Joe Hockey (North Sydney, Liberal Party, Minister Assisting the Prime Minister for the Public Service) Share this | Hansard source

Of course there is a flow through to the economy of strong commodity prices—of course. There is no dispute about that. We are the beneficiaries of some terrific economic times and specifically not only the massive demand in growth out of China and India but also the recovery in the Japanese economy have had a positive impact. Japan remains one of our biggest commodity markets. I stand to be corrected, but I think very little of our coal actually goes to China, for example. A lot of our coal goes to non-China, non-India markets. But overall you cannot dispute the fact that China and India are helping to stimulate significant demand for commodities and we are reaping the benefit of that.

Naturally enough, that demand for commodities is reflected in the more attractive economic circumstances for exploration and, the more attractive exploration is, the more likely companies will find resources and then the development of those resources with higher commodity prices becomes more attractive. If it is more attractive then there is obviously a greater prospect of appropriate return on investment for those mining companies. So you now are seeing major projects with significant lead times that are far more economically attractive now than they were at a lower commodity price. That is flowing through to construction and through to hospitality services in some of the more remote areas. What we have seen over the last few months is a significant surge in employment in retail and in hospitality. Those industries are lower paying industries than the mining sector or, for that matter, construction. But the surge in employment in retail and hospitality is effectively nationwide. And the fact that in the last few weeks we have seen the unemployment rate drop significantly in South Australia and Tasmania is not necessarily directly as a result of the mining boom but because those economies, as reflected in the national accounts, are starting to perform much better. So if the member for Werriwa is driving at the fact that the economy is doing well today only because of the mining boom, then I think he sorely underestimates the impact of good economic management and the fact that, for example, in the year 2000, when seven out of our top 10 trading partners were in recession or depression, Australia had the fastest growing economy in the OECD. That comes about because we have a diversified economy, an economy that is over 75 per cent services. Mining and agriculture combined represent probably no more than 15 per cent of GDP. What we are seeing are the benefits of a diversified economy. Obviously when you have a resources boom the benefits of that boom do flow through to other industries, but it cannot and will not be the sole determinant of a strong economy. For example, productivity will be dampened a bit this year by the worst drought in 100 years. Naturally enough, farm production is down significantly and that is one of the challenges we have in managing what is a finely tuned but well-balanced economy.

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