Statement 4:
Benefiting from our Mineral Resources:
Opportunities, Challenges and Policy Settings
(Continued)
Introduction
Australia's natural resources have been an integral part of its economic development, providing a basis for higher living standards and also acting as a driver of economic and social change.
Australia stands to benefit from continuing strong global demand for its abundant mineral resources. The resulting higher terms of trade has the potential to significantly increase national income for the benefit of all Australians.
With these opportunities, however, come a number of challenges for the economy. These include added pressure on the economy's capacity, structural adjustment to allow labour and capital to be reallocated to best take advantage of the changes in relative prices and returns from the increased world demand for our resources, and — reflecting a rise in national investment — a relatively high current account deficit for an extended period.
Australia's strong performance during the global financial crisis allows these challenges to be tackled and opportunities to be built on from a position of strength. Institutional settings also provide greater flexibility in managing the stresses of major changes in the terms of trade, in contrast to the mixed experiences with previous booms in Australia's history.
On the other hand, previous experience in Australia and worldwide points to the risk that marked increases in natural resource wealth can undermine economic reform and sound fiscal policy: reducing the gains to national income and skewing their distribution.
The role of policy is to build on the strong starting point and to ensure that the Australian community shares in the benefits of Australia's mineral resources, including through a reform of tax arrangements. Policy making also needs to remain disciplined and continue to pursue a broad reform agenda to build the economy's capacity and flexibility, promote investment in a diversified economy, and enhance community wellbeing.
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