Matt Thistlethwaite (NSW, Australian Labor Party) Share this | Hansard source

I speak in opposition to the Minerals Resource Rent Tax Amendment (Protecting Revenue) Bill 2012. One thing that we can never be certain of is the future. All good governments and businesses prepare budgets about proposed allocations of funding based on revenue sources. But neither the business community nor governments throughout the world can ever be certain of the outcomes in relation to those budgets. When we came to government in 2007, the international economy was flying high. There was an asset boom and particularly a housing boom, not only in Australia but throughout the world. The Australian economy had undergone about 20 consecutive years of growth.

But then the global financial crisis hit, and it hit hard. It affected governments and businesses throughout the world. As a result of the global financial crisis and in particular the effects on businesses and their revenue streams, businesses changed their budget positions. They changed the way that they were investing their funds to deal with those changed circumstances. Governments were no different. Good governments change budget allocations based on revenues received. In the wake of the global financial crisis, this Labor government proved itself to be quite adept at meeting the challenges of falling revenues—revenues that have fallen to the tune of $160 billion since the global financial crisis—finding the money to allocate to programs and, importantly, to continue to grow our economy.

It is in this context that I believe that this bill before the Senate this evening is short-sighted and politically motivated. It is scant on detail and modelled effects and facts. It fails to recognise that the current provisions of the Minerals Resource Rent Tax were developed as a result of a comprehensive review of our taxation system undertaken by Mr Ken Henry. It also fails to recognise that the details of this tax have been extensively negotiated after consultation with participants in the mining industry and the wider Australian public. It is a profits based tax. There will be years in which profit levels in the mining industry will not be the same as in previous years. By its nature, the revenue generated by this tax will fall and rise depending on the profitability of those companies that are subject to its provisions.

The tax has only been in existence for six months—not even one fiscal year. It is way too premature to be sounding the death knell of this particular tax. We need to take a long-term view of the way that this particular tax should work. There are issues associated with it, and the government is aware of them. But we are, as good governments should, consulting with industry participants to work through those issues. In particular, we want to work through those issues using a cooperative federalism model through the COAG process.

The Henry tax review looked at the issue of resource taxes. It determined that Australia needed a form of resource rent tax and found that such a tax would provide a more consistent treatment of resource projects and promote more efficient investment and production outcomes. Such a tax would also ensure that the Australian community received an appropriate return for its non-renewable resources. Australia has an abundant wealth of non-renewable resources, which are expected to continue to command high prices, driven by demand, particularly in China and India. Non-renewable resources such as petroleum and minerals are a significant asset of the Australian community. Australia has the world's largest economically demonstrated resource reserves of brown coal, lead, mineral sands, nickel, silver, uranium and zinc and the second-largest reserves of bauxite, copper, gold and iron ore.

The charging arrangements prior to the introduction of the minerals resource rent tax distorted investment and production decisions, thereby lowering the community's return from these resources. Further, the pre-MRRT taxation arrangements failed to collect a sufficient return for the community, because those royalties were unresponsive to changes in profits, particularly given that they were based on an output calculation method. For example, the taxes as they existed prior to the introduction of the minerals resource rent tax, and the royalties, claimed a declining share of the return to resources over recent years, despite the increased profitability of the resources sector. In the years 2001 to 2002, about $50 billion was collected. That had fallen, pre-MRRT, down to below to $20 billion. That reflects the decreasing nature of the return that Australians were getting from the profits that were increasing in that particular industry.

So, in the wake of the Henry tax review, the government consulted with the industry. And, importantly, we got an outcome; we reached an agreement to levy a tax that was much more efficient than the royalties system and met the needs and requirements of the future, in particular, when it came to raising sufficient returns from non-renewable resources.

There has been much commentary on the royalties refund and the fact that the states have increased their royalties in the wake of the introduction of the minerals resource rent tax. I want to concentrate on that fact for a moment. Those opposite have been claiming for some years now that the introduction of this tax would kill the goose that laid the golden egg, that the introduction of the minerals resource rent tax would put the brakes on the mining sector, would be a job destroyer. Yet, at the same time, Liberal and National Party governments in the various states were jacking up their royalties on these minerals in a much greater capacity and to a much greater degree than the minerals resource rent tax. So, on one hand you have the opposition criticising the minerals resource rent tax—a much more efficient tax—and on the other you have state governments pushing up their royalties. That is the weakness in the opposition's argument when it comes to this issue.

Despite that fact, the issue of royalties refunds and the approach of the states is an issue. The government is aware of this, and we are dealing with it, as all good governments should. Through the Policy Transition Group, the GST distribution process and the review, we have been working with the states to try to iron out these problems. In December last year the Treasurer and the state Treasurers agreed to refer this issue to the Heads of Treasuries process to work on a negotiated outcome. That is the way we should be approaching this. That is the way we should be approaching difficulties between state and federal governments when it comes to raising revenue in this country. Cooperative federalism is the way we should be dealing with the sufficiency of our revenue base to fund the services and infrastructure that our country dearly needs, and those discussions are underway.

The Greens are well aware that this process is being undertaken, yet they have introduced this bill in ignorance of that process—and way too prematurely; we still need to work out the outcomes of this process. They have also sought to amend the starting base for the purposes of calculation for some of the coverage that companies get with the minerals resource rent tax. Under the MRRT, miners get a one-off allowance to recognise the value of their existing assets as at 2 May 2010. Rio Tinto and BHP reported that the value of this allowance is around $1.7 billion in their financial statements in August, several months ago. It is important to note that this allowance is written off over the life of a mine and its assets; it is not on an annual basis. So, this reflects a one-off tax shield against minerals resource rent tax liabilities for up to the next 25 years.

The petroleum resource rent tax, for which a similar structure exists, has been in operation for 25 years and has raised about $28 billion. So it is way too premature to be sounding the death knell of this particular tax. It is much more effective and sensible to look at this as a long-term reform. It is really a reform aimed at delivering a fair return on non-renewable resources to our children and our grandchildren. And it will do that, because we have a strong pipeline of investment in the mining and minerals sector in this country.

I have spoken on many occasions to mining representatives in New South Wales, to those companies that are mining in the Hunter Valley and down around Wollongong, and their views of the long-term prospects of the industry are quite interesting and instructive. They have certainly been considered by the government in the development of this particular tax.

What they say is that there will be peaks and troughs, but the long-term prospect for this industry is growth based on the development of China and India. There will be peaks and troughs but the long-term outcome will be growth. And that is reflected in the companies' investment figures. It is reflected in the figures produced by the Australian Bureau of Statistics regarding mining investment in this country and into the future: $109 billion invested in mining in 2012-13—three times more than was invested prior to the minerals resource rent tax being announced by the government. It was $35 billion, in 2009-10.

Those opposite, again out of touch with reality, have been proclaiming the death knell of the resources sector in this country because of the introduction of this tax but the mining companies are laughing at them and saying, 'You're on your own with that argument—you're way out there with that—because we're going to invest three times the amount that we have invested in the past, prior to the introduction of this particular tax.' So the miners themselves and the people who put their money where their mouths are—the companies and the mums and dads who are investing in this industry—know the value of these assets. They know the value of what we are digging up, and which we can only dig up once. That is why the approach of the opposition, and indeed the Greens, on this is out of touch. Good policy analysis and a good approach is to adopt a long-term view of this particular tax and its benefits for the country.

The minerals resource rent tax is raising revenue. It is raising revenue to fund the programs that the government said it would fund. There is no doubt that collections raised through the tax have been impacted by the fall in commodity prices. The price of iron ore per tonne prior to the introduction of the tax was up around $160 a tonne. Over the last 12 months we have seen a dramatic decrease in the value of the spot price. It got down to around $80 a tonne at some point late last year. Thankfully, it has risen again. As I said earlier, this is a profits based tax, and miners' profits will rise and fall depending, importantly, upon the price that they can secure in the market for that particular commodity. But in that respect it is a much more efficient tax than a royalties based system. A royalties based, output calculated tax, is applied regardless of whether the commodity price is good, regardless of the level of investment; it is purely based on the output. When the price turns down and profits are reduced, miners will still pay the royalties—a much more inefficient system. So it is much more efficient to have a profits based tax in this industry. It is similar to the situation that we have had with the petroleum resource rent tax. As I said earlier, that particular tax has raised $28 billion since its inception.

Based on all of this I think the Greens and those opposite really need to have a Bex and good lie down, and calm down. This is a long-term economic prospect for our nation. We need to adopt a long-term view. As I said earlier, it is about the next generation and future generations of Australians getting an adequate return from these non-renewable resources.

The price of iron ore and coal will fluctuate. It will go up and down and the profits associated with this tax will go up and down, but over the long term—as the miners have said to me on several occasions—the forecast is for growth. As there is growth there will be returns from this particular tax for the taxpayers of Australia and the returns will fund programs that we envisaged they would fund when we developed this tax. The returns from this tax are reflected in the fact that there has been a massive downturn in government revenues—$160 billion since the global financial crisis—but this government has a strong record of finding the necessary savings to ensure that we can continue to provide adequate services and infrastructure, and, importantly, to grow our economy despite difficult circumstances.

Although the MRRT—the minerals resource rent tax—is naturally going to be volatile, it will, over the longer term, fund programs. One of those programs that is particularly important and which will be funded through minerals resource rent tax revenues is the boost in compulsory superannuation levels from nine per cent to 12 per cent over the next 10 years. We will be looking at that in the budget context but, as I said earlier, we have a strong record of delivering necessary savings and finding those savings in the budget to fund our programs. We will do that yet again. For the next year, that will be revealed in the May budget by the Treasurer.

The specifics of the bill we are debating today were referred to the Senate Standing Committee on Economics. The committee undertook an inquiry and submissions were sought for a period of four months. I understand that there were not many submissions received by the committee, so the committee determined that they would extend the deadline for the receipt of submissions. They received six submissions from companies and the community. Five of those submissions opposed the provisions of this bill. That was reported by the committee.

So, as I said earlier, the Greens need to calm down. The opposition needs to calm down and we need to take a long-term view of this project.