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The truth about Australia’s coal curse

Jul 2, 2020 • 17m 46s

Australia’s economy is at a crossroads. Its current dependence on coal has its roots in a model built on wool exports, and it needs to change.

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The truth about Australia’s coal curse

256 • Jul 2, 2020

The truth about Australia’s coal curse

RUBY:

From Schwartz Media, I’m Ruby Jones, this is 7am.

Australia’s economy is at a crossroads - capital is draining away from coal, but it is still an export that we heavily depend on.

However, the situation we are in now is really a continuation of the issues Australia has always faced with its economy.

Today - Judith Brett on resources, climate change and Australian’s future.


RUBY:

Judith, what made you start thinking about wanting to write this essay?

JUDITH:

Well, basically my concern about climate change and my despair at the way Australia has been so slow to take it seriously. And the sort of impasse they seem to be in the political class, mainly of us on the side of the coalition. But also there's a bit of reluctance on the side of labor.

RUBY:

Judith Brett is an historian. Her latest Quarterly Essay is called “The Coal Curse”.

JUDITH:

And so I was trying to think, well, what are the reasons for this? And there's been a lot of commentary over a decade and a half that we've just been through in politics about the failings of individuals. But I always, as a historian, I think we need to go beyond the failings of individuals to try to see the world as they see it and see the larger structural forces, if you like, that are shaping their perceptions.

RUBY:

So let's go back, then. What are the roots of this in our economy?

JUDITH:

Well, our exports, which is, you know, how we earn our foreign income, are heavily dependent on the exports of primary commodities, unprocessed commodities.

Archival tape -- unknown:

The vast open hinterland of Australia is fast being turned into the farmyard of the world. With a sheep population of 125 million, the dominion possesses the greatest flock of any country in the world…

JUDITH:

So it used to be wool, and now it's it's minerals.

Archival tape -- unknown:

Like the sheepdog… already realises that much of Australia’s prosperity lies on the sheep’s backs…

JUDITH:

The reliance on unprocessed minerals is in some ways a continuation of the reliance that the Australian colonies developed on the export of wool.

Archival tape -- unknown:

Which produce a thousand million pounds of wool and a thousand million pounds of meat each year come before the judges in the grand championship....

JUDITH:

We know, you know, that Australia used to ride on the sheep's back, that we earned the bulk of our export income from the export of wool.

Archival tape -- unknown:

Last year the commonwealth sent us 4 million pounds worth of lamb and mutton. An industry founded by a few early pioneers today supplies the world.

JUDITH:

And the production of wool didn't support enough jobs for the country that Australia wanted to be. It wanted to be a nation, a populous nation.

So we developed a protected manufacturing sector to provide jobs for the population. And after the Second World War, we increased that protection in order to provide jobs for the migrants we wanted to come here.

Archival tape -- Calwell:

I am going abroad to seek ships for immigrants.

JUDITH:

As we tried to populate because we thought if we didn't populate, we might perish.

Archival tape -- Calwell:

And without immigration the future of the Australia we know will be both uneasy and brief.

RUBY:

So our manufacturing sector wasn’t competitive: it was protected. Was that a problem?

JUDITH:

Well, the problem with the way Australia industrialized was that it's built a manufacturing sector that was to produce products for the domestic population, not for export.

In doing that, it relied on protective tariffs to keep out manufactured goods from countries where they could be produced more cheaply, more efficiently. And so we had a manufacturing sector that became over time quite uncompetitive in a world census.

Australian consumers were paying more for their clothes, their cars, their white goods, their furniture than people in other countries.

But also our exporters, our farmers were paying more for their farm machinery, for their tractors, for their cars. And that meant that it was harder for them to compete on the world market for the things they were exporting, their wool and their wheat.

And the other problem is that because manufacturers were protected from global competition, they became pretty uncompetitive. The profitability of manufacturing firms often depended really on the level of tariff protection they had rather than on their own capacities to innovate and develop new products more efficiently.

RUBY:

Okay. So the manufacturing of goods in Australia wasn’t very cost effective or modern - did that have an effect on the type of society that Australia was becoming?

Well, look, it all worked. I mean, that wasn't so much of a problem. I mean, it left us with a society where we had a lot of people employed in manufacturing. During the 1950s and the 1960s, when world trade was booming, when domestic demand was growing rapidly because of pent up demand from the war, plus the fact that we had a really vigorous migration program, that was all fine.

The problem was the postwar boom, if you like, ended in the 1970s. And when commodity prices fell, it made us quite vulnerable.

RUBY:

We’ll be back in a moment.

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RUBY:

Judith, for those boom years after WWII, Australia’s economy did well. But it was vulnerable to changes in commodity prices - and it was built domestically on tariffs and protectionism. When did Australia start trying to address those problems in the way that its economy worked?

JUDITH:

So when the Hawke government came in in 1983, they started to dismantle the tariff wars.

In 1986, Paul Keating, who was the treasurer in the Hawke Labor government, gave this off the cuff warning to Australians, he'd been talking to the John Laws program, that, you know, if we didn't do something about restructuring our economy, we would become a banana republic. And by that, what he meant was we had to become much less reliant on the export of primary commodities. We had to stop being the farm and quarry for the world and start to expand our export focused manufacturing capacity. That was what he wanted us to do.

Archival tape -- Keating:

I think we can also say that in opening Australia up, in peeling the tariff wall away and removing exchange controls and giving the country some real breadth and life inside it, we have turned Australia to our neighbourhood, we’ve reoriented it to the world...

JUDITH:

We could be earning export income from minerals. But we could also be earning it from the exporting of elaborately transformed manufactures, which is a name given to things that are made, which require quite a bit of capital input and intellectual input - machinery, cars, that sort of thing.

Archival tape -- Keating:

We are now part of this community of nations in East Asia and the East Asian hemisphere and that’s, and again another legacy of Labor, giving Australia that place in the world. [Applause]

JUDITH:

And it did. It did work for a while. Our manufacturing exports did start to increase.

Archival tape -- Keating:

With good strong growth, with good strong growth, we’ve averaged four and a half percent over the last three years, each year the last three years, twice the western world average, strong employment growth, in fact the strongest in the western world...

JUDITH:

But in some ways, we were too late, really, on this.

RUBY:

After this, the next big shift was the rise of the mining industry and the export of fossil fuels. How did that happen and who helped it happen?

JUDITH:

As I said, Australia was very dependent on the export of wool from really the early 19th century through to the 1950s. Now, what started to happen, as we all know, is that artificial fibers started to replace wool. And so this was going to be a big problem for the Australian economy, because we would no longer be able to earn our way in the world.

Luckily for us at this time, that wool was in a sense tanking…

Archival tape:

As the Japanese people rebuilt their cities after the war and expanded their industry…

JUDITH:

Japan in particular was industrializing.

Archival tape:

Small towns and villages throughout Japan now have shopping centres now as modern as in the big cities…

JUDITH:

And there was all of a sudden a big global demand, particularly for iron ore.

Archival tape:

Today, most electricity is made from coal, oil and even nuclear power and then sent to the home and factories of Japan.

JUDITH:

And we started to become a major exporter of iron ore. So by the end of the 1960s, iron ore is a major export and wool has fallen right away.

Now, with the mining industry starting to become more export focused, it needed to have a sort of national peak body that could deal with the federal government on issues like the exchange rate and foreign export controls and that sort of thing. Previous to this, mineral resources are under the jurisdiction of the state government. So the federal government hadn't had much to do with mining.

So they starting to get a national lobby organized, so mining thinks, well, we've got to start doing a bit of public relations campaign, we've got to fend off any legislation that might inhibit our growth at our development.

Archival tape -- mining industry:

In Australia, you can make yourself whatever you want to be so long as you’re prepared to work for it.

JUDITH:

And so you start to get the mining lobby developing, sort of, sophisticated capacity in public relations.

Archival tape -- mining industry:

It’s such a dynamic environment to work in. And also it’s global in nature. The mining lifestyle isn’t just about digging the dirt, putting it on a ship then forgetting about it.

JUDITH:

Essentially, the major aim of the mining industry was to align its interests with the national interests.

Archival tape -- mining industry:

Growing up in Western Australia, it makes a lot of sense to get into mining. There are so many exciting projects that exist and will continue to exist.

JUDITH:

The mining industry couldn't really rely that much on electoral pressure because it's never employed very many people. You know, it's highly efficient. It earns a lot of export income but it doesn't create a lot of jobs despite what we continually hear.

So it had to, in a way, get broader allies out there in the electorate by making people feel that the prosperity of mining underpin their prosperity.

Archival tape -- mining industry:

Mining effectively helps every single Australian. and without a healthy industry, you’re not going to be able to get those kinds of returns…

RUBY:

So Judith where does all of this leave us now? How much do we rely on coal and other minerals? And how exposed does that make us?

JUDITH:

Now, what we saw was once climate change becomes really comes to the top of the policy agenda around the turn of the century, mining, fossil fuel mining in particular, comes under threat again. Now, this is obviously a massive existential threat to the fossil fuel miners. So they then kicked into operational or shifted towards opposing any attempts by government to commit Australia at an international level to reducing the emissions of fossil fuels.

And we saw that starting developing during Howard's period of government. They had less power under Gillard. But once Abbott came in, you know, it kick started again.

Archival tape -- Abbott:

One of the things that will benefit the world in the years and decades to come is if there is a greater use of Australian coal.

JUDITH:

And so we have had this with the way climate denialism got a grip on sections of the coalition. And, you know, we saw that, you know, basically that Turnbull got rolled because of that so that by the time we get to the bushfire season of 2020. We're starting to face these catastrophic consequences that the climate scientists have been predicting.

So it's interesting at the moment, I think we still have. We're still exporting coal. And at a time when global concern about climate change is escalating. We can see that capital, for example, is moving away from fossil fuel, particularly moving away from coal.

You know, from the point of view of climate change, this is a very good thing and it's something that needs to happen. But it also is a risk for the Australian economy because it means that we're likely to have stranded assets. But we've got, I think, particularly in our political elites and the elites in the media as sort of a mindset that somehow we have to keep doing what we always have done.

RUBY:

The flipside of this, I guess, is the push to see Australia become an exporter of renewables. We would still have an economy focused on international markets, but at least we wouldn’t be so dependent on coal...

JUDITH:

What's really, I think, very creative and promising about the suggestion that we become an exporter of renewable energy, is it in some ways, it continues the structure of our economy where we have relied heavily on the export of primary commodities. Here we'd be relying on the export of our wind and sunshine. But it would also perhaps provide if it was able to underpin the development of manufacturing, it would provide manufacturing jobs.

And so we might start to get back a more cost, the more complex economy that we say had in the 1960s compared with what we've got now where I think our economy is very vulnerable.

RUBY:

Judith, thank you so much for your time today.

JUDITH:

Okay. Thanks very much.

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RUBY:

Also in the news,

The Prime Minister has announced a new 10 year defence strategy worth $270 billion dollars, including the purchase of long-range anti-shipping missiles.

In a speech yesterday, Scott Morrison said the policy refocuses Australia on the Indo-Pacific, as the ‘epicentre of rising strategic competition.’

**

And the Victorian Premier Daniel Andrews has warned that Victoria could go back into a statewide lockdown, if current coronavirus outbreaks are not contained.

The warning comes as Victoria recorded double-digit case increases for more than a fortnight.

The Premier Daniel Andrews said a "significant number" of the new infections were recorded in “hotspot” postcodes, which are in lockdown as of today.

Meanwhile NSW is banning people from those postcodes from entering the state, under threats of fines and jail time.

**

I’m Ruby Jones, this is 7am, see you tomorrow.

Australia’s economy is at a crossroads; but the current dependence on coal is really a continuation of issues we have always faced. Historian Judith Brett traces it as far back as our reliance on sheep and wool.

Guest: Author of Quarterly Essay 78: The Coal Curse Judith Brett.

Background reading:

Quarterly Essay – The Coal Curse
The Saturday Paper
The Monthly

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7am is a daily show from The Monthly and The Saturday Paper. It’s produced by Ruby Schwartz, Atticus Bastow, and Michelle Macklem. Elle Marsh is our features and field producer, in a position supported by the Judith Neilson Institute for Journalism and Ideas. Brian Campeau mixes the show. Our editor is Osman Faruqi. Erik Jensen is our editor-in-chief. Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio. New episodes of 7am are released every weekday morning. Make sure you don’t miss out by subscribing on your favourite podcast app. I’m Ruby Jones, see you next week.

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auspol coal climatechange economy history




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256: The truth about Australia’s coal curse