Australia's A$60 billion annual commodity exports, about evenly divided between farm and mineral products, would get a powerful competitive boost on world markets from proposed tax changes, analysts said.
This week's announcement by Australian Prime Minister John Howard that major tax reforms would be drafted before the next federal election, due by mid-1999, have put Australia's farm and minerals export sectors in an ebullient mood.
"In commodity markets competition is the name of the game," said Geoff Carmody of Access Economics, the private consultancy which helped produce the original goods and sales tax (GST) plan for Australia's Liberal Party in the early 1990s.
Australian commodity sales could be expected to benefit from a switch by buyers from competing suppliers rather than by generating greater demand, he said.
Howard has not announced what form his planned tax changes will take, but it is widely believed that a range of indirect taxes would be replaced by a GST if the reform goes through. Howard has also said that personal income tax would be cut.
Benefits for Australian farm and mineral exports on world markets were significant and clear, industry leaders said.
Exports would be a major winner in a switch from indirect taxes to a consumption tax because exports, by definition, are not consumed in Australia.
Exact figures do not exist of how much more competitive Australian farm and mineral exports would be on world markets if indirect taxes were replaced by a consumption tax. Industry associations are now starting major studies into just this.
But industry leaders told Reuters the extra competitive edge Australian commodities would gain on world markets would be more than five percent.
"We're competing on world markets. A GST would be very positive because taxes on business inputs -- sales taxes, payroll taxes -- would disappear," said Jane Robertson, executive director of the New South Wales Minerals Council.
Don McGauchie, president of the National Farmers Federation, described the extra edge which the proposed tax changes would give Australian farm exports on world markets as "significant, more than five percent."
The Business Council of Australia has said the most comprehensive cascade impact of all federal and state indirect taxes on Australian industry was more than nine percent.
Other studies put the cascade effect at almost five percent for agriculture and more than four percent for mining, it said. Total indirect taxes on exports were more than six percent.
Australian dairy products were seen as likely to gain specially from a consumption tax because of the sharp competition they faced from New Zealand exports, which do not pay indirect taxes, McGauchie said.
Australia's mining and agricultural industries both receive a rebate for taxes on diesel fuel, but this covers only fuel used on farm or at the minesite. Both industries pay very considerable taxes on fuel and a huge amount of indirect tax on transport equipment, McGauchie said.
A total A$7.7 billion in business input taxes would go if the three biggest indirect taxes, on petrol, wholesale sales and payrolls, were replaced with a consumption tax, Carmody said.
Within this, about A$1.7 billion in indirect taxes on exports would be removed, he said.
Australia is a world leader in the export of wool, wheat, meat, sugar, dairy goods, coal, iron ore, gold and base metals.
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