Companies

Jul 31, 2013

Did we waste the mining boom? Let’s really test the argument

The evidence that we wasted the mining boom is actually unclear: we just don't notice how we used the vast flow of revenue. Glenn Dyer and Bernard Keane examine the claims.

mining boom

Think we “wasted the proceeds of the mining boom”? That the Howard government or the Rudd/Gillard governments — or both — failed to salt away enough of all that mining tax revenue?

What if it’s a furphy?

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8 comments

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8 thoughts on “Did we waste the mining boom? Let’s really test the argument

  1. uqjfoste

    Finally, some sensible analysis! The Grattan Institute have got it all wrong. The Howard Government did the right thing in the boom – reducing the budget deficit – and the Rudd government also did the right thing post GFC in allowing the budget deficit to rise. Between them, they enacted a superb example of stabilization policy working as it should. Yes, we can quibble about the expenditure choices in both cases but the reality is, as you say, large numbers of jobs were saved. Most Australians, and business commentators who should know better, don’t seem to understand this, or the fact that we have to continue to have deficits until the global economy turns up again. It is far too early to start cutting expenditure significantly to reduce the deficit. 2016 will be soon enough. Meanwhile, the ‘leaner and fitter’ non-mining sector is very likely to move quickly in increasing exports and import substitution as the dollar depreciates. This is all good news and the Howard and Rudd Governments should be praised, not criticized, for their respective fiscal actions.

  2. [email protected]

    This piece seems, consciously at some points, and unconsciously at others, to conflate the mining boom (that is, the expansion of the minerals sector since 2007) with the whole of public policy since 2007. It’s perfectly possible to believe that fiscal and monetary policy since 2007 was pretty good, and much better than elsewhere, without denying the obvious fact that neither the government nor the majority of the public good much benefit from the growth of the mining sector.

  3. steinman max

    Government overspending is the narrative of choice for neo-liberal institutions when it comes to explaining the GFC, the idea is to pick a nation and fill in the details of the global crisis as if it was the fault of government spending, see: neoliberals everywhere.

    Arguing that Australia overspent during the GFC is pure ideology, we’re the last success story in the world because we followed economics and didn’t slip into the neo-liberal tragedy of ideological austerity.

  4. grubbidok

    Usually Crikey economic analysis is excellent but this is a load of tosh. The real ‘waste’ isn’t fiscal but was the opportunity costs (i.e. waster opportunities) associated with investing this once-in-a-generation windfall opportunity into re-election tax cuts rather than the infrastructure that would help grow the country after the boom ended. Instead, the Howard government spent it on tax cuts to get re-elected and Australia actually ended up with poorer transport, education and health infrastructure (and funding) than it had *before* the boom. This ‘hole’ still needs to be filled, but now we don’t have the means to do it. Such a narrow ‘fiscal’ analysis like this kind of ignores the major point IMHO.

  5. The Cleaning Lady

    Excellent article that broadened my thinking.

  6. uqjfoste

    grubbidok,

    Yes, serious questions can be raised about the fiscal policy choices of the Howard Government and I have some sympathy for your view but it doesn’t detract from the fact that it was correct to remove accumulated government debt in the boom. As I understand it, the Coalition’s collective view was that tax cuts would stimulate private investment expenditure and that this was preferred to public sector investment. This balance was somewhat naive but it is also the case that there were public investments made that dubious, such as too heavy investments in electricity grid infrastructure and ongoing subsidies to the car industry. Picking winners is a hard game to play (think NBN)! Had a severe recession occurred many businesses would have been destroyed and capital investment would have collapsed. For the private sector, getting the fiscal settings right in seriously bad global recessionary conditions outweighs issues concerning fiscal details about spending and taxing.

  7. Phen

    Major problem with this analysis is that the provisions and impairment charges raised against assets by corporate Australia aren’t tax deductible and hence don’t put any downward pressure on the corporate tax base.

  8. Christopher Nagle

    I took notes on this article. Full of nuggets. Great article.

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