An Analysis of the Implications for the Gold Mining Industry of Alternative Tax Policies: A Regional Disaggregated Model for Australia*

Abstract

We construct a dynamic model of the Australian economy that has a regional sub‐section representing Western Australia. Within the West Australia sub‐economy, there is a separate technology for the gold mining industry. We implement the model, and simulate a 2.5 per cent tax on gold exports. The outcome shows no fiscal improvement at the national level, although the West Australian budget improves slightly. Real income falls both nationally and in West Australia as the trade balance deteriorates, and an increased real interest rur‐ causes investment to fall. We conclude that the taxation of gold exports leads to few measurable benefits.