Went to a seminar this evening by The Australia Institute. It brought together very clearly what has been a growing sense:
That the mining industry is sending the rest of us broke in Australia.
I had been asking: How will Australia earn its living if we don’t sell coal?
The more pertinent question seems to be: What is Australia doing that actually makes us money? (We should also ask what the costs of doing that are.)
Let’s stop doing the things that don’t make us money just other people in other countries especially if they damage Australia and us.
We also need to live within the ‘income’ we actually make that stays in Australia (not within the make-believe income that actually goes overseas).
A third of Australia’s GDP goes straight off overseas as repatriated profits to foreign owners.
If China buys ore from Rio Tinto they deposit in Rio Tinto’s bank account in Shanghai. Only a tiny part of it ever comes to Australia (a little bit for local wages and enough to pay dividends to the mere 15% of shareholders who are Australian.)
The mining industry is making obscenely huge profits and Australia is getting very little for our valuable minerals that are being stripped out of this country. There has been a profit explosion. Say it used to cost $20 to dig it up and it would sell for $40 giving $20 profit. Now it still costs $20 to dig up but sells for $160 giving $140 profit. No wonder mining companies are racing at breakneck speed to get licenses and get it dug up and shipped offshore.
But we get the consequences with Dutch Disease also known as The Gregory Effect also known as The Resource Curse. We get the two-speed economy with the impact of our high exchange rate. Australia doesn’t have an export boom. The mining industry has an export boom. The rest of our industries are having an export bust in equal magnitude to the mining boom.
Only 1.8% of our jobs are in the mining industry. The skills shortage in the mining industry is in the magnitude of several thousands. They are not here to create a workforce or communities only profits for their 83% foreign owners.
The royalties they pay are very very low. This is the price Australia charges the mining companies to be allowed to dig up the minerals and take them away.
Historically in Australia we’ve thought mining companies were doing us a favour digging our minerals up and taking them away. We’ve given them giant tax concessions; paid for infrastructure; provided cheap power and water; and charged a peppercorn for the resource.
How is the mining boom helping someone working for the minimum wage in the aged care sector? It isn’t helping them at all.
The mining boom drives up inflation. The Reserve Bank raises interest rates to reign in inflation. It does this by slowing down our part of the economy (all the other businesses and industries and agriculture and tourism and education) to make way for the mining bit of the economy.
Australia is heading for a record current account deficit in the middle of a mining boom!