Time for Minerals Council to branch into counselling

“If we don’t dig it up, somebody else will” assumption has long been one of the industry’s key theories. Photo: Rob Homer

The Minerals Council and the state peak mining bodies really ought to consider a strategic expansion into the field of marriage guidance and counselling.

It is an unusual idea, we admit, but bear with us. Michael Roche, chief executive of Queensland Resources Council, was espousing the well-worn mining lobby line again this week. “If we don’t dig it up, somebody else will,” he said.

“If these countries cannot source our coal, they will simply seek it elsewhere, and that coal may not be as high quality, producing a worse outcome for global carbon emissions while denying Australia jobs.”

Illustration: Michael Mucci

Loath to single out Michael Roche for a dig, he is by no means alone, but this is about as well-founded in economic theory as, “If you don’t scratch your nose, somebody else will.”

Roche was going in to bat for Adani’s Carmichael mine, the world’s biggest new thermal coal project in Queensland’s Galilee Basin, a project that has little chance of ever returning a dollar unless the price of coal doubles and stays there for a long time.

The prospect of this occurring – given coal is in structural decline and India, where Adani’s parent is domiciled, aims to ween itself off thermal coal imports in two years – is slim.

But we digress. “If we don’t dig it up, somebody else will” assumption has long been one of the industry’s key theories. Let’s not worry about coal and climate change, if we don’t dig a vast hole in the Galilee Basin, somebody will just dig a mega-hole somewhere else.

We shouldn’t have a mining tax; mining companies won’t dig here, they’ll dig somewhere else. Sound familiar? The message is so widely accepted in Australian business and policy circles that nobody seems to have thought it through.

For a nation so obsessed with mining’s role in the economy, we are yet to notice that this logic would fail Economics 101. Look at it the other way round: “If we do dig it up, someone else won’t.”

Makes sense doesn’t it … not. Why would another country not dig up their minerals because we’ve decided to dig up our minerals?

Take a look at the iron ore market. We’ve been digging as hard as we can and, so far, it doesn’t seem to have put anyone else off putting a shovel in the ground.

And so it is that the mining lobby should shift its focus away from mining and diversify into the area of relationship support services.

“If we don’t dig it up, somebody else will” might not be sound economics, but in the field of social services, it is a lay down misère.

“If you don’t look after your husband or wife, somebody else will.” Now that does make sense. In the sphere of couples’ therapy this is unassailable logic.

Let’s face it, the mining lobby is no good at economics anyway. The Minerals Council of Australia just can’t stop confusing taxes with royalties. If they were to forget about giving doubtful advice to governments and focus on relationship counselling, they wouldn’t have to worry about stuff like the difference between taxes and royalties.

Economics 101, Adani-style

Adani put its “dig it up or else” line to the Queensland Land Court earlier this year, too, when its witnesses were under cross-examination by environmental groups trying to stop Carmichael (the saboteurs, as Prime Minister Tony Abbott describes them, in the wake of Adani’s snake and skink set-back).

As always, the miners went in with their favourite line for the court case. Their economist, Dr Jerome Fahrer of ACIL Allen, told the court: “If it doesn’t come from Adani and the Carmichael mine, it will come from somewhere else in the world. Possibly Indonesia or … who knows where but somewhere else in the world.” As a result, he was able to assure the court that “this mine, as such, is not going to increase the world supply of coal”.

Thank goodness, because if supply went up, price would go down; people would burn more of the stuff, thereby increasing greenhouse emissions, wouldn’t they?

Not according to Fahrer: “This mine … is very unlikely to affect the world price of coal … and if there was going to be an effect on price, the price would go up.”

Hang on! Building new mines pushes the price up? Somebody tell Fortescue and Glencore. They must have been reading the wrong books. Fahrer explained: “Because the initial conditions which will lead to this mine being created is an increase in the demand for coal.”

To people in the economics consulting industry, this probably makes sense. The conservationists’ barrister, Saul Holt SC, clearly wasn’t an economist: “Why would anyone else not do anything based on what Adani is doing or not doing in the absence of a price signal?”

Fahrer: “But they’re not doing anything. You seem to be suggesting that they’re making a decision, and I’m saying they’re not making a decision. They’re just continuing to do what they would’ve done anyway.”

Holt: “Why on earth do these other coal companies in the world not compete for that extra demand? Why do they just sort of sit down and not do anything?”

Fahrer: “Because that would require auxiliary assumptions – additional assumptions … about how they behave.”

Oh, right! That’s what it comes down to eh … auxiliary assumptions! To make the “if we don’t dig it up, others will” line work, without affecting the overall amount of coal consumed, or the coal price, you need to make some assumptions.