Thursday, 3 November 2011
Minerals Resource Rent Tax Bill 2011, Minerals Resource Rent Tax (Consequential Amendments and Transitional Provisions) Bill 2011, Minerals Resource Rent Tax (Imposition — General) Bill 2011, Minerals Resource Rent Tax (Imposition — Customs) Bill 2011, Minerals Resource Rent Tax (Imposition — Excise) Bill 2011, Petroleum Resource Rent Tax Assessment Amendment Bill 2011, Petroleum Resource Rent Tax (Imposition — General) Bill 2011, Petroleum Resource Rent Tax (Imposition — Customs) Bill 2011, Petroleum Resource Rent Tax (Imposition — Excise) Bill 2011, Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011, Superannuation Guarantee (Administration) Amendment Bill 2011; Second Reading
Debate resumed on the motion:
That this bill be now read a second time.
Madam Deputy Speaker, these bills—the 11 bills you just read out—were introduced into the House of Representatives yesterday by the government. This happened after the failure of the government to get consensus on the draft bills that were distributed around the community over the last few weeks. The government now are asking us to speak on 11 bills—525 pages of complicated tax legislation—after giving us notice last night at eight o'clock and then to have a considered debate in the people's house. They talked about the new paradigm—a whole new approach—but every time I raise with the Leader of the House the changes that are being made he says, 'The sins of the father should be visited on the son'—that is, 'You did it to us; therefore we're doing it to you.' I will move to adjourn the debate, and I will do so because now is the time, in the wake of the fact that the matter has gone to committee, to have a proper debate about the tax bills. I move:
That the debate be adjourned.
The House divided [11:08]
(The Speaker—Mr Harry Jenkins)
That represents the death blow for the new paradigm—and good on you, let it be noted. The House of Representatives Economics Committee reports on 21 November on these 11 bills of 525 pages. So now, following the carbon tax, the government has yet again confirmed that in this new paradigm—this new parliament that the Independents so obviously talked about—here we go again. I remember that it was the member for Lyne who was urging in committee meetings that in fact the parliament should not have a rushed government agenda and that it should go to committee before the parliament actually makes a decision. But that is okay—hypocrisy be thy name.
The bills have clearly been rushed, and I say so because even this morning the government was downloading parts of the bills on the internet. It still had not actually—
Just ignore him, as his electorate will, Madam Deputy Speaker. The government was still downloading parts of the bills and the explanatory memorandums this morning, and now it wants us to have a properly informed debate. Well, let's give it a good shot.
The first two of the 11 bills implement the new minerals resource rent tax and extend the petroleum resource rent tax to cover all Australian oil and gas projects, whether they are onshore or offshore. The next two bills—the Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011 and the Superannuation Guarantee (Administration) Amendment Bill 2011—implement changes to the personal income tax provisions and superannuation. The remaining seven bills deal with administrative and technical issues, which this House will not have the opportunity to properly consider.
The new taxation arrangements for the mining sector will apply from 1 July next year, and there are two elements. The minerals resource rent tax regime will apply to the mining of iron ore and coal in Australia, and the petroleum resource rent tax regime will be extended to all Australian onshore and offshore oil and gas projects, including the North West Shelf. This will capture emerging projects such as converting coal seam gas to LNG. The new taxes will apply to Australia's most important commodities: iron ore, coal, oil and gas. The government has struggled with a number of variations of this tax to get it right—one of the reasons why we wanted to have a properly informed debate and a proper opportunity to have a look at the 11 bills. But no: this government, with typical undue haste, gets the details wrong. The big, sweeping statements it comes out with are not backed up with attention to detail. This tax in particular has been a salutary lesson in how not to introduce a new tax.
The original proposal for a resource super profits tax emerged from the Henry tax review in May of 2010. Dr Henry recommended a uniform resource rent tax on non-renewable resources, replacing existing state government royalty systems. The government's original RSPT—resource super profits tax—effectively nationalised 40 per cent of the revenue stream from the mining industry. This government nationalised Telstra again, so why would they stop now? They wanted to nationalise 40 per cent of the Australian mining industry. They would take 40 per cent of the superprofits—profits which in their view exceeded the 10-year government bond rate—and wear 40 per cent of the losses. Of particular concern for business was that the tax applied retrospectively in that it applied to existing business operations which had been developed in an environment with no Commonwealth mining tax. The RSPT was estimated to raise $12 billion over the forward estimates. Of course, there were various changes to that during the course of discussions.
There was, as we know, furious opposition, and it proved the last straw for the then Prime Minister, Mr Rudd. Less than two short months later, he was stabbed in the back by the current Prime Minister, Ms Gillard. The new PM offered the mining industry a truce and fresh negotiations. As it turned out, although we did not know this at the time, this was an olive branch to three major miners in the lead-up to the last election. There were no Treasury officials present. The new minerals resource rent tax was announced just two weeks later, in early July. The announcement was long on rhetoric and actually quite short on detail. In fact, the two-page memo which is the heads of agreement on the minerals resource rent tax is signed by the Prime Minister, the Treasurer, the Minister for Resources and Energy, the head of BHP, the head of Rio Tinto and the head of Xstrata—no other mining companies and no other agreements. It is unprecedented in the Australian taxation system that there is not even a cabinet decision on this but that a government negotiated an agreement for a multibillion-dollar tax with three players when the tax would apply to the industry. I seek leave to table the heads of agreement.
The MRRT applies to fewer minerals and at a lower rate, but it still has retrospective implications. It was estimated to raise $7.7 billion over the same forward estimates as the RSPT, a revenue reduction of $4.3 billion. The smaller miners—the rest of the industry other than the big three—were unhappy, understandably, at not being consulted and believed they were unfairly hit while the big three got off relatively lightly. The government eventually conceded the new tax had not been thought through properly, with the announcement in early September 2010 of a policy transition group to be headed by Don Argus, the former chairman of BHP, to refine the details. The group reported in December 2010, so this is version No. 3 of the mining tax—in fact, version No.4. The first one was what Ken Henry recommended, the second one was what the government announced, the third one was the deal with the mining companies and now we have version No. 4, which the former chairman of BHP is actually engaged in consulting on.
The group reported in December 2010. It made 94 recommendations on the technical design of the new resource tax arrangements. In March this year the government accepted all the recommendations of the group, just showing that the various iterations before were totally flawed as well. In March this year, when the government accepted all the recommendations, they could not get the job done even then, and the government then had to appoint a resource tax implementation group to help with the drafting of the legislation. So there have now been two versions of the draft legislation for the MRRT. One was released in June this year. That version was followed by a revised exposure draft, which was released for comment on 18 September. The government, without notice, then introduced the 11 bills yesterday and expects everyone to sign off on them today. This is a tax that is extraordinarily complicated and fundamentally flawed. The industry, from the big companies to those that can least afford it, is being burdened with considerable costs in having to implement new internal systems to identify and record expenditure in order to ensure compliance. Planning for this new tax—whether with the assistance of external consultants or the redeployment of existing personnel—will be immensely expensive.
Let us deal with the bills before the House. After all this time we would have expected that the design of the tax would be settled and the industry would understand it. But there remains furious opposition. Taxpayers with amounts of MRRT assessable profits—that is, $50 million per annum—will be excluded from the MRRT. The MRRT will apply at a rate of 30 per cent. New investment will be allowed to be written off immediately rather than depreciated over a number of years. A project will not pay any MRRT until it has made enough profit to pay off its up-front investment. The MRRT will carry forward unutilised losses at the government long-term bond rate plus seven per cent. It will provide transferability of deductions. This supports mine development, arguably, because it means the taxpayer can use the deductions that flow from investments in the construction phase of a project to offset the MRRT liability from another of its projects that is in the production phase.
The MRRT will provide a full credit for state mining royalties. That was a point of disagreement after the heads of agreement, which was signed by the three ministers together with the three heads of the mining companies. There was a dispute about whether state mining royalties would be credited in full. Western Australia was the first to move, removing the discount for iron ore fines and therefore increasing their royalties. In its last budget New South Wales also moved to increase royalties. The net cost of that is $3 billion over the forward estimates. That is $3 billion that immediately comes off the bottom line of the MRRT.
The MRRT will provide recognition of past investments through a credit that recognises the market value of that investment. It is written down over up to 25 years. It will recognise the particular characteristics of different commodities by applying a taxing point close to the point of extraction and using appropriate pricing arrangements. It will provide a 25 per cent extraction allowance to recognise the value add and capital that mining companies bring to mineral extraction.
As you can see, it is a complicated tax. It is quite unlike other taxes such as income tax or GST. Those taxes are based on the activities of the company as a whole. The accounts of the company form the starting basis for working out the particular tax liability. Contrast that with the MRRT. It taxes profits from a part of the entity's operations, from mining projects that the entity carries on. There will be increased accounting administration, therefore increased costs to businesses, in measuring results at the project level. Resources put to use more productively will have to be deployed in dealing with this complexity. It will add to the cost of mining in Australia.
The Assistant Treasurer's second reading speech stated that the package of bills was 'developed in partnership with the resources sector', that being just three miners. It went on to say the package 'is a direct result of the strong cooperation of industry in the legislative process'. Fair dinkum—this is just spin and gross exaggeration. Take one example. Since the first material was released by the government, the mining industry has been concerned that the complex tax—which requires the application of novel concepts and principles in working out the liability—will mean the miner is faced with uncertainty in calculating the liability. So, when the government appointed the policy transition group chaired by Don Argus, it recommended that in developing the explanatory memorandum to the MRRT bill—which by the way was still being downloaded on the internet this morning—the drafters should provide clear explanations and examples.
The Minerals Council of Australia felt strongly about the need for certainty. In their submissions on both the first and second exposure drafts, the MCA asked that it be made clear in the bill that the explanatory materials and examples should be taken into account to confirm the meaning and interpretation of the legislation. They also wanted the minister's second reading speech to highlight the importance of the explanatory material to the interpretive process. So, despite the Assistant Treasurer's lofty claims about a partnership, the industry itself—even those that signed the heads of agreement—obviously has concerns about the process.
We also now have details of the petroleum resource rent tax changes for the first time, even though the tax has been in place from 1 July 1987. It will be extended to cover all Australian oil and gas projects, whether they are onshore or offshore, at a tax rate of 40 per cent. There is a range of uplift allowances for unutilised losses and capital write-offs and immediate expensing is available for all expenditure. All state and federal resource taxes will be creditable against current and future PRRT liabilities from a project. You do not win a game by hampering your best performing player with a bad and complicated tax like this. The mining sector is important for Australia's prosperity. It is an industry in which Australia has an international comparative advantage. It employs directly 224,000 Australians, and most of these are in regional areas. In 2010 it accounted for 40 per cent of all business investment in Australia, and that is rising dramatically. The sector is a major driver of growth.
The rules of the game have been changed by the government, and Australia is competing for scarce capital and jobs in a world market. There are plenty of countries seeking to develop their mining sectors—from Brazil, Chile and Canada right through to a number of very poor countries in Africa and Asia—so there is an additional element of sovereign risk associated with these bills. But, more importantly, this illustrates the government's incompetence in making a decision.
We have had numerous versions and numerous drafts and then, when the legislation finally gets to the House, we have less than 24 hours to consider 11 new bills. No wonder the chief executive of South African gold miner AngloGold Ashanti said on 26 October at the Commonwealth Business Forum in Perth that Australia is:
… one of the top sovereign-risk countries in the world on the basis of government policy and its demonstrated behaviour in terms of taxation policy and its inconsistency in policy.
He said that about our country.
The constant changes and confusion on this tax have made international investors more wary of investing in Australia. Of course, the biggest driver of investment in Australia, the biggest pipeline of investment in Australia, is the mining sector, and the head of one of the biggest mining companies in the world identifies inconsistency in demonstrated behaviour in terms of tax policy as one of the reasons there is sovereign risk in investing in Australia.
This is a bad tax. It will reduce investment and jobs. It will reduce the wealth and retirement incomes of everyday Australians. It will hamper Australia in global competition for scarce capital and jobs. And at a time of heightened global uncertainty this is precisely the wrong time to introduce a complicated tax. There have now been four different sets of projections of revenue from the mining tax. The offsetting expenditures as identified in a Senate report are going to create a black hole. This tax will not raise the money that the government is claiming. It will not raise the money! And yet the government claim to have offsetting expenditure. The offsetting expenditure will grow when this tax fails to deliver the revenue that they claim.
The bottom line for Australia is that this tax not only creates a black hole for the Australian mining industry but is going to create a black hole in the budget—and it is all going to be the responsibility of the Labor Party and the Independents. (Time expired)
I have known the member for North Sydney for a long time. We were both elected to this place in 1996. He is a nice guy. I have never seen him so angry. I ask myself, 'Why is the member for North Sydney so angry?' It is simply because he knows that this tax is right, he knows that this is a good tax and he knows that this is a well-designed tax. But, more importantly, he knows that this is a tax which enjoys the support of the Australian community. That is his concern.
He talks about sovereign risk, yet never has the investment pipeline for the mining industry in this country been so strong. In my own electorate of Hunter the debate is not about how we attract more mining investment, it is about how we put a brake on mining investment. There are many in my communities who are concerned that we have too much mining in the Hunter Valley, with all the implications that has for air and water quality and many other issues.
This is the right thing to do. This represents a set of bills which has been agreed between the government and the mining industry after months and months of consultation and, after that, agreement. The member for North Sydney would have the House—and anyone listening to this debate—believe that we are rushing bills into this place that have not been duly considered and which have not been considered properly by the opposition. That is not true. They need no more time on this issue. They have had plenty of time on this issue, and it is time we got on with the debate. Forget about the stunts, like the one we got from the member for North Sydney. It is time we got this important legislation through both this place and the Senate.
These bills not only enjoy my support, I am very confident that they are supported by the people who make up the communities in my electorate. My communities are welcoming of the mining industry. The mining industry has brought great wealth to the Hunter Valley. It has raised average incomes and it has spawned many mining support industries around it. Many of my constituents have enjoyed standards of living they could only have dreamed of were it not for the mining industry. Many of my constituents know that their children have a bright future because of the existence of the mining industry in my electorate, and they are not going to be conned by people like the member for North Sydney. They are never going to be persuaded, because they live with it. Many of them work in the industry. They understand the industry. They are not going to be persuaded that this tax is going to be the ruin of the mining industry.
They believe—and I have consulted widely—it is only fair and right when companies are enjoying super profits as a result of higher coal prices and commodity prices more generally that, given that they are a community owned resource, a greater dividend of that production comes back to the broader Australian community, including, of course, mining communities.
As I said, the mining industry is welcome in the Hunter but it does bring some negatives. I mentioned air and water quality. By definition I should also mention that flowing from that are potential threats to industries that have sustained us for a couple of hundred years and, hopefully, will sustain us for thousands of years into the future if we protect them properly. Mining brings road congestion. It brings an inability to find child care. It brings capacity constraints in housing. If you go to Woolworths in the town of Singleton in my electorate, you will find that you will pay maybe 10 per cent more—I am making the figure up; I must admit I forget exactly what it is—on average for your goods than you would pay in Cessnock, for example, which is half an hour down the road. Why? Because of the existence of the mining industry. The supermarket chains move to the price signal. They will charge for their goods what they believe the market can sustain.
The mining boom is not all good news. While that price difference does not cause a lot of pain for those working in the mining industry, who can afford it, it does cause pain for people who do not work in the mining industry and do not enjoy the high salaries which flow from it. It does not help pensioners, for example, on fixed incomes—as much as this government has done to help them in recent years. They do not enjoy the benefits of the mining industry but they still suffer the congestion, the implications for air and water quality, and the high prices that companies are able to charge for retail goods as a result of the high average wages in that industry.
So it is not all good. My communities say, 'Well, if these guys are making superprofits from resources which, at the end of the day, we own, some of that dividend should come back to us.' Not too many of my constituents will understand the complexities of the tax, but I do not think they have any doubt whatsoever in their minds that the government is sensible enough to make sure this initiative is not going to have severe adverse impacts on the industry. They know, and they read about it all the time, how many mining companies are currently knocking on the doors of the Hunter shire councils, the state government and others looking to either establish new mines or to expand existing mines—notwithstanding the fact that the mining companies, at least some of whom, after all, have been involved in these negotiations, are fully cognisant of the fact that the supertax on mining is coming.
How are we going to use this tax to spread the bounty amongst the broader community? It is very simple, and it has been spoken of already this morning. We are going to use it as an opportunity to finally increase superannuation contributions, from nine per cent to 12 per cent—something which is absolutely necessary. This is not just part of a wish list. We know the Australian demographics, we are familiar with the ageing of the population and we know the constraints and pressures that are going to be put on the transfer system in the future. We need to reassure ourselves that, in the future, people will have a proper level of retirement income saved. It is a very important and necessary initiative.
We will of course provide significant tax cuts for small business, the primary employer of people in this country. As a former shadow minister for small business and a former small business person myself, I know all the challenges small businesses face, but I also know how important they are to the Australian economy. This is a very important and good initiative for small business.
Very importantly for me—and I know for you, Madam Deputy Speaker Bird—is the way in which this tax will return some of that bounty to mining communities themselves by way of community and economic infrastructure, so critical for all the reasons I have just articulated. When you have a mining boom in your community, despite all the benefits, there are some adverse effects. Road congestion is one of them and the ever-increasing rate of coal rail traffic is another. In my electorate, we have a very long list—as I am sure you do, Madam Deputy Speaker—of infrastructure projects which in reality could never hope to receive the sort of investment from government that is needed to knock them over.
In my electorate, we have projects like the Muswellbrook bypass, the Singleton bypass and a number of black spots along the New England Highway. In Scone we have the ridiculous situation where people are having to wait up to eight minutes to continue their drive through the main street because of the level railway crossing there. Can you imagine, Madam Deputy Speaker, a town being cut in half for eight minutes because of the passage of a coal train? That is unacceptable in convenience terms and unacceptable in economic transport terms, but it is also unacceptable in safety terms. We need between $20 million and $30 million for an overpass on that site so that the vehicle traffic is not disrupted. There could be no more perfect an example of an infrastructure problem being created by the mining boom than that. The coal trains are getting more regular and much longer, and cutting off that road for a much greater period of time.
This is a problem directly caused by the coal boom in the Hunter. So it makes absolute sense to take this new tax initiative and use that money to invest in that rail overpass, and there are many similar examples in my electorate. Broke Road, which runs through Hunter wine country—the jewel in the tourism crown of the Hunter Valley—is the worst road in the Hunter Valley. It is frequented by miners travelling to work each day. Undoubtedly, the mining traffic on the road is even heavier than the tourism traffic, given it is a seven-day thing. No doubt that mining traffic is largely responsible for the state of that road. No-one seems to have the money to fix the problem. That is another example of a problem directly created by the mining boom, by the traffic caused by the mining boom, a good example of an infrastructure project which now will stand a much greater chance of being funded as a result of our decision to ensure that, when the mining companies are making huge superprofits because of high coal prices, the local communities—who, yes, benefit, but also have to put up with the negatives which flow—get some relief by sharing in the bounty of those high coal prices. This is not rocket science and that is why people in my communities support this tax. The opposition has a bit of explaining to do. The opposition has to explain to the Australian community why they should not be receiving these benefits. I have spoken in this place on a number of occasions and I have had guarantees from the responsible ministers that, like your electorate, Madam Deputy Speaker Bird, my electorate will receive its proportionate share of the dividends which flow from this tax. At the next election, the coalition—no doubt represented by the National Party in my electorate—will have to explain to my communities why that money should not be returned to the communities from which it comes. That is the explanation they will need to have ready for my constituents and, no doubt, constituents in your electorate, Madam Deputy Speaker.
I want to say one last thing. I want to talk about other threats to this initiative. There is the big threat on the other side from those who are going to deny this, cosy up to the coalmining companies, let them make their super profits and deny the Australian community their share, but there is another threat and it is called the New South Wales government. Critical to this arrangement is an agreement that the states will be rebated on the royalties they would have received as a result of their old system and that they would not seek to further increase those royalties. Surprise, surprise—and I think the same is the case in Western Australia—New South Wales has reneged on that deal, which means that we will have to rebate them more money for the increase in royalties they would have received as a result of the decision to increase their royalties. What does that mean? That means that we are giving more back to the state government and we have less money to share the wealth with communities, including mine and yours, Madam Deputy Speaker. This can become very complex but it is also very simple.
People who live in my electorate can do two things: they can give more and more royalties from their resource to Barry O'Farrell so he can spend the funds on roads in western Sydney or they can pay less in royalties to Barry O'Farrell and let us retain more of the tax which flows from this initiative so that we can spend the money on infrastructure in the Hunter Valley. It is a really simple thing, as complex as the arrangements are. Barry O'Farrell can collect more royalties so he can spend the funds in Sydney or he can keep his royalties where they are and get rebated that amount from us and we will have what we should have, having collected the wealth from the Hunter community—more money to spend in Hunter communities. That is another thing that those who sit opposite will have to explain. I have no doubt that those who sit opposite are talking to Barry O'Farrell because they do not want this to happen. You have seen it today. They will run interference on this at every opportunity, which takes me back to where I began: why? Because they know this is a good initiative which is supported by the Australian community. (Time expired)
Unfortunately, 15 minutes is not enough time to go into all of the flaws in these bills, but I will do my best. I will just comment on some of the misguided statements of the member for Hunter where he thinks that this tax is going to deliver the infrastructure that he needs in his area. I can assure him that, regarding his share of this tax on a proportional basis—and there is a fix to this, which I will come to—he would be lucky to see a couple of hundred thousand dollars going to infrastructure in his area. The last time I looked, they were suggesting only a couple of billion dollars to states like Queensland and Western Australia. You need to consider that the most needed piece of infrastructure in Australia is the Toowoomba range crossing. He talks about eight minutes to get through a level crossing. I have trucks that wait twice that time trying to get across the main street of Toowoomba because the Labor government continues to defy the need for that range crossing. That range crossing alone would cost $2 billion. So do not try and create the impression that the MRRT is just going to be like some magic pudding that will spray money for infrastructure across Australia.
Mr Fitzgibbon interjecting—
The way to fund infrastructure in Australia is to stop spending money on stuff that is completely wasted, like pink batts.
I will leave the member for Hunter to contemplate on all of that. As I said, I rise to speak on a package of bills that must have the distinction of being one of the most poorly designed and economically destroying policies that this government has ever put forward. I know that is an extraordinary statement and I know we have considered a range of policy missteps, clunkers, absolute disasters and complete wastes of money by this government, whether we are talking about the school hall program, where a couple of billion dollars just disappeared into the ether in overcharging by contractors, never to be challenged by the government, or the pink batts program, where another couple of billion dollars just disappeared into the ether. As one of my constituents found out this week, she will have her insulation removed but, of course, nothing will be put in its place. What are they going to do with it? They are going to take it down to the dump and bury it—along with all the money it cost to put it in. There is complete loss of control of the Green Loans program and the photovoltaic program. If we talk about losing control, the issue of the country's borders goes to the top of the list.
I said earlier this week that the Labor government, under its current leader and under its former leader the member for Griffith—perhaps its future leader—has an appalling record on energy and resources policies, and there is no better example of that than the MRRT. It is not something we should be flippant about, given the significance of the energy and resources sector to the Australian economy. I was looking forward to hearing the Treasurer explain in here today his rationale for introducing this highly destructive and deeply flawed minerals resource rent tax. I particularly wanted to hear his justification for using the resource sector as a cash cow to cover the reckless spending that has characterised the Labor government for the entire time the member for Lilley has been in the Treasurer's seat. I also wanted to hear how the government would justify putting forward a package that is little more than a pre-election quick-fix from a government that is desperate to cling to power regardless of the consequences for small and medium sized resource miners.
Alas, circumstances intervened and the Treasurer had to pass the job to someone else because, we are told, he has lost his voice. I too would lose my voice if I were presenting this sort of rubbish as the Treasurer of Australia. In a Freudian set of circumstances if ever there was, perhaps the Treasurer just could not face the thought of coming before this place and presenting, with a straight face, such a disastrous policy. Not to worry: as we know, the Assistant Treasurer is up for any job that gets his hands dirty or his face on television, and he has been publicly proving that since the middle of last year. The MRRT is not the fine piece of fiscal policy that the government would have us believe. It is rushed, reckless, incomplete and an unworthy successor to what was easily the worst piece of policy ever put forward by this government, the resource super profits tax. In its original version—as so passionately argued by the Treasurer and the now Minister for Foreign Affairs, the member for Griffith, when he was Prime Minister—the RSPT was a truly destructive version of this tax. It would have undermined Australia's sovereign risk profile and discouraged investment even more than this tax—and that is really saying something. The biggest flaws in the MRRT are a result of the fact that it was hastily slapped together in the days after the current Prime Minister ousted the member for Griffith with the single objective of scoring a quick political fix with no consideration of the economic or sovereign risk issues associated with it. As a result, the bigger mining companies, particularly BHP Billiton, Rio and Xstrata, were able to press their advantage to get a result that suited them but did not necessarily suit the mid-cap and smaller miners who had absolutely no say in the formation of this legislation. Those junior miners have been left out altogether and, from the feedback I have received and what I have observed of the Policy Transition Group, the government has not even come close to addressing those problems. That is not to denigrate the work of the Policy Transition Group or to question their sincerity, but the fact remains that more than a year after the first resources tax was proposed the wider resource industry is still facing uncertainty and the threat of being disadvantaged relative to international competitors. That position is reaffirmed by the meetings I have had in recent days.
That is not the worst flaw—and there are so many. As I say, I feel like moving for an extension of time, but I shall not. The biggest problem with the MRRT is that it builds a structural deficit into the budget of Australia. I know that those who sit opposite are promising a surplus; I know those opposite who have never delivered a surplus are saying that they can manage the risk. The best brains in the resources industry cannot tell you what the value of the dollar and the value of iron ore will be in two years time, let alone four years time, which has to be calculated so that the government can calculate the return that it is going to get from the MRRT. If you want to know whether that is backed up by the government's own actions, you need look no further than the fact that originally the government said that this tax would return around $12 billion. The Treasurer pulled out all stops to convince us in his pre-election backflip on the MRRT that it shaved off only $1.5 billion before conceding that it was slashed by $7.5 billion. But, of course, as we all know, it later emerged that his change of position on the original super profits tax cost $100 billion. I know when I speak in this House in billions those on the other side wave it away, because a billion dollars to them is nothing. It is the sort of money they can waste in a week on one of their programs, but this is serious money. Moving closer to the here and now, we were told after the election that revenue could be less than $5 billion and then Treasury revealed in February that revenue from the MRRT would be $17 billion over a three-year period, but now we know it is estimated to be only $11.1 billion.
The impact on the budget will be devastating because not only can the government not produce a surplus budget under current circumstances but with the sort of volatility that we are seeing in the market at the moment we are going to see the budget surpluses not taken seriously. The predictions of budget surpluses by the current Treasurer are not taken seriously, but no financial house will have any confidence in their predictions. What we are seeing is Magic Pudding economics. There is no better example of that than a budget set on the iron ore price of three or four weeks ago, which was about US$180 a tonne. That price today is US$120 a tonne. No-one knows whether it is going to $150, which would be its natural balance point, or whether it will drop further. When you consider that when the price of iron ore drops from $180 to $120 the profit a company is making is cut in half—and probably more for some companies—it is impossible to use the MRRT in the calculations associated with it with any degree of certainty.
The other issue is our sovereign risk profile, and the international investment community looks in sheer wonder and amazement at what this government is doing to our country. We first had a complete reversal of a set policy position that had stood for 20 years on condensate tax, agreed to by the Labor Party, but it was so desperate for money it changed that. Then we had a decision to introduce a carbon trading scheme and then it changed its mind on that. Then we had the pledge that there would never be a carbon tax under a government led by the current Prime Minister and, of course, she changed her mind on that. We had the introduction in May last year of the RSPT, and all the reasons for that, and then it changed its mind again in July.
The end result is that the view overseas is that this government does not know what it is doing and it does not know how to position the resource industry to make sure it is internationally competitive. And guess what—we agree with them, and so does Australia. We think this government is a complete joke, an absolute shambles. It cannot put a position in place which it can actually hold for more than six months and where it can give the investment community any sort of confidence at all that it knows what it is doing. Then we get this rubbish that the member for Hunter comes up with about how this money is going to be returned to the community. Complete rubbish!
Western Australia, if the Treasurer's figures are right, will contribute about $8 billion to this tax and, if they are really lucky and they behave themselves and they do not put up their royalties and they do not do this and they do not do that, they may get back about 10 per cent of that for their infrastructure—$1 billion, maybe $2 billion, if they are really lucky. What a joke. This is a con.
This government are pretending that by introducing a new tax people are going to be better off. They are a tax-and-spend government who have never been able to manage money, who do not understand how the basic principles of commercialism work and who want to think that they can introduce a tax and pretend that they are going to return it all to the people, when we know that this money is not going to go into superannuation. The employers have to pay that. The government have to pay some superannuation for their Commonwealth employees, but it is certainly not going to be $11 billion.
What we know is that this bad tax, this tax which is going to affect so severely Australia's competitiveness in the resources sector, its place in the investment community in the world and the view that investors take in Australia is simply that—a tax. It is not a superprofits tax, because they have not applied it to all industry, and it is not just coal and iron ore that make superprofits, if that is the way they want to term making a profit in a good year. I remember when the industry did not make a cracker. What are they going to do then—call it a superloss tax? Probably.
The government do not apply it to other sectors of the economic community. They do not have the guts to try and use this rationale on a few of the other sectors. I am not going to start rabbit racing by suggesting that they are considering other areas, but we know that they are considering other commodities. They know the people who actually have control of this government, the Greens, are suggesting that there be a change in the MRRT even before it is introduced and that they expand the commodity grab. If I can be sure of one thing, it is that this government will find more ways to tax more parts of the resources sector because they need more money to plug their black holes.
In the last few days, of course, we have seen the bewildering prospect of each of the Independents—and good luck to them; they have to take their opportunities when they come—going in for their pound of flesh. It is $100 million, $200 million, $300 million and $400 million here and there. It is this research station and that concept. What do we have? No-one in the industry now knows where this is going to finish up. Are the government going to move amendments to this legislation before it passes the House? We do not know. Are they going to support amendments put forward by the Independents? We do not know. Australia does not know what is doing and, as I said earlier, this tax not only is poorly thought through but is giving Australia an international reputation of being run by a shambles of a government.
In conclusion, can I just say that the resources sector has been forced to wait too long for any degree of certainty, remembering that it is now a year since this tax was originally proposed, firstly by former Prime Minister Rudd and then amended by Prime Minister Gillard. This level of uncertainty has unacceptable impacts on Australia's sovereign risk profile and our international competitiveness. This is a bad tax. We will oppose it in opposition and we will rescind it in government.
I thought that the member for Groom would have been tempted to apply for an extension of time so that he could concentrate on speaking on the minerals resource rent tax legislation before us. That was probably the only thing he did not concentrate on. I hope I can assist his contribution, and I firstly indicate that I welcome the opportunity to contribute to this debate. This is legislation clearly designed to address Australia's current patchwork economy. I know that phrase rolls off the tongues of all of those opposite. They talk about a patchwork economy and a two-speed economy et cetera. That is fine as rhetoric, but sooner or later it falls to us to do something to address this issue.
These bills are designed to encourage industry, investment and development, to assist small business and to promote national savings by locking in the benefits of the mining boom and also paving the way for increases in the superannuation guarantee. Superannuation can be increased, thereby providing a more realistic retirement income for Australians. Madam Deputy Speaker Bird, the benefits of the mining boom, as you would appreciate in your own electorate, are not evenly spread throughout the economy and are certainly not evenly spread throughout our respective communities.
In what could be seen as a once-in-a-lifetime mining boom, which we are now experiencing, resources companies are competing for skilled labour across the globe at a time when in this country we have very low unemployment. That in itself is creating significant pressures. Clearly these companies are in a position to provide generous wages and conditions well beyond the capacity of most other sectors in the economy. I know that firsthand. My youngest son, Nicholas, has spent some time working both in Blackwater in Queensland and in Port Hedland. I am certainly aware of what he was paid there, having helped him to do his tax returns, and I can assure members that, compared to what a 25-year-old earns in the mining industry—and no doubt they work very hard there—a politician's salary pales into insignificance.
As I said, they do work hard and good luck to them. My son is there as an electrician. He works cheek to jowl with other electricians not only from Sydney and where we live but from Launceston and South Australia. All of those young people are up there. That is why you would probably struggle—and people in the gallery would probably know this—to get someone to put an electric light pole or a power point in. It is because under this patchwork economy we are competing for those skills throughout our economy. That is the patchwork nature of the economy that we are now operating under. As a consequence, there are many businesses outside the resources sector that are struggling to attract and retain skilled labour.
I also note that there are many households across the country that do not see the benefits from the mining boom and which are struggling to keep their heads above water given the cost of housing, paying a mortgage and raising and providing for a family in today's environment. The government does not want to slow the mining industry, but the challenge is to ensure that the benefits of this boom do not simply leave our shores as excess profit for the benefit of foreign owners of our largest companies. Clearly the challenge is to ensure that there is an overall collective benefit for all Australians from Australia's mineral wealth. I do emphasise that this is wealth that is owned by all Australians.
The minerals resource rent tax is an opportunity to deliver tax breaks for small business and to provide them with the assistance and incentive they need to develop their enterprises. We know that through their diverse small businesses there will be sustainable employment, because they are the driving force for employment in this country, and it is through small business that we will see sustainable employment—not, quite frankly, through the ebbs and flows of the mining and resources industry.
This tax will also help us to fund the critical infrastructure development that the member for Hunter was talking about. That in itself will assist in enhancing the economic productivity of our nation, particularly through streamlining structures such as port facilities, export facilities and those things which will go to enhance the nation's productive capacity not only now but into the future.
This tax also paves the way to build on the superannuation guarantee by increasing superannuation from nine per cent to 12 per cent, which will be transitioned over the next decade, enabling more Australians to better enjoy a retirement income in their senior years and increasing the pool of national savings in superannuation by $500 billion by the year 2035, from $1.3 trillion as it stands at the moment. This money can be invested in capital and social infrastructure to benefit all Australians.
We on this side of the House are very proud to be further enhancing superannuation; after all, it was a Labor government back in 1984 that took the first steps and allowed award based superannuation to be developed. Those members of the House who, like me, have grey hair, might recall that the union movement forwent wage increases at that stage to productivity increases to enhance superannuation development through award based superannuation and then in 1988 the superannuation guarantee came into effect and applied to all Australians. This is something that we on this side of the House are proud of.
For those Australians on low incomes or working part time, many of whom are below the tax-free threshold, this will enable their superannuation contributions to be made effectively on a tax-free basis, not providing the 15 per cent entry fee for superannuation contributions and therefore providing a much fairer taxation and superannuation benefit for them.
The MRRT is a tax on profit. It is not a tax based on commodity price, size of a mine, or the actual extraction of ore. It is a tax on the profit that is made by a particular mining project. And it is important to note that the MRRT is not a tax on operating costs but one that applies to the net profit from mines that have an after-tax profit in excess of $50 million. It seems to me that we are talking about major companies if we are talking about after-tax profit, to be divided amongst shareholders, of $50 million. Further, the MRRT will not apply to the mining industry in general. It will be levied only on the major iron ore and coal projects that enjoy an after-tax profit in excess of $50 million.
It is important also to note the objective and independent assessments of the value of the MRRT to the Australian people. For instance, the OECD in its 2010 economic survey of Australia said:
The proposed Mining Resource Rent Tax (MRRT) on coal and iron ore operations, along with the extension of the Petroleum Rent Resource Tax, are justified on both equity and efficiency grounds.
It goes on to say:
This Resource Rent Tax is more efficient than the current royalties system, as it raises taxation on finite and immobile resources.
It concludes by saying:
This will improve the efficiency in the resource sector.
Economic commentator Saul Eslake, who I understand is these days at the Grattan Institute, said in relation to the principles of resource rent tax:
The return to Australian people from the exploitation of mineral and energy resources should be based on the profits derived from the extraction and sale of those resources, rather than on the volume of resource production—is one that I and most other Economists strongly support.
The minerals resource rent tax was developed in consultation with the industry. Those major companies that will be paying the tax were engaged in the discussion and have acknowledged their capacity to make a greater contribution to this country.
Despite the objective and authoritative positions and assessments of the OECD, the International Monetary Fund and most mainstream economic commentators, the Leader of the Opposition's position is that he will oppose this legislation and, if given the opportunity to occupy the treasury bench, will get rid of it. He will turn it over.
Yes, give the miners a tax cut. Give it back. In doing so, the Leader of the Opposition and his party will be not only squandering the potential benefits to the Australian people of this once in a lifetime boom but also turning their backs on small businesses and destroying the hopes of 8.4 million Australians who are seeking to have better opportunities in their retirement. Once again he is happy to put politics ahead of the community, and he maintains his rhetoric that the MRRT would force the likes of BHP Billiton and Rio to close their projects in Australia, to vacate to South America or other places, despite the enormous investment programs currently underway by those very companies. Despite making all that rhetoric and playing it out in the popular media, you might recall that it was not all that long ago that a Western Australian Liberal government decided without notice to unilaterally increase the mining royalties on the iron ore industry. You would expect at least some protestation about that. There was not even a peep. There was not one line of criticism from Mr Abbott and his supporters. It was okay to raise revenues over there but not to raise revenues on the basis of doing something for the Australian people. That is a different issue.
In contrast to the Liberal Party, the Gillard government will be locking in the benefits of the mining boom for all Australians, including the less economically fortunate Australians. They will see that they have a government that is prepared to invest not only in this nation but in this nation's people. The Leader of the Opposition and those at the table have the opportunity to explain why it is that the Liberal Party is lining up with some of the richest companies in the world instead of the Australian people, who see that their resources are being dug up and shipped overseas for foreign companies' enhanced profit. This is about doing something to ensure that those excess profits are redistributed through our economy to make sure that we do address the issue of the patchwork economy.
This is not for people to come into this place and simply wax on about a two-speed patchwork economy and multispeed drivers in the economy. This is a matter of people coming in here with an ability to do something about it. This Labor government is standing up and doing something about it. I commend this legislation to the House.
As a proud Western Australian I am an avowed supporter of the mining industry in Australia because of the enormous benefits that flow through our economy and the boost that it gives to our overall prosperity. But those in the government cannot make that claim, as they seek to impose an unfair, complex, divisive, fiscally irresponsible and distorting tax that will reduce our international competitiveness and cost jobs and which has been developed through a deeply flawed and improper process.
Government members are talking of the success of the mining industry but in terms of the problem that it is causing for Australia in creating a patchwork economy. The government appears blind to the obvious threat of a recession in the Australian economy were it not for the mining industry. Our mining industry is critical for our nation's success but only if it can remain competitive against other great mining nations.
The story of mining in Australia is the story of achievement, rising national prosperity, development, opportunity and jobs. That is why I am opposed to any measures that would cripple our mining industry. The talk from the government is all doom and gloom, lamenting the impact of the mining sector on other areas of the economy, particularly manufacturing, and acting as if we have previously lived in a one-speed economy. With the unions and the government's coalition partner the Greens reverting to protectionist rhetoric, I fear that the old socialist mindset is creeping back into the national debate as Labor seeks ways to soak money out of the most productive part of the economy.
The coalition are opposed to the mining tax. Rather than adding cost burdens to the mining sector, we believe that it should be as internationally competitive as possible because we recognise that in a global economy capital can easily move to countries where the rate of return is the greatest. The buyers of our commodities have alternatives. Other countries have or are developing mining sectors that could well rival ours. The development of Asia's great economies explains the level of investment we are currently witnessing in the sector. The strong growth in mining investment over the last decade has reached its highest level in history. The huge demand for Australia's mineral commodities in 2009 increased mining investment to above four per cent of GDP, around eight times its share just 50 years ago.
Australia is currently enjoying the best terms of trade in 140 years on the back of high commodity prices and strong levels of demand, yet still this government cannot manage the budget. They have an appalling fiscal record of a cumulative total of $150 billion in budget deficits over the past four years; in other words, they have spent $150 billion more than they have raised in revenue at a time of record terms of trade. That means that they are entirely dependent upon the strength of the Asian economies, particularly China and India, to continue to drive Australia's economic growth. That cannot be taken for granted. As the dark clouds continue to gather on the global economic horizon, this government is putting in place one of the most burdensome tax regimes in the world on our most productive sector.
The government likes to take credit for Australia's enviable position in the world economy, but it fails to acknowledge that it is derived in large part from our reputation as a safe, reliable exporter of mineral resources and energy. We are a world leader in the export of black coal and iron ore. In 2009 Australia's mineral resources sector contributed close to $160 billion to export earnings. This is compared to around $36 billion for the rural sector and $38 billion for manufacturing. During that period the sector accounted for eight per cent of Australia's gross national product. According to the Minerals Council of Australia, mining companies contributed more than $7 billion in royalties as part of $21 billion paid in state and federal taxes in that year alone.
Mining companies have invested more than $125 billion in Australia over the last decade, including in new capital, exploration, and research and development. Today the mining sector is responsible for the direct employment of over 180,000 people and almost 600,000 people benefit through indirect employment in support industries. As Reserve Bank Governor Glenn Stevens recently highlighted, there is positive spillover from the mining sector to other parts of the Australian economy. He said:
… beyond the benefits being experienced by equipment hire, engineering, surveying and consulting firms, businesses as diverse as those supplying modular housing, laboratory services and the training of semi-skilled, trade and other workers are seeing effects of the expansion.
There are also thousands of additional jobs in broader sections of the service economy, including retail. Since 2007, many of the challenges facing Australia and the mining sector have come from the federal government, first under Prime Minister Rudd and now under Prime Minister Gillard. The superprofits tax announced last year would have had a massive impact on Australia's international competitiveness, and it hit hard our reputation as a safe investment haven. The way the tax was announced and the way it was allegedly sold to the public made it clear that this government just does not get mining; it just does not get the Australian economy. From publicly deriding mining companies as being foreign owned and ripping off taxpayers, to claiming that mining companies only pay minimal tax—and they relied on a student paper from an American university to make that claim rather than the actual tax paid according to the Australian tax office—this was evidence of a government with absolutely no understanding of a vital element of the Australian economy.
On 23 June last year—and the member for Mackellar, who is at the table, will remember that date well—I referred in question time to the comments of the Chief Executive Officer of the Mining Association of Canada, who had called Prime Minister Rudd the mining man of the year in Canada because he would bring a lot of investment their way, and I asked the then Prime Minister if he intended picking up his award when he was in Toronto the following week for the G20 meeting. Well, that was the very last question that I ever got to ask Prime Minister Rudd, for that very night the forces of darkness moved against him—the faceless men of the Labor Party staged a midnight coup. But it does appear as if history is about to repeat itself.
Having unceremoniously removed Prime Minister Rudd from office because of his failures over the superprofits tax, amongst other things, the Gillard government is now seeking to implement an even worse tax, based on the deeply flawed agreement that she reached with the big three mining companies over 12 months ago. This version of the tax is extraordinarily complex, and it introduces a new federal tax on top of corporate tax, payroll tax and the existing state royalties.
There are serious questions as to how much tax will actually be raised and upon which companies the burden will fall. But, due to the extraordinarily clumsy negotiations with the three mining companies—to the exclusion of the 3½ thousand other mining companies in this country—the federal budget is now hostage to decisions by state governments, who are perfectly entitled and constitutionally enabled to raise their royalty rates. The federal government now has to repay all of the royalties that the state governments, whether Liberal or Labor, around the country impose on the mining companies. What an extraordinarily inept negotiating performance by this Prime Minister.
There are serious questions about the constitutional validity of the proposed tax. And, after the government's humiliating loss in the High Court over the legality of its Malaysia asylum-seeker swap deal, we have every reason to be sceptical in the face of the government's assurances that it could win a High Court challenge to its mining tax laws.
Following recent mining tax profit announcements, the Prime Minister is now under renewed pressure from her coalition partner the Greens to claw back an even greater tax take from the mining companies. Senator Bob Brown has labelled the new arrangements 'a perverse outcome' and has called on the government to revive its original tax of 40 per cent on mining profits, although Senator Brown muses that '50 per cent would be more like it'. So watch this space.
I did not ever think that I would see the day when 'Australia' and 'sovereign risk' would be uttered in the same sentence. But reports of investor concern continue as the government continues its assault on our mining sector. A couple of months ago I attended an Australia-central Africa trade forum in Sydney. Ministers and representatives from central African governments—Cameroon, Chad, the Congo and Gabon—were present. I was somewhat taken aback when they announced that they were in Australia to promote investment in their countries because, as Australia was now a sovereign risk, central Africa was a more attractive option. And they knew the details of this mining tax debacle chapter and verse.
There were similar discussions at the Commonwealth Business Forum in Perth last week as part of CHOGM, as delegates from African nations promoted the fact that investment in mining in Africa would be a better bet than investing in Australia under this government's burdensome tax regime. As the chief executive officer of South African gold miner AngloGold Ashanti, Mark Cutifani, said, Australia is:
… one of the top sovereign-risk countries in the world on the basis of government policy and its demonstrated behaviour in terms of taxation policy and its inconsistency in policy.
Having introduced the mining tax measures to increase the government's share of iron ore and coal companies' profits, the Gillard government is now set to increase the cost of a mining company's overheads as well.
Despite having solemnly promised at the last election that she would not introduce a carbon tax, the Gillard government has introduced legislation to implement a carbon tax, which is essentially a tax on energy. So the dangers posed to Australia's economy by this mining tax policy—as well as those posed by the carbon tax policy, which will cascade throughout the economy—are well documented. Yet the Australian mining sector will be amongst the hardest hit. In a statement to the ASX in July, Rio Tinto expressed the widespread concern of the mining sector, and said that the company was:
… deeply concerned the proposed carbon tax fails to shield Australia’s export sector and leaves it at a disadvantage compared to international competitors.
For small to medium sized companies with lesser profit margins to absorb these additional costs, this new tax will be hard felt. This is likely to be the case with Australia's goldmining industry, and I mention the goldmining industry because, while it is currently not included in this mining tax, we should be very well aware that the Greens are calling for its inclusion. So it is only a matter of time before the mining tax will be expanded to include every conceivable mining activity, including quarries, as their superprofits tax did last year. That was included in their resource superprofits tax—an absolute disgrace. So the Greens are calling for its inclusion; the government will fold.
Earlier this year the Department of Climate Change and Energy Efficiency released data which showed that a typical size goldmining company will be hit hard by the carbon tax, which will directly increase operating costs by more than 13 per cent, putting pressure on contractors and their ability to employ people. Currently the goldmining industry employs 7½ thousand people nationwide—but clearly that is of no concern or no interest to this government. Other participants in the mining industry supply chain—such as transport companies, cleaning companies and accommodation providers—will also be affected by increased operating costs.
There has been discussion in Australia recently about the desirability of a sovereign wealth fund to capture the benefits of our mining boom, but it is a fact that the Howard government established such a fund with the Future Fund. However, virtually no money has been added to that fund since Labor took office. We also established the Higher Education Endowment Fund, which was designed to be a fund in perpetuity to receive surplus moneys and, with income earned, to help make our higher education sector world class. That fund has been gutted by Labor.
The point is, of course, that we ran successive budget surpluses and paid down the $96 billion debt we inherited from the last Labor government. But it can only be hypothetical to talk about establishing a sovereign wealth fund any time soon while the government is billions and billions of dollars in debt. The first priority must be to repay the government's debt, which today stands at around $110 billion to $120 billion. The sooner we pay off that debt, the sooner we can recoup the billions in dead money being paid in interest each year.
The coalition's priorities are to get the budget back into surplus, pay down debt and ensure that Australia is in the best possible position to withstand further external economic shocks. But this government just does not understand mining, whether it is imposing a $2 billion condensate tax on Woodside without notice, announcing a superprofits tax that destroyed our international reputation, announcing an economy-wide carbon tax that no other country in the world is implementing, unleashing the militant unions or placing a blanket heritage listing the size of the state of Victoria over Kimberley and Western Australia.
The Gillard-Greens government is no friend of mining, no friend of the Australian people and no friend of this economy. As a nation we should be playing to our strengths. We are world leaders in mining, yet this government wants to drag our mining sector down to the back of the pack with taxes that our competitors will not be paying. We oppose this mining tax and so should all members of this House.
Listening to the Deputy Leader of the Opposition, who never misses a chance to talk Australia and our economic performance down, you would think things were pretty grim. But in my state of South Australia we have just announced progress on a new mine opening with $1.2 billion set aside to expand Olympic Dam into the biggest copper and uranium mine in the world. I am a bit perplexed by some of her rhetoric on how grim it is, given that mining is expanding at a rate of knots in my state—not just exploration and the development of Olympic Dam but many other mineral developments in that area.
This is self-serving rhetoric which covers the fact that the Liberal Party and the coalition have always opposed taxation measures on resources. They opposed the petroleum resource rent tax when it came through in the 1980s. They said that would bring an end to investment and the sky was going to fall. They made the same speeches on the PRRT then as they are doing now—it was going to be the end of the world and it would end economic growth. Instead, we know the PRRT provided valuable revenue which the Howard government later relied on to fund its great budget surpluses.
Labor in government have always been concerned with both the growth of the economy and the distribution of wealth. We have always endeavoured to marry those two things in a manner that is consistent with ongoing prosperity and fairness in the economy. It is important that when we have economic growth not only a small group of people gain the benefits of that growth. It is important to spread that growth throughout the middle-class and working families all over this country. The economic reforms of the 1980s—the floating of the dollar and the reduction in tariffs—were underpinned by social reforms. These included reforms in Medicare, superannuation and family payments which were all about supporting families and making sure middle-class and working-class families had a good standard of living and that health care, retirement incomes and family payments were not left to the market. These payments are needed when kids are growing up.
The Minerals Resource Rent Tax Bill and related legislation represent a continuation of that tradition. We are endeavouring to marry great growth in our resources sector—which is ever present and ongoing despite the claims of the opposition—with the need to properly share that wealth with the majority of Australians. Most importantly, it will be shared not just with this generation but with future generations. For that to happen, we need to have something left when all of this is done.
I heard the Deputy Leader of the Opposition, the member for Curtin, talking about how the Howard government had put money away in the Future Fund, and indeed they did. But I remember reading in Peter Hartcher's book that the Howard government in the 2004-07 budget cycle received some $320-odd billion in extra revenue during that period. A portion of that was put away in the Future Fund, but a great amount of it was spent—and we all know spending in the later years of the Howard government galloped out of control.
That's not true, we ran the first budget surplus in 1988. The Liberal Party never ran one when John Howard was Treasurer. But history is history and we will let the economic historians argue over it. The point is that what we want from this extra resource revenue and what we want from this tax is to be able to hand future generations something of the national providence that we have today. Mining profits over the last decade have skyrocketed by 262 per cent. Normal Australians marvel at the profits of BHP and Rio Tinto, and they marvel at the extraordinary individual wealth that is being generated by some of the mining magnates, who like to offer their opinion from time to time about matters such as this tax. There is no doubt this is a gilded age for some. Some people give rather generous gifts away—good luck to them—but they have vast profits, vast executive remuneration and vast personal wealth, and that is what is being generated. Profits are being repatriated out of this country.
We know that mining workforces and ancillary industries also are deriving gain from mining. Some of the previous speakers talked about the young workers up in the Pilbara region and the great wealth that is derived from mining jobs and from the jobs associated with mining. But it is all derived from the Australian nation. The nation owns the minerals and so it is all derived from the providence we have been bequeathed by having this continent to ourselves.
These mining companies and individuals are allowed to extract these minerals by agreement with the states and by agreement, ultimately, with the nation. The nation has a legitimate right and expectation in the public interest to derive revenue from these minerals that does not just come in the form of royalties but also in the form of a profits based tax. Much has been said about what the mining industry has said about this, but the more sensible voices accept that a profits based tax is a sensible way to go. Although we hear talk about sovereign risk and all the rest of it, much of it is self-serving talk by the minerals industry because it wants to prevent profit taxes in other jurisdictions. It wants to prevent the spread of good ideas, so it is running a scare campaign. It wants to maintain the current arrangement. But, as I said, many Australians have looked upon this gilded age and wondered what it means for them.
Too many communities and too many individuals have been locked out of this great wealth, this wealth that is produced, ultimately, by the nation. Too many people have been adversely affected and we see that as the currency has risen dramatically. We see the impact of that on other sectors, other jobs and the like. We see the rising costs of labour, the rising costs of living in remote mining communities and the effects of booming regional economies. We know that for everybody who is doing well there is a business that is struggling to find a worker or a tradesman. We know that pensioners and people on fixed incomes are struggling with the cost of living. We know from this experience that it is a problem and it has to be dealt with. We know from international experience there are threats to nations' economies that are excessively dependent on resource extraction. We all know about Dutch disease. It has being talked about many times, about how success in resources lifts the currency and that has a correspondingly negative effect on the rest of the economy. We know that excessive disparities in wealth also can occur and that is not desirable. Australia has had a fine tradition of equality and of sharing our wealth. I think that is important to a country.
This bill overcomes these threats. It overcomes those challenges to the country and it ensures the growth in mining profits benefits the whole of the community and ensures that it benefits business. It ensures it adds to national savings and it ensures that regional infrastructure is not left behind. We hear a lot of rhetoric from the coalition on business, but one of the aims of this bill is to share some of the proceeds of this wealth to make sure we have a company tax cut to 29 per cent on 1 July 2013. That is to make sure that companies can compete.
Mr Van Manen interjecting—
I hear my friend opposite interjecting and talking about one per cent. If it was such a small increase, why were you trying to match it during the last election? That is the question.
This bill will provide a new tax break for 2.7 million small businesses. Up to 13,000 businesses in my electorate will benefit from the small business $6,500 instant asset right off. It is important to support business during this time because they are the engine room of employment. It is important also that national savings are lifted. National savings have made a significant contribution to protecting this economy from some of the international ups and downs during the global financial crisis. Our national savings are a huge benefit to this country.
Where would we be without superannuation? This bill increases superannuation contributions from nine per cent to 12 per cent, a very important increase. It also expands the superannuation concessions for 3.5 million low-income earners, so it is not just the top end of town that gets a tax benefit from superannuation. It is a very important equity measure and very important for our national savings and our confidence in the long-term benefits of superannuation. We know that 8.4 million working Australians will benefit and we know it will increase national savings by $500 billion by 2035. This measure will simplify personal tax arrangements. It will allow a $500 standard deduction from 2012 and $1,000 standard deduction from 2013 and will also reward personal savings for five million Australians. The whole gist of this is to put money away for a rainy day—into national savings, into individual accounts. People talk about sovereign wealth funds; but there is no greater sovereign wealth fund in this country than superannuation, and it has been operating since Bob Hawke set it up and Paul Keating expanded it. The tragedy, of course, is that while the coalition fight like blazes before these things get in and say 'the sky is going to fall', once they have been brought in they are happy to benefit from them and happy to have them in place but never, ever to expand them. That is the great tragedy of the opposition's approach.
We know that infrastructure, which has been a great problem area, will benefit. The Howard government only built one piece of infrastructure: the Alice to Darwin rail link. It is a good bit of infrastructure and the nation had waited a long time for it, but it is not much to hang your hat on. We would hope to do better than that and build infrastructure in the regions, particularly to expand resource projects and our capacity for economic development, so that mining communities can expand and those regions can prosper. So there is quite a bit in this for regions and quite a bit for building the national project and for building the north of Australia—these great aims and projects.
This bill is in the national interest. It would be a great act of vandalism to block it or repeal it. That is why, when it is implemented, the coalition will not repeal it. That is just talk—beating their chests and acting like they are going to repeal something when they will not. They will adopt the same approach as they always do: fight it right up to the point that it is successful and then take the benefits this bill will yield for the Australian people and leave it in place. To remove it would be a great act of national vandalism and, I think, a great folly.
I rise to speak today on the Minerals Resource Rent Tax Bill 2011 and associated bills. I think the comments by the most recent speaker, the member for Wakefield, say it all. He mentioned early in his speech that 'any mug can deliver a surplus in a growing economy'. I remind the member for Wakefield that the government he is a part of have proudly talked about keeping the economy growing and yet at the same time have presided over the three biggest deficits in this country's history—by a country mile.
This is the level of economic incompetence that is running this country. This is what we have to deal with. This is what industry has to deal with. This is why we have seen such enormous frustration from industry, not just the mining industry but also so many other areas of industry, who are just gobsmacked by the economic illiteracy of those opposite—and it was characterised today by the member for Wakefield. He said it all, and he said it on behalf of all his colleagues. They do not understand business. They do not understand economics. They are all about politics and spin.
"We are the darlings of the business pages, yet we painted as demons in the early general news.
"We help treasurers keep budgets healthy and give Australia the strength to stave off the threat of recession, yet our industry is a lightning rod for the most adversarial of political debates."
The report goes on:
Dr Williams said Australia was in the middle of one of the longest mining booms in the nation's history.
"Yet we face multiple policy, regulatory and legislative challenges that might collectively render our sector a less attractive destination for international investment than countries such as Indonesia, Colombia or even Mongolia," she warned.
This is at the heart of the problem that we have with this stupid tax, this dangerous tax, this tax born of envy and paraded as a subject of envy when in fact it is ensuring that Australia, in a policy sense, once again under this government shoots itself in the foot.
The attempted implementation of this mining tax over the last 18 months has been one of the most shambolic policy episodes this country has ever seen. This legislation comes 18 months after the Treasurer announced his half-baked so-called resources super profits tax. The first version brought down one Prime Minister, who had not even seen out a term. This second version is contributing significantly to the imminent demise of another, if we are to believe the private talk of those opposite—and are they talking! And are they worried! The member for Wakefield should be in one of the safest seats around, but even he has problems.
Thanks, Mr Deputy Speaker. First they tried to nationalise 40 per cent of the resources sector. This is unprecedented, and it spooked investors around the world. Now this tax targets the mid-tier miners. It is a highly discriminatory tax. It is still in a very dysfunctional form as a tax. It has not received any favourable treatment except from the three big miners. It is seen as a bungled proposal and it reinforces that the government's core instinct is to tax, spend and borrow.
If you are responsible in any organisation—whether you are in business, sport or government—the first thing you do is identify your strengths. Once you have identified the two or three major strengths of your business or your country, you then seek to nurture, develop and protect those strengths, because they underpin your success. You do not see a football team send their champion player out onto the ground with a lead weight around his neck. You nurture your best players. They are the ones that give you the premiership. They are the ones who do something magical in the last half of the last quarter.
Clearly the mining and resources sector is one of our nation's great strengths. But what do we see? We see a government that has sought to introduce not just a carbon tax but also a mining tax into the environment of a mining boom when our mining and resources sector, perhaps our greatest strength, has contributed so importantly to the quality of life that we have enjoyed in Australia for well over 100 years. This government is imposing in the middle of a mining boom two new taxes. It is ignorance and it is envy, but, most importantly of all, it is dangerous. It is dangerous in terms of the lost job opportunities and the lost investment opportunities—and we are seeing sovereign risk manifest itself as a consequence.
Not only did they bungle the proposal in terms of its design—it has taken 18 months—but it is now being rushed in as a symbolic attempt at achievement by a Prime Minister who is hanging by her fingernails onto the leadership. That is what this is about. The way this thing has been designed and the way it is being introduced is all about politics.
Agriculture is another of our great strengths, but look at the way they handled the live cattle job. The incompetence with which they handled that has added to sovereign risk. Our international education effort is another of our great strengths, but they introduced a visa requirement where families have to have three years of the education cost and accommodation to get a visa. Then they wonder why 20,000 Chinese students have stopped coming here. That is ignorance and incompetence. They are obsessed with taxing, spending and borrowing. That drives every policy of this government. They are an old-style socialist government—under pressure all they know how to do is tax, spend and borrow. This mining tax is nothing but a tax grab, pure and simple. It is a tax that will discourage investment. It is a discriminatory tax.
Let's look at where it falls. In research released today by BDO, a major research group, the mining tax liability on Rio Tinto was calculated for the first five years, and it was zero, zero, zero, zero, zero. They calculated the mining tax liability on BHP, and you will not be surprised to learn that, for the first five years, it is another five zeros. They have taken the real-life numbers of a small emerging miner who is making revenue in the order of $600 million to $700 million and calculated its mining tax revenue: first year—2012—zero; second year, $49 million; third year, $107 million; fourth year, $96 million; fifth year, $68 million; and the following year, $63 million. So we are seeing a total effective tax rate of 40.18 per cent in the first year in which they pay the tax, 45.68 per cent in the second year; 45.76 per cent in the third year, 46.12 per cent in the fourth year, and 46.20 per cent in the fifth year.
This is a scandal. We are putting a lead weight around the neck of our greatest strength in this economy. When you look at our competitors around the world—and they are significant, they are large and they are coming at us as they invest in infrastructure to move a mountain of resources that exist around the world—the highest effective rate of tax including royalties is 40 per cent in Canada. We are talking about mid-tier companies paying a 46 per cent effective rate of tax with this new tax. In other countries, such as Brazil and Mongolia and other major future competitors, they are paying in some cases as low as 30 per cent and less. This tax is a lazy and short-sighted attempt by an incompetent government to prop up its budget. That is all it is.
Let's for a minute examine the myth that the minerals sector is somehow not paying its way. They paid very little in 1999, but by 2002-03—when the mining boom was just taking off—they paid around $6 billion in taxes including royalties and corporate taxes. In 2010-11, that figure exceeded $23 billion, a fourfold increase. The profits-based company tax was in the order of $4 billion in 2002-03. That grew to nearly $15 billion. A massive new investment over the next four or five years and the reduction in costs offsetting profits will mean that revenue will continue in a very strong way, depending on the price of the product. So with the existing taxes we have a fourfold increase which is likely to get much higher in the next three or four years, yet the government wants to come in with a carbon tax and a mining tax which will add billions and billions to the tax that these companies are paying, and the effective rate of tax will head towards 50 per cent. This is nonsense. At a time when we should be locking in all of the potential investment that this great resources sector can produce, we are inviting competitors around the world as we see a supply response coming down the line. We think we are awash with resources, and we are. Our iron ore is 13 per cent of the world's supply, and our coal is 15 or 16 per cent of the world's supply. But there are mountains of it elsewhere, and this government is oblivious to that. They are inviting competition, they are ensuring that we will not be competitive and they are taking great risks. They have spent this money before they have earned it.
Then there is the prospect of China. Global reports came from Paul Wiseman yesterday that China's comedown is being engineered by its policy makers. They want to slow expansion just enough to cool inflation. If they get down to six or seven per cent growth—which will cool inflation—China will still have strong growth, but there will be a 15, 25 or 30 per cent reduction in prices. This government is vulnerable: our structural deficit at the last budget was twice Germany's and was 30 per cent higher than even Italy.
Mr Champion interjecting—
The member for Wakefield smiles. He does not understand what a structural deficit is.
It means we are highly vulnerable. With this mining tax and the carbon tax, the government are spending money they do not have. This means we are being put in a highly vulnerable position with deficits potentially for another 10 years.
This bill should never have come before this House. It is the result of the politics of envy. It means that, as a country, we are shooting ourselves in the foot. Under this appalling government it will turn away job creating investment, it will make our economy more vulnerable, it is antigrowth and it is just another piece of stupidity. If we get the privilege of government, we will remove this tax.
I proudly rise to voice my strong support for the economy-building, future-proofing Minerals Resource Rent Tax Bill 2011 and related bills before the House. It is always good to hear from the member for Goldstein. He has certainly had a tough time lately. I remember the budget reply speech from the Leader of the Opposition, who said: 'Sorry, I didn't actually do the budget reply speech. I'm going to give that to the shadow Treasurer.' The shadow Treasurer then came out and said: 'Sorry, I didn't actually get around to doing my budget reply speech. I'll ask the shadow finance minister.' It was amazing. As a teacher, I have heard a lot of excuses about why homework was not done, but that was the first time I ever heard anyone say, 'The dog did my homework.' I have never heard that before. It was amazing.
Some Australians are getting very rich from the mining boom, especially very profitable mining companies. Obviously the Labor Party is not concerned about profits—we support profits—but we are concerned when many Australians are left out. While some Australian small businesses are happy just to break even, our biggest miners are generating phenomenal profits. Mining profits for the year ending 30 June 2011 were a massive $93 billion with $430 billion of further investment in the pipeline, so to speak. So much for the member for Goldstein saying that investment in mining is about to dry up. That is ridiculous.
I say again that there is nothing wrong with big profits. Profits are good for shareholders, they reward workers, they help fund future investment and they stimulate our economy. But where we are seeing such enormous profits from the mining of our coal and our iron ore—Australians' coal and Australians' iron ore—much of this money goes overseas. A responsible government, a sensible government, must ensure that Australians are getting a fair return for our resources, which can only be mined once.
The minerals resource rent tax will apply to all new and existing iron ore and coal projects, and it will apply at a rate of 30 per cent. Only coal and iron ore producers generating an annual profit of more than $50 million will pay the tax. I repeat this for those opposite—you must be making an annual profit of more than $50 million before you have to pay this tax. State mining royalties will be fully credited back to the company, whether that state government is a Labor government or a Liberal government. The tax is expected to raise about $3.7 billion in 2012-13, $4 billion in 2013-14 and $3.4 billion in 2014-15, subject obviously to the variability of long-term international commodity prices. Over 10 years the mining tax, it is expected, will deliver an extra $38.5 billion to Australians.
The Gillard Labor government is determined to share these benefits with all Australians. How will we do this? Firstly, employer superannuation contributions will rise from nine per cent to 12 per cent, giving a 30-year-old worker on average earnings an extra $100,000 of savings.
Secondly, we will also give small business a take in the cut. They will be able to write off every asset worth up to $6,500. Who in this chamber would not support small business receiving such a benefit? You would have to be crazy not to support such a cut.
Thirdly, we will slash company tax to 29 per cent from 1 July 2013. All Australian companies—small, medium and large—will go from 30 per cent down to 29 per cent. In contrast, those opposite plan to effectively increase company taxes with their clumsy two per cent paid parental leave tax.
Fourthly, we will simplify personal tax by introducing a $500 standard deduction from 1 July 2012 and a $1,000 deduction from 1 July 2013.
Fifthly, we will reward personal saving for more than five million Australians with a 50 per cent tax discount on up to $500 of interest income from 1 July 2012.
Sixthly, the government will direct more investment back into mining communities through a regional infrastructure fund.
How could a wise man vote against such a tax? Well, I have heard that the honourable Leader of the Opposition does intend to change his name by deed poll to Joseph Wiseman because, as all film buffs would know, that is the actor who played Dr No in the James Bond movie. That is the only way we would be able to have a Wiseman voting against this incredibly sensible policy.
These projects will boost productivity, they will support jobs and they will look after our hard-working mining communities. I do find the opposition's position on this completely perplexing. The opposition climate change spokesperson told Sky Agenda on Tuesday:
… let me say that the mining tax is a bad idea. The reason it's a bad idea is because capital is mobile in this world, that companies and investors have a choice as to where they set up their mining activities.
Obviously, he is half right: capital is mobile and companies do compete in the global mining market. But mining companies do not easily take their capital and just go to any other country to mine immobile resources. They come to Australia not just because of the present tax arrangements but also—wait for it—obviously because we have some of the best minerals in the world. We are blessed geologically. The competitive edge of Australian mining is not only our lean tax regime but also the abundance of these high-quality minerals and natural gas deposits beneath the ground.
Australia has 10 per cent of the world's coal resources, and most of this is top quality black coal like we have in Queensland—with no disrespect at all to the Victorians who are here. We have some of the top coal in the world, with higher energy burns and lower emissions. Australia has 47 per cent of the world's uranium. So this idea that miners will easily just move their capital around the world and mine somewhere else is quite ridiculous.
Let us have a look at the proposed projects. I will go through some which are on the horizon or have already been announced for new investment or CAPEX. Fortescue has a US$8.4 billion expansion in the Pilbara. Xstrata, to name just a couple of their announced projects, has $270 million in the McArthur River lead/zinc expansion, $1.4 billion in the Ravensworth North open cut coking coal project in New South Wales, $234 million in the George Fisher zinc mine expansion at Mt Isa, US$1.1 billion in the Ulan West underground thermal coal mine in New South Wales and $6 billion in the Wandoan coal mine in Queensland. Rio Tinto has US$6 billion in the Pilbara, $803 million in the Argyle open pit transition and $1.78 billion in the Hope Downs iron ore project. BHP Billiton has US$7.4 billion in the Jimblebar mine development in the Pilbara and US$5 billion in the Bowen Basin. These sums are all in US dollars, which I suppose is at approximate parity at the moment. Woodside has $14 billion in the Pluto project. The Woodside Energy joint venture with BP, BHP Billiton, Chevron and Shell has $30 billion in the Browse Basin LNG project. The Chevron, Shell and ExxonMobil joint venture has $43 billion in the Gorgon LNG project. Santos has $16 billion in the coal seam gas in Gladstone and Curtis Island. BG Group has a $15 billion LNG plant on Curtis Island and in the Surat Basin, Queensland. Origin Energy and ConocoPhillips have a $35 billion LNG project at Gladstone. Royal Dutch Shell has a $11 billion LNG project.
These are just a few of these mining projects that are supposed to be drying up! It is ridiculous that those opposite can actually stand up and seriously argue that we are threatening the mining industry in Australia with this tax. Australia's resources are finite and precious. Australians own them, and the Gillard Labor government understands the responsibility we have to future generations to ensure that all Australians get a fair return—everyone today, everyone tomorrow and those who are not even a twinkle in the eye today. They all need to have a share in the finite resources that we own.
Speaker after speaker from the opposition got on the protest bandwagon and claimed that this tax would all but bring mining to its knees. I remember the member for Warringah wearing his Mitch Hooke-provided white T-shirt. The jeremiad went like this: 'Investment would end, jobs would go and mines would close.' That was only a year ago. That is what the Henny Penny on steroids, aka the Leader of the Opposition, would have us believe. But the reality looks nothing like this. Since we announced the MRRT, mining investment has soared and stronger growth is coming over the horizon, as I detailed. It has grown from $35 billion in 2009-10 to $47 billion in 2010-11 and will nearly double to $82 billion this financial year. Employment in the mining industry has also advanced rapidly. Just go to regional Queensland and you will see that. Go to Western Australia and you will see that. More than 44,000 new jobs have been created, an increase of nearly 25 per cent. The towns in these areas know that. There is absolutely no sign that the mining tax will damage mining investment.
The Labor government has built a strong economy. We have created 700,000 new jobs—140,000 of them in the last year alone. We have more Australians than ever before in traineeships or apprenticeships. Unemployment is at 5.2 per cent. We abolished Work Choices and restored unfair dismissal protections for 2.8 million workers, and we have slashed income taxes for everyone.
The Labor government is standing between the future prosperity of Australia and the road that the Liberal Party want to take us down, which is a US style economy where one per cent of the population controls 42 per cent of the wealth; where the latest data shows that instead of there being 13 per cent of the population living in poverty it has gone up to 15 per cent; where there are more unemployed people than there are union members. That is the sort of economy those opposite would like here.
Australians have confidence that the Labor government will make the tough and necessary decisions to protect jobs and to manage our economy sensibly. The mining tax will deliver for all Australians and help keep our economy strong into the future. I commend the bill, proudly, to the House.
I rise to speak on the Minerals Resource Rent Tax Bill 2011. I, like the Deputy Leader of the Liberal Party, the member for Curtin—who spoke here before—am a proud West Australian and see that this tax will affect my home state more than it will affect any of the other states. It was clear from the results of the 2010 election in Western Australia that this mining tax and the carbon tax were overwhelmingly rejected by the West Australian population.
I started my career as an apprentice electrician and eventually ran a small business, which is how I earned my living before entering parliament. Unlike many on the other side of the House who had careers working for the trade union movement before entering this place, I know what it is like to run a business and to have to deal with burdensome taxes and government regulations. I know how prohibitive to running a successful business those taxes and regulations can become. That is why I always take great caution when it comes to these sorts of bills and look at why new taxes are being introduced. If this great country of ours is to stay strong and if our industries are to create wealth and provide jobs to Australians, we need to be creating and maintaining economic conditions for those industries to prosper. To maintain strong economic conditions we need investment, and those investors need a return on investment. This bill will suffocate investment, as it will be suffocating return on investment. It is as simple as that. We just heard the member for Moreton talk about what they are doing for small business, but this is just the misunderstanding of the Labor Party—they just don't get business and they just don't get taxes. As an example, he said they were going to reduce small business tax from 30 per cent to 29 per cent, a total of one per cent. The only small business that will benefit from that at all is the small business that is making a profit; if it is not making a profit this will be of no help at all. The other example is that they have just increased the superannuation levy, which wipes out the one per cent straightaway. If a small business man is making a profit, he will get an extra dollar for every $100 that he makes in profit. Big deal. That is no assistance to small business at all. But the Labor Party people think that it is a great bonus for small businesses.
To maintain strong economic conditions, we need investment, and investors need a return on investment. This bill will not maintain strong economic conditions; it will do exactly the opposite. The flawed process with which those opposite announced this mining tax to the public remains one of the most embarrassing performances of the government's time in office. It led to chaos across the country, which led to the ending of the prime ministership of the member for Griffith by the current Prime Minister and left an industry with an uncertain future.
No consultation was done with any stakeholders when the initial mining tax was announced. There was no consultation with industry or with state or territory governments despite serious implications for their own-source revenue. The Henry recommendation that a national profit based resource rent tax should replace state and territory royalties and that the federal government should negotiate the federal-state implications of such a move has been ignored by the federal government. The government's decision to provide no consultation on the implications of the mining tax is worrisome, given that resource royalties are 20 per cent of Western Australian state government revenues, nine per cent of Queensland state government revenues and six per cent of Northern Territory government revenues—and despite major implications for GST sharing arrangements around Australia.
This bill will damage Australia's ability to attract foreign investment. The increased sovereign risk brought on by the retrospective nature of the tax, and the large rise in taxation in comparison to overseas investment destinations, will no doubt cause foreign investors to think twice before entering the Australian market. The mineral resource rent tax is divisive. The government has created a situation where we have three big miners—and the rest. It is turning different parts of the industry and the economy against each other.
The WA state Treasurer, Christian Porter, has informed the government that 65 per cent of the revenue will come from iron ore production in Western Australia alone. It is extraordinary that one new national tax would raise 65 per cent of its revenue from one single state economy. This is about $25 billion coming from WA, out of the $38.5 billion total predicted revenue over the next decade.
This tax is deeply unpopular within my electorate of Swan, and obviously all of Western Australia, judging by the 2010 election results. I see the member for Hasluck in the chamber, and I am sure it is just as unpopular in his electorate. That is why it is disturbing that the federal government is trying to link infrastructure projects that would normally be funded out of consolidated revenue to the passage of the mining tax. The government is trying to hold a gun to the head of the Australian people, saying: support this tax, or else.
Of course, the government has shamelessly tried to use this strategy in my own electorate of Swan, when prior to the last election the government tried to link the future of the mining tax with the Gateway WA project for the roads around Perth. This was a very poor strategy. The government said to the people of Swan, many of whose livelihoods depend on the mining sector, 'Your roads are not going to be upgraded by the government unless you support the world's biggest mining tax, which will impact on the economy, your livelihood and your future.' We in the coalition made it clear that we would be funding these road projects, including the airport roads upgrade and the Great Eastern Highway upgrade, without the mining tax. Gateway WA has been identified by the WA government as critical to relieving state transport bottlenecks. Local people in my electorate know only too well of these bottlenecks, which they have to face during their everyday activities on roads which they share with industrial traffic coming to and from Kewdale and the transport hub in Welshpool. That is why on behalf of the community I campaigned hard for the upgrade of the Great Eastern Highway, which I am pleased to say is now underway, after some worrying times, including when there were concerns about the federal government not meeting a shortfall, which would have seen the upgrade cease at Hardey Road.
Gateway WA is a very important project. The federal contribution to the $600 million project is $480 million. The future of such a project should not be linked to what the Premier of Western Australia has described as a tax on WA. The project should also not have been thrown into the realms of uncertainty as it has been by the government's shaky and unreliable negotiations with the Independents. Today in the Australian we saw a big spread on how the member for New England plans to 'hold a gun to the government's head' on the mining tax legislation over issues in his electorate. The message coming out of Canberra is chaotic and the result may well be delays in this project.
We know the real reason why the federal government is introducing this mining tax legislation: it cannot fund any more of the nation's vital infrastructure projects through usual channels because of the massive national debt it has built up. It was interesting to hear the member for Moreton talking about a figure of $94 billion—it just rolled off his tongue. That is close to the national debt that the government has now built up. Kevin Rudd told all Australians he was an economic conservative but misled the Australian people. This country has never in its history been in more debt than it is now. The government cannot meet its obligations to the Australian people to continue to invest in infrastructure, and that is why it has to introduce this mining tax.
If the mining industry is threatened, so will be Western Australia and also the nation. That is why this was such a serious issue in WA before the last election, not only because of a threat to the jobs of the many people who work directly or indirectly in the mining sector but because the people of Western Australia understand the threat to the health of the local and national economy. There are many fly in, fly out workers in Perth and I know that the House of Representatives Standing Committee on Regional Australia is conducting an inquiry into fly in, fly out work practices at the moment, which I know do place strain on many families across WA. It might also be worth consulting with these workers over this legislation and how they feel it will affect them.
It is well known that Western Australia's GST intake is the lowest in the country, at 68c in the dollar. However, projections from the WA government suggest this could reduce to 50c within three years and be on its way down to the 30c mark. Given this, the Premier's recent decision on iron ore royalties was understandable. With no guarantee of WA's future GST return, the Premier was forced to act to secure some royalties. However the impact of this decision on the federal government's budget shows how the mish-mash deal hammered out before the election by the government with only three of the mining companies was just a short-term political fix. Under this deal the government promised to underwrite any rises in state royalties. State governments in Western Australia, New South Wales, South Australia and Tasmania have increased royalties on iron ore and coal, and the result has been a massive hit on the federal budget bottom line.
I heard members on the other side of the chamber complaining about this, but that was the deal the government set up. It was their deal, so they have nothing to complain about. Other states such as Queensland have reserved the right to raise royalties in the future. None of the states were party to the Prime Minister's pre-election quick political deal and now the government is paying the price. As the shadow Treasurer said in his contribution, you cannot have serious and genuine reform of resource taxation and royalty arrangements without active and constructive engagement between the Commonwealth and state or territory governments.
Perhaps most significantly, there are serious question marks over the constitutional validity of the mining tax. We know that Ken Henry said that the federal government never sought advice on the constitutional validity of the tax before its announcement, and there is now the prospect that this legislation may not be lawful under the existing Constitution. As a tax on a resource at the point of extraction, this could constitute a tax on state property as prohibited by section 114 of the Constitution. Following the Malaysia people-swap decision from the High Court, the government is once again introducing legislation that one would think will inevitably result in a High Court challenge.
I would also say that, based on the outcome of the last election, it is particularly unclear whether the parliament has a mandate to introduce this legislation. I will be listening carefully to the speeches from the Independent members but, as I have already mentioned, the member for New England has announced that he will not support the legislation in its current form. Should these Independents have changed their minds since the last election campaign, it would indeed be another sad day for democracy if this legislation is passed in the House—following on from the carbon tax legislation, which only one or two members out of the 150 went to the last election in support of.
The government should start from scratch and pursue genuine tax reform to give Australians lower, fairer and simpler taxes through an open and transparent process. The parliament should stop the MRRT from going ahead and force the government to start again. The Gillard government needs to get its spending under control so it can focus on delivering lower, simpler, fairer taxes and genuine tax reform based on a proper process that gives everyone a fair opportunity to have their say. Instead of doing this, another 287 pages of tax law will now be added, increasing complexity and compliance costs.
It is concerning that the big three miners have been able to gain benefits for themselves that smaller miners do not have access to. For example, the introduction of a market valuation system to calculate applicable deductions gives the big three miners a significant tax shield that the smaller and mid-tier miners cannot access. Smaller companies will suffer under increased compliance burdens. The Henry tax review recommended a lower tax burden for smaller mining ventures, to help start-ups grow and prosper and to keep mining ventures in their decline phase alive longer. Instead, smaller and mid-tier mining ventures will pay a higher effective tax rate under the Gillard MRRT than the big three who were given exclusive access to the negotiations with the government.
One of the most concerning outcomes of this legislation is that it will worsen our structural deficit. The MRRT will help the government create the illusion of an early surplus in 2012-13 but it will leave the budget worse off from 2013-14 onwards. Treasury projections of MRRT revenue to 2020, released under FOI, indicate that Treasury expects revenue to reduce over time. The revenue not only will be downward trending but also will be volatile. Over the first year since the MRRT was announced revenue estimates fluctuated from between $7.7 billion to $24 billion.
While the revenue will diminish, the cost of the measures the government has attached to the MRRT will continue to grow strongly. For example, the cost of the proposed increase in compulsory super to 12 per cent is expected to rise to $3.6 billion in 2019-20, which is when it would be fully implemented. That same year, Treasury projections show MRRT revenue at $3 billion. The Senate inquiry into the mining tax has conservatively estimated that over the next decade the net cost to the budget will be $20 billion.
The MRRT remains a tax based on a deal negotiated exclusively with the three biggest miners who were given privileged access. Instead of making our tax system simpler and fairer, as we were promised, Labor's mining tax will make it less fair and more complex. This tax is divisive to the country, it distorts the national economy and it diminishes our international competitiveness. It is another example of a bad government getting worse. I will not vote for a bill that will reduce the standard of living for Western Australians and drive investment offshore to other countries that are now offering our miners incentives not taxes.
I rise to speak on a series of bills which implement the mineral resources rent tax and extend the petroleum resource rent tax. I would like to acknowledge the assistance in preparing this speech of Chelsea Pietsch, who is participating in a Lachlan Macquarie Internship and spending her week with me here in parliament. I think it is very apt that it is Lachlan Macquarie that is figuring here in this consideration and that Chelsea is from that internship group, because Lachlan Macquarie was a man who had a vision for this country, and we see his vision for the country still evident today in many of the buildings along Macquarie Street in Sydney—and there is no doubt that this is nation-building legislation that is before us today.
Labor is and always has been committed to achieving fairness within the Australian community. As our national platform and constitution state, fairness is one of our key priorities in government. It is our commitment to fairness that shapes our policies and what sets them apart from policies formulated by the opposition. The bills we are debating here today are yet another example of Labor's commitment to achieving fair outcomes for all Australians. And I will repeat that phrase many times throughout this speech, because Labor is for all Australians, not just for some.
Australia has been blessed with incredible natural resources and minerals, which fuel the heart of the Australian economy through the mining industry. Labor fully appreciates the central role of the mining industry in our Australian economy. However, we are also conscious that these natural, wealth-producing resources are finite. We can only dig up our resources once. For this reason, the Gillard government is committed to ensuring that we spread the benefits of the mining boom so that all Australians receive a fair return from the use of our valuable mineral and petroleum resources on the one occasion on which they can be extracted to the benefit of the entire nation. We believe it is not just the very profitable mining companies who should benefit from these natural resources but also the Australian community at large.
More than just achieving fairness with our country's non-renewable resources, however, these bills support growth across the entire economy. This is particularly important to me for the seat of Robertson and the Central Coast region that I represent here in this parliament. I represent an area that has grown at an astronomical rate in the last 30 years. We have many small businesses that are great employers there. We also have incredible pressure on infrastructure. We need to have our economy growing, and the type of legislation that we have before this parliament and the outcomes for Australians are exactly the recipe for success for people from the Central Coast who want to work hard and build this great nation. I can assure the people of the Central Coast that we, the Labor government, will keep delivering for them.
Our government's priority is to lay down the foundations for the long-term prosperity of this nation by ensuring a strong and broad economy. How, you may ask, can we bring about a more equitable share in the profits of natural resources and, at the same time, strengthen the Australian economy? We can achieve these objectives through two critical tools: firstly, by providing an efficient, internationally competitive and sustainable taxation framework on Australia's most significant bulk commodities; and, secondly, by using these taxes to fund important personal and company tax and superannuation reforms that benefit small business and individuals within our Australian community. This is precisely what these bills do.
The Minerals Resources Rent Tax Bill 2011 provides for the taxation of the above-normal profits from mining iron ore and coal. This is a tax on Australia's most significant bulk commodities: iron ore, coal, oil and gas, commodities that very few Australians have access to in their backyard—but they do have them in our nation. We share in them as a nation. They are commodities that make a significant profit—profits that can help create a fairer Australia. The Petroleum Resource Rent Tax Assessment Amendment Bill 2011 seeks to extend an already existing tax on gas and coal projects to onshore and offshore projects. Applying the tax to both onshore and offshore contexts will not only provide certainty to the industry but also ensure broadly equitable tax treatment between competing projects.
Because Labor believes in a fair Australia, the revenue derived from both of these taxes will be used for the benefit of the entire community. Because Labor believes in a fair Australia, we will use the revenue to implement significant tax and superannuation reforms for all Australians, including a cut in the company tax rate to 29 per cent; a new tax break for up to 2.4 million small businesses; reinvestment in Australia's regions through a $6 billion Regional Infrastructure Fund; a boost to superannuation and expanded superannuation concessions for low-income earners; simplification of the personal tax system; and personal tax discounts. That has to be a good recipe for Australia in anyone's book, at least on this side of the chamber. These much-needed reforms represent this government's attempt to make sure all Australians in our patchwork economy get our fair share of the mining boom. We know that many households and small businesses are doing it tough, and we believe that these tax reforms will provide them with the assistance they need to keep managing these challenges as we move together to a better economic and social future—again, for all Australians.
I would like to draw your attention, Mr Deputy Speaker, to a recent study published by the Department of Innovation, Industry, Science and Research, entitled Australian small business key statistics. As the Minister for Small Business, Senator Nick Sherry, revealed during the launch of the study, small businesses accounted for nearly half of total Australian industry employment and a third of industry value-added in 2009-10. In fact, at June 2009, small businesses accounted for nearly 98 per cent of all businesses in the agriculture sector, about 96 per cent in the services sector, about 91 per cent in the mining sector and just over 88 per cent in the manufacturing sector. What these figures indicate is that small business is indeed the backbone of the Australian economy. By implementing the mineral and petroleum resource rent tax bills, the Gillard government is keen to ensure that these critical small businesses receive the support they need to continue providing the essential economic activity they provide to this nation. Labor understands the pressures on small business, and this is why, as of 1 July 2012, the government is offering up to 2.4 million small businesses a new tax break.
As I have already indicated, it is not just small business that will benefit from this new tax. The proceeds of the MRRT will also flow through to regional parts of Australia by means of a Regional Infrastructure Fund. This fund will help communities with much-needed infrastructure support. I have seen this need in my own electorate, the electorate of Robertson. As I said, the growth of our electorate in the last 30 years has been really significant. It has led to ever-growing pressure on our infrastructure. Most evident is the pressure on our roads, our rail, our schools and our health services. Parts of many electorates around the country are bursting at the seams. The tax reforms will help relieve some of this real pressure and, through that relief, stimulate business and further enhance the economic outcomes for our nation.
I now wish to clarify some important points about our tax reform proposals. Firstly, the Minerals Resources Rent Tax Bill is not a tax on production; rather, it is a tax on profit. This is absolutely in line with the recommendations made by the Australia's Future Tax System review. These are recommendations our government takes very seriously. They are recommendations from experts, ignored by those opposite, who always seem to know better than everybody else in every situation—or so they would have us believe. The recommendations we follow are taken very seriously, and we seek to implement viable tax systems for Australia—that is, tax systems that do not destroy, but rather build, the Australian economy. This profits-based tax is a much more efficient way of taxing than state royalties, and it will certainly ensure a much better return for Australia. The opposition will tell you that the introduction of the minerals resource rent tax will derail the mining boom and probably break every worst record they can conjure up. But this is simply not supported by the facts. Consistently we see the real facts getting in the way of the myth making, the negativity and the mischief of those opposite who would tell Australians that all our good days are behind us and none in front of us. The reality is very different to what we hear from the other side—'no, no, no' and the carping negativity—and the leadership this country needs is embodied in this legislation.
The latest survey of business investment plans shows that mining companies invested $34 billion last year. They are going to invest $55 billion this year and—wait for it—the amount is growing. They are going to invest $76 billion next year, hardly a sign of an industry in decay. To put that into perspective: that is more than five times the amount of mining investment undertaken six years ago, before the boom took off. However, it is not just an increase in raw dollar investments happening in the mining sector. Since Labor announced its intention to introduce this tax, mining employment has increased by 34.3 per cent. That is 44,200 mining jobs. And as much as those opposite do not like it, this is no indicator of a mining slump.
The second clarification I wish to make about the minerals resource rent tax is that we were only willing to announce it after significant consultations with major players in the industry. These consultations were facilitated by the Policy Transition Group, chaired by none other than Don Argus—the former Chairman of BHP Billiton—and comprised of numerous representatives, including those from peak industry organisations such as APPEA, MCA and a wide range of mining companies both large and small covering iron ore, petroleum, magnetite and coal seam gas operations across the country.
Our government has not only met with and listened to these representatives, we have also accepted every single one of the 98 recommendations made to us by this group. This is an indication of our commitment to work closely with those in industry. The Labor government cares about industry and highly values the opinions of those who are engaged in the mining boom. We have met with the key players in the mining industry, we have listened to them, we have talked with them and we have made our way forward together for the short- and the long-term future, for the sector as well as the nation. This is unlike those opposite who this week in the Qantas debate sided only with big business. They showed no regard for workers and little regard for the ordinary travelling public. Labor listens and Labor leads with a proper regard for business leaders, for union leaders and ordinary working Australians. We get that we are all in it together.
We have listened to all parties and we have brought the best plans into being in the national interest in this legislation before the House today. We are now seeking to implement all those things which have been recommended to us by stakeholders. Suffice it to say, these bills are none other than a collaborative effort with all at the coalface of the mining industry. But more than this, these tax reforms are our attempt to spread the wealth of the mining boom to all of those struggling to make ends meet in our patchwork economy.
The Leader of the Opposition is against these reforms. As we have seen time and time again, the opposition is much more interested in supporting big business than in addressing the needs of those who are doing it tough. With these tax reforms, small businesses within my electorate, such as the scrumptious Terrigal Bakery, the well-patronised Sushi Circle in downtown Gosford, and hard-working tradies like Paul Palmer, a local plumber, and John Owens, a local painter, will be able to reap some of the benefits of the Australian mining boom. This is a very significant tax reform for small business and they will be able to have multiple items written off immediately.
Labor will provide a boost in the super guarantee from nine per cent to 12 per cent for around 8.4 million workers, increasing the pool of retirement savings by $500 billion by 2035. What more can I say, aside from the fact that we are the party who introduced super and now we are the ones increasing it. As a woman with two daughters, I am keenly aware that women really need this legislation to pass through this parliament to practically improve their lives in retirement. Women retire with 40 per cent less than men in their super, despite the fact that, happily, we live longer. But through the introduction of these bills, implementation of the mineral resource rent tax and the petroleum resource rent tax, Labor is giving all Australians a fair share of the mining boom—a boost to retirement savings, tax breaks for small business, company tax cuts—and at the same time supporting growth of the Australian economy. I commend these bills to the House.