Australia’s First coal town looks to the future

5 Sep

Australian Financial Review 5th September 2015


Many people and companies have become rich shipping coal from the mouth of the Hunter Valley to the rest of the world. Darren Pateman

Newcastle has been exporting coal for a long time. The first coal deal was recorded in  1801, when Philip King, governor of the colony of NSW, wrote to the botanist Joseph Banks in England about shifting a load of coal from what was then called Coal River on a ship called the Cornwallis bound for Bengal in British India.

“Profit for our coals at two pounds five shillings per cauldron. I believe this is the first return ever made from New South Wales,” the governor wrote.

Since then business pioneers from BHP to Japanese investors in the 1970s to Nathan Tinkler have followed that same route to riches, shipping coal from the mouth of the Hunter Valley to the rest of the world.

It is that unique history that makes Newcastle City Council’s recent decision on coal investment seem so strange and even hypocritical.

The ALP and Green-controlled council changed the investment mandate for the city’s $270 million in cash holdings to favour investment in banks that steer clear of coal.

No one was surprised when this year inner-city Marrickville Council in Sydney became the first council to divest from coal but what was Newcastle thinking?

The decision has been slammed since by the mining industry, by Prime Minister Tony Abbott and also by Joel Fitzgibbon, the federal ALP member for Hunter.

Built on coal

Peter Jordan, district president of the CFMEU, which represents miners, says:

“Newcastle was built on coal. They are sitting on the world’s biggest bloody coal port. They forget that to their detriment.”

Newcastle businesses are outraged that the city is biting the hand that feeds it at a time when the unemployment rate there is 9 per cent, compared with 6 per cent for the state. “Elected representatives who take the view there is no future for the coal industry in the Hunter are completely ignorant of the significant role it plays in job growth and sustainability,” Kirsten Keegan, chief executive of the Hunter Business Chamber, says.

The debate in Newcastle is a particular problem for the Labor Party. It has to straddle the gap between traditional blue-collar old Labor voters represented by the CFMEU and non-unionised “progressive” voters, who care more about the environment and climate change and could easily vote Green. Indeed, Newcastle is a microcosm of the massive shift that is taking place across the whole country away from resource-fuelled growth. The problem is how to fill the gap and provide jobs and growth. This week’s lower than expected gross domestic product growth shows the difficulties of the transition.

The CFMEU’s Jordan accuses Declan Clausen, the 22-year-old councillor who proposed the amendment, of “sitting under the tree of the Greens” and points out that Clausen is no coal miner. An environmental science graduate and former school captain of the upmarket Lambton High, Clausen is also convener of the Labor Environment Action Network. He  could not be contacted for this article.

The CFMEU was blindsided by the vote and raised its concerns at an ALP branch meeting this week, but in a sign that its power in Newcastle is on the wane, the council has not budged.

Since the closure of the BHP steel works in 1999, Newcastle is no longer the union town it once was. Indeed the Liberal Party effectively ran the council for a couple of years, until revelations at the Independent Commission Against Corruption forced the resignation of independent former lord mayor Jeff McCloy and killed the Liberals’ in the region.

University town

Most of the coal mining jobs are now much more than 100  kilometres inland, far up the Hunter Valley around towns like Singleton and Muswellbrook and in a different local, state and federal government area. Newcastle  has become a university town and a centre for medical services for a growing retirement community.

Port Waratah Coal Services is the biggest of the two coal loader operators (BHP is the other) but is highly automated and employs just 356 people. Compare that to the University of Newcastle, which has 2635 full-time staff and 26,000 students. The face of large parts of the city has changed too. The cafe society on Darby Street in Cooks Hill is as pretentiously hipster as in Marrickville or Fitzroy.

For many residents all they know about the port are the huge stockpiles of coal near the river that spread dust when the wind blows in the wrong direction. Michael Osborne, a Greens councillor who lives in the  Mayfield suburb next to a coal loader, says a lot of the people who praise the coal port have never lived near one. “They don’t have to wipe the black dust off their windscreens every morning,” he says.

Osborne says there is nothing radical about the decision to divest from coal. He notes that the nearby shire of Gloucester passed an almost identical motion a few weeks before, with little publicity, as have a handful of other councils. The Australian National University and Norway’s sovereign wealth fund have recently limited investment in coal. This week, California voted to stop its huge state pension funds holding thermal coal.

Liberal councillors say  the city is especially hypocritical, since it is happy to take money directly from the coal industry. For example, Port Waratah has agreed to pay $12 million to the city as a condition for development approval for a planned fourth coal loader facility. ALP lord mayor Nuatali Nelmes says this is standard practice with all large infrastructure approvals.

“Newcastle City Council supports economic development and will work in co-operation with private enterprise across all industries to facilitate employment growth and local job opportunities. In doing so, however, it is reasonable to expect that they contribute to both infrastructure and community amenity,” Nelmes told AFR Weekend in a reply to a list of questions.

Could cost ratepayers

The practical financial issue is the loss of interest revenue on the $270 million portfolio. On some interpretations the council will no longer invest in the big four banks, although NAB may have improved its chances this week by promising not to invest in the controversial Carmichael coal mine in Queensland. Investment advisers say smaller banks with no coal in their loan books pay about 0.15 percentage points less on term deposits. So across its whole portfolio, Newcastle council’s moral decision could cost ratepayers about $400,000 a year.

Nelmes says the shift in the investment mandate is not as radical as her opponents claim and it is designed to diversify and modernise the region’s economy. She says investment decisions will still be based primarily on high rates of return and strong credit ratings. But when rates of return and credit ratings are equal, the council will invest preferentially in banks that have strong environmentally and socially responsible credentials.

 “The policy does not preclude investment in coal. Newcastle has a strong past and future with coal and council supports the coal industry and jobs in that industry now and into the future.


“It is important that we also support the creation of jobs in new and emerging industries like renewable technology, smart manufacturing, human health and aged care, affordable housing and equal opportunity employers, so that we can assist in creating a diversified local economy. Our investment policy now reflects this,” she says.

When Mark Twain spent a day in Newcastle in 1895 he is said to have described it as “one big long street with a graveyard at one end and a gentlemen’s club at the other with no gentlemen in it”. A lot of people in Newcastle want to shake off that stereotype.

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