Saturday, June 12, 2010

Miners aren't as important as they think they are

Bring on the mining tax! I can't believe the amount of traction miners are getting with their campaign against the super profits tax. Australia is not strong because of mining - the economy is flexible enough to take advantage of whatever boom is going. I have to give credit for the Government "socialising the gains" in this way. It is even a safety net for the miners if conditions go sour, the reduced tax if profits disappear is really a safety net - that is how progressive taxation works.

On the flip side of the coin, on our second biggest earner (correct me if I'm wrong) - higher education, the government has slammed on the brakes for foreign student intakes. I still can't comprehend why we are paranoid enough to think that young immigrants paying through the nose to get into our country, but still being subject to long term assessment should be slowed. When I compare the amount of money the Government "invest" in my children to get them through until they are employable, and compare it to how much they spend on a foreign student immigrant (negative money) - there is no question. Other countries are making the investment, we are getting their taxes. Once the governments in India and China realise this, it is they who will put up the barriers.

I'm having my six children before the government realises that imports are cheaper.

13 comments:

Chris Fellows said...

Both are moves aimed at the medium to long term that are gambling on the continuation of a high-growth future.

Putting the brakes on higher education is to protect our brand so it will still have value 10 years from now.

In saying that 'Australia is not strong because of mining - the economy is flexible enough to take advantage of whatever boom is going' you are joining the great 21st century caravan of 'form beats content' on its mad career of folly. There is no economy as flexible as Somalia's but except in a few areas such as telecommunications and maritime repossession this has not allowed it to 'boom'. Remove mining and Australia's economy would look like New Zealand's. At best. IMHO.

Marco said...

There is no "Australia brand" of value in the higher education market. Each individual university does have its own brand image, but each have different circumstances which will be hindered by different amounts with the way the government is putting on the brakes. Universities make their own judgements on that, but arbitrarily changing the rules with an intent to reduce overall numbers of foreign students to intake is always going to make it harder to control brand image.

With the mining argument: Australia with a mining Super profits tax compared to the other countries (including Somalia) competing for mine development, is still a much lower sovereign risk. Brazil, RMP, African states etc. have a long record of arbitrarily changing rules to suit themselves in regards to multinational miners. The "Capital strike" that appears to be happening (which is helping our other industries, by reducing our dollar, reducing competition for obtaining employees etc.) actually appears to me to be more bluff than the sort of threat to take seriously. I really don't think it is in those miners interest to try less stable countries. Either way, Australia's economy will be better off.
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Chris Fellows said...

There is no "Australia brand" of value in the higher education market.

Is too. (NB: You gave no evidence for your assertion so I'm not giving any for mine either.) Rules have not been arbitrarily changed, they have been tweaked to squeeze the low-skilled tail of the market (of more interest to you and less interest to me :P)

Super profits tax compared to the other countries (including Somalia) competing for mine development, is still a much lower sovereign risk.

The *absolute* level of sovereign risk is not the issue, changing the *relative* level of sovereign risk (or perceived relative level) is, since the allocation of mining capital was predicated on the existing levels of sovereign risk. Some companies may be bluffing, others really will be recalculating and deciding it makes more sense to invest in a high risk-high return project in Mali or a low risk-low return project in Canada instead of a low risk-low return project in Australia.

I want Australians to be competing to get the mining companies to spend their money here in economically productive ways, not adopting a cargo cult money where our elected officials extort their money and use it to buy elections.

Marco said...

Google "australia brand higher education" yourself if you like. It appears to me that *immigrants* think brand australia first, and then find an institution/course in Aus that accepts them, in which case the reputation of Australia as a place of learning excellence is irrelevant. I don't see how taking in less "hairdresser students" is going to make any difference at all to the brand saleability of any University that doesn't offer that. The brand saleability of universities that do, take a big hit.
I do take your point that somewhere like Harvard doesn't need immigration as an incentive to attract the *best* foreign students, but really, isn't that why super-intelligent people leave their poor countries - in search of a better country?

I'm not sure how your argument is different to "Putting the brakes on immigration is to protect our brand"?

Chris Fellows said...

I don't see how taking in less "hairdresser students" is going to make any difference at all to the brand saleability of any University that doesn't offer that.

If we did have Harvards, it wouldn't affect them. But we don't no matter how much we might like to think we do. And if the Swan Hill Institute of Technology takes in lots of hairdresser students, it will impact negatively on the perception of the Swan Hill Institute of Natural Excellence.

I do take your point that somewhere like Harvard doesn't need immigration as an incentive to attract the *best* foreign students

That wasn't my point... that was a point you just came up with now. You seem to have embraced the Panglossian idea that our world where higher education is a back-door into immigration is the 'best of all possible worlds'. Higher education 'exports' overlap with skilled migration but are not the same thing. Poisoning our education brand will not reduce our desirability as a destination for skilled migrants.

Marco said...

I don't really understand what you mean by a brand. Maybe I've been in the clothing business too long, but I thought the point of a brand was to sell more "stuff" (more university placements) and to get a premium price for the brand (students pay through the nose as well) and that they feel that they get value for the money they pay.

It is one thing for, say, Mercedes to limit their production level of their models to get a higher (premium) price thus protecting their brand - it is quite another for the government to tell all companies they can only produce/sell X number of cheap Y type cars to protect all the Australian brands' futures. What works on an individual company seeking brand appeal doesn't work if it is regulated across the board the way it just has.

ANYHOW, my idea is that higher education is a FRONT DOOR immigration path that could even take pressure off the back door (the back door being boat people)

The more I think about it, for the big brand universities (mainly private US ones), immigration is a primary appeal for foreigners to want to go there.

Brand snobbery, where people would pay huge amounts of money to go to Harvard but would refuse outright to pay a tenth to go another University, is abhorrent to me anyway.

There is such a thing as "good enough" education. I've never perceived an "education brand" for myself or my children, so you will have to forgive me for not understanding it, nor thinking it is even relevant.

Chris Fellows said...

I've never perceived an "education brand" for myself or my children, so you will have to forgive me for not understanding it, nor thinking it is even relevant.

Why are you paying to send your kids to a non-government school then? There must be some perceived value that you are paying for. I would see this as 'brand value'. (I would also see you as 'class traitor')

it is quite another for the government to tell all companies they can only produce/sell X number of cheap Y type cars to protect all the Australian brands' futures. What works on an individual company seeking brand appeal doesn't work if it is regulated across the board the way it just has.

Why doesn't it work? If screwdrivers made in Clamistan have a poor (or declining) reputation because some of them are likely to splinter into jagged fragments at the first sight of a screw, then the government of Clamistan can start protecting the responsible screwdriver manufacturers of Clamistan without immediately incurring the economic costs of driving the shonky screwdriver makers out of business by putting limits on how many shonky screwdrivers they can export.

Marco said...

Why are you paying to send your kids to a non-government school then? There must be some perceived value that you are paying for. I would see this as 'brand value'. (I would also see you as 'class traitor')

Although there is an appearance of brand value associated, it is not so. Although I can't discount that subliminally some brand associations have crept in without me consciously realising it, I will explain in detail in my next post why that is not so.

Why doesn't it work? If screwdrivers made in Clamistan have a poor (or declining) reputation because some of them are likely to splinter into jagged fragments at the first sight of a screw, then the government of Clamistan can start protecting the responsible screwdriver manufacturers of Clamistan without immediately incurring the economic costs of driving the shonky screwdriver makers out of business by putting limits on how many shonky screwdrivers they can export.

Well, this is the reason - No-one asked the buyers of the screwdrivers whether they were happy with them or not. What does it matter that many if not most don't use the screwdriver as a screw driver. They see their friends with a Clamistan screwdriver and want one too. When they get told of their issues as actual drivers of screws they shrug their shoulders and ask "when can I get one?". That doesn't sound like it is a candidate for a bad reputation. If Clamistan doesn't think it right to charge for this alternate use with a separate product, limiting the production of any form of the product is not going to help in the way intended

Marco said...

Oh, I've worked out what an analogueical alternate use might be. Since it really is just a taboo that we don't just "sell" immigration - we would be people smugglers. The alternate use of the screwdrivers would be as sex toys. Clamistan frowns upon that.

Chris Fellows said...
This comment has been removed by the author.
Chris Fellows said...

What you say about the customers and the blinkered, insane-with-greed government of Clamistan might be perfectly true.

What really concerns me is that people who want to make decent screwdrivers are screwed by the current arrangement and the changes go some way- I believe- towards unscrewing them.

I am looking forward to reading your sophistical contortions to back your claim that private primary and secondary education has nothing to do with 'brand value'.

I note in passing that you have not sought to respond to my point about *relative* levels of sovereign risk which means - according to the time-honoured rules of the interwebz - that I win. Pwned!

Marco said...

What really concerns me is that people who want to make decent screwdrivers are screwed by the current arrangement and the changes go some way- I believe- towards unscrewing them.
I can see that. I don't think anything will help much until purchasers have better sex-toy alternatives. The screwdriver business will be continually hijacked by the demand for sex toys. I guess screening screwdriver purchasers to have confidence that they are bona fide screw drivers is enough for my liking. What they do once they have the screwdriver is their own business. It is ironic that such a sex toy liberal has a deep interest in the professionalism and reputation of the screwdriver manufacturers.

I note in passing that you have not sought to respond to my point about *relative* levels of sovereign risk which means - according to the time-honoured rules of the interwebz - that I win. Pwned!

I accept the ruling, especially since mining giants will assess risk and/or bluff regardless of whether the actual risk is anywhere near the perceived risk (differential)
However I don't accept that the resulting loss in mining investment is bad for the short or long term economy. The investment vacuum created by the resulting drop in the dollar will be filled in the agricultural sector. The minerals will still be there when future Governments reverse the effects if they desire (it is quite a reversible tax, unlike the egg-scramble of the GST change). I believe the (profitable to mine) minerals are essentially saved in the bank for later use, however that comes about. The virtually retrospective nature of the tax (it taxes a lot of mines where the entire investment is already made before knowing about the change) is understandibly making the mine owners seethe with anger and keen for revenge on the Government. The nature of the economic effect is acute and severe, rather than chronic long term decline. All the miner's efforts are dedicated to ousting the Government - the only real chance to reverse the tax quickly. It is impossible to therefore objectively prove my point - that the harm is illusory and concentrated on the mining sector, with many other sectors actually gaining. It is easy to prove that mining will suffer - quite hard to prove how everything else will make up for it.

Chris Fellows said...

The screwdriver business will be continually hijacked by the demand for sex toys.

Agreed!

I believe the (profitable to mine) minerals are essentially saved in the bank for later use, however that comes about.

Agreed, also! I think you are probably right and miners aren't as important as they think they are, but more because the boom will not last very much longer... viz. levels of Chinese local government debt Mr Turnbull was talking about in his Sydney Morning Herald op-ed yesterday...