It always pays to be wary of commissioned reports. It also pays to keep an eye on what uses such reports can be put to.

Today The Australian Financial Review happily ran on its front page the latest dire warning from the mining industry about the attractiveness of Australia as an investment source. It follows BHP chairman Jac Nasser’s whinge about investment in Australian costs and other issues last week and sundry assorted business leaders before that. The latest warning was contained in a report by Sydney consultants Port Jackson Partners for the Minerals Council of Australia.

“Higher labour, energy and transport costs had made mining projects in Australia among the most expensive to develop,” was how the Financial Review summarised the report; “iron ore projects in Australia are up to 75% more expensive to develop than those in West Africa. Higher operating costs make the same projects less competitive in the key Chinese market than iron ore from Brazil, despite the much shorter distances from Australia’s mines.”

The key sentence, though, was that “the resources industry hopes the report will help shift the debate from spreading the benefits of the resources boom through the community to lowering costs for the industry”.

But there are two things missing from the Financial Review’s coverage.

Firstly, there’s no discussion of why costs have risen in Australia: the intense competition for labour and materials generated by the mining boom. BHP Billiton and Rio Tinto are spending billions of dollars expanding their Pilbara mines to protect their export position from Australia and in China. Adding to the pressure is the surge in investment in LNG in the same region: investments there total well over $150 billion. Absent some magic pudding of workers and materials, it’s impossible for there not to be upward pressure on costs.

Second, as the Financial Times has noted, this is a worldwide problem, not an Australian one. Mining stocks are down significantly (40% since April 2011), with investors demanding spending discipline rather than ambitious growth.

In fact, the whole claim that Australia is being left behind as an attractive destination for resources investment — we should never forget Tony Abbott’s disgraceful endorsement of Zambia over Australia during the 2010 election campaign — is repeatedly being demonstrated to be plain wrong. Not merely was Australia recently confirmed yet again as the best country in the world for mining investment, but other countries have their own issues.

Brazil, for example, is hardly the shining light of low costs and an accommodating business and government climate implied in the report. The Brazilian economy, once one of the fastest growing in the world, has come to a halt, recording no growth in the March quarter. Despite several interest rate cuts, consumers and business have slowed spending, and that includes the resources sector. Vale, the world’s biggest iron ore miner, has delayed $US8 billion of iron ore expansion plans in the past year because of environmental permit issues (what business calls “red tape”), higher costs and labor shortages. The company also cut its 2015 iron ore output target by 10% to 469 million tonnes tonnes and is looking at selling weak performing assets to focus on metals production.

And Arcelor Mittal said earlier this month that it had suspended a $US1.5 billion Brazilian expansion plan for lack of demand for steel. The company had planned to build a $US1.2 billion wire rod plant at its mill in Monlevade, Brazil, and a speciality steel production line at its mill. And Brazilian steelmaker Usiminas said it was scaling back plans to expand its own iron ore mining operations, cutting 4-5 million tonnes from its projected expansion because of a concern about demand levels in coming years, from 29 million tonnes to around 24-25 million tonnes.

Only last week Bloomberg said Australia (mostly BHP and Rio Tinto) would gain market share in Asia and China in particular over the next five years as a result of Vale’s problems in Brazil. “The investing environment in Australia is a little bit friendlier than in Brazil from a political, environmental and permitting standpoint,” said Andrew Cosgrove, a Bloomberg Industries analyst in Princeton, New Jersey. “Brazil may not be seen as the source of new supply in the future that a lot of people are expecting.”

None of that cropped up in the Financial Review.

Vale isn’t the only big miner facing project delays and challenges in obtaining licenses in Brazil. Bloomberg noted that UK-South African giant Anglo American has been ordered to stop construction at its Minas Rio project, the company’s biggest, six times because of environmental concerns. Last December, Anglo raised its cost projection for at least the fourth time to as much as $US5.8 billion, more than double the figure planned when the company agreed to buy the assets. And the Brazilian government is drafting new rules to increase royalties on the extraction of iron-ore and other minerals. What was that about “sovereign risk”?

The AFR‘s Matthew Stevens, a reliable cheerleader for the miners, noted the Port Jackson report said the reasons why the Australian mining industry was becoming less competitive were the “exchange rate and rising labour costs”:

“Alleviating the exchange rate effect requires long term commitment by governments federal and state to running fiscal surpluses, to the resolution of infrastructure constraints that create inflation, and perhaps more contentiously, to the creation of a sovereign wealth fund to ‘rebalance capital flows’

“Calls to sort out infrastructure constraints is motherhood stuff. No one is against more infrastructure, but governments can’t afford it currently and businesses only invest where it’s commercially viable. Then there’s ‘fiscal surpluses’.”

Well, the business cheering of the Gillard government’s attempt to bring the federal budget back to surplus in 2012-13 has been muted at best. But anyone who thinks a long-term commitment to running fiscal surpluses will produce a lower exchange rate might want to think again. Such a move, over time, would only strengthen Australia’s already strong credit rating and keep the dollar at or above parity for longer.

One way to produce a lower exchange rate would be to abandon any commitment to budget surpluses, loosen the fiscal shackles and knock an A off our AAA credit rating. That might get the currency lower and back to where the mining industry has for years flourished, lazily riding the weak currency for all the extra Aussie dollar income it can get.