Treasury secretary Ken Henry has challenged the belief that Australia's mining industry saved the nation's economy during the GFC, telling a Senate hearing Canberra's economic policies were more to thank for the survival.
Treasury secretary Ken Henry has challenged the belief that Australia's mining industry saved the nation's economy during the GFC, telling a Senate hearing Canberra's economic policies were more to thank for the survival.
"I've heard it said on a number of occasions, in fact I have lost count, that the mining industry saved Australia from recession," Dr Henry told the hearing.
"These statements are not supported by the facts."
Dr Henry's comments drew a swift rebuke from Chamber of Minerals and Energy chief executive Reg Howard-Smith, who said in a statement released today Dr Henry's comments grossly misrepresented the role played by the resources sector in Australia's economic recovery.
Mr Howard Smith said during the worst of the downturn in 2009 the minerals and petroleum industry contributed $2.8 billion in royalty payments alone.
"Despite a rising exchange rate and lower commodity prices, the sector still accounted for 85 per cent of WA's total merchandise exports, valued at $76.9 billion, with iron ore, petroleum and gold leading the way," Mr Howard-Smith said.
"Had the industry collapsed as Dr Henry suggests, it would have left a massive hole in the country's finances.
"Even in the economy's darkest hour, mining companies were pumping billions into the WA and national economies and providing hundreds of thousands of direct and indirect jobs."
The federal government's stimulus measures and interest rate cuts were the key factors behind Australia's better-than-expected economic performance, Dr Henry said.
The man behind the proposed Resources Super Profits Tax told a Senate hearing that the economy also benefitted from early swift action by the likes of China and South Korea to combat the global downturn.
"We find ourselves in the part of world that's growing stronger than anybody imagined this part of the world would be growing 12 months ago," he told an estimates hearing in Canberra on Thursday.
This stronger growth had produced stronger revenues which would help to return the budget to surplus three years earlier than forecast.
"There are not many countries in the world that find themselves in a position like this," Dr Henry said.
The result of this faster return to surplus meant that net debt would peak at 6.1 per cent of gross domestic product (GDP) rather than the peak of around 10 per cent that was expected 12 months ago.
"That obviously puts Australia in a very small group of countries with very low levels of public debt," he said.
"When one considers what's going on right at the moment in other parts of the world, particularly in Europe, I think we can all take some comfort of the fact that at least in Australia the fiscal position is in very good shape."
The CME's statement is below:
Treasury secretary misrepresents role of resource sector
Today's comments from the architect of the federal government's supertax on mining, grossly misrepresent the recent role played by the sector in Australia's economic recovery.
Chamber of Minerals and Energy of Western Australia (CME) Reg Howard-Smith said the Treasury Secretary's claim that resource companies had been quick to shed jobs during the Global Financial Crisis, was an unwarranted attack on the hundreds of thousands of Western Australians who continue to rely on the sector.
"Like most sectors of the economy, mining suffered during the GFC and this led to the loss of some jobs," Mr Howard-Smith said.
"But companies went to great lengths to ensure workers were redeployed to other operations where possible - had this not occurred, the losses would have been much greater."
Department of Mines and Petroleum figures show, during the height of the crisis, employee numbers dropped 12 per cent in the eight months to June 2009.
But demand remained for skilled and experienced workers, and since then, numbers continue to recover.
Dr Ken Henry also told the senate committee, "in the first six months of 2009, mining investment collapsed - mining output collapsed."
In fact, the sector continued to drive the state and national economies.
During the height of the downturn, the minerals and petroleum industry provided a life-line to WA finances - contributing $2.8 billion in royalty payments alone, in 2009.
Despite a rising exchange rate and lower commodity prices, the sector still accounted for 85 per cent of WA's total merchandise exports, valued at $76.9 billion, with iron ore, petroleum and gold leading the way.
"Had the industry collapsed as Dr Henry suggests, it would have left a massive hole in the country's finances," Mr Howard-Smith said.
"Even in the economy's darkest hour, mining companies were pumping billions into the WA and national economies - and providing hundreds of thousands of direct and indirect jobs."
This year, the sector will pay $3.2 billion in state-based royalties.
