Suddenly there’s a little momentum behind the notion that to save manufacturing, Australia needs to manage its boom better. From the SMH today:
The wave of job cuts in the steel industry, blamed on the high dollar, has reignited calls for a sovereign wealth fund to rein in the exchange rate.
After BlueScope Steel yesterday said it would shed about 1000 jobs, on top of 400 foreshadowed by OneSteel last week, a national fund to save more from the mining boom received backing from the Greens, the Australian Industry Group and prominent HSBC economist Paul Bloxham.
A sovereign wealth fund is a savings pool used by commodity-rich countries such as Norway to invest the windfall of a resources boom or to soften the blow from a sudden fall in commodity prices.
Mr Bloxham, a former Reserve Bank economist, said a sovereign fund would probably require higher taxation of mining.”If you held that [extra revenue] in a sovereign fund, you would be slowing the pace of structural change in the economy and potentially put downward pressure on the exchange rate,” Mr Bloxham said.
”We are well into this mining investment boom now. What would have helped is if we had had a larger mining tax – it would have discouraged some of this investment from happening so rapidly,” he said. ”We could probably all do with a little less structural economic change.”
The chief executive of Ai Group, Heather Ridout, said Norway had been able to offset some of the pain of a high exchange rate by investing its fund’s assets overseas.
”We need a longer-term strategy to deal with the dollar and its impacts,” Mrs Ridout said.
”This needs to be articulated and advocated and may include the establishment of a sovereign wealth fund that stabilises the economy without the need for interest-rate rises when surges in commodity prices create the risk of overheating,” the industry leader said.
The Greens leader, Bob Brown, said he would propose a sovereign fund financed by a higher mining tax at the government’s tax summit in October.
A sovereign wealth fund has been supported by Commonwealth Bank chief executive Ralph Norris, Liberal frontbencher Malcolm Turnbull and the International Monetary Fund.
Yes, and me, pretty much alone, ever since rumours of the RSPT first surfaced. Not that that matters now. What does matter is that manufacturing, through its lobby, the Australian Industry Group (AIG), needs to seize this moment with the launch of a thoroughly planned and intensely unfair mutli-media assault on mining and the government, and the damage that the two together are doing to the broader economy.
This campaign needs to be ceaseless and relentless and must cause a moral panic throughout the manufacturing union’s grass roots membership, as well as the members of affiliated tradable goods sectors in education and tourism. Freaking the general public out is also very useful.
The core message must be that mining is going to cost everyone in these sectors their jobs. But several other key narratives will stoke the necessary outrage:
- Over-dependence on the communist state of China
- The fact the RBA has declared that 80% of Australian mines are foreign owned
- An unrestrained mining boom threatens house prices
- An unhealthily close relationship between Canberra and miners is a fourth
The campaign should have pre-planned and commissioned economic research to control the editorial agenda of the major papers. This can be drip fed as required. The campaign must also raise a special advertising budget and begin a coast-to-coast media assault upon the government. CEOs of as many major operations in the three sectors as possible should begin making bold public comments about impending job losses and sing from the same hymn sheet – that mining and its lackies in government are going to cost much larger employers many, many jobs. The AIG will need to establish a special task force to coordinate all of these media operations.
All of these voices must propose the same simple solution. A new tax on mining and an SWF to take the pressure off the currency. This can be argued within a broader macroeconomic narrative of “managing the boom”.
The goal of all of this is to get a new mining tax on the agenda before the October tax summit. It’s no good going into that summit with some genteel notion of discussing ideas. The summit must become a live or die event for the government in which they address the “manufacturing crisis” or face death at the subsequent poll. The summit must be the event at which a new mining tax is announced, based on Saul Eslake’s simple idea of calibrating the mining corporate tax rate against some notion of value:
Surely a better and simpler way of procuring for the Australian people as a whole a larger share of the value created by the exploitation of the finite resources of which they are the ultimate owners would be for the federal government to legislate that, for as long as the prices of prescribed minerals are above some level (such as their average in 2004-05), the tax rate paid by mining companies will be, say, 33 per cent…
That’s how to get policy change in this country.
