The Minerals Council of Australia's advertising campaign against the Resource Super Profits Tax (RSPT) highlights its $80 billion tax payments over the last decade. Eighty billion dollars in the abstract does not really mean much. It has to be related to the mining industry's profits and compared with other industries. Using the national accounts as basis for Australian industry as a whole, the average tax rate paid by Australian business in the nine years since the Howard government introduced the New Tax System was 24 per cent. In comparison, the $80 billion tax contribution of the mining industry averages out at just 19 per cent.
‘Minerals in the Australian economy’ is of course a big topic. On the one hand that means it is inevitable that major issues are not discussed. On the other hand it means that the contributor has a lot of scope to select what to talk about.
The position here is not to question the peak mineral thesis but to explore what that would mean for the Australian economy more widely.
Just to be clear though; much of the discussion below accepts the peak production thesis which suggests production will peak in the near future and decline thereafter.
Energy market reform and greenhouse policy are complex areas of public policy. It is unlikely that those who designed the current RET/CPRS set out to encourage coal mines to burn their waste methane rather than use it to generate electricity, but that is precisely what is being proposed. This problem can be simply fixed by ensuring that existing and newly built Waste Coal Mine Gas (WCMG) generators are eligible for RECS until 2030. The small size of the WCMG generation sector is such that any increase in electricity prices will be trivial in comparison to the other trends and policies currently influencing the residential electricity price.
The mining boom bonanza barely spread beyond the mining industry itself but the negative implications of the mining boom were felt very widely. This is important in view of the current suggestions that the end of the mining boom implies that Australians will have to tighten their belts. Symmetry should apply in the event of a slump in commodity prices. Just as the benefits of the boom were largely confined to the mining industry, the adverse effects of any slump in commodity prices should likewise be confined to the mining industry.
The perception of most Australians is that the mining boom delivered unambiguous benefits for the Australian economy, including more jobs, exports, tax revenues and, for the majority of people, higher incomes. But was this the case? This paper looks more closely at the extent to which Australians have, in fact, benefitted from the boom, which it dates as beginning after the December quarter 2004 when commodity prices clearly began to show the impact of the increased demand from the rest of the world.