Statoil and how Norway essentially protected its future is a lot like how Australia should have dealt with the so-called mining boom.
Named and outlined better, our "mining tax" could have been this. It could have protected against capital flight and essentially built national strength for all at the expense of those (especially foreign interests) looking to dig up serious swathes of our ground.
Instead, we had a predictable response from the mining magnates and Coalition, an easily duped and panicked public, and a flailing government at the time who named the concept terribly and defended it poorly. And when challenged on the whole "it's barely made any money" front, caved instead of noting that it'd been potentially hampered for political reasons.
What's an easier sell to the public? "Mining tax" or "Future Fund; funded by giant, mostly foreign mining companies."
Look at the Coalition's "$20b" medical research fund. So many people think that's a current $20b fund, rather than a far smaller fund to be built up to $20b over a number of years, and then to fund research only from the earnings of the fund and not from the fund's base value. Labor should have framed the MRRT much more like this and it would've made for a better sell. Avoid the word tax, outline the goal with a specific value range and target date, and name the beneficiaries of the earnings - technology research, medical research, etc.
I can't see how this wasn't a big missed opportunity for Australia.
Australia is basically like many African nations, where foreigners run the resources sector and the locals hope to get a piece of the pie through employment/wages.
However, Norway's resources are completely different to Australia's. Norway knows where the oil is, they just have to dig it up. So, they can just have a state-owned company pump it out of the sea and keep the profits for themselves.
OTOH Australia's minerals are hidden across a barren landscape the size of the continental USA. Projects are very speculative and require huge investments. New discoveries are being made every year all across the continent.
Hancock Prospecting (company now owned heiress Gina Reinhart, one of the richest women in the world) was created when its founder crashed a personal plane somewhere in the outback and discovered resources in the dirt (or something like that).
Even when you do know where the stuff is, tens of billions often need to be invested before anything is produced, like the new LNG wave.
There is no way the 23 million Australian citizens could invest this kind of capital into speculative projects. One failed project would bankrupt the nation. So, foreign investment is required.
But, even with minimal resource taxation/royalties, Australia is becoming uncompetitive for many resource investments, with the AUD and commodity prices where they are. Iron ore at its current price is now unprofitable, basically. As well all know, corporations require a certain ROE to do anything. Nobody is going to risk $10 billion for a possible 1% return. Massive LNG projects are getting shelved left and right.
There's oil hidden all across Australia and her waters, too, but there is very little infrastructure in place such as pipelines to transport the product to terminals/refineries, like there is in the US. If Australia was to nationalize its oil industry, would its people be willing to shell out tens of billions of their own tax dollars to build this infrastructure? All speculatively, knowing that their type of oil production is not profitable at all if oil once again goes below $70 a barrel, which could happen overnight (see Sept-Nov 2008)?
While I could see some sectors of the resource industry being nationalized, broadly it's just not sustainable. With costs where they are, there isn't a ton of room for more royalties.
Best thing would be for policymakers to just move on from relying on mining and start focusing on educating the population and competing where it counts on the global stage.
> All speculatively, knowing that their type of oil production is not profitable at all if oil once again goes below $70 a barrel, which could happen overnight (see Sept-Nov 2008)?
Is there an obvious reason they couldn't sell their oil forward (or just sell futures)? You can sell oil forward three years for around $89 a barrel at the moment, as opposed to around $93 a barrel for delivery next month.
That's for WTI, and Brent is currently even more (in fact the Brent curve is in contango at the moment). I don't know what grade Australian oil would be, but I wouldn't be surprised if it's closer to Brent than to WTI.
How can prospecting and extraction be both simultaneously unprofitable and also creating incredibly wealthy heiresses? If resource extraction and profit-sharing in Australia is most closely compared to that of African nations, it doesn't seem like the public is benefiting much from allowing their natural resources to be appropriated and sold by multinationals.
There was even discussion around this prior to the disastrous introduction of the mining tax[1][2]. Interestingly there was at least some support on both sides of politics for it.
Having lived in Australia for 3 years, I've been surprised their 3 major areas were mining, tourism and international education. Even Syndey's next big bet is to build a huge casino. They sound ephemeral, like just taking the money where it is. Of course they're richer than Europe, but isn't it better to build industrial sectors (I mean transformation industries with know-how) and research?
Because the mining industry is powerful (major share of our exports) and big business dominates the media. They get the public fearful about the loss of jobs.
Further, Labor's infighting put off a lot of people while the Coalition were consistent with their message in opposition.
Mining companies own, or control much of the Australian media. There was only one newspaper who didn't go for the coalition in the last election. It was the Age, which was mostly critical of Labor, but not entirely. There were big legal battles for control of the Age, but the existing board one control in the end, but lost a lot of editorial power.
Out an out corruption basically. The country began because of a miners revolution, and to this day they have more power than they earn.
The large coal mine (by an Indian company) despite declining coal prices, and the state earning more money via tourism, is going ahead because of brilliant control by the mining companies. This company has a terrible record of keeping their mines clean as well. Not only that, but the carbon produced is similar to all planned carbon saving planned by the government proving they lied about reducing carbon themselves. Further more coal kills a million people per year through pollution, and China is reducing their spend on coal, like most other countries. Which means the price of coal is only going to fall.
Named and outlined better, our "mining tax" could have been this. It could have protected against capital flight and essentially built national strength for all at the expense of those (especially foreign interests) looking to dig up serious swathes of our ground.
Instead, we had a predictable response from the mining magnates and Coalition, an easily duped and panicked public, and a flailing government at the time who named the concept terribly and defended it poorly. And when challenged on the whole "it's barely made any money" front, caved instead of noting that it'd been potentially hampered for political reasons.
What's an easier sell to the public? "Mining tax" or "Future Fund; funded by giant, mostly foreign mining companies."
Look at the Coalition's "$20b" medical research fund. So many people think that's a current $20b fund, rather than a far smaller fund to be built up to $20b over a number of years, and then to fund research only from the earnings of the fund and not from the fund's base value. Labor should have framed the MRRT much more like this and it would've made for a better sell. Avoid the word tax, outline the goal with a specific value range and target date, and name the beneficiaries of the earnings - technology research, medical research, etc.
I can't see how this wasn't a big missed opportunity for Australia.