The Mining Tax proposed by the Labor Government is only just starting to be felt in the employment market as there is significant momentum in the mining and supporting industries. The true bite won't be felt for another couple of months but when it does kick in the effects are likely to be significant.

The problem with the mining tax is two-fold. Firstly the tax itself is very large, complex, poorly explained and is based on a theoretical concept that hasn't been tried anywhere else before. Secondly the way the implementation of the tax has been handled has been disastrous and has left an entire industry hanging in the air. These two factors combine to greatly affect the confidence of the resources sector and as soon as you have falling confidence, you have falling job growth.

The mining tax is a variation on a tax "invented" by Cary Brown in 1948 which was designed to involve a government in high volatility industries - of which mining is a prime example. It meant that in the good times the government would get more tax in exchange for funding a percentage of the startup costs of that industry. In the case of the mining tax in Australia, though, in the good times the government gets more tax in exchange for a promise that when the bad times come the government will write a cheque to the mining companies for 40% of their losses. The government argues that this means that investors in mining should feel 40% safer than they normally do, but the mining companies don't believe that if the economy crashes and the government is in the red they will ever get those cheques. So all they are seeing is an extra 40% tax on their profits and no reduction in their risk which will directly affect how much money they invest in Australia and hence how many jobs there will be.

In addition to this the way the tax was announced undermines the confidence of the mining sector. The tax was announced with great fanfare as to how it would allow an increase in superannuation, a reduction in company tax, and a return to government budget surplus in 3 years. However there was little to no consultation with the industry that will be paying the tax. This means the companies spent a week trying to digest the implications of the tax then once they saw what this meant to them, their investors, and the viability of their projects, they started to panic.

Since this tax was announced we have had a number of our mining clients advise us that they are now only recruiting for existing projects and not looking for people who would be involved in exploration or expansion. This is only having a slight impact on direct recruitment today but the potential long term effects are huge. With no expansion and no exploration there won't be any new mines for people to move to when the existing mines begin to move to end of life. This tax, as it currently stands and in the way it was announced, will not just slow job growth but is likely to cause a significant contraction in employment in the mining sector. A number of employees in the mining sector today won't have a job to go to in the future.

The employment effects will also be felt outside of the mining industry. With no expansions the civil construction companies will lose a significant contributor to their work loads. No new mines means no increasing demand for rail facilities, ports, water, or housing to support them. The knock on from this will be felt right throughout the entire economy.

In summary the mining tax, as it currently stands, will significantly impact employment and jobs growth not just in the mining sector but also in those sectors that have benefited from its growth. The uncertainty around the tax and the level of this tax will see a significant decrease in investment in mining, which means as mines move to end of life we will see people losing their jobs in mining and having to leave the industry. We haven't seen the full effect of this tax on employment yet and what we are currently seeing is just the tip of a very big iceberg.