Resources Minister Martin Ferguson has backed a research report released this morning that warned the cost of delivering mining projects must be kept in check if investment plans are to become a reality.
A Minerals Council of Australia report released this morning found Australia was vulnerable to competition from resource-rich emerging economies, with labour costs in the resources sector growing more quickly than the national average and now ranking among the highest in the world.
"Other developing countries are pushing us out in markets we thought we were dominant in," MCA chief executive Mitch Hooke told Sky Business.
"Policy reforms are needed to help companies do the heavy lifting."
The report produced for the MCA by Port Jackson Partners said new modelling revealed capital costs had made new thermal coal projects 66 per cent more costly to build and iron ore projects 30 per cent more expensive than the global average.
It said if Australia did not act to boost competitiveness, real GDP would be 5.3 per cent lower in 2040 than if it did act.
The report called for more skilled migrants and changes to the Fair Work Act to boost productivity and complained the federal government was too focused on the redistribution of wealth rather than the productivity of the sector.
Mr Ferguson said there was $270 billion in committed capital investment and $230 billion in planned projects in the pipeline.
"The opportunity is still there for the wave of investment to continue, but we have to keep the cost of delivering these projects down," he said.
"To maximise our opportunities we must ensure we maintain an environment which continues to attract investment to the benefit of the whole community."
He said the federal government had introduced a $3 billion investment in skills and training, and was working towards streamlining environmental approvals and allowing access to skilled migrants, to address the challenges.
"Our future earnings will not be based on record commodity prices, rather on increased volumes resulting from our being able to deliver projects in a cost-effective manner," he said.
But Labor backbencher and former economics professor Andrew Leigh said the government wouldn't be supporting a race to the bottom on wages.
"I understand there's elements of the Minerals Council of Australia that would like $2-a-day wages, but Labor is not going to be supporting this kind of race to the bottom in the minerals industry," Dr Leigh told reporters in Canberra.
"We're supporting investment in infrastructure - that's where the revenue from the mining boom is going - and we're supporting a Minerals Resources Rent Tax."
Earlier this month, billionaire Gina Rinehart suggested local wages were too high.
In a video posted online, the Western Australian mining magnate said many of her peers believed Africa, where workers could be hired for less than $2 a day, offered better prospects for investment.
