The irony of this is that the record budget surplus was built on the back of a commodities boom .
A flow-through shares scheme, estimated to cost $50 million annually over four years, would have given a desperately-needed boost to declining resources exploration in Australia, according to Association of Mining and Exploration Companies chief executive Justin Walawski.
"The exploration industry will rightly point to an opportunity gone begging," Walawski said.
"They will point to a government which has politically enjoyed the benefits of exploration conducted 10 and 20 years ago, yet produced a budget that fails to reinvest in the very industry through which the economy was buoyed.
"This is despite the fact that the mining industry, the oil and gas industry, big company and small, ABARE (the Australian Bureau of Agricultural and Resource Economics), the Australian Stock Exchange, the Australian Shareholders Association and every state resources minister have screamed that we need to compete on the world stage and encourage mineral exploration investment in Australia.
"We're not, we're losing it … Australia is rapidly becoming known as a losing proposition."
Several state resources ministers also condemned the decision.
MacFarlane has previously said the 2006-07 budget would be his last attempt at having a flow-through shares scheme introduced in Australia.
A flow-through shares scheme encourages exploration by junior companies by allowing shareholders of the company to claim an income tax deduction against any exploration expenditure the company makes.
Canada introduced a flow-through shares scheme with great success in 1999, boosting its share of global minerals exploration expenditure substantially and turning its capital markets into the destination of choice for mining companies.
University of Queensland business school head professor Tim Brailsford said the budget did not go far enough to address the critical workforce issues.
Brailsford said feedback from the business community revealed capacity constraints that were putting a cap on production and a shortage of inputs that was pushing costs higher.
"Nowhere is this more prevalent than the mining sector where talented labour is in acute shortage. We face the prospect of having created a dangerous circle of reliance wherein prices are being inflated because of supply shortages," he said.
"The key question is whether prices will plummet once the supply tap is turned on."
