Discussion: Imagine the impact on the e...

Imagine the impact on the economy if he could no longer afford to buy his lunch!

I loved the site of Gina encouraging the crowd to chant. Not only is it obvious she is short of a dollar, but the dollars she does own are all due to her own skill. It would be interesting if some competing export lobbies started to realise how much they will lose from a high $A.

I suspect this realisation is why we have heard virtually nothing from the Nationals in general and one Senator Joyce in particular over the last couple of weeks. Added elements include that the mining industry is a major competitor with agriculture for labour, and in some places (including the aforementioned Senator's home turf) for land too.

I like the fact its too much effort for him to hold up the sign. The best he can do s lean it against his leg

Doesn't mining "hurt working families" - KRudd June9 "for many West Australians the mining boom meant only higher rents, bigger mortgages and increased cost of living". I think Krudd has found Mining's weak spot that he can exploit for the election. Oh wait, wasn't this new tax supposed to increase mining investment????

The competing export lobbies are well aware of the impact of a high AUD, and the impact of a highly profitable expansionary mining sector which pays high prices for its goods and services. But we can't credit it all to the Australian mining sector. China's domestic appetite has increased demand, and prices, for manufactured goods as well as for its raw materials. Throw in global events such as Hurricane Katrina which created a huge demand for rebuilding in a relatively short time frame and we see major pressure on supply.

One of the things which influences the public discussion is that I expect that the government IS looking to slow the further expansion of the mining sector, for all the reasons that O-ing outlines (or, more technically, because supply constraints - especially in the availability of labour, particularly skilled labour - are threatening to cause an inflationary spiral), but it would be politically impossible to say so openly.

There's nothing particularly unusual about action being taken to slow down an economy when it's overheating, it's just that it's usually done across the whole economy, it involves increases in interest rates rather than increases in tax, and it's done by the Reserve Bank so it's somewhat removed from day-to-day politics. Increasing interest rates wouldn't help in this situation, (a) because it also hits other parts of the economy with a much lesser capacity to pay and (b) because it would drive the A$ up still further. Leaving aside arguments involving the resources being finite, publicly owned etc., a sector-specific tax seems to me to be about the best policy option available to temper an unsustainable sector-specific boom. Of course, bringing an economy, or part of an economy, down to earth gently is an inexact science at best and the early 1990s provided a fine example of what happens when you get it wrong.

I can certainly understand that people who are riding the crest of the wave would have a powerful incentive to keep the boom going as long as they can - if you're earning $150K driving a truck in the Pilbara, or bought a Port Hedland house for a song 20 years ago that you're now renting out for $1600 a week, the status quo is a very good thing - but that shouldn't be confused with the national interest.

Exactly Blair. Can't raise interest rates to slow mining. Wouldn't have much impact as most of the capital comes from overseas, and the impact would be felt in the non-mining states with unpleasant political and social consequences. Re the competing export industries, in NZ milk prices are almost back to the levels prevailing before the 2008 crash. Nowhere near that in Australia. The absence of a mining sector in NZ helps explain the disparity.

On a lighter note - I loved the letter to the Editor in this morning's Age (11/6) - referring to Rudd's opposition in this matter as Clark Kent and Lois Lane (see photo on front page of yesterday's Age). An uncanny resemblance!!

so we should allow mining in our national parks so we can afford to drink milk again...? Sigh, I'm all confused....

No. We (australians) shouldn't listen to the extravagant claims of the miners that it will be good for the rest of Australia for them to pay no extra tax.

Great news. After less than three days of consultation between govt and miners, the Mining Council is accusing the government of indulging in sham consultation. Most organisations would take somewhat longer to identify bad-faith consultations. But the mining industry has more experience than most in this tactic. Wasn't this the industry which told us that individual work contracts would allow employees to negotiate with the mining companies. Those negotiations took the form.. here is the contract, sign it. Seems the boot might be on the other foot now.

That's an extravagant claim, Neil. The mining industry actually suggested replacing royalties with the resource rent tax (to the Henry review). Yes, mining is objecting to being singled out as an industry to pay 57% tax rather than the current 43% (according to the ATO).

The time for consultation was during the Henry review - but there wasn't any. Rudd has fiddled with the Henry recommendation and then presented it as is, with non-negotiable elements - the 40% rate for instance. This is in stark contrast with the way the Petroleum Resource Rent Tax was introduced by Labor - the PRRT author Peter Walsh has criticised Rudd's handling of the RSPT introduction (as have the Labor premiers of the mining states).

Much of the concern around that is about the effect of the new tax on investment - [and some is also from some fat executives wanting to preserve their own income streams] Mining needs upfront money to conduct exploration, resource definition and plant/mine construction - before you see any ore.

The Government is offering itself as a 40% investor on profits as well as losses - but they aren't going to put any money up front to pay for exploration or development. That will make it much harder to get mining projects going, which is all right if your economy doesn't really need any steel, copper, cars, computers, railways, trains or houses. Woops there's some extravagance creeping in. The upshot is - not all mining companies are the same (there are ~600 on the ASX), but most need up front investment to make it happen. This tax, as currently framed by Rudd, will discourage that and that will have a negative effect on the industry, which should concern all Australians, most of all in terms of jobs.