Productivity in mining a disaster: BIS
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The mining sector's labour productivity is a disaster that will block much future job growth in the industry, says a new report.
Pressure from lower commodity prices, high and rising costs and the lowest labour productivity in a generation had ignited a new war on costs within the mining sector, said economic forecasters BIS Shrapnel in their Mining in Australia 2012-2027 report.
However, that would not threaten a forecast boom in mining production over the next decade, the report says.
Growth in employment will not keep pace with the expansion in production as miners seek to restore productivity lost during the furious race to invest in new capacity since the mid-2000s, said BIS infrastructure and mining unit senior manager Adrian Hart.
Mining only represents about two per cent of the Australian workforce.
While employment in mining had doubled since the mid-2000s, lower levels of construction and increased productivity through the next five years are forecast to see it peak at 315,000 jobs by 2016 before a decline, the report said.
"Labour productivity in the mining sector is an absolute disaster," Mr Hart said in the report.
"It is now 60 per cent off its peak in 2000/01 - when miners had to respond to the Asian financial crisis and then a global downturn - and is at its weakest level since 1987.
The productivity "war" has led to a blame game between miners, governments and unions about whether management, workers or the Fair Work Act were to blame for inefficiencies in output.
Mining services industry contractors are already feeling the heat, with Boart Longyear and MacMahon Holdings cutting earnings, suffering share price slides and recently replacing their chief executives.
Miners were taking a tough approach with contractors, suppliers and governments to reduce costs, improve productivity and restore competitiveness, said BIS.
The bigger miners were striking tougher bargains contractors, bringing work in-house and shelving projects.
It was not all bad news, Mr Hart said.
"Miners will ramp up production from new mines and expansions to offset lower commodity prices," he said.
The report forecast annual average production growth of 7.3 per cent to 2016/17, lifting its share of GDP to 9.1 per cent.
The increase in production is regarded by industry experts as well as the Reserve Bank as the third phase of the mining boom.
The first was the rise in prices, regarded as having peaked in 2011, with the second phase of investment predicted to peak in 2013-14.