How Australia squandered the mining boom The unbridled power of the mining lobby combined with short-term populist politics means Australia is ending its historic mining boom little better off than when it started. Australia failed to capitalise on a once-in-a-lifetime mining boom because politicians put short-term vote-winning policies ahead of the long-term interest of the nation, economists say. The private interests of the powerful mining lobby were equally to blame for the squandering of a golden opportunity to strengthen Australia’s economic future. An unprecedented boom in demand for commodities – mainly from China – saw Australian exports of iron ore and coal skyrocket in the early 2000s. But rather than use the associated tax revenue to strengthen the non-mining sectors in preparation for the inevitable end of the boom, the Howard government passed the savings straight to households in the form of income tax and superannuation tax concessions, a move which Labor supported. “I’ve never seen something so squandered in my life,” says Mr Richard Robinson, associate director of economics at BIS Shrapnel. “What happened in the 2000s [when the mining boom began] is that corporate tax revenue increased. Instead of putting that into a future fund, their first response was to recycle those increases into personal tax cuts. The household sector was therefore the main beneficiary of the mining boom.” This, he says, translated into increased investment in property and rising house prices. What the government should have done Mr Robinson says the government should have kept income tax where it was, and put the revenue into a ‘future fund’ or sovereign wealth fund that could be used to fund other sectors when times were tough. ... more at link ... thenewdaily.au/money/2015/01/15/australia-squandered-mining-boom/
Posted on: Thu, 15 Jan 2015 22:14:11 +0000
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