LIFT THE SPEED LIMIT ON THE ECONOMY: MCA PRE-BUDGET SUBMISSION

Realising the opportunity of the mining boom and lifting the speed limits of Australia’s economy at a time of global economic uncertainty should be the focus of the 2012-13 Budget.

The MCA is urging the Government to shift gears from spreading the benefits of the boom (through higher and ineffective taxes like the carbon tax, ad hoc spending and increased regulation) to tackling the real challenges of fiscal sustainability, productivity growth, expanding supply-side capacity and enhancing the economy’s structural flexibility.

This is not a zero-sum policy game as the “patchwork economy” narrative might suggest. In reality, the policies needed for Australia to make the most of the boom are the same as those needed to support the long-term growth and competitiveness of other sectors.

Australia is at a crossroads when it comes to making the most of the boom with future gains far too reliant on past economic reforms. Canberra needs to discard the complacent view that the benefits of the mining boom are “in the bag” while also rejecting false claims that the boom could be more a threat than an opportunity for Australia, coming at the expense of other parts of the economy. The challenge in 2012 for Australia is to recharge the batteries of market-oriented economic reform and not wait for the traditional spur of economic crisis to provide the impulse.

Once the leadership issue is resolved, the Government must get  on with the job of removing the speed limits on our economy and pushing on with market-oriented economic reform.

The MCA’s priorities for the 2012-13 Budget are:

  1. Long-term fiscal sustainability – Further steps should be taken to address the structural deficit in the Commonwealth Budget and to ensure appropriate medium-term fiscal policy settings. Though global economic conditions will necessarily bear on any return to budget surplus in 2012-13, this should not impede a long overdue review of Commonwealth spending priorities.
  2. Best practice regulatory reform – Renewed Commonwealth leadership is urgently needed to reform poorly developed and administered regulation at all levels of government. Inefficient and overlapping regulation is creating higher costs and uncertainty for the minerals industry in the key areas of project approvals, energy and climate change policy, water market access and occupational health and safety.
  3. Efficient capacity building – Efficient public sector investments and targeted reforms are needed to overcome current and future capacity constraints given the structural changes taking place in the Australian economy. Growth in the minerals industry is highlighting pressure points on skilled labour and inadequate social infrastructure in mining regions.
  4. Benchmarking Australian competitiveness – Policies that drive Australian projects up the global cost curve and increase sovereign risk impede industry growth and result in the opportunity cost of lost national income. The Australian Government needs to begin regular benchmarking of Australia’s competitiveness and ensure critical economy-wide policy settings (including energy and climate change policy, taxation and workplace regulation) promote flexibility and growth.

Confronted with heightened international volatility and intense competition for markets, capital and talent, the Australian minerals industry has a major stake in successful economic reform. Low productivity growth and rising cost structures in Australia have contributed to deteriorating international competitiveness over recent years. A more coherent and competitive policy framework is needed to maximise gains from the mining boom and to secure long-term growth and prosperity for all Australians.

Further information: Ben Mitchell 0419 850 212