by Sarah Burnside
Sarah Burnside is a Perth-based freelance writer with experience in law and policy. She tweets at @saraheburnside
Questions around the mineral sector and the taxes it pays are not as prominent in this election campaign as they were in 2010, but they have not disappeared.
The Liberal Party promises to abolish the minerals rent resource tax, the Greens seek a return to something approaching the original resources super-profits tax, and Labor is doing its best to look content with a cobbled-together compromise that satisfies almost no one (but which was recently ruled not to be unconstitutional). More broadly, there is an underlying anxiety about the role of mining in our political economy and the benefits the nation derives from it. Some conclude that we have wasted the resources boom; others fear that Australia has assumed ‘sovereign risk’ and will drive away investment, and questions about the legitimacy of public ownership of minerals simmer quietly.
This mixture of political narratives and public concerns is reminiscent of an earlier boom, which lasted from the mid-1960s to the early 1970s and the events of that era demonstrate some of the difficulties faced by governments in interacting with the resources sector.
The resources boom was welcomed, but it was not seen as an unalloyed benefit. The 1970s saw the high tide of dependency theory, which holds that powerful nations use the global market to extract wealth from those less favoured, and the theory resonated in Australia: it complemented what was termed our ‘new nationalism’. Donald Horne, who charged that his homeland was ‘a lucky country run mainly by second-rate people who share its luck’, noted that Australia represented ‘a rich prize in international investment, full of loot’, and suggested that it ‘could end up as an economically colonial country again’.
Others feared the impacts of Australia’s reliance on resource industries and foreign (in particular American) capital on its political economy. For instance, in 1965 Brian Fitzpatrick and Ted Wheelwright wondered whether it was possible for Australia to ‘adopt a foreign policy in conflict with those great and powerful friends on the other side of the world who are the suppliers of foreign largesse and the recipients of profit therefrom’.
Although there were concerns within the Coalition government about the nation’s dealings with the mining sector, it made only limited changes to the federal government’s somewhat laissez-faire approach during its 23-year period of rule between 1949 and 1972. The Labor Party, however, seized on the issue in the 1960s, arguing that Australia was failing to profit from its mineral wealth. In 1965, Gough Whitlam identified his nation with the exploited Third World, contending that ‘[i]nternational mining and oil companies are frequently more powerful than the governments of the countries whose commodities they develop’ and arguing that the ‘place and pace of development of Africa’s copper-belt and Australia’s bauxite deposits are not determined in Africa or Australia’.
Once elected in 1972, the Whitlam government moved with characteristic speed in the area of resources policy. The Minister for Mining and Energy Rex Connor had a vision which included export controls, foreign investment guidelines, and the creation of a Petroleum and Minerals Authority to develop resources in partnership with the private sector. Connor also engaged the economist and journalist Tom Fitzgerald to report on the ‘contribution of the mineral industry to the national welfare’.
Fitzgerald’s report was compellingly written, in plain English rather than bureaucratese. He focused on the return Australia obtained from ‘the exploitation of the country’s natural resources’ and zeroed in on concessions in the federal Income Tax Assessment Act 1936 which he considered over-generous. Fitzgerald calculated that during the period 1967-1972 federal government assistance to the mineral sector exceeded tax payments from mining companies by $40 million and that the concessions had ‘cost the national exchequer some $140 million in each of the last two financial years’.
The report was anathema to the mining industry and the Coalition parties, which criticised its methodology and disagreed with its findings: Country Party leader Doug Anthony accused the government of ‘political hatemongering against [the mining] industry’.
For Whitlam, however, the report proved the nation had ‘been paying to be exploited’. He promised the Report would be ‘the starting point for the formulation of policies aimed at maximising the return to Australia of her natural endowments’ and closed off a few concessions. Connor was equally buoyed, seeing the Report as proof that previous Coalition governments had ‘never even got to first base with the multi-national mining companies’ and had suffered from ‘a cargo cult complex’. Paul Keating, then a young backbencher, characterised the Report in somewhat grandiose terms as ‘the most devastating document ever to be presented to the Australian Parliament’. (Times change: in his 1990 Boyer lectures, Fitzgerald would later criticise the Hawke and Keating governments for their ideological attachment to deregulation, arguing that it was ‘possible for a Labor Party in office to be far less effective in preserving commonsense economic principles than it would have been if it had remained as a challenging Opposition’).
The Whitlam government’s attempts to shift the nation’s relationship with the resources sector were bitterly opposed, and these efforts ended, in the wake of the Loans Affair, on a particularly memorable Remembrance Day in 1975. Successive Labor administrations steered well away from ‘resource nationalism’, and when the Rudd government dared to re-approach the issue of mining taxes in 2010, reprisal was swift.
The Whitlam government’s resource policies are still portrayed as political poison: Paul Kelly hyperbolically discerned in the Rudd and Gillard governments the ‘ghost of Connor’. Labor, twice bitten, maintains that the watered-down MRRT is an acceptable compromise, and it is difficult to see how future administrations could shift the status quo. Further, the notion of an undifferentiated national interest emphasised during debates in the 1970s was overly simplistic, involving the use of rather blunt proxies (such as tax revenue or mineral production) and since that time globalisation has reduced all governments’ capacity to influence local economies. Discussion of these complexities does not fit neatly into the bite-size chunks demanded by a 24-hour news cycle.
Following the 1975 dismissal, Canadian political scientist Garth Stevenson noted the ‘general feeling among mining and petroleum people seems to be that Labor governments are innocuous at the state level, but that at the federal level they can do considerable damage to the industry’. Re-reading this statement in 2013, the danger appears to have been somewhat overstated.
Sarah Burnside’s study of the Fitzgerald report and Whitlam era debate over the contribution of the mining industry to national welfare will appear in History Australia: Journal of the Australian Historical Assoiciation in December 2013. The same issue of the journal will also include a study of the iron ore industry and the origins of the 1960s mining boom by David Lee.
Citation: Sarah Burnside, Mining History for the 2013 election. Australian Policy and History. August, 2013.