It's in the nature of the news media to focus on the new, on the bit
that's changing. So when people like me bang on about the resources boom
- as we've been doing for about a decade - it's probably inevitable we
leave many people with an exaggerated impression of the size of the
oh-so-important mining industry.
Most people have little idea how
mining compares with the rest of the economy. Some, when asked, say it
may account for a third of the total.
Sorry to mislead. It's
actually a bit over 10 per cent of all the goods and services we
produce. If that doesn't seem like much, it is. It's a bit more than the
whole of the manufacturing industry contributes and about three times
what agriculture does.
More to the point, it's up from about 4 per
cent before the boom began. And it's a big deal for any industry to go
from 4 per cent to 10 per cent in the space of a decade. That couldn't
happen without having big implications for other parts of the economy,
with the high dollar just one example. So it's little wonder the
economists have been so obsessed by it.
It's the biggest single
development affecting the economy - the whole of the economy - in that
time. And though the smarties began proclaiming the boom's death a year
or two ago, its closing stages will still have big effects on the
economy - favourable and unfavourable - for at least another couple of
years.
Many people are uneasy about the expansion of mining.
Digging non-renewable resources out of the ground and shipping them
overseas seems such a dead-end occupation. People's reservations are
compounded when they realise how amazingly capital-intensive mining is.
That is, how few people it employs.
Mining may account for 10 per
cent of our total production, but it accounts for only about 2 per cent
of total employment. Building new mines is labour intensive, but running
them isn't. If so, why bother?
It's a mistake to think it's only
direct employment of people that makes an industry worthwhile. What
matters is how much income an industry generates. Why? Because when that
income is spent it will generate jobs elsewhere in the economy. That's
what spending does: generate jobs.
In the case of mining, however,
there's a complication. Though the powers that be don't trumpet the
fact, mining is about 80 per cent foreign-owned. Even BHP Billiton is,
essentially, a foreign company. And most of the extensive capital
equipment mining uses is imported.
Mining in Australia is a highly
profitable activity because we possess a large share of the minerals
and fuel the world values highly, and because our deposits are generally
high quality and easily extracted.
If mining creates so few jobs
directly, and so little of its profits accrue to Australians, that
leaves two key concerns to ensure Australians get suitable recompense
for the exploitation of our natural inheritance: make sure miners pay
adequate royalties on the minerals we grant them and make sure their
profits are adequately taxed.
Business people tend to portray
taxes and revenue received by governments as dead money. The opposite is
true. The government spends the money it receives, and when it's spent
it creates jobs, like all spending does.
The Labor government
bungled its attempt to ensure the miners' profits were adequately taxed.
But, rather than correcting Labor's errors, Tony Abbott has pledged to
abolish the tax and let the foreign miners off the hook. Then he'll
wonder why the huge expansion in mining production we're now seeing is
creating so few jobs.
It gets worse. Not only are we under-taxing
the miners, we're giving them lots of subsidies. Not only does the
federal government give them a rebate on the excise on their diesel
fuel, the state governments give them assistance by building the roads,
railways and ports they need to ship their minerals abroad.
According
to calculations by the Australia Institute, the states gave the mining
industry $3.2 billion in concessions in the financial year just ending.
Queensland gave assistance worth almost $1.5 billion, mainly by
providing railway infrastructure and freight discounts.
Western
Australia spent almost $1.4 billion, mainly on roads and port
infrastructure. Other states' subsidies are much smaller - $140 million
in NSW, $40 million in Victoria - but so too are their receipts from
mining royalties.
It turns out the Queenslanders' subsidies to mining
are equivalent to almost 60 per cent of the royalties they receive. In
WA it's about a quarter, and in NSW it's less than 10 per cent. In
Victoria, however, it's three-quarters.
And this while governments,
federal and state, are crying poor and cutting spending on many worthy
causes.
As Ian McAuley, of the University of Canberra, has pointed
out, we're slashing our planned spending on foreign aid because we can
no longer afford such generosity, but by abolishing the mining tax we're
being very generous to big foreign mining companies. This makes sense?
