The number on the desk
In 1938 the Lyons Government banned iron ore exports on one adviser's estimate. It took 22 years, a new set of officials and a trade deficit to start undoing it. On Whose Advice, week two, scores the decision on the record.
In 1938 the Lyons Government banned iron ore exports on one adviser's estimate. It took 22 years, a new set of officials and a trade deficit to start undoing it. On Whose Advice, week two, scores the decision on the record.
In 1940 the Commonwealth's geological adviser put Australia's recoverable iron ore at no more than about 350 million tons. Geoscience Australia says the country mined 953 million tonnes in 2023 alone, and still holds about 58.6 billion tonnes of economic demonstrated resources, the largest in the world.
Last week I used the 1938 iron ore export ban to explain how this series works. This week I went back to the file.
Lyons's Cabinet decided on 17 March 1938 to prohibit all iron ore exports. Historian David Lee, who has worked through the Cabinet and diplomatic papers, could find no Cabinet minute. Lyons announced it in the House of Representatives on 19 May, to take effect from 1 July.
His public reason was the survey. "In the light of the report which Dr Woolnough has now made," the statement read, "the Government is satisfied that the accessible iron ore deposits which are capable of economical development are so limited as to compel their conservation for Australian industrial requirements." It promised a full survey with the states and said that if the survey showed "some reassuring features", the government "would be prepared to reconsider".
His private reason was Japan. A British firm, H.A. Brassert, held leases on Koolan Island in Yampi Sound, financed by the Nippon Mining Company, to ship ore to Japan. On 7 April 1938 Lyons cabled London: "Desire you understand we are not only concerned with preservation of adequate ore reserves but also expressly wish to avoid the establishment of this Japanese Enterprise in North West Australia."
So there were two aims: conserve a scarce resource, and keep a Japanese-financed enterprise off the Kimberley coast.
Walter Woolnough was the Commonwealth Geological Adviser from 1927 to 1941. Lyons asked him in August 1937 for a general review of the iron ore position. Lee's account of the report shows how narrow it was. Woolnough counted only deposits over 20 million tons, high grade, low in impurities, and within economical reach of the right coking coal. That left two groups: Iron Knob in South Australia, at 150 to 200 million tons, and Yampi Sound. Against national use of about two million tons a year, he concluded Australia would "in little more than a generation become an importer rather than a producer of iron ore". He noted that "very large tonnages" were known in inland Western Australia, then set them aside as too far from coal.
Not all the advice pointed one way. Lee records that Defence, in 1934, 1935 and again in December 1937, saw no serious security objection to the Yampi venture. On 13 December 1937 External Affairs, under its secretary Roy Hodgson, concluded that stopping it would be inadvisable and unnecessary. The loudest alarm came from the Department of Commerce, including its trade commissioner in Tokyo. BHP's chairman, Essington Lewis, told Lyons in March 1938 that reserves were not so limited as to warrant a ban. Geoffrey Blainey later called the report "dubious even in the light of the facts on his desk in 1938".
Two details tell you which aim was in charge. The ban stopped ore, but scrap and pig iron kept going to Japan; Lyons assured Lewis there would be no restriction on scrap. And when waterside workers at Port Kembla refused in mid-November 1938 to load pig iron for Japan onto the Dalfram, the Commonwealth applied the Transport Workers Act against them on 7 December. The ore ban was about who controlled an Australian deposit, more than about denying Japan iron.
The promised survey with the states reported in 1940. It backed the original advice and put the ceiling near 350 million tons.
The war ended in 1945. The ban stayed.
Harold Raggatt, Woolnough's chosen successor as geological adviser, became the first director of the Bureau of Mineral Resources in 1946 and was Secretary of the Department of National Development from July 1951 to January 1965. Senator Bill Spooner was Minister for National Development from May 1951 to June 1964. Through the 1950s the department and the bureau favoured keeping the embargo, and Western Australia asked without success to have it lifted.
Meanwhile the ground was speaking to anyone allowed to listen. Lang Hancock found iron ore in the Hamersley Ranges in the 1950s. Stan Hilditch stood on what became Mount Whaleback in 1957. Lee records that both kept their finds secret until the embargo was relaxed. Under Western Australia's rules, a discoverer had no assurance of keeping what he found. The National Museum of Australia calls the ban "a major disincentive to iron ore exploration" over the next 20 years.
By late 1959 the department and the bureau had changed their view and backed a cautious, experimental relaxation. The National Museum records that Spooner favoured modification while Menzies and his trade minister, John McEwen, were against. In March 1960 Menzies insisted that Spooner first consult the steel industry. BHP's chairman, Colin Syme, argued that easing the ban was unlikely to bring back an export trade. Lee's verdict is that BHP did not start the ban in 1938, but that it "came to suit the interests of the Australian steel industry".
What broke the deadlock was money. Australia's trade deficit was widening. On 24 November 1960 Cabinet kept the three biggest high-grade deposits reserved and allowed up to a million tons a year from smaller or undiscovered ones. The first licence, on 1 December 1960, was for 500 tons. Within two years the Pilbara finds were public. In May 1963, Lee records, Spooner told Cabinet the new deposits were so large that "the original reason for the export policy, i.e. conservation of our limited resources, has now vanished". The Menzies Government lifted the Yampi ban in 1965. The last Commonwealth embargoes were rescinded on 17 May 1966, under the Holt Government, which had taken office in January.
Lee credits the end of the ban largely to the advice of Raggatt, once Woolnough's protégé, who devised a staged relaxation that encouraged discovery.
Was the ban a disaster? The record says less than you might think.
The narrow aim was defensible. Australia was at war with Japan within four years. Keeping a mine financed by a Japanese company, one chaired by a former admiral of the Imperial Japanese Navy, off the north-west coast was a judgement a Cabinet could reasonably make, even against Defence's advice.
And the boom probably could not have come much sooner. Lee, drawing on economic historian Ian McLean, argues the 1960s boom needed Japanese steel at scale, long-term contracts, heavy-haul railways and bulk carriers, none of which fully existed until about 1960. Hamersley laid its 292 kilometres of track between August 1965 and June 1966.
So the cost is not twenty-two years of a modern iron ore industry. It is harder to measure: a decade of exploration not done, finds kept quiet, and a country that believed it was poor in a mineral it was rich in. I can't find a sourced dollar figure for that, so the Cost test stays blank.
BHP held the accessible high-grade ore and, in Lee's words, had "no incentive to search for more". Western Australia waited. When the ore finally moved, the sellers were scattered and the buyers were not. In March 1965 a senior Treasury officer warned Treasurer Harold Holt of the possibility that "Australia's iron ore resources are being sold to foreigners for a song". On 26 May 1965 Cabinet itself recorded that "a highly controlled and unified demand had in this case operated against a scattered and disorganised supply and so forced down the price".
The Builder's Creed asks what a builder's Australia would have done instead. Here the record answers for me. Count before you close the door: the survey with the states came two years after the ban, not before. Use a targeted tool for a targeted fear: the worry was one foreign-financed lease, not the continent. Put a review date on any ban. Reward the people who find things, so they speak up. And when you open the door, organise the sellers before the buyers organise you, which CSR's chief, Sir James Vernon, conceded to Menzies in 1965 would, with hindsight, have been the better course. The processing promises written into the 1960s agreements are a separate story, and Under Our Feet has been following that one on Thursdays.
In 1938 Australians argued hard about pig iron and Japan; the Port Kembla wharfies carried that argument at real cost. On the file, the sharpest challenge to the number itself came from Japan's consul-general, whose interest was obvious. We tend to fight the politics of a decision and leave its arithmetic to the experts. Here that left one desk's assumptions standing for 22 years.
| Test | Score | Why |
|---|---|---|
| Cost | blank | No sourced dollar measure of the delay. Lee and McLean argue the boom needed 1960s conditions. |
| Spread | 1 | Gains concentrated (BHP's hold on accessible ore, per Lee); costs real but diffuse and unmeasured. |
| Warning | 1 | Defence and External Affairs saw no need to stop Yampi; the technical adviser said ban. Divided advice, not overridden consensus. |
| Delivery | 1 | Kept the Japanese-financed enterprise out; "conserved" against a shortage that did not exist, and slowed the exploration that would have shown it. |
| Lock-in | 2 | 22 years to partial lift, 28 to full rescission. |
Total: 5 from the four tests I could source (Cost blank). Not in the "worked" column. The 1960 relaxation, scored on its own, is: Cost 0, Spread 1, Warning 0, Delivery 0, Lock-in 0. One out of ten. That one worked, and it was officials changing their own advice that made it work.
Next week: the 1973 tariff cut and the Rattigan committee.
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