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Published 30 August 2012 04:16, Updated 03 September 2012 06:30
Thank goodness it’s over. The boom that is. It’s over according to a variety of sources, including BRW’s sister publication The Sydney Morning Herald and the Resources Minister Martin Ferguson – and he should know. The evidence comes from BHP Billiton’s axing of a $30 billion investment in South Australia’s Olympic Dam mine and a $20 billion investment in infrastructure at Western Australia’s Port Hedland. This substantially eats into the expected $260 billion of mining investment that is driving the boom.
But now it’s over, perhaps we can relax. For the past few years, the boom has been nothing but a source of angst and trouble, from what I can see. The focus on the negative affects of the boom has been unrelenting, from the pressure on labour to the blows it has dealt to manufacturing and exporters. At times it has seemed like the boom was nothing more than a burden that it would have been better to let other nations deal with. I am sure Greece – or any European nation for that matter – would be more than happy to take it off our hands. To a large extent we ignore or forget that it kept Australia out of the financial crisis, that a rising dollar has made imports cheap and holidays fantastic and that we are now the sixth-wealthiest nation per capita in the OECD, with a person on the average wage now 8.9 per cent better off in terms of disposable income than they were five years ago. We forget how personal tax rates have fallen while social benefits have risen and that from the outside, Treasurer Wayne Swan is considered a financial whizz kid after last year being named Finance Minister of the Year by the prestigious Euromoney publication.
Now we don’t actually know if the boom is over – every pronouncement in the past two weeks that it is over has been met by an equally strident claim that it’s not. In fact, according to Trade Minister Craig Emerson we’re not even half-way through the mining investment boom. Meanwhile BIS Shrapnel has released a report that pinpoints the peak of mining investment as coming in 2014. Confused? You should be because unlike a recession, there is no formal technical definition of a boom so maybe it’s over and maybe it’s not, we have no real way of knowing apart from sentiment, which blows hot and cold.
However, hopefully any concern that the boom is over should turn our attention to what exactly we have done with it. The answer is not as much as we could have. There was a lot of talk about a sovereign wealth fund but this is now firmly on the backburner. The mining tax, which was devised as a way of spreading the benefits of the boom, has been botched and will not deliver as much as originally expected.
To make up for this shortfall, the government has had to go back on an intended cut in the corporate tax rate, and is now telling business that if it wants a cut it will have to fund it from tax benefits elsewhere. If there’s any one sign of how we have mismanaged the boom it is the fact that we can now not afford to deliver promised relief in tax across the board.
The Australian pysche has had an uneasy relationship with the mining boom. We have been distracted from focusing on what to do with the boom by the sheer size of Asian demand. Hopefully the fear that it is over will allow us to refocus our efforts on making sure we get the maximum out of this economic period.