Tuesday, 22 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
When speaking before question time, I named 17 mines in north-west Queensland that are on the drawing board as projects. To go ahead, they will need a rail system or some other method of transportation, they will require power and they will require water. Water is not a great problem for us insofar as most of the giant rivers in Australia flow into the Gulf of Carpentaria, so water can be reasonably adequately obtained. The federal government deserves very great praise for the initiative on the transmission line known as CopperString, which will take grid system power at long last into the mineral belt of Northern Australia. The minister, Mr Ferguson, has said on many occasions in this House that all of Australia's base metals are in the top one-third of Australia, if you like, and there is not a power station within 1,000 kilometres of where we need the power to be.
In my book History of Australia, which will be published shortly by Murdoch Books, we talk about developmentalism. That was an idea long since lost to this place. We heard the last speaker on the MPI telling us how wonderful the economics of Mr Keating and Mr Hawke were. Well, there was simply no development that took place in this country during that period of time; there was not a single item of infrastructure.
There was only one item of infrastructure built by the government that followed and, to their disgrace, it was the railway line from Adelaide to Darwin. It was a disgrace in the sense that it was a railway line from nowhere to nowhere through the biggest desert on Earth. It was built so that the Liberal Party could win the election in South Australia. If that railway line had been built from Tennant Creek across to Mount Isa, all of the great mineral wealth and all of the great agricultural wealth would have had quick and speedy access out through Darwin. The top third of that railway line from Adelaide to Darwin would have been very profitable indeed. But there was no such enlightenment. We were thinking politics; we were not thinking development.
Almost every member on the front bench of both sides of this parliament could not spell the word developmentalism. I do not say that to be denigrating of them, but one mob was there for 12 years and the other mob has been there for three and, if you like, 12 years before that. So for the best part of 30 years they have both been there and not one single piece of infrastructure was built in that time. I sat in the parliament in Brisbane for 20 years and in that time one of the biggest dams in Australia's history was built, the Burdekin. It was an initiative of the state government. The railway line that opened up the coalmining industry of Australia was built from Gladstone to a little railway siding called Blackwater. There were virtually no export coalmines in this country at the time that railway line was built. The giant port of Gladstone, one of the few ports in the world that can take 200,000-tonne shipping, was built. One of the four biggest power stations in the world was built at Gladstone. Those threes pieces of infrastructure facilitated the creation of Australia's aluminium industry and the creation of Australia's coal industry.
If we had the policies of the current Labor tradition and the Liberal tradition on the other side, then none of those great infrastructure projects would have been built because they would have said, 'Oh no, they have to pay for themselves.' If they had to pay for themselves, then they simply would not have been built. The railway line to Blackwater was not going to pay for itself—there was not a single mine there at the time. The people in this place do not seem to understand, because they have never been out in the real marketplace in the real world and most of them have never backed their judgment with their own money in their lives. They have never been involved in business and they have no experience of that sort of decision making. If they were out there, then they would understand that there is a chicken and egg situation. The mining company says, 'We cannot open a coalmine unless we have got a railway and a port.' The government says, 'Well, we are not going to build a railway to a port unless there are coalmines there.' It is the chicken and the egg.
Premier Beattie, in a very generous and gracious act, said that the coalmining industry of Australia was created by Bjelke-Petersen. I was there when those giant infrastructure items were built at great expense creating great debt. The Queensland government was the biggest borrowing government in Australian history by a long way and easily the most successful economically in the nation's history, because each of those resources that we built brought great wealth to the state of Queensland and great revenue to the people of Queensland. Some of us said there was a bit of bushranger stuff in that railway line and I suppose there was—more than most people know, actually.
There are 17 mining projects to be developed, the second biggest wind farm in the world is proposed to be opened at Hughenden along this copper string transmission line and at Pentland there is the biggest sugar project in world history which will produce 112 million tonnes of sugar a year being turned into ethanol and electricity. Renewable forever! The sun will shine, rain will fall from the skies and the Burdekin River will flow and a little bit will be diverted to spread out on this grass which we call sugar cane—this magnificent and magical product.
The other thing we need is to be able to get our product out of north-west Queensland. Why was Louis XIV, the Sun King, one of the most famous rulers in world history? Because he built canals all over France. In fact, at the end of his reign you could go by boat from the Mediterranean all the way to the English Channel. He deserves his place in history. Why was Peter the Great great? There are a number of reasons, but again the most famous was that he built canals. The easiest and cheapest way to move anything is on water. Everybody in this place knows that. The great growth of China was facilitated by the mighty canal and irrigation systems that were built by enlightened rulers in that country. Theodore Roosevelt is carved up on Mount Rushmore for three reasons. One reason he is famous is that he smashed Esso, Rockefeller's company. One of the other famous things that he did was to build the Panama Canal. These people were great because they built canals.
If you look at a map, the Gulf of Carpentaria is extremely flat. You can come 200 kilometres from the sea and still be only about 30 metres above sea level. It lends itself to the building of canals. We have giant iron ore deposits. We have never looked for iron ore, but when we were looking for copper, lead and zinc we stumbled across iron ore. According to media reports and the Bureau of Resources and Energy Economics, we have stumbled across some 900 million tonnes so far, but we cannot get it out. The only way is the railway line which is 1,000 kilometres from Townsville. We have got to get a canal built from the Albert River south from where we can access it to take this product out overseas very easily and cheaply.
I visited Moranbah with the state member, Mr Knuth. I was absolutely appalled when one of the councillors there, Mrs Baker, told us that Moranbah was going to have 3,000 or 4,000 workers on two sides, so Moranbah would be between these two great barracks areas of young men with nothing to do of an evening in the town when they are off-shift. This town would be turned into a barracks rather than a town.
If you give us a tiny bit of bitumen on which we can put two-acre allotments, we can provide civilised living for the tens of thousands of people that are needed in that area to make a civilised community that will be there for 100 years. You would know the issues that I am talking about, Mr Deputy Speaker. At the present, every single piece of infrastructure in Moranbah will be straining at the bit and collapsing to make foreign coalmining companies rich. I do not object to that—the fact that they are foreign I do—but the fact that our infrastructure is collapsing. (Time expired)
It is with pleasure that I speak to the legislation before the House, the Minerals Resource Rent Tax Bill 2011 and cognate bills. I am on the record as having expressed on a number of occasions support for the concept of a rent resource tax. I agree with the position of the Minerals Council of Australia, particularly in relation to the way in which a rent tax works. It works on profits rather than on royalties. There has been a lot of talk about the way in which this particular rent tax has been designed, the way in which the previous superprofits tax was designed, and there has been a lot of politics in terms of how it has all come together.
It is public knowledge—I am sure that most people in the House know—that, even though I had been supportive of the concept of a minerals resource rent tax, I had occasion about a fortnight ago to be very annoyed with one of the major coal seam gas companies, Santos, and the way in which they were trivialising and treating constituents in the electorate of New England on the Liverpool Plains. They acted to put in place a drill hole to test-drill for coal seam gas. They did that in the full knowledge that an independent scientific study was underway—the Namoi Catchment Water Study. The Commonwealth funded that study to the extent of about $1½ million, and BHP, Shenhua and Santos themselves had put some money in to try to gain some independent knowledge about the relationship between the groundwater, the surface water, the flood plain and the Murray-Darling system and what was actually happening in that situation.
When Santos decided to proceed without the full knowledge of the independent study, people in my electorate decided to blockade that development. The day before, I had actually said to Treasurer Wayne Swan on the phone that I was supportive of the minerals resource rent tax. But I was annoyed with the way in which that company—which has generally got a pretty good reputation—treated these people and with the fact that these people had to embark on a blockade process.
Many of the same families, some of whom are in ill health and distress, embarked on a similar process when BHP marched onto the flood plain six years ago, not all that far away. BHP had been granted a licence by a New South Wales minister who had never been there. That minister is currently under investigation by ICAC, I believe. They had been granted this licence, and the minister did not even know the landscape that he had granted the licence over. BHP, with its muscle—and we in this place know about the muscle that it exerts from time to time—marched onto the flood plain and said: 'This is what we are going to do, boys. Welcome.' The community were outraged at the potential impact on water resources, particularly on the flood plain. That would have had an impact on the people in the immediate vicinity, potentially, and also on the interconnected groundwater systems that extend for about 300 kilometres within the Namoi system, and on the way those systems relate to the river system.
I commented on a number of occasions that it was almost an absurdity that, while we in the parliament are trying to design a Murray-Darling plan, we are allowing these activities to occur—not only on the Liverpool Plains but on the Darling Downs and in other parts of Queensland—for example where you reside, Mr Deputy Speaker Scott. There were very real concerns about what could happen in relation to water supplies. It was not about whether people were pro or anti mining; it was about whether the appropriate areas were being investigated and about the investigative pressures that the mining companies and the state governments—particularly New South Wales in this case—were under in terms of needing the cash from the exploration licence and potentially the royalties—
The member for Kennedy has vast personal experience in drilling holes and knowing where to find things. I know that he would understand a lot of the issues that are in Queensland. Many ministers have gone to the Liverpool Plains; the Prime Minister flew over there a few months ago; Minister Crean has been there; Minister Ferguson has been there; Senator Doug Cameron has been there; and many people from the coalition have been there, from both state and federal level. On the back of that action from Santos, I notified the Treasurer that I would not be supporting the minerals resource rent tax until three things happened. One of those is that Santos remove itself from this ridiculous action until appropriate scientific rigour can be applied to the process and the area.
For those who do not know, this particular area is a very small ridge in the middle of a flood plain which has very significant groundwater resources under it. The flood plain covers an area of about 100 kilometres, across the base of the hills, by about 80 kilometres. You can imagine a rectangle of about 80 kilometres by about 100 kilometres. And all of that water has to go through a six-kilometre neck at a little place called Breeza. You have this absurd proposition that has been placed on that community, and they boycotted BHP for 621 days until BHP saw sense and removed itself until the conclusion of independent scientific work. That is going to be completed probably mid next year.
This flood plain has this massive amount of surface water that flows across it from time to time—not every year. There are massive amounts of surface water and there is a massive drainage system. It connects with the electorate of Hunter. He would be well aware of the capacity of that flood plain to flood. He has represented part of it in the past. Given that knowledge and the fact that these people were going to blockade—in this case, a coal seam gas mine—I saw fit to use the leverage of this particular parliament to say to the Treasurer: 'I won't be supporting this unless you people fix this up. These companies aren't listening. They're just not listening to what these people are saying. They are using the law against the people on these very sensitive, highly productive agricultural areas.' And they are in fact, in my view, damaging the miners who are mining where they should be mining by attempting to move out onto these very sensitive landscapes.
The three issues I put to the Treasurer at the time included that Santos remove itself. That has happened. The second issue was that some of the proceeds of the minerals resource rent tax should be used to fund what I call 'bioregional assessments' at an independent level so the community can have some confidence in the process and in when an assessment process takes place and the independent science is found. Currently, the miners have to do that through their exploration licence. There is mistrust and no confidence in the process, because the state is relying on it for money. The third proviso was that the Commonwealth amend the Environmental Protection and Biodiversity Conservation Act to allow water to be a trigger. I have had legislation in the parliament on this particular issue since September. The Commonwealth, as it does now through heritage and endangered species issues, can in fact enter the planning process on extractive industries if there is a trigger. Currently, water is not a trigger.
Mr Deputy Speaker Scott, you would be aware of instances in Queensland where 1,200 conditions were placed on a coal seam gas field by the state and 300 were placed by the Commonwealth. If you have to place 1,500 conditions on anything it says that there is a problem with the process.
The member for Kennedy is quite right. The capacity to police and prove things makes it very difficult.
What has come out of all of that is that Santos has removed itself from the pilot well and the government has agreed. I thank the government and the people I have been negotiating with for the last fortnight, who have been extremely positive in relation to this. I think most people—I hope on both sides of the parliament—recognise that there are very real issues here. This is not about playing a political game; there are legitimate issues.
I can remember something that happened in 2008. I attempted to amend the Water Act 2007 to allow a similar process that we are talking about now: an independent scientific process. That was passed by the Senate one night. The National Party and the Liberal Party supported the Greens, and it was passed. Press releases were sent out by many within the National Party about what a great thing they had done for the farming community. I remember Senator Joyce saying that the Liverpool Plains people would be so grateful to the National Party for what they had done. About 2 o'clock in the morning Mitch Hooke from the Minerals Council of Australia and others came into the building, and the very next morning the Liberal and National parties recanted their vote. It is one of the very few times it has ever happened, I am told. They recanted their vote on the pressures from the mining industry.
Proceed forward some time to 2008, and Melanie Stutsel, the environmental director for the Minerals Council of Australia, gave evidence to a Senate inquiry in response to some of the things that I had been suggesting at the time and had with the Howard government as well—the Howard government was still in play then. She gave evidence to say that a more appropriate role for the Commonwealth was to put in place a bioregional planning process where the states and territories would take that bioregional planning process into account when planning the release of exploratory or extractive licences. That is why the Minerals Council has not attacked my particular proposition: it is their words. They said at the time—and I have had discussions with them since and have high regard for a lot of people involved there, having known Mitch Hooke personally for many years—'Good idea, Tony, good idea—but we're not going to fund it.'
The minerals resource rent tax comes along, and they can fund it indirectly but not be in control of the process, as they are now through the exploratory processes. The Commonwealth will fund it, and it will be indirectly from the mining industry itself. So we will now have a process where potentially—if the states come onboard; although, the Commonwealth has given an undertaking that, if the states do not come onboard, it will legislate to the very same effect that the Commonwealth will take over some of those responsibilities in terms of the EPBC Act—an independent scientific committee is set up that will be funded to the extent of $150 million by the Commonwealth through the MRRT. That money will provide for these bioregional assessment processes. It will make the companies comply with a process that takes onboard that scientific information, some of which will be the very information that those companies have been finding anyway but has not been trusted by the community. So they do not have to pay for that anymore. The minerals resource rent tax will pay for that independent scientific bioregional assessment process.
I would urge people who are interested in this to read the Prime Minister's letter. It is very conclusive in terms of the issues that it raises and the processes that it involves. It will amend some of the states' legislation if they do not go down that track, and there is some reward built into it as well in terms of Commonwealth money. If they do not go down that track, the Commonwealth has given an undertaking that, if COAG cannot do it, it will legislate and do exactly the same thing in its own right, in terms of water being a trigger and the environmental bioregional assessment processes taking place.
I am very pleased to have been part of that process. In a sense, I thank Santos for doing what they did, because it brought this issue to a head. I am sure they did not mean to do that, but it has brought it to a head. I thank the members of this chamber who have privately and publicly said to me over the last few days that this sort of thing should have happened a long time ago. It could have happened in 2008 if the Water Act had remained amended, but that is history now. This is an opportunity for a fair go for people who live in these areas to have confidence in the process. (Time expired)
In just over a week's time we will celebrate the 157th anniversary of one of the most infamous episodes in the history of our nation. The date 3 December 1854 will be forever remembered as the day of one of the most significant domestic conflicts. Many historians now consider this event to be the birth of democracy, as it led to a big step towards universal suffrage. The event is, of course, the Eureka rebellion: an organised movement of civil disobedience by miners in the goldfields of Ballarat, protesting against the crippling effect of increased taxes and the burden of regulation imposed by government authorities.
The miners, mostly small operators, found they were dealing with authorities that would not listen and did not care. So they stood their ground. They built their stockade. They defended their rights, kind of like on olden day 'Occupy Ballarat' movement. The result was an assault by armed troops using the most uncompromising methods, and over 30 miners were left dead. The battle may have been lost, but a larger war against tyrannical authorities was won. To show the degree to which the world turned following Eureka, rebel leader, Peter Lalor—a man identified as being so antiestablishment that he was hunted with the offer of a £400 reward—would become so revered by the people that years later he was elected as Speaker of the Victorian parliament. No-one sums this up better than Mark Twain, who, during his visit to Australia, wrote:
The ... miners protested, petitioned, complained—it was of no use; the government held its ground, and went on collecting the tax. And not by pleasant methods ...
By and by there was a result; and I think it may be called the finest thing in Australasian history. It was a revolution—small in size; but great politically; it was a strike for liberty, a struggle for a principle, a stand against injustice and oppression ... It is another instance of a victory won by a lost battle. It adds an honorable page to history; the people know it and are proud of it.
This struggle for a principle contributed greatly to the Aussie legend.
The Southern Cross symbol of the Eureka flag has become permanently linked with struggle, more recently perverted by Norm Gallagher and the Builders Labourers Federation during their fights against the Victorian Labor government in the 1980s. Now, 150 years after Eureka, we see that little has changed. We have a government operating with a total lack of understanding for how businesses operate and with a foundation so entrenched in unionism and wealth redistribution that they seem to have forgotten what the Eureka flag actually stands for.
When the minerals resource rent tax was first proposed, coupled with an increase to superannuation contributions from nine to 12 per cent, I was doorknocking in the Bennelong suburb of Ermington. I visited mostly older Australians who had paid off their mortgages long ago and proudly saw the prudence of a time when Australians were encouraged to be responsible for their futures, proud of their achievement of home ownership and secure that the government could not devastate their life savings with poorly conceived policy. On announcement, the market judged the government's new tax by slashing the value of such blue-chip stocks as BHP and Rio. The proud old homeowners of Ermington, with savings safe in the bank, were now feeling vindicated—their prudent ways of living within their means, paying off their home and saving for a rainy day. Their concerns were for their children and grandchildren and the behaviour of their party. Reckless policies and criminal waste shook even the most faithful.
They did not like what Kevin Rudd was doing, but they liked even less what followed. Enter Julia Gillard, not through a democratic process but as a crowned factional princess. The people and the people's wills were not what she had to answer to. They were not her master. Her first course of action was to modify the next tax for the approval of the big three miners. Three was to become a very significant number for our new Prime Minister. The claim was made that she worked tirelessly with her Treasurer over six days to develop this new deal for the big miners, yet this claim did not even survive the gentlest of scrutiny as, at the last minute, the Treasurer took his old school mate's seat at the front of a plane and, for two days, attended the G20 table in Toronto, and there were two days in travelling time. Working tirelessly with the Treasurer? I do not think so.
Never mind; the new PM was on a roll. A pattern of behaviour was developing. By appeasing the big three miners, she would be safe in her position, and we, the people of Australia, would pay. We then moved to an election to vindicate her position, and three was again her number. The pattern of behaviour was repeated. A deal was done with three Independents, as kids would trade sports cards. The PM's position was safe and we paid. The final assault on democracy was the marriage to the Greens, which has resulted in her having to endlessly explain her promise to the Australian people that 'there would be no carbon tax under the government I lead'.
If we are to believe our Prime Minister, the only conclusion that can be reached is far more dreadful than our PM lying to us, and that is the conclusion that Bob Brown actually leads the government and we have a carbon tax under the government he leads.
The consistent modus operandi with this Prime Minister and her government is that deals are done with three and the ones who will pay will be ye, so that the Prime Minister will remain she—not a great day for democracy and not a great day for the people of Australia. In the simplest terms these traumatic times define the chasm of difference between our two parties: Labor taxes with promises of spreading the wealth, with a sizable amount of waste along the way; our 12 years in government demonstrating our capacity for fiscal responsibility and an ability to achieve budget surplus.
The promised mining resource rent tax has now identified Australia as a country of sovereign risk, driving would-be investors to safer venues, like war-torn Africa. This government is introducing a tax against our miners that is divisive, complex, unfair, fiscally irresponsible and distorting—reducing our international competitiveness. Just like the other tax that was passed in this parliament earlier this month, this is a bad tax which came out of a deeply flawed process.
For those with short memories, here is a reminder of events. In 2007 Prime Minister Rudd commissions a root and branch inquiry into our tax system. The Henry tax review produces 138 recommendations. The government adopts 3½. One of these recommendations is the resource super profits tax. This new tax, representing the biggest new tax imposition in a decade, is announced with zero consultation with industry and zero consultation with state and territory governments, despite serious implications for their own revenue. The Henry review had recommended a national, profit based resource rent tax to replace state and territory royalties, giving the federal government responsibility for negotiating the federal-state financial relations implications of this change in policy. However, the government simply were not up to the job of engaging with the states and doing the hard yards on genuine tax reform. Instead, they developed what they ironically called 'work-arounds', to avoid doing any work, to get the system right—instead, making it far more complex and messy than it needed to be.
The pushback from the community costs the Prime Minister his job, the policy gets aborted, and, in secret, a new policy is negotiated exclusively between three government ministers—without their expert advisers—and the managing directors of the three biggest mining companies. Much like the small miners in Ballarat, the competitor companies to the big three were totally excluded from the negotiation process, and of course a tax is designed which further entrenches the dominant position of the three big players, acting as an anticompetitive policy against any of the entrepreneurial dynamic smaller players in this important industry.
More than 12 months after the government is re-elected, after coming within a whisker of being the first single-term government in nearly 70 years, we observe that there is yet to be consultation with any of the state and territory governments about the implications of the mining tax. This is despite major implications for GST-sharing arrangements for all states and the fact that resource royalties represent 20 per cent of the West Australian, nine per cent of the Queensland and six per cent of the New South Wales state government revenue.
The Henry tax review was initiated for root and branch reform with the intention of delivering a simpler and fairer tax system. Instead, we have 287 pages of legislation that is significantly more complex and considerably less fair. The mining resource rent tax gives an unfair competitive advantage to the big three companies who were allowed to design the policy, such as the introduction of the market valuation system to calculate applicable deductions, which gives the big three a significant tax shield not available to small- and mid-size mining companies. Smaller miners will be forced to either pay the new tax sooner or continue to pay royalties on production while also being subject to increased compliance burdens. This is despite the Henry tax review—in recognition of the significant investment costs inherent in new mining ventures—actually recommending a lower tax burden for smaller mining ventures to help start-up companies grow and prosper.
Earlier this afternoon the shadow Treasurer spoke in this place with his usual eloquence and rhetorical flourish about the ineptitude of this government and their attempts to achieve the first Labor budget surplus since 1989. He highlighted that the mining tax package will actually leave the budget worse off. In particular, over the medium to long term it will worsen the current structural deficit.
Over the first year since the mining tax was first announced, revenue estimates have jumped from $12 billion under the original Rudd model, doubled to $24 billion with revised commodity price assumptions, gone back down to $10.5 billion under the Gillard deal and gone further down to $7.4 billion after taking into consideration changes to the exchange rate—and now the estimate is $7.7 billion with further exchange rate predictions.
Treasury documents released under freedom of information requests have shown projections of mining tax revenue to reduce over time to 2020, yet the government's costs will continue to grow. The cost of the proposed increase in compulsory super to 12 per cent alone is expected to rise to $3.6 billion in 2019-20—which is when it would be fully implemented. That same year, Treasury projections of mining resource rent tax revenue is $3 billion. There is that number three again. This mining tax deal makes the federal budget a hostage to state and territory government decisions to increase royalties on iron ore and coal. It will impose significant additional compliance costs and reduce the efficiency of our tax system. There is even a serious question mark over the constitutional validity of this new tax.
But there is a better way. Genuine and sustainable tax reform can only be achieved through an open, transparent and inclusive process involving all relevant stakeholders. Just like those legends that came before us on the stockade and stood up against unfair taxes and regulations, it is our duty as representatives in this place to stop this divisive, complex and unfair tax from going ahead and to force the government to start again, to focus on getting spending under control and to implement lower, simpler, fairer taxes and genuine tax reform that is based on a proper process, giving everyone a fair opportunity to have their say and be heard. The Australian tradition of struggle for a principle, extolled so beautifully by the words of Mark Twain, would demand no less.
I rise to speak on the Minerals Resource Rent Tax Bill 2011. I want to touch on some of the strands of thought and some of the arguments that have been in the public debate over the past 12 to 18 months. I appreciate the various positions put by numerous parties to the debate in this time. The area of resource taxation is extremely complex, I understand, even for accountants, and I am pleased that the ATO has been involved in the Resource Tax Implementation Group to establish how this package will actually work in reality. We have also had the Minerals Council of Australia sit down and negotiate with the government—as sectional interests should, especially where their members are so directly affected.
This bill provides Australia with great opportunities. As I said, the opportunities that this bill provides cannot be ignored. We cannot afford them to be ignored. We saw incredible change throughout the 20th century, from the dominance of the British Empire, two world wars, the emergence of America and the USSR as superpowers—and the failure of the latter—and the dawning of the Chinese re-creation. Hardly a decade went by without an event of mesmerising significance.
Within Australia, we started last century as, effectively, a group of British colonies. We saw our cities and living standards improve immeasurably with the migrant fuelled economic explosion that transformed the Australian way of life, forging with sweat and brine 'the lucky country' badge we subsequently tried to remould into that of 'the clever country'. After consisting for most of our history of a mine or a farm, some 60 per cent of our economy is now in the services and education sectors. The 20th century was the making of Australia. By the mid-80s, under Hawke and Keating, we even rid ourselves of subservience to our English court of law in the Privy Council. With that act, thanks to Labor, we actually became a modern, independent nation.
Our transformation continues. The 2010 Intergenerational Report refocused our attention on the many future challenges that are now starting to become immediate reality—in particular, an ageing population. The mass of our workforce will retire in decades to come, and our tax base will battle, as it has been, to sustain the quality of life to which we have become so accustomed. We face challenges of huge proportions.
One of the most substantial transformations that Australia will work through in the first half century of this new millennium will be the reworking of our social infrastructure and systems to afford an ageing population the income it needs and the care it deserves and to keep our national books in very good order and our future bright. None of us wants to become another Greece or Italy or share in what is going on in Europe at the moment.
But how will we do this? It is already apparent. Policies have been pursued by this Labor government to make the substantive changes required of future governments to deliver good governance with prudence. We have already seen the reworking of the age pension, increasing its value in real terms while making it more targeted for those who need it most—a job well done. We have seen the reinvigoration of the private health insurance industry. The membership now is higher than it has been for 35 years. In this area, policies, including some introduced by a previous government, have clearly worked. They have done their job and run their course. And now—to avoid unintended consequences of those policies, to avoid going too far and overbalancing, to avoid falling flat on our collective face—adjustments are required to keep the package and to keep the system on track and on budget. As with most policies reaching maturity, adjustment and recalibration are required.
We have also seen the new deal between the Council of Australian Governments to reinvent healthcare funding across our nation, delivering our first performance targets to drive public satisfaction while maximising the efficiencies we can engineer and driving taxpayers' dollars further—a tremendous result of this government. We are seeing COAG also sign up to another reform, more substantial in conceptual change than both of these just mentioned—bigger than reworking the pension, bigger than reworking health funding and performance. In a sizeable shift, the Gillard government has got all states and territories to give support to the very, very popular principle of a national disability insurance scheme which will fund substantially higher care for Australians in need well into the future.
We have our health budget, our age pension outlays and our disability support pensions-cum-insurance scheme undergoing substantial reform. But there is another Labor creation that is also undergoing a substantial refit to prepare Australia, as a nation, for our future challenges—the increase of the superannuation guarantee to a level that will actually deliver the finance required for people's retirements. And, with this, I get back to the bill before us and one of the outcomes of the passing of this bill. As a result of this Labor government increasing a previous Labor government's super guarantee from 9 to 12 per cent of wages, our ageing population becomes substantially more affordable. For the first time in our national narrative, senior Australians en masse will be independently more comfortable in retirement, able to exercise their self-determination in living arrangements, home care, health care—whatever they care to afford. If we ever wanted to make good on the clever country idea, this reform will go a very, very long way to achieving it.
This government has been amazingly successful in identifying the major national priorities of this and future Australian federal governments, going forward half a century and acting now to make the inevitable changes smoother, easier and more affordable for us individually and collectively.
Re-engineering our power-generating capacity is another case in point, as is building a continental superfast communications system of great capacity for the century ahead.
The increase to the superannuation guarantee from nine to 12 per cent is just one of the intended benefits of the adjustment to the mining industry's tax regime, as contained in the bills before us today. You will all have noted various other policies. I have spent the last few minutes articulating the dominant challenge that we as a nation need to be prepared for in the decade ahead and how this government is preparing to meet that challenge. With the passing of this bill and the streaming of revenue towards meeting one of the potentially problematic areas of future government outlays, the Gillard government is well and truly leading our nation towards sustained prosperity.
On that point, I want to note a couple of points from the Minerals Council of Australia's submission to the House of Representatives Standing Committee on Economics on Wednesday, 16 November:
Export earnings from both commodities combined in 2010-11 were around $91.7 billion—more than one in every three export dollars earned by Australia, up from around one in 10 a decade ago.
The submission also said:
The minerals industry … accounts for around 7% of GDP, upwards of 20% of national investment and more than 50% of Australia’s exports of goods and services.
This is incredible growth, contributing to the tsunami in capital investment that is just starting to make itself felt and that will continue to drive capacity growth for years to come. This is really the point that the Minerals Council was making. With Brazil and other nations with very high grade ore coming online for the first time, with incredible deposits of wealth only now just starting to be tapped, Australia can only expect the competition within the minerals sector globally to increase. The last decade has seen prices for ore go through the roof. But we should not anticipate more of the same.
To keep our almost dauntingly high income streams into the future, to keep our national export income comparable to what it has become, it makes excellent sense to move from this most recent era of price growth to one best characterised by volume growth. Instead of relying on unprecedented, dizzyingly high prices for our commodities, we should look to sustain cash flow by selling greater volumes. As Labor has been saying for years—and year in, year out during the Howard government—we need to address the capacity constraints in our mineral export industry. The Minerals Council agrees with Labor, saying we need 'sustained capacity building' to 'secure prosperity for future generations of Australians'—capacity building in our ports, our transport systems, our financial markets and our workforce.
As I just said, commodity exports have reached seven per cent of GDP. The Minerals Council sees the value of commodity exports having the potential to stabilise at around 19 per cent of GDP over the next five years, not including support services—from seven per cent to 19 per cent of GDP in five years. Iron ore and coal reaped $90-odd billion in export income in 2010-11. Commodity export revenues in total are projected to potentially reach $480 billion in real terms by 2030. These numbers, these billions of dollars, may well make a person dizzy.
What is taking place to our north and our north-west and what will continue to take place over the next several decades puts human history in its entirety into a sort of preface, a preamble: the building of China, the building of India—the construction of what will become the two greatest economic powerhouses that the world has ever seen. This is no small project. It requires no small investment, no small resourcing, and Australia is in the box seat, if we play our cards well now, to be the supplier of much of the vast resources that those two powerhouses and others will require for decades to come. This is their century, and we will supply them with their iron. I commend the bills to the House.
This mining tax is another example of this government's policy failure—another disaster, another mess. But it is also a tax that will have particular disadvantages for people who live in regional Australia. It puts their businesses, families and entire communities in a no-win situation. If the tax becomes law, regional communities will the lose the jobs and economic prosperity created by mining development and mineral processing. Most of this industry that is about to be subjected to a new supertax is located in regional communities. The processing sector is also generally in regional communities. In many places, this is the major part of a regional economy. So this is a tax that is going to be particularly focused on regional Australia.
The government has said that any new investment in services in regional areas is dependent on introducing this great big new tax. So, if it does not pass, vital regional development projects will simply not be funded. This is really a shabby sleight of hand from a government promising goodies that it cannot afford, based on a tax that has not passed the parliament and that, if it does, will hurt regional Australia hard. It is lose-lose: either we lose jobs or we lose the promised regional funding activities. In fact, as things currently stand, Labor has already committed $916 million from its Regional Infrastructure Fund—to be funded out of the mining tax—but there is only $400 million in the kitty. The government is calling now for applications for new projects, but there is no money there to actually fund the successful applicants. This is already showing some of the same symptoms of the fraud in the last round of the regional development grants. It was simply a fraud, with most applications being refused altogether and, for states like Queensland, not a single project having been approved west of the Great Dividing Range. In other states, of course, nearly all of the money went to Labor electorates, even though Labor represents only a very small proportion of regional Australia. That means that a lot of communities stand to be dudded.
What we see with the mining tax is a shameless cash-grab from a desperate and financially incompetent government. Mining companies already pay royalties to state governments, a system that has been in place for 100 years. The mining industry and its growth are vitally important to this country. It provides work for over 780,000 Australians—187,000 people directly and a further 600,000 in support industries. The minerals resource industry accounts for more than seven per cent of Australia's economy and has invested more than $125 billion in Australia in the last 10 years.
The mining industry's contribution to the Australian economy is now $121 billion a year. It generates $138 billion a year in export income. That is over half our total goods and services exports. The industry spends $35.2 billion on new capital investment, $5.7 billion on exploration and $4.2 billion on research and development. Combining company taxes and royalties at $23.4 billion, the carbon tax at $3 billion and now the mining resource rent tax, the mining industry will be footing a massive $30 billion tax bill. But this is not the first tax this industry pays. It is on top of taxes like company tax, fringe benefits tax, goods and services tax in the form of net refunds, excise duty, petroleum resource rent tax, capital gains tax, luxury car tax and all the other taxes that are imposed on Australian business. At the state level there are royalties, payroll tax, land tax, motor vehicle registration, insurance duty, other transaction costs and the list goes on.
I am about to quote the minister at the table, Mr Rudd, he will be pleased to know. In an editorial titled 'Pain on the road to recovery' in the Sydney Morning Herald in July 2009, then Prime Minister Kevin Rudd cited official estimates that the mining sector's expansion had delivered a $334 billion boost to Commonwealth revenues in the period since 2004-05. The man who is now the foreign minister was praising the industry for all the taxes it had already paid to the federal government. But that was not enough. We now need another tax on top of all that.
Australian resources belong to all Australians—and that is not new—and it is fair that the Australian people should have a fair share of the benefits of those resources being used in Australia and around the world. That is the foundation of the existing state royalty schemes. Miners do have a responsibility to put back into the community and to partner with regional communities for their social licence. I am not one of those who argue that mining royalties are somehow an inefficient or ineffective tax. The reality is it is a price that miners pay, for using a resource that is essentially owned by the Australian people. I guess, strictly speaking, it is owned by the states, but it is also owned by the Australian people. They are entitled to a fee, a payment, for taking those minerals out of the ground and they are entitled to a payment whether or not the company is making a profit. If they are not making a profit then they are still taking the minerals out of the ground and they ought to be paying a social licence, a royalty, for that.
On top of that we will now have a profits super tax, and that sends the wrong signal. Even in our national anthem we praise the advances of 'wealth for toil'. It is the Australian ideal that the harder you work the greater your rewards. For any government to decide what constitutes acceptable profits—and that, in exceeding this arbitrary threshold, companies need to be whacked with additional tax liabilities—sets a dangerous precedent. Labor's green partners are not satisfied with the super tax just on the mining industry, they want to extend it right across the corporate sector. Every part of business must now be wondering whether they are next.
Never try to be too successful in this country because, if you do, if we have a Labor government it will think up a new special tax to make sure you cannot keep being successful. The very notion that we would seek to bludgeon a successful industry with what amounts to a success tax is certainly sending the wrong kind of signal to all Australians. What happens if farmers, for instance, have a good season and the prices are high in the world and the Americans get rid of their trade barriers and the Europeans get rid of their trade barriers and suddenly farmers make a profit? Are they going to be slugged then also with a superprofits tax of the nature that is proposed for the mining industry?
It is worth remembering that this is only one of 19 new or increased taxes that have been served up by this Labor government in their four years in office. To every problem, this government's response is a new tax, a new regulation or a new bureaucracy. What they should be doing is getting out of the way. It is important that we provide incentives, rather than discourage industry, to invest and to expand. To make matters worse, this government has refused to release all the modelling and assumptions underpinning this flawed mining tax. We do know that they promised to spend $14 billion from the promised revenue from this tax. But the government's forecast revenue for the tax is only $11 billion. We know that even this expectation has now been completely shot. Three billion dollars has been taken from the expected revenue because of additional royalties levied by the New South Wales and Western Australian state governments. That is a $3 billion hole already in the tax revenue from this mess.
It gets even murkier as deals are done with the Greens and the Independents to try to get the passage of this bill through the parliament. On top of that, since all of these estimates were done the price of coal and iron ore has already dropped by 20 per cent. The revenue goes down again and again. It has once again been a botched process from beginning to end. The public have no reason to believe that any of the numbers that have been served up in relation to this tax will end up being close to the mark.
The negotiations—when we got to the mark 2, 3 and 4 versions of this tax—were held with a couple of ministers behind closed doors. They did a deal with a small group of the biggest players in the industry—and those companies did these ministers over. They got themselves into a position where they have a good deal but they shifted the burden onto the miners who were locked out of this process, who never had a chance to put their case.
And now we have a deal with the member for New England, who has really let his constituents down. He promised them he was going to save them from the coal seam gas industry. And what has he got out of all of his negotiations? He has got yet another committee. He said he was going to have $500 million for studies. He settled for $200 million for a new committee.
I do not think that gives anyone in regional communities any confidence at all that the issues of concern to them are going to be dealt with as a result of this deal.
The cost of the various measures that the government is proposing under the whole mining tax arrangement are also obviously undermined by the fact that the government's own projections keep changing. The revenue estimates started at around $12 billion. Then it became $24 billion with revised commodity price assumptions. It went down to $10.5 billion after the mining tax deal and with different commodity price assumptions, then to $7.4 billion because of changes in exchange rates and then to $7.7 billion because exchange rates changed yet again.
Treasury projections of MRRT revenue to 2020 released under FOI indicate that Treasury expects revenue to reduce over time as commodity prices come back to more normal levels. As the previous member rightly referred to, there is now much more competition in this sector, particularly for coal and iron ore. The Brazilians and other South Americans are launching a fleet of vessels with capacities of up to 400,000 tonnes, which are going to take away a lot of the competitive advantage that Australia has in the Asian market. The government does not seem to be taking this sort of thing into account when they make their assumptions about the revenue that this is going to raise in the years ahead. Yet the expenditure is locked in, through things like the superannuation changes and a range of new initiatives that they say are going to be key parts of this package. The expenditure is locked in but the revenue is likely to fall.
So you can see that in doing all of this work on the legislation the government have allowed themselves to become very exposed to the decisions of the states. If the states raise their royalties the federal government revenue goes down. Western Australia, New South Wales, South Australia and Tasmania have already increased royalties, and Queensland has made it clear that it reserves the right to do so as well.
Then there is the question of the constitutional validity of this tax. These are serious questions because the tax is on the resource at the point of extraction. Is it, in fact, a tax on state property, as prohibited by the Constitution? A number of states have indicated that they are likely to take High Court action. Then there is the question of discrimination between states, which is also prohibited under the Constitution. This is another mess and there is no doubt that the government has not thought through the implications of the likely impacts on the measures that they propose to fund from this tax when the revenue continues to fall.
There is another point that I think is worthy of recognition. That is the fact that some 65 per cent of the mining tax revenue is going to come from iron ore production in Western Australia. Dr Ken Henry gave that evidence to the Senate mining tax inquiry. It is extraordinary that a new national tax will raise 65 per cent of its revenue from one single state economy. Is it any wonder that Western Australia is concerned about the impact of this tax?
Genuine and sustainable tax reform can only be achieved through an open, transparent and inclusive process involving all relevant stakeholders, not just a chosen few. The government needs to get its spending under control, then focus on lower, simpler, fairer taxes and genuine tax reform based on a proper process giving everyone a fair opportunity to have their say and be heard. We will continue to vigorously oppose this mining tax in opposition, and when we come to government we will rescind it.
I rise to speak on the Minerals Resource Rent Tax Bill 2011 and other bills. Australia is naturally endowed with large, high-quality deposits of minerals and petroleum that are exhaustible and depletable. The majority of these non-renewable resources are publicly owned and the rights to use, sell and otherwise benefit from them are vested in the Crown.
It is the characteristic of non-renewability that allows exploitation of these resources to generate economic rent or above-normal profit. Economic rent is a return on a factor of production—in this context, mining investments—greater than is necessary to attract that factor into the production process. Economic rent, to the extent it can be identified, can generally be taxed without distorting the decisions of investors.
The minerals resource rent tax is a tax on the economic rents miners make from the taxable resources—iron ore, coal and some gases—after they are extracted from the ground but before they undergo any significant processing or value adding. Economic rent is the return in excess of what is needed to attract and retain factors of production in the production process.
The MRRT is a project based tax, so a liability is worked out separately for each project the miner has at the end of each MRRT year. The miner's liability for that year is the sum of those project liabilities. The tax is imposed on a miner's mining profit, less the MRRT allowances, at a rate of 22.5 per cent—that is, at a nominal rate of 30 per cent less a one-quarter extraction allowance to recognise the miner's employment of specialist skills.
A project's mining profit is its mining revenue less its mining expenditure. If expenditure exceeds revenue the project has a mining loss. Mining revenue is, in general, the part of what the miner sells its taxable resources for that is attributable to the resources in the condition and location they were in just after extraction—the valuation point. Mining revenue also includes the recouping of some amounts that have previously been allowed as mining expenditure.
Mining expenditure is the cost a miner incurs in bringing the taxable resource to the valuation point. Mining allowances reduce each project's mining profit. The most significant of the allowances is for the mining royalties which the miner pays to the states and territories. This ensures that the royalties and the MRRT do not double tax the mining profit. In the early stages of its introduction, the MRRT, together with the project's starting base, provides another important allowance. The starting base is an amount to recognise the value of investments the miner made before the introduction of the MRRT. Other allowances include those paid for losses which the project made in its early years and for losses transferred from the miner's other projects or from the projects of some associated entities.
The MRRT will ensure that all Australians, not just the very profitable mining companies, can benefit from the mining boom. It will ensure that profits are shared. We understand that many Australians do not feel the benefits of the boom. We understand that many businesses and households are doing it tough. The MRRT will lift the superannuation guarantee from nine per cent to 12 per cent so that more Australians can enjoy a comfortable retirement with the overall superannuation reforms. The MRRT will mean that a 30-year-old worker on average earnings will retire with an extra $100,000 of savings. It will also boost our pool of national savings, and this will strengthen our economy for the future and lock in the benefits of this mining boom for years into the future. Some 30,400 people in the Lyons electorate and 161,700 people across Tasmania will benefit from the superannuation guarantee increases.
The MRRT will also give a big tax boost to 2.7 million small businesses, and this will help many that are struggling. The instant asset write-off means that small businesses can immediately write off each and every asset worth up to $6,500. The Leader of the Opposition would rip out that major tax relief for the same small businesses. That is a big shame.
The MRRT will provide a business tax cut to all Australian businesses, including those which are not in mining. This will help keep unemployment low, which will mean more Australians coming home with a pay cheque to look after their families. The MRRT will invest in infrastructure in our great mining communities, which will help the sector to prosper and support jobs while ensuring that the benefits of the boom are locked in by reinvesting them in our hardworking mining communities.
We want to see profitable industries in Australia, and, like Dr Washer from Western Australia, I want to see a future for our other main industries—tourism, construction and manufacturing—which must still be viable when other parts of the economy slow down.
When I see the other side of this House not wanting to share the profits of the mining boom across the whole of Australia—and we know that we do have different levels within our economy—I know why I am in the Labor Party. We are about sharing the wealth of our nation and putting it into the future through superannuation so that people will have more superannuation on their retirement; we are about putting that wealth into investment opportunities; and we are about reinforcing opportunities for small business. They will be able to write off $6,500 worth of expenditure, and that will give them a boost, keep them going and help them increase opportunities through new technology—new computers et cetera—for their businesses.
There is a really good opportunity with these bills, and I am really pleased and honoured to be here to give them support. I certainly support the bills.
Why are we here again debating what is clearly just the latest—though, I guarantee you, not the last—new Labor Party tax? It is another seriously flawed, ill-conceived tax aimed at making Australian businesses and industry less productive and less competitive in global markets. Why are we here debating a tax which is so complex—it ranges across 287 pages—so costly to business and obviously so flawed in its assumptions that the Treasurer will not release the figures? Why is this government not providing the parliament with its economic modelling of world commodity market price fluctuations on the projected mining tax revenues? The real reason we are here debating this latest inequitable and inefficient Labor tax is simply that this government is vicariously addicted to reckless spending—to wasting billions and billions of dollars of taxpayers' funds—and it now has to tax its way out of a mess of its own creation in order to desperately raise revenues.
I believe that the majority of Labor's planned spending for mining tax revenues could have been already funded and delivered through existing revenues. If the government had not wasted billions of dollars of taxpayers' funds superannuation and tax cuts could already be in the hands of taxpayers without the waste. From pink batts to overpriced school buildings to the massive $1.75 billion blow-out in managing asylum seekers to Green Loans—and all that is just for starters—there is a litany of failed, costly tender processes. There is also Fuelwatch and GroceryWatch—the list is endless.
This government is racing Australia headlong to our highest ever gross debt of $250 billion, and the government continues to borrow $135 million every day, with a daily interest payment of $18 million. What we do know is that this government simply cannot handle money, particularly taxpayers' money.
No wonder the business sector is afflicted by uncertainty. Any business or industry sector actually making a profit right now is extremely nervous. You only have to talk to them: they know that they may well be the next target for the next round of Labor taxes. In fact, the mining tax may well be extended across a broad range of commodities. After all, we have seen the government deliberately misleading the public over the carbon tax, the backflip on uranium to India and on asylum seekers—and let's wait and see about their supposedly signed, sealed and delivered budget surplus promise.
Eighty per cent of members of the Australian Institute of Company Directors know that this government simply does not understand business at all—that it fails to consult effectively with business over and over, if at all, in the same way that it failed to consult the 3½ thousand miners in this country. The government designed this tax exclusively with three miners only—not 3½ thousand, just three. No wonder 70 per cent of company directors say that this government will have a negative effect on their business decision making, particularly given what we have seen in the absolutely shambolic process throughout this mining tax. I would suggest that, for the first time ever in the history of this nation, sovereign risk is now a requisite consideration for board members. KPMG and a group of 100 senior finance executives are instructing businesses to look at asset write-downs and impairment tests to assess the financial and commercial impacts of the carbon tax on their interim and annual financial reports.
This tax is also resonating globally on investment decisions. We know that Chinese political and business leaders have raised real complaints and concerns about the mining tax with WA Premier Colin Barnett. We know that the carbon tax alone will eat significantly into the profitability of Australia's mining industry, and that is in addition to the volatility in world markets, as we have heard here, and the indisputable fact that there are other countries with major mining resources that do not and will not have a carbon tax or a mining tax and also have much lower labour costs. But, yet again, the government is deliberately making Australian businesses less competitive.
This is flawed logic, and the government deludes itself that Australia is the only source of minerals in the world. Australia is actually competing every day—just talk to the companies—for markets and capital with countries like Brazil, Chile, Canada and Mongolia, as well as African and Asian countries. It was spelt out by the chief executive of AngloGold Ashanti, who said 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'. If you are around a board table, it is tough making decisions.
The volatile state of the world economy, a possible contraction of global economic growth, a big new carbon tax, a big new mining tax, sovereign risk for the first time ever in Australia, unprecedented government waste, ineptitude on a scale we have never seen before and uncertainty equate to economic and industrial vandalism for the Australian mining industry. This is a time for caution, not a time to increase risk and the cost of doing business. Let us be really clear: it is future project approvals over the next decade that are at greatest risk. They are not at risk because of just one big new tax but because of a government that is openly hostile to business, imposing a regime of multiple new taxes and uncompetitive and uncertain policies, as well as government spending, waste and incompetence at unprecedented levels.
If this were not enough, what is also irrefutable is that the impact of the mining tax will fall disproportionately and unfairly on the Western Australian mining industry. It also appears to be a calculated attack on state rights under the Constitution. It is discriminatory. It is a tax imposed at the point of extraction, which is in effect a tax on state property—prohibited by the Constitution. Sixty five per cent—$25 billion of the $38.5 billion mining tax revenue—will be ripped from my home state. It is unprecedented that the majority of this one new national tax will come out of just one state, Western Australia. Even worse, there has been no consultation on the MRRT with Western Australia, or any other state or territory government.
We in Western Australia—and this is something that I hear from my constituents and it is in their words—have had an absolute gutful of this government using and abusing WA as a politically dispensable cash cow just to feed their addiction to spending and wasting billions of dollars of taxpayers' funds. The heartland of the iron ore and magnetite industries in Australia will suffer the greatest impost, and the government is once again picking winners and losers. The MRRT will disproportionately burden and penalise smaller and emerging operators. The higher effective tax rate will penalise and discourage riskier ventures—those that have far lesser capacity to attract investment than the major miners.
This filters right through the state economy and local employment. For instance, I have a great fencing contractor in my electorate who provides the perimeter fencing for magnetite exploration. When I last spoke to him, he had just two weeks of work left. He told me that the work had stopped because of the mining tax—that companies were not going ahead with their exploration and he had no work for his employees. So the fledgling 38 small magnetite companies trying to get off the ground will not be respected and encouraged by this government for their effort, resilience, enterprise, hard work and willingness to risk their investment funds and employ people. Instead they face counterproductive, increased, unfair taxes—higher than for the mature miners—increased unit costs of production, increased compliance costs, new hurdles and a hostile government. Mining companies will have to be very focused on their MRRT obligations. They will need—and I would encourage them to have—very solid, defensible data, as I have no doubt that the government will be instructing the ATO to aggressively pursue revenue to help shore up their budget surplus and meet their MRRT spending obligations.
I have not seen the several proposed amendments to this bill. However, the Commonwealth should not seek to further override the sovereign responsibilities of the states defined in the Australian Constitution through any of the proposed amendments. The current bill is a slap in the face for state governments that own the resources coveted by the Gillard Labor government.
Our Constitution vests lands, and the minerals they contain, in the states, including the management of lands for the protection of the environment and the benefit of current and future generations who live in those states. For instance, in the case of coalmining and resource exploration in and around the Margaret River region, the state can provide sound process and the certainty required, for all parties, through good planning, so that the future of the region is properly mapped out in an inclusive and thorough process.
One option could be that the Western Australian government develops a Capes Region schememodelled on the already existing Metropolitan Region Scheme, Peel Region Scheme and Greater Bunbury Region Scheme. These schemes are legislative planning schemes that control planning and development in the regions they cover, which include nearly all of the rapidly growing areas of the state. A Capes Region scheme, like the existing planning schemes, would also be a statutory tool that would have to be passed by the state parliament, and any amendment would be a disallowable instrument in their parliament.
This would provide the legislative backing and certainty for the region. It would deal with issues such as the potential impacts on the region's key iconic groundwater resources in what is one of Australia's two internationally recognised biodiversity hotspots. In addition, the region is experiencing strong population growth—well above the state and national averages. For example, the Shire of Busselton's four per cent annual growth rate dwarfs the state's growth of 2.2 per cent and the national figure of 1.7 per cent. This means that the South West has to manage its infrastructure needs and natural resources carefully. Shallow superficial aquifers that sustain iconic jarrah and karri forests, and the region's caves, cannot be viewed in isolation because they communicate with the deeper Leederville Aquifer and even the Yarragadee Aquifer. These two larger groundwater sources are key for the growth and even the survival of the region's environmental, agricultural and social assets.
In conclusion, I question the assumptions and the modelling of the mining tax, particularly given market volatility—and we have heard expressed more than once here today how prices have already reduced since this tax was announced and the legislation has come before the parliament. I wonder how the government will fund its mining tax promises if the mining tax does not raise the revenue projections estimated by Treasury. We have already seen the MRRT revenue estimates fluctuate between $7 billion and $24 billion. That is a fair bit of difference, and there are a lot of things the government has committed itself to.
We do know that this government cannot handle money. We also know that it is addicted to reckless spending. And there is a better way. The government should get its spending under control and focus on lower, simpler, fairer taxes and genuine tax reform. It should be equitable; it should include all stakeholders, not just a chosen few; and it should deliver genuine tax reform through proper processes.
I rise to speak on the Minerals Resource Rent Tax Bill 2011. The Minerals Resource Rent Tax is about Australia's future. It will help secure the future of all Australians, not just the future of a few mining companies and their wealthy owners. It will boost the retirement savings of about 8½ million workers. It will help low-income earners to boost their superannuation contributions. It will fund billions of dollars of new roads, bridges and other critical infrastructure. It will help 2.7 million small businesses to invest in new machinery and equipment. It will make a major contribution to this country's future, far beyond the current mining boom. And it will do this by ensuring that our largest mining companies pay a fair price for the mineral resources that are owned by all Australians.
No-one disputes the enormous benefit to the Australian economy and the thousands of jobs that mining creates. What is vigorously disputed, however, is whether the Australian taxpayer is getting a fair deal from the extraction and processing of mineral resources which are owned by the Australian people. The big exporting mining sector is now enjoying the benefits of a second commodities boom in little more than a decade. Since the current boom took off in 2004, we have seen prices for iron ore increase by more than 400 per cent and prices for black coal increase by more than 200 per cent. And while it is true that mining companies are taxed on their profits at the same nominal rate as all other companies, this does not entitle them to get the nation's natural resources on the cheap.
Entirely separate from company profit tax are the amounts paid by miners for the right to extract and sell our natural resources. These amounts represent the cost of raw materials for the mining companies, and they have been typically charged as royalties. The simple fact is that the amount mining companies are paying taxpayers for the raw materials has not kept pace with the soaring prices at which they are selling them to China and other developing countries. In fact, a decade ago taxpayers received about $1 for every $3 of profit that mining companies made; today that proportion has fallen to $1 out of every $7. So the case for the MRRT is quite simple. The nation is clearly not receiving anything like the same benefits from the current resources boom as the mining companies and their executives, and the MRRT will ensure that all Australians get a fairer share from our valuable non-renewable resources. In addition to the MRRT, the existing Petroleum Resource Rent Tax regime is to be extended to cover all oil, gas and coal-seam methane projects, onshore and offshore, to ensure that these projects are treated equitably.
As I said, iron ore and black coal prices have increased by several hundred per cent since 2004. Iron ore, coal, oil and gas are our biggest and most profitable commodities and represent three-quarters of the value of our resource exports and operating profits. That is why the MRRT will only apply to our very largest mining companies. In fact, the MRRT and PRRT combined will only be paid by some 320 companies. And, unlike royalties, one great advantage of the MRRT is that it varies depending on profits, so the higher the mining company's profit, the more tax is paid.
I said earlier that mining companies are taxed at the same company tax rate as all other companies. This is true, but there are billions of dollars of tax concessions that only mining companies enjoy, and which are, in effect, allowed to them by other Australian taxpayers. For example, other companies have to depreciate their capital equipment over its expected useful life, but mining companies can deduct the full cost of exploration immediately. And there is preferential treatment for oil and gas companies that effectively increases depreciation rates for assets like oil rigs. Concessions like these mean that the effective tax rate that mining companies actually pay on their profits is well below the headline rate of 30 per cent. And in some stages of a mining company's life, particularly when it is investing heavily in equipment and exploration, it might be many years before it pays any company tax at all.
In fact, the mining company owned by Mr Andrew Forrest has not paid any corporate tax for seven years.
Mr Forrest is Australia's richest man, worth an estimated $6 billion. He recently acquired a $50 million private jet, and his Fortescue Metals Group is valued at $16 billion. yet he has not paid one cent in company tax. He is a high-profile and vocal critic of the MRRT, yet he has admitted his company may not be liable to pay that tax either.
But wait, there's more. On top of concessions that allow billionaires to avoid company tax, there are the fuel tax credits—'fool tax credits' might be more appropriate! While working Australians pay about 38c a litre in excise when they fill up their tanks, the likes of BHP Billiton, Rio Tinto and Fortescue Metals get back nearly all of this through tax credits. In fact, the mining industry is the largest beneficiary of the fuel tax credit scheme, and Mr Forrest gets about $1.7 billion a year back from the taxpayer. So the reality is that the resources sector already gets very generous benefits from the Australian taxpayer when compared with other companies.
I want to turn now to how the revenue raised by the MRRT will benefit all Australians and how it represents a major investment by the Gillard government in this country's long-term future. The revenue from the tax will support all Australian businesses, particularly those that are not directly benefiting from the mining boom, through a cut to the corporate tax rate and additional tax relief for the nation's 2.7 million small businesses. It will also support the Regional Infrastructure Fund with billions of dollars to build roads, rail and other critical infrastructure.
Compulsory superannuation contributions for working Australians will be boosted to 12 per cent to ensure fairer and more secure retirement incomes. About 8.4 million employees are expected to benefit from this measure alone—that is 90 per cent of all full-time workers. Let me give you some examples of what this means. For an 18-year-old entering the workforce on average weekly earnings, these superannuation reforms will add $200,000 to his or her retirement income. Someone now aged 30 will have an extra $108,000 on retirement and someone now aged 40 will be $57,000 better off at retirement. Even someone who is now 50 will get $22,000 more at retirement and be even better off if they take advantage of the new tax break for additional super contributions by older workers.
Currently employers are only required to pay the superannuation guarantee until their employees reach the age of 70. So to allow older Australians to stay in work if they want to, people aged between 70 and 75 will now be included in the compulsory superannuation guarantee. Older Australians with low super balances will also get a boost to their retirement incomes. Workers aged over 50 with balances below $500,000 will be eligible for tax concessions on up to $50,000 worth of top-up funds. The government will also provide up to $500 to individuals with taxable incomes of up to $37,000 at a concessional rate of tax. This will help low-income earners, effectively eliminating the contributions tax they pay on their super.
For businesses, the superannuation guarantee rate will be increased gradually, with initial increments of a quarter of a per cent from 1 July 2013. There will be a phased increase over three years to 12 per cent to allow employers to take the increased contributions into account in future wage negotiations. Many employers will also benefit from company tax reductions. Future wage increases are expected to be sufficient to ensure that real wages continue to grow overall.
Small businesses in particular will benefit from the MRRT. Every small business in the country will get a tax break through instant write-offs for asset purchases of up to $5,000. Currently a small business has to depreciate a computer or a machine over three years. Now that business will be able to write off the asset in the first year, giving them a boost to their cash flow. Up to 2 4 million small businesses, including tradies, will benefit from the simplification of the depreciation rules for other assets, and up to 720,000 small companies will benefit from the reduction of the company tax rate from 30 per cent to 28 per cent from 2012-13, one year earlier than the start of the cut for larger businesses.
Reducing the current 30 per cent company tax rate will create new jobs, attract investment and grow the economy and is expected to boost long-run GDP by 0.4 per cent. Despite all of these economic benefits, the scaremongering from parts of the business lobby and the opposition is intensifying. A year ago we heard dire predictions that a mining tax would cripple our resources industry. However, since the announcement of the MRRT, the industry has continued to go from strength to strength: There has been a boom in investment, a boom in profits and a boom in employment. New investment in the sector has risen from $35 billion in 2009-10 to nearly $50 billion last year and is expected to be $82 billion this year. Australia's earnings from energy and minerals exports have gone from $138 billion in 2009-10 to $175 billion last year and an estimated $218 billion this year. Employment in the industry has risen 14 per cent in the past year. That is an extra 27,800 people now bringing home a pay packet each week.
Vested interests will always say whatever suits them so they can tear down important reforms, but the Gillard government is committed to the MRRT and to ensuring all Australians benefit from the big profits many of these mining companies are making. In contrast, those opposite have no plan to capture and distribute the benefits of the current mining boom. The coalition failed to harvest the benefits of the previous resources boom and, given half a chance, they would squander the current one as well. Instead of supporting the sensible measures in these bills, they are trying to wreck a vital reform for these uncertain economic times. Instead of profits based tax reform, which is supported by the mining industry and which taxes only the largest and most profitable companies, they continue to support the inefficient royalties system, which hits all companies—small and big, in bad times and good—regardless of how profitable they are. The evidence is now overwhelming and incontrovertible: the MRRT and PRRT have not, and will not, discourage investment in Australia.
I might just point out, too, that goldmining in the state of Victoria is exempt from royalties. I am wondering whether that will continue under the Baillieu government because goldmines in Victoria will not be affected by this MRRT tax but they may well be adversely affected if the Baillieu government decides to reintroduce royalties. The royalties system was abolished by the previous Brumby Labor government to attract jobs in the industry and it has done that very well.
The government, through extensive consultation with industry, has designed a tax that will ensure Australia remains internationally competitive. Claims by the member for Groom, for example, that the MRRT poses a sovereign risk to Australia are simply wrong and not supported by any evidence whatsoever. The fact is that last year saw record levels of capital investment in resources and energy projects, despite the industry having full knowledge of the details of the MRRT. New capital expenditure on minerals and energy projects in 2010-11 was the highest on record and nearly four times the average annual expenditure of the past 30 years. Since the government announced the MRRT and PRRT on 2 July last year, we have seen investment not only continue but accelerate, particularly in the three commodities—coal, iron ore and petroleum—covered by these resource taxation reforms.
Claims that the MRRT somehow disadvantages small miners are also wrong and have been rejected by the Minerals Council of Australia, among others. Despite what the jetsetting Andrew Forrest may claim, the vast majority of the MRRT will be paid by just three companies: BHP Billiton, Rio Tinto and Xstrata.
Those opposite need to stop saying no and support this important economic reform, instead of denying the nation the benefits of our biggest ever mining boom—benefits that include billions of dollars of new roads, bridges and other critical infrastructure, much of which will benefit the resource-producing regions of Western Australia, New South Wales and Queensland.
In summary, the Australian people, and not the mining companies, own the mineral resources in the ground. These resources can only be dug up and sold once, and that is why the Gillard government is committed to ensuring that all Australians benefit from our nation's mineral wealth. The MRRT meets all of the criteria for a good tax. It is economically efficient, it will raise revenue without distorting investment incentives for mining companies, it is fair, and Australia's big mining companies can certainly afford to pay it.
I commend these bills to the House.
I rise to speak on the Minerals Resource Rent Tax Bill 2011 and the related bills. It is always a joy to hear the government talking about wild, profligate spending and squandering. At the end of 2007, I could have sworn that the then government had this country in great shape, with surpluses running for years and money in the bank—all investments for the future. Then, after the last four years, we suddenly do not seem to have any more money in this country. If anything, this is a government defined by taxing and spending.
We heard the Treasurer talking about DNA. What their DNA really means is that 'tax and spend' is the only way forward. I look upon my position as one of responsibility to my constituents of Cowan—fundamentally, Western Australians. I remember as part of the 2007 election campaign doorknocking in the suburb of Girrawheen, in the south of Cowan. As I was walking along a street not far from the then Blackmore Primary School, I saw an ALP brochure floating across the ground, having been blown from some letterbox—from which it had been ditched, no doubt. On that brochure, I saw lines from the then Labor Premier of Western Australia advocating to local Cowan residents that Kevin Rudd's Western Australian Infrastructure Fund would give back millions of dollars a year to Western Australia. I also remember the television advertisement with Kevin Rudd standing up in Kings Park talking about all the great things he was going to do, including the WA Infrastructure Fund. In fact, that is probably the last time I heard of the WA Infrastructure Fund.
According to Dr Henry—and the government tells us to rely on his word—65 per cent of the mining tax will come from Western Australia. I guess when, back in 2007, Kevin Rudd talked about the WA Infrastructure Fund, which never came to pass, what he was thinking about was some sort of fund generated completely or substantially by what is the property of Western Australia. I really do look upon this attack on Western Australia, this fundamental drawing of so much wealth that belongs to Western Australians, as a betrayal by the Labor Party's MPs and senators, all of whom are clearly very happy with shipping out all that cash from Western Australia. So clearly the priorities are there.
I made the point before that the Constitution actually talks a little bit about this. It talks about who owns what, and the owners of what is in the ground are actually Western Australia, the taxpayers. The people of Western Australia are the owners of this. When the government talks about how all these resources are the property of the nation, they are incorrect. They are actually the property of the Western Australian people.
The Western Australian government has been greatly, and appropriately, opposed to this action by the federal Labor government and their Green partners—and the Independents, but we will get to them shortly. When the Premier has had the temerity to make the point that, in accordance with the Constitution, these resources belong to the state, he has been met with threats of penalties, GST carve-up attack and barring access to federal funding. For trying to enforce the constitutional rights of Western Australia, the Premier is threatened with an even worse result from the GST carve-up than is currently the case. It is an absolute disgrace. I probably need to move on because I do not have the time to cover so much ground.
One of the points is: why is this tax actually required? If we cut down to it, what the government are desperately holding on to now is trying to get to the point where there is actually a surplus in the budget papers for the coming 2012-13 financial year. That is one of the big objectives. Of course, they have a hell of a lot of spending that they want to do. They want to line up and embed a few structural deficit problems into the future. I will also get to that.
What this actually means is that it is a tax, and it is a tax to create the illusion of a budget surplus. Then it will be followed up with spending which actually exceeds the revenue that the tax will take in. By that I mean that at the end of the next decade the bottom line to the budget will actually be $20 billion in the red as a result of this—particularly when you look at how the Assistant Treasurer has talked extensively about the superannuation aspect of these bills. The cost to taxpayers of the proposed increase in compulsory super to 12 per cent is expected to rise to $3.6 billion by the 2019-20 financial year. So the government accepted all that responsibility for future taxpayer generations but, unfortunately, in that same year the MRRT revenue is expected to be just $3 billion. So the budget will be $0.6 billion in the red for 2019-2020 based just upon the superannuation aspect of this. It is no wonder that we then get to $20 billion in the red for this whole tax—this imperfect and, really, incompetent tax.
Again, as I said before, the realities are that this is just a government that is very much into finding a tax—it likes all taxes—and then it is very keen on just shipping it out the door immediately. Unfortunately for Western Australians, the money that is being generated is fundamentally from Western Australia and being spent elsewhere. And by embedding structural deficits in this taxpayer funded pay rise there is trouble ahead for the future.
I look back and remember how Treasurer Costello, the last Treasurer to actually produce surpluses in this country, created the Future Fund, which was meant to look after unfunded liabilities for federal Public Service superannuation. And here we are, going back into that whole arrangement again. I really wonder whether maybe it is the government's plan to create that structural deficit or to further the structural deficit in the budget. Is that about a taxpayer funded pay rise for people or it is part of an early pension payment plan?
I think that the Australian people are pretty smart. When they look at the sort of debt that this country has amassed so quickly under the current government they realise that someone actually has to pay in the future. We do not want to end up being like Greece in the future. We do not want to end up living beyond our means. If you make the case to the taxpayers that there is money to be repaid and that this country has to get back into a surplus—that debt has to be repaid—they are pretty smart and they will realise that maybe we cannot afford to do this sort of stuff. But until there is a change of government I cannot see that anyone is going to be making that case.
I did mention the Independents before. There are, of course, a number of Independents who always back the government, and the government depends on them for their continued survival along with the Greens—who it is completely in bed with. I do note that it has been said that the deals that the government has done with the Independents have cost another $300 million over the next five years. I know that there are another series of committees, reviews and other inquiries. Those are the sorts of things that do thrill the member for Lyne and the member for New England. They do thrive on these sorts of things; it makes them feel like there is some sort of progress actually taking place. Again it comes down to the fact that someone has to pay, and I think I have made the case that it is Western Australia that is definitely doing all the paying in this matter. Really, it is the case that the Labor Party, the Greens and some of the Independents are very much into milking Western Australia and making the most of the other mining-rich states.
It is all flowing one way; there is hardly anything going back the other way. It is no surprise really that this has been greeted with such opposition by the state Premier for Western Australia, the Hon. Colin Barnett, and also by others who see that maybe this whole mining tax is something that should be challenged in the High Court with regard to the Constitution. As I said before, it always comes down to the government saying, 'It belongs to the Australian taxpayers,' when in fact that is not true.
I would also like to speak about the impact on small businesses. I know that this has been raised by other speakers, but the entrepreneurs tax offset legislation that was brought in by the last government gave quite a boost to these very small start-up businesses. I think that some 145,000 businesses will be worse off. These businesses generate very small revenues, but they will not have the tax benefits as a result of changes brought in under the legislation that we are considering tonight.
The government may talk a lot about their one-off tax write-off, but this is something ongoing for a number of the microbusinesses in Australia, which really do represent the entrepreneurial spirit of this country. Those microbusinesses, those neighbourhood start-up businesses, have the same sort of mentality and commitment to success that led the much maligned—by the government—Andrew Forrest to create a great employer of Australians and of Indigenous people.
The government's attack on these microbusinesses and small entrepreneurs in some ways is quite similar to the denigration that the government heaps upon Andrew Forrest and those people who are actually producing something for this country rather than just pursuing the redistribution of income from those who produce.
I am about to run out of time, so rather than go too much further into this I will briefly comment upon the thought by the Prime Minister, which still has to be ratified by the factions at the Labor Party conference, to sell uranium to India. We applaud that because we think it is a good thing for Australia and for India as well. It is a bit of a pity, though, that in August 2009 the now Prime Minister was quoted as saying, 'As a principle, we do not sell uranium to countries that have not signed the non-proliferation treaty.'
I am just talking about mining, but I will move on. As a Western Australian I believe it is my duty to oppose this tax because it is not good for the state and it is not right. No country has ever taxed itself into prosperity. This is just one of 19 new or increased taxes in the last four years by this government. In the future this government will be defined as a tax and spend government with terrible financial management. This tax will embed structural deficits. I will never support a tax that is an attack on Western Australia.
The coalition does not support the Minerals Resource Rent Tax Bill 2011. It is just another disastrous economic policy of Labor that will particularly hurt regional Australia. It will be devastating to my electorate of Calare as well as the national economy in the long run. Worse still, it will not produce enough revenue to fund the initiative promised by one of the two most fiscally incompetent governments of my lifetime, and I do not need to mention the other one.
I note that the MRRT is a project based tax on the economic rents miners make from the taxable resources, which are mainly iron ore, coal and some gases. The tax is imposed on a miner's profit at a rate of 22.5 per cent. The Gillard Labor government's tax scheme, like most things they attempt on an economic basis, is utterly flawed. It is dividing the industry. It is completely unfair. It will reduce our international competitiveness. It is fiscally irresponsible, which is hardly a surprise given the sort of legislation we have seen over the last four years. Most importantly to me, this tax will do nothing but hurt regional areas like Calare.
Mining is one thing that my electorate of Calare does. Agriculture, energy production, forestry and transport are also major industries, but mining is certainly one of the biggest employers in the electorate along with small business, which is almost always the biggest employer. We have the Northparkes mines just north of Parkes between Parkes and Peak Hill, the Cadia mine west of Orange and the extensive Centennial Coal mines across the Lithgow region. Xstrata has some mines there as well.
Mining in Lithgow has played a major role in the region's economic prosperity for basically 150 years. There is the Clarence Colliery, the Airly mine, the Angus Place Colliery, the Springvale Colliery, the Charbon Colliery, the Ivanhoe North Colliery, the Lambert's Gully mine, the Invincible Colliery and the Cullen Valley mine. Needless to say, all these towns and regions rely heavily on the mining industry for their prosperity and their jobs. These mines do not just supply jobs to the towns; they bring families to the bush, attract investment, financially support local clubs and events, and help small business do what they do.
According to the ABS, retail and construction are also two major employers in my electorate. Quite obviously you do not have to be a rocket scientist to know that that is correct. These sectors rely on people and, more importantly, on people moving to the local region, and mining brings them. But, as is expected of this government, with no concern or appreciation of the bush it wants to introduce a tax that will cut these mines and these towns down—I am not sure what kind of common denominator it is looking at but it certainly is not looking at one that will be in the interests of the regions.
The MRRT has problems associated with it. The primary issue is that it hurts the little guys. This government decided to rely on Australia's three biggest mining companies—Rio Tinto, Xstrata and BHP—to help design the tax and to speak on behalf of the industry. I do not think it takes a rocket scientist to realise that companies the size we are talking about have a somewhat different perspective and a somewhat different ability to deal with these issues. All other competitors were locked out of the process. Does this make sense? I guess this is a government that likes to deal with big companies and big unions. It does not like to deal with ordinary people. It certainly does not like dealing with small business. It certainly does not like dealing with agriculture.
The smaller and mid-tier coal companies are the focus of the tax. They are the ones that are going to suffer the most. The three big mines will not be paying the tax in the early years but the smaller mines will. These smaller companies will either pay the MRRT sooner or continue to pay royalties on production. I think Twiggy Forrest hit it on the head when he said that this tax will hit the small miners instantly. That will mean that Calare's mines will find themselves instantly less competitive against the larger mining bodies. That should not be surprising given that this whole thing was worked out by those large mines.
As I said, this tax is divisive and unfair. The mines in Calare can ill afford to be hit by this tax. The local mines in Calare are not the big guys. They are amongst the smaller mines in the Gillard-Bob Brown government firing line. This legislation also flies in the face of the government's beloved Henry tax review. It recommended a lower tax burden for smaller mining ventures. Instead, smaller and mid-tier mining ventures will pay a higher effective tax rate than the big three.
The two miners who do most of the coalmining in my part of the world are Centennial and Coalpac. With the introduction of this tax, both companies will find themselves instantly less competitive against the larger mining bodies. The smaller companies will pay the tax sooner or continue to pay royalties on production while also being subject to increased compliance burdens. Centennial Coal is an exporting orientated company. While Australia may be a significant exporter of minerals, we do not dominate any of the major markets. Due to the global nature of coalmining, this tax will severely jeopardise the Australian mining sector's ability to compete on the world stage.
There is a very real situation in central western New South Wales revolving around Lithgow and Bathurst. The combined introduction of the carbon tax and the MRRT will significantly increase the risk of investing in Australia's resources sector. The combination of the carbon tax and this new mining tax could not come at a worse time. With faltering world economies, our government should be doing everything they can to support our strongest performing sector and get behind it, not to get on top of it and not to penalise it.
The mining industry has supported Australia through the tough times—yes, and done well out of it. During the global financial crisis the mining sector played a large role in keeping us afloat. We are like Brazil and the mid-west states of America: we are productive. We did not need to rush into borrowing a couple of hundred billion dollars just so the government could hand out $1,000 to people. We did not need to do that. We were always going to get through that because we are a resource economy. This tax is essentially about the government pilfering our nation's most successful industry to pay for their own waste, their own mismanagement and the fact that, in less than two years, they ran up a debt higher than Hawke and Keating were able to do in 14 years. Unfortunately, no amount of money can put an end to this mismanagement.
As was said earlier this afternoon, how often does a government look to introduce a tax and go more into debt and pay more money because of it? That is what they are going to do with this one. The Treasury modelling suggests that revenue from the MRRT will total $38.5 billion but the cost of promises made by Labor and the Gillard government as a result of the mining tax total $57.6 billion. If it were not so serious, it would almost be a thing of mirth. But it is not; it is real life and it is going to hurt my part of the world and it is going to hurt a very large part of Australia. Countries like Brazil and even Indonesia, which has considerable coal deposits—though people seem to forget that—must think this is the greatest thing and has given those countries the greatest competitive advantage on top of the carbon tax.
I have grave concerns about the government's so-called promise to prop up the Regional Develop Australia Fund from the tax. Future rounds of this program will only continue if this tax goes through. I guess that is a blatant example of blackmail, but it is so very typical of a Labor government with no understanding and no realisation of what makes the bush tick. The people of regional Australia deserve better from a government that promised to deliver for the regions. It is very much taking from both sides of Paul to give to Peter. The chance that the revenue from this tax will go back to the regions is pretty slim. You only have to look at the track record of this government, and the Regional Infrastructure Fund is a prime example. There was $400 million allocated from a regional fund of $1 billion to go where? To go to Alice Springs, Broken Hill, Condobolin or Karratha? Which region? No, it went to Perth Airport. If anything should warn regional Australia how important they are, 40 per cent of the only seriously allocated money to the Regional Infrastructure Fund went to Perth Airport. The last time I looked Perth was a metropolitan capital and it was not part of the regions. I guess if anything told us how important we are in the regions and how this government's word cannot be taken at face value, that is the greatest example of it.
The coalition has a far better solution to a disastrous, crippling tax. As the shadow finance minister said earlier today, everything the government has worked out is on the best prices that ever existed for iron ore and coal, and only a small reversal in what these things are being exported for will bring this whole scenario tumbling down twice as fast as could possibly happen. We believe this MRRT should be stopped now and that the government should start again. It needs to get its spending under control and stop formulating toxic taxes to pay for its waste and mismanagement. We believe serious, genuine, sustainable tax reform can only be achieved through an open, transparent and inclusive process involving all the relevant stakeholders, not just the three big ones. The government loves big business and big unions because it only has to talk to a few and does not have to take account of people. Unfortunately for this government, regional Australia is about people and small business and the people who work for it.
Only then should the government focus on lower, simpler, fairer taxes and genuine reform.
It is the people living in regional Australia who are going to be hardest hit. Of the almost quarter of a million Australians that are directly employed by the mining sector, most of them are from our regions. That is not to mention the tens of thousands of small businesses, service entry and so on who indirectly rely on the mining sector. The towns and cities of Calare, in particular, rely heavily on the sector. Many of our towns certainly would not exist in the state they are. While the central west of New South Wales is big on agriculture, forestry and various other industries, including tourism, mining is central to its existence. I fear for the businesses that rely on the mines. I fear for the schools, the hospitals, the shops, the cafes, the sporting clubs and the youth groups. I fear for the shareholders who will desert foreign investment, and communities will be left wondering what happened.
This is a tax on regional Australia. It is a tax on small communities that rely on mines. It is a tax on electricity and anyone who uses it. It is a tax on the productivity of an industry that has helped to build our region. It is a tax on heating our homes in winter and cooling them in summer. It is a tax on our community's way of life in country Australia. It is a tax that starts on 1 July next year which, combined with the most toxic tax of all, the carbon tax, will see us all suffer. I cannot stand idly by and watch this government do over regional Australia again.
Hot on the heels of the carbon tax passing the Senate, the Gillard government has rushed another swathe of bills into this place that continue a tradition for this government. A wealth redistribution bent is becoming entrenched in all Gillard government policies—quick-fix tax grabs that move to plug budget black holes and pay for idealistic policies that aim to solve every problem for every Australian.
The minerals resource rent tax is another piece of legislation formulated without due consideration of the true impact it will have not only on industry but also on wider society. Tax the rich to give to the poor, says this government, and all our problems will suddenly go away. But, like any fairytale, it is not quite that simple. As the Select Committee on the Scrutiny of New Taxes stated in its interim report:
The Gillard mining tax is divisive, complex, unfair, fiscally irresponsible and reduces our international competitiveness ... It gives an unfair competitive advantage to the three largest miners and makes federal budget outcomes hostage to decisions about royalties by state and territory governments.
Surely this is a lesson not to introduce a new tax. There is little in these bills worth saving. The government must start from scratch and pursue a genuine tax reform agenda to achieve a lower, fairer and simpler tax system through open, transparent and inclusive engagement with all stakeholders. Failure to do so in the case of this mining tax will only reinforce the current iron ore oligopoly, lock potential new smaller and mid-tier producers out of the market and act as a significant disincentive for new developments and diversification in the future. Failure to do so will also cast questions on the way this government does business with the private sector.
Recently, while on these shores and standing in this place, President Obama spoke of freedom, prosperity and liberty. The alternative Prime Minister echoed these sentiments, as did importantly our Prime Minister—importantly because this philosophy is ignored in the mining tax legislation. A nation cannot express its fundamental principles in ideologue but forget them when it comes to writing the laws of the land, which it should go without saying must always be in the best interest of all citizens. This government has divided the mining sector by making the three biggest miners co-signatory in the design of this new tax.
The Prime Minister afforded Xstrata, BHP Billiton and Rio Tinto an unprecedented position to act on behalf of the entire industry. Three big miners with well-established projects have written every advantage into the negotiations they can with offsets and tax deductibilities galore. But it leaves us with legislation that illegitimately disadvantages smaller operators. The disadvantages are due to lower economies of scale and consequently higher unit costs of production and their often single-project status which prevents the transfer of unutilised losses and royalty allowances to related projects. This delays cash flows, reduces profitability and introduces a risk that some losses will never be recovered. And their higher risk profile reduces the availability and increases the cost of both equity and debt.
This would only be aggravated by the higher level of taxation due to the MRRT. The Henry tax review, from which the idea of the MRRT stemmed, was supposed to be about root-and-branch tax reform to deliver a simpler fairer tax system. Instead, the Gillard mining tax is more complex, less fair and continues this government's trend of ignoring its own advice with a view to economic expediency. 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. These companies feel understandably aggrieved that the mining tax will make it harder for them to compete with those big multinational, multicommodity companies.
With consideration of the government's own modelling as outlined in the Treasury's second exposure draft, an emerging producer starting after 1 July 2012 will pay a much higher level of total taxation—corporate income tax plus net MRRT and royalties—compared to an identical project which was already in existence prior to 2 May 2010, when the MRRT was first announced. There will be a time lag before the project which was in existence before 2 May 2010 will pay the same effective annual rate of total tax as that on a new project starting after 1 July 2012. These bills have fundamental unworkable flaws. It would be most acceptable for the government to expand the scope of its analysis of the impacts of this tax beyond the Select Committee on Scrutiny of New Taxes. Further inquiry would demonstrate the government should take measures to establish a higher degree of competitive neutrality in the MRRT legislation.
The mining sector is hugely important to Australia's continued prosperity. It is an industry where Australia has an international comparative advantage for now. Mining accounts for nearly two-thirds of the value of Australia's exports of goods and one-half of Australia's total exports of goods and services. Mining directly employs 224,000 Australians and there are tens of thousands of additional Australians in manufacturing, mining services, construction and infrastructure working to support the mining sector. In 2010-11, mining accounted for almost 40 per cent of all business investment in Australia. Forward estimates suggest mining will account for over half of all business investment in 2011-12. That makes the sector a major driver of growth today. Investment in this sector will add to Australia's economic activity for many years to come.
Australia is competing for scarce capital and jobs in the world market. There are plenty of other countries seeking to develop their mining sectors. At this time of global economic uncertainty, governments and public policy makers around the world are focused on saving old jobs and creating new jobs. Why then is this government introducing job-killing legislation? You do not win a game by hampering your best player. With the MRRT there will be a strong incentive for companies with diversified operations to place new capital in countries where they will get the highest return after tax. This will reduce the flow of capital to the higher-taxing countries and those higher-taxing countries may soon be Australia.
The mining tax is not the cure-all serum the Treasurer is searching for to bring the budget into surplus by 2012-13. Treasury projections of MRRT revenue to 2020 indicate that Treasury expects revenue to reduce over time as commodity prices come back to more normal levels. Over the first year since the mining tax was announced, revenue estimates have jumped around from $12 billion, up to $24 billion, back down to $10.5 billion, down again to $7.4 billion and up slightly to $7.7 billion. But the cost of measures the government has attached to the MRRT will continue to grow strongly over time against these declining revenues. Over the next decade, the Senate inquiry into the mining tax has conservatively estimated that the net cost of this tax will be $20 billion. The cost of the proposed increase in compulsory super to 12 per cent alone is expected to rise to $3.6 billion in 2019-20. That same year, the Treasury projection of MRRT revenue is $3 billion.
These deficits could be significantly reduced or eliminated by legislation that does not illegitimately disadvantage a significant proportion of the mining sector. More fundamentally, these are deficits that Australia could rally against if the federal government revisited its contract with the Australian people. Taxation is one of the most complex and delicate policy areas entrusted to law-makers. Taxation reform must be an ongoing process. It must not to be targeted at one industry in isolation in an attempt to profit from private enterprise success. Australia needs genuine taxation reform, not lazy tax grabs. Australia needs taxation reform which is focused on delivering lower, simpler and fairer taxes. Australia needs tax reform aimed at improving our productivity and international competitiveness to encourage increased workforce participation and enterprise, and to attract investment.
Genuine tax reform must be accompanied by a serious effort to reduce government spending and waste. Asking if the measures require the funding of this new tax is something the executive powers section of the Constitution charges the federal government with involving itself in. Or are these issues best left to the private citizen to tackle with income that should be left in their back pockets? The goal of tax reform must be to reduce the overall tax burden of the Australian community.
I return to the words of the President of the United States of America, the Prime Minister and the alternative Prime Minister last week: 'Freedom, prosperity, liberty'. These words were echoed in this chamber by all leaders as the very values by which our nation has prospered. This freedom is also freedom from taxation, freedom from social engineering and freedom from unjust wealth redistribution. We cannot forget this when speaking to legislation and ultimately casting our vote on bills that so clearly subvert these ideals. The current ad hoc nature of taxation reform in Australia must be consolidated into a coordinated framework that focuses on spending reform. The work of the Henry tax review would be reconsidered and all state and territory governments would be actively engaged.
I wish to speak now with specific reference to my state of Western Australia. To this day there has been no consultation with any of the state or territory governments about the implications of the mining tax. This is despite resource royalties representing 20 per cent of WA state government revenue. At the time the government signed the deal with the big three miners, Treasury assessed that the MRRT would raise around $38.5 billion annually. About 65 per cent of that revenue, or $25 billion, is expected to come from iron ore production. With almost all the iron ore production taking place in Western Australia, the MRRT is a massive and disproportionate national tax impost on this state's economy. WA Premier Colin Barnett also questions why the tax will not be applied universally to all mining operations—namely, high-grade haematite and low-grade magnetite.
This tax is a further intrusion of the government into the revenue sphere, autonomy and budget flexibility of the states and territories. While the mining tax is envisaged to operate alongside state royalties, with a tax credit available for state royalty payments, I suspect there is a significant risk that states will effectively be crowded out of this revenue base. Industry is also likely to bring pressure to bear on the states to abolish their royalties so that companies need comply with only one regime rather than two. Such an outcome would increase WA's reliance on Commonwealth grants and exacerbate the already high vertical fiscal imbalance between the Commonwealth and WA. The absence of a Commonwealth, state and territory agreement was always going to expose the federal budget bottom line to future royalty increases in any state or territory. How the federal government ever thought they could 'reform' resources taxation and royalty arrangements without actively engaging the states and ultimately reaching agreement with the states is beyond belief. After all, the resources belong to the states, not to the Commonwealth.
The government has made a mess of its attempts to reform our tax system. It should cut its losses and start again. Genuine tax reform can be achieved only through an open, transparent and inclusive process involving all stakeholders, including state and territory governments. The combination of highly volatile revenue from the MRRT expected to reduce over time and the increasing cost of associated measures over time, as well as state and territory royalties being credited by the Commonwealth, creates a fiscally irresponsible combination. There is no need for a multibillion dollar new tax on top of the existing mining taxation framework to ensure an appropriate return for the community. The government's MRRT will handicap Australia in the global competition for scarce capital and jobs. It carries significant risks for Australia's long-term economic prosperity. The coalition opposes this mining tax.
I rise this evening to speak on this Minerals Resource Rent Tax Bill 2011 and the associated bills, which, of course, includes an amendment moved by the member for Kennedy to the second reading motion. This is a new tax; it cannot be cast as anything else. It is another new tax that this government wants to introduce and that will not only have an impact on the competitiveness of the mining sector in Australia but also, if the government is successful in getting it through both houses, rip more wealth out of the regions. We know from the experience we have had of this government, particularly with the regional development grants that came out only recently, where the money will end up: it will not end up back in the regions.
The government is telling us also that it wants to invest in the regions, and I will touch on that a bit later, but it also wants to use the tax to increase the superannuation savings guarantee from nine per cent to 12 per cent over the next six to seven years. That is a laudable objective. We all agree on this side of the House that we need to encourage people—workers and people in business—to put money aside for their own retirement, because we know that in years to come there will be a smaller group of Australians paying tax and there will not be the capacity to meet, you might say, the pension entitlements that we have in place today. So it is important that we plan now to make sure that we have superannuation savings accumulating during workers' working lives. But the government said that it will be using this money to increase the superannuation guarantee from nine to 12 per cent. It is going to be the small businesses paying that increase from nine per cent to 9¼ per cent to 9½ per cent and progressively upwards towards 12 per cent, not the government. When the Labor government under Hawke and Keating introduced compulsory superannuation, it was offset with what would otherwise have been a tax cut through the budget process, so it was not borne by the employer. But this will be borne by the small businesses, so it will be yet another tax applied to small business—albeit we on this side of the House support the need to encourage superannuation savings over people's working lives.
The government also said that they have pledged to set up a Regional Infrastructure Fund and also Infrastructure Australia to invest in road, rail and port infrastructure. It all sounds very nice, but the money is coming from this new tax. I just remind the House: when we were in government—the member for Cowper would remember this—did we introduce a new tax to start the progressive upgrade of the Pacific Highway? We did not introduce a new tax to do it.
We did it from revenue, because we were prudent managers of budgets. The very successful Regional Partnerships program and the Sustainable Regions Program—if we want to refer to regional infrastructure—were programs run out of budget revenue. We did not introduce a new tax. It just demonstrates the way that this government thinks. If it wants to do something, it thinks, 'Where can we tax the taxpayers? Where can we tax, in this case, the resource sector? Where can we get more money?' It is about taxing and spending. That seems to be its whole modus operandi. It just cannot manage money.
I mentioned Labor's Regional Development Australia funding. We have had one round of that, and we have had all our regional development committees in our electorates. I encouraged mine in my electorate of Maranoa to get out there and get worthwhile projects. We have had local mayors and committees meeting and organisations and businesses putting their submissions forward. They were then short-listed by the Regional Development Australia committee. People travelled hundreds and hundreds of miles and gave their time to go through this process. Then, of course, the announcement came. West of the range in Queensland, not one project was funded, notwithstanding that we had some very, very worthwhile projects.
What is even more interesting is that the government says it was a program for regional Australia. In fact, at the opening of parliament, when the Prime Minister took the vote from the crossbenches to enable her to become Prime Minister, she said that she was going to be a Prime Minister for regional Australia. The very first chance she had with her government and her leadership to be able to deliver to regional Australia was with those announcements for regional Australia.
Labor holds just 23 of the 62 regional electorates in Australia. Most of the electorates are held by the coalition in regional Australia and yet in the first round of grants we were missing in action. Our electorates were somehow just not considered to be regional Australia. It is about trusting the government with money. Why would we support this new tax and trust them to do as they have pledged to do if they are successful in getting this legislation through both houses of parliament? We really cannot trust them.
We had wonderful projects put forward by organisations in my electorate. Mr Deputy Speaker Adams, you would know very well an area out there in western Queensland very near Mount Margaret—Plevna Downs. I think you may know the property well from your days when you were involved in the wool industry. Some magnificent dinosaur remains were recently discovered there. There is a wonderful project there and they need some regional development funds for that. A lot of work went into a very professional application. It had support from the oil and gas industry out in that part of the world and from the local government. But did the grant come through? No, it did not.
We submitted a regional development grant application in Longreach for the Stockman's Hall of Fame. We submitted one to establish a Barcaldine day care centre where there is not a day care centre today. If we are going to keep young people in rural and outback Australia, we have to have the infrastructure that supports young families. The regional council based out of Roma, the Maranoa Regional Council, had a great project to provide a new aged-care facility in the town of Mitchell so that they could keep their community together and so that people as they aged would have the confidence they could move from their home into an aged-care facility that was approved and accredited. Whilst the one they have now is a wonderful building, the community accepts that one day it will not meet accreditation standards and it is thinking about the future. Did it get funded? No.
I will certainly be watching the next round of funding. I have got all of my energy focused on those communities that put in applications before, making sure they meet the new guidelines because they have changed again. I will be encouraging them to shortlist two or three or four in each of the regional development areas in Maranoa, of which there are three, and submitting those projects again. I hope that this time we will see the process deliver for the genuine areas out there in regional Australia that have very worthwhile projects that do deserve the support of the government.
When I talk about the experience of dealing with Labor governments and how they manage money, there is no better example of the mismanagement of money than the Queensland Labor government. They have been in government almost continuously for a little over 20-odd years now. They are confronting the electorate next year. When it comes to managing money the Queensland Labor government just have not got a clue. Against the backdrop of the biggest mining and resources boom that we have seen in Queensland, the Labor government continue to rack up debt. They have racked up a $89 billion to $90 billion debt against the backdrop of the growth that we have had in the state of Queensland and the receipt of huge mining royalties. Against the backdrop of all that they were still able to mismanage the economy and rack up debt to the tune of $84 billion to $85 billion. I cannot give you an accurate figure but it is in that order, Mr Deputy Speaker. Not only have they racked up this debt against the backdrop of the biggest mining boom in Queensland where they received something like $3 billion in the 2008-09 year as mining royalties but this federal government, I understand, also want to get their fingers into that pie as well.
Queensland has also lost its triple-A credit rating. That is an absolute disgrace for the state of Queensland. No wonder Queenslanders are going to revolt against this government at the next state election. We have always believed in our great state of Queensland and the growth of Queensland. We do not take failure in Queensland, but we have a failed Labor government up there that has failed to manage the economy.
I accept that, and I will come back to the bill, but I just wanted to demonstrate in that example that when it comes to managing economies we know we cannot trust Labor. Why would we trust them to go in and tax the mining sector, still manage the economy and deliver infrastructure for regional and rural Australia?
I notice that the Attorney-General of Queensland, the Hon. Paul Lucas, has put out a press release relating to the Queensland government wanting to get their fingers into some of this infrastructure money from Infrastructure Australia. They have listed some nationally significant, high-priority road projects. The Bruce Highway upgrade is in the early stages of development. The Cooroy to Curra section A is apparently ready to proceed and is 'nationally significant'. The Mackay ring-road is 'nationally significant'. That is the category they put them under. They have also listed the second range crossing at Toowoomba. It is a nationally significant crossing which I absolutely support. But, when it comes to a proposed pipeline and when it might be ready, it just says that the second range crossing has 'real potential'. It does not say it is ready to proceed. It just says it has got 'real potential'. We know it has got real potential, but we need more than that.
Then I go down the list and I think, 'The Warrego Highway will surely be listed by the Attorney-General in Queensland.' It should be on a nationally significant priority list, given the mining boom adjacent to and along the corridor of the Warrego Highway. But it comes under a second category. I am very happy that it is listed, but it is a new submission and it is 'ready to proceed'. I am certainly going to have my eyes open and I will be looking to see just how ready the ministers and the main roads department are—and they are already getting in Queensland $3 billion in royalties from the mining sector—to see some of that money rolled out into the Warrego Highway. Under the AusLink program, when we were in government, 20 per cent of the money for the national highways would come from state governments. It was not all going to come from the federal government. All I saw in this submission was that the Queensland minister said that the national highways are a federal responsibility and they are asking the Commonwealth to help fund these roads which are clearly a federal responsibility. I understood that it was also a part state responsibility, to the tune of 20 per cent.
I say to the House this evening: we just cannot trust this government with money. They now want to tax the resource sector, which is responsible for delivering enormous growth in my electorate, which is creating many more jobs. We want to be alert to the fact that this money can shift overnight to projects offshore where governments do not impose such punitive taxes on their profits and their development. That is a real concern to us and that is why we will be opposing this tax and this legislation.
The coalition opposes the Minerals Resource Rent Tax Bill 2011. This is a flawed tax derived from a flawed process and it will have a detrimental impact on our economy through its multiplier effects and unintended consequences. It is being imposed on one of the most important sectors of the Australian economy—one that until now was succeeding, despite the federal government's poor and reckless management of the Australian economy. This tax is a result of an extremely flawed process. The resources super profits tax, the predecessors of what we are debating today, was announced with no consultation with industry and no consultation with stakeholders. There was no consultation with the state governments and no consultation with territory governments, despite the tax having significant impacts on their own revenue—the revenue which funds our schools, hospitals and local roads.
There is no doubt that this tax has an impact on the states' revenue, as the Henry tax review recommended that this tax replace state and territory royalties and, as such, the Commonwealth government should negotiate the financial implications of this tax with the states. However, the Gillard government did not take this direct approach, did not put in the hard yards of negotiation that would result in a defined funding arrangement—like the coalition government did with the introduction of the GST.
Instead of genuine reform, we have seen a series of discussions which have led to a complex, complicated and convoluted system that is to be introduced under this scheme. Further, when consultation did take place, it was an extremely closed-door process involving only the Prime Minister, the Treasurer, the Minister for Resources and Energy and the managing directors of the three biggest mining companies: BHP, Rio Tinto and Xstrata. The managing directors of all other mining companies, the competitors of these three big miners, were excluded. The inclusion of only three companies, any three companies, in the development of such fundamental change for the whole of an industry is treacherous. Understandably, any economically rational managing director would be looking out for their own interest. This has become apparent through the inclusion of the market valuation system used to calculate applicable deductions, as this design gives the three big companies a significant tax shield that is not available to small and mid-tier companies.
The government's proposal also means that smaller miners will either pay the minerals resource rent tax sooner or they will continue to pay royalties on production, while also being subject to increased compliance burdens. This burden on the smaller miners is in direct contradiction to the Henry tax review, which recommended a lower tax burden for smaller mining ventures to help start-up ventures grow and prosper. The closed process in which the government chose to engage is questionable and leads me to view the development of this tax scheme as a very flawed process.
And still there has been no consultation with state and territory governments. Australia has a federal structure—yes, we have a central Commonwealth government—but you cannot have a federal structure unless the regional governments, our state and territory governments in Australia, have powers that the central government cannot render inoperative and unless the regional governments have the ability to provide themselves with the necessary finances to enable their powers to be exercised.
Any funding that affects the revenues of the states and territories should be discussed with those governments. That is their right. To not discuss this tax proposal which will have significant implications for GST sharing arrangements around the country, and will have significant impacts on state royalties, is really quite an outrageous and arrogant move by this government. Resources royalties make up six per cent of the New South Wales government's revenue, nine per cent of the revenue of the state government of my home state of Queensland and 20 per cent—one-fifth—of the Western Australian state government's revenue. Changes that affect such large amounts of funding really must be discussed with states and territories. However, this government has failed to undertake that consultation.
Real reform of resource taxation cannot take place without consultation with the states and territories. We have seen the results of this lack of consultation already. The Western Australian, New South Wales, South Australian, and Tasmanian governments have already increased royalties on iron ore and coal in light of the uncertainty now surrounding resources, and this is translated into a $3 billion hit to the Commonwealth government budget so far. The Queensland government has reserved its right to raise royalties in the future.
The MRRT affects state budgets, and state decisions regarding resources affect federal budgets. It seems clear that discussions should take place between the two parties, but the federal government simply did not include the states and territories as part of their plan.
It also seems that the government is keen to stifle debate, with the legislation moving to the second reading just 24 hours after it was introduced and just weeks before the House Standing Committee on Economics is due to report on its findings into the tax. The full explanatory material was only fully uploaded onto the parliamentary website on the morning that the second reading began.
There are also serious questions which should be raised about the constitutional validity of this mining tax. Dr Ken Henry himself has confirmed that the Commonwealth government did not seek advice with regard to the Constitution. Resources are the jurisdiction of the states, and the mining resource rent tax imposes a tax on a resource at the point of extraction. Whilst the Constitution disallows interstate custom charges—Queensland cannot impose a tariff on goods entering or exiting their ports—it is currently unclear whether the MRRT is in fact imposing a tax on state property, which is prohibited by the Constitution. By not seeking advice on the constitutional validity of the MRRT, the government has already caused a situation where a number of mining ventures and the Western Australian state government have announced High Court action if the MRRT legislation should be passed by parliament.
The MRRT is already proving to be divisive. The actions the government has taken have seen the industry split between the big three companies, which were included in the policy development, and the rest, particularly the small and mid-tier firms which are aspiring to be as successful as these three big companies and provide the jobs and wealth to Australia that would come out of such success.
It is also dividing the states. Since Federation we have seen contention over state funding arrangements; however, under the MRRT scheme 65 per cent of the revenue would come from Western Australia alone. This was confirmed by Dr Henry in evidence to the Senate mining tax inquiry. It is astonishing that one new national tax would raise 65 per cent of revenue from one state alone—an estimated $25 billion of $38.5 billion of total revenue over the next decade.
I have spoken about the flaws of the process of developing the MRRT. Equally as worrying, however, is the effect it will have on the budget. The MRRT will significantly worsen the structural deficit of the budget over time. The government seems to think of it as their own magic pudding—a never-ending source of revenue. Much of their expenditure on new programs is dependent on this legislation being passed. However, while Australia is experiencing a mining boom—and we are fortunate to be a resource-rich nation—at the end of the day our resources are finite and the decision to link a volatile revenue source to programs with ever-increasing costs puts fiscal policy in a very tenuous position.
A prime example of this was found during the Senate inquiry into the mining tax. The proposed increase in compulsory superannuation alone, once fully implemented, will every year cost more than the MRRT will raise, according to Treasury estimates. Overall, conservative estimates show that approximately $57.6 billion in government spending has been linked to the revenue of the MRRT. However, Treasury estimates that $38.5 billion will be raised by the MRRT. This points to a $19 billion shortfall before any of these programs are introduced or a $21 billion shortfall once the reduction from the Western Australian royalties decision is taken into account. This is simply irresponsible. It is yet another example of this government's poor and reckless financial management.
Mining counts for two-thirds of the value of Australian exported goods. Mining employs 224,000 people and many tens of thousands more in industries supporting and supplying the mining sector. In 2010-11, mining accounted for 40 per cent of business investment, and on forward estimates will account for half of investment in 2011-12—a huge contributor to economic growth in Australia. However, the MRRT changes this. Mining is an industry with long-term leases. It takes many years to achieve a fully operational mine. This government's actions have created a cloud of uncertainty not only about the effects of the MRRT but about how the government may decide to change the rules halfway through a project's life. Mining companies that established themselves 10 years ago would not have included the MRRT into their forecasts, so why should they now believe that their industry will not change again and again?
It is naive to think that, by introducing a tax which will impose great costs on this industry, we will not see projects, jobs and investments go offshore. Australia may be resource rich, but we do not hold all the mineral resources in the world. Nations such as Canada, Brazil, Chile and the continents of Africa and Asia are all currently developing their resource sectors and would be happy to take the extra investment that will be driven out of Australia. Capital can move, and a company which sees that a country has high sovereign risk will choose another option for their new projects. The MRRT risks that situation.
As I have just said, the actions of this government have already caused uncertainty, and companies will take the impact of government decisions and imposts on their projects into account when deciding whether or not to pursue a project in Australia. The constant changes and confusion surrounding the development of the MRRT has already affected investment decisions and will continue to do so. This, of course, negatively affects Australia's economy at a time when we are one of only a few countries actually keeping our heads above water.
And it is not only the mining industry that will hurt under the MRRT. Four hundred thousand Australian small businesses will be affected by changes to the entrepreneurs tax offset that are part of the package the government intends to impose. The stripping away of this tax incentive will take $150 million from small business; and, as a former small business owner myself, I know just how hard this loss will be for Australians trying to support themselves and their families. When the bills come in, it is the small business owner who gets paid last. If the weekly earnings do not stretch to cover those small business owners, they simply do not get paid. We are not talking about big multinational companies; we are talking about restaurants, service providers and corner shops. The Treasurer said just today that small business is the driving room of Australia. How does he then justify the effects of abolishing the ETO?
The minerals resource rent tax is flawed—flawed in its development and flawed in its outcomes. It is an impost with far-reaching effects, and the revenue it is expected to raise has already been flagged for projects that have an expected shortfall even before they have started. The minerals resource rent tax will have a detrimental effect on this key industry. It will have a detrimental effect on investment. It will have a detrimental effect on jobs. And it will have a detrimental effect on the economy. The coalition cannot and does not support this flawed legislation.
Today I rise to speak on the bills that comprise the minerals resource rent tax or MRRT, including the expanded petroleum resource rent tax, or PRRT. Like the carbon tax, this is a bad tax that will reduce investment and jeopardise jobs. The bills before the House are extremely technical and complex, and I note that there are in fact 11 bills, totalling 525 pages. It is disappointing that this government wishes to push through this new tax before the parliament finishes, denying the opposition and the mining and resources industry the opportunity to adequately scrutinise these bills before moving to debate. Nevertheless, I, along with my coalition colleagues, will continue to raise concerns with regard to the MRRT.
As I speak about the mining tax and these bills today I will be focusing on what this tax will actually do and how unnecessarily complex it is; how it is unfair to small and mid-tier mining companies; how it will reduce Australia's international competitiveness in attracting further investment; and the potential for this tax to detrimentally impact the future progress and prosperity of the Gold Coast as we seek to take advantage of the nation's mining boom.
In relation to the legislation before the House, there are 11 bills that essentially fall into three subsets. The first two bills seek to create a new tax, the MRRT, and extend the current PRRT to cover onshore and offshore Australian oil and gas projects. I will discuss these in further detail shortly. Secondly, the Tax Laws Amendment (Stronger, Fairer, Simpler and other Measures) and Superannuation Guarantee (Administration) Amendment bills seek to change personal income tax provisions and superannuation. Thirdly, the remaining bills deal with administrative and technical issues.
The MRRT is a project based tax on economic rents that miners make from taxable resources. The proposed tax is imposed on a miner's mining profit, minus its MRRT allowances, at a rate of 22.5 per cent. If this legislation is passed, the new tax arrangements will apply from 1 July 2012. The MRRT will apply to the mining of coal and iron ore and the PRRT will apply to various emerging projects.
The original proposal for a mining tax came from the Henry tax review, which recommended a resources rent tax on non-renewable resources that was intended to replace existing state government royalties. An initial resources super profit tax was announced by the former Prime Minister, without any consultation with industry or the state and territory governments, and was estimated to raise $12 billion over the forward estimates. This was such an unpopular move that it became one of the principal reasons that the former Prime Minister lost his job—summarily dismissed, it would appear.
Despite the history of opposition to this mining tax, the current Labor government still wishes to go ahead. In fact, to get to this latest incarnation of the mining tax and expanded PRRT, the negotiations were conducted in secret between the Prime Minister, the Treasurer and the Minister for Resources and Energy and the managing directors of the three biggest mining companies. Why did the government exclude the smaller mining companies from the negotiating process—and the state and territory governments for that matter? It was hardly an inclusive process that the Prime Minister embarked upon.
Resource royalties represent 20 per cent of the Western Australian government's revenue, nine per cent of the Queensland government's revenue and six per cent of the New South Wales government's revenue. There are therefore huge implications for these states and, as the Henry tax review recommended, the Australian government should negotiate the federal-state financial implications of such a move. However, the Gillard government has chosen not to expand the consultation process.
I spoke briefly earlier about how complex this legislation is, and I note that the Henry tax review referred to the need for the regime to be about root and branch reform so as to deliver a simpler and fairer tax system. However, the Gillard mining tax has managed to be much more complex and is less fair, particularly to the smaller mining companies. Under the Gillard mining tax these smaller mining ventures will pay a higher effective tax rate, even though the Henry tax review recommended a lower tax burden which would be aimed at assisting in start-ups so that these ventures could grow and prosper.
The University of Western Australia showed in its modelling that there would be a four per cent discrepancy in the level of effective total taxation between projects that existed prior to 2 May 2010 and those developments taking place after 1 July 2012. The ultimate reality is that new smaller miners will be paying six per cent extra tax and that larger mature miners will pay only an extra two per cent, thus contributing to an anticompetitive regime. This tax is not fair and simple as is claimed; rather, it is unfair and unnecessarily complex.
The coalition shares the concerns of industry that the implementation of this mining tax will impact Australia's international competitiveness as a destination for resources investment. Growing the size of the industry should be the main focus, not cutting the industry into smaller and smaller pieces. Australia is part of a global economy and there are many competing nations vying for investment in the mining and resources industry. Therefore, we should be implementing tax policies that provide incentives for investment, rather than introducing a tax regime like the Gillard mining tax which hinders this economic prosperity.
I note the salient points made in a submission by the Chamber of Minerals and Energy of Western Australia to the House of Representatives Standing Committee on Economics on the minerals resource rent tax legislation, and I quote:
Ultimately, the additional impost of the MRRT will mean less revenue will be available to fund projects, repay debt and provide a return and refund to investors and this may be a real point of difference between funding a project in Australia versus one outside Australia that is not subject to an MRRT equivalent.
The mining and resources sector is a crucial part of Australia's economy and, consequently, integral to our nation's future growth in almost all other industries and infrastructure plans.
While Australia's economy used to ride on the sheep's back, we now find ourselves riding in the back of a miner's truck but with a competitive advantage in the international market place. Almost 40 per cent of all business investment in Australia in 2010-11 came from mining, with forward estimates predicting this to grow to over 50 per cent in 2011-12. Mining consists of about half of our total exports of goods and services, whilst accounting for approximately two-thirds of the total value of exports of goods. It is an industry that directly employs 224,000 Australians, with thousands and thousands more working in industries that help support the mining sector, such as manufacturing and construction.
These figures show just how important the mining and resources sector is to Australia, and I would now like to put on the record the flow-on effects this mining tax will have on the prosperity of the Gold Coast. The Gold Coast is well positioned to benefit from the nation's mining boom and develop a fly-in, fly-out, or FIFO, terminal for the region. We are also well positioned to become an education centre of excellence, with trades and tertiary courses and qualifications that are developed and targeted to provide support to the mining and resources sector.
l have spoken in this place before about the economic challenges facing the Gold Coast and the positive effect that a FIFO workforce can have with regard to employment prospects for local residents as well as the wider economic benefits it will have for businesses and the city at large. Of course, a future FIFO terminal on the Gold Coast and its success is dependent on the prosperity of a strong mining and resources sector. The Gold Coast is well suited to become a national FIFO hub. We have excellent education facilities, with four universities, a variety of public and private schools and over 160 registered training organisations. Closer to the Gold Coast Airport itself, there are private and public hospitals as well as a variety of medical practitioners and allied health services.
As well as basic infrastructure essentials, the Gold Coast also boasts a rich variety of community groups and sporting organisations, each playing an important part in the local community. There are also many locations for workers and their families to enjoy some downtime, with beaches, national parks, theme parks and other attractions situated all over the Gold Coast.
The direct employment opportunities resulting from the Queensland mining and resources industry are set to grow from 44,944 full-time equivalents in 2010 to 121,685 in 2030. This is almost triple the full-time equivalent number for 2010. It has been predicted that there will be a 4.9 per cent per annum increase in employment growth in mining operations over the next five years.
I have recently spoken in this place about a mining expo held on the Gold Coast that I attended. It attracted about 10,000 people—almost double what was expected—with the vast majority of attendees looking for employment. The Gold Coast community in general sees the mining and resources sector as a potential employer that will help provide opportunities for them and their families and keep our local economy strong.
Further, the educational facilities already present on the Gold Coast can be used to complement the educational requirements of a FIFO workforce. This could boost the tertiary take-up rate on the Gold Coast, which is well below the national average. The establishment of an educational hub for the mining and resources sector would also further boost the local economy through the expansion of tertiary institutions and, consequently, the services that they require.
This MRRT is placing all this at risk. A Gold Coast based FIFO workforce could potentially be a highly viable solution to help solve a six per cent unemployment problem. Coupled with the government's carbon tax, the increasing cost of travel will be a further dampener on the prospect of establishing a FIFO terminal where it is desperately needed, on the Gold Coast. By placing a greater burden on the mining operators that are currently willing to hire FIFO workers, the possibility of this opportunity to increase employment participation and economic prosperity may slowly slip away. This government is in effect legislating for unemployment and economic uncertainty. It has managed, in the short space of time it has been in office, to acquire a rightfully earned reputation for indecisiveness and distrust and an insatiable need to tax.
In conclusion, I would like to reiterate the my position and that of the coalition on this issue: we oppose the Gillard government's plans to introduce this minerals resource rent tax. As I have mentioned already, the government should be seeking genuine, fairer and simpler tax reform, achievable only through an inclusive and open process, not just with a select few stakeholders to the exclusion of all others. These reforms must also maintain the integrity of our international competitiveness. They must not hinder it. Furthermore, if this tax is passed, the ability for the Gold Coast to develop a workforce to assist the mining and resources industry will be at risk, as will as our ability to develop as an education centre of excellence, with trades and tertiary education focused on this important sector.
I therefore conclude by encouraging the parliament to stop the minerals resource rent tax from going ahead and suggest that the government go back and re-evaluate what the 'national interest' truly means—because the coalition will oppose Labor's great big new mining tax to protect our national economy.
Through the actions of this government, we have witnessed the trashing of democracy in Australia. In promising not to have a carbon tax and then doing the exact opposite—when it could cobble together a half-baked government—the Labor Party rendered democracy pretty much useless. The voice of the people was silenced and we witnessed the trashing of democracy.
But democracy will be restored at the next election, and introducing this new mining tax will ensure that the restoration will be just as painful for Labor as the four years Australia has had to endure this government. The last time a government sought to impose extraordinarily unfair taxes on miners, it gave rise to a movement known as the Eureka Stockade, which is credited as the birth of democracy in Australia. So history repeats. In the lead up to the Eureka Stockade, the government imposed heavy taxes on the entrepreneurs, the miners who were spilling their blood, sweat and tears on the goldfields in Victoria at Ballarat. In return for the heavy taxes they received—wait for it—nothing. The government saw an opportunity for a quick money grab, took it and gave back nothing in return. It was no wonder then that those brave miners took up arms against the government. At that time, they had little choice. The Eureka Stockade, where miners drew a line in the sand and said, 'Enough enough is enough,' was such a defining moment in Australian history and laid such an enduring foundation for our culture—including the concept of a fair go—that Australians are still rallying behind that notion of rebellion. But here we are 157 years later, and what has this government learned? Nothing.
Eureka parallels a similar story in the United States of America where the famous Tea Party patriots demanded 'no taxation without representation'. We may well be demanding something similar here, because history is repeating itself. This government just simply cannot help itself. Someone is making money, the Labor Party thinks. 'We cannot have people earning a living digging stuff,' say the Greens. 'We will tax it,' is their first and only answer. This is an ill-conceived tax from an illegitimate government; make no mistake. Even the previous Labor government, the one that had some legitimacy, started this rot. The funny thing is that that government was knifed, and that Prime Minister was knifed—
because of the carbon tax and the mining tax—and, as the member for Riverina says, 'in the back'. Here we are with the two-faced Labor-Greens taxaholics imposing exactly that: a carbon tax and a mining tax on the Australian people, who are not so dumb that they cannot see the self-defeating nature of these two taxes. The general public has enough nous to know that this mining tax—a deal done with the three biggest miners in this country—is unfair and discriminatory.
Even today they are still chopping and changing what the tax is and how it works. In the Australian today we find out that an attempt to raise the threshold to $75 million was another failed attempt to cover up a botched plan. It is a dog of a tax, and putting a different collar on it will not stop it from being a dog of a tax. The small mining companies, the ones not allowed to have any input, do not care what colour the collar is, because they know that they will be getting it in the neck.
We can be sure that the big three miners will be gaining a competitive advantage out of this deal. They will have made sure that their hide is looked after. The combination of the mining tax and the carbon tax will make Australia the highest taxed mining industry in the world. That will make Australia about as attractive to mining companies as broccoli to five-year-olds.
Mining companies are global concerns, and there are plenty of countries in the world where they will not be taxed to death. An interesting report came out in September from Deloitte Access Economics, suggesting that a more 'creative' method of calculating tax was used by Treasury to back their claim that the mining industry paid just 27 per cent tax. That was the claim Treasury made during the debate over the failed superprofits tax. The Deloitte report found that the minerals industry paid an average tax rate of 41.5 per cent between 2007-09 and 2009-10, and that should scare off most of the potential investors.
Even China is scared. Chinese diplomat Ouyang Cheng warned, in the Age on July 7 about the difficulties this mining tax would impose on Australian-Chinese economic cooperation:
''There are some worries from the Chinese mining enterprises regarding newly released MRRT [minerals resource rent tax] bill,'' he said.
This government has been warned, and the warnings are coming from people who know far more about mining and far more about economics than anyone in the Labor Party or the Greens will ever know. They have been warned.
But this muppet government presses on. This furry Labor glove with a green hand inside and a couple of limp independent strings attached is trying to tell us that this tax is about fairness and equity. They would have us believe it is about 'spreading the wealth'. They froth and bubble about our 'patchwork' economy. They had to stop talking about a 'two-speed' economy because it did not fit the story they wanted to tell. So now it is about a patchwork economy because—surprise, surprise—different industries are in different cycles. I have got news for this government. There has always been a 'patchwork' economy in this country. We have just never had a government so addicted to tax that it sought out any industry rising to the top of its cycle so they could tax it into the ground.
Here is a question: what happens when the cycle turns, as it inevitably will? How will this government fund the milk and honey they are promising when the well runs dry? Which industry is going to be next? The Leader of the Nationals was in this place earlier, posing the same question. If agriculture—an industry that has been flogged around the bottom of a cycle—were to come good and somehow start to make good profits, would this government introduce a great big farming agriculture tax? Absolutely, because there is no tax that the Labor Party does not like.
But while the small miners and the Chinese investors are worried, perhaps the Treasurer and, for that matter, every taxpayer should be worried as well. This mining tax is supposed to raise $11.1 billion over three years, and of that this government is going to spend every penny and a few billion more.
Only the Labor Party could introduce a whopping great tax that actually costs more money than it is going to make. They did it with the carbon tax and now here they are doing it again with the mining tax. But it is going to get worse because the mining companies are saying that they are not going to pay the tax if they can help it. So the $11.1 billion is at the mercy of the accounting policies of the very large mining companies, who have a duty to their shareholders to deliver as much post-tax profit as they can get. Certainly, we know that the big three are not going to pay any tax at all, and the government has let that happen.
But it will get worse. The state governments are going to raise royalties, and some already have. They have to, because this Labor government flatly refuses to fund vital infrastructure where it is needed. We have seen Western Australia and New South Wales make their moves, and now South Australia is going to follow no doubt. When the big one, Queensland, follows—that will probably happen with a change of government—we will see. But I tell you that the states are moving. They raise just nine per cent of state revenue through royalties in Queensland, compared with WA, which raises 20 per cent of state revenue through royalties. When a fair dinkum government comes in to clean up the mess in Queensland, there will no doubt be an increase in those royalties. Or, maybe the Bligh Labor government will come to itself and raise the royalty stakes right now, all of which the federal government will have to refund to the mining companies. So the mining tax is suddenly turning into this bigger and bigger loss. The $11.1 billion is suddenly dwindling—going down and down. But it could become a lot worse, because the world is facing a new financial crisis brought on by excessive government debt—something this government should be very acutely aware of.
Another economic global concern will affect demand for resources and therefore profits. Where will the money come from then? Remember that these guys are promising milk and honey will rain down on the land from this mining tax. Superannuation is going to be increased from it, they say. They seriously think that people will suddenly think taxing an industry will make us all the more wealthy because their superannuation contributions will be increased. 'The roads will be paved with gold,' they say. 'We are spreading the wealth,' they gush, 'to businesses not in the booming resource industry.' Let us take a closer look at that plan. It is not the government that is going to be paying increased super. It is businesses that are going to pay increased super. Far from spreading the wealth to businesses outside the resource boom, this government will be, effectively, taxing them. That is right: they will manage to smack down the booming industry, while still managing to smack down other industries and small business as well.
That is right—and claim the credit, as the member for Riverina says. They try to fob us off with a line about lowering company rates to offset the increased employment costs brought in by super changes, but who is going to believe that line? I can tell you that we will not fall for that. Thousands of small businesses that are not companies will not believe it for a second—those that are small traders and those that are in partnerships: Bob the plumber, Uncle John and Aunty Betty at the corner store. They are the small business who will pay this super tax directly, because they employ a lot of people across this nation. Or they did until now; because when employment costs go up something has to come down. I can tell you that many of these businesses are already on the edge. They are marginal now and cutting back on personal expenses themselves. They are waiting for an opportunity, though, to grow their business. But if there is another expense they will have to lay off staff or cut costs, or they will just go and shut up shop and look for a job somewhere. And if there are none, they will probably become yet another person on the unemployment line.
What this ridiculous tax and superannuation plan will do is introduce a different patchwork in the economy. What is worse is that this government is trying to claim credit for the superannuation. What really sticks in my craw is this concept that the mining tax is going to deliver for regions. What a joke, and what an absolute rort.
We have seen how Labor fails on that scorecard with the Queensland Labor government. Queensland already taxes the mining industry—it is called royalties. All the hard work—the sweat, the toil and the effort—and all the blood and tears in North and Central Queensland contributes to the state economy and to the national economy. All the burden that families bear, all the wealth-producing effort, delivers more than $2 billion in royalties just through the coal ports of Abbot Point, Hay Point and Dalrymple Bay in North and Central Queensland alone.
And what do we get in return for that? Zero, zilch, nothing. That money is funnelled straight into the south-east corner. We have seen attempts to spread that wealth, but it does not get spread around. It actually just gets funnelled. If this same foolish plan is put into federal Labor hands, we know too well in Central and North Queensland what will happen. It will be used to fill the gaping void that currently prevents Wayne Swan from getting a surplus. It will go down to Sydney or a bit further to Melbourne. None of it will come back to the wealth-producing centres.
How do we know? Let us take a look at the forward estimates. The mining tax raises, as I said, $11.1 billion over the next three years. What comes back to regional Queensland—the big wealth-producing area, apart from WA? The best they can offer is a handful of transport infrastructure projects. There is something good in here: $160 million for a ring road in North Queensland; $120 million for safety upgrades on the Peak Downs Highway, although it will actually cost three times more than that to deliver; $54 million for an intersection in the south-west of the state; $50 million for a port access road in Gladstone; $40 million for an intersection upgrade in Central Queensland; and in my electorate I am stuck with a $10 million study. Great!
But I am being pretty generous here because not all these projects are actually linked to the mining tax. They are regional projects that will be funded over the lifetime of the forward estimates where the MRRT is supposed to collect $11.1 billion. These projects total $434 million out of a tax take of $11.1 billion. That is less than four per cent returned to one of the greatest mineral wealth states in Australia. If that is a fair share, I would hate to be sitting at the dining table when Swanny's carving up the corned beef. I am a big fella, and I suspect that when the Treasurer thinks that four per cent is a fair share I would be getting this little sliver of silverside and I would probably have to fade away to a shadow!
What a rort—$11.1 billion out, with the large bulk coming from Queensland, and only four per cent back. Ripping $100 out, giving four per cent back and saying that is fair—what a joke! Fairer faces emerge from the underground at Oakey Creek, covered in coal dust from head to toe.
For a substantial part of our history mining has been a source of national prosperity and therefore of great political significance. The Eureka rebellion in 1854 was a revolt by Victorian miners against excessive taxation and regulation by the government of the day. The symbol of that rebellion, the Eureka flag, has remained a perennial favourite with all sorts of minority interest groups and antiestablishment causes from ultra-right nationalist classes to warring trade unionists and everyone in between. Along the way the true origins of the conflict have all but disappeared, but in the minds of most people it exists as nothing more than a non-specific instance of the true-blue Aussie battler sticking it to the man. The fact is that the Eureka rebellion was a revolt by Victorian miners primarily against what they saw to be excessive taxation and regulation by the government of the day. So from the earliest days of our nation's history mining has been a hot button issue. It is remarkable how today very little has changed.
After coming to office in 2007 former Prime Minister Kevin Rudd and the Treasurer commissioned a so-called root and branch inquiry into the nation's taxation arrangements. One outcome of that review was a recommendation for a resource superprofits tax. Strangely enough, the profits tax proposed by the government did not really look much like the one suggested by the Henry review. Having been taken completely by surprise, the mining industry launched a campaign to have the superprofits tax abolished. I do not imagine in their wildest dreams they would have thought they would have been so successful. Not only did they succeed in having the tax shelved; they also played a huge role in bringing down the Prime Minister of the day.
After Prime Minister Rudd's removal the new Prime Minister, Julia Gillard, promised she would negotiate with the mining industry over the massive taxes. Instead, she cut a backroom deal with the three big miners—Rio Tinto, BHP and Xstrata—and left the various state governments in the dark and another 320 mining interests out in the cold. The result of that deal is the legislation we have before us today, the Minerals Resource Rent Tax Bill 2011.
The amount of money that the country will supposedly make from the tax appears to be a little uncertain at the moment. Over the first year since the mining tax was first announced revenue estimates jumped from $12 billion under the original RSPT, to $24 billion under the RSPT with revised commodity price assumptions, to $10.5 billion after the Gillard mining tax deal and more recently to $7.4 billion thanks to changes in the exchange rate. So we have a bouncing ball from $12 billion to $24 billion to $10.5 billion and $7 billion. The most recent figure is $11 billion, minus the $3 billion that the federal government will have to reimburse the states, leaving around $9 billion of revenue. Nevertheless, revenue from the proposed tax has been included in the Commonwealth budget since 2010-11 despite the tax not coming online until 1 July 2012.
Here is where things get rather more interesting. According to Treasury, the revenue derived from the MRRT and the expanded the PRRT will decline over time; however, the cost of the budget measures the MRRT is supposedly paying for will increase over time. Have you got that? The costs are going to go up in the future as the revenue stream dwindles.
Furthermore, the key assumptions underpinning these taxes remain a secret. What is the government up to in not releasing the data? I can forgive people in Australia who think that the concept of this tax is sound and good value because we are taking money from the mining companies and giving it to the poor—it is a Robin Hood type of tax—but let us look at what we are being sold here. Exploration in our resource sector is at 140-year peak. This government would have you think that its tax has actually stimulated the resources sector.
It is not often that you will hear me say complimentary things about the government in my home state of Queensland, but at least they provide details of the assumptions underpinning their mining royalties and allow proper scrutiny of their revenue estimates. Instead, the Gillard government remain intent on keeping the figures under wraps. Why? What are they hiding this time? They had to be dragged kicking and screaming to release the modelling behind the carbon tax. They had to be shamed into releasing the updated figures. That is because the only figures the government care about are the polling figures, and at the moment they are not that flash.
The rest of it is just grist to the mill, just interchangeable sets of numbers to be twisted and manipulated according to the political imperatives of the day. All of this necessitates the employment of legions of spin doctors who are all tasked with manipulating the shoddy truth into something resembling a good-news story. How far down this path do you really want to go? It is government of the spin doctors by the spin doctors. For goodness sake, it certainly is not for the good of the nation.
You blokes should listen to your former leader Mark Latham. Last week he gave half of your frontbench a spray. Quietly in the corridors some of your parliamentary colleagues agreed with Mark and said he speaks the truth. But the government, try as they might, still have not been able to move on from the glory days of 2007 and the old 2020 talkfest. They like to talk about reform, but all they ever do is announce more inquiries, more reviews and more reports. They commission a review and then ignore the recommendations. That seems to be the modus operandi of the Labor government. This very day in the parliament we saw yet another committee being formed.
This government likes to talk a lot about reform, particularly tax reform, but as ever the reality does not match the rhetoric. As I have said in the past, Labor's idea of tax reform is to introduce new taxes. I have lost count of how many we are up to now, but I believe there have been around 19 or 20 new taxes or increases in tariffs.
Much like the others, the MRRT has so many shortcomings it is hard to know where to start, but I will give it a shot. For starters it introduces another new tax on an important industry on top of the existing royalty and income tax arrangements, making our tax system more complex and less fair. It also reduces our international competitiveness as an attractive investment destination. We are already seeing junior and mid-cap miners moving future investments offshore. As the lead time for mines can sometimes be up to five or 10 years, it is the future resources sector that will suffer particularly as China's growth comes off and demand softens. It also gives an unfair competitive advantage to the big three multinational, multicommodity and multiproject companies who were given the exclusive opportunity by the government to negotiate the design of its new tax with all their competitors and stakeholders locked out of the process.
This tax makes the federal budget become a hostage to decisions made by state and territory governments about their royalty arrangements. Predominantly that means, whatever the government puts in the Mid-Year Economic and Fiscal Outlook document, it will be held hostage to whatever state government royalty amendments are made and the federal government will be left hanging onto the bag. It raises serious and unresolved constitutional issues and links a highly volatile and downward-trending revenue stream to a suite of budget measures, the costs of which are projected to increase, thereby worsening the Commonwealth budget strategy and structural deficit over time.
At the last count I think our revenue streams were to be $11 billion. The $3 billion that the government will have to credit will leave around $9 billion revenue. The forecast expenditure for savings from the MRRT will be around $14 billion. As that revenue comes off, the government is going to be caught, and I would not mind betting London to a brick that when the MYEFO document comes out the figures will be changed again. It is going to be up to the coalition, when we get to government, to clean up the mess.
It is the last point which gives me the greatest cause for concern. The government have proposed various associated measures which will become increasingly costly over time to fund by a tax which could be dramatically impacted at any time by increased state government royalties. These deficiencies completely refute the government's argument that their proposed changes create a more efficient tax system. The original concept of a resources rent tax was investigated by Ken Henry and recommended negotiations with the states and territories. This government went ahead and conducted their negotiations with the big three without them. So much for the rhetoric of expert advice that the government cling to! To this day there has been no consultation with the state and territory governments about the implications of a mining tax for them, despite the fact that the resources royalties represent 20 per cent of the Western Australian government's revenue, nine per cent of the Queensland state government's revenue and six per cent of the New South Wales government's revenue.
Under our constitutional arrangements royalties are the responsibility of the states and territories. That did not stop the government making a deal with the big three companies to credit all state and territory royalties when calculating their exposure to the MRRT, apparently completely oblivious to the flow-on consequences of that decision to the federal budget. In the absence of a negotiated agreement with the states, any time the states decide to raise their royalties, as Western Australia did and as Queensland and New South Wales reserve the right to do, the Commonwealth will be forced to cover the shortfall.
At the time the government signed the deal with the big three, Treasury assessed that the MRRT would raise around $38.5 billion. That figure will be raised almost entirely from projects in my home state of Queensland, Western Australia and New South Wales. I know my colleagues from Western Australia will have more to say on this. If we are being honest, Western Australia is the one that is going to be left carrying the can. Something like 65 per cent of revenue from the tax will come from one state. That is an extraordinary figure. Since when has a supposedly national tax ever raised 65 per cent of its revenue out of one single economy? It seems fair to say that the mining tax as proposed by the government is more complicated, less efficient and less fair than the arrangements currently in place.
It is the view of the coalition that the MRRT and the expanded PRRT are broken beyond repair. Any attempt to fix the defects in these taxes would likely result in a series of compromising concessions to the affected companies. That is no way to implement tax reform. Reform is always an ongoing process, but it should be delivered through an open, transparent and inclusive process, not through backroom deals with a few privileged companies who were given the opportunity of hammering out the deal to their own advantage. Indeed, any so-called reform borne out of such a process would lack the legitimacy required to make it worthy of the name.
We know now that the mining tax is unfair and inefficient but—guess what?—it might even be unconstitutional as well. There are a series of questions that cannot be answered as to whether the MRRT, which is a tax on resources at the point of extraction, is in fact a tax on state property and therefore prohibited by the Constitution. A number of mining companies and even the state government of Western Australia have flagged possible legal action if this legislation gets through the parliament. I would like to think the government had done their research and made sure that they were on solid legal footing before introducing these bills, but it seems that it was just too much to expect. We only need to look at the debacle of the PRRT and the ruling of one tax, one customer. Exxon Mobil has 50 per cent shares with BHP and that one ruling has been in dispute in the courts since 1990.
You might have thought that the government had learned their lesson after the debacle surrounding the Malaysian solution, but it seems not. In fact, thanks to Ken Henry, we now know that they did not seek any legal advice on the constitutional validity of this tax. Could things be more absurd? Here we are debating a bill which stands a half-decent chance of being the second highest profile government policy to be declared unconstitutional in the High Court. What an embarrassment!
Tonight I rise to speak on the Minerals Resource Rent Tax Bill 2011 and related bills and I do so to talk about three particular issues. The first point is that this tax, as designed by the government, has been flawed from the very beginning. The second point relates to the impact that this tax will have on Australia's international competitiveness and potential investment. The third point is the impact of this tax on the budget position.
First and foremost, this is incredibly complex tax legislation. The 11 bills before us consist of around 525 pages of some of the most complex tax changes that have ever been introduced into this parliament. It is particularly interesting that the government was not all that keen for too much scrutiny of these bills. The reference provided by the Treasurer to the House Standing Committee on Economics to review these pieces of legislation was given to the committee on Wednesday, 2 November for a report on Monday, 21 November.
This is clearly not a substantial amount of time for a proper inquiry to be conducted and analysis to be made. It did restrict the witnesses that could be heard by the committee, which was, I suggest to the House, one of the intentions behind such a short reporting period. The consultation process on these taxes and the implementation and design has been flawed from the very beginning. It was flawed not only after the Henry tax review, where the government made its very first announcement on a mining tax with the RSPT, but also on the MRRT, which is the subject of these bills this evening.
The MRRT was designed by the government and the three big miners in secret. A deal was done between the government and these three big miners—BHP, Rio Tinto and Xstrata—and, very interestingly, no consultation occurred with any of the 350 other miners who would be affected by the new tax. This leads to some key questions about whether certain advantages have been provided to those negotiating the tax in the first instance to the detriment of those smaller miners who were left out of that consultation process. It is also significant that when this tax was designed the consultation did not involve state governments, whose royalties were central to the concerns raised in the Henry review—that state royalties were leading to distortions in investment and production decisions. No consultation occurred at the state level. We hear the tax was designed by the government in secret with the three big miners without consultation with key stakeholders and, we learned, without any officials present. I think that the view on just how flawed this way of designing a tax is is best summed up by Mr Yasser El-Ansary of the Institute of Chartered Accountants in Australia, who gave evidence to the House Standing Committee on Economics. He stated:
The government's approach to consultation and policy design in respect of the new resource tax arrangements during the course of 2010 can only be described as abysmal ... If there was an international prize for the best worst policy consultation process in a sophisticated open market economy, Australia's efforts during the course of 2010 would win hands down.
While the consultation process around the original resource superprofits tax announced in early May 2010 was bad, the subsequent consultation process that involved striking a deal behind closed doors with three key mining groups in July 2010 was even worse. It would not be unreasonable to say that that represented a low point in Australia's economic and political history. It is a low-water mark which most Australians would prefer not to see repeated in our lifetime. I think you would be hard pressed to find anyone to support the view that this is a good way to make public policy decisions. We certainly agree with that on this side of the chamber. It is a very poor way to make public policy decisions. In fact when you look back to the past where complex tax changes have been made and you look at the consultation process involved in those changes, you see a very different process. The GST springs to mind. The implementation of the GST in the late 1990s and the early 2000s was a much more comprehensive package that was presented, tested and modelled. People were given an opportunity to look at the impact that the new tax would have on them and the subsequent benefits that would flow from that tax. It was properly modelled and that model was transparent. It was clear that the impact on the economy and the prices in the economy were things people could see upfront. Because of that, it stands in complete contrast to the conduct of the process with the MRRT.
A secret deal has been done in secret with modelling that has not been properly released. The government has said on a number of occasions that under FOI it has released its model for the MRRT. Yet when questioned by the House Standing Committee on Economics on whether all the information had been released, if the assumptions on which that model was predicated had been released, Treasury officials were forced to concede that in fact those assumptions had not been released. This stands in very significant contrast to the way that models are put together by the WA Treasury and the Queensland Treasury: their assumptions are made public so that they are in full public view for proper and critical analysis. The government should release the assumptions behind their model and they should do that forthwith.
The second point I make tonight relates to the potential impact on mining investment and the impact on Australia's international competitiveness. One of the issues that came up time and time again when this matter was being discussed before the economics committee was that of sovereign risk. Sovereign risk is not a phrase that is traditionally associated with Australia, yet it is one that is very much associated with this tax. Who can forget the front pages of the New York Times and the Wall Street Journal that link Australia and sovereign risk together as a result of the tax that the government wants to bring forward?
Mr Hooke of the Minerals Council of Australia made a statement that the MRRT has had a very significant impact on Australia's position from being previously one of the safest places to invest. He quoted a study by the Fraser Institute of Canada, which is independent and surveyed some 400-plus CEOs around the world. It looked at 51 jurisdictions of resource-rich nations and broke them down into provinces. Through that debate, Australia dropped from being 18 out of 51 to being 31 out of 51 in what the institute calls the policy potential index. It is of concern that potential investors in Australia would see Australia as a risky proposition. Concerns have also been raised that a number of decisions have been made not to invest in Australia as a result of the announced tax, and evidence was presented in relation to that.
It is useful to look at what other people are saying about Australia and sovereign risk. At the October Commonwealth Business Forum in Perth, the Chief Executive of the South African gold miner AngloGold Ashanti, Mr Mark Cutifani, stated 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'. We on this side of the chamber note that the perception that Australia is subject to sovereign risk will damage its ability to attract capital investment and thus damage the economy—and that is of concern.
My third point relates to the revenue and fiscal position of the government and the fact that the MRRT will have a very significant impact on the fiscal position of the government. As everyone in this chamber is aware, this government inherited a very strong fiscal position from the previous, coalition government. Unfortunately, though, this great economic legacy has been squandered by Treasurer Wayne Swan in just four short years. We are now looking at a position where our gross debt ceiling has been raised to $250 billion and we now have a net debt of $107 billion and a deficit of around $49 billion. Clearly one of the intentions behind the government's MRRT is to try and raise revenue. The reason the government need to do that is they are reckless spenders.
This government has had a very consistent reputation over the past four years for raising and introducing new taxes. This is the 19th of those raised or increased taxes and it is most definitely a big one. Despite the fact that the goal behind the MRRT is to raise revenue, it should be noted that it is incredibly volatile to changes in such things as the historic high commodity prices and production volumes. The MRRT package of bills before us includes both revenue and expenditure measures. The way that the government has constructed these bills is that the spending will continue to grow as a permanent feature of the architecture of these bills, yet there is no guarantee that the revenue will also continue to increase.
The modelling that was released shows that this tax is expected to raise $11.1 billion over the last three years of the forward estimates, but since the government released that model the New South Wales and Western Australian treasuries announced increased royalties over that period of $1 billion and $2 billion respectively. These royalties will be credited against the revenue of the mining tax, which means the net revenue to the federal government will be reduced to around $8.1 billion. According to the government's numbers, there is a shortfall in revenue relative to spending of around $2.8 billion over the forward estimates, but this blows out to $5.7 billion when crediting the New South Wales and WA royalties. We can probably foresee a situation where royalties will increase in the future.
It is clear that the spending side of the bills package is locked in, but the revenue is subject to the vagaries of the international market and state royalty changes. Both the Reserve Bank of Australia and Access Economics have suggested commodity prices in terms of trade have peaked and are declining a little more rapidly than expected, creating downside risks for the mining tax revenue. In effect, this package will significantly worsen Australia's structural budget deficit over time with the government's proposal being underfunded beyond the forward estimates period.
These are just three of the concerns that the coalition has with the MRRT package of bills brought before this House. We call on the government to take heed of them. (Time expired)
I rise to speak to the minerals resource rent tax package of bills. This package of 11 bills totalling 525 pages is of serious concern for both Australia's current economy and its future prosperity. As I have said in this place before, the Australian people deserve to have a say on the future prosperity of this great nation. They deserve to have a say on this tax package, which has serious implications for the Australian economy broadly and for the mining industry specifically.
As the federal member for Longman, I would be remiss if I failed to articulate my serious concerns about the implications of these bills for my electorate. My electorate's local economy is based on tourism, light industry and manufacturing, which will all certainly feel the impact of this tax package.
Businesses in my electorate rely on confidence in the market and the strength of our country's economy, which is largely based on the continued prosperity of the mining industry.
As Australians we are all aware that we owe much of our prosperity to our resources. However, no-one is under the illusion that we will forever be able to rely on mining to prop up our economy. There is also no dispute over the fact that as a nation we need to be savvy about how we ensure that our current resources will ensure our future security. But this tax, which has ignored the advice and input of all but three mining companies and simply does not take into account the situation of hundreds of smaller companies, is not the best way for our country to maximise the benefits of the mining boom in Australia.
As I have stated in this place many times before, we in the coalition recognise that our economy will face many challenges in the future, and we understand that our economy will need to transition and be restructured post the current mining boom, rising to meet the challenges of an ageing population. It is important that as a nation we meet these challenges from a position of strength. The coalition left the current government with that position of strength. The Howard government paid off $96 billion of Labor debt, leaving this government with $50 billion in the bank. However, this Labor government has managed to turn that $50 billion in the bank into over $107 billion in net government debt, which is accumulating more debt at a rate of $100 million a day, with an interest bill of $20 million a day.
It is here that the philosophical difference of the two sides of politics emerges. We on this side of the House believe in lower taxes and in growing the productive capacity of the economy. Those in the Labor Party believe in higher taxes. This Labor government is so addicted to new taxes that it has introduced or increased 19 taxes. For every problem, its solution is a tax. Binge drinking is a problem; we have a tax. Smoking is a problem; we have another tax. There are floods in Queensland—yes, that is right: another tax. Climate change and the environment present a problem; not only do we get a tax but we get the single largest carbon tax in the world. Yet again, what do we have in these bills before the House? Yet another Labor tax.
It is the design of this tax that is fundamentally flawed. This is a bad tax, a tax that affects the sovereign risk profile of Australia. This is yet another tax from a bad Labor government that will be yet another deterrent to investment in Australia and investment in the future of the mining industry. Contrary to what the Labor Party would have you believe, we are not the only country in the world that has iron ore. We are not the only country in the world that has coal. We operate as part of a competitive global marketplace. This Labor tax, along with all the other Labor taxes, will bear on the investment decisions of companies that are operating in the global marketplace. From where I am sitting, this tax does not bode well for Australia's future.
I am concerned that this tax is another opportunity for a tax grab by the Labor Party as a means to fund its wasteful spending. I am concerned that this government is taking the easy way out and that it is failing to make the tough decisions. We have seen pink batts, school halls and a blow-out on border security—all wasteful spending that should have and could have been avoided. On this side of the chamber we are instead guided by the principle that governments do not have any money of their own; they only have the people's money in trust. This money is held in trust for the people of Australia with the expectation that it will be spent wisely, not wasted in bungled government programs and certainly not wasted under the justification that a government can create yet another new tax, such as this tax that we are debating today.
I also have great concern about what this bill will mean for Australians living in my electorate. It is all very well for this Labor government to say that mining companies will be the ones that foot the bill for this tax, but it is foolhardy to fail to recognise the greater impact this has on all areas of the economy. It is not just the direct impact that this tax will have on the mining companies themselves; it is also the trickle-down effect that we will see for all areas of our economy. In my electorate there are many who will be indirectly impacted by the changes to the mining industry.
Let me share with the House some examples from my electorate. One local business, Glendale Homes, builds prefabricated housing utilised by mining sites and regional communities which host large numbers of mining employees. A decrease in the mining industry and a consequential decrease in the numbers of employees requiring accommodation will wipe out a large percentage of this business and will affect this innovative local business in my electorate. Another great local business, Atlas Heavy Engineering, will also be impacted by the tax. Atlas, like many local businesses, is being hit hard twice this year—once with the cost increase of the carbon tax and yet again with the probable decrease in demand for mining equipment due to this tax.
It is not just businesses adversely affected. Unemployment is a huge concern in my electorate, something I have spoken about countless times before, with the town centre of Caboolture hosting twice the national rate of unemployment. Every day I speak to families in my communities who have been forced to take employment elsewhere, including in the mining industry, because local jobs are difficult to come by in our depressed local economy. An impact on the mining industry from this tax will be felt in my electorate. A loss of mining jobs would put more pressure on families in my electorate, seeing local unemployment continue to rise.
While it is vital that as a nation we take advantage of the current mining boom, that should not be at the expense of future potential investment. The Labor Party may have conveniently forgotten in their quest for new taxes that we have a tried and proven method which has survived and worked well for more than a century in Australia. This is the system of state based royalties, a system that ensures that money raised from mining is spent in that same state and a system where state governments are competitive and where a state such as my own state of Queensland can make the tough decisions, encourage investment, and be fairly rewarded for doing the hard yards. That is a right that has endured a century—a right that the Labor seek to remove with yet another new tax.
If we as a nation are to take full advantage of the current mining boom, we must do so in a way that encourages potential future investment in our mining industry rather than discourages it. The international investment community must look at what this Labor government is doing in our country with more than a little degree of confusion.
Underpinning all investment decisions should be a significant degree of certainty. And the one thing we have never seen from this Labor government is certainty. We have a PM that promised never to introduce a carbon tax under the government she led and who subsequently introduced a carbon tax. Now, with this tax, we have seen version after version, Prime Minister after Prime Minister, with each updated version of this tax negotiated with just a select few companies who were given the opportunity to negotiate and discuss the tax. Three companies, BHP, Rio Tinto and Xstrata, were given the chance to discuss this tax while the Labor Party left the rest of the mining companies, and particularly the critical smaller and start-up mining companies, in the dark. What we are debating here in this place today is this version of the mining tax which represents far more of a political fix than a carefully considered and effective piece of public policy—a political fix that was desperately scrambled together after the current Prime Minister politically assassinated the member for Griffith.
It is clear that there is an imperative for Australia to prepare for its future; however, this tax is not the solution. Another tax grab from this government will hinder, not help Australia's future. Let me leave the House once again with the wise words of Winston Churchill, which I think so accurately capture this debate. Winston Churchill said:
We contend that for a nation to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.
Perhaps the Labor Party should take his advice.
I too rise tonight to speak on the minerals resource rent tax bills. If I might start with an observation, tonight we are not hearing from members of the government.
Mr Ripoll interjecting—
This is my 10c worth. Are they not sufficiently encouraged by the merit of this tax to be in here tonight? I understand, as we speak, the Prime Minister is in strong negotiations with the Greens because the deal has not been done. Is this country being run by deals done on the side, by people that sit behind me? Are the people over there that impotent that they sit there, let deals be done by minority groups and then sit on their hands and not contribute to the debate? I find it strange that the members of the government do not have enough conviction to stand up and support something that is of such importance to the future of this country.
This is an ill-conceived and poorly constituted tax. This is a tax that has been put together in conjunction with the three large mining companies with very little consultation behind closed doors. It is divisive, complex, unfair, fiscally irresponsible, distorting and a lost opportunity. This tax is once again another grab of the resources from regional Australia to be taken and placed elsewhere. I believe that mining companies should contribute more, but I believe they should contribute more to the communities where the mining takes place. We have got the Minister for Regional Australia, Regional Development and Local Government in the chamber tonight and he has stated that future payments under the RDA are dependent on the passing of this tax.
I am glad you confirm that, Minister, because I am just wondering where regional Australia is. The last round seemed to have forgotten anything west of the sandstone curtain. I understand that the good people in the art gallery in Newcastle see themselves as regional Australia, but we are not seeing very much west of the range. We are not seeing anything out where this wealth is being produced. We have seen what the policies of this government are doing to regional Australia. Go to the town of Kandos. Last year, they had a cement plant. This year they have got nothing. It was closed down because of the carbon tax. That is the policy of this government. In Cobar, the cement that they use in the copper mine now comes from Asia instead of Kandos. That is what this government is doing. This government is bringing in this tax to fill in its bottom line. It is paying for the wastefulness and the squandering of money that we have seen over the last four years.
The missed opportunity is the need to see real infrastructure and real spending in regional Australia. We need to see real growth that will set regional Australia up beyond the mining boom, that will bring value adding to agricultural produce and that will use some of the energy sources being mined in regional Australia closer to home rather than placing them on ships and sending them overseas. This tax will not do that. This tax will take once again from regional Australia where the wealth is produced and distribute it elsewhere. As with the carbon tax, this government is about wealth redistribution: taking it from those that are productive and placing it elsewhere. Regional Australia will not wear this.
We are seeing a deal that was done by the member for New England to get this tax through. It is with great frustration that the member for New England would pass a tax that is as poorly constituted as this one to get a local outcome. While I have sympathy with the intentions of the member for New England, I believe that he has been dudded. I believe he has been sold short. I believe that if anyone else from this side of the chamber went back to the people of the north-west with the deal that the member for New England had done they would be severely ridiculed. The member for New England has basically got another committee and no teeth.
The real issue with strengthening up the legislation we have is with the state governments. The government in New South Wales is working through the process, as is the government in Queensland, I believe, to get this under control. What we have now is a committee and potentially another level of bureaucracy. In the past the farming community have not been served well by environmentalists, and I have great concern that the added focus that this will put on the extraction industries will have long-term detrimental effects on the farmers in my electorate.
The government says that the Prime Minister is a great negotiator. Being in government, and being the Prime Minister, is about leadership. It is about showing direction. It is not about doing grubby deals. As we speak, negotiations are going on with the Greens. What this country is lacking at the moment is a sense of direction. What this country is lacking is confidence. Every time one of these harebrained, half-baked pieces of legislation comes through this place, the country loses confidence.
What makes Australia grow is when individuals have confidence and belief that they are being led well enough that they can invest and grow their own businesses, undertake employment, undertake education and improve themselves and this country. From speaking to people in my electorate, I know that at the moment they are feeling that they are rudderless. They feel that they are not being led, that the country is being run by side deals and dodgy negotiations—not true leadership. If you want to see an example of an ill-conceived piece of legislation, this is it.
The people that I represent believe that the mining companies should contribute more to the communities where this is coming from. But the government has been duped by the three big miners and an opportunity has gone begging.
Unfortunately, this great House is no longer a place of debate where ideas are exchanged and where legislation is formulated. This place has become a rubber stamp for grubby backroom deals.
I rise to speak on the Minerals Resource Rent Tax 2011 and related bills. The deliberately leaked ALP polling that is purportedly telling us that the Australian public is in favour of the government's minerals resource rent tax may well reflect the case. That may be what the public thinks, but just because the public thinks it does not meant that it is a good or an equitable tax. In fact, I think they have been sold some loose information about attacking the big miners and getting their share of the pie, without being given the full facts that underpin the legislation, which favours three players—as against the rest of the mining community—iron ore, coal and the petrochemical industry.
It is a fundamentally badly designed tax that is riddled with inconsistency. The fact is that it taxes only iron, coal and hydrocarbons. Roxby Downs used to be the biggest open-cut mine in the world—a fabulous project, I must say. It will take four years of digging before BHP actually get down to the ore body. It will take four years, using 110 350-tonne dump trucks, 24 hours a day, to get down to the ore body. It is a mine that will last at least 80 years; and, when they do get to the bottom, there is a lot more ore underneath that as well. What a project! But amazingly, it will not pay the minerals resource rent tax. There will be an enormous amount of infrastructure required in the cities of the Upper Spencer Gulf to enable this project. But the government will have to take money from other mining operations interstate and put it back into South Australia, because they have elected to choose just two or three commodities in Australia to tax. That is what I mean about inconsistency.
No, I do not support the tax, Minister. I do not support the tax for a number of reasons, which I will come to in a moment. The deal stitched up with the big miners was no doubt a deal to get the big miners' boots off the neck of government. In the lead-up to the last election, when they were running a public campaign which led to the political assassination of the former Prime Minister Kevin Rudd, the current Prime Minister said that this was one of the three things that she was going to fix, and she had to come up with a deal. But a deal did not come cheaply. She has done a deal with the big three miners but she has not done a deal with the rest of the mining fraternity.
It gets even sillier, because the tax was originally designed—this is going back to the former Prime Minister's version, the superprofits tax—to usurp the states' ability to tax their own resources. In fact, the government thought that they were going to be able to get away with that this time around as well. I think they even thought they had negotiated that. They thought they had negotiated the point where only current state royalties would be credited back to the mining companies. But—whoops—they made a mistake in the negotiation. In fact, they are covering off on all future rises of state royalties as well. Now the minerals resource rent tax stands as a green light to the states to raise their royalty rates, because all future state royalties will be refunded to the miners.
Get this, Mr Deputy Speaker, because it takes a bit of getting your head around: increases in state royalties will be credited against amounts due under the minerals resource rent tax. A rise in state royalties will not cost the miners extra; it will be directly funded by the federal government. It is an impossible situation. Why wouldn't the states raise their royalties until the revenues from the MRRT disappear altogether? And what risk does this present to future budgets? Australia has a fundamental imbalance in its federation. The states and local governments spend much more than they raise, and the Commonwealth government taxes much more than it spends.
Clearly this leads to a policy disconnect: the states spend money that they have not worn the political consequences of raising. Nowhere could the consequences of the state spending someone else's money be more adequately demonstrated than in the BER projects.
At the other end of this imbalance is the Commonwealth, where the government raises the money but does not get to claim credit for the expenditure. The most obvious example I can think of here is the APY Lands, where there is precious little to show for a lot of government expenditure—more than $100 million a year—but what little there is the state takes full credit for. There is new housing and the provision of police stations, but in reality the money has come from the Commonwealth.
Amazingly, 53 per cent of the South Australian government income comes from the Commonwealth. It raises a whole group of questions about federal and state responsibility in services like education and health—but it is not strictly relevant and I do not have time to tease out the detail today, so I will come back to it at a future time. But, notwithstanding the government's inability to stop the states raising their royalty rates up to the level of the MRRT with impunity, the tax is designed to deny the states the ability to more adequately match their revenue raising to their outlays to centralise tax collection.
The states do not have a lot of ways to raise taxes. Many of them are inefficient and impose economic penalties on businesses. The growth taxes they do have—property taxes, payroll taxes and stamp duties—all have significant negative impacts on the wealth generators in our communities and disadvantage businesses across the nation and across state borders. They also disadvantage businesses in comparison with overseas producers. We all know that these special taxes on employment and entrepreneurs are bad for the economies and most state governments would like to get rid of them, but their choices are limited. The grab by the government to fill a budget black hole because this government cannot stop spending actually impedes the states' abilities in the future to more adequately match their revenue raising to their expenditure, and I think that is a weakness in our federation that will have to be addressed in future years.
To come back to the government's need for a minerals resource rent tax, it is worth considering the recent history. In 2007, when we had a change of government, there was $20 billion in surplus and $45 billion in saving, and the government has had a tax-and-spend four years. Now we have borrowings at $200 billion plus, we have net debt of at least $110 billion and there is every expectation that the MYEFO—which almost certainly we are not going to get during this sitting of parliament but will be released once we have gone away and are unable to shine the spotlight on the result—will show a deterioration of at least $10 billion in that budget. No Labor government in 22 years has produced a surplus, and there is not much chance of one now. The government's forecasts have been woeful and always overly optimistic. So why are things in reality always worse than the government's forecasts? All that can be is spin.
There is an inherent danger in a government relying on profits based on a minerals resource rent tax to underwrite new spending programs, and it relates to the volatility in resource prices. Sure, money is good when prices are up; but it can be non-existent when prices are down. Treasury has calculated these tax dividends going forward in a time of high prices. It is the worst time to calculate what you might be getting from a tax, and that is what the government has done. In fact, they have even spent more—$4 billion more—than they calculate they will raise from this tax. It is a familiar story.
But I think it is worth having a look at iron ore spot prices over the last five years, because, after all, that is what the minerals resource rent tax is based on: iron, coal, oil and gas. In November 2007, average spot price for iron ore was $186 a tonne. In November 2008, it was $72 a tonne. In November 2010, it was $164. By February 2011, it was $190. It is currently around $133 a tonne, and there is a reasonably pessimistic outlook for the price. It may come as a surprise to the government, but the halving of returns is not the halving of profits; the halving of returns is the obliteration of profits.
The one significant company in this space in my electorate—OneSteel, who are exporting around six million tonnes of iron ore a year—has been in the news quite a lot lately. OneSteel said only two days ago that their first-half profits had fallen by 70 per cent, owing to the sharp fall in iron ore in recent months. If we look at those prices, in recent months iron ore has come off about $55 a tonne or 30 per cent. It does not stretch the imagination that far to think it could come off 50 per cent, and then there would be no profit at all.
There are risks to the industry in this, but there is an extra risk to the government to design a budget around a tax that might be there one year and not there the next, the year after that or the next three. I used to be a farmer and I understand a bit about these droughts and famines, and it takes a fair bit of managing to run a national budget on that basis. I would not like to have to run the national budget based on the idea that farmers are always making a steady profit each year.
Where the mining tax might make some sense in my mind is if Australia were to place the returns of the mining tax into a sovereign wealth fund where you accumulate money. Of course there is not much danger of a sovereign wealth fund being created at the moment, because we have $110 billion in back debt to pay off, but the point is that you could accumulate money in times of high prices. It would pay interest that you could rely on. Then, when times were tougher, you would rely on the interest and would not draw down the rate.
But, as I said, there is very little chance of establishing a sovereign wealth fund in Australia in the near term, because of course we have great debts to pay off.
So the impact of the tax on small to medium miners is also quite apparent. As I said, there is currently only one company in my electorate affected and that is OneSteel. It is a time when OneSteel is really under pressure. The government has trumpeted the steel transformation package but I would point out that, as far as Whyalla is concerned, OneSteel could in fact take the money and run, because it could fulfil its requirements under the steel transformation package and still exit the Whyalla steelworks. The government wants to put another tax onto this company, which is trying to survive at the moment—and, sure, last year it made $500 million out of mining, but it lost $185 million out of steel making.
Interestingly, when it comes to the mining tax, after the AGM that OneSteel had two days ago, its chairman Peter Smedley said, 'There was not sufficient certainty around the outcomes to provide guidance on the financial impact of the tax.' I beg your pardon. It had been negotiating this tax for two years and now this significant miner still does not know how the tax will affect its bottom line. Two years of negotiation and it does not know. So that tells you where this important company was in the negotiation process—well outside the room.
Can we assume for the purposes of this matter that, if OneSteel made a profit of $523 million last year on mining—and I remind you that they lost $185 million on steel making—that 22½ per cent of that would be taken away by the mining resource rent tax. That is $100 million from a company that is losing $185 million a year on steel making, employing 3,000 Australians in doing so. It seems to be a very dangerous assault.
There is great expectation around the electorate that South Australia will emerge as a medium-size supplier of iron in the world market. The small start-up companies I have talked to are all redoing their sums at the moment in the light of both the carbon tax and the mining resource rent tax. One of the things they are telling me is that they are very concerned about the compliance burden because, while they will not be paying tax in the initial years, they are actually going to have to run separate accounting systems because the mining resource rent tax is calculated in a different way to their annual returns because it stops at the mine dump.
One company is seriously considering building a port and, in this case, the pipeline—it is not a railway; it is magnetite—for the calculation of the mining resource rent tax will not be deductible against the costs of developing the mine. The company will have to keep those records going into the future for when they reach the point when they will have to inform the government that they are now starting to make a profit out of this tax. They will run these dual accounting systems for all that time. (Time expired)
Having pushed through this parliament its unpopular, toxic carbon tax under the misnamed 'clean energy' bills, at the behest of the Greens, Labor now wants to introduce the minerals resource rent tax. This is a government addicted to new taxes. Why is this so? Because this is a government addicted to spending—wasteful spending, unnecessary spending—funding schemes devised in thought bubbles, dreamt up on the run and then made policy against the national interest. Australia's net debt is now about $90 billion. Gross debt is $217 billion. In a six-week period in recent months Labor borrowed another $11 billion.
The Treasurer—if he is the world's greatest Treasurer, I would hate to see the worst—often spruiks about how the government nursed the nation through the global financial crisis. He waxes lyrical about how we came out the other side of the GFC better than other countries in the world. He is correct. But this was only because Labor was left with plenty of money in the bank when it took office in 2007.
Indeed, Labor inherited from the Howard government a $20 billion surplus—a word which is not really in the Treasurer's vocabulary—a $45 billion Future Fund and an economy with no net debt. In four years those savings, earned through sound fiscal management, are all gone. The nation's bottom line is now deeply in the red, forcing future generations to pay off Labor's wanton waste.
There is never a good time to owe more than you can really afford to pay back, and this is especially true at present, with Europe burning and the United States of America in trouble.
Some on the other side may suggest that the minerals resource rent tax is a way to a better financial future, retiring debt and being able to fund worthwhile projects. But what this comes down to is a matter of trust. When it comes to financing programs, Labor simply cannot be trusted. The Minerals Resource Rent Tax Bill 2011 is another tax from a bad government.
The mining industry has, does and will continue to help drive Australia's economic wealth and prosperity. After coming to office in 2007, offering so much vim and vigour, the Rudd government conducted an inquiry into the nation's taxation arrangements, Australia's Future Tax System review, also known as the Henry tax review. The resource super profits tax was the government's response to the review. The announcement caught the mining industry, the states and territories and other stakeholders by complete surprise. This galvanised the mining industry, and a concerted campaign was mounted to have the resource super profits tax abolished. The push to axe the tax contributed to the downfall of Kevin Rudd, and Julia Gillard replaced him on 24 June 2010.
The new Prime Minister, as well as declaring that the government had lost its way, said she would immediately cancel the government's multimillion dollar advertising war with the miners over the superprofits tax. The new Prime Minister undertook to negotiate with the mining industry over the resource super profits tax. Julia Gillard said she would deliver the two taxes, and her third promise was to deal with the influx of asylum seeker boats off Northern Australia—and what a mess that has become. However, instead of negotiating with the mining industry, the new Prime Minister and her Treasurer, the now new Deputy Prime Minister, struck a new mining tax deal in secret, and exclusively, with the three biggest mining companies—BHP Billiton, Rio Tinto and Xstrata—in the lead-up to what was always going to be a difficult 2010 general election.
The clandestine negotiations with the multinational, multicommodity and multiproject majors excluded around 320 of their competitors and every state and territory government from that process. What resulted from all of this was the minerals resource rent tax and expanded petroleum resource rent tax.
These new taxes are supposed to start on 1 July 2012. Revenue from the proposed national mining tax has been in the Commonwealth budget since 2010-11. The revenue from those taxes, which Treasury has assessed as reducing over time, has already been allocated for a number of related measures, the cost of which will rise over time.
The Henry tax review, supposedly, was intended to simplify the tax system and make it fairer. Instead, the Gillard mining tax is more complex, far more intricate and less fair. There will be an additional 287 pages of tax law—up from 161 pages when the government first released the draft. The big three companies allowed to help design the mining tax get an unfair competitive edge from the minerals resource rent tax—and that is un-Australian. These three companies gain a significant tax shield not available to smaller companies from the introduction of the market valuation system to calculate applicable deductions. That is unfair. Smaller miners will either pay the minerals resource rent tax sooner or continue to pay royalties on production while also being subjected to additional compliance burdens.
The Gillard mining tax lessens Australia's international competitiveness. It has serious implications for the revenue bases of states and territories. The Henry review recommended a national profit based resources rent tax to replace state and territory royalties and that the Australian government should negotiate the federal-state financial relations implications of such a move. The Labor government, however, did not have the courage or decency to engage with the states to do the necessary negotiation on genuine tax reform. Instead, it came up with a policy which has made everything more complicated and everything increasingly messy. That is the Labor way.
You have to feel for the state and territory governments and what this means to them. Resource royalties represent 20 per cent of the Western Australian state government revenue, nine per cent of Queensland's state government revenue and six per cent of New South Wales state government revenue. The Gillard government's mining tax deal hits the federal budget hard. State governments in New South Wales, South Australia, Tasmania and Western Australia have already increased royalties on iron ore and coal. Queensland has reserved its right to do so in the future. That effectively deals a $3 billion blow so far to the federal budget. That is a big whack.
None of the states were privy to the Gillard government's mining tax deal. They were not even consulted—not even considered. A responsible federal government, making far-reaching reform of resource taxation and royalty arrangements, would always, one would have thought, engage in detailed and frank consultation with state and territory governments. Not this one. But then, 'responsible' and 'Labor' are two words which do not, it seems under the present administration, belong in the same sentence.
This mining tax package will leave the budget considerably worse off and over the medium to long term it will worsen the current structural deficit. Revenue from the minerals resource rent tax will be extremely volatile and downward trending. Treasury projections of the mining tax revenue to 2020 released under freedom of information show that Treasury expects revenue to reduce over time, as commodity prices revert to more normal levels after a global 'supply response' to today's record highs. At the same time, the cost of measures the government has earmarked for the mining tax will continue to grow—and grow strongly—over the years. The cost of the proposed increase in compulsory superannuation from nine per cent to 12 per cent is likely to increase to $3.6 billion in 2019-20. That is when it would be fully implemented. That same year, Treasury projections of the mining tax revenue is $3 billion.
But this Labor government will not let anything get in the way of a tax it can impose—no way. There is not a tax this government does not like. The mining tax could well initially mask the government's own economic mismanagement and failure. For the Treasurer, yet to produce anything near a surplus, that surely will be a plus. But, while the minerals resource rent tax will assist Labor to create the con of an early surplus in 2012-13, it will leave the budget substantially worse off from 2013-14 and beyond. The Senate inquiry into the mining tax has cautiously calculated that, over the next decade, the net cost to the budget—that is, the minerals resource rent tax minus the cost of related measures—will be $20 billion. That is a shocking statistic.
Peter Costello, that deliverer of prudent, sound and immeasurably better budgets than his successor, must cringe when he reads how badly the nation's coffers are faring. The Labor government has already broken its promise on debt. On 11 March 2009, the Treasurer, invoked 'special circumstances', permitting the government to borrow up to $200 billion. In the May 2011 federal budget, the government changed the Commonwealth Inscribed Stock Act 1911 to allow it to borrow up to $250 billion. The government refused to allow the parliament to debate this increase in separate legislation, which has always occurred when it has needed to be increased in the past. This will no longer be a 'temporary' increase due to 'special circumstances'. The government's amendment means a permanent increase in the amount that the government can borrow.
There are 12.3 million taxpayers in Australia. Every taxpayer will owe an extra $12,314 now that Labor has put $150 billion on the nation's credit card. Over the past 12 months, Labor has borrowed $135 million a day, every day. Over the next four years, Australians will pay $18 million a day in interest on this debt. Economics Professor at Harvard University, Dr Ken Rogoff, recently compared debt growth across different countries. He found that, in percentage terms, only Iceland and Ireland had increased debt at a faster rate than Australia.
The carbon and mining taxes will harm Australia's international competitiveness. Spending billions of dollars buying carbon offsets overseas will not help Australia's environment. Imposing the world's harshest carbon emissions tax on Australia's biggest businesses, biggest job creators—Labor calls them polluters—will not reduce the temperature and will not lower sea levels. Imposing a mining tax on selected mining companies will stifle investment, force mining companies to lay off staff to meet shareholder expectations and not return money to the regions from whence it came, where it was dug out of the ground.
As with everything Labor does, the modelling is all wrong. Labor will not so much as reveal the modelling for the carbon tax, because it was based on other countries across the world imposing a similar carbon reduction scheme—and we all know that is not going to happen any time soon, if ever. We have been left here in Australia high and dry. We will be left in a similar position, high and dry, with the mining tax.
The coalition opposes the government's plan to introduce a minerals resource rent tax. The tax is project based on economic rents made from taxable resources—iron ore, coal and some gases—and the tax is imposed on a mining profit less its MRRT allowances at a rate of 22.5 per cent. You cannot trust Labor to properly spend money made from burdening the nation with yet another tax. You cannot trust Labor, full stop.
There is a better way. Genuine and sustainable tax reform can only be achieved through an open, transparent and inclusive process involving all relevant stakeholders, not just a chosen few, not just the ones that Labor chooses to bring into the tent. The parliament should stop the minerals resource rent tax from going ahead, and the government must start again. The government needs to get its spending under control. It cannot continue to spend the way it has been over the past four years, because the nation demands it and the taxpayers demand it. The government needs to focus on lower, simpler, fairer taxes and genuine tax reform based on a proper process, giving everyone a fair opportunity to have their say and to be heard.
I rise tonight to speak on the Minerals Resource Rent Tax Bill 2011 and the accompanying suite of 10 bills. The object of the minerals resource rent tax, the MRRT, as outlined in this bill, is to ensure the Australian community receives an adequate return for its taxable resources, having regard to: the inherent value of the resources; the non-renewable nature of the resources; and the extent to which the resources are subject to Commonwealth, state and territory royalties. The minerals resources rent tax is a project based tax on the economic rents mining companies make from taxable resources, including iron ore, coal—and coal seam gas extracted as a necessary incidental of coal mining—and anything produced from a process that results in coal or iron ore being consumed without extraction, including a number of other gases. The tax will be imposed on a miner's mining profit less its MRRT allowances at a rate of 22.5 per cent.
The proceeds of the MRRT will be used for a number of expenditure items, including: lowering the company tax rate to 29 per cent for small business from 1 July 2012 and 29 per cent for companies from 1 July 2013; increases in superannuation age guarantee and charges; increases in concessional contribution caps for low-income earners over 50; government superannuation contribution tax rebates for low-income earners; increases to small business instant asset write-off threshold and simplified depreciation; motor vehicle deductions for small businesses; a 50 per cent discount on interest income; the establishment of a regional infrastructure fund; standard deductions for workplace expenses; phasing down interest withholding tax on financial institutions; and the abolition of the entrepreneurs tax offset.
Now let us look at the inconvenient truth which no-one on the other side of this chamber wants to address. They take offence at a reality check in relation to their policy. This is indeed a lofty aspiration as these initiatives will conservatively come at a cost of $57.6 billion by 2020. Now let us compare this big spend with the Treasury's modelling of how much the MRRT will actually bring to the government's coffers, which is $38.5 billion dollars. Still no-one on the other side wants to mention that. This is a $19 billion dollar shortfall for the budget achieved in just seven financial years. If we include the additional $2 billion shortfall in revenue as a result of the Western Australian state government's decision to remove royalty concessions, it brings the total shortfall to just $21 billion dollars.
Referring to the abolition of the entrepreneurs tax offset, more than 400,000 of our country's small businesses will be affected by changes to the ETO as part of the Labor government's complex numbers game to make their mining tax look more appealing. Under the potential changes, 145,000 businesses with an income between $30,000 and $65,000, would face a $10 a week, or $500 per year, tax increase. This is still not addressed by anyone on the other side of the chamber. Self-employed semi-retirees, home-based businesses and small retailers are just some of the types of businesses that face a 25 per cent tax increase under the Gillard government's mining tax. No-one mentions it.
In Macarthur, my electorate, there are 9,760 businesses. Of these, more than 95 per cent are small businesses. These businesses are the backbone of our community, supporting local employment and investing back into the community through our numerous local charities, events and causes. I cannot stand idly by and allow this tax to hurt small businesses in my electorate as they too will face this 25 per cent tax increase as a result of the mining tax.
The minerals resource rent tax has arisen from a fundamentally flawed process. This tax is the brain child—and it has been called a number of other things—of a desperate Treasurer and three mining giants. It has been conceived through secret negotiations with the three mining giants, BHP, Xstrata and Rio Tinto, giving them an unfair competitive advantage over the rest of the industry. Both the Prime Minister and the Treasurer have once again snubbed their noses at the idea of industry consultation—shame.
As a result of this grossly and fiscally irresponsible Treasurer, we have a mining tax before us today that is needlessly complex and convoluted. This tax is divisive and unfair to the remainder of the mining industry. It is custom designed by the three biggest mining companies to further entrench their dominant position within the mining industry, all the while placing a huge administrative and financial burden on the small and mid-tier mining ventures that seek to compete with them. This new tax will also place massive compliance costs on sectors which may not necessarily have a large liability under the MRRT, such as the onshore oil and gas sector.
To make matters worse, the Prime Minister and Treasurer have also foolishly exposed the belly of the beast that is the federal budget by enshrining in legislation a full credit for state royalties paid by a company for a mining project. Already state governments in Western Australia, New South Wales, South Australia and Tasmania have increased royalties on iron ore or coal, with Queensland reserving their right to do so in the future. And it is the state's right to do so. New South Wales had to raise mining royalties as the federal government refused to listen to their concerns about the unfair impact the carbon tax would have on New South Wales electricity generators. The effect of the state's decisions to do this is a hit on the federal budget of close to $3 billion dollars, with potentially more to come.
The Treasurer has no right to whinge about this, as he refused to consult with any of the states when developing this fundamentally flawed legislation. Nor should the Treasurer set his attack dog, the Minister for Infrastructure and Transport, onto these states by threatening to reduce federal infrastructure investment. These are states that are merely protecting their revenue streams. Resource-rich states rely on the revenue from mining royalties to help fund important services such as health, education, law and order and transport. Did the Treasurer really think he could have a serious and genuine reform of resource taxation and royalty arrangements without actually engaging with the states? Instead, the Treasurer and the Prime Minister are trying to tiptoe around a real reform agenda.
This brings me to my next point, which is whether or not the MRRT is in fact a tax on state property, which is specifically prohibited by the Constitution. The resource rent tax will have huge implications for all of the state and territory governments. Resource royalties represent 20 per cent of the Western Australian state government revenue, nine per cent of the Queensland state government revenue and six per cent of the New South Wales state government revenue. We are already seeing a number of mining ventures, as well as the Western Australian state government gearing up for a High Court challenge over this issue.
Let us look at the facts. This government does not have a great track record defending itself in the High Court. The fact that the government did not even bother to seek advice from Ken Henry about the constitutional validity of the MRRT does not give much confidence in this arrangement.
The last point I would like to make about this government's latest bungled attempt at tax reform is the impact that the MRRT will have on our international competitiveness in attracting further investment. As the shadow Treasurer pointed out, the chief executive of the South African gold miner AngloGold Ashanti, Mark Cutifani, said on 26 October at a Commonwealth Business Forum in Perth that Australia is one of the top sovereign risk countries in the world on the basis of government policy, its demonstrated behaviour in terms of taxation policy and its inconsistency in policy. This is a huge worry.
The constantly changing and confusing nature of this tax has made international investors much more wary about committing funds to Australian projects. But there is a better way to secure Australia's future. The first step is to stop this lunacy, prevent the MRRT from going ahead and force the government to start all over again. This country needs genuine and sustainable tax reform. This reform can only, and it will only, be achieved through an open, transparent and inclusive process involving all relevant stakeholders, not just a selected few. But, before we embark on any tax reform, it is essential that this government gets its spending under control. I have heard a number of speakers show tonight how out of control it is. Once this happens, true reform based on a proper and fair process can occur.
I rise to oppose the Gillard government's package of bills that comprise this minerals resource rent tax. I stand with my coalition colleagues, who also oppose the government's measures to reap additional revenue from mining companies who already pay a significant amount of tax and royalties for the right to mine and sell our mineral resources.
The MRRT is a poorly constructed and poorly thought out piece of legislation that attacks the strongest and most profitable sector of our economy. The government's basic argument for implementing this package of bills that make up the MRRT is that we need to tax the mining sector while the going is good because we only dig up the resources once.
I have two problems with this argument. Firstly, Australians do in fact receive 'their fair share', as it were, in three ways: the royalties paid by mining companies to the states for them to spend on roads, hospitals and schools; the tax mining companies pay to the federal government to spend on the PBS, defence and universities; and, lastly, the profits from mining companies which distribute dividends to self-funded retirees, investors and superannuation funds. Now the federal government wants to take an extra chunk out of our most profitable export market. You cannot have your cake and eat it too.
The second problem I have with the 'tax while the going is good' argument advanced by the Gillard government is that it presumes that government is better at spending the money derived from the mining sector, rather than the hardworking Australians and self-funded retirees who have taken the risk and invested their savings and superannuation into mining companies themselves. The government believes it is better at spending taxpayer's money than the taxpayers themselves. This ideology may be familiar to our Prime Minister, the shrewd and benevolent redistributor of the wealth, and to some others on the government benches. It is called socialism. As I have said before, you can take the girl out of the socialist alliance but you cannot take the socialist out of the girl.
The MRRT is about the government shovelling away as much revenue to spend as quickly as they can before voters exact their judgment in two years time. But what will the Gillard-Brown government spend taxpayers' money on next? Will they spend it on more school halls that are not needed, on home insulation schemes that cost more to rectify than they did to actually implement, on more failed GroceryWatch and Fuelwatch-esque projects, on a National Broadband Network that is overpriced and will be rendered obsolete in a decade's time or on another $10 million for the Geelong Football Club? I am sure the Gillard government have plenty of unworthy projects in the pipeline. The less the government have to spend of hardworking Australian's taxpayers' dollars the better.
The mining and resources sector is providing Australia with an enormous injection of jobs and investment that we must rightly take advantage of. According to the Department of Foreign Affairs and Trade, Australia's total goods and services exports reached $284.6 billion in 2010. Of that total, resource commodities, including iron ore and coal, made up 47.5 per cent of Australian exports with a value of $135 billion. Furthermore, Australia registered a $16.8 billion trade surplus, reversing a trade deficit of $4 billion in 2009. The value of Australia's exports increased by 13.9 per cent with the surge in exports led by strong demand and prices for metal ores, minerals and coal.
Undoubtedly, minerals and resources are the backbone of Australia's trade exports. This sector is recording solid growth and will continue to attract investment in the years to come if the government handles the mining boom in the right way.
The Gillard-Brown government's MRRT policy before the House is not the best way to take advantage of this economic boom. The MRRT adds a whole new and uncertain layer of legislation for minerals and resources companies. It adds nearly 287 pages of tax law—it is up from the 161 pages when the government released the first draft. The MRRT distorts the market sector by introducing the market valuation system to calculate applicable deductions as it gives the big three—BHP Billiton, Rio Tinto and Xstrata—significant protection from taxation that has not been made available to smaller and mid-tier mining companies.
Expert independent modelling by the University of Western Australia highlights the unfair and discriminatory nature of the MRRT regime, and shows there will be a significant difference in the level of the total taxation between a mature mine and a new or emerging miner.
The University of Western Australia modelling shows that there will be at least a four per cent difference in the effective total taxation between a project that was in existence before 2 May 2010 and that applying to less advanced or new developments taking place after 1 July 2012.
The big three miners will be able to claim a significant deduction for the market value of their starting base assets, which allows them to reduce their MRRT liability for the remaining life of the mine or 25 years, whichever is the lesser. New, emerging and invariably smaller mining companies will not be able to claim such an offset. The research goes on to demonstrate that under the MRRT a small, emerging miner will be paying an extra six per cent in tax compared to a large, mature miner that will be paying an extra two per cent. The MRRT regime is unfair and, due to the distortion of the taxation liability, places small and emerging mining companies at a competitive disadvantage.
The constitutional arrangements regarding the role of state governments and the impact on their mining royalty rights have been badly mishandled. The state governments have not been consulted about this major reform. Western Australia, South Australia, New South Wales and Tasmania have all rather shrewdly taken advantage of the loopholes left wide open by the Gillard-Brown government and have increased their royalties, which has already hit the federal budget by nearly $3 billion.
Another troubling aspect of the legislation before the House is the timing of the introduction of the tax on the mining sector at the same time the carbon tax legislation will be introduced next year. The MRRT will compound the carbon tax and will make mining and exporting from Australia completely uncompetitive in a global market. The MRRT will tax the profits of mining companies, which will eat into the profits the companies create. Mines will not shut down immediately, despite reduced profits. The colossal capital investment many mining companies have made over the last decade in infrastructure and equipment will ensure that most projects currently up and running will fulfil their life expectancy, if not simply to garner a return on investment.
The power of the MRRT and the carbon tax combined with higher wages, lack of adequate port infrastructure in Australia and fluctuations in the global market will simply deter future investment in the mining and resources sector in Australia. The investment from mining companies will go offshore to markets and economies that do not have a job-destroying carbon tax or a punitive minerals resource rent tax. Brazil, Canada, South Africa and Indonesia are all nations that are happy to take advantage of Australia's economic suicide.
The state governments have seen an explosion in revenue through the royalties regime, revenue which has been invested in roads, railways, hospitals and schools. The federal government still reaps rewards from the mining boom through company taxation. The increase in mining revenues has allowed the federal government to make investment in universities, social projects and defence equipment and provide pension increases and medicines. Australians, at both private and public levels, are already getting a fair share of the mining boom. As profits increase, the private and public pools of money also increase. By imposing the MRRT and the carbon tax, the government is sending the clear signal to the mining industry and the world that Australia is not the place to invest in the future.
I cannot support a package of bills that has been so hastily and secretly prepared, that will drive down investment and competitive advantage in our most important export sector and that will reduce the profits going towards superannuation and investment funds of mum and dad shareholders and self-funded retires. Nor can I support a package of bills that will increase the revenue stream flowing into the coffers of an incompetent, hopeless and economically illiterate Labor-Greens government.
I rise today to also speak on the mining tax bills that are before us. I do not wish to go over all the material, which previous coalition members have spoken on, but I would like to associate myself with many of the comments that the coalition speakers made today and yesterday. What I would like to do tonight is focus on two points. The first is the impact that this mining tax package will have on the structural deficit and the second is the impact of the tax package on small businesses in my electorate and, indeed, across Australia.
Let me go to the first point. What will this tax do to the budget structural deficit? We all know that one of the problems that this government has is its profligate spending. It has already created a massive structural deficit where its spending programs are growing in excess of the revenues. What does this government do when introducing a new mining tax? It concurrently proposes spending programs which are even greater than what the tax earns. What is worse is that it is highly likely that the revenues from the mining tax will decline over time, while the new expenditures are locked in to increase over the years ahead, hence exacerbating the structural deficit.
Let us look at some of the numbers. If you look at the revenue side of things, the revenues will be volatile and they will be downward trending. The Treasury predicts that the MRRT revenue to 2020 will reduce over time down to $3 billion as commodity prices decrease as international supply increases. However, on the cost side of the equation, costs of the measures introduced by these bills will continue to grow strongly. The proposed increases in the superannuation surcharge levy from nine per cent to 12 per cent, for example, is expected to rise to $3.6 billion by 2019-20. While the MRRT will help the government create the illusion of a budget surplus in 2012-13, it will leave the budget worse off from 2013-14. Indeed, the report of the Senate inquiry conservatively estimates that over the next decade the net cost to the budget of this package will be a full $20 billion. This mining tax package continues the extraordinary tax and spend manner which we have come to know of this particular government. The structural deficit it creates will simply crowd out further private investment and put upward pressure on interest rates.
Let me come to my second point, and that is the impact this package will have on small businesses. One of the measures that this package introduces is barely spoken about by the government. In fact you would be very hard pressed to even notice that this was one of the measures contained in this mining tax package. It is the abolition of the entrepreneurs tax offset. The entrepreneurs tax offset was introduced in 2005 by the Howard government as a means of providing some tax relief for very, very small businesses which were earning less than $75,000. It provides a 25 per cent tax discount for businesses earning less than $50,000 and then scales out to businesses earning less than $75,000. What does the mining tax package do? It abolishes that entrepreneurs tax offset. This means that 400,000 small businesses across Australia will be impacted by this and will have to pay higher taxes as a result of this package. A small business might be a sole proprietor working from home, or it could be a cleaner, or it could be a tradie or it could be an everyday person trying to start up their own business. They are earning $50,000 and they will now have an $837 tax hike from next year as a result of this package. On average those 400,000 businesses will have between $500 and $800 more tax to pay from next year as a result of this package.
In my electorate, alone, there almost 5,000 businesses that fall within this category. There are businesses like Jillian Ansett's JMA Marketing and Promotions, for example. This particular business is run solely by Jillian and she runs it from home. It is typical of hundreds of thousands of businesses around the country. It offers marketing and promotional services to other businesses. Her business falls within the income bracket. It is not a wealthy business; it is just a very small, everyday business. She provides a good service and does a good job. From next year her tax bill will be around $800 larger.
Everybody knows that small businesses are already doing it tough at the moment. Everybody knows that. All the members on the other side of the chamber would know that, if they were decent, hardworking local members. You only have to walk down to your shopping strips or into your retail precincts to understand that small businesses are doing it tough. You only have to speak to any of the tradies associations, or speak to some of the tradies or any small business owner and they will tell you that small businesses are doing it tough.
What does this government propose? It proposes a carbon tax so that small businesses will have to pay a 10 per cent increase in their electricity prices. There will be a 10 per cent increase in the first year alone and that increase will go up in subsequent years. That is the last thing that small businesses need. Then on top of that they are now going to have to pay a 25 per cent increase in their income tax if they are a small business earning below $75,000. These are hardworking Australians and they are not earning a lot of money, but they have the courage to get out there, start a business, be entrepreneurial and provide services which people in the community want. So, what does this government do? It wacks them. Instead of actually encouraging such businesses and instead of patting such businesses on the back and supporting them in whatever way we can, particularly through these difficult financial times, this government comes in here, puts on a carbon tax and then comes in here again and gets rid of the entrepreneurs tax offset so that they will have to pay a 25 per cent increase in their tax and have to fork out an extra $800 in cash each year in order to pay for the profligate spending of this particular government.
I think this is an outrage. I can understand why this government is not talking about it. I can understand why no single member on the other side of this chamber has mentioned the abolition of the entrepreneurs tax offset, because it is going to affect thousands of businesses in each one of their own electorates. Four hundred thousand businesses across this nation will be affected by this measure. That means on average 2,000 to 3,000 businesses in every one of our electorates will be affected. I challenge each of those members opposite, before they go ahead and pass this legislation through this parliament, to speak to these small businesses who are earning $50,000 or $60,000—these hardworking business owners—and ask them what they think of having a 25 per cent tax increase on their earnings. We should be doing everything we can to support small businesses, not penalising them as this government is doing through this mining tax package.
It is with some hesitation that I rise to lend some comment on the government's minerals resource rent tax, but I make the point categorically that I will not support it and will not vote for it. It is irresponsible; it is a simple grab for cash; and it is simply one more tax from the government. It is almost as if there were not a tax that the government have not looked at attractively. It is almost as if there were not a profit the government did not seek to tax. In coming to office four years ago—indeed, four years ago this Thursday—there have been 13 new, enhanced or emboldened taxes. Is it any wonder that they have asked Treasury to title taxes as savings within Treasury documents? I am not too sure how they reached that degree of hyperbole, but there have been 13 new, enhanced or emboldened taxes.
We have just passed the tax with respect to carbon, a pollutant in the atmosphere. The fact is that no other major advanced economy in the world has put in place an economy wide tax. The President of the United States and the prime ministers of Canada, South Korea and Japan have all indicated they are going nowhere near an economy wide tax. The price of a carbon credit in Europe is about $16 and falling. The price got down to a few cents at the Chicago carbon exchange before it collapsed. I remember the government standing here with its original emissions trading scheme lauding the Chicago exchange as an example of what should be done. I have heard nothing since it collapsed into such a huge hole. We know that in Europe the carbon tax is 1/400th of the impost of the carbon tax upon Australian citizens.
This is a world of great uncertainty, where the 10-year bond rate for Greece is over 25 per cent, Spain's is now over 6.5 per cent and the spread between French and German 10-year bonds has never been greater. This is a time when commentators are speaking of a lost decade approaching us, where most commentators believe Italy cannot afford its repayments and last week the European Central Bank revised projected growth from 1.8 to 0.5 per cent. We are facing the collapse of Italy, the eighth largest economy, amid its inability to pay its debts and the financial contagion that may well eventuate. We have a government building on a carbon tax to make our industry less competitive—and on top of that it is now bringing in a mining tax. It is beyond belief that a government facing such global uncertainties would consider putting greater imposts on our industry, but here it is.
The state of our federal government finances is parlous at best. The quality of the current government spending is less than parlous. Today in question time they lauded the great school hall program: $16 billion to build what I am sure are nice school halls—I have been in quite a number of them—but, in terms of adding economic value to the economy, it is dubious at best, with every cent borrowed and interest being paid on school halls.
The current budget is at the mercy of terms of trade, which are at a 140-year high, with record mineral export prices. A change of just four per cent of these terms of trade will put the much touted 2012-13 budget surplus into pipedream status. We know that resource exports now stand at 57 per cent of Australia's total exports and have increased from 41 per cent in 2005. Iron ore, of course, is the largest and coal the second largest export. This reflects, in most part, a sharp rise in global prices, which have increased at an average annual rate of 23 per cent for iron ore and eight per cent for coal over the same period, measured in Australian dollars. We know that the Australian thermal coal price in October 2006 per Australian dollar per metric tonne was $62.62. It reached a high in 2008 of $200 a metric tonne and as of last month it was $125 a metric tonne. You can see the wild price fluctuation. In between the $200 spike in July 2008 the price dropped below $90 in October 2009 and has upped and downed to $125 today.
The government look upon this as if they are walking into an Orthodox church and all they see is the gold that glitters, as opposed to what the church stands for. In this case they are looking at the graphs and saying, 'We could help our parlous state of finances by taxing this.' The problem is that we have a structural deficit in our economy if mining resource prices come off and that structural deficit will be exacerbated if the threat of European contagion from a default in Italy comes to mind. Economists are putting that as far more likely than not.
We are a small, open economy. We are incredibly vulnerable to export prices. Whilst the Italian default is likely, economists have also said it is too big to bail out at $2.2 trillion worth of debt. The interest on that debt rolling over $300 billion next year at 6.5 per cent is eight per cent of GDP, $140 billion a year in interest. The Italian government under Berlusconi was saying, 'But our budget's in surplus'—quietly, cough-cough—'before interest payments'. Italy is at the point now where it cannot afford the interest let alone keep the economy going. Economists are saying the best case now appears to be a recession in Europe, with the Chinese Vice President yesterday saying a global recession is likely. We pray this is not the case and we will certainly join the government in doing everything we can to ensure it is not the case, although for the most part this is out of our hands.
Public finance is about hoping for the best and planning for the worst, but planning for the worst as storm clouds gather is not about introducing new taxes. If Italy falls, if a degree of financial contagion moves, resource prices will come off. Will they collapse? No-one knows. What if they halve to October 2006 levels of $62? The structural deficit we have will only get worse.
Andrew Robb, the member for Goldstein, made the point that despite the mining boom we have had three record deficits, including of $50 billion and $22 billion or thereabouts, leaving us a net debt of something like $110 billion. Our current 10-year bond rate is fluctuating around four per cent. We need to find $4 billion a year on average upon that debt just in net terms, notwithstanding the fact that we have a gross borrowing approval limit of up to a quarter of a trillion dollars and interest is paid on the gross level. The member for Goldstein made the point that we have a structural deficit in this year's budget which is twice Germany's structural deficit on a per capita basis—an astonishing statement. He goes on to say that on a per capita basis compared with Italy, one of the bigger economies in the world and one of the shakier ones, we have a structural deficit which is 30 per cent greater. On a per capita basis, he argues, we could be seen as twice as risky, twice as bad and twice as big as Germany, and compared to Italy our structural deficit is 30 per cent greater on a per capita basis.
In anyone's language this is a substantial vulnerability. Faced with such a vulnerability the question that needs to be asked of a competent government is: would you, facing such a vulnerability, impose an economy wide carbon price that no other country is doing and a substantial hit in a resource tax on our mineral wealth? I think the answer, if you look at what parliaments across the world have done, is a resounding no. The member for Goldstein continued that, if there is a downturn in commodity prices, we may be facing a $50 to $70 billion deficit for years to come with higher debt and all of the prosperity and the blessings we have had from the mining boom may be squandered. The member for Goldstein makes a sobering point.
This is the government's second attempt at a tax on our mineral resources. Their first attempt was to nationalise 40 per cent of the resource sector. This brings back memories of Chifley in 1947 trying to nationalise the banks, but I digress. Not only did they bungle their first proposal in its design, but 18 months later it is being rushed through. The House will sit all night until this bill gets through. It is only Tuesday and there are a number of sitting days left for debate. It is almost as if this is a symbolic attempt by the PM to be seen to be achieving something.
If you look at what the miners will pay it is instructive. The budget estimates have numbers in the multiple billions of dollars with original estimates towards $8 billion, yet BDO research said the mining tax liability for Rio Tinto for the first five years would be zero. They calculated the mining tax liability for BHP as zero again. They took the real-life numbers of a small emerging miner with revenue of up to $700 million and looked at its mining tax revenue: first year, zero; second year, $49 million; third year, $107 million; fourth year, $96 million; fifth year, $68 million; and the following year, $63 million. This results in an effective total tax rate of 40.18 per cent in the first year, 45.68 per cent in the second, 45.76 per cent in the third, 46.12 per cent in the fourth and 46.2 per cent in the fifth year.
This tax has been described as attacking the goose that laid the golden egg. We are looking at a taxation rate on these miners upwards of 45 per cent for mining companies with revenues of up to $700 million—that is not a large-cap mining house. Companies will need to find those resources to pay it, yet Rio and BHP, who can amortise enormous losses, will not be paying anything at all in the first years. It absolutely reeks of Mark Latham's 2004 hit list, but this time the hit list is of companies who are apparently far two wealthy. I have listened to the speeches of Labor members of this House and all they have done is to attack the wealth of the likes of Gina Rinehart, Clive Palmer and others as if to say: 'You're wealthy; we're going to take it from you and redistribute it because we as the government know best.'
Even the Howard government never professed to know best. This government has tried to denigrate what the Howard government did, but let me tell you what they did with the proceeds of first mining boom. Prime Minister Keating left $106 billion in net debt in 1996 and, by the time that was paid off, a further $57 billion was paid off in interest—over $160 billion was paid off because of Labor's last debt.
A couple of years of sunshine—$60 billion was put away in the bank, in the Future Fund, to offset future liabilities in superannuation for public servants and the military and to deal with an ageing population post 2020; $20 billion was put in the bank from the 2006-07 surplus; and the 2007-08 surplus provided a further $20 billion. One hundred and sixty billion dollars or thereabouts was paid off from Labor's debt, including interest; $100 billion in cash was put aside or in surplus from the 2007-08 budget. It was the world's 10th largest sovereign fund at the time. That was $260 billion that the government put aside from the first mining boom—a quarter of a trillion dollars was put aside. That is what a responsible government does in a mining boom: it lives within its means. It saves and is frugal. It does its best to share the wealth of that around whilst also meeting its responsibilities.
Be under no doubt: the reason why we as a country were able to manage many of the ravages of the GFC was that China was, of course, buying our minerals; we had no debt thanks to the Howard years; we had at least $40 billion in spare cash, putting aside the Future Fund; and our interest rates were comparatively high, so monetary policy could be eased. If writing cheques would see us through the GFC, why did no other country fare so well when they wrote bigger cheques than us? Because it had nothing to do with cheque writing and everything to do with prudent fiscal policy.
What we see here is a tax on mining that is poorly constructed, that is poorly thought through and that is being implemented at the worst possible time, when the world is facing some significant ravages out of Italy. It is hallmark and symptomatic of a government that continues to lose its way. (Time expired)
I rise tonight to speak about the Minerals Resource Rent Tax Bill 2011 and associated bills—11 bills in total, another 525 pages of legislation that this tax-and-spend Gillard government want to add to Australian law. These bills are a further symptom of the Gillard government's inability to model and to design policy and their failure to consider the full consequences of new taxes for the economy.
These bills are a short-term fix after years of government waste and mismanagement of the economy, which in the long term reduces Australia's international competitiveness and damages our economy. Firstly, the ostensible premise of this bill is to spread the wealth under the misguided assumption that the mining sector is not contributing enough or paying its fair share of the tax revenue. Anyone who has had contact with the mining industry knows the amazing opportunities that mining has opened up for people across Australia and the way the mining boom has helped grow and nourish many local communities all over this great country of ours.
As with the carbon tax, this bill does intend to share the wealth and redistribute hard-earned wealth from the rich to the poor. The government is taking money away from those who are willing to risk it to build an industry which sometimes takes many, many years to make any returns to shareholders and investors and giving it to those who are not. It is the typical return to class warfare that is regularly engaged in by those on the other side of the House. They take a static snapshot of the economy, they see that one particular industry or sector of the economy is doing well, and so what do they do? They tax it and tax it and tax it to breaking point.
The mining sector does in fact make a very large contribution to Australia's economy and the taxation revenue of this nation. According to the Australian Taxation Office itself, the mining sector in 2007-08 paid the highest effective tax rate of any sector in the Australian economy when considering net tax and royalties. The sector employs nearly half a million Australians, many of whom work as mining and environmental engineers or in capital cities—in electorates like the electorate of Brisbane. Many mining companies have offices in the electorate, including BHP, Rio Tinto, Newcrest Mining, Anglo Coal, Hancock and many other resource sector companies. BHP Billiton, just one mining company, estimates that there are approximately 500,000 Australian shareholders. These are not just institutional investors; they are mum and dad investors who are willing to risk their own money and hope to derive financial benefit themselves from the mining boom.
The member for Higgins yesterday tabled the dissenting report of the Standing Committee on Economics. It is clear from reading that document that this government is ignoring many worrying issues about the mining tax. The Treasurer is not being transparent about the fundamental assumptions behind the modelling, nor does he fully take into account the impacts on the underlying revenue over the forward estimates. The Treasurer has said that a project-by-project resource rent tax is much more efficient than a state based royalties tax, yet at no point in this government's plans and its design of the tax did it consult with any of the state or territory governments—you would think that, with a major reform like this, it would consult with the states and territories, but it did not do any of that—about this huge future reform opportunity to decrease state royalties. I note that Ken Henry's recommendation in that wonderful report that he presented to the government was that a nationwide tax should be implemented to replace a royalties structure. These are Ken Henry's words. This is what he had to say. But this lazy and incompetent government has put all of that in the 'too hard' basket; it is too hard for it to do. So Australia is left with one of the most complex, unfair and messy taxes ever. Instead, the government consulted only the directors of three of Australia's biggest mining companies, and since then the Gillard government has not been able to outline who will pay, what they will pay and how it will work under this tax. Treasury has not modelled the impact of the tax on jobs, on growth or on mining investment, yet the government still wants to go ahead with the tax.
This sounds all too familiar, doesn't it? It is very similar to the Gillard government's very flawed implementation of the carbon tax—even after passing both Houses of Parliament, to this day, we still do not know which of the 500 biggest companies will pay that tax.
There are some companies, like FMG, who predict they will not have to pay anything under the rent tax for years, given the favourable concessions to larger mining companies. On the other hand you have all these contradictions. You have these mid-tier and emerging mining companies that will be heaped with higher and higher compliance costs. Many small miners informed the House of Representatives Standing Committee on Economics of the administrative and compliance burden that they will face if this tax is passed. However, the government does what the government always does best: it refuses to listen to their concerns. It does not consult. Once again, we should not implement this tax until we are fully aware of the costs it will have on emerging mining companies and their employees.
Moreover, these 11 bills contain new revenue and expenditure measures and there is no guarantee that these proposals will be revenue neutral. Already, there is a $3 billion black hole after the state government of Western Australia and New South Wales announced an increase in state royalties of $2 billion and $1 billion respectively. There is also a shortfall in revenue relative to the spending in the government's own numbers to the tune of $2.8 billion for a total blowout of $5.7 billion. In the future, it would not be surprising to see other states increase their royalties due to the very poor design of this tax grab—and that is all it is: a tax grab. Over time, states could increase their royalties such that they collect all of the revenues previously intended for the federal government, while the expenditure measures of these bills remain in place and unfunded.
There are other revenue worries that relate to the nature of the mining industry itself. We have a government that has deemed this industry to be so successful that it is taxing its so called superprofits. Do we have a promise from the government that when there is no longer a boom, when mining companies are not doing so well—and it will happen; they have told us for many years it will happen—the Labor government will rescind this tax? I doubt it very much.
Mr Bradbury interjecting—
The member opposite protests. He knows what I am talking about. Both the RBA and Access Economics have suggested that terms of trade and commodity prices have already peaked and are dropping off much quicker than originally expected.
The amount of continuing revenue that the government expects to receive is far from clear. The Labor government does not know what the states will do. It does not even know how the international market for commodities will perform, yet it has locked in the spending aspects of these bills to further add to Australia's budget deficit.
There are also remaining questions about the effect of the tax on GST distribution. Currently, Western Australia loses billions of dollars a year in GST revenue, meaning that, for every dollar of GST the Commonwealth collects from the state, it hands back only 72 cents. Dr Henry confirmed during the Senate mining tax inquiry that 65 per cent of mining tax revenue over the next decade could come from iron ore production in Western Australia. However, we will not see a 65 per cent return of mining tax revenue return to that state. Again, this is an attempted short-term fix by the Treasurer, which will deprive the people of Western Australia of something that is rightfully theirs.
These bills will also hurt the perception by international businesses of Australia as a safe destination to invest their money, and we see that. The Gillard government is attempting to finish off the parliamentary sitting year by rushing through and implementing another ill-conceived measure that will reduce the confidence of international investors in Australia. In a submission to the committee, the Chamber of Minerals and Energy of Western Australia wrote:
Uncertainty around implementation and administration of the new measures increases the risk premium international investors demand from Australian investment.
We already have a carbon tax, we have a nationalised broadband network crowding out private investment and now we have the additional impost of a mining tax. These will make Australia a less attractive place to invest. Most of all, it is the inconsistency that businesses see in this government. No-one, much less people from outside Australia, know what they will come up with next, and whose agenda it will serve.
It is true that mining is not an industry that value-adds—to iron ore or coal, for example. Consequently, what this tax will do is direct investment to other countries which mine the same materials at the same global prices but have more business-friendly tax regimes. The world is an international supermarket; companies can go anywhere. Other countries have expressed their delight at Australia's mining tax. When Kevin Rudd first announced the now dropped resource super profits tax, the first person to hit the airwaves was the Canadian finance minister, who said:
If it is what it appears to be, a significant tax increase, that's another competitive advantage for Canada.
Canada was out there spruiking how fantastic it would be for Canada. There are new markets emerging everywhere in the world. We have competitive markets in Brazil, Peru, Mexico and many other nations. They are all beginning to open and be attractive to global mining companies. This is not the time to reduce Australia's competitive advantage. If Australia has a mining tax, there is no doubt about it, there will be jobs lost. There will be money sent out of the country.
Finally, the Gillard government decided again to ignore the advice from the Henry tax review. It did not recommend an increase in the superannuation guarantee from a rate of nine per cent up to 12 per cent. As the dissenting report noted, there is no direct link between the mining tax and superannuation itself. The argument that Australia needs a mining tax to finance superannuation is based on a fallacy.
Labor attempts to bolster its case by saying that superannuation is a tax on employers—and many believe this fallacy. What we have is a government that is incompetent. We have a government that continues to tax and tax and tax. The coalition believes that Australians should have the liberty to make fiscal decisions about what is right for their families. There are many families out there who have mortgages and children, and their ability to finance their cost of living will be severely impacted by an increased rate of superannuation payments, because what happens is that there is a trade-off of less take-home pay.
It is clear that this government is willing to damage the long-term prospects of the Australian economy merely to apply a bandaid to the precarious fiscal position which they have put us in. It is just another tax grab. The mining tax that this government devised is fundamentally flawed. They did not consult with industry, they did not consult with other levels of government. They did, however, introduce 11 bills that have a highly volatile revenue stream that could leave the budget in a much worse position than it was before they began. This government has shown us consistently why we cannot trust them to manage the economy. We cannot allow them to use a damaging tax to again damage the Australian economy. For these reasons, we must reject this tax.
Today I rise to represent the thousands of owners and operators of small to medium sized businesses in the electorate of Flynn. These are all family businesses that operate as plumbers, mechanics, cleaners, transport operators, childcare centres—and the list goes on and on. These are the businesses that are going to have the flow-on from the minerals resource rent tax together with the carbon tax.
Let us talk about the increase in the superannuation guarantee from nine per cent to 12 per cent. Dishonestly, the government would have us believe that the mining tax will fund the additional three per cent increase in cost to businesses. This is not correct. It will pay the three per cent the government needs to fund the cost of paying the increase to the growing number of public servants, but it will not fund the cost to small business. Mum-and-dad businesses will have to pay it out of their own small incomes. And, as we know, small business is suffering right across Australia. Make no mistake: the MRRT will not contribute one cent to the increased cost caused by the MRRT and the carbon tax—not one cent.
What about the claim that business will get a reduction in company tax from 30 per cent to 29 per cent? About 60 per cent of these businesses are not registered as companies. So guess what? They will not get any tax reduction; they will stay at 30 per cent. That is another misrepresentation by this dishonest government.
A country cannot ever tax itself into prosperity, but this government is addicted to more taxes. If $75 million is a superprofit and warrants an additional tax, there must be a lot of Australian companies out there that are living in fear. What about the banks and financial institutions? I will bet they are getting a bit worried. They are making billions of dollars in profit; the government will be looking at them to tax them also.
Let us talk now about industries in my electorate. A week after the carbon tax passed through both houses in this parliament, Rio Tinto announced that they were isolating their investment in the Boyne Smelters and the NRG Gladstone Power Station, of which they own 42 per cent. They are preparing these investments for sale. They do not do overnight planning for these operations; they are on a 10- to 20-year plan and they have already factored in the cost of a carbon tax and possibly a mining tax, once it goes through this House.
Places like Indonesia, Mongolia, South America and Africa, where taxes and employment costs are much lower than in Australia, are only too willing to pick up our industries and take them offshore. We were the largest coal exporter in the world. Twenty years ago, Indonesia did not export any coal. Would you believe that now Indonesia exports more coal than Australia does? Australia is not the only country in the world that has these resources, but we are the only country in the world that has a tax like we will have after this mining tax comes in.
The government has presented the MRRT to the Australian public as a fix for all our ills, but how can we rely on the government's figures when the Treasurer—who calls himself the 'world's best Treasurer'—tells us one day that revenue from the MRRT will be $7.4 billion and then the next day he says it will be $24 billion? What will it be? Even the world's worst Treasurer would be able to tell us that there is a lot of fresh air between $7.4 billion and $24 billion. Yesterday the Treasurer gave the bizarre excuse that he is yet to update the government's numbers because, he claims, the states are yet to inform him. Hold the phone, Mr Deputy Speaker, the New South Wales and Western Australian governments' royalty increases are included in each state's recent budget papers.
I had assumed that Treasury knows how to read budget papers—but maybe I was wrong.
The big fear that government should have is if the Queensland state government—a Labor government—ever releases a take on royalties. Look out. The Queensland government is in dire straits with huge debt, and, once they do a Western Australia or New South Wales, the royalty issue becomes another field that we do not know. But you can rest assured that the royalties will not decrease; they will only increase, and it will be a burden to the mining industry again.
The Treasurer has to explain—and he should explain before this bill is put to the vote—what the assumptions are on the commodity prices and production volumes. Which companies will pay the MRRT? Which resources will pay the MRRT? How can Australia's small and medium miners afford the tax if Australia's biggest miners are not contributing to the tax? Coal and iron ore prices are controlled by China. We have no guarantee from the federal or state governments that royalties for regions will improve the state of our regions. What about our health systems? Is there any guarantee our health systems will be propped up in these coal-rich gas fields? We are experiencing high rent costs in those areas; they average between $500 and $2,000 a week. Our roads are deteriorating. There are gross housing shortages. This is placing enormous strain on fixed income families. The regional benefits from a mining tax are nil, as stated so far. I remain totally opposed to this tax.
The mining industry supports many community events, non-profit organisations and sporting events throughout my region. If there is a race meeting on, you can bet there is a trophy given from a mining company. If there is a rural show day, all these types of events are sponsored by mining companies in my area. There is never a community event that goes past where the mining companies have not put their hands in their pockets, sponsoring an event every day, every week, every month of the year. I wonder what will happen to these funding programs in the future. Your guess is as good as mine, but I would like a small wager on what the outcome will be.
I remain totally opposed to this tax and I want to close by saying that it is getting harder to support the government in the style to which it has become accustomed. We are taxing good Australian businesses out of existence, and the mum-and-dad businesses that are vitally important to my electorate deserve a much better deal.
I also rise to speak on the package of 11 bills which form the minerals resource rent tax legislation 2011. The introduction of the carbon tax was a big blow to the mineral industries in Australia, and now this minerals resource rent tax requires the minerals sector to dig even deeper to fill the holes left after Labor's profligate spending.
We are told this tax was negotiated with three large companies: BHP, Rio Tinto and Xstrata. This is rather extraordinary behaviour. Their competitors, particularly the small- and medium-size mining companies—the little ones who are out there risking all, looking to prove up new deposits, the ones who take on Indigenous employment and offer great hope to families who have never had such amazing jobs, the ones who give them all sorts of great starts in life—were excluded from the negotiations.
This is unprecedented and extraordinary business, taxing the minerals companies, after only the merest and smallest discussions with the state and territory governments. They, after all, have been receiving royalties from the mining companies for many years, and you would have thought that consultations with the state and territory governments re the coordination of their royalties and this new mining tax would have been essential. But we are led to believe there has not been any in-depth discussion.
The revenue from the MRRT is highly volatile, with estimates ranging from $7 billion to $24 billion annually. That is to be expected in a sector where it is literally bust or boom. You often go for many years with exploration before being able to prove there is any value under those there hills. According to estimates made by Deloitte Access Economics, the minerals industry will probably pay a record $23.4 billion in combined company tax and royalties in 2010-2011. That is before the MRRT even comes into existence. In his evidence into the Senate select committee's inquiry into the new taxes, Ken Henry, the then Secretary to the Treasury, agreed that the MRRT would impact on mining company investment decisions and their production decisions. What country would set about making it more difficult for high-risk ventures to go about their business and stay there?
Over the last decade, direct revenues from federal company tax and state and territory royalties generated by the minerals industry have exceeded $110 billion, again according to Access Economics. This is, under anyone's estimation, a substantial amount of money coming from mining companies; but, according to the Gillard government, $23.4 billion generated before this new tax is simply not enough. They need more. They have a very particular need.
This government is going further into debt each day they are in power. They are taxing an already heavily taxed industry so they can try to return a coalition type surplus by the next budget. This has been promised repeatedly by Treasurer Wayne Swan. The mining boom has been dubbed a once-in-a-century opportunity, and this government is therefore determined to milk the cash cow so they can try to cover their financial mismanagement—their great expenditures and debts—while they can grab that surplus.
According to the Minerals Council of Australia, the implementation of the MRRT will have a critical bearing on investor confidence and on the future competitiveness of Australia's minerals sector. Why would offshore investors want to invest in mining companies in Australia that will be outrageously taxed by the world's biggest carbon tax and now the MRRT? They can easily go to more competitive and inviting economies such as Brazil, Canada, China and South Africa, where they will not be faced with a crippling set of government grab-mes.
James Edwards, Executive Officer, Economics and Tax, at the Chamber of Minerals and Energy of Western Australia, has said that we do not have a monopoly on resources and we must maintain our international competitiveness. That is just plain obvious and common sense. According to this Gillard government, we need to spread the benefits of the mining boom through taxing the mining companies higher—well, taxing some of them higher. Not only does the minerals industry already pay billions of dollars to state and federal government; it has also given thousands of Australians jobs, and some of these are the best jobs their employees have ever had. Under this government, the Australian unemployment rate is now about 5.3 per cent. Is it possible that this new tax will dampen investment and so cut jobs in the minerals sector, leaving Australian workers and their families much worse off? Why would we do this?
This government has created a financial crisis for itself through reckless spending on whacky and wasteful schemes. Who can ever forget the overpricing and rip-offs in the multibillion dollar BER program, the life-threatening pink batts—billions of dollars blown away there—and the set-top box debacle? My constituents in Echuca still cannot get digital TV. And who can forget the $900 cheques in the mail for dead people and people in New Zealand who had long left the country. Who can forget the hundreds of millions of dollars wasted in buying low-security water—or no water at all—for environmental flows that could not be delivered in the Murray-Darling Basin? Who can forget the billions of extra dollars now spent on detention centres and wages for wardens because this government cannot get its asylum seeker and people smuggler policy right? Who can forget the GroceryWatch and the Fuelwatch schemes, and the My School website which have done nothing but cost money—and, in the case of My School, blame and shame poor schools for having struggling students?
As the shadow Treasurer reminded us today: 'This Labor government inherited from the John Howard government a $20 billion surplus with more than $45 billion in the bank. They inherited an economy with no net debt and in just over four years this government has accrued $150 billion in deficits, more than $200 billion of gross debt.' That is the end of the shadow Treasurer's quote—but of course he can go on indefinitely, as all of us can, about the fact that every Aussie now carries on their back the equivalent of some $4,000 in debt that this government has accrued in its few years in government.
The Treasurer, Mr Swan, tells us that he is going to have us all back in surplus very soon. How is he going to do that? I think this government decided that, since they seem incapable of efficiently and cost-effectively managing government programs, they will instead lean on the middle and small sized mining companies to fill their coffers. You might wonder, however, why the Labor government needs the MRRT when it is about to raise $27 billion through the new carbon tax. The problem is that the carbon tax is going to cost them $31 billion in expenditure. So the new carbon tax is not going to do it. It is not only going to cripple the competitiveness for every energy-intensive export-exposed workplaces; it is also going to leave the budget $4 billion worse off. That is the carbon tax for you. What a dilemma!
Where else can this government find the cash to fund the surplus—the surplus Mr Swan has promised? I think the minerals sector knows where they have found the magic pudding. Many qualified tradespeople from the Murray electorate have jobs in mines across Australia, and they particularly sought those jobs during the worst drought on record—one that we have just suffered through. These tradespeople work weeks at a time away from their homes and their families. They make great sacrifices to find that employment and to bring their earnings back to their families in Victoria. They make a very good living. I do not want people in my electorate to face more hardship because of this government's policy squeezing the jobs out of the sector.
Experience shows that we cannot trust this government to spend the revenue raised from this new tax or the carbon tax responsibly. I repeat: when the Rudd government came into power in November 2007, it was handed a substantial surplus of $20 billion, with no net debt and $45 billion in the bank. As we have been saying to ourselves repeatedly: 'Where's it all gone? What have we got to show for it?' Sadly, because this is a city-centric government, rural and regional Australia has nothing to show for it—that is, unless of course you are one of the Independents or Greens whose position in sharing the power depends on being promised some largesse for your electorates.
This government's failed initiatives have heavily impacted on the people in my electorate of Murray. We had, as I said, the worst drought on record. Some of our farm families could not survive that drought with equity left in their properties. They were forced to think the unthinkable and that was to sell their family farms. Fortunately, there was a program called the Exceptional Circumstances Exit Package—a program that had been initiated by the Howard coalition government. We needed only about another $5 million to assist those farmers who had already committed to sell their properties with the inducement of a $150,000 grant to set them up and retrain them for a future. About $5 million was all that was needed. This government announced that of course the Exceptional Circumstances Exit Grants would be extended for another 12 months. That was announced in the last budget. We were stunned when, only six weeks after that budget announcement, we were told: 'Oops! Sorry. We miscalculated the funds for the EC exit grants. They are all committed.' How can a government not understand before a budget announcement how much is actually committed in grants which in fact take four to six months to determine? What an extraordinary mismanagement. But what heartbreak and devastation that extraordinary decision has left.
Some of my families are now financially devastated from selling their farms. They were forced to sell their farms by circumstances beyond their control, but with an expectation of having some funds to buy at least a home. Those farm families are now hoping that an act of grace might come their way from this government, but that needs to be about $5 million. I hope, therefore, that this government understands that every dollar counts in this economy. Every dollar has been hard-earned by taxpayers or by those who pay resource rentals or excise. Every dollar is hard-won. It should be the end of profligate spending when it comes to this government's future behaviour.
We have before us a bill to bring in a new tax, the minerals resource rent tax, which is not even going to be spread evenly over the industry sector. We are told, triumphantly, by some of the biggest miners that they do not expect to pay a cent with this new tax. Some of our largest mining companies are warning their shareholders that this tax is a debacle and that it is going to be a serious problem for them in terms of their future competitiveness and whether they even want to stay in this country. So we have to worry very much about this new tax.
In order to get this legislation through, the government has done deals with the Independents and the Greens—but, unfortunately, they are not driven by delivering benefits to all of the Australian community; they are driven instead by sharing power with this government. It has to be more than that. If we are going to have an economy that can recover quickly from an extraordinary round of spending, wastage and bad value for money—if that is going to be achieved—we have to look harder at how we tax a sector like the mining industry.
This industry has done us well in the past. We were built on gold in Victoria in the 1800s. Western Australia is now built on a bigger range of minerals. Western Australia, South Australia, Queensland, New South Wales and Victoria have had an enormous bounty as a result of our mineral wealth. Let us not see that sector as purely a cash cow to cover the profligate spending of a government that does not know how to manage its books.
As a member of this federal Labor government, it is with quiet satisfaction that I join my colleagues at the end of a difficult but momentous year of reform in order to support the passage of the minerals resource rent tax legislation. This is a Labor initiative. It is about making this country fairer and stronger. It is about sharing the wealth that should be better shared. It is about ensuring that the development of finite mineral resources is translated into wide and long-term benefits for all Australians, and that those benefits are translated into a stronger, more diversified Australian economy.
The minerals resource rent tax which we debate here can be thought of in three ways. First, it is absolutely fair and right for government, on behalf of all its citizens, to make sure that companies and individuals make a fair contribution through taxation to the common needs and shared wellbeing of this country. Mining companies do not own the non-renewable mineral and energy resources they extract; they belong to all Australians, who are thereby entitled to share in the benefits. Second, the MRRT fits within a suite of tax reforms that will ease the administrative burden and costs on low-income taxpayers and on Australian business, especially small business. Third, the proceeds of the MRRT are directed at the long-term financial benefit of individual Australians and of the Australian economy by underwriting a staged increase in compulsory superannuation from nine per cent to 12 per cent.
Over at least the last decade, large and enormously profitable mining companies have not been paying a fair share through their tax contributions at a time in which their use of our mineral resources has returned a veritable river of gold. Against average Australian business profit of 11 per cent, mining companies have in recent times averaged profit of around 36 per cent, while large mining companies—with more than 200 employees—have averaged around 47 per cent.
The vast majority of economic analysts and even most mining sector participants have acknowledged that an increased tax on profits calculated at the point of extraction is entirely fair, efficient and reasonable. What is more, it is absolutely necessary if we are to create the capacity to deal with the critical issues that confront us in the areas of aged care, disability funding, infrastructure and the support needed for innovation and manufacturing.
Over the last decade, and through some very difficult economic times, mining companies in Australia have been providing a very significant source of export income, a very significant focus for investment, and a very significant number of jobs. This is more true in Western Australia than anywhere else—and, as a Western Australian, I applaud the sector for its performance and for its contribution to Australia's economic resilience. But we must keep things in perspective. Mining jobs represent less than two per cent of all jobs—and even in WA they represent only about five per cent. Last year, the understandable but not always honourable resistance to fair taxation by some hugely profitable miners, gave many Australians the impression that the resources sector rescued this country from the global financial crisis. Yet very little mention was made of the fact that in the immediate aftermath of the GFC, mining companies cut their workforce by 15 per cent. Very little mention was made of the fact that it was the government that acted decisively to underwrite confidence in the financial and banking sector and to bolster demand in construction and retail—the two highest sectors for employment.
There were also those in the mining industry who tried to blame the equity market jitters last May on the mining tax proposal and also claimed that a mining tax would hurt superannuation by harming resource stocks. Those claims were so ridiculous that David Buckingham, former head of the Minerals Council, was moved to describe the miners' resistance campaign as 'hysterical' and 'complete rot'.
Along with overstatements there was also fearmongering. We were told that fairer tax reform, just like the Clean Energy Future package, would jeopardise investment in Australian resources projects. The shadow Treasurer said that the requirement for hugely profitable mining companies to pay a fairer share of tax on profits above $50 million was 'almost guaranteed to kill the mining boom stone dead'. If the shadow Treasurer possesses a passing familiarity with the economic and investment data, he would know that resource sector investment, which was $35 billion dollars in 2009-10, grew to $47 billion dollars in the financial year just passed—after the announcement of the MRRT—and that it is projected to reach a staggering $82 billion this financial year.
In recommending that these bills be passed, the House of Representatives Standing Committee on Economics report on the Minerals Resource Rent Tax Bill found that mining companies generated profits of $92.8 billion to June and have plans on their books to invest $430 billion in the further expansion of their industry. The report noted that in the last decade mining profits have jumped 262 per cent. The Australian resources sector has a long record of outstanding, high-level competitive performance, but it is only one of many sectors of our economy and it should always be subject to the same kinds of consideration, scrutiny and regulation as are applied to every other sector.
Philip Daniel, deputy head of the International Monetary Fund's tax policy division has described the MRRT as a 'significantly worthwhile reform' that should be copied by other mineral-rich nations, while the OECD, in its 2010 Economic Survey of Australia, said:
The proposed minerals resource rent tax on coal and iron ore operations, along with the extension of the petroleum resource rent tax, are justified on both equity and efficiency grounds.
This reform is not just about ensuring a fair share for all Australians; it is also about improving the tax system across the board. It delivers a tax discount on bank interest, which is often the only investment income for many low-income earners and lower-middle-income earners. It delivers the administrative ease and value of an instant write-off up to $6,500 for small business and it underwrites the reduction in company tax to 29 per cent for all businesses from July 2013, with the tax break for small business to operate from next year.
Finally, and perhaps most significantly, it delivers a further instalment of Labor's great superannuation project. With the passage of the minerals resource rent tax, we will see a staged increase in compulsory employer superannuation contributions from nine to 12 per cent, which will boost the retirement savings of 8.5 million Australians with additional, expanded super concessions for 3.5 million lower-income earners and 275,000 people aged over 50. This will make a huge difference to the position of individual Australians in retirement and it will make an enormous difference to the economy in its aggregate effect. As John Brogden, the Chief Executive of the Financial Services Council and former Liberal leader in New South Wales, observed earlier this month, 12 per cent superannuation:
… sees more than half of the Australian population have an adequate retirement and that's the difference between heavily relying on the pension and having part pension or no pension.
This increase in superannuation, which is both prudent and necessary, will make a dramatically positive difference to the retirement income of working Australians, which includes more than 48,000 workers in my own electorate of Fremantle.
Perhaps the most overlooked aspect of the MRRT package is the more than $6 billion that will be invested in vital infrastructure around Australia through the Regional Infrastructure Fund. In Western Australia alone $480 million has already been earmarked for the Gateway WA project, which will see five vital upgrades to Perth's transport infrastructure and highway network.
I am sure it is a matter of serendipity that the parliamentary year should come to an end with these bills, which, along with the Clean Energy Future package, represent large-scale reforms that change Australia for the better and for the long term. They build upon a number of other national policy achievements in 2011 that all Australians now share, including paid parental leave, historic mental health jobs skills and training packages, and the greatest investment in public transport of any federal government. The minerals resource rent tax and the extension of the petroleum resources rent tax, in combination with a range of tax reforms, and crowned by this new and necessary instalment in Australia's great superannuation story, is a fitting note on which to end what has been a tough but substantial year of good government.
I have previously had the opportunity to speak about my opposition to this mining tax in this House, and I intend to reiterate my opposition to this tax and outline the particular issues of fairness, which have led me to propose amendments to this mining tax. I did not support the mining tax at the election. I do not support the mining tax now. And I will be voting against the mining tax when it comes before the floor of this parliament. I have consistently stated that I do not support a Commonwealth mining tax. I believe that Australia's natural resources are owned by the states and not the Commonwealth—and, as such, I believe that the current royalty regime is the best mechanism to ensure the community receives a fair share of the mining industry. A Commonwealth mining tax is yet another attempt by the Commonwealth government to erode the states' rights and states' royalties. I have consistently said that this tax is a tax on Western Australia, as many have stated in this place today.
Since the announcement of the Gillard tax deal there have been various requests for information on where the mining tax revenue will come from. The government refused to released this information until forced to release it under freedom of information. As discussed in the Senate committee report, this FOI information confirmed that this tax is a tax on Western Australia. The FOI information illustrated that the Prime Minister struck a mining tax deal under which it expected that more than 80 per cent of the revenue would come from iron ore in Western Australia over the forward estimates. The taxing of one specific state economy in this way is unfair and discriminatory. This mining tax is yet another impost on the state of Western Australia. It is part of a triple assault on WA by the federal government: mining tax, carbon tax and the unfair return of the GST revenue.
As well as my opposition to the federal mining tax generally, I have particular issues with the negotiation, design and application of this particular mining tax, referred to as the minerals resource rent tax. Firstly, it will harm Australian miners by damaging their international competitiveness; secondly, the MRRT was the result of a secretive negotiation between the now Prime Minister and the three biggest multinational, multiproject mining companies—BHP, Rio Tinto and Xstrata—to the exclusion of every other mining company in Australia; and, finally, it delivers disproportionate advantages to the three big miners, who negotiated the design of the tax, and delivers competitive disadvantages to smaller, emerging miners who were not privy to the negotiations.
I have consistently called for this mining tax to be scrapped. The current tax was designed behind closed doors with the big three mining heavyweights: BHP, Rio and Xstrata. I do not begrudge the big three—as many have—for the way they negotiated this tax. Any company would look after their own interests when given the opportunity to negotiate a tax with a government. But these three companies are not representative of the mining industry. These three companies are multinationals with numerous projects which post tens of billions in profits each year. These three mining companies are very different to the 320 smaller mining companies who were excluded from negotiations completely. These companies compete in the same global markets as the big three.
Also excluded from the secret negotiations were the state and territory governments, including the governments of Western Australia and Queensland, where most of the mining industry operates. The secrecy that surrounded the negotiations has also extended to the assumptions, modelling and figures used by the government to underpin their forward estimates. Compare this to the Western Australian government, for example, which publicly provides assumptions underpinning royalties and forward estimates in their budget. Over the months I have lobbied the government hard to listen to industry, listen to the people and scrap the tax. However, if the government insists on this bad tax, it must at least make changes to ensure that it is fairer for the mining companies excluded from the negotiations.
I have opposed the mining tax passionately because my electorate of O'Connor is the home of many mining companies, and many of the companies' employees. These companies employ, train and upskill many of my constituents. Further, these mining companies, more than any other industry, continually make valuable and voluntary contributions to the community through provisions of infrastructure, funding for charitable projects and sponsorship. For example, a natural resource company operating in the port of Esperance, in my electorate of O'Connor, recently constructed the town's first overpass. This was a major infrastructure project that will continue to provide benefits to the town for many years to come. More than $4 million was spent on local goods, services and contractors during the construction of the bridge.
However, you do not need to live in or represent an electorate such as O'Connor to be outraged by the grossly unfair way this tax was negotiated and finalised, and you do not need to live in an electorate such as O'Connor to feel uncomfortable about the way this tax is set to unfairly advantage the three biggest and most profitable mining companies at the expense of the rest of the mining industry. In this House I have previously expressed my dismay at the Labor government. It is a government that holds out values of fairness and equity, yet it devised and plans to impose a tax that advantages the three richest, largest and most powerful mining companies at the expense of all smaller mining companies in Australia. I am appalled that a Prime Minister would trade off the interests of the unrepresented mining industry to help seal her own leadership deal. It has been my position that if the federal government insists on a mining tax, it should start fresh negotiations in good faith for a fairer mining tax. If the legislation is going to be forced through this parliament, and I truly hope it is not, it is my position that the legislation should at least be fair.
Unlike the government, I have spent considerable time consulting industry on issues related to the mining tax. Following these lengthy consultations, I have decided to move three amendments to make the tax fairer. Firstly, I will be moving amendments to introduce a 10 million tonne ore threshold so that smaller miners who sell less than this threshold amount of ore will not be liable for the mining tax at all. Secondly, I will be moving an amendment seeking a legislative commitment that the smaller miners will not pay the tax earlier or at a higher rate than the three mature minors who negotiated the tax. Finally, I will be moving an amendment to exclude magnetite ore from the tax. Magnetite ore is significantly different to hematite ore, and, because of these differences, it should not have been included in the mining tax to begin with. These amendments will not fix the mining tax; however, they would at least make the tax fairer for smaller mining companies as compared to the big three mining companies.
I will now go into these proposed amendments in slightly more detail. The first proposed amendment would introduce a 10 million tonne per annum ore threshold. The effect of this amendment would be that the smaller companies who are under this threshold will not pay the MRRT. This would occur through the introduction of an emerging miner factor which would discount the MRRT rate by 75 per cent. The emerging miner factor, in addition to the existing extraction factor of 25 per cent, would reduce the MRRT rate to nil. The dozens of emerging miners who have profits not comparable to the $20 billion posted by BHP and who were completely excluded from negotiations and consistently excluded from any meaningful consultation should be excluded from the operation of this tax. They should not be subject to the complicated compliance burdens of this tax, they should not be subject to the disproportionate effects it has on emerging miners and they should not be burdened by the weight of a tax designed by the richest and most powerful members of the industry.
If some of the miners excluded from negotiations are forced to pay the tax, there should be a much higher threshold before the liability kicks in. A tax negotiated by a company posting a $20 billion profit and hoping to extract over 300 million tonnes of iron ore in the future should not apply to a company which is making one-thirtieth of the profit and extracting less than one-thirtieth of the ore and which was totally excluded from all negotiations. If the government insists on this mining tax, at the very least a higher threshold should be introduced to properly distinguish between the huge multinationals who negotiated the tax and other, emerging and junior, miners.
Modelling and studies conducted by industry and academic institutions have indicated that the application of the MRRT will lead to the smaller miners paying the MRRT earlier and at a higher rate than will the big three miners who negotiated the tax. This competitive disadvantage was confirmed in a study conducted by a professor of economics at the University of Western Australia. The differential is partly due to the starting base allowance. I do acknowledge that the starting base concept gives recognition to the risk and substantial capital expenditure undertaken up to the proposed taxing point. However, the MRRT must be imposed fairly, and as a question of fairness it is imperative that we ensure that the social consequences of the tax are not unfair to small miners. We must ensure that small miners, perhaps with single projects, do not have cost disadvantages compared with the big miners who have multiple projects. After all, they are all selling their product in the same global market.
As such, I will propose amendments to guarantee that smaller miners will not pay the tax earlier or at a higher rate than the three mature miners. I propose that this be done by inserting a clause in the MRRT bill that ensures that no miner pays before a mature miner pays the MRRT. A mature miner is then defined as a miner with a group production of over 40 million tonnes, to capture the three large miners in the industry. This will distinguish fairly between the massive established miners and the rest of the industry.
Secondly, a clause in the imposition bill will ensure that no miner's MRRT rate is higher than the highest mature miner's rate. If the government insists on continuing with this flawed tax they should enshrine in legislation that small miners will not pay the MRRT earlier or at a higher rate than the bigger multiproject miners.
The other issue which should be addressed is the exclusion of magnetite from the mining tax. Magnetite ore, unlike hematite ore, has a very low iron content and is therefore of very little value in its raw state. Magnetite companies have to heavily process their ore before it is valuable. The government has said that it expects to recover no tax from magnetite miners under the mining tax because the value of the ore relies on significant downstream processing. However, these companies continue to be burdened with compliance costs and plagued with investment uncertainty over the application of the mining tax. An amendment to exclude magnetite would mean greater investment certainty for a new value-adding industry that promises more than 12,000 new jobs in Western Australia alone.
The mining tax is an assault on Western Australia. It is yet another example of the Commonwealth eroding state revenue bases, and will result in another example of the Commonwealth ripping off regional Western Australia by failing to apply the revenue to WA and to regional Australia generally. The government rhetoric in the budget papers and the media is that they are investing in our mining regions. However, over 50 per cent of the first billion dollars from the mining tax revenue will be spent on upgrading roads, freeways and bridges around Perth airport under the Gateway WA project. The government falsely claims such projects as 'regional development'. In reality it is stripping profits from regionally based companies and misusing that revenue by pandering to marginal electorates and further supporting a fly-in fly-out workforce, which has a devastating effect on regional development in Western Australia.
This is why I will be supporting the member for Kennedy's amendment in ensuring that part of this revenue goes back to regional Australia. I urge the regional members of this House, especially those who have resource industries, to seriously consider the merits of the mining tax on regional development and regional Australia.
In conclusion, I would like to acknowledge my staff—particularly Kayla Calladine—who has done a mountain of work on this very important issue. I thank her sincerely. This mining tax is bad for industry, bad for Western Australia and bad for my electorate of O'Connor. Further, this particular MRRT is grossly unfair for the smaller and emerging miners and is grossly unfair for every mining company excluded from the Labor government's deal with the three big miners.
I am pleased to have the opportunity, albeit at this late hour, to join in the debate on this package of legislation currently before the chamber.
I will not detain the House for long, as just about everything that could be said about this legislation has been said by members on both sides of the chamber. I do, however, want to place on record my opposition to the Minerals Resource Rent Tax Bill 2011 and also the related bills.
I think that it is unfortunate that a further tax is being considered. I believe it is not correct that three companies should be given an advantage, and I believe that another tax is not the solution to the need for the government to obtain additional revenue.
This legislation amounts to a cash grab by a government that needs additional funds to continue to run the country. While the Sunshine Coast, that I am privileged to represent, is not traditionally seen as a mining area, we are an area which does have a substantial involvement in the mining industry. Mr Deputy Speaker Sidebottom, I suspect that you, and most other honourable members, have visited the Sunshine Coast, boosting our local economy, enjoying the hospitality of our people and hopefully benefiting our local economy by spending dollars there, thereby creating jobs and making a better lifestyle for those people who live there. If honourable members have not yet been to the Sunshine Coast, may I take this opportunity to encourage them to do so. We are primarily a tourist region, though we do have other industries, and people come from all over the country to visit the Sunshine Coast and enjoy our beaches and our wonderful way of life. But the employment situation across the nation is making it more difficult for many people who reside on the Sunshine Coast to actually get employment there, and they are increasingly searching further afield for work.
The mining industry has provided an answer, and it has also given opportunities for those prepared to fly into and out of the Sunshine Coast to mining communities. It really is important, therefore, from the point of view of those families on the Sunshine Coast reliant upon the mining industry, for the mining industry to continue to be prosperous. Unless the industry is prosperous those jobs will not be provided and local people will no longer have the opportunity to be supported by this industry which has made such a wonderful contribution to the economy of Australia for so many years.
The mining resource rent tax is a threat to the jobs of workers and families. Currently, we have about 2,500 people based on the Sunshine Coast who are employed in the mining sector, and what we really want to achieve on the coast is a situation where we have a very good fly-in fly-out operation. The Sunshine Coast is obviously one of the best parts of our society in which to live. It is one of the most attractive parts of the country. And if we are able to continue to have increasing numbers of people flying in and out of the Sunshine Coast, then that is going to boost our local economy while of course providing an educated, qualified and motivated workforce for the mining industry.
The difficulty is that, with the mining resource rent tax, we are going to have a situation where the industry will have less incentive to expand, and that is indeed unfortunate. There are almost 8,000—in fact, 7,666—businesses in the construction sector which have a vested interest in the continuation and growth of the mining sector. Many of these businesses are family businesses. People work hard. They make sacrifices. They pay their fair share of tax to make ends meet. Unfortunately, if the mining resource rent tax legislation becomes part of the legal fabric of this country then obviously there will be additional tax burdens. This will impact adversely on the ability of the mining industry to provide the kind of living needed by so many of our local businesses which are affected by the economic fortunes of the mining industry, which is an extremely important industry as far as the future of Australia is concerned. It really is important that the government, at this late hour, reconsider this legislation.
It also presents certain difficulties, insofar as the Commonwealth appears to be taking responsibility for an industry and for resources which, under our Constitution, are in fact the property of the states. So I can imagine that there will be a substantial amount of litigation. As a former lawyer, I can understand that this sort of legislation will be excellent for my former colleagues but not necessarily excellent from the point of view of the economic health of the country.
I just think that it really is important to encourage investment in the mining industry and, therefore, it is counterproductive to introduce a tax which will undermine investment because it will act as a powerful disincentive for people to put their money where their mouth is, and we will see this industry, which has really been a saviour for Australia, not succeed as it has in recent times. I therefore ask the government to reconsider the provisions of the Minerals Resource Rent Tax Bill. It is one thing to look at what money the government hopes to obtain from the introduction of this legislation; on the other hand, the government ought to consider the costs that will impact upon so many local communities, including the community on the Sunshine Coast.
I place on the record my opposition to this package of legislation and my intention, when a vote takes place either later tonight or early tomorrow morning, to vote against this legislation. I see it as being retrograde legislation, legislation which will not benefit the local economy on the Sunshine Coast, legislation which is inequitable in so far as it tends to impact more adversely on smaller players in the industry rather than larger players. The government really ought to go back to the drawing board to try to bring forward legislation which is more equitable, less rushed and something which can be accepted by the Australian people.
It was the great German statesman of the 19th century Otto von Bismarck who said: 'Laws are like sausages. It is better not to see them being made.' I am reminded of this quote as I rise to speak on the Minerals Resource Rent Tax Bill and the 10 related pieces of legislation. Flawed from the start and deficient to the end, the government's plan to introduce a mining tax at the federal level has been characterised by incompetence writ large. Secrecy and confusion have become bywords for a process that has not just alienated investors and the industry but also contributed to the downfall of a Prime Minister who miscalculated the toxicity of a tax across the Australian electorate. Now the government stands desperate to ram this legislation through the House, cobbling together last-minute deals in the backrooms with the Independents, while denying its own members an opportunity to speak on the bills—all because it fears the political consequences of subjecting such flawed legislation to further scrutiny and debate.
There are three major reasons this legislation should be opposed, so damaging as it is to our economy and our country. First is the flawed process. The minerals resource rent tax now before the House finds its genesis in the resource super profits tax announced by the Rudd government in May last year. The RSPT was the brainchild of the Henry tax review and was one of only a handful of recommendations from the 138 offered by the review that was ultimately adopted and subsequently announced without any consultation with those stakeholders most affected. This 40 per cent tax was on profits which exceeded the 10-year government bond rate. This was seen as a particularly punitive rate of tax and would have had retrospective application to projects where investment decisions were initially made on the basis that no such tax would ever exist.
The hue and cry was both expected and understandable. But far from learning the lessons of this failure, the new Prime Minister, Julia Gillard—desperate to be seen doing something on the eve of an election—proceeded to enter into exclusive new negotiations with the three biggest miners, leaving many small- and mid-tier players out in the cold. Led by the Prime Minister herself, the Treasurer and the Minister for Resources and Energy, Treasury officials were not invited, leading to the obvious conclusion that this was to be a political not an economic settlement. Again subject to stinging criticism of its process, the government adopted a policy transition group, headed by former BHP Chairman Don Argus, to provide further advice. Its 94 recommendations were subsequently accepted and the result is the MRRT, which is a project-based tax on taxable resources—iron ore, coal and some gases—at a rate of 22½ per cent.
Extending to more than 500 pages, the legislation is extremely complex and has even been subject to question as to its constitutional validity, opening up new avenues of uncertainty. What is more, the MRRT deviates from Dr Henry's original recommendation to do away with state government royalty schemes, preferring to leave them intact. Even the number of companies that the government claims will be subject to the tax has shrunk dramatically. Originally the RSPT was to apply to more than 3,000 miners. Last year, the Prime Minister claimed the revamped scheme would apply to around 300. And now, in the last few days as the threshold has been changed in a deal with the member for Denison, we have the government saying that it will apply to around 30.
It would seem that the mining tax, so important to the government as a matter of principle, has been sacrificed on the altar of political expediency. All the government wants is simply a deal to say it is done. Groucho Marx would be proud of Prime Minister Gillard's actions, for it was he who once said:
Those are my principles and, if you don't like them ... well, I have others.
But if one thinks that the flawed process that led to this tax is bad, then one should consider the detrimental impact it will have on jobs and investment in the mining sector.
Australia's resources sector employs directly more than 200,000 Australians, many in regional areas. The flow-on impact for jobs in construction, mining services and manufacturing is also significant. In 2010-11 mining constituted around 40 per cent of all business investment in Australia, with that number only going upwards from here. As an income earner it is without parallel, with the resources sector contributing around $160 billion in export earnings in 2009-10. We cannot afford to put this kind of investment, job creation and wealth generation at risk—but with the mining tax it is at risk.
Other commensurate resource rich countries like Canada, Brazil, Indonesia and South Africa do not have such a punitive taxation regime. When one adds the carbon tax to the equation it is not hard to see foreign companies and market investors deciding to put their money elsewhere. It is with this in mind that the chief executive of South African miner Anglo Gold Ashanti, Mark Cutifani, said recently at a forum for Commonwealth business leaders 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.' Such a damning statement must be a cause for concern.
We have to understand that we may be in possession of over 10 per cent of the world's coal and iron ore reserves, but this is not a monopoly position. The resource industry is competitive and sentimentality has no place. Investors are looking for returns on their capital and if Australia does not provide such a conducive environment they will go elsewhere—and our resources will ultimately stay in the ground and the potential economic dividend to the nation will never arrive. A third and final downside to the government's MRRT legislation now before the House is the detrimental impact it will have on the budget's bottom line. It is estimated this mining tax and the PRRT will raise $11.1 billion over the forward estimates. But, with the recent increases in state royalties by the New South Wales and Western Australian governments, this number has fallen to $8.1 billion. With volatile commodity prices—iron ore, for example, has dropped nearly one-third in recent months—there could be an even bigger black hole in the government's revenue projections.
Not withstanding these factors, the government has committed to using these proceeds on a range of measures, including changes to the company tax rate, superannuation age guarantee and the creation of a regional infrastructure fund. These government promises will create a structural deficit, with the Senate inquiry into the mining tax estimating that the net cost to the budget over the next decade will be at least $20 billion.
This country is enjoying its best terms of trade in nearly 140 years. But, despite these economic times, the government have an extremely poor economic record which has seen them quickly squander their golden inheritance from the Howard and Costello years of no government debt and $50 billion in the bank, so that this government now have a net government debt position of $107 billion and rising and an interest bill of nearly $20 million a day—enough to build five teaching hospitals in Australia each and every year.
In light of this poor economic record, the mining tax before the House tonight will only make Australia's budget situation worse. This mining tax is the child of a flawed process. It will increase sovereign risk, it will deter investment and send jobs offshore, and ultimately it will produce a structural budget deficit position which will hurt the Australian people in the long term. For these reasons and many others, the legislation before the House tonight cannot be supported. There must be a better way.
Many speakers before me have pointed out the damaging impact of the Gillard Labor government's minerals resource rent tax and how it treats sections of the community differently, how it divides the nation and how it will drive small business to the wall. Tonight I want to address one part of the mining tax—a very significant part—and its impact, particularly on small business.
This tax has Labor failure written all over it. It was designed to rake in funds to replace the billions of wasted dollars on failed schemes—the BER program, pink batts, computers in schools—and budget blowouts on hopelessly managed programs like the NBN implementation. The Gillard Labor government's mining tax has hit a new high. Labor has managed to create a new tax—Labor's answer to everything—and it has managed to eliminate another of the Howard government's successful initiatives.
Small business forms the backbone of the Australian economy and the Gillard Labor government is trying its hardest to break the back of the hundreds and thousands of men and women who work in their own business—the self-employed, semi-retirees, home-based businesses, start-ups, small retailers, self-employed contractors and micro-business operators. These ordinary, everyday hardworking Australians are the targets for the Gillard Labor government's attack on small business through the mining tax. As part of the mining tax legislation the Gillard Labor government will abolish the entrepreneur's tax offset. Not many people would know about the tax offset, but those in small business understand its benefits. This tax offset was introduced by the Howard government in 2005 to encourage and support our small businesses and family enterprises. In 2005, it was originally thought that over 300,000 small businesses would benefit from the initiative. In 2008-09, the Australian Taxation Office reported that more than 425,000 microbusinesses had claimed the offset. It provides a 25 per cent tax offset on annual income tax liability on turnover up to $50,000, phasing out to cease at a turnover of $75,000. Abolishing this incentive will mean that around 145,000 small businesses with an income between $30,000 and $65,000 will face at least a $10 a week, or $500 a year, tax slug, with those with taxable incomes around $50,000 facing a $16 per week, or $830 per year, tax hike.
For some businesses—whose incomes are modest and for whom the challenges of running them seem to be getting tougher and tougher—that cost could be the final straw. Any member of this House who walks through their electorate and knocks on small-business doors will understand that it is extremely tough right now. In effect, the loss of the offset will increase costs and act like another tax on small business. Yet the Gillard Labor government is out there saying it is going to be good for small business. It will save the government $180 million in 2013-14 and $185 million in 2014-15—a total of $365 million over the forward estimates.
In the electorate of Macquarie, there are an estimated 4,500 small-business operators, contributing to our diverse national economy. These are businesses that are creating local jobs and driving our regional and local economy. Why should small business have to pay for Labor's total lack of control of spending and the subsequent attempt to save money? What will they tax next when they have spent the mining tax and the carbon tax? Small businesses are the losers again as Gillard and Swan hit productive sectors of the economy to make up ground lost through sheer waste and mismanagement.
The coalition acknowledges that small business is the backbone not just of this nation but of our local and regional economies. It is a local employer. It provides a means for people to be independent and to have a future. The coalition will fight changes to increase taxes for small business. Unlike Labor, we encourage small business and we will ensure that small business has a voice within the coalition, with a seat at the cabinet table.
Small business, by its very nature, is enterprising, hardworking and resilient. This latest hit by the Gillard Labor government will test that resilience. I urge small business, when the next election comes, to remember that Labor, by introducing this legislation into this House, have not considered their needs, the pressure on them, the burden they bear and the sacrifices they make. On behalf of the coalition, I say that this is poor legislation. It is bad legislation for small business. Everyday Australians who work hard to make a future not just for themselves but for the people they employ and for their local communities deserve better. There is a better way and the coalition can provide it. The coalition cannot support this legislation without changes that will make a difference for small business.
I would like to thank all members who have contributed to this debate on all of these bills. Today the Gillard government is taking a major step forward in delivering a historic economic reform. It is a reform which will ensure that Australians get a fair share of the returns from the sale of our non-renewable resources. It will ensure that those returns are distributed right around the community to every corner of our country. I have been listening to the various contributions to this debate over the past 17 hours, and I can tell that those opposite have simply given up the fight—they have lost the stomach for the fight, because they know that history has caught up with them and they are on the wrong side of this debate. They are a party divided and they have finally realised that no is not an answer. It is certainly not an answer when it comes to the needs of our small businesses and certainly not an answer when it comes to the superannuation accounts of working Australians. So they do look very uncomfortable sitting there with their leader, siding with vested interests and not standing up for the 2.7 million small businesses of Australia and the eight million workers of Australia. As they have gone through the debate over the past 17 hours, you can see it gradually dawning on their faces that they are about to vote against the interests of 2.7 million small businesses around this country and against the interests of over eight million working Australians. I never thought I would see the party of Menzies and Howard voting against small business in this House in the way they are about to do. I never thought I would see that, but I am certainly not surprised that they are voting against the interests of eight million working Australians—they have a proud record of continuing to do that for a long period of time! But to come into this House—the party of Menzies and Howard—and to vote against the interests of small business, as well, I think sets a new low for the modern Liberal Party.
The Australian people will not forget this day. This will be the day that the Liberal Party established itself as the party of the vested interest, not the party of the national interest—a party which has been captured by a handful of companies, not the great mass of the working population of this country—and they will carry this vote with them forever. It will be hung around their necks for the rest of their careers. It will never be wiped from their voting record.
We on this side of the House have chosen this path not because we thought it was going to be easy but because we were absolutely determined to deal with the pressures of the patchwork economy. We chose this path because we believe that Australians deserve a fair return for non-renewable resources—resources they own 100 per cent. When listening to the debate tonight from the Liberals and the Nationals on the other side the House, you would think that these resources were owned by the companies. They are not; they are owned by the Australian people. When prices go to 140-year highs, the Australian people are entitled to a fair return from those resources and they are entitled to have it spread right around their community, not for it to be the exclusive preserve of a few shareholders. These resources are owned by the Australian people, not by the companies. They are our resources. They are nonrenewable; they can only be dug up once, and we as a nation should be using the profit from those resources to invest in the future of our country, to attract investment in the country and to spread the profit from it around the country to strengthen our country and to build our nation. That is what this is all about. We on this side of the House are the nation builders looking after our workforce, building our small businesses, building the infrastructure, strengthening our economy, building our national savings and strengthening this country for the future—taking advantage of the fact that our terms of trade are at 140-year highs.
That is why we have a proposal for a resource rent tax: to make sure we invest it for the future of our country so we can build our nation, because these resources can be dug up only once and what we are doing is making sure that future generations benefit from these resources. We are making sure they go to the workforce, to eight million workers; to the eight million sovereign wealth funds, the superannuation accounts of the Australian workforce, making sure they get a fair go; and of course making sure that many of the small businesses that are not in the fast lane also get a tax break. This is a very important measure. It will really assist small business cash flow.
On top of all that, there is the investment in infrastructure, particularly in the mining regions. That is also critical, because the mining communities around some of our most profitable mines are not receiving the investment they should be receiving—for example, around Mackay, Townsville, Rockhampton, Mount Isa. We intend to make those investments. Even if the local members do not have a clue about how it can be done and how they should support their electorates, we are determined to make sure that we support those very productive parts of our economy through investment in infrastructure as well.
But we also understand that not every industry is in the mining-boom fast lane. We understand that tourism and other parts of manufacturing are suffering because our dollar is higher. We understand it is important to put in place a range of policies that make our economy more competitive and give a fairer go to those businesses. That is also very important.
What we have here is a package of very important reforms. The $6,500 instant asset write-off will put something like $1 billion in 2012-13 into our economy, into assistance for small business. Think about that for a moment: a billion dollars. But that is not good enough for the party of Howard and Menzies. It is the Labor Party that is prepared to do that because we understand the need to give many small businesses a helping hand.
We also understand the importance of superannuation—what it can do not just for the dignity of working Australians in retirement but also to build up our national savings. We saw how important that was during the global financial crisis and recession. Our superannuation savings were used to recapitalise Australian businesses at a very difficult time. Our national superannuation savings pool is a tremendous asset to this country, the envy of the world, but we have to build it up for individuals and we have to build it up for our nation because as a capital-hungry country we do need to build up our national savings as well—not just our public savings but also our private savings. That is why we want the superannuation guarantee to go up from nine to 12 per cent. For a worker aged 30 who retires at 65, that means an additional $108,000 in retirement, a 24 per cent increase in their retirement savings. So there will be a very significant boost over time, not just from the guarantee but also from the additional contribution we are putting into the accounts of low-income workers. It will be a very significant boost to the superannuation of many of the lowest paid in our community, many of them women and many of whom do not have very significant retirement savings at all.
All of this comes together in a plan which builds the nation, builds up our workforce, builds up our national savings, builds up superannuation, builds up small business and builds up mining communities. This is how we must respond to the challenges of the mining boom and the challenges of the Asian century.
Now, it is not too late for those opposite to change their minds. The case here is compelling, and we have been reading in the newspapers that there are a number on the other side who are now having second thoughts—and so they should, because the case is so compelling. It is not too late for them to vote for a big tax cut for small business. It is not too late for them to vote for a significant boost in superannuation for eight million Australian workers. We have in the MRRT and the PRRT a tax system which gives an increased return to the nation when times are good. That is why we have a resource rent tax—so that when the terms of trade are high we get a fair share of those. It is something that encourages investment. It is a good tax. That is why it was recommended by the tax review, to replace royalties. Wednesday, 23 November 2011
Listening to those opposite talk about royalties tonight you would swear that they thought the system of royalties is a great tax; it is not. It is an inefficient and poor tax which does not give a fair return to the Australian people, but we have a system which can achieve these other objectives while delivering a fair return to the Australian people. That is what this legislation is all about. It will deliver for small miners just as it will deliver for all in the mining industry. It does not discriminate against small miners at all. It is important to take into account the situation of small miners, and the government has done so. That is why we will lift the threshold to $75 million. We think that is a reasonably good idea—we think that it probably has something going for it—and I hope that we can see that supported in the House tonight. The bulk of this tax will be paid by the very large miners—make no mistake about that—and that is as it should be, because they are the ones who are super profitable.
This bill is a very important reform. It has been argued in this House that somehow it is discouraging investment, but we have a record investment pipeline in mining in Australia at the moment. There is something like $430 billion in the pipeline with something like $82 billion in this year alone, which is up from $35 billion only two years ago. It is very important to put this arrangement in place so that the Australian people can get a fair return.
What is so strange about the debate we are having in this House is that while the mining industry largely supports this tax and says they will pay more, the Liberal and National parties in this House say, 'No, no—they can't afford it; they deserve a tax cut,' and they say all that when they have a $70 billion crater in their budget bottom line while still claiming that they are fiscally responsible! Their first new initiative is to make the big miners pay less tax. How does that work? It certainly does not add up. It defies logic and shows just how irrational those opposite have become.
It has been argued that somehow there has not been enough consultation. There has probably never been tax legislation which has been subject to more consultation than have the bills before this House. It has been absolutely comprehensive—up hill and down dale, two waves through the tax office, the Argus review and parliamentary inquiries. There has never been more consultation or debate about a bill in this House in the last 20 or 30 years than there has been about this bill. It has been absolutely comprehensive and very thorough, as it should be.
We on this side of the House are supporting very strongly this historic reform to the Australian taxation system which delivers a fair return to the Australian people for the resources they own 100 per cent. We must do this so we support our small businesses. We must do this so we support Australian workers. We must do this to build the nation. We must do this to create prosperity for the future. That is why we on this side of the House are strongly supporting all of these bills before the House. We understand that if we want to leave a stronger Australia for our children and if we want to build the nation, it takes a brave proposal like this which spreads the bounty of our country to every corner of the nation. This is what is required to build a prosperous Australian nation in the 21st century.
The original question was that this bill be now read a second time, and to this the honourable member for Kennedy has moved as an amendment that all words after 'that' be omitted with a view to substituting other words. The immediate question therefore is that the amendment be agreed to.
A division having been called and the bells having been rung—
As there are fewer than five members on the side for the ayes, I declare the question resolved in the negative in accordance with standing order 127. The names of those members who are in the minority will be recorded in the Votes and Proceedings.
Question negatived, Mr Katter, Mr Crook and Mr Christensen voting aye. Question put:
That this bill be now read a second time.
A division having been called and the bells having been rung—
The member for North Sydney having placed something on his head has raised a point of order. The question is that this bill, the Minerals Resource Rent Tax Bill 2011—one bill—be read a second time.
The House divided. [00:13]
(The Speaker—Mr Harry Jenkins)
Question agreed to.
Bill read a second time. Message from the Governor-General recommending appropriation announced.