The 2018-19 Budget must deal with emerging risks to growth
The 2018-19 Budget must pursue reforms that will deliver strong economic growth and long-term budget repair. The robust performance of the Australian economy over the past decade has not resulted in budget surpluses and declining net debt.
On the contrary, while real gross domestic product (GDP) has grown at an average rate of 2.7 per cent – and unemployment has remained at around 5.5 per cent – budget deficits have increased by $53 billion and net debt by $280 billion since 2007-08.
The resources sector – which includes minerals extraction, oil and gas and metals processing – has been and will continue to be integral to our economic success. Resources investment has offset declining business investment in other sectors, higher resources exports have boosted national income and resources company taxes have enabled much of the growth in government spending.
Australian mining: further export growth hampered by productivity barriers
In 2016-17, resources exports reached a record high of $198 billion and accounted for 54 per cent of Australia’s total export revenues. Compared to the peak of the commodity price cycle in 2011-12, Australia is now producing significantly higher volumes of its key mineral exports.
The Australian mining boom’s transition to the production stage comes after a period of significant investment in the resources sector, in which more than $400 billion of mining, energy and infrastructure projects were developed in Australia.
This investment has led to production increases over the last five years of 73 per cent for iron ore, 20 per cent for coal, 16 per cent for bauxite and 13 per cent for gold. Multifactor productivity in the resources sector increased 2.4 per cent in 2015-16.
Australia’s world-class mining sector could perform at its best – generating additional benefits for the economy, the workforce and society – if policy reform was kickstarted in a number of important areas.
Reform in critical areas such as environmental assessments and project approvals, workplace relations and taxes and royalties has either stalled or regressed. Australian mining will not achieve its potential to create jobs and national prosperity while the reform agenda remains at a standstill.