Mining subsidies over-estimated

The size of state and territory subsidies to the mining and resources sector has been dramatically overstated, according to a report released today prepared by Michael Schur of global firm Castalia Strategic Advisors.

The report, Mining in the Age of Entitlement? Response to the Australia Institute was prepared in reply to claims made by the Australia Institute that subsidies for the sector from state and territory governments totalled almost $18 billion over six years.

It found the figure was closer to 2 or 3 per cent of the institute’s estimates.

Similar analysis by the Productivity Commission in June estimated that Commonwealth assistance to mining was around $546.5 million annually, mostly through research and development tax concessions and assistance through the CSIRO.

The majority of the modelling, the report says, was flawed in three ways, with some spending not relevant, some being recovered by cost-reflective tariffs, and some general government spending not targeted at mining.

Examples of incorrect expenditure included more than $1 billion of subsidised rail passenger travel in Queensland, and the Goonyella-Abbot point rail expansion, worth $831 million but reclaimed through user charges.

The industry paid more than $50 billion in royalties during this period, the report said.

Mr Schur was formally secretary of the New South Wales Treasury.

Minerals Council of Australia chief Brendan Pearson said the Australia Institute’s analysis of the mining sector “could not be trusted”.

“Whether the errors and distortions uncovered by Michael Schur were made wilfully or in ignorance, it is now indisputably clear that the Australia Institute is little more than the research arm of the Greens,” Mr Pearson said.

“Australians deserve better.

“The mining sector is Australia’s largest export earner and a major contributor to national income.

“Debate about the industry’s role and contribution to the Australian economy and public finances should be based on facts, not pseudo-economics and ideology.”