VZCZCXRO4699
RR RUEHPT
DE RUEHBY #1096/01 3472052
ZNR UUUUU ZZH
R 132052Z DEC 09
FM AMEMBASSY CANBERRA
TO RUEHC/SECSTATE WASHDC 2426
INFO RHEHAAA/WHITE HOUSE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHOT/AMEMBASSY OTTAWA 0019
RUEHBJ/AMEMBASSY BEIJING 9673
RUEHBN/AMCONSUL MELBOURNE 6835
RUEHPT/AMCONSUL PERTH 5099
RUEHDN/AMCONSUL SYDNEY 5104

UNCLAS SECTION 01 OF 02 CANBERRA 001096 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR EEB/ESC/IEC, EEB/CIP/BA 
DEPARTMENT FOR EAP/ANP 
 
E.O. 12958: N/A 
TAGS: ELAB EMIN ECON ETRD PGOV AS
SUBJECT: ANTICIPATED LABOR SHORTAGE COULD STRENGTHEN UNIONS AND 
DELAY RESOURCE PROJECTS 
 
¶1. (SBU) SUMMARY:  Australia's resources and energy sector is 
forecast to continue growing but companies are worried about skilled 
labor shortages and new labor laws, which unions are keen to 
exploit.  The GOA estimates there are 80 planned or approved energy 
and resource projects that are likely to increase demand for skilled 
labor by 70% over the next decade.  This is likely to produce a 
labor shortage, which combined with changes to immigration and labor 
policies and a pipeline of confirmed projects that keeps growing by 
the day, could threaten the completion of, or at least delay, some 
of the projects.  END SUMMARY. 
 
Resource Boom and Labor Shortage 
-------------------------------- 
 
¶2. (SBU) Booming investment in Australia's resources and energy 
sector is expected to continue.  The supply of skilled labor in the 
sector, however, is not keeping pace and industry groups have 
lobbied for urgent government action.  The GOA estimates there are 
80 planned or approved energy and resource projects in Australia 
that are likely to see demand for skilled labor increase by 70% over 
the next decade.  Minister for Resources and Energy Martin Ferguson 
said in November, "If all of the proposed projects proceed there 
could be as many as 70,000 construction jobs and 16,000 ongoing 
positions generated by 2020."  Western Australia (WA) Premier Colin 
Barnett suggested in July the state would have to accept Chinese 
workers when the next round of major resource projects gets underway 
or face a critical skills shortage.  (Note:  WA contains many of 
Australia's resources and is already near full employment -- at 5%, 
it has the lowest unemployment rate of any state.  End Note.) 
 
Government Response 
------------------- 
 
¶3. (SBU) The GOA established in September a National Resource Sector 
Employment Taskforce to help secure the workforce required to build 
and operate major resource sector projects over the next decade. 
The Taskforce -- which includes representation from the resources 
industry, state governments, education and training providers -- 
will examine the current pipeline of skilled construction workers 
such as engineers, boilermakers, welders, concreters, riggers, 
drillers and divers that will be needed and the areas where 
additional skills focus will be required.  It will also examine 
strategies to create jobs in supporting industries such as 
logistics, transport maintenance and hospitality. 
 
 
Companies concerned 
-------------------- 
 
¶4. (SBU) BHP Billiton CEO Marius Kloppers recently warned that 
Australia will face another skills shortage in the resources sector 
as global demand returns.  BHP Vice President for Government 
Relations Bernie Delaney told us that  a tight labor market is not 
new to the sector, where companies used to hire foreigners or pay 
high wages for "fly-in, fly-out" workers willing to live in tough 
conditions for weeks at a time.  He said that new legislation 
requiring equal wages for foreigners will have little or no impact 
on BHP's use of skilled worker visas to bring in skilled labor to 
compensate for domestic shortages.  He noted that the majority of 
BHP's foreign workers -- brought in under Australia's 457 visa 
category -- fall into skilled categories and are paid market rates. 
Qcategory -- fall into skilled categories and are paid market rates. 
The advantage of these workers is that they are available when 
locals aren't and they can be brought in within three to four 
months.  Mining giants BHP and Rio Tinto prefer "direct engagement" 
with domestic workers, arguing that the exclusion of unions has 
meant 16 years of comparative peace in workplace relations for the 
resources industry.  But the Rudd government banned such direct 
engagement when it passed the Fair Work Act -- which went into 
effect on July 1, 2009. 
 
¶5. (SBU) Worried about the potential impacts of the Act, companies 
have switched to non-union collective agreements.  Some of the Act's 
provisions of concern to the companies are:  Greater scope for union 
officials to enter worksites; obliging employers to engage in "good 
faith" collective bargaining; abolishing individual agreements; and 
allowing a union to enter a workplace covered by a different union 
to engage with employees, opening the possibility of turf wars 
between unions. 
 
Unions see an opportunity 
 
CANBERRA 00001096  002 OF 002 
 
 
-------------------------- 
 
¶6. (SBU) Unions want to leverage the strong labor demand to expand 
their coverage.  The Construction, Forestry, Mining and Energy Union 
(CFMEU; aligned with the Left faction of the Labor party) and the 
Australian Workers Union (AWU; aligned with the Right faction of the 
Labor party) are competing for members and eyeing wage opportunities 
in WA, such as the massive A$43 billion Gorgon project and up to 
10,000 new jobs. 
 
¶7. (SBU) AWU leader Paul Howes acknowledged more union-friendly laws 
but opined that these were less prescriptive than the proposed 
Employee Free-Choice Act is in the U.S.  Howes said AWU had been 
negotiating with Gorgon contractors and was optimistic AWU would get 
significant coverage for its members during the construction phase 
of the project.  CFMEU Secretary Andrew Vickers said his union is 
challenging the exclusion of unions from agreements in federal 
court. 
 
¶8. (SBU) BHP CEO Kloppers and WA's Chamber of Minerals and Energy 
called for Australia to improve its use of labor through improved 
training and incentives, as well as increased immigration.  However, 
Howes said immigration law amendments, which now prohibit paying 
temporary foreign workers less than Australians, effectively make 
them more expensive to hire, once transportation, housing and other 
costs are factored in.  He suggested Gorgon use local contractors to 
benefit "manufacturing workers on the east coast," noting the 
structural economic shift taking place countrywide and likely to 
hurt the manufacturing-heavy economies of states in the eastern part 
of the country.  [Comment:  BHP's Delaney said that there is little 
difference in cost of foreign compared to local skilled workers 
because most staff are employed under comparatively expensive 
"fly-in, fly-out" arrangements.  The cost to relocate foreign 
workers to Australia is not much more than the cost of getting local 
labor to relocate from the East Coast to Western Australia, he said. 
 End comment.] 
 
Unions Already Striking 
----------------------- 
 
 
¶9. (SBU) The Maritime Union of Australia (MUA), which covers 14 
ports and claims membership of 3,000, is aggressively seeking wage 
talks in the resources, seafaring and construction sectors.  The WA 
Chamber of Commerce and Industry fears the MUA's campaign for higher 
wages will disrupt several multi-billion dollar resource projects 
off the WA coast.  In November, MUA went on strike against Norwegian 
company Farstad - whose vessels service oil and gas fields including 
Woodside's Pluto LNG project. 
 
¶10. (SBU) Woodside, Australia's second-largest oil and gas producer, 
claims that partly because of higher-than-expected labor costs, the 
cost of its Pluto project could jump by as much as A$1.1 billion. 
In December, the CFMEU went on strike at Woodside's Pluto project in 
WA's Pilbara region, over proposed accommodation changes.  Companies 
like Woodside are taking preemptive measures against looming labor 
competition, such as awarding 3-year loyalty bonuses, including 
stock options, to all employees. 
 
 
¶11. (SBU) Comment:  At the Gorgon December 1st inauguration, besides 
congratulatory remarks, labor issues dominated conversations among 
stakeholders (subcontractors, services companies, government).  All 
Qstakeholders (subcontractors, services companies, government).  All 
agreed there is already a shortage of skilled labor and made 
Ambassador Bleich aware of their concerns about the impact of 
empowered unions.  The Rudd government is sympathetic to unions but 
wants to keep them from damaging Australia's international 
reputation as a competitive and reliable supplier of resources and 
energy.  Unions are likely to increase membership and gain real wage 
increases as long as they avoid "killing the goose that lays the 
golden egg."  When faced with a smaller-scale labor shortage two 
years ago, companies were able to work around it by hiring 
foreigners.  Some believe that changes to immigration policy may 
make it harder to do this in the future, though one of the biggest 
players clearly does not.  The uncertainty surrounding availability 
of skilled labor, as well as changes to labor policies, could 
threaten the completion of, or at least delay, some of the growing 
number of resource projects planned in Australia. 
 
BLEICH