The ABS values Australia’s assets
The latest report by the Australian Bureau of Statistics on the world leading System of Environmental Economic Accounting was released yesterday.
The ABS have taken a lead role in developing the system at the United Nations level over the last decade. Last year the UN ratified the SEEA methodology:
The SEEA framework follows a similar accounting structure as the System of National Accounts (SNA) and uses concepts, definitions and classifications consistent with the SNA in order to facilitate the integration of environmental and economic statistics.
The SEEA is a system for organizing statistical data for the derivation of coherent indicators and descriptive statistics to monitor the interactions between the economy and the environment and the state of the environment to better inform decision-making.
There is plenty to digest in the ABS report – with land of course king in valuation terms at 80% of environmental assets. The value of Australian land increased by 79% over the decade 2003-04 to 2012 -13. Interestingly, the productive value of the economy was up 67% but waste more than doubled that at 147%. Over a decade, black coal is up 936% but brown coal down 65% (that’s good news re carbon intensity). The ABS findings on mineral and energy resource rents were higher than my findings in the Total Resource Rents of Australia report, of oil & gas plus subsoil minerals at $41 billion. The ABS found $58.9bn in economic rents in those sectors.
The ABS also found:
Between 2003-04 and 2012-13, the value of Australia’s iron ore assets rose from $7b to $366b as a direct result of increased market prices.
That’s pure economic rent (the ability to charge prices above the supply cost + a normal rate of return). It could be taxed without distorting supply. How? If the global price is say $110 per tonne of iron ore, Australian exporters would have to charge the same price or lose customers. Thus a Resource Rent takes away the unearned increment (a % of the naturally rising value) to share with the public, in lieu of the common-wealth.
Instead of doing this, or educating the public on the need for it, our conservative Liberal Government, traditionally the promoters of efficient taxation, are preferring to promote (via various government channels) the regressive GST tax and expand it to food, health and education. This is a second best option. Additionally, their agenda is to scaremonger the public on the need to sell our last remaining public assets to finance infrastructure. This will be a two way loss – these newly privatised monopolies will soon ramp up prices to deliver returns for shareholders, discouraging least cost economics and thus exports. Secondly, the benefits of new infrastructure paid for by the public will be privately pocketed by the insiders who get the nod on where to buy land (near the new train station or tollway on-off ramp).
Back to the report …
We must ask – what does it mean that Australia’s environmental assets are worth $4,826 billion and that this is nearly double the value a decade ago?
Total government spending at all three levels was $390 billion in 2011-12. Divide 10 into $4,826 billion to see the naturally rising value of the earth as more than capable of financing all of government. We could avoid the decade of deficits we are being warned of if the government was willing to assist the productive economy.
The SEEA report does not include all resources. The value of water licenses is an area that I also struggled with in the Total Resource Rents of Australia report. Same with fishing and forestry licenses, satellite orbit rents.
Yes – in 2014 we are still struggling to value the common-wealth. We can fund the Hadron Collider to understand what happened at the dawning of time, but the ABS continually faces budget cutbacks.
I hope to discuss this exciting report in more detail on the Renegade Economists radio show.