Treasurer Wayne Swan has warned revenue from the mining industry boom will not be as great as expected.
He told the Brisbane Media club that they should not expect the “rivers of gold” that resulted from the previous mining boom.
However the opposition and industry have labeled this as just an excuse to lay the groundwork for a tight upcoming budget, hiding the Labors economic mismanagement..
Swan talked down revenue gains that the mining boom that high commodity prices would deliver, pointing to mining companies writing off the value of capital expenditure and thus paying less tax into government coffers.
“In the early years of the (new) projects, even though the prices are going to be relatively high and they are going to be quite profitable, they will be writing off a lot of that capital expenditure.
“The expectations that some have about the volumes of revenue that are going to flow from (the mining boom are inflated” Swan said.
However the opposition says that the Labour led government is simple making excuses for poor economic management.
The Australian Minerals Council’s Mitch Hooke has slammed the comments in an op-ed piece in the Australian today, saying the treasurer is again twisting the facts to suit his political interests.
“He ignored a doubling of mining company tax payments to account for 24 per cent of total company tax receipts in 2008-09, even though the resources sector accounts for only about 8 per cent of gross domestic product.” writes Hooke “He also ignored that, as a proportion of GDP, the industry’s total tax contribution (company tax and royalties) had increased fourfold.”
Hooke was also critical of the mixed messages coming out of the industry in regards to reinvestment and capital expenditure.
“we were also told last year that most mining profits were being sent overseas. Yet now, according to the Treasurer, because most mining profits are being re-invested in Australia, it is causing pressures on other sectors and depressing tax revenues.” he said.
Deloitte Access Economics Director Chris Richardson said that mr Swan’s assertions were a bit wide of the mark, instead attributing budget weakness to the effects of the GFC.
“They are giving excuses, some of which are genuine and some of which are temporary” Richardson told The Australian, further noting that increased minerals prices could see a 50% increase in the tax miners
What do you think? Is Wayne Swan yet again using the mining industry as a scape goat, or does he make a valid point? Let us know in the comments.