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INFO RUEHBY/AMEMBASSY CANBERRA 3644
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C O N F I D E N T I A L SECTION 01 OF 02 MELBOURNE 000104 
 
NOFORN 
SIPDIS 
 
STATE PLEASE PASS TO USTR 
 
E.O. 12958: DECL: 09/09/2019 
TAGS: ECON ENRG ETRD EIND AS
SUBJECT: U.S. BUSINESSES ON AUSTRALIAN ETS AND THE ECONOMY 
 
REF: A. A) CANBERRA 732 
     ¶B. B) PERTH 39 
     ¶C. C) MELBOURNE 95 
 
Classified By: Justin Kolbeck, Pol/Econ Officer for Reason 1.4(d) 
 
Summary 
------- 
 
¶1. (C/NF) A number of executives from U.S. companies are 
concerned that murky details in Australia's proposed Carbon 
Pollution Reduction Scheme may lead to unintended 
consequences.  These executives told similar stories of 
cutting staff and tightening belts in 2009, but are 
increasingly optimistic that the worst may be behind for the 
Australian economy.  End Summary. 
 
Mixed Feelings on ETS 
--------------------- 
 
¶2. (C/NF) At an August 13 luncheon hosted by Charge in 
Melbourne, U.S. business executives expressed mixed 
perspectives on Australia's proposed Carbon Pollution 
Reduction Scheme (ref. A).  Craig Lovel, Huntsman's Australia 
and New Zealand General Manager for polyurethanes is worried 
about grey areas and gaps in the CPRS legislation.  While he 
is still waiting for additional details, he is concerned that 
the legislation could push the chemicals industry out of 
Australia into neighboring Asian countries.  Boeing's Chief 
Financial Officer, Amy Hoover, is also trying to figure out 
what will be required under the proposed legislation, 
particularly in the carbon trading scheme.  An Exxon Mobil 
executive expressed similar concern about vague details to 
Consul General in a separate meeting, noting the worrying 
potential for gaps to be filled in later by regulators. 
 
¶3. (C/NF) Other U.S. firms are more optimistic.  Kellogg 
Brown & Root's (KBR) Director for Water and General 
Engineering Mark Gobbie sees opportunities to help carbon 
intensive companies gear up to cope with required changes 
under the CPRS.  General Electric's (GE) Country Executive 
for Australia, Tim Rourke, also sees new space to provide 
solutions to other firms such as alternative energy products. 
Rourke cautioned, however, that GE's capacity to capitalize 
on the CPRS is contingent on clear cut and understandable 
policies which he felt are still lacking. 
 
On the Australian Economy 
------------------------- 
 
¶4. (C) Caterpillar's General Manager for Underground Mining, 
Tami Nelson sees commodities indicators turning green. 
Copper prices are approaching an inflection point that will 
enable Caterpillar's Australian operations to ramp up 
activity again.  Most executives agreed that the Australian 
mining/commodities industry is stabilizing and are looking 
forward to an uptick in 2010.  Dean Lomas, Director for 
Venture Australia (a Detroit-based components manufacturer) 
and Huntsman's Lovel both said that their firms continue to 
be hard hit by the downturn in the Australian automotive 
industry, but predict that the sector is beginning to recover 
thanks to effective government stimulus and improving 
confidence levels.  Huntsman later announced on September 8 
that it would close its 200-person Melbourne polystyrene 
plant.  Caterpillar has reduced its staff by approximately 50 
percent since late 2008. 
 
¶5. (C) Boeing and KBR's Australian businesses continue to be 
buoyed by a defense industry that is holding up globally, but 
are taking defensive positions by reducing expenditures and 
conserving cash.  KBR in particular is looking forward to 
capitalizing on the Gorgon natural gas project in Western 
Australia (ref. B).  GE sees similar opportunities in the 
Gorgon project as well growing their wind power and 
alternative energy businesses in Australia. 
 
Frustrated by Labor Unions 
-------------------------- 
 
¶6. (C/NF) All seven of the executives, including Paccar's 
(Kenworth) Joe Rizzo, expressed a level of frustration 
regarding Victoria's influential labor unions (ref. C). 
These business leaders see a key weakness in Australia's 
"inflexible labor force" which still maintains anachronistic 
 
MELBOURNE 00000104  002 OF 002 
 
 
views on workplace entitlements.  Executives said that they 
had recommended moving some operations to other subsidiaries 
in places like South Africa, India and China in order to 
avoid costly labor disputes in Australia.  While tougher 
business conditions have tempered some unions' expectations, 
there was a level of frustration by these business leaders 
that labor unions were willing to draw out disputes even if 
it led to their companies' collapse. 
 
Comment 
------- 
 
¶7. (C) These executives' perspectives on the Australian 
economy track well with what we have heard from local firms 
and observers on the economy.  There is still some concern of 
a second global financial shock, however, Melbourne 
commentators are adopting a more optimistic view on the 
Australian economy.  There is even some speculation that 
Australia may dodge a "technical recession" (two consecutive 
quarters of GDP contraction) due to strong business 
investment numbers coming out of Victoria.  Uncertainty 
surrounding Australia's Carbon Pollution Reduction Scheme is 
a frequent gripe here, however, and we are told that 
businesses are putting pressure on the Rudd government to 
fill in these perceived gaps and grey areas. 
 
THURSTON