Costello plots resources pact [January 03, 2006]

AUSTRALIA wants to put the operation and security of the mining and energy markets on the international political agenda for the first time since the oil crisis of the 1970s.

Peter Costello plans to use a meeting of global financial leaders in Melbourne this year to press for a global pact to reduce the threat of nations distorting markets to secure long-term energy or resource supplies.

"The developing countries are going to have huge calls on energy and, by and large, they don't have huge energy resources," the Treasurer told The Australian. "The question they're asking themselves is, 'What security do we have for our energy supply?"'

The initiative comes as Russia cut gas supplies to Ukraine in a dispute over subsidised prices, a move threatening supplies to Western Europe.

The rapid growth of the economies of China and India have caused shortages and record prices for commodities such as oil, copper and iron ore.









In a speech to be delivered in Los Angeles this month, Mr Costello is expected to argue that the best way to achieve security of supply is to strengthen the legal framework and property rights for the global resources trade. This would help prevent countries from doing secret or market-manipulating supply deals.

Mr Costello is one of the founders of the G20 group of nations, which brings together the finance ministers and central bank chiefs of the leading developed and emerging economies.

He will seek support to improve the transparency of resource and energy markets and strengthen property rights for resource companies and their customers.

His plan has the support of the Minerals Council of Australia. Chief executive Mitch Hooke said: "We have been consulted. We are supportive of it."

The council has been concerned by efforts by some Asian governments, in particular China and South Korea, to find ways to intervene in markets, such as imposing import licences.

Australia is expected to use the G20 meeting to argue that crises such as the row between Russia and Ukraine result from contractual arrangements based on subsidies rather than market prices.

Australia wants the G20 to consider the distortions subsidies create for producers and consumers. The meeting will also consider how poor nations can develop resource and energy deposits without other parts of their economy suffering.

Mr Costello also said he would advance one of his oldest interests -- the ageing of the population -- with the G20 expected to consider its effect on the global economy. "What will it do to the movement of labour? What will it do to capital flows, and, as a consequence, to capital flows? What will it do to trade balances and exchange rates?" he said.

The other big issue on which Mr Costello is seeking a breakthrough is increasing the representation of Asian nations in the governing board of the International Monetary Fund.

The meeting of finance ministers and central bank chiefs will be held in Melbourne in November. However, Australia's priorities will be the subject of meetings between senior officials of G20 nations throughout the year.