Borders uncertainty a recovery risk: BHP

Snap border closures by trigger-happy state governments could hamper the nation’s recovery from the pandemic, says BHP.

BHP’s Edgar Basto.

Australia’s biggest mining company has warned that snap border closures by trigger-happy state governments could hamper the nation’s recovery from the pandemic, with BHP listing uncertainty around border regimes as one of the “headwinds” for the economy.

The resources giant made the comments in a submission ahead of Josh Frydenberg’s May 11 budget. It also called for investment incentives for “nationally significant capital projects” and the ­establishment of a national skills training program as measures to kickstart the post-COVID economy.

But, while noting Australia was in an “enviable position” compared to other countries, BHP said the economy still faced headwinds that could restrict growth, pointing to the need for a “nationally consistent approach to border closures” to end uncertainty for businesses affected by local travel restrictions.

“Australia’s ‘new normal’, which includes localised COVID clusters and corresponding controls, contains an inherent degree of uncertainty for many businesses,” the submission says.

“A key priority will be to ensure businesses in Australia can have the confidence needed to continue to invest and employ in this environment. A nationally consistent approach to border closures would be welcome in this respect.”

Tight border restrictions imposed by resources-rich Western Australia allowed the mining sector to power through the immediate impact of the pandemic without mine closures.

In the wake of border closures, BHP and other mining giants such as Rio Tinto and Fortescue Metals were forced to relocate thousands of workers to WA, and adopt a policy of only hiring local workers for their Pilbara mines and construction projects.

While keeping the mining sector booming, the state Labor government’s “WA first” policy has helped push up wages and costs across the sector and resulted in the re-emergence of skills short­ages in some critical areas, particularly in the construction sector, with Fortescue citing difficulty in accessing an interstate workforce as one cause of a cost blowout at its Iron Bridge project.

The rollout of coronavirus vaccines has led to hope in the sector that an end is in sight to sudden border closures by states, but WA Premier Mark McGowan maintained the state’s hardline stance on ending the use of interstate fly-in fly-out workers in the lead-up to the March 13 election, promising to “train locals for local jobs” instead.

BHP also warned the federal government that escalating tensions with Beijing posed a risk to economic recovery, and that it should not follow the lead of US President Joe Biden in raising corporate tax rates to pay back debt taken on to fund stimulus measures.

“Australia is an export-dependent economy in a world of rising trade protectionism and escalating tensions with our largest trading partner,” the submission says. “As at December 2020, China had imposed trade restrictions on 10 commodities representing $24bn worth of Australian exports.”

To help manage those “headwinds”, BHP has called on the Treasurer to offer additional incentives to companies proposing major capital projects in regional areas, such as a targeted investment allowance, to encourage the construction of new mines and infrastructure projects.

“By setting minimum project spend and job creation thresholds, the government could target its support to nationally significant projects that will generate the greatest economic impact, injecting capital to regional economies quickly and at scale,” the company said.

“By helping business get more major projects across the line in an otherwise challenging investment environment, we can secure Australia’s next wave of investment and set the nation up for ­another robust economic comeback through regional employment and supply chain opportunities.”

BHP also wants an overhaul to Australia’s skills training system, asking the federal government to establish a new skills program that partners with major employers to support nationally recognised apprenticeship and trainee­ship programs, currently the domain of state governments.

“The program would provide large employers a single point of entry into government and a clear, streamlined process for seeking co-investment — reducing red tape, incentivising investment and helping develop Australia’s next generation of skilled tradespeople,” BHP said.

BHP Minerals Australia boss Edgar Basto said Australia’s economic recovery from the pandemic would need “strong partnerships” between communities, industry and government.