That’s the big question Australia’s political leaders need to ask themselves.
Opposition Leader Tony Abbott has been waiting for a symbol of the devastation wrought by the mining and carbon taxes and yesterday he declared he got it in the shape of BHP Billiton’s decision to shelve its $20 billion Olympic Dam project.
While BHP specifically said neither tax had an impact on its decision, Abbott and his team had months’ worth of quotes from BHP chairman Jac Nasser on hand to show how the chairman has consistently slammed the taxes, labour laws and cost pressures in general.
The sight of Abbott and journalist Leigh Sales trading BHP quote after BHP quote on the The 7:30 Report was ridiculous. Abbott was determined to get this message out – basically, the Olympic Dam decision shows everything we’ve said about these taxes is right – and even a skewering by Sales wasn’t going to stop him.
The Opposition will try to make hay from the Olympic Dam decision for the next few days and possibly longer, although I am not sure whether they can make much of a case to pin it on the carbon and mining taxes.
The mining tax doesn’t even cover uranium, the main commodity to come out of Olympic Dam, and surely BHP would have been assuming some sort of carbon pricing mechanism in its planning for the $20 billion project. Frankly, I am just not sure that $20 billion projects are generally derailed by government decisions at any rate.
Still, while the Opposition might be wrong on why the Olympic Dam cancellation/delay is bad news, Abbott is right that it’s not a welcome turn of events for our economy.
It is certainly bad news for the South Australian economy, which was hoping for a big boost to employment and economy activity from the expansion.
But more worrying are the broader implications for the national economy – many will take this as proof positive that the mining boom has officially run out of steam.
Again, that’s hardly cut and dried. There are still $270 billion worth of mining projects in the pipeline, and even as commodity prices fall the mining industry will remain very profitable and pivotal to Australia’s export markets.
But regardless of whether we get a gradual slowdown in China (which would lead to a gradual slowdown in the mining sector) or a harder landing, it does appear that the mining boom is cooling.
The longer term question our politicians should be asking themselves – instead of trying to heap blame on one another – is a simple one: What next?
What next for the South Australian economy? What’s the next growth driver for the state?
What next for the Federal Budget? If the boom is coming off and tax revenues fall, what will that mean for spending and cost cuts over the next two years – whoever is in government.
What next for exports?
What next for the labour market? Mining isn’t a huge employer, but it does soak up skilled workers, so there could be some positive benefits from any slowdown.
But most importantly, what comes next for Australian economic growth? The mining industry has carried the economy through the GFC and the ugly hangover that has followed it. But what are the next industries that can propel growth?
For a long time I’ve expressed concern about how the economy might look after the boom. The high Australian dollar and high costs mean manufacturing won’t pick up the slack. The education sector has slowed somewhat in recent years and services aren’t as easy to export as rocks dug out of the ground.
And what of the SME sector? The entrepreneurs of Australia are always ready to grow and build businesses, but has government done enough to encourage innovation and ensure SMEs have the capacity to grow?
The answer is no. And with the mining boom slowing, the clock is ticking for politicians to answer this key question, and plenty more.