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Resource rents, taxation, and political economy in Australia

28 May 2012
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The claim that the Australian mining sector is too heavily and unfairly taxed is a mantra that mining executives seem unable to break free from despite the facts. The latest such claim has come from the BHP Billiton chairman Jacques Nasser who complained on 16 May 2012 about the Australian industrial relations system and tax system and threatened to take the company’s investment elsewhere. In fact, the mining sector in Australia has been lightly taxed, as both the Henry Review and the 2012 federal budget papers revealed. Attempts by global corporations of all kinds to influence public policy on taxation and wages by threatening to remove their investment is a fundamental feature of globalization, one faced by the poorest developing countries as much as the most advanced countries. In Australia’s case, the ongoing acrimonious debate about resource taxation and the role of rich mining magnates in influencing public policy has to be seen within a background of centuries of conflict between the resources frontier and the state.

The major issues for Australian public policy about governance of the natural resource boom, causing such heated political and policy debates, revolve around community endowments, resource rents, and state fiscal capacity. In order to understand the debates and policy outcomes we need to see them in a historical context of Australia as a settler society that was always dependent on commodities in its export profile. Unlike some other commodity dependent countries, however, both historically and today, Australia transformed its dependency into a wealthy, middle class, democratic, urban society from the early 20th Century, now with a very high HDI score (second only to Norway). How did that happen – was it engineered through policy or was it a free-market outcome? Although Australia has never been a resource-cursed society to any significant degree there are signs of such tensions today. Much is at stake in the debate about redistribution of resource rents. The ‘Australian model’ is being watched closely in other resource-dependent countries and all is not necessarily a ‘balanced’ and ‘progressive’ model in the ‘Lucky Country’.

Author: Christopher Lloyd School of Business, Economics and Public Policy, University of New England, Australia and Nordwel Centre, Helsinki University, Finland

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2012
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