Rio Tinto Chairman Says it's Europe that's Down Under, not Australia

Rio Tinto Chairman Jan du Plessis said Friday that while Australia is known as the Land Down Under, the present global economic reality is that it is Europe which is down under.

Du Plessis, who recently visited Australia but is based in London, observed that eurozone counties are locked in a straightjacket in which the founders of the single currency threw away the keys.

"The very core of the problem is that the countries of Southern Europe are in some instances living way beyond their means and, in order to preserve the single currency, the tab for their excesses will have to be picked up by their neighbours to the north," he said.

Because of the economic imbalances within the system and different sets of cultural values, du Plessis said it is hard to see any solution that would sustain the euro zone over the long term. The majority of Germans are not willing to expand further financial support to their neighbours.

In the case of Greece, he said even if the bulk of the country's debt would be written off, Athens "has lost the ability to re-establish a semblance of competitiveness through deflation of their domestic current."

Du Plessis said the inevitable future for Greece is high unemployment, stagnation, social unrest and political instability.

While the eurozone is grappling with its survival, the biggest challenge facing Australia is how to manage its prosperity, he said.

Du Plessis pointed out that Australia is considered a "lucky country" for its abundant natural resources, location and wonderful climate. He also credited reforms made by different Australian government such as floating the currency in 1983, reducing tariff barriers, reforming labour markets and updating tax and competition laws.

"As a bridge player might say, Australia was not only dealt a good hand, but you have played your cards well," the Rio Tinto chairman said. He urged Australia to use its advantages in the good times to ensure the country would be well positioned for the expected tougher times ahead.

Going local, he said in the case of Rio Tinto, the firm has identified diversity in its workforce as the key in widening the pool of skilled workers. He pushed for apprenticeship programme for young people who want to pursue a career in the resources sector or other forms of training.

Du Plessis agreed that skilled migration and temporary skilled migration is part of the solution, which even the government has recognised.

He said Australia must exercise discipline and strong leadership to prevent its present success from giving rise to complacency.

"Do remember that decisions made - or not made - have very long-term consequences. You are in a wonderful position - please don't miss the opportunity to remain one of the most fortunate countries on earth," he concluded.