This undated handout photo released on September 4, 2009 by Rio Tinto shows a reclaimer working in the Yandicoogina stockyard and loading a conveyor with high grade iron ore in Western Australia's Pilbara region. (AFP Photo/Christian Sprogoe/Rio Tinto)

Australia's Mining-Heavy State Looks Elsewhere for Growth


NOVEMBER 06, 2015

[Updated at 11:32 a.m. on Friday, Nov. 6, 2015 to correct comment in 13th paragraph to "had not become lazy", rather than "became lazy"]

Jakarta. Australia's biggest resources state has long relied on China's hearty appetite for raw materials for its wealth but with growth in its main trading partner slowing Western Australia is trying to cultivate other trading partners such as Indonesia.

The state's top political leader and premier, Colin Barnett, this week visited Indonesia to promote everything from agriculture and tourism to overseas education and real estate.

The state recorded its first budget deficit in 15 years last year and fiscal 2016 could be worse as royalties from mining and oil and gas tied to international prices decline.

It's been more than two years since the state saw its AAA credit rating from Standard & Poor's stripped to AA+.

"It's been talked about for a long time, but I think now I'm putting more of my time into broadening and diversifying the economy," said Barnett, who was on his first trip to Indonesia as premier after frequently visiting China over the boom years.

"We'll still be dependent on resources for the next 50 years but we'll broaden it out," he said. "We will never be a manufacturing state and we don't aspire to that, but the area of greatest potential is probably agriculture."

In Indonesia, the state has long been a supplier of millions of tonnes of wheat annually and has even devised a noodle specific to local tastes.

No industry more than iron ore rode the double-digit wave of growth that gripped China in the last decade and no place mines more of the steel-making raw material than Western Australia.

The state reaped hundreds of millions of dollars in royalties each year as annual production surpassed a half-billion tonnes.

China's still buying, but with so much iron ore around and industrial growth contracting each quarter, prices are down 75 percent from 2011 peaks, translating into much lower royalties.

"I spent most of my time as premier dealing on that relationship with China and Japan, because in the last decade iron ore production will have doubled and liquefied natural gas production will have trebled," he said.

"China has now come back to slower growth rates. So therefore where else do we go," said Barnett, noting that the state's treasurer was also abroad visiting another huge Asian market India this week.

Barnett said his state had not become "lazy" as revenue from mining cascaded into government coffers.

"It's only now that we see investment in about half a dozen hotels either in construction or going into construction. There was very little space for tourism, particularly middle income, lower cost, family-type accommodation and transport," he said.

"Indonesia is sitting here, 250 million people to our north.