Australia’s housing and tourism industries have suffered
greatly from the mining boom. They are intrinsically much bigger employers than
mining, but have shrunk in the face of a spiralling Aussie dollar and the re-direction
of bank lending away from housing and into mining. The high Aussie dollar is
the direct result of foreign investment in mining, and it affects our
international tourism industry in particular.
Australia’s mining boom has occurred due to rising global
commodity prices, for no other reason, not increased operational efficiency,
not improved product quality or value adding, nor improved infrastructure other
than for use by the quarrier itself.
The boom has caused enormous dislocation in the Australian
economy (the so- called “two-speed economy”). It has caused large transfers
away from the traditional uses of capital and labour, leading to higher
unemployment and reduced availability of funds for investment in new housing
and tourism infrastructure.
The history of mining in Australia is dominated by very
generous industry assistance to BHP mainly, who pioneered Australia’s mining,
oil and steel making industries from 1883. The industry assistance was designed
around building a vertically integrated steel industry to elevate Australia to
an advanced first world economy.
BHP asked and received Federal assistance such as cash
advances for exploration, delayed tax payments until returns on investment
became “commercially acceptable”, and free fuel excise of 20%. This was seen,
rightfully, as an investment by taxpayers in Australia’s economic future.
But then in the mid 1990’s, BHP reverted to quarrying at the
expense of steel making. But the old array of tax deductions remained. Steel
making is a substantial employer as a percentage of capital outlay, with many
ancillary industry multipliers. Quarrying is highly mechanised, and a low
employer as a percentage of outlays.
For example, Fortescu, an Australian owned iron ore quarrier
formed in 2003, and already the forth largest in the world, employs a mere 2500
people on a turnover of $3.2 billion (one hundredth the size of Australia’s
economy). In 2010, Fortescue made a net profit of $580 million, but paid no
income tax. Why? Because all of the tax incentives used to promote Australia’s
steel industry still apply to quarriers, who do no value adding. But they
continue to receive the 175% research and development allowance and 20%
concession on all diesel fuel. To Fortescue, everything is ”research and development”.
These tax concessions deprive Australians of funds which
should be used to promote other value adding industries like housing and
tourism. Priorities for Federal funding should be employment numbers and growth
multipliers. The Housing Industry receives very few tax incentives, in fact the
opposite is true. The Tourism Industry, which employs three times as many
people as the mining industry, receives no tax concessions and a paltry handout
of $150M a year for a bureaucracy and international promotion from the Federal
Government.
Australia advanced from being a “banana republic” when BHP
vertically integrated our great wealth of natural resources into steel making,
with all its associated industry and trade multipliers.
But when Australia ceased making steel, the quarriers
retained all of those tax incentives that were designed to promote a national
value adding steel making industry. And that has been to the detriment of
higher employment industries such as housing and tourism, the fundamental
employment drivers of the once great state of Queensland.
Bill Morris
Author
Midwood Queensland Investment Report
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