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The minerals sector and the australian economy
Book reviews A study on quantitative impact THE MINERALS SECTOR AND THE AUSTRALIAN ECONOMY Edited by L.H. Cook and M.G. Porter George Allen and Unwin, Hemel Hempstead, Herts, 1984, 324 pp, f 20.00 This collection of nine papers originated with a grant to Monash University Centre for Policy Studies by the Australian Mining Industry Council. The brief of the grant - to study and report on the quantitative impact is well met by the authors, all of whom are either currently connected with the Centre of Policy Studies or have worked with the Centre in the past. Other sponsors of the research were the Reserve Bank of Australia, The Australian Petroleum Exploration Association, CRA Ltd, the National Energy Research Demonstration Development Program, and the Commonwealth Committee for Promotion of Excellence in Research. Three papers - ‘Minerals sector growth and structural change’ (L.H. Cook and E. Sieper); ‘Some quantitative estimates of the effects of changes in the minerals sector’ (L.H. Cook and V.J. Lees); and ‘Quantifying the effects of changes in the minerals sector: background notes’ (L.H. Cook) - are particularly designed to serve the aim of the volume which is ‘to add more analytical thrust to the debate: on the social, political and economic impact of the Australian mining industry. A general equilibrium model based on disaggregated microeconomic variables (using the latest version of the ORANI model of Australia, modified to allow some simple macroeconomic variables such as tax receipts to be incorporated) is developed to examine such well-worn subjects as the Gregory Thesis, the effects of foreign ownership, the multiplier effects, and the capture of ‘economic rent’. The results of the analysis are sure to be debated long and hard by economists.
150
The other papers (two on taxation by T.C. Bergstrom and D.C.L. Nellor; P.R. Hartley’s study of foreign ownership; the paper by A.O. Krueger and M.G. Porter on the asset theory of exchange rate determination; the defining of the key issues in the debate on the Australian mining industry (M.G. Porter); and C.R. Doran’s historical survey) give the reader a comprehensive overview of the thinking in Australian academic circles. Most of the papers provide useful references, and the editors have assured that material is coherently presented. However, as is so often the case in collections of papers of this kind, the volume suffers from the lack of an index. Most particularly, the lack of a general summing up of the material is to be regretted.
Acrimonious
discussion
The book is a valuable contribution to the continuing debate about the effects of ‘mining booms’ on the Australian political economy, particularly at a time when there is acrimonious discussion in Australia about a prop-
osed resources rent tax. The modelling by Cook and Lees seems to conclude that growth in the minerals sector has indeed generated a sizeable increase in tax revenue at existing tax rates, but the more important gain to Australia from the mineral sector has been increased factor incomes. On an empirical basis, C.R. Doran has concluded that the minerals industry has stimulated economic growth, earned export income, attracted labour and capital, encouraged the development of infrastructure, and assisted in diversifying and expanding the Australian economy. A number of the papers will be required reading for economists involved with the minerals industry. It is far less likely to appeal to mining industry executives and sharebrokers, in part because of its lack of a concise conclusion. There is also likely to be considerable argument about the design of the general equilibrium model and its applicability to government making policy. However, to this reviewer the emphasis on facts is to be lauded, and the papers should be read carefully by designers of more sophisticated models and analyses. M. H. Govett Consultant Australian Mineral Economics Pty Ltd and Govett and Govett Pty Ltd
A pertinent, all-round guide MINERALS
HANDBOOK
1984-85,
by Phillip Crowson Macmillan,
London,
1984, 294 pp
This is a second edition of an extremely useful reference source for data on metals and minerals compiled by a world authority in the field. There has been relatively little change from the first edition published in 1982. The list of materials covered have been expanded by eight to include a total of 46 non-fuel minerals and the data have been extended in time until about 1982/83. There is a set of introductory tables comparing the materials in terms of (1) adequacy and distribution of re-
serves; (2) the import dependence of major consuming regions; and (3) growth rates of production and consumption. Additional general tables demonstrate the importance of South Africa as supplier of some two dozen minerals, and the dynamic growth of reserves, both in absolute terms, and in relation to output, for four major metals over the past ‘forty years. Separate sections on each mineral covered provide tabular data on the geographical subdivision of reserves, production and consumption, trace growth rates and price developments and analyse import dependencies among major consumers. Brief verbal notes describe main uses, substitution possibilities and marketing arrangements.
RESOURCES
POLICY June
1985
150
The other papers (two on taxation by T.C. Bergstrom and D.C.L. Nellor; P.R. Hartley’s study of foreign ownership; the paper by A.O. Krueger and M.G. Porter on the asset theory of exchange rate determination; the defining of the key issues in the debate on the Australian mining industry (M.G. Porter); and C.R. Doran’s historical survey) give the reader a comprehensive overview of the thinking in Australian academic circles. Most of the papers provide useful references, and the editors have assured that material is coherently presented. However, as is so often the case in collections of papers of this kind, the volume suffers from the lack of an index. Most particularly, the lack of a general summing up of the material is to be regretted.
Acrimonious
discussion
The book is a valuable contribution to the continuing debate about the effects of ‘mining booms’ on the Australian political economy, particularly at a time when there is acrimonious discussion in Australia about a prop-
osed resources rent tax. The modelling by Cook and Lees seems to conclude that growth in the minerals sector has indeed generated a sizeable increase in tax revenue at existing tax rates, but the more important gain to Australia from the mineral sector has been increased factor incomes. On an empirical basis, C.R. Doran has concluded that the minerals industry has stimulated economic growth, earned export income, attracted labour and capital, encouraged the development of infrastructure, and assisted in diversifying and expanding the Australian economy. A number of the papers will be required reading for economists involved with the minerals industry. It is far less likely to appeal to mining industry executives and sharebrokers, in part because of its lack of a concise conclusion. There is also likely to be considerable argument about the design of the general equilibrium model and its applicability to government making policy. However, to this reviewer the emphasis on facts is to be lauded, and the papers should be read carefully by designers of more sophisticated models and analyses. M. H. Govett Consultant Australian Mineral Economics Pty Ltd and Govett and Govett Pty Ltd
A pertinent, all-round guide MINERALS
HANDBOOK
1984-85,
by Phillip Crowson Macmillan,
London,
1984, 294 pp
This is a second edition of an extremely useful reference source for data on metals and minerals compiled by a world authority in the field. There has been relatively little change from the first edition published in 1982. The list of materials covered have been expanded by eight to include a total of 46 non-fuel minerals and the data have been extended in time until about 1982/83. There is a set of introductory tables comparing the materials in terms of (1) adequacy and distribution of re-
serves; (2) the import dependence of major consuming regions; and (3) growth rates of production and consumption. Additional general tables demonstrate the importance of South Africa as supplier of some two dozen minerals, and the dynamic growth of reserves, both in absolute terms, and in relation to output, for four major metals over the past ‘forty years. Separate sections on each mineral covered provide tabular data on the geographical subdivision of reserves, production and consumption, trace growth rates and price developments and analyse import dependencies among major consumers. Brief verbal notes describe main uses, substitution possibilities and marketing arrangements.
RESOURCES
POLICY June
1985