Australia too reliant on resources: Tanner  

I occasionally moan about Australia suffering from the "Dutch disease" as our economy becomes increasingly dependent on exports of coal and LNG from natural gas and coal seam gas. The ABC reports finance minister Lindsay Tanner is starting to worry about it too - Australia too reliant on resources: Tanner.

The Federal Finance Minister says Australia has become too reliant on resources and needs to expand its export base.

Lindsay Tanner says there has been a "worrying period" over the last decade where resources have increased their domination of Australia's exports.

Lindsay Tanner says the 1990s saw great diversification, with strong exports across a range of sectors, and he says there needs to be a return to that kind of diversification.

"We had a huge growth in tourism, in education, in specialised manufacturing, in wine, in pharmaceuticals that helped us to diminish our enormous reliance on minerals," he told ABC radio 774 in Melbourne.

"That's kind of almost gone into reverse in recent times. So it's not so much that there's one country that we're dependent on, it's that we have, I think to some extent, too many eggs in that basket." ...

The Grattan Institute's program director for productivity growth Saul Eslake says, while the mining boom certainly has contributed to wealth creation and an increase in tax revenues, it also has some negative side-effects.

He says the recent boom in mining activity may actually be damaging some of the sectors of the economy that Lindsay Tanner wants to revive.

"The mining industry can't possibly guarantee prosperity for the vast majority of Australians, given that it accounts for less than 3 per cent of total employment," Mr Eslake told ABC News Online.

"One of the corollaries of the present mining boom is a very high value of the Australian dollar that is hurting the competitiveness of sectors such as agriculture, manufacturing, tourism and education, most of which employ considerably more Australians than the mining industry does."

He says the currency impacts will be exacerbated by wage pressures as Australia's economy nears full-employment again.

"Growth in demand from the mining sector could well put upward pressure on wages in other sectors of the economy contributing, in the context of a strong exchange rate, to a further squeeze on the profitability of employers in other parts of the economy and thus diminishing the viability of those industries."

Mr Eslake says, while the damage to those other industries could be long-lasting, the current mining boom has a finite lifespan.

The danger is that, when the mining boom does come to an end, there will be few other internationally competitive export industries left standing to provide employment alternatives.

"The mining boom, though it may well go on for more than a decade, isn't going to go on indefinitely any more than previous mining booms have, and future generations of Australians are going to look for other sectors of the economy for their employment prospects long after this present mining boom has come to an end," he noted.