Australia’s richest person, Gina Rinehart, yesterday accused the government of using the mining industry as a cash machine, warning of an unhealthy reliance on the sector and unsustainable debt levels.
In a speech to the Australian Mines and Metals Association conference, the outspoken tycoon, chairman of Hancock Prospecting, said that without reform Australia risked the debt problems faced by countries like Greece.
“Let’s not be too proud to admit that we’re really just a large island with a small population with record debt,” she said, according to extracts of the prerecorded speech released online.
“Plenty of Australians know this in a casual way. What few seem to properly understand — even people in government — is that miners and other resources industries are not just ATMs for everyone else to draw from without that money first having to be earned and, before that, giant investments are made,” she said.
Australia’s economy has been driven by the mining industry, but the boom is approaching an investment peak and a bumpy transformation lies ahead as alternative sources of growth are sought.
Mining projects have faced headwinds from depressed conditions in Europe and the US, softening growth in China and increased competition from other producers as well as falling commodity prices.
Earlier this week, the government revealed a significant plunge in revenues due to sluggish corporate tax earnings and announced an A$18 billion (US$18 billion) budget deficit for this year, having previously forecast a surplus.
Rinehart said the government had been complacent in managing the commodities boom and its debt levels — which are forecast to peak between next year and 2015 at 11.4 percent of GDP — were unsustainable.
“It is incredible that after the last six years of record commodity boom times, we now find the once lucky country in record debt, with the budget tipped to deliver yet another deficit, to further increase our record debt,” she said. “Without mining and its related companies this country has no hope of repaying our record debt without facing the problems Greece and other countries faced with overspending and consequent debt traumas.”
Australian Prime Minister Julia Gillard called the claims “absolute nonsense.”
“[It’s] not backed by economists and not backed by ratings agencies with their triple-A rating of the Australian economy,” she told reporters, denying Australia was using the mining industry to fund its promises.