THE Federal Government should restrict mining licences to save Victoria's troubled manufacturing sector, a senior economist argues.
Canberra-based Matt Grudnoff, from think tank the Australia Institute, said Victorian manufacturing was "being destroyed" by the mining sector and warned more jobs could be lost unless the heat was taken out of the boom.
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"During a boom, we should be trying to slow it down; not stop it, but keep a check on it so it doesn't impact negatively on other areas," he said.
"We should be working out how many projects the economy can reasonably sustain and perhaps even auctioning off the licences.
"Because after a boom comes a bust."
Mr Grudnoff said if the demand for Australian minerals, and consequently the Australian dollar, continued unchecked it would hurt Victorian manufacturers trying to compete with cheap imports.
"The reverse is also true in that our exports become too expensive and jobs will continue to be shed at all levels of manufacturing," he said.
Victoria and Tasmania were the hardest hit of the states, he added.
"Victoria doesn't have a large resources sector like Queensland and Western Australia, so it's getting all of the disadvantages of the boom and none of the advantages," Mr Grudnoff said.
According to the Australian Bureau of Statistics, manufacturing contributed $31.1 billion to the Victorian economy in 2009 and 2010, and Victoria's sector makes up almost a third of the national manufacturing output.
However, the high dollar has taken its toll: just last month, food manufacturers Mars and Murray Goulburn announced they were sacking more than 100 workers between them at their Ballarat and Rochester plants respectively.
Executive director of the Minerals Council of Australia Victorian division Megan Davison denied the manufacturing sector was being sacrificed to the mining boom.
"A lot of the research and development and advances in technology flow on to the manufacturing sector, and manufacturers have the potential to bid in to that system to become providers of component mining technology," she said.
A spokeswoman for Federal Minister for Industry and Innovation, Greg Combet, acknowledged the dollar was hurting Victorian manufacturing but said "that is why the Government is pursuing policies to ensure the mining boom does not result in a hollowing out Australia's manufacturing industries".