A couple of interesting pieces appeared today about the self-serving claims of the mining industry about the Resources Super Profits Tax, dutifully echoed by journos and opposition pollies, and it would now appear, Anna Bligh.
Talk about an exploration and extraction. The Australian mining industry is world-class when it comes to rent-seeking.The lesson here isn’t so much that the mining industry is a pack of liars. It’s what the media does with the lies. We’ve all been engaged in a collective flagellation of Kevin Rudd and Wayne Swan for the last 48 hours over their cowardice and failure to embrace reform. But as we’re already seeing with the limited reforms they’ve picked up, the media flog them even if they do pursue meaningful change.
The Government will now be criticised for attacking the mining industry, which is dominated by vast multi-nationals generating billions of dollars. The absurd claims of the miners that they’ll move offshore?—?made even as Newcrest acquires Lihir in a $10 billion deal?—?will be taken seriously. Dire forecasts of job losses will be run with a straight face, despite previous claims being exposed as blatant falsehoods.
It’s more of the media’s “perpetual present” that I’ve complained about before. If it happened longer than five minutes ago, it never happened.
The media want it both ways, naturally. We’re all high-minded economic purists when it allows us to criticise governments for failing to undertake significant reform. But should a government be so foolish as to attempt something, the media doesn’t take long to get stuck into them, and gleefully provides a platform for critics of reform, no matter how often and how badly the latter have been proven wrong.
You’d never know, for a moment, that there actually exists a set of widely agreed criteria for comparing competing tax rules and regimes, and that facts and figures can be obtained to assist in applying these criteria. I wonder if the ABC employs a single senior reporter who has an economics degree with a standard public finance unit in it. Have any of them have actually read the relevant chapter of the Henry Review? If they had, they’d at least be able to explain the basics…
All this amounts to a pretty good prima facie case for the resource rent tax. If our economic reporters did a bit more homework, they’d place the burden squarely on the critics to prove otherwise, rather than just invite them to fulminate and threaten.
NB: Previous discussion on LP here.
Update: Kevin Rudd is now refusing to confirm that the rate will be 40%, and negotiating with mining companies. That didn’t take long.
As I too wrote on my blog http://enpassant.com.au/?p=7106(admittedly not in the same league as Bernard et al):
But if it is good enough for miners, why not for other industries too? After all their profits and super profits come from our labour too.
One answer might be, as we have seen today, the sorts of arguments the mining industry is putting: the tax will kill the goose laying the golden egg, (or whatever the nonsensical phrase is), unemployment will go up, mining investment will head offshore and the other lies that business sprout when its profits are slightly curtailed.
It’s all bullshit. Mining capital is on a good thing and they will pass future minor tax increases on to China and India. Or god forbid, squeeze their own ’super’ profits.
As I too wrote on my blog http://enpassant.com.au/?p=7106(admittedly not in the same league as Bernard et al):
But if it is good enough for miners, why not for other industries too? After all their profits and super profits come from our labour too.
One answer might be, as we have seen today, the sorts of arguments the mining industry is putting: the tax will kill the goose laying the golden egg, (or whatever the nonsensical phrase is), unemployment will go up, mining investment will head offshore and the other lies that business sprout when its profits are slightly curtailed.
It’s all bullshit. Mining capital is on a good thing and they will pass future minor tax increases on to China and India. Or god forbid, squeeze their own ’super’ profits.
I can’t say that I’ve heard a single attempt tat explaining the super-profit’s tax, only endless grabs of self-serving mining execs wail and gnash their teeth while forceasting doom and gloom, adding in breathless coverage of how BHPs’ share price is down. AM has been at it on the radio this morning constantly referring to it as the mining super-tax, rather than the super-profits mining tax.
If I had some spare cash I’d be buying BHP stocks right now and taking advantage of some easy gains courtesy of the chicken-littles.
I can’t say that I’ve heard a single attempt tat explaining the super-profit’s tax, only endless grabs of self-serving mining execs wail and gnash their teeth while forceasting doom and gloom, adding in breathless coverage of how BHPs’ share price is down. AM has been at it on the radio this morning constantly referring to it as the mining super-tax, rather than the super-profits mining tax.
If I had some spare cash I’d be buying BHP stocks right now and taking advantage of some easy gains courtesy of the chicken-littles.
@ 2
Michael, the reason we’ve had no attempt at any sort of credible explanation of the true nature of the Resource Rent Tax (RRT) is because it’s not as “super” as the autocue readers will have us believe.
There are actually a number of concessions which will continue to see companies speculate, invest and employ, including: tax credits for royalties paid; carry forward accumulated project losses; income tax deductibility of RRT paid. (It’s also probably too difficult to comprehend for said “readers”.)
@ 2
Michael, the reason we’ve had no attempt at any sort of credible explanation of the true nature of the Resource Rent Tax (RRT) is because it’s not as “super” as the autocue readers will have us believe.
There are actually a number of concessions which will continue to see companies speculate, invest and employ, including: tax credits for royalties paid; carry forward accumulated project losses; income tax deductibility of RRT paid. (It’s also probably too difficult to comprehend for said “readers”.)
Maybe fly in fly out arrangements that now extend to flying somone from Tasmania to the Kimberley will have to be reassessed…maybe fly in fly out will have to be reassessed generally….I’m not seeing this as a bad thing. Fifo’s don’t contribute much to community and are only interested in how much money they can make (if you’ll forgive me for drawing a very broad stereotype).
If a super profits tax removes some of this madness then so much the better.
Maybe fly in fly out arrangements that now extend to flying somone from Tasmania to the Kimberley will have to be reassessed…maybe fly in fly out will have to be reassessed generally….I’m not seeing this as a bad thing. Fifo’s don’t contribute much to community and are only interested in how much money they can make (if you’ll forgive me for drawing a very broad stereotype).
If a super profits tax removes some of this madness then so much the better.
Given the damned if you do, damned if you don’t, nature of media reporting of (especially but not only) Labor governance, the Nike conclusion should be drawn; just do it. The special interest group and thus media condemnation is going to come anyway, so a progressive government ought to implement the reforms for which it stands. Which is rather the point of being elected – not merely holding power, but exercising it.
This is where the late Howard and Ruddist government by bribery and focus-group falls down. An attempt to appease all sections of the electoral with welfare (think the family tax benefits), all special interest groups with cash (think the so-called CPRS), or to pander to focus groups (think Rudd’s asylum seeker lock out) are a waste of time, money and political capital. All changes are going to be damned in the media, so – damn the media – make them anyway.
Given the damned if you do, damned if you don’t, nature of media reporting of (especially but not only) Labor governance, the Nike conclusion should be drawn; just do it. The special interest group and thus media condemnation is going to come anyway, so a progressive government ought to implement the reforms for which it stands. Which is rather the point of being elected – not merely holding power, but exercising it.
This is where the late Howard and Ruddist government by bribery and focus-group falls down. An attempt to appease all sections of the electoral with welfare (think the family tax benefits), all special interest groups with cash (think the so-called CPRS), or to pander to focus groups (think Rudd’s asylum seeker lock out) are a waste of time, money and political capital. All changes are going to be damned in the media, so – damn the media – make them anyway.
Update: Kevin Rudd is now refusing to confirm that the rate will be 40%, and negotiating with mining companies. That didn’t take long.
Update: Kevin Rudd is now refusing to confirm that the rate will be 40%, and negotiating with mining companies. That didn’t take long.
This is Rudd’s governance “for the whole of Australia”, governance by
briberyconsensus in its essence. The notion of governance by consensus is absurd – if a consensus existed, why would we need a government?This is Rudd’s governance “for the whole of Australia”, governance by
briberyconsensus in its essence. The notion of governance by consensus is absurd – if a consensus existed, why would we need a government?FMark – consensus rarely just emerges by itself. Surely one role of government is to encourage discussions to reach consensus on contentious topics.
FMark – consensus rarely just emerges by itself. Surely one role of government is to encourage discussions to reach consensus on contentious topics.
It’s our ‘goose’ and our ‘golden eggs’ after all. Some measures have to be taken to acquire some long-term national benefit from the mining boom,otherwise we will be left with an empty quarry and few competitive industries. The real meaning of Donald Horne’s phrase ‘The Lucky Country” will be painfully apparent to the next generation. Unfortunately,so many journalists seem to parrot the first comment they hear or read and that is usually made by vested interests or their supporters in the Coalition.
The PM has just made one of those ‘courageous decisions’.
It’s our ‘goose’ and our ‘golden eggs’ after all. Some measures have to be taken to acquire some long-term national benefit from the mining boom,otherwise we will be left with an empty quarry and few competitive industries. The real meaning of Donald Horne’s phrase ‘The Lucky Country” will be painfully apparent to the next generation. Unfortunately,so many journalists seem to parrot the first comment they hear or read and that is usually made by vested interests or their supporters in the Coalition.
The PM has just made one of those ‘courageous decisions’.
Fmark declaimed:
Because consensus is imprecise. There is almost certainly a consensus in Australia that there ought to be a welfare safety net, that children ought to be nurtured and cared for well, that everyone should have access to adequate housing, that there should be a high quality health system, everyone should pay their fair share of tax and so forth …
What do these statements mean in practice? What service standards should apply, and how should the resources needed be raised and maintained? There would be much less consensus on these matters and the closer you get to a specific policy regime the weaker the consensus becomes.
That’s one reason for government — translating a consensus on aspirations held by the constituency as a whole into some feasible and maintainable action in a policy sense.
Of course, just how one evaluates the scope of the consensus tends to get very little attention. Typically, it involves reliance on the loudest talking heads, which almost by definition, amount to the most privileged stakeholders in the system, since they are, under Galtung & Ruge principles, best placed to feature in media coverage.
Fmark declaimed:
Because consensus is imprecise. There is almost certainly a consensus in Australia that there ought to be a welfare safety net, that children ought to be nurtured and cared for well, that everyone should have access to adequate housing, that there should be a high quality health system, everyone should pay their fair share of tax and so forth …
What do these statements mean in practice? What service standards should apply, and how should the resources needed be raised and maintained? There would be much less consensus on these matters and the closer you get to a specific policy regime the weaker the consensus becomes.
That’s one reason for government — translating a consensus on aspirations held by the constituency as a whole into some feasible and maintainable action in a policy sense.
Of course, just how one evaluates the scope of the consensus tends to get very little attention. Typically, it involves reliance on the loudest talking heads, which almost by definition, amount to the most privileged stakeholders in the system, since they are, under Galtung & Ruge principles, best placed to feature in media coverage.
@Chris and Fran:
I would argue that in some cases, consensus is unlikely or impossible. Benefiting one group (e.g. tax-payers at large) will disadvantage other groups (e.g. mining corporations reaping very large profits). It is the corporate responsibility of the mining companies to legally avoid paying more tax. Conversely, citizens are entitled to want a larger proportion of very large profits to be redistributed to them through taxation.
I don’t a consensus is achievable or necessarily even desirable here. It is the role of governments to decide what is in the best interest of this country and govern appropriately. Seeking to achieve “consensus” a.k.a. damage control via negotiating with stakeholders is never going to work.
What will inevitably happen though negotiations with corporate lobbies regarding the super-profits tax, as with the CPRS, is that the measures will be watered down. Then, the media and said corporate lobbies will loudly condemn the legislation anyway. The end result of which is A) less useful legislation, B) the government is condemned for the legislation anyway, and C) the government is perceived as cowardly or weak and condemned for that as well.
@Chris and Fran:
I would argue that in some cases, consensus is unlikely or impossible. Benefiting one group (e.g. tax-payers at large) will disadvantage other groups (e.g. mining corporations reaping very large profits). It is the corporate responsibility of the mining companies to legally avoid paying more tax. Conversely, citizens are entitled to want a larger proportion of very large profits to be redistributed to them through taxation.
I don’t a consensus is achievable or necessarily even desirable here. It is the role of governments to decide what is in the best interest of this country and govern appropriately. Seeking to achieve “consensus” a.k.a. damage control via negotiating with stakeholders is never going to work.
What will inevitably happen though negotiations with corporate lobbies regarding the super-profits tax, as with the CPRS, is that the measures will be watered down. Then, the media and said corporate lobbies will loudly condemn the legislation anyway. The end result of which is A) less useful legislation, B) the government is condemned for the legislation anyway, and C) the government is perceived as cowardly or weak and condemned for that as well.
FMark @11: “I don’t a consensus is achievable or necessarily even desirable here. It is the role of governments to decide what is in the best interest of this country and govern appropriately.”
Totally agree. A wants 100% of profits and so does B. If B gets more, then A gets less of the profits – a zero sum game.
If we were to apply the same amoral principles (note “amoral” not “immoral”), then the government would examine the next best alternative for the companies, and make sure that their offer is ever so slightly better than the companies’ other options.
Ruthless? Yep. And so are those execs, when dealing with other players in the market.
Rational financial decisions mean that the companies will do what nets them the best return. The exception would be “strategic” decisions, such as delaying a project while jawboning on about cancelling it, to scare their opponent into a backdown. Would corporate execs do something as low and sneaky as this? Wot you reckon?!!
FMark @11: “I don’t a consensus is achievable or necessarily even desirable here. It is the role of governments to decide what is in the best interest of this country and govern appropriately.”
Totally agree. A wants 100% of profits and so does B. If B gets more, then A gets less of the profits – a zero sum game.
If we were to apply the same amoral principles (note “amoral” not “immoral”), then the government would examine the next best alternative for the companies, and make sure that their offer is ever so slightly better than the companies’ other options.
Ruthless? Yep. And so are those execs, when dealing with other players in the market.
Rational financial decisions mean that the companies will do what nets them the best return. The exception would be “strategic” decisions, such as delaying a project while jawboning on about cancelling it, to scare their opponent into a backdown. Would corporate execs do something as low and sneaky as this? Wot you reckon?!!
Nothing in the concept of consensus implies everyone agreeing in detail on everything.
Of course mining executives are going to object to paying every cent of tax. A consensus need not include them. In any society, there are always dissenters. That doesn’t mean consensus is impossible.
Nothing in the concept of consensus implies everyone agreeing in detail on everything.
Of course mining executives are going to object to paying every cent of tax. A consensus need not include them. In any society, there are always dissenters. That doesn’t mean consensus is impossible.
@Fran at 13:
Of course you a right regarding the meaning of consensus. However, this is what Rudd’s formula of government by consensus has come to mean: no one will lose. When this logic is applied to his IR changes, it manifests as a promise that no one in this country will be worse off. When it comes to the ETS, it results in legislation fatally compromised by over compensation to polluters. Similar results will result from the negotiations over the super-profits tax.
@Fran at 13:
Of course you a right regarding the meaning of consensus. However, this is what Rudd’s formula of government by consensus has come to mean: no one will lose. When this logic is applied to his IR changes, it manifests as a promise that no one in this country will be worse off. When it comes to the ETS, it results in legislation fatally compromised by over compensation to polluters. Similar results will result from the negotiations over the super-profits tax.
A “super profits” tax?
But this is a government fiat declaration that all profits over the government bond rate are somehow ‘super profits’. That’s just insane. How is the profit defined? In relation to what investment amortisation schedule?
Do you like the precedent that if you get an investment profit in excess of the government bond rate, the government can seize an additional 40% of it on top of what you already pay?
There seems to be an idea that nobody but Australia has these resources. That would be wrong. The Brazilians have as much iron ore as us, of as good a quality. make ours more expensive than theirs and that’s that.
Qatar has much more gas than us, and a large investment going into Victoria has already gone to Qatar instead over a similar issue of government fiat. (So Victoria kissed goodbye to some thousands of jobs)
China is building the largest iron ore mine in the world in Africa right now. They have established a neocolonial government in Sudan to get Sinopec into Sudanese gas and oil.
Long term, this policy is economically disastrous (pretty much like everything else Rudd has come up with).
As a traditional ALP voter, I hope like hell Gillard rolls Rudd and fast, so this record of policy disaster after policy disaster is stopped in its tracks. We might get a decade of sensible government with Gillard. What are the odds of that with this cack-handed clown Rudd in the PM’s office? Or do you want Abbot in that office instead? Because that’s where it’s heading now.
MB
A “super profits” tax?
But this is a government fiat declaration that all profits over the government bond rate are somehow ‘super profits’. That’s just insane. How is the profit defined? In relation to what investment amortisation schedule?
Do you like the precedent that if you get an investment profit in excess of the government bond rate, the government can seize an additional 40% of it on top of what you already pay?
There seems to be an idea that nobody but Australia has these resources. That would be wrong. The Brazilians have as much iron ore as us, of as good a quality. make ours more expensive than theirs and that’s that.
Qatar has much more gas than us, and a large investment going into Victoria has already gone to Qatar instead over a similar issue of government fiat. (So Victoria kissed goodbye to some thousands of jobs)
China is building the largest iron ore mine in the world in Africa right now. They have established a neocolonial government in Sudan to get Sinopec into Sudanese gas and oil.
Long term, this policy is economically disastrous (pretty much like everything else Rudd has come up with).
As a traditional ALP voter, I hope like hell Gillard rolls Rudd and fast, so this record of policy disaster after policy disaster is stopped in its tracks. We might get a decade of sensible government with Gillard. What are the odds of that with this cack-handed clown Rudd in the PM’s office? Or do you want Abbot in that office instead? Because that’s where it’s heading now.
MB
Re #6,
Do you laugh or cry?
Re #6,
Do you laugh or cry?
MB@15:
So wrong. Go and read James Farrell’s piece. Don’t just spout rubbish.
A super-profits tax on resources is widely agreed to be the most efficient and least distortionary taxation method for mining. Mining is different to other industries in that once the stuff is dug up, it can’t be dug up again. So mining super-profits are actually akin to monopoly rents. Hence the higher rate of tax.
Other economic activities, say in manufacturing or services, that earn above normal rates of profits are typically assumed to be doing something new and/or working more efficiently than their competitors, so they deserve the super-profits they earn (this is the reward for innovation). Mining companies make enormous profits when demand outstrips supply, because there is only so much ore in the ground, and this drives the price up (not innovation). Enter the super-profit tax, or as it should be called, resource rent tax.
MB@15:
So wrong. Go and read James Farrell’s piece. Don’t just spout rubbish.
A super-profits tax on resources is widely agreed to be the most efficient and least distortionary taxation method for mining. Mining is different to other industries in that once the stuff is dug up, it can’t be dug up again. So mining super-profits are actually akin to monopoly rents. Hence the higher rate of tax.
Other economic activities, say in manufacturing or services, that earn above normal rates of profits are typically assumed to be doing something new and/or working more efficiently than their competitors, so they deserve the super-profits they earn (this is the reward for innovation). Mining companies make enormous profits when demand outstrips supply, because there is only so much ore in the ground, and this drives the price up (not innovation). Enter the super-profit tax, or as it should be called, resource rent tax.
Arch @ 17 – but mining companies also similar to manufacturing or services also have the same incentive to do something in a new way or work more efficiently. For example with better mine planning they can save millions of dollars by not digging where its not absolutely necessary – and its not unusual for them to spend hundreds of thousands of dollars on planning tools to achieve this. Higher prices due to demand/supply of course help but you can also say that of other industries.
The banks for example are making a lot more profit with less competition – why should a super tax not apply to them too. And since many service based industries can’t be exported either (which is one reason given for the super tax on mining) why not apply the super tax to many service based industries – its not like restaurants or AFL games are going to get exported.
The main reason the miners have been chosen is that they have little public support and there’s a big bucket of money there.
Arch @ 17 – but mining companies also similar to manufacturing or services also have the same incentive to do something in a new way or work more efficiently. For example with better mine planning they can save millions of dollars by not digging where its not absolutely necessary – and its not unusual for them to spend hundreds of thousands of dollars on planning tools to achieve this. Higher prices due to demand/supply of course help but you can also say that of other industries.
The banks for example are making a lot more profit with less competition – why should a super tax not apply to them too. And since many service based industries can’t be exported either (which is one reason given for the super tax on mining) why not apply the super tax to many service based industries – its not like restaurants or AFL games are going to get exported.
The main reason the miners have been chosen is that they have little public support and there’s a big bucket of money there.
Rio Tinto closed today up $1.22 (+1.82 per cent).
Rio Tinto closed today up $1.22 (+1.82 per cent).
Chris @18: “The main reason the miners have been chosen is that they have little public support and there’s a big bucket of money there.”
Perhaps the tax should be on profits that are being exported offshore?
The problem is that we have gone from a nation of Aussie-owned mining companies (e.g. MIM, WMC, BHP, CRA), to a nation which is selling most of its assets to foreign ownership.
It comes down to what RussellW @9 wrote: “Some measures have to be taken to acquire some long-term national benefit from the mining boom, otherwise we will be left with an empty quarry and few competitive industries.”
A few people defending the economist sacred cows about FDI (Foreign Direct Investment) and comparative advantage etc, need to wake up and have a rethink about where this takes us if the FIRB ultimately allows foreign firms to control virtually all our assets.
Look at the end-game guys, not the short-term story.
Chris @18: “The main reason the miners have been chosen is that they have little public support and there’s a big bucket of money there.”
Perhaps the tax should be on profits that are being exported offshore?
The problem is that we have gone from a nation of Aussie-owned mining companies (e.g. MIM, WMC, BHP, CRA), to a nation which is selling most of its assets to foreign ownership.
It comes down to what RussellW @9 wrote: “Some measures have to be taken to acquire some long-term national benefit from the mining boom, otherwise we will be left with an empty quarry and few competitive industries.”
A few people defending the economist sacred cows about FDI (Foreign Direct Investment) and comparative advantage etc, need to wake up and have a rethink about where this takes us if the FIRB ultimately allows foreign firms to control virtually all our assets.
Look at the end-game guys, not the short-term story.
Lex of the London Financial Times, not known as a social democrat, had this to say of the resource rent tax and the miners’ loud objections:
Lex of the London Financial Times, not known as a social democrat, had this to say of the resource rent tax and the miners’ loud objections:
I’ve got no problem with mining royalties but as the minerals are only mined once the money should go into a rainy day fund not general revenue or cutting other business taxes.
I’ve got no problem with mining royalties but as the minerals are only mined once the money should go into a rainy day fund not general revenue or cutting other business taxes.
@22 – Chumpai – the money is being allocated to specific purposes.
@22 – Chumpai – the money is being allocated to specific purposes.
Hey Kim, yeah I did hear Wayne Swan mention that and I’m all for using it on infrastructure etc. But I would rather it be put into some sort of sovereign wealth fund and deposit the interest (or earnings, whatever) into general revenue. Then the government of the day can use it on infrastructure, health, the pension or anything else that takes its fancy.
Yes ideally we should invest the money in value adding infrastructure but I think it will be too tempting for politicians to fritter the tax away on white elephants. Put the money away so it can still be working for us long after the minerals are gone.
Also, thanks for the James Farrell link, definitely one of the better pieces of commentary on this issue. From what he’s saying it might be better to replace royalties with a resource rent tax of this sort.
Hey Kim, yeah I did hear Wayne Swan mention that and I’m all for using it on infrastructure etc. But I would rather it be put into some sort of sovereign wealth fund and deposit the interest (or earnings, whatever) into general revenue. Then the government of the day can use it on infrastructure, health, the pension or anything else that takes its fancy.
Yes ideally we should invest the money in value adding infrastructure but I think it will be too tempting for politicians to fritter the tax away on white elephants. Put the money away so it can still be working for us long after the minerals are gone.
Also, thanks for the James Farrell link, definitely one of the better pieces of commentary on this issue. From what he’s saying it might be better to replace royalties with a resource rent tax of this sort.
Elise @ 20 “Perhaps the tax should be on profits that are being exported offshore?”
yes – I suggested pretty much the same thing on another thread. If the concern is about profits going overseas than such a such a scheme would suffice without affecting future local exploration plans as much – in fact it might encourage more of them because if they were to use the money to explore overseas they would have to pay the tax.
Chumpai @ 24 – yes it may be better to have a resource rent tax instead of royalties, but the current proposal is to charge both. And I agree with you it would be better to put some of the money away for future development and investment (which is what Norway did). The last lot of saving didn’t last very long but it did help avoid the worst of the GFC.
Elise @ 20 “Perhaps the tax should be on profits that are being exported offshore?”
yes – I suggested pretty much the same thing on another thread. If the concern is about profits going overseas than such a such a scheme would suffice without affecting future local exploration plans as much – in fact it might encourage more of them because if they were to use the money to explore overseas they would have to pay the tax.
Chumpai @ 24 – yes it may be better to have a resource rent tax instead of royalties, but the current proposal is to charge both. And I agree with you it would be better to put some of the money away for future development and investment (which is what Norway did). The last lot of saving didn’t last very long but it did help avoid the worst of the GFC.
@24 – No worries, Chumpai – I agree the Farrell post is a good one!
@24 – No worries, Chumpai – I agree the Farrell post is a good one!
Chumpai
I see no reason for thinking a future government will be any less likely to spend accumulated assets on “white elephants” than the current one. At least the current one is formally accountable to someone specific — us.
The real question here is smoothing out the ripples associated with windfall revenue so that the non-tradeable sector isn’t put under perverse pressure and the wealth is spread about.
Although super probably isn’t the best place to park funds from an equity of investment POV, there are almost certainly worse places.
Chumpai
I see no reason for thinking a future government will be any less likely to spend accumulated assets on “white elephants” than the current one. At least the current one is formally accountable to someone specific — us.
The real question here is smoothing out the ripples associated with windfall revenue so that the non-tradeable sector isn’t put under perverse pressure and the wealth is spread about.
Although super probably isn’t the best place to park funds from an equity of investment POV, there are almost certainly worse places.
Chris @18:
Yes, over the longer term, but in the case of demand for a manufactured good increasing, and consequently driving up profits: (i) new manufacturers can come on-line in a reasonable time frame, increasing supply and (ii) the super-profits give entrepreneurs an incentive to devise new products or manufacturing processes, to substitute for existing ones, both of which drive down prices. This is simply not the case for mines, because: (1) the huge lead times and costs of getting a mine up and running prohibit entry to new players, and more importantly (2) there is a limited amount of the stuff and it typically cannot be substituted.
Good point. I’ll drop Swanny a line. Vast portions of the electorate would love it
These are substitutable goods. Try to name an AFL club or restaurant that earns super-profits.
Chris @18:
Yes, over the longer term, but in the case of demand for a manufactured good increasing, and consequently driving up profits: (i) new manufacturers can come on-line in a reasonable time frame, increasing supply and (ii) the super-profits give entrepreneurs an incentive to devise new products or manufacturing processes, to substitute for existing ones, both of which drive down prices. This is simply not the case for mines, because: (1) the huge lead times and costs of getting a mine up and running prohibit entry to new players, and more importantly (2) there is a limited amount of the stuff and it typically cannot be substituted.
Good point. I’ll drop Swanny a line. Vast portions of the electorate would love it
These are substitutable goods. Try to name an AFL club or restaurant that earns super-profits.
Fascists vote Liberal!
Fascists vote Liberal!