WESTERN AUSTRALIA ECONOMY - MORE THAN ROCKS AND

UNCLAS SECTION 01 OF 02 CANBERRA 001003 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON ETRD ENRG AS SUBJECT: WESTERN AUSTRALIA ECONOMY - MORE THAN ROCKS AND GAS? ¶1. (SBU) Summary: Canberra-based econoff visited Perth, Western Australia (WA) September 18-19 for meetings with local government and business figures. On this trip, econoff hoped to meet with people to discuss topics OTHER than Western Australia's booming resources sector, which includes nickel, iron, natural gas, and all sorts of other minerals like zircon, aluminum and gold. But it is clear, despite some prospering industries like shipbuilding, that mining and energy are the main game in town for driving economic growth, and appear destined to remain so. End summary. ¶2. (SBU) Canberra Econoff and Perth-based economic assistant met with John Shute, manager for the Americas in the West Australian Government's Department of Industry and Resources' (DIR) Market Development Branch, senior research officer Pam Reynolds, and David McCulloch, the acting head of the DIR Market Development Branch. They gave an overview of state efforts to spur economic development and covered some of the non-mining/energy sectors of the WA economy. One of the biggest employers in the Perth metropolitan area is the shipbuilding industry, centered on the Australian Marine Complex (AMC) 14 miles south of Perth. Shute described this as an A$500 million per year (US$400 million at current exchange rates) industry that directly employs over 2500 people. The AMC, launched 50 years ago as a joint initiative of the WA and Federal governments, boasts Australian shipbuilder Austal as the largest tenant and employer (1400 jobs) and has a wide range of companies in the shipbuilding and marine support sector. Per Shute, 50% of Australia's commercial shipbuilding production takes place in the AMC (the rest is mostly in Tasmania). Products include fast ferries, luxury boats, defense vessels for the GOA, commercial fishing craft, and marine research vessels. AMC focuses on "the top end of the value chain" rather than trying to compete with lower-cost shipyards in countries like Korea and China. Demonstrating the importance of the "rocks and gas" sector, Shute added that the growth of off-shore petroleum and natural gas fields off of northwestern WA had provided significant spurs to AMC businesses, which build and maintain boats and other items used in servicing off-shore oil and gas rigs. ¶3. (U) WA is also producing innovations in environmental management - for example, Shute noted Perth's hydrofuel cell powered buses, biofuel and biodiesel research, and new developments in waste and water management. Shute said WA's efforts in water management and the development of salt-resistant plants as possible sources of biofuel material that would not compete with food crops for arable land have attracted attention from other dry places like Israel. ¶4. (U) Shute said WA has a "worldwide" reputation for fisheries management, in particular for rock lobsters. WA's coast is relatively poor in nutrients, Shute said, thus by necessity requiring more expertise and leading to more careful management of fisheries. He also noted growing investment in information technology and communications, although significant elements of that are in areas like special data and imaging, designed for use in mining, with some spinoff applications in the medical and computer gaming fields. Like Australia as a whole, WA is also growing as an exporter of education services - but much of this represents people coming to WA for technical or university training in mining and resources extraction. ¶5. (U) But resources overwhelmingly remain the top dog when Q5. (U) But resources overwhelmingly remain the top dog when it comes to the state's exports (WA exports are 14% of Australia's overall exports); of Western Australia's top 10 exports by value in 2007, eight were various WA-produced metals and ores, crude petroleum, and natural gas. The other two were non-monetary gold (much of which was in fact re-exported after being brought to WA from abroad for processing) and wheat. Minerals and energy comprised 85% of WA exports in 2006-07 (and 30% of the overall state economy); agricultural products were 8% and manufactured items 5%. ¶6. (SBU) The minerals focus was evident in econoff/econ assistant's meeting with the American Chamber of Commerce in Perth. After discussing resources and defense, General Manager for Western Australia and Northern Territory Penelope Williamson said they were trying to "get another demographic" to join AmCham WA. They have attracted some small software companies that have resource industry customers. And membership includes many of the normal AmCham members - hotels, banks, and other international businesses. But the focus for AmCham in WA remains largely on the booming resources sector; the one annual trip to the US that the AmCham in Perth organizes for members is to fellow resources hub Houston. (AmCham now is adding a second annual trip that focuses on the marine and defense industries.) ¶7. (SBU) A meeting with the Chamber of Commerce and Industry for Western Australia (CCI) also underscored the dominance of CANBERRA 00001003 002 OF 002 mining and energy. As Executive Director for Economic Policy John Nicolaou noted, so much of the investment in WA is centered on resources that it is "hard to remove yourself from resources." CCI noted that construction is flourishing, and so are services such as lawyers and accountants. But resources business is a significant source of growth for construction, law, and accountancy. Nicolaou noted that health technology is doing well in WA, home to two Nobel Prize winning doctors. CCI stressed the growing role of Perth, along with Houston, Aberdeen and Stavanger as a "global hub" for mining services - technology, software, management, and exploration expertise and support. But they were unable to quantify the size of the mining services sector, noting that the Australian Bureau of Statistics does not measure it directly, simply lumping it into the overall mining sector. ¶8. (SBU) Comment: During the visit, Econoff had an interesting visit with French defense, aerospace, and security company Thales' Perth offices; Thales showed off some of the work they are doing for the Australian defense department and other security-related projects. But despite hearing about shipbuilding and some other projects and a little about the export-oriented agricultural sector, the attempt to learn more about the non-resource parts of WA's economy, and the almost automatic return of WA government and chamber of commerce types back to the word "resources" during attempts to discuss other economic activity in Western Australia, underscored the dominance of mining and energy for this huge chunk of the Australian continent. Given Western Australia's geographic isolation, dry climate, and small population base, this does not appear likely to change in the foreseeable future. End comment. ¶9. (U) This message was coordinated with ConGen Perth. MCCALLUM