Over The Nullarbor And Over The Horizon – Colin Barnett

The Hon Colin Barnett was first elected to the Western Australian State Parliament in 1990 as the Liberal member for Cottesloe. On 6 September 2008, he was elected Premier of Western Australia. Colin Barnett also holds the portfolio of State Development. Prior to entering Parliament, he was Executive Director of the Chamber of Commerce and Industry of Western Australia. Colin Barnett addressed The Sydney Institute on Thursday 3 September 2009, to discuss the complex interactions of natural resources, environmental preservation and economic investment and to outline his vision for Western Australia.

OVER THE NULLARBOR AND OVER THE HORIZON

COLIN BARNETT

Thank you very much Gerard for that introduction, and can I thank all of you for the opportunity to address the Sydney Institute. I am conscious that this is the week of the 20^th anniversary of the Institute and it has been an important forum for ideas and for debate in Australia.  So, thank you and congratulations.

The topic of my address says something about Western Australia. It is a long way away and it is different; we don’t have pokies, we don’t have daylight saving and we don’t have toll roads. But there are some more fundamental structural differences between Western Australia and its economy and Australia in the broad.

I intend to say a little bit about the last State election. I’d like to then say a little about some major issues of big projects and state development, and then some comments as I see them relating to our relationship with China.

First, the last State election in Western Australia. As you may know, I had made a decision to leave politics and I was quite comfortable in that decision. I’d had a good run, I’d been deputy leader, I’d been a Minister for eight years in the portfolios that I went into politics to be involved in, that is the mining petroleum industry, and as well a period in education which I thoroughly enjoyed.

The Labor government under Alan Carpenter had some problems, serious problems, and had lost the respect of many people in the West Australian community. The Liberals had had three leaders in three years, and there had been some fairly well publicised what I describe as “off-field incidents”.

In the lead up, the then leader Troy Buswell made a decision to stand down. I discouraged him from that decision but he decided that he would stand down, that it was the best thing to do. As a result of that I was essentially drafted back from my imminent departure from politics. I did so willingly, but with some conditions. I thought at that stage we had a rough chance, maybe a 40 per cent chance of winning an election, I said I wanted absolute loyalty, absolute commitment to doing it, otherwise I wasn’t interested. There was nothing in itself to attract me back into that role.

I got that; even from some people in the party that hadn’t always been close to me did their job and did it superbly. I became the leader of the Liberal Party in Western Australia on the 6 August; Alan Carpenter called the election on the 7 August.  At the time, I was buying a new suit. Having come back into the leadership I thought I’d better – I’d run down my wardrobe – I thought I better actually buy at least one new suit. I was with my tailor and I said make it two, it ended up three, because the news broke when I was with him.

And we were straight into an election campaign. The election had been called six months early, and right at the start of the Beijing Olympics. That worked against Labor and in favour of the Liberal Party. People saw it as being less than honest, of cheating, un-Australian, lacking sportsmanship, and I certainly played on that throughout the election campaign for what it was worth. And particularly during the Olympics of all events, when that epitomises sportsmanship and the idea of a fair go, here was an election called very cynically, six months early for no reason, no valid reason at all.

Labor spent a lot of money advertising during that election period. All it did was irritate people. With the interest in the Olympics you can imagine, perhaps, your annoyance if you saw political advertisement coming on just before the 100 metre sprint. People didn’t like it, they were aggravated and annoyed by it. I campaigned on many issues but I had a fundamental theme, and that was I would, if elected, lead a government of honesty and integrity. And I brought back into the Liberal ranks an Independent, Dr Liz Constable, who has a Joan of Arc status, and quite deservedly, in Western Australian politics. An outstanding person, conservative, independent and she stood by my side every time I talked about honesty and integrity, and is now a Minister in our government, although still an Independent but very much on the conservative side of politics.

The campaign did have the basis of a change of government. The Labor Party had sacked or had resigned five ministers during their term; had all sorts of inquiries and hearings before the Corruption and Crime Commission. They had failed in several key areas of policy and there was a sense in the community they had wasted the opportunity of the preceding economic boom.

As the Liberal leader I presented policy differences. We did have policy, more than perhaps the media anticipated. We campaigned on some easily understood issues. On law and order we had a simple key policy: a message to the community that if you assault a police officer causing bodily harm you will go to jail, and that legislation is about to be law. We also had a policy to retain the older hospital, Royal Perth Hospital in the centre of Perth, it serves as all central city hospitals do. Many people from disadvantaged backgrounds, many lonely people, many elderly people, and that has been done. We supported uranium mining, a long standing position of the Liberal Party and we knew there was a lot of potential uranium to be developed in Western Australia. And in other areas there were key points of difference that we emphasised throughout the campaign.

When the campaign started, I thought we had a 40 per cent chance of success, but there was a mood in the community for change that I, and I think probably everyone, had underestimated. As I went around into marginal seats, into shopping centres, people came up and slapped me on the back, said, “Good luck, I’ve always voted Labor. This time I’m voting Liberal”. I wasn’t quite sure initially why that was, but it was growing.

And you do have moments in election campaigns. One moment was the City to Surf fun run in the middle of the campaign. Now I happened to be at Parliament House by chance preparing for the day’s media announcement, and obviously you could not help but notice 40,000 people about to run down St Georges Terrace and past the driveway to Parliament House. So I took my tie off, went down there and stood there and simply waved. Now it’s not bad politics when you get 40,000 runners within ten metres of you over a 40 minute period. What I found extraordinary and didn’t expect and had never had experienced in my political life were people were cheering, “good on you Col”, you know. I think one person yelled out, “free booze for pensioners!”, and one person in a faltering voice said, “up the Labor Party” and was howled down by the crowd as they all ran past. So the mood was there and it continued to gather. Interestingly enough the media in Western Australia did not detect that mood throughout the election campaign. Candidates, campaigners on the ground did.

We won the election. The count was slow and we had a difficult period of coming together with an alliance rather than a coalition with the National Party. That took a week, but we got there.  And we had slimmest of majorities, one seat.

But I want to emphasise that we won that election. We didn’t just fall over the line by accident.  The Liberal Party won 10 seats off Labor in a 59 seat Lower House.  We won comfortably in the Upper House. The Liberal Party outpolled Labor by 30,000 votes alone, then you can add the Nationals and the conservative independents.

As we have gone on over the last year, our position has improved somewhat.  There was a by-election in a safe Labor Seat of Fremantle.  We took the decision not to contest that and the Greens won it.  Not sure how that will work out in the end, but Labor lost a seat.

A former Labor minister, who stood and we re-elected as an Independent, took a decision that he would vote with the National Party – sits on our side of the House and has kept his word.

As recently as a month ago, a young Labor member in the North-West region of the State decided that the Liberal-National Government was doing good things in his electorate and he would like to be part of it, so he defected from Labor and joined the National Party.  So, on a good day, on a good day we now have 32 votes out of 59.   The Government is certainly more secure than it was a year ago.

As a Government we have set some standards: some standards in the public sector, standards in terms of conduct of ministers and members of Parliament and an emphasis on making decisions.

Every week in the West Australian Cabinet I say to Ministers, your job is to judge the issues that come to you, take the advice, assess it, look at the alternate points of view – but you must make decisions, you must do that, that is your responsibility.  And we’ve been doing that.  In economic, financial areas, housing, health, education, and we’re going to continue to do that to remain, what I hope, is a good Government and judge, so to be.

The election of our government coincided with, obviously, the global financial crisis.  But I have not lost sight of what I take as the three messages that came out of the election. There is no doubt that people voted for a change of government.  They also voted, very clearly, for more to be done in country areas.  Not just country voters, but also city voters.  And they also voted for more attention, more to be done on the environment.   They were the three themes that came through the election campaign.

It was interesting on the environmental issue, the Labor Party in the last two weeks of the campaign decided to campaign intensely, at a local level, on an anti-uranium mine position. Now that might work in Sydney or Melbourne, but it’s not going to work in the world’s leading mining economy and it didn’t.  I think during the whole election campaign, two people came up to me and asked me about uranium mining and basically didn’t support it.  And one said to me, “we much prefer geothermal” and I said, “that’s nice, but do you realise in Western Australia, geothermal is radioactive decay?”  She didn’t like geothermal anymore. So it just didn’t resonate as an issue.

Now, as a government, I’ve taken on the responsibility of State Development.  That is my background during the government of Richard Court and Western Australia is all about big projects, international trade, large bold steps forward.

Our history, the 1890s, the gold boom, the population growing from 50,000 to 200,000.  The 1960s, the development of the Pilbara region, iron ore and natural gas to Japan.  A relationship that has underpinned our economy for 50 years and now, obviously, the emergence of modern China and the emergence of India and other nations.  There have been these waves of development.

There are a number of major projects taking place in Western Australia and I’m just going to mention them briefly, but I want to talk about more what I think it means nationally and make some comments about what might be going on and what are some of the opportunities and maybe some of the risks we face.

Now I know everyone’s been to Western Australia and I hope I’m not being patronising by putting a map up.  Look, Western Australia is a long way away, and if you live or work in Western Australia for any period of time you realise that not only is it a very isolated state, it is large.

Geography and distance impacts on everything in our State. It is 2,400 kilometres north/south, 16,000 kilometres east/west, basically the size of Europe.  To get to somewhere takes time and is expensive. The population is only 2.2 million people.  75 per cent of them live in Perth.  Ironically such a large land mass has such a heavily concentrated population in just one city.

We are blessed and we are fortunate in an extraordinary natural resource endowment.  And I am not exaggerating in saying Western Australia is without doubt the world’s leading mining economy.  Over 50 different minerals produced, significant world market shares, 10 per cent of liquefied natural gas, 15 per cent of iron ore, 10 per cent of nickel, 10 per cent of gold, 35 per cent of titanium, and it goes on and on.  There are significant world market shares located in one area.

It’s a very specialised economy, heavily concentrated on mining, petroleum and farming and it’s a very internationally focused economy. That is reflected in the title of this address Over the Nullarbor and Over the Horizon.  There’s truth in that perspective of Sydney.  In Western Australia, people for the last 50 years have looked over the horizon to Asia, not over the Nullarbor to Sydney, Melbourne or Canberra.  And that is implicit in almost everything that happens, in government, in business and even down to travel patterns.  People will go to Bali rather than go to Rottnest Island.  It’s cheaper.  And that has been in Western Australian ethos for decades. There is that connection that is stronger than elsewhere in Australia.

Now there is an extraordinary opportunity and extraordinary number of large projects happening.  As a Premier and with my senior staff, I have worked intensely.  I have never worked as intensely in my life as getting these projects going. To get state economy to the extent that helps Australia through the global financial crisis and to get a momentum back into development.

I just want to just briefly mention a few spots around the State.  Right up there, at the top, Kununurra, close to the Northern Territory border – that is the site of the Ord River Dam and the Ord River Irrigation Scheme.

The Ord River Dam, some of you may have seen it.  It is magnificent.  By far the largest freshwater resource in Australia.  It contains 18 times the volume of water in Sydney Harbour.  When the Ord River and the other river that comes out the other side of the Kimberley, the Fitzroy flow, and they don’t flow all year, they are seasonal, according to the cyclonic conditions.  When they are in flood they are literally of Amazon proportions.  This is one of the world’s great water resources and it is a vast area of land.

The Kimberley region, that top end of Western Australia, is twice the size of the state of Victoria.  To fly across it from Broome to Kununurra, in time and distance, is the same as from flying from Melbourne to Sydney. This is a vast area, it is a pristine environment, small population, 30,000 to 40,000 people, extraordinary and beautiful and spectacular countryside.  Well known too, as it appears on the Qantas ad.

When it was opened in 1972 by Billy McMahon, he announced stage two would follow on immediately.  Well, it didn’t and there were a lot of problems in agricultural production in that sub-tropical region.  The State and the Commonwealth have, however, reached an agreement on developing Ord Stage 2, which is adding a further 16,000 hectares of irrigation land, more than doubling the size of the project.

The State will spend $230 million on extending the irrigation channels, the roads, the bridges, all of that infrastructure and then sell the land, obviously, to farmers.  The Commonwealth will spend about $190 million on improving the social infrastructure, housing, health services, education, training, particularly for indigenous people, not only around Kununurra, but in that whole broader East Kimberley region.

Interesting, a major agricultural project, with abundant water and irrigation, matched by a major social objective, to see if two together can provide real opportunities for prosperity and worthy lives and success, personal and business for Aboriginal people.  So it’s a great social experiment, hopefully a great social endeavour, I should say, taking place in that area and I’m confident it will succeed.

Going around the Kimberley, there’s a place called James Price Point.  James Price Point will no doubt become well known in Australian debate in months to come. Off there is a very large natural gas resource called the Browse Basin, undeveloped, no production from there at all, as yet. All the major companies of the world, petroleum, are exploring and finding gas and oil in that area.

Along with the Commonwealth, the State Government has decided that that gas should be processed in that area at a place called James Price Point, which is about 60 kilometres to the north of Broome.  Yes it is the Kimberley coast, but it is not the Kimberley coast that most people would identify with.

The area around James Price Point is flat and scrub land, pristine, unoccupied, but not remarkable. No difference than thousands and thousands of square kilometres of similar land.

James Price Point has a beach, not remarkable.  There are no hills, rugged spectacular cliffs at James Price Point.  In fact the whole Dampier Peninsula, on which it is a part, is over 200 kilometres long, basically flat. This is not the spectacular Kimberley. That does not say it is unimportant.

The impact of an LNG plant will be minimal. This is not an industrial complex, as someone would try and describe. It is basically a large refrigerator.  All it does is take natural gas, cool it down to minus 170 degrees centigrade, where it turns into a liquid, its volume’s reduced and it can be exported, contained within shipping.  High tech, high sophisticated, very clean. And all that will be there will be this LNG plant, perhaps several of them.

The frontage on the coastline will be perhaps a kilometre. The shipping movements maybe two or three a week, of the most sophisticated commercial shipping in the world.  Now there are concerns raised quite properly, and recently, about whales. Some spectacular photos of over 160 Humpback whales off James Price Point.  Great to see.  They’re thriving. They swim up and back each year.  And they don’t only swim past James Price Point, they swim past Bunbury, Fremantle Harbour, Geraldton, through all of the massive shipping and frequent movements of the iron ore ships of the Pilbara.  And there, numbers are 22,000.

The whale population on the west coast of Australia has recovered to pre-whaling volume levels.  It is one of the world’s great migrations, and the numbers are increasing at around 10 per cent per year.

So yes, it’s fantastic. Great, extraordinary thing.  The LNG industry in the Kimberley will not impact on the whales. There are far more shipping movements in the southern part of the State, which they also swim past, than there will ever be in the Kimberley, and I think it’s important that people look objectively at what’s bound to be a significant environmental debate in Australia.  I recognise that.

Coming down the coast to the Pilbara, the project that is attracting a lot of attention now is the Gorgon natural gas project on Barrow Island. Barrow Island is interesting. It’s about 60 kilometres long, flat tableland, only rises a couple of metres above the sea and it is a piece of ancient, remnant Australia.  And for that reason, as it was cut off from the mainland, species have survived on Barrow Island that exist nowhere in the world.  It is pristine, it is unique in that sense.  And ironically, one of the reasons those species have survived in such a pristine state is that the oil industry has been there for 40 years, Chevron.

The island, because of its unique species, flora and fauna, various types of wallabies and goannas and things, because of the unique species, the oil industry has operated on a quarantine basis. Other islands like the Monte Bello and other Islands in the area, haven’t had the oil industry present and so haven’t had quarantine, feral rat species and plant species have arrived and basically destroyed the natural habitat.  It’s interesting.

So, when Gorgon develops the project, and this is a $50 billion investment, which is 30 million tonnes of LNG, liquefied natural gas, a year, the demands on the quarantining and protection of that island are the most exacting conditions probably put on any project in Australia’s history.

And it’s a massive project.  Ten thousand people, probably, employed on the island and on Australia’s mainland during construction.  There will be three-and-a-half thousand people on the island itself during construction.  Building the accommodation itself will cost half a million dollars.  There is nothing, I think, that anyone can really come to grips with.

And there are other projects.  We already have the North-West Shelf.  There is the Pluto LNG project that has one production train, looking at a second and a third.  There are several projects to the north in the Browse Basin.  Other projects in the area of the Pilbara coast, include Wheatstone, Macedon, Scarborough. Gorgon might be the biggest, but there are several of others at the scale of 20, $30 billion.  And the point I make is not to talk so much about an individual project, to make the observation for Australia, we are seeing the emergence of an extraordinary degree of investment and a major new industry sector for the Australian economy.

And if I can take a moment, just to comment on the gas reserves.  Gas is an attractive fuel. It can be used for town gas, to appliances in the home, it can be used for power generation, it can be used for its chemical composition. It’s a clean fuel.  If you produce electricity from a combined cycle gas plant it will produce one-third to one-half of the emissions of an equivalent coal plant.  It’s clean.

For many countries that’s attractive. For many countries, also, it’s a transition energy source, between maybe a coal era and a nuclear era and it might fill those 20 or 30 years in between.

Many of the companies find access to gas reserves, around the world, now limited. South America, the Gulf region, as state owned enterprises, basically take over those resources.

So the world is focusing on this part of Australia, and our gas resource there, we have as a nation, is world class. This is a world class resource, and the industry, transporting gas as a liquid, is a relatively young industry.  It only began in the 1960s and in Asia-Pacific in the 1970s.

We currently, as a country, predominantly from Western Australia, a little bit in the Northern Territory, produce 20 million tonnes of LNG a year, which is about 11 per cent of world production.  The projections, and I think they are realistic, by 2020, not that far away, Australia could be producing around 60 million tonnes or around 15 per cent of what the world demand is expected to be at that point.

This is perhaps the greatest investment wave Australia has ever witnessed, and it’s going to bring all sorts of issues with it.  And they include, have we got the workforce?  Will industrial action become a problem? Will that push construction costs too high?  There are all the environmental issues to be managed, a host of factors and I’m working as the State Premier to try and make sure that we maximise the benefits, not only for Western Australia, but for Australia, out of this natural resource and the development that’s taking place.

Coming down the coast, there is another region, iron ore, in the Mid-West of the State, to the north of Geraldton.  Geraldton is a town of about 35,000 people, 400 kilometres to the north of Perth. There is a mineral province in that area, which is quite rich and diverse, including iron ore.

It would have developed, had the fabulous resources of the Pilbara not being discovered in the 1960s. Everyone just simply jumped over the Mid-West and left it.  I have been passionate about trying to develop a deep sea port at a place called Oakajee, which is again relatively remote. It’s important, because it’s one of the few places on the West Australian coast where deep water comes in close to the beach.

And to have alongside that a world class industrial estate, rail lines, iron ore, copper, nickel, a whole range of minerals and hopefully the processing of those into higher value products in that area.

When I was a minister in the 1990s, looking after the resources industry, and I first started to promote this Oakajee project, I was handling a lot of prospective industries and developments.  And the dream in Western Australia has always to add more value, to do more, to take the iron ore to steel, to take the natural gas to chemicals, to take the nickel to stainless steel, whatever it might be.  And it never really quite worked, we never got there.  We made some success story, but never got there.

And if you think about it, it was fundamentally flawed.  Because what, from the days of Charles Court, and others, what people have been trying to do, if you think about it, was to turn a mining company into a manufacturing company. To say to the mining company: go out and compete with your customers. Or to turn a petroleum company into a chemical company. That is actually flawed, it was never going to work, and it didn’t work.

And I came to the realisation – fairly obvious, I suppose, in hindsight – that what we needed to do was to attract the customers here.  And to do that we needed two things: we need a purpose-built industrial site for them to build their complexes, their plant, their processing operation; and we needed low-cost and plentiful energy.

And that realisation came to me when there was a project that I was trying to bring together in the 1990s and we lost it to Trinidad. I can cop losing a project to Canada, I can even cop losing one to Victoria, but I can’t cop losing one to Trinidad.  And all they had was that… a very small gas resource, which was the main feedstock for this chemical plant, but they had a purpose-built industrial estate.

Now, for companies that are manufacturers and processors and chemical producers, they don’t have the ownership of some fabulously wealthy, high-priced natural resource.  They are buyers, they don’t want to become miners.  And Oakajee is a dream about developing the most competitive area for mineral processing in Australia, perhaps the world.

That’s what it’ll be about, and the other part – the more complex part – will be getting the energy price right. That’s what it’s all about and I’m pleased that the Commonwealth Government has joined with the State, and the Commonwealth and the State will jointly own the port side of that operation. The total Oakajee development’s about $4 billion, but the port – Australia’s west coast deep sea port – will be government-owned and it’ll be operated commercially.

The other interesting little thing about Oakajee, it will be the first major project in the resources industry that could be described as genuinely Australian, Japanese and Chinese. It may a forbearer of other investments and projects to come, quite unique.

There are other projects that we’re working on; there’s a whole lot of things happening.  Looking at some major city redevelopments: sinking the rail line; a waterfront development, a bit like a Darling Harbour; and the like.  These are all big things for Western Australia and it is riding on the emergence of China in particular and India to a lesser extent.

And I want to make a few little comments about our relationship with China.  Now, I am not a China expert by any means and I don’t purport to be one. I’ve been to China several times, I went several times as a minister in the 1990s working on projects such as these, they all have long gestation periods.  I happened to be in China in July coincidentally at the time at which I think the relationship between Australia and China reached its lowest point.  And I don’t want to overstate that, but at the same time I think our relationship is in a serious state and needs a great deal of attention.  I was there as only a State Premier – happens to be in the State that is important to China It’s most important, there, to talk about iron ore and natural gas and other projects, like Oakajee.

The point I would make, to begin, on China – and it may sound somewhat unpalatable, but I believe it to be true – China is more important to Australia than Australia is to China. We need to get ourselves through that intellectual hoop.  What we produce, which is primarily minerals and agricultural produce, can be bought elsewhere.  There is nothing particularly unique or rare about what we produce. Africa has abundant resources, China is a big player in Africa.  So, remember, your first reality check.

When I arrived in China there were a range of issues that just coincidentally compounded on that week, and I just happened to be at that time there, I guess the most senior Australian who happened to be in China.  Some of them were commercial, some of them were political.
The commercial issues, were several, and this is from China’s perspective. China saw that Australia was discriminating against China in terms of foreign investment approval. I don’t think they are, or we are, but that was the Chinese perception. They also saw that China was allowed to get involved in some of the marginal, smaller mining projects with probably a less prestigious part, and certainly low-quality resources, unlike what had happened with Japan.

We also had the rather spectacular case of the arrest of Stern Hu, the Rio Tinto executive, and charges – initially espionage, now something less than that – obviously a very critical issue.  Ah, great apprehension about the proposed merger of BHP and Rio Tinto’s iron ore operations. And of course, just before I’d arrived, we had the circumstance where, with Rio Tinto – in its post global financial crisis problems – Chinalco, a major state-owned enterprise equivalent to a top five Fortune 500 company had agreed to increase its stake from around eight per cent to around 19 per cent in Rio Tinto: a lifeline. And that, at the last moment, was rejected. That caused great resentment not so much, I might say, in Chinalco but certainly in the Chinese Government.  All of those factors were all concentrated.

At the same time, there were some broader issues. Concern about the Dalai Lama, perhaps not that significant in itself, the Dalai Lama has come to Australia several times. So that was probably not of significance.  But what was significant was the visit to Australia, to the Melbourne Film Festival, of Rebiya Kadeer.  Now, I don’t pretend to understand the rights or wrongs or the intricacies of the situation in China. But if you look at it from a Chinese perspective, two or three weeks earlier, the serious rioting, 300 people killed on both sides of that ethnic dispute. China saw it as Australia welcoming a person they regard as causing insurrection and internal instability. That’s how they saw it. They saw it as Australia interfering in their domestic internal problems and they probably saw it as pretty arrogant of Australia to be commenting in any case.

Now, I don’t dismiss the human rights issues. I don’t dismiss freedom of speech and freedom of reporting. I should never do that.  But I don’t think we were wise as a country, given the importance of our economic relationship with China. And we can have our own views, but we should not forget it is a one-party communist country, and whenever you go to China there is always some little thing that happens to remind you this is not a Western democracy.  It is changing, it is evolving.

And those issues were there throughout that week. I spent every meeting I went to – and this was with heads of the major state-owned enterprises; people such as the mayor of Shanghai, ranked four or five in the China system; party secretaries; government officials at a pretty high level – every meeting I began by saying: your investment, Chinese investment, is welcome in Australia, and it’s particularly welcome in Western Australia.

By the end of the week I was getting very positive, more than positive, basically commitments to iron ore, gas projects based in Western Australia.  I don’t think that would have happened at the beginning of the week.  I have never worked as intensely on an overseas trip as I did during that week in China.

One little story summarises the sentiment. This was front page news, too.  There were headlines: “Rio spies” – anti-Australian media, probably anti-Australian propaganda, full-on throughout the Chinese media.  Anyone who sits back in Australia and thinks this was some slight aberration, it would be a misguided view.  This is a serious circumstance in our relationship.

And it came to me when I was invited to do an interview with Chinese television. Now I am only a State Premier, I don’t expect to be in the Chinese media, I don’t expect to be an amateur diplomat, but that was the situation I found myself in. I was interviewed by an elderly Chinese reporter who was described to me as China’s equivalent of Parkinson – a similar age, a similar style show – and a show that apparently is watched by all the Chinese leadership.  He set up a little studio in the hotel to do the interview. When I walked in, he walked up to me and said: “Oh, hello Mr Barnett,” introduced himself, and said: “Over my career I have interviewed 300 world leaders.”  And I said to him: “Well, that’s very flattering, but I’m hardly a world leader.”  And he said: “No, but you are this week.”

And that was the intensity of the China-Australia issue in Beijing at that time.

Now, I don’t think, you know, it’s ruined; but this is not something that can be dismissed as just a couple of incidents.  It will take Australia to treat China as a special case.  We need to show respect to China, as we show to America and to Japan and to European countries. We need to recognise that China is the most important country to our future over coming decades. And we need to see China not just as a buyer of raw materials, but to be able to enter into a genuine economic partnership.

We should be encouraging China not to be involved in aggressive, hostile takeover bids for small companies with marginal resources.  We should be encouraging China to be shareholders – hopefully minority – but shareholders, significant shares: 10, 15 per cent, whatever it might be, with major partners – Australia’s top companies, Europe and America’s top companies – on the quality natural resources. Let’s lift the relationship, let’s show China the respect that we should.

And that was the theme that I developed.  And, if I can make a comparison in history: the relationship between Australia and Japan was forged in the 1960s, just a decade or so after the end of the Second World War.  What an extraordinary environment!  And yet we forged this relationship with Japan.  My father was a rat of Tobruk.  He was not happy about it, nor was his generation, but he was convinced along with others in Western Australia that our future lay with the post-war reconstruction of Japan, selling iron ore and natural gas.

But there was a great deal of thought that went into that relationship both by the West Australian government, some governments on this side of the country, and the Commonwealth Government.  And the deal was implicit: Japanese companies, the trading houses – the Mitsuis and the Mitsubishis – the steel mills, and the electricity and the gas utilities became foundation investors in quality projects with quality partners.  They took small shares in those projects: 16 per cent in the North-West Shelf Project; five per cent of something else. And they held those long term shareholdings to this day. It was a mature relationship, an understanding at a government-to-government and at a corporate level that has served both countries well, and certainly served development in Western Australia particularly well.

And yet here, in the first decade of this century, we get the emergence of China, probably the economic phenomenon on this century.  And we have not, as a country, through both Commonwealth and State Governments, put the time into the relationship that was put into the relationship of Japan in the 1960s. We have left it up to China to sort of struggle around our resources industry, probably get a lot of bad advice, get involved in some potential projects, where it was more about the share price and speculative gains and never actually mining, getting involved in not quality parties or partners.

We need, in my view, as a country, to put special emphasis into the China relationship.  Not treat China just as any other country, but make it a special case because of its unique importance. We need some clear policy guidelines through Foreign Investment Review Board, on the relationship with China.  And I would suggest it should be similar to the rules we basically laid down with Japan.  If we do that we will do well and we will prosper.

So I thank you very much to listening to me.