The massive Olympic Dam mine, now fully approved, threatens by itself to shift the centre of gravity of the future South Australian economy away from its traditional base in manufacturing.
A ‘two-speed economy’ is in the early stages of being made. Part and parcel of this new dynamic is the decision by BHP Billiton, Olympic Dam’s owners, to reduce the importance of local copper refining, an elementary form of manufacturing. At the same time, the Rann government agreed to a (relatively speaking) low level of royalties on copper, and locked them in for an extensive period of time. Future opportunities for compensation have thereby been reduced. Once again, it seems, federalism has intervened in the area of mineral taxation to deliver a sub-standard outcome. Future solutions to these problems are only likely to be found in the comprehensive reform of the taxation system (which is what Ken Hentry sought, and what both Rudd and Gillard both failed to deliver). A federal tax regime that rewards minerals processing and penalizes the export of unprocessed commodities seems warranted.