SIR WILLIS CONNELLY ORATION Repositioning Australia's Vocational

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					SIR WILLIS CONNELLY ORATION
MELBOURNE, 7 DECEMBER 2007


      Repositioning Australia’s Vocational Education &
                     Training System
                     By Chris Fraser, BE, Dip App Sci, FAusIMM
                    Executive Director, Minerals Council of Australia


Overview
Thank you for that introduction,
I am honoured and humbled to receive the Willis Connelly medal for 2007. Sir Willis
Connelly was an outstanding engineer and communicator. The early part of my career
benefited greatly from the foundations he helped establish in the State Electricity
Commission of Victoria. The SECV was a technically advanced organisation with a
culture of engineering excellence and the resources to implement innovative solutions to
problems. It also made a significant investment in the training of its people.

I would like to commence by acknowledging the President, Peter McCarthy, and
Directors of the AusIMM, its outgoing Chief Executive, Don Larkin, and the Barbarians
Society Der Steiger, Dr Ralph Higgins and my Barbarian colleagues.

I would also like to acknowledge the MCA’s Chief Executive, Mitch Hooke, whose
public policy leadership has been critically important in reaching the position I advocate
today.

Mr President, my presentation today focuses on the need to reposition Australia’s
vocational education and training sector so that it is able to make a meaningful
contribution to the contemporary Australian minerals industry.

So, with your indulgence, I have constructed my presentation to:

•   Introduce you to the Minerals Council of Australia;

•   Provide you with an overview of the Australian minerals sector;

•   Discuss why we think that we are in a “super cycle” of global demand;

•   Mention the capacity constraints limiting the global industry’s supply response;

•   Discuss the skills shortage as a particular capacity constraint;



Willis Connelly Oration – 7 December 2007                                                    1
•   Outline the MCA’s response to the skills shortage in policy terms and practical
    initiatives; and

•   Identify the changes required of the vocational education and training sector so that it
    is repositioned to effectively service the needs of the minerals sector.

Hopefully I can effectively communicate all that in the 20 minutes I have allocated.


The MCA
Mr President, it is difficult to present the policy changes I advocate without first
introducing the Minerals Council of Australia and its role in representing the Australian
minerals industry.

The MCA is the peak industry organisation representing Australia’s exploration, mining
and minerals processing industry, nationally and internationally. It is a member company
funded industry association operating as an incorporated private company limited by
guarantee. The association’s governance structure is as for a corporate entity with a Full
Council of members; Board of Directors; Standing Committees; and Secretariat.

MCA member companies produce more than 85% of Australia’s mineral output and a
greater proportion of minerals exports. The mineral products of members include base
metals, precious metals, coal (thermal, metallurgical, lignite), iron ore, uranium, mineral
sands, and light metals; all to a stage of primary transformation.


Significance of the Australian Minerals Industry
Many of you know the Australian minerals industry in pure economic terms - the industry
is:

•   Just short of 10% of Australia’s economic activity;

•   Comprises around 40% of Australia’s total export income ($A91.3 B);

•   Is the third largest minerals sector by value of production of any country in the world,
    after the US and South Africa;

•   Is the bedrock to the growth and prosperity of many regional and remote communities
    in Australia, and indeed to the Australian economy as a whole;

•   The total taxation and royalty revenue we contribute to the Australian and State
    Governments is more than $9 billion per annum; and

•   The industry’s financial performance has changed markedly in the last couple of
    years - from an industry barely recovering the cost of its investment capital to now



Willis Connelly Oration – 7 December 2007                                                     2
    generating returns on investment to the delight of patient shareholders and the
    enthusiasm of capital markets around the world.

Further, Australia has diversified its minerals exports. While our traditional markets -
Japan, the Republic of Korea, Chinese Taipei, and Europe - continue to be strong
markets, over the past decade China and India in particular have become more important
to Australia.


The Global Super Cycle of Demand
Mr President, notwithstanding the current “sub prime” turmoil in global equity markets,
we at the MCA are confident that we are two years into a “super cycle” of global demand
for our products – a decade plus of sustained demand - some consider 10-15 years - even
20-year - time horizon of demand strength.

This super cycle of demand, its strength and length, is driven by an underlying structural
adjustment in the global economy and the global nature of our industry, more so than the
traditional drivers of the commodity cycles we’ve experienced over the past 100 years.

The key determinants of this structural change are:

•   increasing globalisation of the world’s trade and commerce;

•   increasing global competition for financial and human capital, global custom, land
    access, technology and services;

•   the longest period of above-trend global growth in over 30 years with the lowest
    global inflation since the 1960s and the lowest global unemployment since the early
    1980s;

•   the rapid industrialisation of developing economies and reindustrialisation of excess
    capacity from OECD countries to non-OECD countries;

•   increasing global integration through rationalization and consolidation of the minerals
    industry, for economies of scale, and concentrating global supply with greater
    inventory control and pricing discipline; and

•   increasing legitimate community and market expectations for improved
    environmental and social stewardship.

The product of this structural adjustment is the re-balancing of global economic
development, trade and strategic power. This structural adjustment has established a
whole new global order, a new economic paradigm for our industry. That is, developing
economies now account for more than half of the global economy and two-thirds of
global growth, and their economies are increasingly relying on domestic demand growth
rather than export sales to power their growth.


Willis Connelly Oration – 7 December 2007                                                   3
The engines of global growth have shifted from the OECD to the non-OECD countries,
and specifically to what is known as the BRICs economies, that is, Brazil, Russia, India
and China.


Supply Response
In response to this global surge in demand, increased supply of minerals commodities has
virtually limped onto the market, hampered by a period of under investment during the
late 1990s and early 2000s, and the current capacity constraints across the world.

Indeed, capacity constraints are the economic policy issues of the moment. They are a
global phenomenon and increasingly a factor in determining a country’s competitiveness
and attractiveness to investment in a highly globally integrated industry.

It is generally well accepted that there is no shortage of global natural resources. For the
foreseeable future, the global resource base is not likely to be a major constraint to
supply.

Rather, the limiting factors to supply are production constraints, barriers to investment
and market access, availability of skilled labour, and reform backsliding limiting our
flexibility to respond to the dynamism of the modern market and ability to meet the
demands on a modern minerals operation.

These and other capacity constraints are real and significant; policy makers ignore them
at their peril. Business as usual is simply not an acceptable option.

Mr President, we have a once in a generation opportunity to turn the wealth from
our minerals resource endowment into social capital for the benefit of future
generations. The loss of opportunity and long-term implications clearly present a
business case for reform.


Skills Shortage is a Capacity Constraint
Mr President, I now will explore skills shortages as a particular capacity constraint to
growth. The Australian minerals industry’s requirement for more people with specific
skills is one of the serious capacity constraints facing our nation.

The growth of our industry over the past few years has put the spotlight on the
fundamental shortcomings of our national education and skills formation infrastructure.
Both sides of government recognise this shortcoming and the new Government has made
it a centerpiece of its policy going forward.

To put the skill shortages into context, it is instructive to examine the jobs growth in the
minerals sector over the past 5 years as this helps explain why it is becoming more
difficult to recruit skilled people.


Willis Connelly Oration – 7 December 2007                                                      4
Current ABS Labour Force data plus MCA data, provides us with an estimate of 137,000
people currently directly employed in our industry. The industry has experienced an
overall 66% increase in employment over the five years to June 2007, which is a
remarkable achievement.

Research commissioned in 2005 and reported in 2006 by the MCA with the Chamber of
Minerals and Energy of WA and the Department of Education Science and Training,
under a National Skills Shortage Strategy Project, has provided us with an authoritative
forecast of labour force requirements over the next 10 years. The research found that:

•   the minerals industry will require an additional 70,000 workers by 2015;

•   there are regional differences: demand will be highest in Western Australia and
    Queensland;

•   there are discipline specific differences: most acute shortages will be for mechanical
    and electrical tradespeople and mine operators;

•   Specifically, the industry will require an additional 27,000 tradespeople and 22,000
    skilled operators with VET qualifications and skill sets; and

•   there are commodity sector differences: the greatest shortages are projected to be in
    coal, iron ore, bauxite, copper and nickel.

Of the extra labour needed, over 7,500 will be professionals. Professionals make up
about 10% of employment in the minerals sector and, while the numbers are not as
dramatic as the projected trades and semi-skilled worker shortage, the impact will be
profound. Consequently, we also have a critical challenge in attracting and retaining
graduates in mining engineering, geology, metallurgy and mechanical, electrical and
chemical engineering.


A Strategic Response
Mr President, the MCA’s response to this critical capacity constraint has been directed at
policy development and advocacy at a national level, and the implementation of
deliberate initiatives directed at easing the constraint at national, state and regional levels.

The solution is not just about education and training, it is also about people, work
practices and work arrangements. That is, the solution is not just about beating up on the
education and training sector for the failure. It’s about attracting people to our industry,
then training them and then retaining them.

The MCA’s comprehensive response sets in place the conditions for the ongoing supply
of skilled, productive people to the Australian minerals industry. The goal of this work is
a minerals industry that has the skilled people it needs when they are needed. My


Willis Connelly Oration – 7 December 2007                                                      5
particular interest here today is the public VET system’s ability to be part of that
response.

The MCA policy position on VET is focused on the establishment of a market driven,
flexibly delivered, competency based system that services the industry’s needs. This
position reflects the current reality that, although the minerals sector spends more on
training per employee than any other sector ($1643 per employee compared with the
national average of $458), almost all of this training is industry funded. However, given
the scale of emerging skills shortages it has become an industry imperative that the
relevance, quality and delivery modes of the publicly funded VET sector be improved.

Governments spend nearly $4 billion per year on operating revenues for VET, with the
Australian Government accounting for more than 25% of the total. Yet the minerals
industry accesses less than $20M per year of the publicly funded VET sector services.
But, as the minerals industry comprises about 1.5% of the national workforce, it could
expect to receive at least $50M - $60M per year on a proportional basis.

The MCA’s current initiatives directed toward growing the pool of skilled labour for the
minerals industry include:

•   Careers promotion initiatives directed at creating awareness of career and job
    opportunities in the industry. For example, the current phase of the “Mining Careers”
    initiative is targeted at attracting both school leavers and people in the workforce and
    has involved the development of high quality products such as the
    MiningCareers.com website, careers promotion infrastructure and targeted marketing
    campaigns in partnership with MCA members and State and Territory minerals
    councils and chambers.

•   Higher education initiatives have moved on from building collaborative relationships
    with and between key participating universities. These relationships are now focused
    on implementing capacity building programs with selected university departments for
    the delivery of minerals education for new and existing industry professionals. The
    Minerals Tertiary Education Council’s programs and initiatives are extensively
    supported by industry and are delivering more and better-educated professionals.

•   Sponsoring the development of a postgraduate course in Community Engagement in
    response to calls from industry for more people with higher levels of skill in
    community engagement and community relations. The University of Queensland is
    currently taking enrolments for the first intake in 2008.

•   Collaborative cross-sectoral regional initiatives to grow the pool of skilled labour are
    progressing through three programmes:

      o MCA is signatory to a MoU agreement with the National Farmers Federation
        and the Australian Government to build a pool of skilled workers capable of
        meeting the needs of both industries throughout regional Australia;



Willis Connelly Oration – 7 December 2007                                                      6
      o a collaborative initiative of the Local Government Managers Association,
        funded by the Australian Government, to develop alliances between local
        government and employers within the resources and infrastructure industry
        sectors to address concerns of minerals industry predatory behaviour in mining
        regions; and

      o The Victorian Government has implemented the recommendations of an MCA
        study of minerals industry skills shortages in provincial Victoria by funding the
        management and operation of a regional collaboration cluster of employers for
        a three-year period at Bendigo.

•   The MCA’s ‘Women in Mining Dialogue’ has established a platform of industry and
    government collaboration to address structural and cultural impediments limiting
    women’s participation in the minerals industry workforce. This is the first year in a
    5-year industry agenda to increase the participation of women.

•   A MoU on Indigenous employment has established a strategic partnership between
    the MCA and the Australian Government through a five-year program. The MoU
    facilitates both government and industry working with specific Indigenous
    communities with a long term goal to build sustainable and prosperous communities
    through engagement in the Australian economy.

•   Improving the relevance and quality of VET training through:

      o the Institute of Trades Skills Excellence where the MCA is lead agent for the
        minerals sector. The Institute is an industry led organisation funded by the
        Australian Government to promote quality training providers, excellence in
        trade teaching and new apprenticeships; and

      o strongly supporting the minerals industry skills council (SkillsDMC) in its role
        to establish the competencies, standards and training materials for minerals
        industry VET training.

•   Skilled migration as a critical source of labour with that importance continuing into
    the future. MCA and the Chamber of Minerals and Energy of WA are currently
    reviewing the effectiveness – for the minerals sector - of the permanent skilled
    migration program, and the long stay business visa (457 visa).

•   And finally, the MCA is currently working in partnership with the Australian
    Government and five member companies with operations in the Northern Territory to
    review and identify opportunities to train young Indigenous people from
    neighbouring communities for potential employment through apprenticeships at the
    mining operations.

However, there is yet more work to be done.



Willis Connelly Oration – 7 December 2007                                                   7
With acknowledgement to Dr Matthew Butlin, formerly of Newcrest Mining, who has
recently reviewed the education and training response of the minerals industry to the
skills shortage, there are two broad groups of skilled workers. Firstly, there are some
unique vocational skilled occupations that relate purely to the minerals industry where the
industry is the primary beneficiary. And secondly, there is a larger group of skilled
occupations that are relevant to a range of industry sectors and where the minerals
industry is merely one of the stakeholders.

Dr Butlin rightly observes that the industry needs to ensure that there is an adequate
supply of the uniquely skilled people and gets its share of people with the other critical
skills.


Repositioning the VET Sector

Mr President, the high profile nature of the current minerals boom, combined with the
industry’s attraction and marketing strategies has generated considerable interest from
potential employees. There currently appears to be no shortage of applicants for
unskilled positions, although many lack the basic literacy and numeracy prerequisites for
the industry. However, there continues to be a critical shortage of skilled trades people,
experienced miners, supervisors, technicians and mining professionals. That is, we have
a shortage of skilled people. This shortage is chronic in some areas and can only grow in
the future as the industry continues to expand.

Therefore, building on the existing initiatives, there is a need to continue attracting
skilled people to the industry and for a further, intensified focus on education and training
to ensure that potential employees are aware of the pathways into the industry and have
appropriate skills for entry.

I believe it is imperative that:

•   Firstly, Governments take steps to improve the literacy and numeracy of school
    leavers.

•   Secondly, Governments continue the VET sector reform agenda but at an accelerated
    pace. It is even more critical to transform the VET sector into a competency based,
    market responsive, flexible delivery, quality-training sector that can service the needs
    of the minerals industry in remote and regional Australia.

•   Thirdly, Companies are encouraged to find innovative ways of fast tracking
    apprenticeship training. For example, one major mining contractor has cut the time
    for apprenticeship from 4 years to 12 – 15 months for mature entrants. They have
    achieved a 98% completion rate through a comprehensive pre-selection process that
    sets high selection standards with an emphasis on maturity, safety, and personal
    growth.


Willis Connelly Oration – 7 December 2007                                                    8
•   And finally, the minerals industry, in collaboration with governments, establish a
    network of VET level mining education and training centres in the principal mining
    regions across Australia as proposed by Dr Butlin. The centres should be well
    resourced with excellent staff and quality training materials and include industry in
    their governance whilst utilising existing training infrastructure in their region. I
    expect that the network of training centres would build on existing education and
    training initiatives and partnerships already emerging in Queensland, South Australia
    and Western Australia which involve the corresponding minerals industry State
    chambers and councils. A loose network of the centres would ensure a collaborative
    approach to high quality training materials that could also be delivered through
    modern e-learning processes to accommodate employees at remote and regional
    mining sites. The centres could be aligned with the technical training activities to be
    established at neighbouring secondary schools and access some of the Government’s
    450,000 new training places.

These and other new initiatives are critical if we are to continue to effectively address the
skills shortage capacity constraint head on.


Conclusion

In conclusion, Mr President, I believe the initiatives I advocate here will contribute to
delivering the skilled workers so critical to the sustainability of the Australian minerals
industry and the Australian economy. But they will not be achieved solely by the MCA
and our partner State and Territory councils and chambers. They will require a
coordinated program of reform by the Australian Government and State and Territory
Governments working together as well as companies working in partnership with the
VET sector.

As we all know, the minerals industry is a key driver of national wealth and regional
development. Governments must therefore recognise that education and training
solutions for the minerals industry must accommodate delivery in remote and regional
settings and will require different treatment to the solutions applied to manufacturing
industries in Australia’s capital cities.

It is only with a comprehensive, coordinated reform that the publicly funded vocational
education and training sector will be able to service the needs of the minerals industry
with high quality, relevant training delivered when and where required.

Thank you, Mr President, ladies and gentlemen.
ENDS




Willis Connelly Oration – 7 December 2007                                                     9

				
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