dont kid yourself the resource boom will last

http://www.news.com.au/business/money/story/0,25479,24043730-14327,00.html

We must ride China's boom - BHP
BY JAMES MCCULLOUGH July 19, 2008 12:00am

AUSTRALIA must capitalise on the Chinese economic boom with large structural and economic changes or risk becoming nothing more than a branch office to the world's largest mining houses, says BHP Billiton chairman Don Argus.
Mr Argus says the Chinese economic boom has created a once-in-a-century political, social and economic change similar to the Industrial Revolution.

He says Australia is well-placed to benefit from the runaway growth, which he predicts will continue for many years, but says we need to act now on numerous fronts.

Mr Argus said in Brisbane late Thursday that BHP Billiton (bhp.ASX:Quote,News) directors had made a conditional offer for Rio Tinto (rio.ASX:Quote,News) to create a global resources company with scale to compete with China's industrialisation that was changing the world.

"However, we need to get smarter and we need to work out what we do with the dollars earned and taxes paid (from the mining sector)," he said.

"We continue to see the resources sector as a cash cow continually milked, but without serious reinvestment we will lose this opportunity.

"Australia's position in global resources is not guaranteed.

"If we fail to remain competitive Australia will incur a substantial opportunity cost and, in the worst-case scenario, our resources will fall into overseas hands and we will become a branch office - just like Canada."

Mr Argus said that, in terms of global competitiveness, Australia had dropped since 2001 from being the ninth most globally competitive nation in the world to the 19th.

"This is coming at a time when we are seeing a change which takes place only once every two or three centuries," he said.

China's staggering growth would be the greatest urbanisation in history.

Mr Argus said China had a plan to build 400 new cities by 2020 and was already building a city the size of Sydney every six weeks, consuming 50 per cent of the world's concrete.

"This industrialisation and urbanisation is still in the early stages and we need to capitalise on it," Mr Argus said.

"We have been losing competitiveness, but we are well-placed to increase market share and we have the resources to do it, so Australia in the new world order needs to work out whether we become a competitor or a spectator."

Lower-cost operations were crucial for survival along with a much-needed increase in the scale of Australia's global mining operations.

For instance, to satisfy the world demand for copper over the next 25 years another 15 mines the size of BHP's Escondida in Chile needed to be found and developed.

Commenting on the Rudd Government's emissions trading scheme, Mr Argus said what sounded easy in theory was very hard in practice.

"It will generate huge revenues, but the question is how will the Government use them?" he said.

And any discussion about emissions trading must be accompanied by a debate on the future use of nuclear energy.

BHP Billiton shares closed 90 down yesterday at $36.65 and Rio was down $2.50 to $115.50.