ECONOMIC TITANS SPEAK UP
25 October 2011,
AUSTRALIA is on the verge of its biggest and longest mining boom since the Gold Rush began in 1851.
The Gillard Government is banking the Mineral Resource Rent Tax (MRRT) will use growth in the resources industry to return the Federal Budget to surplus by 2012-13.
Funds from the tax will reduce broader taxes by 2016-17, but the government may fail to prevent the return of double-digit inflation once the mining boom ends and surplus funds are used to deliver tax cuts.
One remedy for inflation involves channelling some of the surplus into a sovereign wealth fund to cover future costs of an ageing population, disaster recovery, offsetting the carbon tax and Indigenous Australian programs.
Gold Coast Business News asked a panel of experts featured at Bond University’s Titans of Industry forum for their views on Australia’s role in the new global economy.
SAUL ESLAKE (PICTURED), GRATTAN INSTITUTE PROGRAM DIRECTOR
What are your thoughts on the carbon tax?
Even though the current government had enough votes to get the carbon tax through parliament, the next government will abolish it – and if they can’t get the abolition legislation through at this election the Coalition can resort to a double-dissolution of powers.
There is no more certainty than when the legislation was first announced.
What did you make of the Tax Forum in Canberra?
Prime Minister Julia Gillard said the mining boom was likely to last much longer than previous booms and the transformations in our economy would be deep and painful. I hoped the Tax Forum would be more like the 1996 National Reform Tax Summit, in which the Howard Government started the Ralph Review of business taxes and GST reforms in the late 1990s.
To achieve this, the forum must satisfy two conditions: Bipartisan support and a big surplus to pay off the losers. We haven’t had much of either, so there is a slim chance of achieving major reform.
Former prime minister John Howard’s greatest service to the nation was actually when serving as federal opposition leader. He put the national interest before partisan goals of getting into office.
Incumbent Federal Opposition Leader Tony Abbott seems to be following the example of Barry O’Farrell, who became New South Wales Premier by making life difficult for the Keneally Government.
What key challenges have been created by the mining boom?
This is the biggest and probably the longest mining boom in history since the Victorian Gold Rush. However, Australian commodity booms have historically ended in bursts of double-digit inflation.
This is because state governments failed to accept the market share of different sectors cannot add up to more than 100 per cent of the national gross domestic product (GDP).
If we are going to have the biggest mining industry in the world, the mining sector is going to expand its share of GDP and ultimately bring inflation.
The Federal Government’s Clean Energy Bill, MRRT and the long-term impacts of sovereign debt are discussed by a panel of experts who all agree Australia’s fiscal strategy requires vast improvement. Read comment from the entire panel of experts by getting your copy of Gold Coast Business News' October issue – out now in more than 500 Queensland newsagencies.