tijaco

better times are coming, but who will benefit?

Australia is going to have another boom. That much is fairly obvious and predictable. Having read the work of Ross Garnaut and having paid close attention to the machinations of the energy sector, this much becomes clear quite quickly. Last time, the boom was in our mining sector. This time, the boom will be in renewable energy and the industry that will be built around it. Whether or not this could, should or will happen is not the subject of this piece. Neither is the focus whether it will happen before the effects of climate change make the Earth wholly inhabitable. Instead, this piece is based on its inevitability over the next decades and whether we will learn from the mistakes of our first boom.

The mining boom, by all independent accounts, was wasted by the Australian government. There were skyrocketing revenues coming from the mining sector, and Australia had the chance to tax those revenues at a reasonable rate and do wonders with the taxes*. Instead, the Howard government chose to let the big, multinational businesses do their thing and not worry about taxing them too much. Even still, the revenues coming to the government from the increased revenues of the mining sector were substantial. With these taxes, rather than implementing programs which were good for the working class, Howard decided to reduce taxes on households. The effect was that people had more money in their pockets, which was nice. But they then spent this extra money on housing, causing house prices to rise.

This response to the mining boom was contrasted with Labor’s response when they finally got in office in 2007. Kevin Rudd came to office with a plan to tax the mining sector properly, and he paid for his Prime Ministership with it. Rudd’s plan was to set the rate at 40%, and this prompted a $22 million advertising campaign against him from the Minerals Council, not to mention the constant abuse from the Murdoch media. Along with some opportunism and power politics, he was eventually removed from office and Gillard’s replacement plan of a 30% tax on only a portion of the industry was significantly weaker. Regardless, the tax was scrapped soon after Abbott gained office in 2013 and we’ve not heard a whisper of a tax from the two Prime Ministers since then. What would Labor have done with these taxes? Perhaps fund the NBN, the NDIS, Close the Gap reforms, properly funded the CSIRO, improve our education so it’s a bit better than 39th out of 41 countries.

But Labor’s plans to tax the minerals sector properly is only one step in countries benefiting from their own resources. Norway’s method was to create a sovereign wealth fund. Back in the 1970s, Norway realised that they were at the beginning of an oil boom. For this reason, along with the fact that oil prices are known to be unstable, they established this fund in 1990. After 30 years, the fund is now worth over a trillion US dollars. The Norwegian government is allowed to take 3% of the value of the fund to spend each year if it needs to do so, which now equates to $US30 billion. In saying that, the first time they withdrew any money from the fund was in 2016 in reaction to a declining oil price and was used for public spending.

So, what can we learn from our own past mistakes and the different paths that other countries have taken? We have a golden opportunity with renewable energy to facilitate a new boom in Australia. In fact, it is likely going to occur anyway, regardless of whether the government takes any decisive action. Renewable energy provides an opportunity for, as Friendlyjordies puts it, “the first power grid in human history to be built without government subsidies”. The private sector knows this, as do forward-thinking Liberal MPs. NSW Energy Minister Matt Kean is on board with turning Australia into a renewable energy superpower. As is Labor MP Josh Burns. And it’s for this reason that distinguishing between the two major parties in this country is more important than ever.

As is evidenced by Prime Ministers going back to Whitlam and likely even earlier, the difference between Labor and Liberal is stark. The Liberals, as they have done before, will waste the boom and allow the profits to be sent offshore, into the Cayman Island accounts of the richest. Labor, as evidenced most recently by Rudd, will put their political careers on the line for the good of the nation.