The boss of explosives group Orica has warned Australia risks facing a future that will look increasingly like “France and not Singapore” as the country loses its economic vibrancy and as China’s economy changes gear.
“The dynamic, vibrant economy that I saw when I first came [to Australia] is not present any longer,” Alberto Calderon warned in an address to a Latin American business group late on Tuesday. “Our economy will look more and more like France, not like Singapore. But this is not inevitable; this can be changed.”
The warning came as the easy gains to Australia’s exports from the surge in China’s standard of living, which had lifted demand for Australia’s exports of iron ore and coal, for example, is now maturing. Its rising standard of living and expanding middle class will lift demand for copper, instead, he said.
“This optimism for the long-term copper outlook sits on the back of China’s economic progress and the increasing movement of its populace into the middle class,” Mr Calderon, a former senior executive with BHP, said in his address. “You can reliably track the demand from steel-making commodities such as iron ore and coking coal, to more consumer product inputs such as copper and aluminium, by looking at GDP per capital. Demand for copper plateaus much later in the industrialisation cycle, compared with the bulk commodities.
“Steel intensity tapers off when GDP per capita reaches around the $US15,000 level (on a purchasing power parity basis), while copper demand keeps growing until GDP per capita hits between $US30,000 and $US40,000. China accounts for around 45 per cent of global refined copper demand, and by the end of 2015, its GDP per capita was around $US14,450. Gold has similar market dynamics to copper.”
Like Latin America, the challenges facing Australia such as the impact of falling commodity prices on royalties and national income, declining ore grades, labour productivity and industrial relations, need to be tackled by making the country as competitive as it can be to attract business investment, to innovate and grow. This also means tackling the high rate of corporate taxation, he said.
“Corporate taxes are the highest in the OECD, consumption taxes the lowest,” he argued. “Make this boundless country as competitive as possible, and incentivise productivity to unleash its undoubted potential. Unfortunately we seem to be following the path of France and other developed low-growth countries.”
Higher taxes on investment along with higher government spending work to crowd out the private sector, he warned.
“The easy charm of Melbourne and Australia has bewitched me,” Mr Calderon said, “and, if the government doesn’t keep changing the rules, I plan to apply for permanent residency next year.”
This story Administrator ready to work first appeared on Nanjing Night Net.