Cheering mining tax cut is applauding public's own defeat

PUBLISHED : Thursday, 08 July, 2010, 12:00am
UPDATED : Thursday, 08 July, 2010, 12:00am

Australia's government may make more concessions on its mining tax to iron ore miners after an industry meeting ...

Reuters, July 6

Somewhere over a billion years ago, a long-standing ocean current flowing eastward from what is now Africa carried dissolved iron until it reached a shallow sea where primitive algae grew in formations called stromatolites.

This algae was among the world's first organisms to have achieved photosynthesis and the free oxygen thus produced had a great affinity for the dissolved iron. It precipitated as rust. Thus did God make western Australia.

That entire part of the continent is one big iron ore deposit really, some of it of poorer grades, some of it richer and the mining companies that now extract it do not so much mine as just scoop it. They are actually railway companies. The big part of the job is transporting the stuff to a seaport.

It is valuable stuff at present. Millions of industrial slaves in Chinese assembly plants convert it to huge profits. To whom should these profits accrue?

One might say that as the ore originally came from Africa, the proceeds should go back to Africa where they could be put to very good use in places like the Congo.

No, I agree, a non-starter. What we actually do in such circumstances is say that the rights should be assigned to the nation state whose borders extend over the ore deposit. This was not how it worked in Australia, however, when ownership of the ore was determined many years ago.

The system that prevailed at the time was that any prospector of European origins could hammer four sticks into the ground and declare that he owned everything between these sticks.

All he had then to do was file some papers with the appropriate bureaucrat, pay a small registration fee and the claim was his outright.

Strange to say, this antiquated system still prevails today. Mining companies continue to have full ownership rights over Australian national assets at no greater cost than the original claim registration fee many, many years ago.

The companies say, of course, that they boost the Australian economy by creating jobs, making investments and paying taxes and that this is all they should be asked to do. I wouldn't set much store by this hauteur. The way it actually works is that their profitable export activities push up the Australian dollar and make life much harder for other Australian exporters, whose profits are then pinched back.

It's not quite a zero-sum game, but it's in that league.

This is in the nature of how resource extraction affects any economy. Resources are a gift of nature but exploiting them crowds out other activities and the nature of the work involved does little to help move an economy upmarket.

The classic example is the Spanish Empire of 500 years ago. It had all the mineral riches of America but could do little with them to make a name for Spain. The Renaissance came out of Italy, where people had to live on their wits.

The lesson is that economic success comes more from brains than hands. Hong Kong itself is a fine example. This town has nothing but the wits of its people. If gold or iron ore had been found under the ground, however, you would now find Hong Kong's name only on a survey map. I'm not so sure that those stromatolites conferred a blessing on Australia.

But what I really cannot understand is how the mining interests of the country could so easily overthrow a prime minister who had led his party to a resounding election victory little more than two years ago, and all in pique that he should call for the Australian public to have a greater share in the proceeds of an Australian asset. I know they say it actually happened because his opinion polls were low and Australians were unhappy with his environmental record.

Yeah. Uh-huh.

And I simply don't understand why so many Australians have gone along with this and cheered Kevin Rudd's successor for cutting that mining tax back as her first act of office.

I myself have reason to cheer. I'm a shareholder of BHP Billiton. But I can't fathom how the Australian public can applaud its own defeat.

I also don't understand how the ruling party can call itself a Labor Party, a party of the working people, any longer. I don't share the party's political views but I do respect people who stand by their principles and this bunch has proved itself a bigger sell-out than the Communist Party of China.

If this is the way things remain I shall stand confirmed in my view that the only sensible people in the place are its aboriginal inhabitants. Perhaps, western Australia is best returned to them.