BHP Billiton CEO says Australia's growth tied to China's
Updated
In China, an estimated 50-thousand skyscrapers will be built over the next 20 years.
It's this explosive growth and demand for building materials which has driven Australia's resources export boom. Last night, the C-E-O of the world's largest mining company BHP Billiton told the Lowy Institute in Sydney, China is essential to Australia's growth and Australia shouldn't take the business for granted.
Presenter: Timothy McDonald
Speaker: Marius Kloppers, CEO of BHP Billiton
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TIMOTHY MCDONALD: The Government claims its stimulus package allowed Australia to weather the global financial crisis, while the Opposition claims it was the previous government's financial management that did the trick.
Last night, BHP Billiton's CEO Dr Marius Kloppers said his own industry deserves a slice of the credit too, and a rather large one at that.
MARIUS KLOPPERS: We've weathered the global financial crisis better than other economies and a number of factors obviously explain this resilience but the IMF (International Monetary Fund) site and I quote and it starts with "strong commodity exports" and then goes on about government policies and so on and so on.
TIMOTHY MCDONALD: But he cautions we're not out of the woods yet.
MARIUS KLOPPERS: And I think that on balance we've seen the world come out of this recession a little bit more slowly than we've seen in other events. So as you can see from my comments, we remain relatively cautious in the short and medium term.
TIMOTHY MCDONALD: Still, he's bullish about the longer term future for Australia's mineral exports, largely because of the expanding market in Asia and particularly in China.
MARIUS KLOPPERS: Today Australia has got five cities with more than a million people, think Europe has got 35. By 2030 China will have 220 and from now to then it will build 50,000 new skyscrapers or about 600 times as many as Sydney has got.
TIMOTHY MCDONALD: Dr Kloppers says all those buildings will require a huge amount of ore and digging it out of the ground will require massive investment.
He says that's a major challenge because Australian banks have sometimes been hesitant to take the risk and other methods of financing infrastructure have presented difficulties as well.
MARIUS KLOPPERS: The Australian bond market has always been stunted, you know, existing share holders have been very good in giving equity, particularly in this downturn and while this is very effective as a tactical source of funds it's not a long term solution. We have an absence of a bond market.
And additionally, while clearly not simple, a part of the solution has to lie in continued foreign direct investment, meaning that both Australia and Australian companies are going to need to be open to this kind of investment despite its immediate and strategic implications.
TIMOTHY MCDONALD: What's more, he warns the mining sector faces a looming skills crisis.
MARIUS KLOPPERS: Just two years ago there was a massive gap in talent in the resources industry, my view is that this gap is going to return and we need to ensure that we have the right labour used in the right way.
TIMOTHY MCDONALD: He says the success of Australian iron ore producers will depend on their ability to make markets more open and transparent. At present, iron ore prices are sometimes locked in through annual contracts but Dr Kloppers wants to see a more flexible market.
