Senator EDWARDS (South Australia) (16/03/12) (12:52): I cannot begin without just passing some comment on the latter part of Senator Stephen’s discussion of the bills before us. If you apply that royalty as an analogy, then the owners of that wonderful thoroughbred, Black Caviar, should look out, because with 19 wins under its belt it is going very well and we should probably tax their prize money because they are going so well disproportionately to other winners. And, while we are there, why not put 100 kilograms on the horse just to ensure that it fails at the next start?
Over the last decade Australia has had the good fortune to be able to benefit from the ongoing expansion of worldwide demand for our natural resources, particularly from Asia. While resources have long contributed to government revenues, under the prudent stewardship of the Howard government, the coalition left no debt for the incoming Labor government. Having eliminated the $96 billion of net debt it had inherited from the previous Labor government, the coalition instead left the Rudd Labor government a surplus of $20 billion and $60 billion in the Commonwealth’s Future Fund.
This prudent fiscal management capacity escapes this government under the Greens—no!—Gillard Labor government. I know who is in charge here, because I come to work here every day, but the Australian people struggle to discern who really has their hands on the levers of Australia’s economy. We all know the reason why the Gillard Labor government wants a mining tax. It is because Labor has so mismanaged the economy in the four years Prime Minister Gillard and former Prime Minister Rudd have been pulling the levers, the whole time looking over their shoulders in an effort to head off any party leadership coup. In that time the net financial worth of this great Commonwealth has worsened by over $230-odd billion. They are leaving a huge debt behind, and as I look at the children assembled in the gallery I fear for what this government is going to leave as a legacy for them.
We hear the constant bleating of the Prime Minister and the Treasurer blaming the global financial crisis, but it is largely their own naive, profligate spending that has led to this predicament which, of course, will be left to the coalition government to repay. Just like some spoiled teenagers’ party, Labor will leave the only fiscally responsible adults to clean up their squalid party mess. The current Labor government is borrowing $100 million per day. The coalition will have to find $136 billion to repay the principal on Labor’s spending spree, which by 2014-15 will cost more than $7 billion a year in interest. What a Labor legacy that all those children I see and know out there in this country are going to inherit.
This mining tax should not be misconstrued as reform but should be seen for what it is: a snatch-and-grab tax. This is a case of rabbit in the headlights—they have lost the plot. The economic managers of the Gillard-Brown government have no fiscal management; it is just snatch and grab from a government that taxes and spends. The mining tax does not make taxation simpler or fairer, and it inevitably raises the compliance costs for all involved. The sad reality is that the mining tax is an attempt to disguise the omnipresent rampant waste and chronic mismanagement of the public purse under the Gillard-Brown-Greens alliance, a government which has squandered the coalition’s legacy in just 4½ years. Every Australian has now been burdened with record levels of debt by this incompetent Labor-Greens government.
This myopic attack on the resources industry was hatched in the same ivory tower as the carbon tax, where the key Labor players sat round mulling over that question: where can we find the money to fix this mess? Only this week it has been revealed by the Centre for International Economics that the carbon tax could potentially cost Australia $30 billion in lost economic growth by 2018. Labor arrogantly assumes that it can continue to place the burden of its own incompetence on business success stories—in this case the resources industry. Labor overlooks the fact that the very strength of the industry is dependent on attracting massive investment from abroad.
Only by complementing domestic investment with that from abroad can Australia fully capitalise on the opportunity of a rapidly rising Asia, hungry for our resources. Attracting foreign investment is made much harder due to the almost xenophobic rhetoric from the Greens. They have attacked mining companies as foreign and demonised foreign mining executives, while Wayne Swan indulges in a class war that is both lazy and crass. This is not just harmless and antiquated rhetoric. During the parliamentary inquiries into the mining tax, the CEO of the Minerals Council of Australia, Mitch Hooke, noted how the introduction of a mining tax has contributed to increasing the perception of sovereign risk. This same point was made on 26 October 2011 at the Commonwealth Business Forum in Perth, where the chief executive of the South African gold miner, AngloGold Ashanti, Mark Cutifani, stated:
… we have Australia as one of the top sovereign risk countries in the world and places where government policy has demonstrated failure in terms of taxation policy and its inconsistency in policy.
The flaws of this tax are manifest. Labor has exposed mining companies to double taxation but has committed to crediting mining companies the royalties they pay to the states. The commitment to crediting mining companies is uncapped and has left the Commonwealth exposed. In addition, Labor does not even know what the royalty take of those states may be as they look to increase their royalty income streams.
This Labor government have made some very dangerous assumptions. They have made the grave error of overlooking likely changes in state royalties and the inevitable volatility of global commodity prices. The Commonwealth has little control over these factors. There is little to stop the states from simply increasing their royalty base, as shown by comments made most recently during the election campaign in Queensland and, also recently, the New South Wales government. Commodity prices are at the behest of global demand, particularly from China. As growth slows from its breakneck pace in key markets like China, this tax exposes the budget to an increasingly large structural deficit over the coming years. As David Uren has highlighted, a fall of only 20 per cent in commodity prices would entirely wipe out the government’s revenue from the mining tax. What is worse, it would likely leave the government paying at least $4.5 billion for the various concessions they have committed to on superannuation, company tax and small business that were meant to be funded by the mining boom.
Both the RBA and Deloitte Access Economics have noted that global commodity prices and Australia’s terms of trade have peaked and are declining a little more rapidly than expected. The government has again taken the growth of the Chinese economy for granted. In the last week there have been indications from China’s top leaders that this growth is slowing. This makes the predictions that underpin Labor’s mining tax look dangerously out of touch—and Treasury has been gagged on releasing how it came about its forecasts. Labor has largely ignored this inconvenient truth, once again demonstrating its complete economic and fiscal incompetence. The coalition has repeatedly called on Labor to reveal which commodity prices were factored into the budget calculations, to no avail. What else is Labor hiding about this mining tax? This resources tax is only the latest of Labor’s tax and regulatory policies that leave foreign investors to question whether Australia is really serious about staying at the forefront of the resources industry. The government’s bill will raise Australian mining tax rates to a level that will be higher than other resource-rich countries. Make no mistake: this new mining tax will drive investment by some of this country’s biggest employers into the waiting bosom of carbon tax-free and mining tax-free global resource-abundant countries, countries that will use this chance to gain the upper hand in the resource race to fuel a rising Asian region.
This government’s mining tax is a handbrake on the exploration and development needed to drive the industry forward into the decades ahead. It diminishes the incentives to invest and expand production capacity here in Australia. The mining tax also puts unnecessary pressure on the small players in the industry and discourages competition. In practice, the mining tax is unfair and discriminatory and acts as a barrier to entry for many aspiring miners. Expert independent modelling from the University of Western Australia has highlighted that there would be at least a four per cent difference in the level of effective total taxation between a mining project that was in existence before 2 May 2010—and, by the way, that is mostly the three major iron ore and coalminers that my colleagues have spoken so eloquently and extensively about this morning and yesterday—than that applying to the new developments taking place after 1 July 2012. This fits into Labor’s pattern of peddling false concern for fostering small enterprise.
We now know that the government looked after the Greens and the three biggest miners, with preferential treatment to neuter opposition to this myopic tax, but in playing favourites and freezing out smaller miners from their consultation, the government are placing most of the new tax burden on these minnows, whose operations are much more marginal. It will see a small, emerging miner paying an extra six per cent in tax compared to a large, well-established miner that only has to pay an additional two per cent. No wonder they were in a rush to come to an agreement. Mr Wayne Swan’s tall poppy syndrome has been exposed in his attacks on successful individual mining entrepreneurs like Clive Palmer, Gina Rinehart and Andrew Forrest. The Treasurer is willing to throw rocks at these three outspoken and highly successful Australians but leaves alone those companies he plays favourites with. The Treasurer’s attacks on this successful Australian trio brings back the very worst of Labor’s past bashing of free enterprise.
I guess it is no surprise from a government dominated by union bosses and lawyers who have never had the guts to start their own businesses. Neither the Prime Minister nor the Treasurer have ever run any sort of business, and their claims to understand the realities of a real economy are totally disingenuous. Our competitors in the global resources game do not stand idle. They do not willingly hobble themselves either. Their industries are not subject to organised hostile attacks by the parts of the Green movement, egged on by its leaders here in parliament. That the Greens are deeply hostile to uranium mining directly threatens South Australia, where some 40 per cent of the world supply lies buried, along with significant deposits of gold and copper. The massive expansion of the Olympic Dam site is critical to the future of South Australia. I cannot remain quiet as this Gillard-Greens alliance threatens future nation-building projects, whether through their poisonous media campaigns or Bob Brown’s political brinkmanship to widen the mining tax to include uranium and gold.
The Australian and the Financial Review have revealed that extreme green groups are planning to exploit the legal system and use dirty spin tactics to sabotage the expansion of the coal industry. This attack by a cabal of idealistic economic vandals on the coal industry is the height of hypocrisy, seeing as many of these activist green groups benefit from a tax-free status of their own activities. Around $70 billion of coal investment faces the possibility of being delayed or abandoned. Even the union movement realises what dangers the Gillard-Greens alliance has led us into. Even the CFMEU National President, Tony Maher, has called the prospect of a green sabotage of the coal industry an ‘economy killer’. The passage of this poisonous mining tax legislation begs the question: does the government have the courage to cut a swathe through the legal minefield of obfuscation and delay being laid by its partners in the Gillard-Greens alliance to derail the expansion of the vital Australian coal industry?
While Treasurer Wayne Swan is willing to condemn such green campaigns to derail the coal industry, he is not willing to admit that his own mining tax presents the same risks to Australia’s national interest now that foreign investors see us as an increasingly risky destination. Mining companies already pay vast amounts of company and payroll taxes in addition to the rich vein of royalties that help keep the rest our economy strong. In South Australia, BHP Billiton’s Olympic Dam expansion needs the skills and services of businesses across South Australia, and it is estimated that the project will create an additional 15,000 jobs in the state. The new mine is likely to provide billions of dollars to the South Australian economy over the first 30 years of its operation. The benefit to the South Australian government looks likely to rise to at least $200 million annually once the expansion of the operation is completed.
This boon for South Australia is now coming under threat. It was revealed on Tuesday that recent modelling by the state Treasury indicated that 1,500 jobs may be lost next year in South Australia as a net result of the carbon tax. This will negate 75 per cent of the jobs created by the Olympic Dam expansion in the next year, which only adds to the burden that is this mining tax. That the state Labor Premier and Treasurer claimed not to know about this modelling only shows that the Labor Party cannot be trusted as economic managers.
It is important to note that the resources industry provides a ladder of socioeconomic mobility to all Australians. Fortescue Metals is a company that has taken the lead in efforts to share in its prosperity by seeking to dramatically raise the numbers of Indigenous Australians it employs. Fortescue has awarded $320 million in contracts to Indigenous contractors, and over 1,000 Indigenous Australians have benefitted from its three dedicated employment and training centres, the biggest of which is in the state represented by my friend and colleague Senator Eggleston, at Pundulmurra TAFE college in South Hedland.
Instead of yet another tax on the mining industry, what Australia needs is vision, innovation and far-sighted policy that will enable Australia once again to take the lead in an increasingly competitive global resources sector. As the independent economist Dr Ed Shann argues, we need policy reforms that lift Australia’s overall growth rate by encouraging more flexibility and thus productivity in the economy. This mining tax is not one of those reforms.
Tax and spend is not the answer, Prime Minister Gillard. Get out of Australians’ lives and instead provide the hope, reward and opportunity that both small and large companies as well as the mums and dads across this country deserve.