001-02	2002-03	2003-04	2004-05	2005-06
Alumina (Mt)	10.9	11.1	11.2	11.2	11.5
Copper metal (kt)	53.5	59.5	53.3	61.9	71.0
Lead metal (kt)	75.1	70.0	29.4	2.3	58.7
Zinc metal (kt)	223.7	206.5	108.0	48.4	107.9
Coal (Mt)	6.2	6.3	6.0	6.3	6.7
Cobalt (kt)	4.4	4.9	4.6	4.5	5.1
Diamonds (M ct)	25.7	38.9	32.5	22.8	29.3
Gold (t)	185.0	187.5	177.0	167.4	151.1
Iron ore (Mt)	164.6	188.5	202.0	233.2	243.5
Nickel (kt)	179.5	191.9	182.2	180.4	191.2
Petroleum condensate (Gl)	6.3	6.9	6.2	5.6	5.6
Crude oil (Gl)	15.1	14.0	13.2	12.8	11.6
Liquefied natural gas (LNG) (Mt)	7.4	7.8	7.8	11.0	11.7
Natural gas (Gm3)	7.5	8.1	8.1	7.6	7.7
Salt (Mt)	8.6	9.6	9.9	11.6	10.8
Western Australian Department of Industry and Resources, Mineral and Petroleum Statistics Digest 2005-06.

MINERAL AND PETROLEUM EXPORTS

Industry view

The Western Australian economy relies heavily on export income, with the value of merchandise exports accounting for 39.0% of Gross State Product between 2001-02 and 2005-06. Merchandise exports originating from the resources industry (excluding confidential items) accounted for 63.0% (annual average) of total state exports during the same period. Nationally, exports originating from Western Australia's resources industry comprised 18.3% of total Australian merchandise exports.

VALUE OF EXPORTS(a), By industry of origin - Western Australia
		2001-02	2002-03	2003-04	2004-05	2005-06
ANZSIC	Industry	Value (fob) ($m)	Value (fob) ($m)	Value (fob) ($m)	Value (fob) ($m)	Value (fob) ($m)
11	Coal mining	1.6	0.9	0.3	0.2	0.3
12	Oil and gas extraction	7 389.2	7 805.5	6 201.5	8 839.4	10 072.1
13	Metal ore mining	5 773.6	6 012.0	6 089.4	9 182.2	14 640.2
14	Other mining	81.5	80.7	75.0	87.4	107.6
2510	Petroleum refining	334.0	367.1	363.3	509.7	567.4
2711	Basic iron and steel manufacturing	254.8	314.2	406.9	91.6	106.9
2722	Aluminium smelting	-	-	-	0.9	0.1
2723	Copper, silver, lead and zinc smelting, refining	101.6	61.9	77.6	85.9	259.0
2729	Basic non-ferrous metal manufacturing n.e.c.	4 341.1	5 152.3	5 573.2	5 608.2	7 106.4
	Re-exports	61.4	62.2	120.4	81.7	78.4
	Total(a)	18 338.9	19 856.8	18 907.7	24 487.0	32 938.4
- nil or rounded to zero (including null cells)
(a) Excludes confidential commodities.
ABS data available on request, International Trade in Goods and Services, Australia, cat. no. 5368.0.

Major export commodities

Western Australia's major export commodities between 2001-02 and 2005-06 were iron ore, valued at $36 billion (20% of total WA exports), followed by gold ($27 billion or 14.8%), crude petroleum oil ($23 billion or 12.7%) and natural gas ($15 billion or 8.1%).

The value of Western Australia's resources exports increased by 79.6% between 2001-02 and 2005-06. The value of metal ore mining exports increased by 153.6% during this period, mostly due to iron ore, which increased by 148.9%. Most of this increase was over the last two years, with a 54.0% increase in 2004-05 and a 58.4% increase in 2005-06. This growth reflected the higher iron ore export contract prices negotiated in 2004-05 and 2005-06. The increase in volume of iron ore exports between 2001-02 and 2005-06 was 52.9% or 82.1 million tonnes.

Exports from the oil and gas extraction industry increased by 36.3% between 2001-02 and 2005-06, from $7,389 million to $10,072 million. Natural gas exports increased by 56.9% during this period, $2,612 million to $4,093 million, mainly due to increased production capacity on the North West Shelf. Crude oil exports recorded a rise of 23.1%, over the period, from $4,315 million to $5,311 million. However, in volume terms, there was a 35.5% decrease in crude oil exports. The other commodity to record a large value increase between 2001-02 and 2005-06 was gold, which rose by 98.8%, from $3,602 million to $7159 million, mainly due to centralisation of national gold refining in Western Australia. The volume of gold exports increased by 59.9% during this period.

Major export markets

The Western Australian Department of Mineral and Petroleum Resources reported the major markets for the resource industry's main commodity exports in 2005-06 as:

• Petroleum products: Japan (53%), Republic of Korea (16%) and Singapore (9%);
• Iron ore: China (53%), Japan (29%) and Republic of Korea (10%);
• Nickel: China (23%), Canada (18%), Finland (15%) and Japan (7%);
• Non-monetary gold: India (39%), United Kingdom (33%), Thailand (10%) and Japan (5%); and
• Alumina: China (17%), South Africa (17%), Bahrain (15%), United Arab Emirates (13%), Mozambique (11%) and Canada (10%).

• Petroleum products: Japan (53%), Republic of Korea (17%) and Singapore (10%);
• Iron ore: Japan (40%), China (28%) and Republic of Korea (16%);
• Nickel: Finland (26%), Netherlands (16%) and Japan (15%);
• Non-monetary gold: United Kingdom (24%), Republic of Korea (16%), Singapore (16%), Hong Kong (15%) and Japan (8%); and
• Alumina: China (19%), United States (18%) South Africa (13%), Canada (13%), Bahrain (10%) and United Arab Emirates (10%).