Donald Duck is looking better and better

Posted: February 22, 2013 in Ranting
Tags: , , , , , , ,

I have not been posting here nearly as frequently as I would wish to be. However ‘real’ life has been sticking its sticky fingers into my so-called life and making quite a mess of things.

What inspires me to start furiously bashing away at the keyboard once more was a line I heard in interview on this morning’s radio – that whoever governs Australia after the next election shall have to face the same problem as now, that prices of resources are dropping thereby reducing the incoming revenue stream.

Once upon a time, Australia was said to ‘ride on the sheep’s back.’ That harks back to the glory days of wool, particularly once wool hit the magic ‘a pound (cash) for a pound (of wool in weight)’ mark. And a great deal of that wool was exported bringing additional monies into the country. Wool and other agricultural products do not have the same degree of economic importance in that respect any longer – still important but not in a position of ovine jockeying.

The place of the traditional agricultural products in the economic scheme of things has frequently been taken by another primary product – production of raw resources through mining, although the mining industry goes through cycles of practically dizzying highs and crashing lows. Like any export market, it is very much price driven. If the price isn’t there to justify the cost of production, then mining ceases.

Photo: Chris Lane

John Howard Photo: Chris Lane

For years now, Australia has been in the midst of riding a boom in resources prices. This was a product of external matters such as expansion of Chinese industrial capabilities and therefore demands for products such as coal and iron ore. Despite what some may say, this didn’t have anything to do with Australian economic policy etc. The Howard government rode this wave throughout its time in office. Of course the Howard era also had another unexpected bonus – huge amounts of Goods and Services Tax revenue from sales of petrol at the service stations. Why? Australian’s participation in George Bush’s Coalition of the Gullible (or whatever it was called). The invasion of Iraq over mythical weapons of mass destruction drove the price of oil through the roof on the various exchanges. And so the price at the pump jumped big-time. And accordingly GST revenue exploded upwards, way beyond revenue forecasts. Again it was a revenue stream that was not a direct consequence of government policy. What happened to that excess revenue is a subject for another rant, another time.

Kevin RuddPicture: Kym Smith Source: The Daily Telegraph

Kevin Rudd
Picture: Kym Smith Source: The Daily Telegraph

Howard’s successors in government, the Labor governments of Kevin Rudd and then Julie Gillard, kept on surfing the resources boom. Those revenue streams helped fund Australia’s hedge that kept off the worst of the GFC in this country.

Along the way we’ve seen those who own the mining interests have their wealth simply skyrocket. The infamous Clive Palmer in Queensland, bought into mining interests at the right time and his wealth escalated dramatically. Even more significant was Gina Reinhart, after convincing Daddy on his deathbed to put her back into his will and then managing the collapse of one of the trusts Daddy had set up to benefit Gina’s despised step-Mother (who seemed to be a gold digger anyway), thereby directing yet more wealth in her direction. Reinhart is now a multi-billionaire (and no, it’s not defamation, just a rather crude simplification of already well-documented facts).

Gina Rinehart protests against the mining tax last year. Photo: Tony Asby

Gina Rinehart protests against the mining tax last year. Photo: Tony Asby

The degree of super profits being realised by the mining industry is what drove the Labor government to introduce its special ‘mining tax.’ This was to tax mining interests on their ‘super profits.’ The repeated catch cry was that it was only right and fair to ensure the distribution of such wealth. Naturally mining interests screamed blue murder. Reinhart held rallies for her miners, insisting that this tax was going to shut down their operations, thereby costing them all their jobs. Interestingly enough, not long after that Reindhardt, after presenting herself as the champion of the hardworking miners, started her public campaign to dispense with her Australian workforce and replace them with specially imported Asian immigrants who would be employed at substandard rates and conditions, with Reinhart claiming the greedy Australian workers were ruining her business. Naturally she claimed government should allow her to so royally screw those immigrants. Not much being said then about all the Australians she was seeking to put out of work.

Julia Gillard. Photo: Andrew Meares

Julia Gillard.
Photo: Andrew Meares

The mining tax went through and became legislation. The massive revenue to the government’s coffers from this new tax was to be a keystone in Labor’s electoral promise to return the Budget to surplus. There was only one problem. Once the data came in on just how much revenue was actually being earned from this new tax, it was a very small fraction of the forecasts. It was all a screaming big mess for one very simple reason. It was all bollocks.

The Howard, Rudd and Gillard governments have all ridden the generous wave presented by high resource royalties. And they have all acted as if this was going to be at least an indefinite thing if not a permanent boom. But of course it wasn’t going to be that. Yet it has become blindingly obvious that none of these interests had many any real plans for what if said prices drop? What if the demand for those products drops?

So now we are facing reality. The price of resources has dropped. Government of any flavour is going to be trapped by this failure to even properly plan for what should have been blindingly obvious – those prices and that demand will eventually drop. The fall in prices has reduced the monies coming in from the mining tax. The fact that the estimates were so very, very wrong, brings up the question of how those estimates were created in the first place? Did they really not bother to factor in the fact that the signs were already on the horizon? At the same time, the relatively piffling amounts raised by the mining tax have made a thorough mockery of Gina Reinhart’s rabble rousing. Rather than the mining tax costing her workforce their jobs, it was in fact Reinhart who was advocating the actions which would see who knows how many of her miners out of a job. Her blatant scare  tactics have been shown to be sheer garbage (the cynic might be tempted to draw comparisons to her forcing an inquest into her elderly father’s death and her insistent claims that her step-mother had employed imported hit men – the fact that Step-Mummy being somehow found guilty would see her removed as a beneficiary of Daddy’s will, putting even more cash into Reinhart’s hands would have been an unintended externality *cough cough bullshit cough*).

At the end of the day, all I am seeing is a combination of short-sighted immediate political gains, a chronic failure to properly plan and obscene degrees of greed. I have said it before and I shall say it again – come next Federal election, Donald Duck’s looking pretty good to me. If nothing else we would at least be amused by the sight of one of his feathered incoherent tantrums at Gina Reinhart.

Ross sigVote the rant

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.