Australia's Dutch disease

Canada is not alone in suffering from the insidious Dutch disease. Australia, too, is feeling the pain. Whereas Canada's version is caused by booming tar sands production, Australia's is caused by booming iron and coal production.

The resources industry is credited in part for keeping Australia out of recession and insulating it from the worst effects of the global financial crisis. On the other hand, because of the boost it has given to the Australian dollar, it has created big losers. According to Saul Eslake, chief economist at Bank of America Merrill Lynch (Australia), "There's been a 'two-speed' economy. On one side is the booming mining sector and some of the industries that hang off it, like heavy construction. On the other, you've got floundering industries like manufacturing, tourism, retailing and higher education, which employ many more people than mining." Sound familiar?

In order to help even out the benefits, the Australian government has levied a 30 per cent tax on iron ore and coal profits over A$75-million.

The mining industry is fighting back in a big way ... and winning. The Minerals Council of Australia launched a multimillion-dollar advertising campaign which led to the tax eventually being watered down. The campaign also helped bring down former Prime Minister Kevin Rudd. The mining companies plan to continue their advertising assault. Furthermore, they are increasing their grip on the press. Rupert Murdoch's right-wing News Corp already owns eight of the country's 12 major daily newspapers and mining magnate Gina Rinehart is making a move for majority control of Fairfax Media which owns three of the remaining four. News Corp also dominates regional and suburban newspaper publishing.

The defeat of the ruling Labor Party, already unpopular, will be almost guaranteed with mining company ad campaigns and big donations to the opposition combined with a hostile press. This will bring to power the conservative, mining industry-friendly Liberal/National Party coalition (it has promised to repeal the mining tax as well as Australia's carbon tax). This, too, will be familiar to Canadians: a government committed to defending an extractive industry above all else, most particularly above the environment. Polluters won't pay and Dutch disease will persist with its viral mischief.