Two Controversial Mining Projects in Australia: Some Questions on Their Socio-Economic Viability

25 Pages Posted: 27 Jun 2018

See all articles by Dodo Jesuthason Thampapillai

Dodo Jesuthason Thampapillai

Crawford School of Public Policy

Iftikhar Lodhi

Lee Kuan Yew School of Public Policy, NUS; Graduate School of Public Policy, Nazarbayev University; National Research University Higher School of Economics; National University of Singapore (NUS) - Institute of South Asian Studies (ISAS)

Date Written: May 16, 2018

Abstract

This paper deals with economic analyses of two mining projects in Australia – one on the Liverpool Plains in New South Wales and the other on the Galilee Basin in Central Queensland. The adverse environmental and social externalities of these projects are well known – especially the impacts on the Gunnedah and the Great Artesian Basins. Notwithstanding these impacts, private financial analyses demonstrate significant revenue gains to the mining firms and render expenditures on mining to be sound investments. Nevertheless, economic analyses illustrate that the net benefits to Australia are possibly absent even without accounting for environmental social externalities. Given that the property rights of the mineral reserves are vested with the State, the Resource Rent Tax (RRT) becomes a legitimate fiscal policy tool. The paper argues that the assessment of mining decisions, must account for the depreciation of the Mineral asset. When this depreciation is measured by recourse to the Hartwick-Rule, the mining projects demonstrate monetary viability only when the RRT is enforced and is invested in its entirety on options that generate annual returns in excess of 4 per cent. Whilst environmental and social externalities would readily wipe out this monetary viability, it is noteworthy that such viability is clearly absent for rates of investment less than 3 per cent in the application of the Hartwick-Rule. Besides, with both projects, agriculture is a potentially dominant and viable alternative.

Suggested Citation

Thampapillai, Dodo Jesuthason and Lodhi, Iftikhar, Two Controversial Mining Projects in Australia: Some Questions on Their Socio-Economic Viability (May 16, 2018). Lee Kuan Yew School of Public Policy Research Paper No. 18-07. Available at SSRN: https://ssrn.com/abstract=3179880 or http://dx.doi.org/10.2139/ssrn.3179880

Dodo Jesuthason Thampapillai (Contact Author)

Crawford School of Public Policy ( email )

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
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Australia

Iftikhar Lodhi

Lee Kuan Yew School of Public Policy, NUS ( email )

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Graduate School of Public Policy, Nazarbayev University ( email )

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National Research University Higher School of Economics ( email )

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Moscow, Moscow 119017
Russia

National University of Singapore (NUS) - Institute of South Asian Studies (ISAS) ( email )

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Bukit Timah Road #07-01
Singapore, Singapore 259770
Singapore

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