Gas boom has given the economy all it's going to give
THE global head of Westpac's economics and research Bill Evans says Australia has got all its going to get out of the gas boom, and there's nothing on the horizon to replace it.
Speaking at the Golding-backed Gladstone Engineering Alliance Conference in Gladstone on Wednesday, Mr Evans said the massive shock to the Australian economy which would occur when major projects on Curtis Island stopped construction was a huge concern to economists.
"The thing that worries Canberra and the Reserve Bank is what impact this massive investment has had on the economy," he said.
Mr Evans said there were three distinct phases of any mining boom.
The first phase is a pick up in commodity prices, with companies having to invest little to increase profits. This essentially means that there is more income to tax.
"The best stage of a mining boom for a country is that first stage when the prices take off, particularly because of the huge increase in the fiscal position," Mr Evans said.
However, he noted the previous government had "frittered away" the advantages of this period on measures such as the baby bonus, tax cuts and family benefits.
Instead, he argued, the money would have been better spent on infrastructure projects.
The second phase of the boom, the investment and construction phase, is nearing its peak.
So the problem is when do these projects start to be completed? Because there's no evidence that there's going to be a new wave of projects coming through
"The second stage is currently rolling over, and while that created some wage issues for other industries it was a benefit to Australia," he said.
However, Mr Evans noted with some concern that there was a lack of projects in the pipeline to pick up the slack after the Curtis Island projects rolled off construction.
"So the problem is when do these projects start to be completed? Because there's no evidence that there's going to be a new wave of projects coming through," he said.
He said investors were looking to other areas such as PNG, the US and Africa to invest because of the cost pressures being felt by proponents of Australian projects.
Mr Evans also said any benefits to Australia from the taxable income created by the production of the projects would be muted, as most of the dividends would be appreciated by overseas investors.
He also said the amount of tax able to be gathered from the project components would be weak over the next five years.
"The problem is that the producers have got a lot of accumulated tax deductions," Evans said.
"Which means over the next five or six years, the contribution of corporate tax to the Australia economy from the production process is going to be pretty limited.
"We're going to have to wait until 2020 until we see a big boost to our corporate tax."