Helen Polley (Tasmania, Australian Labor Party, Shadow Parliamentary Secretary for Aged Care) Share this | Hansard source

I rise today to denounce the coalition's insistence on scrapping the minerals resource rent tax and to explain why the minerals resource rent tax is so important to the future prosperity of Australia. From beginning to end, the hypocrisy of the coalition on this issue has been nothing short of breathtaking. The original plan was to introduce a resource super profits tax which would have applied to all resources at a rate of 40 per cent. It followed a recommendation featured in the Henry tax review, which found that scrapping the state based royalty taxes that apply to mining projects and replacing them with a uniform national resource rent tax would raise billions more dollars. As the review noted, it would not be without precedent either. In fact, the planned new tax would have been modelled on the petroleum resource rent tax levied on products, including crude oil and natural gas, mined in Australian waters. The effective tax rate in the mining industry was just 17c in the dollar, yet in Canada it is 23 per cent, in Russia it is 30 per cent and in South Africa it is 33 per cent.

It was clear what needed to be done. The state based royalty system was outdated and reform was needed, based in part on the principle that the Australian community expects—and should expect—to receive a fair return from its natural resources that can be dug out of the ground and sold just once. During a once-in-a-lifetime mining boom of a type which few could have predicted, Australia's special circumstances suggested the need for an additional tax.

As then Treasurer Wayne Swan announced:

… we will now tax mining profits in a way that supports the growth of the industry and the economy and ensures the community gets a fair return.

Almost at once the coalition became hysterical, claiming that the sky would fall in. The mining industry would crumble, we were told. Australian prosperity and jobs were at risk, they thundered. There is the prospect of sovereign risk, they shrilled. Then began a concerted and cynical campaign in lockstep with big mining, one that had possibly never been seen in Australia before on such a large scale. Never mind the public interest or a sober analysis of just what the Henry review recommended, the coalition sensed blood in the water and an opportunity to boost their election war chests.

The mining industry spent an estimated $22 million on a disingenuous campaign attacking the tax. To give an overall breakdown: BHP Billiton spent $4.2 million; Rio Tinto spent just over $537,000; the Association of Mining and Exploration Companies spent just under $274,000; and the industry's national body, the Minerals Council of Australia, spent $17.2 million. Several companies donated another $1.9 million to the Liberal Party and the Nationals. This included Clive Palmer's own company, which donated $700,000. The way the mining giants saw it was that Australia had the best democracy money can buy and they did not hesitate for a second to take advantage. Was any of this really fair? Would a superprofits tax actually benefit the nation in the long run? Those questions were not really of concern to the mining sector or the coalition in opposition at the time.

It was after an unrelenting attack of an intensity rarely seen in Australia that Labor instead introduced the minerals resource rent tax, with an effective rate of 22.5 per cent. The coalition and big mining called off the hounds. But, of course, the result was not one that benefited the nation as a whole, just vested mining interests reaping extraordinary profits. Richard Denniss, a former adjunct professor of the Crawford School at the Australian National University, is just one of many who realised that the wool was being pulled over the eyes of the Australian public. He noted:

The mining industry employs around 2% of the workforce and pays the lowest rate of tax on its profits of any industry in Australia.

The original mining tax would have ensured that the mining industry made the kind of contribution to the taxpayer that their expensive advertisements claim they do.

Today’s figures show that the 98% of Australians who don’t work in mining will see very little return from the high prices that foreign companies can seek Australia’s scarce resources for. We are missing out on a once in a generation opportunity.

That is what the concentrated and aggressive campaign of the coalition and big mining means for Australia: we missed out on a once-in-a-generation opportunity. It was an opportunity that the vast majority of countries around the world can only dream of.

But of course the coalition's line of attack on this matter is not without precedent. In fact, we have seen this sort of response from the coalition and mining and energy interests before. It is par for the course for those opposite. During the 1990s, native title legislation provoked a very similar response from the mining industry and the Liberal Party. In 1993, for example, the head of Western Mining Corporation, Hugh Morgan, said:

The economic and political future of Australia has been put at risk and our territorial integrity is under threat … our freehold titles will slump in value if the earning capacity of our mining, pastoral, tourist, fishing and forestry industries is wound down as a result of the consequences of Mabo.

But freehold titles did not slump in value and the earning capacity of the mining sector accelerated rapidly in ways that could not even have been imagined.

I spoke a moment ago about how the Hawke government introduced a petroleum resource rent tax in 1987, at a rate of 40 per cent. These tax reforms were also strongly opposed by the coalition, as well as the energy sector. In fact, the exploration manager of energy giant Esso claimed:

Any introduction of additional taxation runs a substantial risk of shattering industry confidence and drastically delaying exploration activity so that future production will never have any chance of satisfying Australia’s oil requirements.

But that did not happen. The investment continued and the industry thrived. In fact, several years ago, Gorgon famously initiated the biggest ever single investment in Australia's history.

The mining tax was just part of this broader trend. It is pure self-interest, cloaked in a broader concern for the Australian economy, jobs and freedom. That is why comments like those that I just referred to from energy and mining interests and their whip boys in the Liberal and National parties should be taken with a grain of salt, if not ignored altogether. Instead of paying attention to such opinions, we should calmly and rationally explore why the minerals resource rent tax is so important.

It almost goes without saying that there are many ways to view the mining resource rent tax. Some on the right view it as part of a socialist agenda to unfairly seize hard-won profits. Others view it as a form of retribution against mining giants like Gina Rinehart, who are quick to champion conservative causes in their own interest. But there is one aspect of the mining resource rent tax that seems to have been conveniently ignored by many commentators that, quite simply, it makes economic sense.

Every federal government has a responsibility to ensure not only that the nation's economy prospers but also that it will prosper and grow for years to come. We cannot just be concerned about the here and now. Responsible governments anticipate future challenges and work in the long-term interests of all areas of the economy, not just those that are reaping the highest tax revenues right now.

Australia is a rich country, with a population of just 22 million people. I admit that I was surprised to learn that we are currently the 12th largest economy in the entire world. Australia enjoys an incredibly high standard of living and we were one of the very few industrialised economies not to fall into recession during the global financial crisis, thanks to the previous Labor governments. Whilst it is true that the Australian economy has grown for several decades, it is reasonable to say that right now we are relishing the gravitational pull of the largest industrialisation to occur in human history.

China is accomplishing something that is transforming global macro-economic trends and we are positioned perfectly to take advantage of it. Once considered a laconic British outpost, occupied by sheep and with a sunburnt landscape, it was only in relatively recent times that we began to realise just how valuable our raw materials were. Geographically close to East Asia, it is obvious that with the rise of the tiger economies that we are in the right place at the right time. Between 2004 and 2009, the rise in commodity exports accounted for more than 50 per cent of all Australian economic growth. China's share of our total resources exports hit 40 per cent in 2011. At the beginning of the last decade, it was just seven per cent.

So why rock the boat? Why change anything? Why implement new taxes? The reason is that, even though we are a lucky country, it does not mean that we should be complacent. Australia faces numerous challenges which restrict the potential of various sectors. The tyranny of distance and our high dollar, caused in large part by the sugar hit of the mining profits, makes life particularly difficult for businesses across the country. Put simply, we are a long way from almost everyone else and the dollar has been trading far above its historical average of between US70c and US75c for longer than anyone would have expected. The recent demise of manufacturing giants in the automotive and food-processing industries, not to mention Alcoa, is proof of that.

The coalition has repeatedly and falsely claimed that the price on carbon was the cause of Alcoa's demise. But the company itself actually said that the carbon price was not to blame for its decision to shut its Point Henry smelter in Victoria. Instead, the operation was closed due to a range of reasons, such as falling aluminium prices and also notably the high Australian dollar. Doing business in Australia can be hard for this very reason.

The coalition has repeatedly—and, again, falsely—claimed that unions were to blame for the automotive giant Toyota leaving Australia. But that is not the case. In fact, Toyota Australia went out of its way to reject Treasurer Joe Hockey's claim that the manufacturing union's actions were behind the decision to stop making cars in Australia in 2017. Instead, the real reason why it was not sustainable to make cars in Australia anymore was the high Australian dollar and low economies of scale.

So it is clear that, because of facts such as our location and our high dollar, we face special circumstances. The threat that Labor has been keen to combat at every turn is that of a dual-track or dual-speed economy, with mining companies reaping ludicrous profits whilst almost all of our other sectors suffer.

I want to be clear—we are a country susceptible to Dutch disease, where one particular industry benefits at the expense of another. In Australia, the export of raw commodities such as iron ore has seen the Australian dollar rise and rise in the last decade. What this means is that labour and other costs in the manufacturing sector in particular have soared, making it even more difficult for local companies to compete on price with foreign providers. Compounding this problem is the fact that skilled workers have been quick to switch to higher paid jobs in the resources sector. As Australian Industry Group head Heather Ridout explained several years ago, we effectively have two economies in Australia. One is for those enjoying the spoils of the mining industry. On the other hand, we have those in areas such as manufacturing and tourism who cannot compete with the distorting impact of the high Australian dollar.

If we want Australia to be nothing more than a giant quarry supplying China and India with the minerals they need to supercharge their economies, then we really should not act. But if we want to prepare for the fluctuations of demand for our minerals that will arise, if we want other sectors in Australia to survive, then we do need to act. I guarantee you this: whilst we are blessed with a bounty of riches across the continent, we should never rely solely on mining because the minerals are finite and the demand will ebb and flow according to trends and dynamics beyond our control. Any responsible government would not look ahead 10 years; it would look ahead at the next 50 years.

The duplicity of some conservative politicians enjoying the current spoils of mining has been incredible. Western Australia's Premier, Colin Barnett, has on numerous occasions criticised those who blame the mining boom for weaknesses in other sectors. Yet he has also agreed that the strong dollar hurts trade-exposed industries such as tourism. In his state, local manufacturing has been in free fall, in part because of the high Australian dollar but also because multinational mining companies have not awarded more contracts locally.

Across Australia, many aspects of the mining sector have often been unable to capitalise on the China boom. In fact, the figures demonstrate again and again that companies that form part of the mining sector have struggled to survive during the boom. This was demonstrated pointedly a little over two years ago when BlueScope Steel announced it would abandon exports because of the high dollar and low steel prices, in the same week that BHP Billiton reported an 86 per cent increase in profits to just under $23 billion. As one operator of a company that produces steel and piping for mine sites in Western Australia noted in relation to the big players who run the mining boom:

They want all this money for themselves, but they expect us to live on a bowl of rice.

It is not fair and it is not sustainable. Although the focus of late has of course been on Toyota, Alcoa and SPC, they are not the only ones that have been struggling. Everyone from winemakers and food producers to aerospace engineers have had to deal with the problems associated with a high Australian dollar.

Some in the coalition may well ask: is there really a problem? So some companies may be struggling, but this is how markets work—freeing people up to produce things we cannot import and directing workers where pay is highest. The mining boom will continue and Australia will prosper. 'Let the good times roll on.' But of course it is not as simple as that, because the mining boom will not last forever. When it ends we do not want to be left with no remaining non-mining sectors. If we do not act carefully, all the factories, the knowledge and the skills that have been built up over decades, will have been left to rust.

Any political party with any sense of responsibility would recognise that the mining boom will not last forever and that we need to benefit from the wealth it creates right now and prepare for the future. A report partly funded by the federal Department of Resources, Energy and Tourism and authored by Australian National University economist Luke Hurst in 2012 found that iron ore prices are likely to fall in coming years. The report even found that, if capacity in Africa comes on stream, prices would fall to $60 per tonne in the next seven years. It seems ridiculous not to prepare for the future by ensuring that the Australian economy remains diverse and competitive in multiple areas.

By taxing the superprofits of the mining companies enjoying once-in-a-lifetime rewards, we can ensure that Australia does not suffer unnecessarily from a dual-speed economy. This is not about class warfare, it is not about the richer states such as Western Australia propping up poorer states and it is not about the federal government greedily snatching away hard-earned profits. It is about common sense and proper economic management. We need to prepare for the future. We need to support other sectors. We need a diversified economy. Most importantly, we need leaders who stand up to the mining companies and deliver policies that benefit the economy as a whole, not just vested mining interests. We need a party and a government with vision, and I can tell you right now that those opposite me are failing this important test. That is not a secret. It is one of the few things that they are not trying to keep secret, and that is their incompetence in planning for the future. It is a big miner's dream, but it is Australia's nightmare. Therefore, I cannot support this bill. I urge others to oppose it most strongly.