Left-wing ‘think tank’ short changes resources sector [opinion]

It’s not every day that a left-wing anti-mining, anti-gas ‘think tank’ is caught out, but that’s what happened with The Australia Institute this week. The name of the ‘think tank’ sounds very official. 

The reports churned out from its partisan platform look official. However, as revealed by a former secretary of the NSW Treasury, the Institute’s recent report into the Australian resources sector, is officially wrong. 

The Australia Institute (TAI), a founding member of the anti-coal and gas movement, released a report in June claiming that state and territory governments across Australia were subsidising the Australian resources sector to the tune of $17.6 billion over a six year period between 2008/09 and 2013/14. More than half of the alleged subsidies were supposedly being paid by the Queensland Government. 

An independent analysis by a former Treasury head, Michael Schur, now Managing Director of Castalia Strategic Advisors, has revealed fundamental errors in a report that was clearly designed to deceive the media and the wider public into thinking state governments were funding Australia's resources sector instead of vital public services.

Mr Schur did find that the Institute’s report revealed one truth, and that is that TAI executive director Richard Denniss and his co-authors had little understanding of public sector finances. 

In a damning critique he says this: ‘Our analysis shows that the Institute has applied a flawed analysis based on a distorted understanding of public sector accounting that grossly exaggerates the level of subsidy to the mining and resources sector and we find that the $17.6 billion claimed as subsidy almost entirely fits into one of the following categories: Not relevant to the mining and resources sector … exaggerated or … not verifiable’. 

This scathing critique means that the credibility of TAI is now in tatters. Every piece of work this group produces should be regarded as suspect in the light of this deception.

The Castalia critique is supported by the Productivity Commission, which recently found that the effective rate of state assistance to the mining industry in Australia was negligible.

The findings of the Castalia report should serve as a timely reminder that the Institute is committed to shutting down the mining and gas industries in Queensland.

The mistakes that litter TAI’s report include: The bulk of the expenditure claimed as a subsidy, $10.3 billion, is associated with the commercial provision of rail, port, water and electricity services and infrastructure from which the government generates significant income; $3.7 billion in capital expenditure claimed as a ‘subsidy’ was spent by the government on items such as roads; and TAI also incorrectly asserts that capital expenditure on road projects associated with the resources sector constitutes a subsidy (roads are funded largely through general taxation and are available to all vehicles whether private or business). 

The remaining amounts—comprising about 20 per cent or $3.6 billion—aren’t associated with the mining and resources sector at all and appear to have been incorrectly categorised. 

From a Queensland viewpoint, one of the biggest howlers was the claim that $1 billion in Queensland Rail concessions for passenger and some non-coal freight services was in fact a subsidy to mining.

This deceptive TAI report should come as no surprise though because they have been churning out in recent years, faux-economic report after report attacking the contribution of the mining and gas industries to Queensland. They seek to paint the resources sector in this light to deflect attention from the fact that in 2012-13 resources sector companies spent almost $38 billion in Queensland on wages, goods and services and community contributions. That direct spending injection is calculated to have generated total spending of $76 billion – or equal to one quarter of the state’s economy. 

The resources sector also supports 430,000 or one in every five jobs across Queensland. Bashing the resources sector is effectively bashing the foundation of every family that relies on the sector for employment. 


*Michael Roche is the CEO for the Queensland Resources Council.

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