WA reaction critical

Given the Australian government's initial response to its commissioned Henry tax review is to impose a 40% super profit tax on mining companies to fund its other commitments, the implications are to be felt by many gradually.

The most significant implication of this tax impost is its geographically differential impact. The states with large mining production will bear the brunt of this tax, while other states with little or no tax will be big winners.

As a result, it can be expected that the reactions across the nation are likely to be very different.

Compare West Australia with the ACT, for example. WA is the largest mining state in Australia, with abundant minerals deposits, such as iron ore, etc. It has been the engine room for the mining boom associated with the China boom. So the mining companies operating in WA will be hit by the proposed new super profit tax. The consequences are likely to be big the share prices of mining companies will fall due to reduced profits for their shareholders as compared to the case with no such taxes. New mining investments are also likely to not grow as much as otherwise. This will have an employment effect in terms of both numbers and wages.

On the other hand, the ACT does not have mining production. This tax proposal will have no negative effects on it. In fact, it will be positive as the positive redistribution effects work their way to the ACT economy.

It would be interesting to see how WA will react to this taxing and redistributing idea. It had in the past tried to leave the Commonwealth.

Now given that everyone can expect the mining boom to last and its implications for WA, would it consider that parting issue again?