At a time of lively debate in our democracy, the Minerals Council of Australia is launching a new series of Public Policy Monographs focusing on the central issues that surround the development of Australia’s mineral resources. In the first of the series, respected economist Dr Ed Shann examines the policy challenges associated with maximising growth in a mining boom. From the perspective of someone steeped in Australia’s ‘reform era’, Dr Shann outlines the demand and supply side reforms needed to ensure Australia takes full advantage of this once in a generation opportunity to lift its wealth. Among the key points he makes are that:

• Rather than focus on how to maximise the benefits of a mining boom, debate in Australia has tended to focus on sectoral conflicts and distribution issues. As a result, we risk choosing policy options that reduce the potential gains to the nation as a whole
• Structural change occurs constantly in a dynamic, growing economy and rapid growth in Asia offers opportunities beyond mining – agriculture, education, tourism and parts of manufacturing all stand to benefit. At the same time, the non-mining sector must be able to adjust costs and innovate which demands increasing the economy’s flexibility and productivity
• This boom will be long-lasting and has much wider implications for the future of the Australian economy and its structure than previous temporary surges in commodity prices
• The mining and mining-related sectors are much bigger than people think, now making up around 20% of the Australian economy. The mining services sector is growing rapidly at 15 to 20% a year in Australia
• The structural tensions created by the rapid expansion of high productivity mining can be eased by policies designed to lift the speed at which Australia’s economy can grow
• Australia can sustain above trend output growth without rising inflation based on rapid growth in the high productivity mining sector. We can grow faster by cutting interest rates to expand demand and by using existing spare capacity
• A range of supply side reforms can lift the speed limit of the economy by boosting productivity and improving flexibility. Sensible supply side policies are similar with or without a mining boom. We need to increase the flexibility with which resources move between sectors and make it easier to improve productivity within firms. Policies that subsidise declining firms only lower our growth potential.

Compared with today’s alternatives, Ed Shann offers at once a more optimistic, yet challenging, narrative for Australia’s economic future – one that should be compelling to all who recognise the benefits that past reforms have delivered to Australian society. Te monograph is available at www.minerals.org.au