17 May 2013

“Greetings from the lucky country” by Gina Rinehart
> Video here

Australia has relied on its resources for its prosperity for a long time, and especially during the last six years of record commodity prices. We began to be called “the lucky country” decades ago when we rode on the sheep’s back, but now the country is riding on the back of the miners and related industries.

I repeatedly refer to “and related industries”, because mines don’t just sit there out in the bush, cut off from everything else.

In fact, their development, construction and operations mean work and revenue to many others, from every part of the country. Just think of the dongas, we miners need the trucking industry to get them to site, construction workers involved to connect power and plumbing and anchor for cyclones, the decorating of those dongas (yes they have curtains, bed spreads, lights and chairs etc.), the fit outs (basins, taps, air conditioning, beds etc.), the cleaning, and the maintenance – and this is just for dongas! Without the mining industry, at least one third of most accounting and legal firms would shrink. It’s the same story with other industries – airlines and charters, hotels, restaurants, catering, equipment maintenance, consultancies, engineering services, geological services, testing laboratories, office supplies, cars and – well, where do I stop? And let’s not forget that without the miners and all these related industries, where would bureaucracies be? And where, exactly, would they get their money for schools, hospitals, roads, defence and much more. BHP Billiton is just one of our miners, but its chairman, Jac Nasser, this month estimated that this one miner alone paid $9 billion in taxes and royalties in Australia last year – or about what the Federal Government spent on higher education. Nor did that include anything for payments under the Mineral Resources Rent Tax or the carbon tax.

The industry needs to keep repeating this and standing up for itself. It needs to keep reminding fellow Australians this – that without mining and its related industries this country has no hope of repaying our record debt, without facing the problems Greece and other countries faced with over spending and consequent debt traumas.

Let’s not be too proud to admit that we’re really just a large island with a small population, with record debt. Trade with the world – and especially now to Asia – has always been critical to keeping up our standard of living. From riding on the sheep’s back when we were a much smaller nation, we have raised our living standards on the back of the mining and related industries and consequent exports overseas, primarily to Asia. Without exports we cannot sustain our living standards.

Plenty of Australians know these things in a casual way. But what few seem to properly understand – even people in government – is that miners and other resources industries aren’t just ATMs for everyone else to draw from without that money first having to be earned, and before that, giant investments made.

This month gave us a perfect example. Woodside pulled out of its $40 billion gas hub near Broome because rising costs made it economically unviable. I wonder how much of those costs came from green tape, approvals hurdles, endless delays, carbon taxes, and the rest.

But here is the astonishing thing. Even though the project was now dead, Woodside reportedly faced demands from some Aboriginal leaders that it and the Barnett Government were still “morally obliged” to pay out a $1.5 billion compensation package to traditional owners, and help give them real jobs.

This is spending the money of a resources company without giving even the company itself the chance to first earn it. And this strikes me as so symbolic of where we are as a country. We’re forgetting the basics.

It is worth repeating, jobs and economic growth are created by the private sector. Governments do not create those jobs. More often the Governments role seems to be to make them less viable by taking as much money as they can from resources projects to spend, and adding to the cost burden.

It is incredible that after the last six years of record commodity boom times, we now find the once lucky country in record debt, with the federal Budget tipped to deliver yet another deficit, to further increase our record debt. Add to that the debt in all our overspending States, and in the Northern Territory too. This debt is simply unsustainable, especially when Australia now faces an increasing elderly population with increasing needs, and fewer workers to pay for it all. This lucky country has got to start thinking, and acting.

I’m not the only outspoken but time deprived Aussie now raising such concerns. Increasingly others are raising similar concerns. A PwC report released on 15 April 2013 concludes: “Skyrocketing costs combined with falling capital productivity are dragging down Australia’s overall economic performance.”

Any miner could give you a long list of the rising costs – in obtaining Government approvals and their ongoing expense, in meeting Government requirements, expensive delays in government allocation of land, payroll tax, CGT, stamp duty and other taxes. No wonder major projects like Browse have been cancelled. This should make us all sit up and think. We are becoming too expensive and cost uncompetitive.

Even The Business Council of Australia on 15 April 2013, said: “The decision by Woodside Energy Limited to shelve its proposed Browse LNG project near James Price Point in Western Australia is a stark warning of the cost pressures in the Australian economy.

“This is a worrying sign because these major projects are the main game in Australia’s economy. Missing out on opportunities like this impacts on the whole nation. If we don’t ensure major projects can be delivered more efficiently then our standard of living will be reduced.”

Governments need to be reminded that if they want more taxes from miners and related industries they can’t discourage investment needed to first earn what they want to take. The costs must come down. Investment needs to be welcomed; our country must compete against all others for investment. The reverse happens when a Government imposes increased taxes, apparently unable to understand how that hurts investment and makes it harder to sell our products at competitive prices internationally. Tax increases can destroy businesses, and that means less taxes and fewer jobs. And less opportunities.

It is amazing that this point still needs to be made. Too many of our governments seem to have had their thoughts clouded by six record years of revenue. They seemed to think the ATM would never empty, and never need refilling. They seemed to think we could somehow afford to be increasingly cost uncompetitive, and become deeper in debt. It is as if Spain, Greece, Britain, Italy and Portugal had no warnings to give us about the similar path we are now taking. It is as if their struggles with unemployment, riots, increased crime, debt and a sheer lack of money for even essential services, had nothing to teach us.

Now the warning signs are coming closer. Holden has had to cut yet more jobs, and Jac Nasser – a former senior executive of Ford – is predicting the demise of the Australian car industry.

It is time for bold new ideas for Australia. Ideas like developing the largely untapped resources of Northern Australia through the establishment of Special Economic Zones throughout the North of Australia.

This is the vision of Australians for Northern Development and Economic Vision (ANDEV).

The north has abundant water and under-utilized land at a time when the world’s population is growing bigger and richer. The global population is projected to rise from 7 billion to 9 billion by 2050, and the global middle class from 500 million in 2009 to 3.2 billion by 2030. This will create an explosion in demand for protein and energy.

The North has the potential to develop beyond our imaginations. We should learn from the successful economic policies of Lee Kwan Yew, who transformed Singapore from what it was when I was a teenager – a third world i.e. poor country, with no water of its own, insufficient land to feed its people and no minerals – to the rich, ultra-modern and debt-free nation it is today with major investments for its future, very low crime, very good hospitals and schools, truly five star hotels, leading international airport, excellent shops and restaurants, entertainment complexes and more. Lee Kwan Yew kept taxes low, encouraged investment, and look what happened to our neighbour! Without even any of the natural benefits our north has.

In contrast, we’ve been saddled with bad government policies that make us uncompetitive, when we could instead make the North a productive food bowl and source of minerals, as well as a centre for medical care, tourism and services for not just Australia but our Asian neighbours.

And for those doomsayers who don’t think lowering taxes could have any benefit, don’t forget what happened in Queensland when then Premier Sir Joh Bjelke Petersen, Queensland’s longest serving premier, and still loved by the many Queenslanders I meet, eliminated just one tax – the death duty. People left the south in their droves, bringing billions of dollars of investment with them that created new jobs in construction, hotels and restaurants. Even without the benefit of the record resources prices, Sir Joh left his state debt free and with cash in kitty, which not even one of our current federal and state governments have managed to do.

And for those negative scribes who are simply anti a free market approach to anything, please read the outstanding speech Rupert Murdoch recently gave for the IPA, which is on the IPA’s website at http://www.ipa.org.au/ and ANDEV website at http://www.andev-project.org/ and try to consider that not only is a free market approach the most effective economically, but importantly, the best morally also, as poverty and less opportunities are usually not the best for people, especially those in poverty.