Reaping the Rewards
Australia is performing better than other OECD countries during the pandemic thanks to policies implemented by the Coalition. By James Mathias.
There were two figures within the release of the National Accounts for the June Quarter this week that provide cause for reflection on how the defeat of the Rudd Government in 2013 was so critical to Australia’s result in performing better than other OECD countries like the UK, France, the United States and Germany.
From the outset though, the situation still remains dire both here and abroad given estimates put the amount people who have lost their job globally at nearly 500 million.
The two beacons of hope within the June Quarter Statement are the continued increases in mining investment and the surprise of the largest current account surplus on record. The election of the Abbott Government in 2013 was crucial to the recording of these figures.
Despite non-mining sector businesses recording a reduction in investment by 5.1 per cent for the quarter, mining sector investment did the opposite and increased by 1.3 per cent. This was the third consecutive increase in investment and most notably the first rise in financial year terms in seven years.
This is the first reason why the defeat of Rudd and Labor in 2013 was so important to these figures – namely that it put to bed forever the Minerals Resource Rent Tax (MRRT).
The MRRT applied an effective tax rate of 58 cents in the dollar for big mining companies which at the time was argued as a major disincentive to these very same companies investing in Australian projects. As then-CEO of the Minerals Council of Australia and MRC Director Mitch Hooke said in his keynote address to the Stockbrokers Association of Australia conference in 2010: “The Government’s proposed super tax will weaken the Australian minerals industry, and if you weaken mining, you weaken the Australian economy.”
That statement made a decade ago was true then and is vindicated now, as the June quarter figures show that it is the mining sector that is leading investment within the Australian economy. It’s undeniable to conclude that had that tax remained, the mining sector would have been significantly weakened and thus restrained from further investment.
The second beacon within the June quarter accounts is the record current account surplus of $17.7 billion which is 3.8 per cent of GDP. Australia has just recorded its longest period of current account surpluses since the 1970s which can be directly correlated to aggressively pursuing free trade agreements (FTAs).
The election of the Abbott Government in 2013 saw some of the largest FTAs signed in our history. FTAs now cover around 70 per cent of our two-way trading relationships compared with just 26 per cent in 2013.
The June quarter saw net exports contribute a 1 percentage point growth to GDP as imports fell more than exports. Seven of Australia’s 14 FTAs in force (half) have been signed since the election of the Coalition in 2013 that include agreements with Japan, China, Korea, Peru and Indonesia. Included in this is also the herculean Trans Pacific Partnership agreement which many had written off before Australia stepped in and led the charge in brokering the agreement.
It is another Menzies Research Centre Director who we have to thank for a majority of these agreements, former Trade Minister Andrew Robb. Had he not pursued these agreements then, we would not be reaping the rewards of them now.