The Economic Reform Imperative - 2011 Biennial Tax Conference: Speech

On behalf of the Minerals Council of Australia, may I acknowledge the traditional owners, the Noongar people, and extend the respect of the MCA and my own, to the elders and their ancestors.

Chair of the MCA’s Tax Committee, Ms Ann-Maree Wolff, Mr Don Argus, Chair of the Australian Advisory Board of Bank of America Merrill Lynch and Chair of the Government’s Minerals Resource Rent Tax Policy Transition Group, other distinguished guests and colleagues.

Welcome to the MCA’s 2011 Biennial Taxation Conference.

Two years ago – October 2009 - I stood before this Conference and reflected on the previous 2 years, visiting the circumstances that had precipitated:

  • the global financial crisis and the policy responses in the immediate aftermath
  • the GFC check to the profound underlying structural change in the global economy and strategic power, and the global minerals industry - that we knew would not materially compromise the underlying fundamentals - demand did recover quickly and continues to exceed supply
  • the dramatic shift in the domestic economic policy reform agenda from the productive to the redistributive, from the policy narrative of national capacity building to the politics of envy and class war.
  • and, we all foreshadowed the difficulties the industry faced in prosecuting a case for tax reform within a policy and political environment seduced by the prospect of our industry as a milch cow for repairing Australia’s fiscal position.

Looking back over the last 2 years from today, I find no satisfaction in reflecting on how poignant those remarks were.

Indeed, from a bad base, the economic policy reform agenda has simply got worse.

It is bad enough that the current circumstances of the Federal Parliament have led to economic reform inertia, political indecision and policy uncertainty, and increasingly so, erosion to our sovereign risk standing in international product and capital markets.

It is worse still that the public policy contest today is to guard against backsliding on the economic policies which have so transformed the Australian economy over the last 3 decades and served this country so well, as judged by any socio-economic indicator.

If you doubt the importance of continuing these economic reforms, then compare the last time we had a commodities (agriculture and mining) boom in the 1970s to the underlying fundamentals of today’s extraordinary expansion. 

Back in the 70’s, the Federal Government was in direct control of all arms of macro-economic policy, including the value of the exchange rate, the conduct of monetary policy and centralised wage setting arrangements – what some liken to “macro-policy activism.”

Governments owned banks, energy and water utilities, railways, ports, and even an airline - and agriculture was heavily dominated by statutory marketing authorities operating under Acts that pooled the product, the sales returns and the marketing risk, across producers almost irrespective of product quality specifications.

The economy was protected and regulated, leading to job and consumer insecurity and investment uncertainty.

We were recession prone with high unemployment, high inflation and high interest rates.

No wonder that boom ended in tears.

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