Treasury Board Warned Labor Against A Small Australia

Treasury briefing warned Labor against a small Australia

Paul Cleary
From: The Australian
August 16, 2010 11:19PM

TREASURY warned Tony Burke and Wayne Swan in April that Australia faced the early onset of “acute” skills shortages.

But Labor responded by supporting sharp cuts to immigration levels that may worsen the situation.

Treasury has also said in a confidential briefing to the Treasurer that the abandoned resource super-profits tax was needed to “cushion” the non-resource states from severe side-effects by cutting the company tax.

Labor's compromise with the mining industry reduced the company tax rate cut by just 1 percentage point – to 29 per cent – while the Coalition is offering a 1.5-percentage-point cut which, for large companies, is offset by a proposed hike of 1.5 percentages point to pay for its parental leave scheme.

The Treasury advice puts the onus on Labor and the Coalition to cut the company tax further as the mining boom makes other sectors less competitive by driving up the dollar and wages. It also warns that the mining boom could be the cause of housing shortages.

The revelations are contained in a set of 19 documents obtained by The Australian under Freedom of Information laws.

Two months after Treasury's briefing to Mr Burke, the Sustainable Population Minister, and Mr Swan, Labor switched from a “big Australia” policy under Kevin Rudd to the low-growth “sustainable” population policy adopted by Julia Gillard. The Coalition has also switched to a low-growth policy, despite supporting continued high immigration in January, by announcing plans to cut the immigration intake by 100,000 to 170,000.

The April 30 Treasury executive minute to Mr Burke, which was copied to Mr Swan, says: “Over the next one to two years, the Australian economy is again expected to face capacity constraints.

“These constraints are expected to emerge earlier, and to be more acute, in certain regions and industries.”

The brief focuses on labour shortages in the resources states of Western Australia and Queensland, and makes it clear that high immigration has been important in addressing skills shortages. The documents confirm Treasury's belief that, without the right policy mix in terms of immigration and taxation, the resources boom will harm other export sectors.

A spokesman for Mr Swan said last night that Labor had made significant adjustments to the skilled migration program so that it was more responsive to industry needs, and the government was focusing on substantial investment in training.

It would provide 700,000 training places over five years and introduce a $2.5 billion training centre program so that every secondary school student would have access to a trade training centre to start learning a trade at school.

“The previous government neglected skills despite the repeated warnings of the RBA, leading to skills shortages,” Mr Swan's spokesman said. “And Mr Abbott is now doing the same thing with his determination to stop investment in skills and training.”

Labor has also increased to $6000 assistance for unemployed people wanting to relocate to find a job, although this scheme has had a poor track record in the past.

The Treasury brief to Mr Burke and Mr Swan says that capacity constraints began to emerge in 2008 despite stronger working-age population growth, mainly through higher interstate and overseas migration.

“For example, in Western Australia the unemployment rate fell to 2.3 per cent in October 2008, the lowest state unemployment rate recorded since the labour force survey began in 1978,” Treasury says.

A July 30, 2009 briefing to the Treasurer's office warns that housing shortages could be explained by the mining boom.

“It is certainly true that much of the 'heat' in the housing market in recent years has been reflected in prices, with investment activity remaining subdued,” this briefing says. “But this has also been a period where strong profits in the mining sector have fuelled an investment boom that has drawn resources away from sectors such as housing.”

The April 30 briefing to Mr Burke and Mr Swan warns that labour shortages have persisted in a number of trades and professions over much of the past two decades.

“Persistent shortages are particularly apparent in health professions and for trades such as motor mechanics,” it says.

A March 18 briefing to the Treasurer warns that demand for labour in the mining sector is leading to skills shortages in the construction sector.

A March 31 briefing to Mr Swan indicates that the 40 per cent RSPT would be needed to help restrain the mining boom and minimise the harmful effects of higher wage costs and the higher dollar.


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