If it looks like a mining subsidy and acts like a mining subsidy…[opinion]

In June this year, The Australia Institute released research showing that state governments in Australia had spent $17.6 billion on assisting the minerals and fossil fuel industries in Australia over the last six years.

All this expenditure is reported by state treasuries. Researchers at the Institute spent several weeks going through the budget papers of each state and the Northern Territory, and working out which items of expenditure related to these industries.

There are quite a lot of budget papers. Each state puts out four or five each year, and they’re often 50 pages long; that’s over 10,000 pages. They’re not exactly bedtime reading. In fact, it was a long, boring task.

Who would have thought that something so dull would get people so upset? 

This week we’ve been called “vermin”, “the lowest human filth” and there are various pictures featured by the NSW Minerals Council that are still less flattering.

The reason for all this excitement is a report commissioned by the Minerals Council which presents a different view from that of our report. It’s a shame the industry is only now engaging with our research. We wrote to the minerals and gas lobby groups back in May, inviting them to be part of our study, but received no reply.

Better late than never.

The Minerals Council report doesn’t dispute that this money has been spent. And they don’t provide any alternative figure for the central question of ‘how much do state governments spend on their mineral and fossil fuel industries’. So what’s the problem?

The problem is a difference of interpretation. In particular, how should we interpret the fact that state governments spend billions on infrastructure that assists the minerals and fossil fuel industries? The Institute considers this a form of assistance or, and here’s the bit that gets everyone hot under the collar, a subsidy.

The Minerals Council considers infrastructure built by state governments for their industry not to be a form of assistance because they intend to pay the money back later, through user fees or other payments.

This raises several interesting points. How should we consider government spending on an activity that generates future benefits? Should we focus on the future benefits, or on the current spending?

Look at those who have tried to secure major investment in health and schools. Try arguing for the funding of the Gonski education reforms, or the National Disability Insurance Scheme because that spending will generate economic returns in the future. The response has been a standard ‘we understand that’s important, but we can’t afford it because of the budget emergency.’

The Minerals Council want us to focus on the possible future benefits of infrastructure for their industry, regardless how much governments have to spend to get them. They’re very good at this. Hardly a month goes by without some claim of billions of dollars paid through some tax, royalty or fee. But the lobbyists are strangely quiet when it comes to talking about the billions spent on the regulation, administration, promotion, and capital expenditure for the minerals and fossil fuel industries.

And if this spending is such a great investment, why is it that state governments are doing the spending and not the private sector themselves?

Either these projects are too risky, or too low-return for the private sector to touch; in which case this is surely a form of assistance. Either that or state governments are crowding out the private sector. But then the major banks would be thundering that they are being locked out of lucrative investments. We don’t hear that thunder for the items in our analysis. We think this is assistance.

The Minerals Council dispute that some items identified in our analysis are relevant at all to their industry. The strangest example of this is the hundreds of millions of dollars state governments, particularly NSW and Victoria, spend on ‘clean’ coal research. They say that while this money “may appear to be a subsidy, in reality this is another example of pre-competitive research and development”.

Research projects for the coal industry don’t benefit the coal industry? Surely we can all agree to stop funding them then.

Similarly, the state-owned Cobbora coal project has cost taxpayers nearly $100 million, but the Minerals Council don’t consider this relevant as the money hasn’t accrued to one of their members. But it’s still state government money spent on people trying to dig up coal, so I’m sticking with it as a subsidy. At least we can all agree it’s been a waste of that money.

The fact is that state governments spend billions on the mineral and fossil fuel industries. This isn’t controversial. What is controversial is whether you think this is a form of industry assistance, or a sensible investment for the state. In some instances it might be either or both.

But to work out which is which, we need to have proper information. The Minerals Council make a lot of claims about how much they pay. Our report shows how much they’ve received. Hopefully state treasuries will be inspired by this debate to start publishing detailed analysis on their governments’ spending on the minerals and fossil fuel industries, as well as the funds the industries pay. 

Unfortunately, given their reticence to bring any figure to the table, I doubt Minerals Council will agree.

*Rod Campbell is an economist and a member of The Australia Institute

 

Here is the article published yesterday from Queensland Resources Council CEO Michael Roche hitting out at TAI figures in its mining subsidy report.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.