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The Australian Government Is Failing to Fulfill Its Election Promises —to Mining Companies

But even if the Abbott government could achieve what the mining industry is asking for, should Australians want them to?

by Girard Dorney
Aug 11 2014, 4:30pm

Image via Wikipedia Commons

This article originally appeared on VICE Australia.

There are political science models showing that when it comes to election time, governments tend to be judged on the health of the national economy. To a large extent, the theory goes, the government’s ideological stances and the promises they’ve made don’t matter. It also doesn’t matter whether or not the government is responsible for the health of the economy, good or bad.

If you’re in charge while the country is in recession, your best bet is to blame the lackluster economy on a previous administration. If you’re in charge when things are going well, your best bet is to take credit for everything.

Few think a nation’s government has total responsibility for the state of the economy. We live in a globalized age; local economies are a part of the world economy, and subject to its fluctuations.

But people feel the need to do something. They need to blame or praise someone. And economists have basic disagreements over whether particular policies are financially sound.

So it’s not surprising that — while each individual has their own beliefs — as a group we keep it simple and vote to make what small difference we can. Economy is bad? We need a change of government. Economy is okay? No change necessary.

Are there exceptions to this very broad rule? Of course, Australia just experienced one.

In 2013 the Australian Labor party was voted out of government even though the Australian economy was doing okay. For most people the never-ending leadership issues and internal dysfunction of Labor — which was compounded by the political dysfunction caused by a minority government — made the party a particularly unattractive voting choice. That’s for most people. Higher-ups in the mining industry had a more traditional election, so to speak.

Labor was in charge during the decline of the mining sector’s boom years. Couple that with the introduction of the mining tax and Labor pretty much guaranteed themselves industry-wide dislike.

Newport Consulting’s Mining Business Outlook Report, published every year, surveys mining executives at a number of different companies. Reading each year’s report gives you an idea of changing attitudes within the industry.

In 2010 it looked like the mining sector had come out of the global financial crisis okay, and so the majority were cautiously optimistic about the future. They didn’t thank the government for that — they thanked China and high commodity prices. Their main advice to Canberra was to ditch the mining tax.

In 2011 and 2012 the boom hadn’t begun to ease off completely and the outlook was even better. Both years over 50 percent of mining executives surveyed were ‘very optimistic’. Their advice to Canberra changed slightly, because the carbon tax had arrived. They now wanted to abolish that as well as the mining tax. In the 2012 report one executive felt particularly persecuted and is quoted as saying, “We don’t like the way miners are pilloried by the government. We already pay high taxes; why do we need to pay more?”

It was around this time that the Coalition government, headed by opposition leader Tony Abbott, came up with its point by point election promises to “scrap the carbon tax, end the waste, stop the boats, build the roads of the twenty first century and deliver the strong and dynamic economy that we need.”

Sounds pretty perfect right? Exactly what the mining sector wanted to hear from him at the time. But time moves forever forward and shit? Shit happens. In 2013, for the first time since Newport Consulting had begun issuing their annual reports, the majority of mining executives were not optimistic about the future, “Volatile market conditions are the primary reason for a downbeat view.”

Demand was decreasing and suddenly the best years were in the past. Of those surveyed 31 percent still put abolishment of the mining and carbon tax ahead of any other advice to Canberra but it wasn’t a clear favorite. Twenty-seven percent wanted more flexible Industrial Relations and new limits on union power, and 14 percent wanted investment in national infrastructure.

Mining and carbon taxes may look like bad policy in the eyes of miners but the effect they have on the industry pales in comparison to dropping commodity prices and decreased demand for coal and iron-ore. The global economy, largely outside of any one government’s control, was and is the financial drag on Australian mining.

So by the time the 2013 election rolled around, the promises of Abbott’s that became important to the mining industry were the vagaries he tacked onto the end of his five-point plan, “build the roads of the twenty first century and deliver the strong and dynamic economy that we need.”

This week the 2014-15 Mining Business Outlook Report was released and now an overwhelming 94 percent of industry executives surveyed are ‘not optimistic’ about the future. Investment is way down as most mines move into production phase and the main thing the industry wants from Canberra are less regulations and faster approvals, less red tape, and Industrial Relations flexibility.

Miners are like other industries, and like citizens themselves. When things are bad they look at whoever is in government and ask for help, any kind. And when they don’t deliver they think less of the people in government. From one executive, “We expected big changes, but have seen little action…We want action, and ask the government to deliver on their promises.”

Can Abbott and the Coalition government deliver? Well, it’s been almost a year and they had a hell of a time repealing the carbon tax, and they still haven’t repealed the mining tax or passed a budget. He’s down in the polls and all his political capital is being spent on achieving the bare minimum.

Then comes a bigger question. Even if the Abbott government could achieve what the mining industry is asking for should we want them to?

A General Manager of a publicly listed coal company is quoted as saying, “Australia has gone from being one of the best places in the world to invest in mining to just about the worst. We are too expensive."

This is not a point about low commodity prices; it is an indictment of the cost of mining in Australia. So what’s he talking about?

The main factors contributing to high costs, outside of geography, are the high value of the Australian dollar and the fact that mines here are subject to many layers of regulation. Put another way: the reason Australia is a poor investment for mining companies is because we’re a wealthy nation that’s harder to exploit than less developed nations. We’re a nation with strict Industrial Relations laws, a nation where workers have unions and are paid well, and we have a relatively rich electorate that cares about the environment.

We shouldn’t want legislation that drastically alters any of those qualities. Luckily, it doesn’t seem as though Abbott is capable of delivering.

Changes to IR laws are not going to happen not in this term of government, they’ll have to take it to the next election. As for bureaucratic streamlining, Abbott has already axed departments but there’s no further legislation in the pipeline. There isn’t a lot of confidence in the Coalition government right now from any corner.

Abbott failed to deliver on the promises that he didn’t care about, such as his promise to not make any cuts to education, health, or pensions. It’s beginning to seem like he might also fail to deliver on promises he does care about, and the mining industry is not happy.

Follow Girard Dorney on @GirardDorney

Image via Wikipedia Commons

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