The Federal Finance Minister says Australia has become too reliant on resources and needs to expand its export base.
Lindsay Tanner says there has been a “worrying period” over the last decade where resources have increased their domination of Australia’s exports.
Lindsay Tanner says the 1990s saw great diversification, with strong exports across a range of sectors, and he says there needs to be a return to that kind of diversification.
“We had a huge growth in tourism, in education, in specialised manufacturing, in wine, in pharmaceuticals that helped us to diminish our enormous reliance on minerals,” he told ABC radio 774 in Melbourne.
“That’s kind of almost gone into reverse in recent times. So it’s not so much that there’s one country that we’re dependent on, it’s that we have, I think to some extent, too many eggs in that basket.”
Mr Tanner says Australia’s future prosperity should not be pinned to one industry, and the Government is looking at ways to boost productivity in other sectors.
“Minerals are always going to be critical for Australia, there’s no question about that,” he added.
“But our strategy of improving infrastructure and skills and lifting our productivity very much has in mind the need to revive our performance in some of our other aspects which have been languishing and, also, to strengthen newer areas like financial services.”
Mining can’t guarantee prosperity
One of Australia’s leading economists says he has some sympathy with Mr Tanner’s view.
The Grattan Institute’s program director for productivity growth Saul Eslake says, while the mining boom certainly has contributed to wealth creation and an increase in tax revenues, it also has some negative side-effects.
He says the recent boom in mining activity may actually be damaging some of the sectors of the economy that Lindsay Tanner wants to revive.
“The mining industry can’t possibly guarantee prosperity for the vast majority of Australians, given that it accounts for less than 3 per cent of total employment,” Mr Eslake told ABC News Online.
“One of the corollaries of the present mining boom is a very high value of the Australian dollar that is hurting the competitiveness of sectors such as agriculture, manufacturing, tourism and education, most of which employ considerably more Australians than the mining industry does.”
He says the currency impacts will be exacerbated by wage pressures as Australia’s economy nears full-employment again.
“Growth in demand from the mining sector could well put upward pressure on wages in other sectors of the economy contributing, in the context of a strong exchange rate, to a further squeeze on the profitability of employers in other parts of the economy and thus diminishing the viability of those industries.”
Mr Eslake says, while the damage to those other industries could be long-lasting, the current mining boom has a finite lifespan.
The danger is that, when the mining boom does come to an end, there will be few other internationally competitive export industries left standing to provide employment alternatives.
“The mining boom, though it may well go on for more than a decade, isn’t going to go on indefinitely any more than previous mining booms have, and future generations of Australians are going to look for other sectors of the economy for their employment prospects long after this present mining boom has come to an end,” he noted.
Mr Eslake says a resource rent charge is likely to be one tax canvassed by the Henry Review, which is due to be released before the Federal Budget is handed down in May.
He says, while the Government would not want to actively constrain the mining sector, shifting the tax burden to those resources companies that are highly profitable by introducing a resource rent tax to replace the current mining duties would make sense.
“There are reasonable arguments for moving away from a production based system of taxing the mining industry, one which takes no account of the profitability of individual mine ventures, to one which allows the community to share in high prices as well as increased volumes of production of mineral resources, whilst also ensuring that in periods when commodity prices are very low mining companies are not punitively taxed.”