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

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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