What the Treasurer told a gold industry leader
Australian Financial Review July 11/97
By Lenore Taylor
Peter Costello found out two days ago that Robert
Champion de Crespigny, the head of Normandy Mining
and one of the most important figures in Australia's gold
industry, was about to publicly attack him.
He heard that de Crespigny was angry about Costello's
reported remarks on the gold industry and that he blamed
the Treasurer for contributing to the damaging drop in the
gold price that followed last week's announcement by the
Reserve Bank that it had sold two-thirds of its bullion
reserves.
De Crespigny's concern is widely shared within the
mining industry.
On Wednesday Costello picked up the phone and called
de Crespigny to straighten things out.
According to de Crespigny, Costello said he had been
badly misquoted. He had never said there was no reason
for the Reserve to keep its gold holdings; he had never
said central bank gold holdings were anachronistic.
De Crespigny agreed to check the record, and the two
had a long discussion about the industry.
When he reviews the quotes, de Crespigny will find the
following statements attributed to the Treasurer: "Gold no
longer plays a significant role in the international financial
system"; and, in answer to the question 'Why hold any
gold at all?', the statement that "It's really only for the
purposes of diversification."
Rightly or wrongly, de Crespigny insists that the reported
comments contributed to the fall in the gold price, and
other miners are angry that the Government approved the
sell-off in the first place.
"If you believe what you read from overseas analysts, the
Reserve Bank sale showed a loss of confidence in gold,
and Costello's reported comments supported and
reinforced that view," de Crespigny said.
De Crespigny goes back with Costello -- they are friends
who met soon after Costello entered Parliament in 1990
and de Crespigny hosted Liberal Party fund-raising
dinners at his Adelaide home in the lead-up to the last
election.
But this did not mute his concern. He was also
unimpressed by the Prime Minister, Mr Howard's,
comment that the gold industry had itself contributed to
the downward pressure on prices by engaging in futures
trading, and with the Resources Minister, Senator
Warwick Parer's comment that the gold industry was just
experiencing price fluctuations that had long been borne
by other commodities traders. "We are getting a whole
lot of politicians who know nothing about gold who are
making statements when they should not," he said --
adding that his concern was for the industry as a whole
rather than the prospects of his own company.
"Those are not sensible comments and the politicians
would be better holding their own counsel at the moment.
"If I was the Prime Minister or the Treasurer I'd just have
said the Reserve Bank had made its independent
decision, but the gold industry had made a massive
contribution to Australia since the 1850s and would
continue to do so . . . I think that's what a leader would
have said . . . I can only assume the Prime Minister was
also misquoted."
Yesterday, the Treasurer did make very supportive
comments -- "The gold industry is a very important
industry. It's one that we value and we have confidence in
the gold industry," he said.
The reaction of the rest of the mining industry to the gold
price slump has been slightly discounted by a view similar
to Senator Parer's -- that the "gold boys" were finally
subject to the same wild price fluctuations that have
always beset other commodities. But there is also a
strong belief that Costello's comments contributed to the
gold price dive and a disbelief that the Government could
be quite so offhand about a decision that could have
major implications for jobs and exports.
Executive director of the Minerals Council of Australia,
Dick Wells, echoes de Crespigny's concerns. "The
decision of the Reserve Bank was one for them . . . but
what was disappointing and what caused the price
reaction was the aspersion cast on the value of gold,"
Wells said.
"It was very unfortunate the way the announcement was
made . . . it was seen as casting a negative sentiment on
the value of gold as a reserve for central banks and that
has had the consequent market reaction." Chief Executive
of the Association of Mining, George Savell -- whose
organisation represents many smaller mining companies
-- did not mince words. He took issue with the decision
to approve the sell-off in the first place.
"He caused what happened. He approved it without any
thought to what would happen to the industry." It's not
the first bone of contention between the miners and a
Government which came to power declaring itself
"unashamedly pro-development".
The mining industry has had good access to Howard and
his ministers, and concedes that initiatives like the
removal of export controls and the revamp of Federal
and State environmental laws are positive. But it has also
had a long-winded and sometimes quite bitter run-in with
the Government on diesel fuel rebate and an intense
debate about native title, which has resulted in some, but
by no means all, of industry concerns being met.
The mining industry also shares the general business
community impatience with the pace of reform and has a
nagging feeling that as a sector it might be slightly taken
for granted.
"There is a tendency at the moment because of the focus
on jobs for the Government to look to small business and
manufacturing to get job generation and a concern that it
could lose sight of industries like the resource industries
which underpin the whole Australian economy," Wells
said.
"It's not easy, we know, but industry elected this
Government with the expectation that some of the tough
things that the Keating Government was failing to do
were going to be pursued by this Government, and while
some of them have been, there's an impatience to see
others done.
"We really can't be sanguine about competitiveness . . .
because the sentiment is there in the boardrooms that
other countries are really becoming much more
competitive."
None of which is likely to cut much ice with the Prime
Minister, who this week said the business community's
criticisms of the pace of reform amounted to "talking
through its own pocket" and were a direct result of the
Government asking business to make a small contribution
towards reducing the Budget deficit. Partly because of
their good access and partly because of the close
relationship between the immediate past MCA president,
Mr Jerry Ellis, and the Prime Minister, the mining industry
has so far pursued the glitches in the relationship with the
Government behind closed doors.
Which is perhaps why Senator Parer thinks there haven't
been any.
Asked about George Savell's angry remarks, Senator
Parer said AMEC had "always taken the extreme view".
"If you talk to the rest of the industry you won't get that
reaction . . . the general feeling is quite positive . . . it's the
best relationship they have had with a government for
nearly twenty years," the Senator, a former chairman of
the Australian Coal Exporters Association, said.
The mining industry is not suggesting that its relationship
with the Government has broken down.
But the 18 months spent fighting the moves by the
Treasury and Finance departments against the diesel fuel
rebate, the difficulty in having a calm voice heard in the
native title debate against the shrieks from the farming
lobby and, in particular, last week's handling of the gold
sell-off decision has made them decidedly nervous.
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