The Brisbane Line is back.
The notorious defensive line along the Darling/Murray river system from Brisbane to Adelaide was supposedly the fall-back position for Australian and American troops in the event of a World War 2 Japanese invasion.
Ian Harper of Deloitte Access Economics brought it back at the conference of the Australian Petroleum Production & Exploration Association last week, a clever point that seemed to wash over the media pack but, in conversations I had on the floor of the Adelaide convention centre, struck home with more than a few of the 3,008 delegates.
Harper is one of Australia’s best-known economists and was a leading light of the University of Melbourne’s Business School until he went to Access Economics.
His role on the APPEA conference plenary speaking list was to present the findings of Deloitte’s research, commissioned by the association, on the economic contribution of Australia’s upstream oil and gas industry.
The core of his talk was a focus on the major policy issues raised by the rapid growth of the industry and the need to manage its impact on the non-resource-related parts of the economy to secure a sustainable lift for our prosperity over the longer term.
This is where the Brisbane Line was introduced, with a map of Australia that was bright green for 80 per cent of the land mass and dark blue for the south-east segment below a line from Brisbane to Adelaide, including struggling Tasmania.
“North-west of the Brisbane Line,” Harper told the APPEA audience, “lies 53 per cent of investment projects and 20 per cent of employment. South-east of the line is 80 per cent of employment and 47 per cent of investment projects.”
South-east of the line, of course, also lies the bulk of seething voters, who, on the basis of media reports and talk-back radio, are convinced they are not benefitting from the the resources boom, aided and abetted by some parts of a federal government, and a Treasurer in particular, apparently hell-bent on demonising “the mining industry.”
If the opinion polls are right, some time in the next 18 months these voters and those in Western Australia will throw the reins of power to Tony Abbott and the Coalition in a massive rejection of the Labor party – a sentiment which has already manifested itself in thumping defeats at State level in New South Wales and Queensland.
Harper at APPEA presented three “Do’s” and three “Don’ts” for the federal policymakers.
Do run the federal budget in surplus and target monetary policy on inflation.
Do reform State regulation to facilitate interstate transfers of labor and capital.
Do invest in infrastructure, skills and education to promote productivity growth in the non-resource sector.
Don’t subsidise industries in which Australia has no comparative advantage.
Don’t let policy become unpredictable and directionless or subject to the veto of special interests.
Don’t establish a sovereign wealth fund because we don’t need it.
One of the key needs for the upstream petroleum industry and the mining industry is to demonstrate that benefits from the boom are flowing to all the community, a task that it not proving easy – and is manifesting itself on the eastern seaboard in a worrying blowback against the onshore gas sector over coal seam methane developments.
As was pointed out at APPEA, when members of the Country Women’s Association take to the streets in Lismore, you know you have a problem.
The Deloitte study emphasises that the oil and gas sector’s economic linkages in Australia are broader and deeper than commonly appreciated, a point that, reading the media files a week after the APPEA conference, I can see has not been conveyed to the public in any shape or form.
According to Deloitte, about $4.3 billion of the $28.3 billion value-added provided by the industry in 2010-11 flowed to supplying industries across the country, including maintenance and construction and professional services.
These are linkages more likely to be visible in Brisbane and Perth than other capitals.
Deloitte argue that the robust export performance of the resources sector provided important national income and employment over the course of the global downturn and played a key role in Australia being able to withstand the more dramatic impacts that confronted other economies.
Being able to distill this message in to one that can be appreciated by the bulk of voters living below Harper’s new Brisbane Line is a large challenge for APPEA, its members and the broader resource sector – and one that a Coalition government will need to help to drive.
This includes selling the story of how the oil and gas sector is contributing to the broader community’s welfare through its tax payments, now running at about $8 billion a year. This will be a lot more when LNG sales treble over the course of the decade.
You would need to scratch a lot of my neighbours in the leafy Hills district on Sydney’s north-west or on the pavements of Marrickville in the city’s inner west, where my son and his family live, before you found anyone who knows and appreciates this.
In economist-speak, Harper and Deloitte present the issue like this: “The level of industry investment and the substantial boost in production slated to come on line over the next decade will provide enormous economic benefits to the country.
“However, in order to fully harness these gains, there will need to be further adjustment to the allocation of resources within the economy.
“This has already presented various sectoral and workforce pressures, such that the ‘multi-speed’ or ‘patchwork’ economy, is now a common thread in the national conversation.”
And it is not working below the Brisbane Line to the advantage of the resources sector.
Nor, post-2013, will it do so for a new-minted Coalition federal government elected on a backlash against Labor from the community that can be expected to quickly turn to discontent that new leadership is not providing a dramatic change.
Observe Victoria and New South Wales today for examples of the point.
The Coalition’s Ian Macfarlane summed up this anti-boom sentiment in his APPEA talk as the easiest of populist lines to sell to the community: Why should we let huge, greedy multinationals rip us off to boost their profits while we pay through the nose for services?
As Macfarlane said, electricity prices have become a totem issue of public anger, and therefore political concern, in recent years – and there are more price rises to come, accompanied by higher gas prices, too, as the Queensland-based LNG trade gets going and world parity prices flow in here to at least some extent.
Resentment of the leadership of the resources sector, which has been blatantly one of Wayne Swan’s tricks for the past year and more, is going to continue to ripple through the community well after the voters have ejected this government.
Macfarlane observed at APPEA that the pressure on State governments to “do something” about energy prices is likely to become irresistible and he frets about how counter-productive this will be if the “something” is a kneejerk response.
The resources sector as a whole has been caught off guard three times in the past two years – first by Julia Gillard’s U-turn on a carbon price, second by Swan’s endless attacks on the resources robbers and third by grassroots reaction of farmers, aided and abetted by environmentalists, who can hardly believe their luck, against coal seam methane development.
As the APPEA chief executive, David Byers, put it in Adelaide, the energy industry is at the centre of a furious public policy debate because of its importance to Australians’ standard of living, the competitiveness of key parts of the economy and the quality of the environment.
I agree with him that the industry needs to do more to build public appreciation for its contribution, current and potential, and clearly the target area is south-east of Harper’s new Brisbane Line.
Clearly, too, as Byers and others like AGL Energy’s Michael Fraser have been saying, the clock is ticking on this issue.
There are more than a few rivals eager and able to grab the Asian markets if sufficient of those living below the Brisbane Line, and the politicians reacting to them, end up placing us in an environment where we do not, after all, win the gold medal.