I think we may have reached peak "stop Adani". In The Australian Financial Review on Monday last week, Richard Denniss prosecuted the fantastic argument that we should not allow Adani to open because that would hurt coal production and jobs in NSW!
So the message to North Queensland is, 'sorry you can't have jobs because we have to protect another part of the country'. Townsville's unemployment rate for the past 12 months has averaged 9.1 per cent, so you can imagine how such a message would be received north of the Tropic of Capricorn. The unemployment rate around Newcastle has averaged 5.7 per cent over the same period.
But let's take Richard's argument to its logical conclusions. Why allow pesky competition at all when the entry of new businesses sometimes puts other businesses out of action? Why do we allow Bunnings to open when they have caused Mitre 10s to close? Why do we allow Netflix to stream when so many video stores have shut down? Think of all the heartache we could stop if we just stopped all this wasteful competition and let some kind of modern, technocratic Politburo sort it all out.
Richard's argument reveals the warped misunderstanding green activists have of the market. Their largely socialist outlook of the world blinds them to the well-demonstrated benefits of competition. We should not seek to protect some businesses in Australia by limiting the prospects of others. If the coal from North Queensland ends up out-competing NSW coal, we will have a stronger and more competitive industry as a whole. (This is extremely unlikely given NSW thermal coal is the best in the world.)
What Richard is really suggesting is we reintroduce a single desk for the export of coal. If the export of coal from Queensland can influence the global price, then the export of coal from NSW can do the same. On this reasoning we should have every coal miner seek permission from Canberra before a ship leaves the Newcastle port, so we can ensure the maximum price. That is something the coal industry is unlikely to welcome.
In fact, we have tried this before in many commodities and they have all ended in failure. We may think we can outsmart global markets, but practical experience has taught us that trying to micro-manage such outcomes from a room in Canberra is a recipe for disaster. Thankfully such proposals have largely been consigned to the dustbin, notwithstanding their bizarre reappearance as an argument prosecuted by the unholy alliance of incumbent coal miners and greenies.
Room for both
Most happily for us, we are unlikely to have to make this choice between Queensland and NSW because world coal markets are booming and there is ample room for both. Last year the production of coal-fired power globally reached a new record at 9723 terawatt hours.
It is this increased demand that has pushed coal prices to near record highs, and increased the margin for high-quality Australian coal over Indonesian coal by six times. Coal has once again become Australia's biggest export and this wealth is helping pay for important public services by bringing state and federal budgets to balance sooner.
Last week the International Energy Agency forecast that coal demand is set to grow by 492 million tonnes in the Asia Pacific region by 2040. Australia exports just under 400 million tonnes so this is a massive opportunity for us to create more wealth and more jobs right nationwide. The IEA conclude that new mines in Australia, such as Adani's, would be required to meet this increased demand.
The biggest opportunity lies in India. With coal demand there set to grow by over 600 million tonnes by 2040. Last year, India imported 160 million tonnes of thermal coal but Australia accounted for just 3 million tonnes of that. As the world's largest coal exporter that performance is not good enough.
This week The Australian Financial Review will host an important summit on Australian-Indian relations. The Adani project, as the largest potential Indian investment in Australia by far, offers the most direct way to cement a strong and ongoing relationship between our two countries.
We are sometimes too complacent about Australian-Indian relations. Sometimes we rest back on the "three C's" of "cricket, Commonwealth and curry". These won't be enough, to take our relationship to the next level we must add a fourth C of "commerce" and the quickest way to do that is to grow our trade in a fifth C of "coal".