Senator CAMERON—I note your opening address where you have tried to bring us back
to the key aspects of the government’s response to the global financial crisis. You indicated
that macroeconomic policy was principally responsible for the recovery. There has been a lot
said recently about the role of the mining sector in the resilience of the economy. There is an
argument being put that the mining industry played a pivotal role in the recovery. What was
the role of the mining industry both in terms of the resilience of the economy and
Dr Henry—I have heard it said on a number of occasions, in fact I have lost count of the number of times I have heard people say, including senior commentators, that the mining industry saved Australia from recession or, even in less extreme versions of the statement, that the mining industry contributed strongly to Australia avoiding a recession. These statements are not supported by the facts I would have to say. As senators know if one defines a recession as two consecutive quarters of negative growth then it is true that the Australian economy avoided a recession but the Australian mining industry actually experienced quite a deep recession on that calculation.
In the first six months of 2009, in the immediate aftermath of the shock waves occasioned by the collapse of Lehman Brothers, the Australian mining industry shed 15.2 per cent of its employees. Had every industry in Australia behaved in the same way, our unemployment rate would have increased from 4.6 per cent to 19 per cent in six months. Mining investment collapsed; mining output collapsed. So the Australian mining industry had quite a deep recession while the Australian economy did not have a recession. Suggestions that the Australian mining industry saved the Australian economy from recession are curious, to say the least.
The mining sector, in particular, is a very significant beneficiary of some very large tax concessions, and these relate mainly to accelerated depreciation provisions. The mining industry being very capital intensive—it does not employ a lot of people; it employs a lot of capital—these provisions of the tax code have a very marked impact on the mining industry’s effective rate of tax: that is to say, they have the effect of reducing taxable income to a fraction of economic income which is a long way below 100 per cent.
[Comment: I remain intrigued by the Left’s eagerness to adopt the language of neo-cons. Left wing commentators take it as gospel truth that the mining sector was our liferaft during the GFC. I hope the PR spin doctors were paid well.]