Monday, 19 March 2012
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
I rise to speak on the mining tax bills with mixed feelings, and this comes partly from being a Western Australian senator. Dealing with the mining tax bills has exposed the degree to which Canberra views my state as little more than a lucrative and ever-expanding hole in the ground. I want to set one myth to rest at the outset: the idea that the support of the Greens for fair taxation of the mining industry means that we are somehow anti mining. Of course we are no such thing. A big wind turbine, perhaps for many people the symbol of the transition that we are here to drive, is 200 tonnes of steel; solar PV cells require rare earths and silicon; electric vehicles require high-capacity lithium batteries; the high-speed rail system that we want to introduce to this country will run on steel rails—and it is very hard to do any of that without mining.
What I am opposed to is the idea that, because of its role in our economy, the mining industry should be entitled to throw its political weight around like some kind of cartel, dodge fair taxation and punch holes in environment protection and heritage laws built up painstakingly over many decades. Every time a public policy issue arises that affects mining interests, whether it be taxation, native title, carbon price legislation or industrial relations reform, sections of the industry shriek 'sovereign risk' and threaten to pack up and leave. That is not the whole industry, of course; just those with the more aggressive sense of entitlement, the Xstratas of the world. We saw that most recently with the contrived hysteria around the resource super profits tax.
Whenever I hear these threats to throw the toys out of the cot I think it would be interesting, just for once, for somebody to carry out the threat and leave, to help reduce pressure on interest rates, inflation, exchange rates, house prices and so on. But, of course, it is an empty threat. The ore bodies are here, the stable political and security environment is here, the rail and port infrastructure and permissive planning environment are here. It is just schoolyard bullying with a big budget and, on the rare occasion that someone calls it out, it always turns out to be vapour.
The main reason for my ambivalence on these bills comes from the simple fact that they would have been better had the government not caved in to the bruising campaign of intimidation and misinformation run by the Minerals Council on behalf of its membership, with the Liberal and National parties as their ever-compliant policy sock puppets. Before I deal with the mechanics of the bills it is important to remember what it is that we are talking about here. The coalition have approached this debate as though the minerals in question all belong to Clive Palmer as his birthright and that this tax is a criminal socialist misappropriation of wealth from its rightful owner. Senators from the Labor benches have of course made the point that Australia's mineral resources belong to all of us by way of being the property of the crown—that is, the crown of a much-loved hereditary monarch on the other side of the world.
In fact, these minerals are coming from country, from Aboriginal land, where in many cases the 200-year legacy of dispossession is still real and present. Here we are in Canberra, thousands of kilometres from the iron ore operations in the west Pilbara, discussing how to redistribute the largesse from a once-in-a-lifetime mining boom while those from whom we take these commodities live in conditions of degrading the poverty within sight of ever-expanding waste rock dumps.
We were told that the native title system would correct these historic injustices and position the traditional owners to benefit from extractive industries on their land. The record has been dismal. An ARC funded research project examined more than 40 native title agreements negotiated with mining companies since 1992 and discovered that in only a quarter of cases were land councils able to negotiate substantial revenues. And we know why: the act spells out that Aboriginal people who have gone through the arduous process of proving to a tribunal that they have somehow managed to maintain connection to country have the right to negotiate over projects, but they do not have the right to say no. They know that if negotiations break down the project will go ahead without any royalties being payable. In that legal context there is no equality of arms, and that is how we set the system up. I congratulate my Western Australian colleague Senator Rachel Siewert for bringing forward legislation to address this and other serious flaws with the Native Title Act.
So, thus far, the mining tax debate has been able to progress as though the mining revenues in question were discovered on some accountant's spreadsheet in Melbourne or on a hard drive deep within the Treasury department. The distance between the major mining provinces and the vast majority of Australians has created, I think, a disconnect such that our current highly unusual circumstances are seen as normal, an economic perpetual motion machine that will keep the cash registers in Canberra ringing and deliver a razor-thin budget surplus just in time for a federal election, and maybe they even will. But the fact is this is a temporary phase—this is a moment highly dependent on successive five-year plans drafted by the Chinese Communist Party, dependent on ever-increasing and unregulated combustion of cheap fossil fuels and dependent on continued confidence in a global financial system that is profoundly out of balance. Fundamentally, all mining booms end the same way. Visit Goldsworthy in the Pilbara. It is now just a collection of empty quadrangles fading back into the spinifex a short distance from a mine void that was abandoned when the iron ore ran out. Goldsworthy was closing about the time when the much larger Mount Whaleback deposit was being opened up, literally a mountain of iron that BHP have been dismantling for four decades.
Read DRET's annual resource report and you will see that we have eight or nine decades more of iron ore mining at present rates of extraction. That little caveat—'at present rates of extraction'—heralds the Goldsworthy endgame. None of the proponents in the Pilbara or on the North-West Shelf or in the Bowen Basin or the Darling Downs or out at Olympic Dam have any intention of proceeding at present rates of extraction, and their shareholders would sack them if they did. The mining industry intends to double present rates of extraction across the board as soon as possible, halving the depletion horizon. Then the imperative from shareholders and creditors will be the next doubling—and then the next. The boom is coming to an end one way or another but we have been hypnotised by the laws of supply and demand and the powerful magic of the price signals to believe that it can last forever. Geology says otherwise, and geology will win.
That is the context in which we debate these tax bills today. What do you do with such windfall gains while they are here? In the midst of this turbocharged resources free-for-all, economic common sense is being fed into a primary crusher and bald-faced rent-seeking has been put up on a pedestal as though it were a proxy for the national interest. Asset stripping has been deliberately confused with wealth building. It is the liquidation of four billion years of geological inheritance in a few short generations rebranded as sustainable growth.
Treasury told the Economics Legislation Committee a fortnight or so ago that there are $450 billion in extractive industry investments in the pipeline in this current decade. That is a figure well in excess of the entire Commonwealth annual budget. It is a figure probably unprecedented in the history of the country. Governments at all levels are dismantling anything that might stand in the way of this headlong rush to strip the continent of its resources as rapidly as possible.
These are nonrenewable resources, sold off cheaply on long-term contracts, resources that will be immeasurably more valuable as we move into an age of depletion. In the case of fossil resources, some of it will need to stay in the ground in perpetuity. But instead, state governments have become hooked on mining royalties despite the economic collateral damage that is now impossible to ignore. Why would we remove all obstructions from an industry that has demonstrably pushed the currency up by 30 per cent, structurally damaging the tourism, education and manufacturing sectors which collectively employ 10 times as many people? Why would we push the fast-forward button down harder when the RBA was citing the risk of the mining boom overheating our economy in their statements in the wake of every interest rate rise between May 2006 and March 2008?
The commodities boom has seen labour costs bid up so rapidly that other sectors can no longer retain workers, sectors including the Australian Navy that now cannot put submarines to sea for lack of marine engineers and other skilled workers. The boom has helped put unprecedented stress on Australia's already dysfunctional housing market, particularly damaging for people not on mining wages but nonetheless caught up in a property bubble. Why would we pour more fuel on fire? We know why. The Australian Institute's estimate of the profits to be raked out the mining industry over the next decade stands at about $600 billion, that is why; well over half a trillion dollars, not in turnover—in profit. Treasury's original model of taxing this unprecedented windfall was met with a beautifully calibrated $22 million advertising campaign, an incalculable return on investment that crashed the Resource Super Profits Tax, cost a sitting Prime Minister his job, and led to the watered-down model we are presented with today.
When we turn to the opposition, we find that they are led by a guy who just bobs up and down whenever Mitch Hooke tells him to. The sum total of their initiative is to let these profits be sucked out of the country as rapidly as possible. It is an industry policy that says: liquidate everything, as quickly as we can, no matter what the collateral cost to the environment, to communities on the frontline and the rest of the economy.
The Greens propose to return to a model more akin to the one that the former Treasury Secretary Ken Henry started with or, heaven forbid, a model closer to the Petroleum Resource Rent Tax, that was also met with high-pitched shrieking from the industry and its Liberal Party proxies when it was first introduced. If that tax has held the oil and gas industry back since it was introduced, I would be delighted to see some evidence.
The Greens propose to roll back the frankly idiotic get-out clause that gives the states a blank cheque to raise royalties, which will then be fully reimbursed by the Commonwealth. Premier Colin Barnett in Western Australia is quite right when he reminds Canberra that mining royalties are a state responsibility and accuses Canberra of bullying in threatening to withhold GST receipts by way of retaliation. I do not understand what the Australian Treasurer is doing. Maybe a government senator will jump up during the debate and let us know.
I believe that some of the benefits of this boom, properly taxed, should be banked in a sovereign wealth fund as a source of capital for the future when the well has run dry and as a hedge against rapid currency movements. The Norwegian model is frequently spoken of. The North Sea oilfields are now well down the back end of the depletion curve but smart policy-making there has left the country with one of the largest sovereign funds in the world from which to sustain prosperity.
Colleagues, when we put this bill to a vote later tonight I will be voting for it, because the alternative is to vote for nothing. Unlike the friendless CPRS, this is an example of something being better than nothing. But as Senator Brown has indicated, this is a package that will require ongoing review and improvement to see if the reality bears any resemblance to the modelling. I want to know whether or not AMEC were right when they told the committee a couple of weeks ago that accountants for the big three miners have so completely wormholed this package as to cripple it. I do not often get up here and agree with AMEC, but credit where it is due, the big three miners sold out AMEC membership, the juniors and the mid-tier miners, and did a deal to benefit themselves at their established operations.
This is a story that still has some twists and turns in it yet. I find myself in the peculiar position of agreeing both with AMEC and Colin Barnett, our Premier, in the course of this contribution, which has created strange alliances and probably cost a few friendships as well. If we can at least agree that these resources are nonrenewable, and that we here in Canberra are placed in a position of enormous trust in their stewardship and liquidation, that at least will be a start. I foreshadow the second reading amendment that we will move later this afternoon in my name and Senator Brown's name in order to correct some of the flaws that were introduced into this bill when it was renegotiated by new Prime Minister Gillard and Treasurer Swan. I thank the Senate.
I also rise this morning to support the Minerals Resource Rent Tax (Consequential Amendments and Transitional Provisions) Bill 2011. In doing so, the Australian Labor Party has always believed in a fair go for all Australians. We have always stood for social justice and a sense of community. We are the party who believes everyone should have the same opportunities no matter their background and we believe in rewarding hard work.
Our party believes that, through the good times and through the tough times, the great mission of Australian Labor governments for more than 100 years has been to provide for and improve the lives of ordinary Australians, giving every Australian opportunities through education and training, ensuring fairness at work and supporting Australians through the different stages and transitions of their lives. This is exactly the premise of the minerals resource rent tax. We believe all Australians should be able to share in the wealth of the resources of this country, not just the mining magnates. Why shouldn't they? The resources of this country belong to the people.
Treasurer Wayne Swan says prices of iron ore and coal have skyrocketed. The Prime Minister says commodity price increases have led to Australia's term of trade being at the highest point in 140 years, 'Driving the biggest resources boom since the 1850s gold rush.' This is thanks to the economic reform in Asia with mining investment being stimulated by Asian demand.
Mining profits have risen over the past decade by 262 per cent. A lot of these profits go overseas, which is why it is time to implement a policy to assist our hardworking Australians. The current system of royalties is inefficient because they fail to take into account production costs. As a result, they collect the greatest share of their returns from non-renewable resources when profitability is low or negative and collect a smaller share with their returns when profitability is high. The Australian future tax system review identified that delay was the case from 2003-04 to 2008-09 when mineral profits increased as a result of high commodity prices. The AFTS review noted that while governments can increase royalty rates in response to increases in profitability, this may discourage investment by creating uncertainty.
The MRRT rate will be 30 per cent minus a 25 per cent extraction allowance to recognise the use of specialist skills. It will apply to companies whose profits exceed $75 million, which means small miners will not be affected. Treasurer Swan states 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.
Let us remember the emphasis that this is a tax on profits. On 2 November, Minister Bill Shorten said
Unlike royalties, the MRRT recognises the massive investments that miners make. The tax does not apply to the value added by miners through processing. It applies only to profits attributable to the resources at the valuation point just after extraction. Under the MRRT, projects will be able to immediately write-off new investment and immediately deduct expenses. No MRRT will be payable until the project has made enough profit to pay for its upfront investments.
The Labor government does not believe that only a few should benefit from this resources boom. We believe everyone should be able to share in the wealth. Not only do we want to boost superannuation for our working Australians but we also want to lend a hand to small businesses and to invest in infrastructure for our generations to come. The Labor Party believes in nation building. We did it with our economic stimulus package and we are doing it again with the mining resource rent tax.
Through the Regional Infrastructure Fund we will be investing in roads, rail and ports to help with the transportation of export materials, increasing road safety by keeping large vehicles off local roads and improved transport efficiencies. The Regional Infrastructure Fund is worth $6 billion from 2011-11 to 2002-21, with $5.6 billion tied up with the MRRT.
The Department of Infrastructure and Transport states the objectives of the Regional Infrastructure Fund are to promote development and job creation in mining communities and in communities which support the mining sector, to provide a clear benefit to Australian economy development, to invest in Australia's resources of export capacity and to address potential capacity constraints arising from export production and resource projects.
My state of Queensland is a strong mining state and under stream 1 of the Regional Infrastructure Fund six projects of the eight with funding committed are in the Sunshine State. Gladstone port access road has an Australian government commitment of up to $15 million, Blacksoil interchange has up to $54 million, Townsville ring road has up to $160 million, Peak Downs highway has up to $120 million, upgrade of the intersection of the Bruce and Capricorn highways has up to $40 million and Mackay ring road study has $10 million. This is a great investment in Queensland, something we as a government should be proud of. Not only will these infrastructure upgrades support developing mining communities but they will also provide the infrastructure for freight transportation, improving safety and reducing congestion.
Queensland has been through tough times lately and Premier Anna Bligh is confident Queensland is back on track. At the state campaign launch recently, Premier Bligh told us that, despite everything, Queensland is 'outperforming the national economy of a nation that is recognised globally as having done the best job for coming through the global financial crisis.'
That is something for Queensland to be proud of and these investments are only going to assist Queensland further. Building our nation is important but so is building up our hardworking Australian nest eggs. We believe in rewarding people for their hard work and this is one of the Labor values. Under the Whitlam government we introduced a universal healthcare system, Medibank, later renamed as Medicare. Under the Keating government we introduced superannuation guarantee amongst many other things, and we will be increasing the superannuation guarantee so that Australians have more in the kitty when they retire.
With the MRRT, the Labor government will increase the superannuation guarantee from its current nine per cent to 12 per cent. This will benefit 8.5 million Australians with an average worker at 18 receiving an extra 25 per cent or $205,000 in retirement savings. An Australian who is 30 will see an additional 24 per cent or $108,000 and a 40-year-old will see an extra 15 per cent or $56,000. This is an extraordinary increase and one our workers are entitled to. I speak with some experience when it comes to superannuation. I reflect on my time on the board of the Labor Union Cooperative Retirement Fund when I was a union official with the National Union of Workers. LUCRF, the acronym, was the first industry fund ever created fought for by workers in the wool and hide industries, a marvellous achievement as a superannuation fund that resulted in workers receiving benefits so that they can invest and provide for their later lives of retirement. Also, interestingly enough, I picked up this morning a release from the Australian Council of Trade Unions indicating that a new national poll shows that 75 per cent of Australians support the lifting of the superannuation guarantee from nine to 12 per cent. The president, Ged Kearney, indicated that eight million workers throughout Australia will be better off in retirement as a result of the proposed new laws, with some workers getting up to $143,000 more. Ms Kearney said:
The Labor Government is again showing great national leadership on superannuation and the protection of workers’ retirements. This is in stark contrast to Tony Abbott’s opposition to the resources tax package and his recent attack on industry superannuation which both show he is not interested in protecting workers and acting in the national interest.
It is amazing to see that 75 per cent of people in our country support this outcome as opposed to those opposite. I recall when I first started as a union official, going out to workplaces when the superannuation guarantee was at three per cent, encouraging workers to understand the importance of a guarantee to provide them with some sort of retirement income in their later years and how it was embraced by those people in the many workplaces I visited. Gradually, over time, this Labor government and past Labor governments have provided that assistance to workers by making sure that entitlement is available for them when they reach the age of retirement. It is an entitlement that no doubt those opposite opposed when it was first legislated.
We not only want to look after workers but also our hardworking small business owners. They are the backbone of our community. Businesses that have a turnover of less than $2 million will benefit from an instant asset tax write-off of $6,500 per item. There is no limit to how many items they can write off and this will make tax time much easier for small business owners. Small businesses will also be able to write off the first $5,000 spent on a motor vehicle and enjoy a cut to the company tax rate. This cut to the company tax rate will apply to all businesses big or small. As you can see, the Labor government is committed to small businesses that provide important services to our community.
Those opposite would spruik that the minerals resource rent tax will discourage investment in the mining sector. Let me tell you that is not the case. In fact, in his second reading speech, Treasurer Wayne Swan said:
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.
We have also received endorsement of the MRRT in the OECD's 2010 economic survey of Australia. It states:
The proposed mineral 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 resource rent tax is more efficient than the current royalty system as it raises taxation of finite and immobile resources. This will improve efficiency in the resource sector.
The House Standing Committee on Economics inquiry into the Mineral Resource Rent Tax Bills 2011 report concluded that the bill should be passed to introduce a fairer system. It stated:
Mineral resources are currently taxed through a combination of royalties and company tax. Royalties are an inefficient taxing arrangement. The Australia’s Future Tax System Review found that royalty regimes were the most distorting taxes in the Federation. Specifically, royalties are often set at rates low enough to operate in periods when commodity prices are low to average. This means that royalties fail to provide an adequate return when commodity prices are high as they are now and have been through much of the mining boom. In contrast to royalties, the MRRT takes into account the profitability of mining operations.
The higher the profits of the mining sector, the higher the return will be in the pockets of hard-working Australians, and that is the way that it should be. All of us own the natural resources of this country and all of us should benefit, not just the mining companies. That is fair, equitable, up to our Labor values and ensures that everyone benefits and is rewarded for their hard work. I commend these bills to the Senate.
(I rise also to make a contribution to the legislation before us today: the Minerals Resources Rent Tax Bill and associated bills. I stood in this place last week talking about the private health insurance bills and said, 'Wouldn't be great if, just once, this government could give us a decent piece of policy to debate?' We see a lot of commentary from the other side not only in this chamber but also in the other place about the supposed negativity of the coalition, the supposed negativity of the leader of the coalition. If the government gave us some decent policy, we would not have to say 'no'. It is as simple as that. It is not 'no' for no's sake. It is 'no' because the policies this government continues to put before us and before the Australian people are so bad. The minerals resource rent tax is no different.
The shambolic process that we are seeing in the development of policy is gobsmacking. Again, the minerals resource rent tax has thrown us up that same shambles. This is a piece of legislation that is unfair, complex, divisive and fiscally irresponsible, and yet the government is putting this up, saying, 'Isn't this a wonderful piece of legislation,' and 'This will be great for Australia.' Quite simply, it will not. Interestingly, when we look at this shambolic process, again it throws up the nature of this government and its inability to properly go through a process to give the Australian people decent policy and decent outcomes.
Let us have a look at how this turned up. There was the initial RSPT, which was announced without any consultation with anyone. The government put together what it thought was a great policy, the RSPT, and brought it forward. It absolutely got howled down by the entire industry, it seemed at the time, as well as by many others simply because the government had not even bothered to consult. It had not bothered to talk to the industry or to the people that the RSPT was going to impact to see if it was even going to work or to see if industry could even deal with the implications of that particular piece of legislation. What was extraordinary at the press club, which was very recently on 5 March, was the Treasurer talking about that. He was questioned about the process of the RSPT and the fact that the government had come under fire from all quarters. The Treasurer said:
And if we could have sat down in greater detail with the mining industry following our announcement and worked our way through those issues then we might have had a less bloody and bruising experience.
Again talking about the RSPT, he said:
But the real thing that meant that we could get it done was that when we sat down, we got for the first time from the companies, information that neither the Henry Inquiry nor the Treasury had, which was the real story about volumes and price.
That is after the RSPT—that is talking about the new configuration—and the Treasurer is saying, 'This is the first time we have actually sat down with the industry.' When they were talking about the new form of legislation we were going to have post the RSPT: 'Oh yeah, first time we'd sat down with the industry.'
I wonder if it had actually ever occurred to the Treasurer initially to talk to industry about the initial policy. Clearly it had not, and yet we had as recently as last week the Treasurer saying, 'Oh yes, this was the first time we got to sit down with the companies.' It is entirely his responsibility. It was entirely his bailiwick to talk about those impacts of the initial RSPT with industry in the first place. How stupid is that? Why would you not as a government take the opportunity to discuss the potential impacts of a significant piece of legislation with the industry it is going to affect? It is just extraordinary and yet another example of this government's inability to properly go through a process, to properly consider implications and to properly consider any unintended consequences from pieces of legislation. They are just doing it on the run and they are completely inept.
We have this situation with the Treasurer, who eventually thought it might be a really good idea to sit down with industry and see if they might like some kind of minerals tax part 2. But then, when he ended up sitting down with industry, how many companies did he talk to? Three. Three of the biggest miners—and that was it. Not inclusive, not talking to the whole range of hundreds of other companies this was going to affect. He did a deal with the big 3.
I do not know about you, Mr Deputy President, but to me that is not consultation. That is picking and choosing to try and get a piece of legislation through from this cobbled together Greens, Labor, Independent government—whatever it is that is actually running the country at the moment—and speaking to three of the big mining companies. I find it absolutely extraordinary for this Treasurer to initially have no consultation whatsoever and then: 'Let's see now. I have a few hundred, I don't know, 700 or 800 mining companies this is going to impact. I know—I'll talk to three! Three would be good. Three is a good number. I like the number three. That sounds like a good idea. I will talk to three of them and see if I can get them to agree.' This is completely unfair and illogical for the government—for the Treasurer—not to include consultation with the entire industry. It just goes to show that the government was merely trying to get a piece of legislation through the Parliament, not trying to develop legislation properly for the industry, and again shows just how inept this government is when it comes to developing policy.
The Henry tax review was supposed to be about root-and-branch reform to deliver a simpler, fairer tax system, but what we have actually got is something that is more complex and less fair. We have got something like another 287 pages of tax law and an unfair competitive advantage to big end of town. It simply does not make sense. Those on the other side go on about the great virtue of, 'We all own the minerals and it has got to be fair for everyone and we all deserve a share'—well, we get that through the royalty system.
The fact is there has to be recognition given to the companies who are investing in the industry in the first place. There has got to be recognition given to the productive capacity that those companies provide. You cannot simply say, 'Gee, all of those minerals are under the ground and we deserve all of them,' when we have got these companies who are doing the investment, who are taking the risk, who are at the coalface—pardon the pun—doing all of the work to extract the minerals. You simply cannot discount that. What they are doing in their contribution for this nation at the moment is nothing short of extraordinary. In a lot of ways they are actually holding up a very inept government, making the country look good. It is those men and women out of the ground in the mining industry, the agriculture industry and our small businesses right across the country who are holding this country together, who are providing the productive capacity for this nation in spite of the government, not because of the government we have in place at the moment. That is just wrong, and it is no surprise that so many people are coming up to me at the moment and saying: 'Will you please get this government out of office. We need a change of government. We have no confidence in this government.'
You can really see it. When I am out in regional communities and moving around, it is still very under the radar, but confidence has gone. Money has stopped moving. We have got small businesses running accounts out to 90 days, effectively working as banks because of the lack of confidence in the ability of this government to run the country, and that is a very sad state of affairs.
It is going to leave the budget worse off and, when we have got now a debt of around $232 billion, a piece of legislation that is going to leave the budget even worse off is absolutely extraordinary. Keep in mind, colleagues, as my very good colleague Senator Williams knows only too well, the ceiling is $250 billion.
We are getting very close to that $250 billion ceiling. Do you hear the government talk about that very often? No, you do not. You hear them talk about this legislation before us—the Minerals Resource Rent Tax—and how terrific it is. It is actually going to leave the budget worse off, and we have a situation—is it not extraordinary colleagues that when we came in we left the Labor government a surplus—where we now have a $232 billion debt and the four biggest deficits in a row that we have seen in this country in decades. The fact that it is going to leave the budget worse off is just extraordinary. Again, it is dividing the industry. It really is the big three and the rest. It has become David and three Goliaths, and it is really dividing the nation and dividing the industry. How would all of those other companies have felt when the Treasurer, Wayne Swan, went in and talked to the big three but did not bother talking to any of them? What are they, chopped liver? They deserved as much consultation with the Treasurer as any of the big mining companies did. I think it is simply appalling.
What is extraordinary is that this legislation is just another example of shambolic policy when it comes to regional Australia. This government simply does not understand regional Australia or regional communities. Extraordinarily, this Labor government thinks metropolitan areas should be treated as regional. This is how incredibly inept the government is at delivering for regional communities—it is looking at metropolitan areas as regional. This mining tax is going to fund the Regional Infrastructure Fund. It is interesting that the biggest allocation from that fund so far is $480 million. This is hugely significant. Nearly half a billion dollars is going out from the Regional Infrastructure Fund, and where did that $480 million go? To roads around Perth Airport.
Sure, it is fantastic, but I defy anybody in this chamber, anybody in the other place and anybody across the nation to define Perth Airport as regional. It so clearly is not. Yet this government says: 'Here we go, here is nearly half a billion dollars. We're going to whack this out to Perth Airport and we'll take it from the Regional Infrastructure Fund.' That is a classic example of this government not caring two hoots about regional Australia. If it did—and the proof is in the pudding here—it would have directed that $480 million to somewhere regional.
I know Senator Sterle is always telling me—and I agree with him—how absolutely fantastic Western Australia is, and I would think that Senator Sterle would hate to think that those of us over here on the east—'t'other siders'—might even possibly ever refer to Perth as regional. You would be affronted, Senator Sterle. You would be astounded. You would be absolutely appalled that we t'other siders would ever refer to Perth as regional. Yet your Labor government says Perth is regional, and has put on the table $480 million for somewhere that is clearly not regional. It just shows the absolute disconnect that this Labor government has when it comes to regional communities.
The Regional Australia Institute—again, more shambolic policy like the minerals resource rent tax—sounds regional, doesn't it? It sounds like it should have a fairly regional bent, to me. It has the word 'regional' in there. It has one office, and where is it located? Gosh, Canberra! Let us put the Regional Australia Institute in Canberra—what a fine idea! Did it never occur to anybody in the government that the place to locate the Regional Australia Institute might be in a region? Good lord, that would absolutely necessitate common sense, none of which we see from the other side of this chamber or from the other side of the chamber in the other place.
Last week we heard Senator Wong, Minister for Finance and Deregulation, saying in answer to a question:
First, this government is the greatest supporter of regional Australia this nation has seen in a very long time.
One tries not to laugh uproariously in this place but, at that particular moment in the chamber, I did, and I think it was echoed right around every single regional community in this country. For this government to say that it is the greatest supporter of regional Australia is nothing short of hilarious because it is so obviously not. When it comes to things like mismanaging and delaying water reform, the whole Murray-Darling Basin debacle and the fact is that there has been no proper scrutiny of the social and economic impacts of withdrawing water out of those communities—it just has not been done. When it comes to water there is no information about where any of the environmental water is going to go, what the benefit is going to be and how it is going to get there. It is another shambles from this Labor government.
The best one, though, has to be the carbon tax. How can the minister, Senator Penny Wong, say 'this government is the greatest supporter of regional Australia this nation has seen in a very long time,' yet at the very same time be introducing a carbon tax which is going to hit regional Australia—as my very good colleague Senator McKenzie knows probably better than anyone—and regional communities harder than anywhere else? This government hasn't a clue, and we are seeing it again with this minerals resource rent tax. It is around 100 days until this carbon tax comes in, and that is going to be a very sad day for this nation and a very sad day for regional communities in particular.
What else have we seen from this government when it comes to not being the greatest supporter of regional Australia? They will not even consider properly the impacts of foreign ownership and foreign control when it comes to our agricultural land. Indeed, we have the reverse, with the Minister for Trade, Craig Emerson, saying: 'Oh yeah, we should just be bringing money in from Asia. It's a fantastic idea! It's brilliant!' He is not even thinking about the potential impacts of that 20, 30 and 40 years down the track. He is not even considering it.
It is all related to the mining tax, thank you very much, Senator Sterle, because the minerals resource rent tax is yet another example of policy from this government that does not properly consider regional Australia. It is absolutely relevant. The trade minister talks about considering properly the impact of foreign ownership and foreign control, and says they are going to risk our free trade agreements. They are free trade agreements; they are not feel-free-to-buy-up-our-country agreements. The fact that the minister will not properly consider the long-term ramifications of this is yet another example of the shambolic policy that we see from this government when it comes to regional communities. The minerals resource rent tax is just another. When we look at that tax we see what it is going to do. As I said earlier, it is divisive and it is going to pit company against company.
The fact that the minister spoke to only three out of goodness knows how many companies it is actually going to affect is absolutely extraordinary. This lack of consultation is something that we see through legislation time and time again from this government. The minerals resource rent tax is no different at all. It is extraordinary. As I said earlier, it is going to make things worse. It is going to leave the budget worse off. The revenue is going to be highly volatile and downward trending.
We will hear from the other side many a contribution about how wonderful it is going to be. Thank you, Senator Sterle. You know, Senator Sterle, as much as I do. You will stand up and give this blah, blah, blah in a few minutes about how fantastic it all is. Yet at the end of the day when this is going to leave the Australian people worse off, when this is going to leave the economy worse off, how on earth can we on this side of the chamber support this legislation? We cannot. This is not saying no for no's sake. This is saying no because this is yet another appallingly bad piece of regional policy from a government that has such a disconnect and clearly does not understand the needs of regional communities.
I have been really looking forward to making my contribution to this debate on the Minerals Resource Rent Tax Bill 2011. May I just say from the outset that, regardless of what some people who are listening may think, I do have the greatest respect for my colleague Senator Fiona Nash.
Sorry, she put me off; she made me laugh. I will not stop there. I am going to keep going. I have no doubt about Senator Nash's commitment to regional Australia but, sadly, unfortunately, we have witnessed in this country in the last 18 months or so—while we have been having this debate about some form of tax concession or tax collection from the mining industry—a plethora of mistruths, lies and misleading figures. Anyone who wants to make some commentary on it who has no background on it has their little bit and their moment in the sun. But I would like to actually clear up a few things.
I suppose I am not allowed, but I would love to ask a question to those out there who may be listening or those in the gallery. The whole idea of this tax on our non-renewable resources is that it concerns only iron ore and coal. It does not affect any other commodity. I would like to get a feeling from the gallery. When you look at the massive amounts of iron ore and coal being dug up in this country that cannot be replaced, do you think it is unfair—through you, Mr Deputy President—that once a company hits $75 million in profit they will pay a tax? If they make $74,999,999.95, they will not pay the tax. I do not think for one minute that any decent, hardworking Australian would think that the Gillard government is being at all harsh on companies because they are taking our nonrenewable commodities. What they do with them range from fantastic things to who knows what else around the world. It is a $75 million profit tax.
So if you listened to Mr Abbott, Mr Hockey and Mr Robb—that is if they are on the same page on the same day, and that has not happened for months and months, and Senator Sinodinos must be cringing—you would think that we, as a government, are going out there to crucify employment. You would think that we are going out there, in their terminology which I have read in the paper over a number of months, to kill the golden goose. This is an absolute lie. Mr Acting Deputy President, the whole basis of the Liberals and the Nationals—
I would vote for you if the time ever came. You would think that if they were speaking the truth we were going to kill investment. If I may, there are a lot of good things to say about the minerals resource mining tax, and I will flow on because Senator Nash has given me the opportunity to talk about the Gateway WA project. That is what the airport upgrades are called. I have in front of me—and I am not tabling it, but I am speaking to it—a newsletter put out by Senator Eggleston with the member for Swan. It is Senator Eggleston's contribution to the negativity around the mining tax. I just want to quote some of Senator Eggleston's words. This lovely, glossy thing was floating around Western Australia the week before last, I believe. Senator Eggleston says:
Western Australia's fly-in-fly-out (FIFO) workers—
they are the miners that live everywhere else but fly into these remote mine sites—
will be hit hard, with job cuts expected to offset the tax.
How in the heck did Senator Eggleston come to the conclusion that if the employer makes $75 million in profit it will cost jobs? I do not know how that works. Senator Eggleston also goes on to say:
With global economic uncertainty at its peak this has already been seen, with BHP announcing 155 job cuts in January.
Well, dash! The mining tax is not even in yet and BHP are putting people off. What the heck does that have to do with the mining tax? And if it does come in it will not be until next year. So where did that come from? This is the sort of mistruth being spread around. Senator Eggleston, who will have the chance to defend himself, also goes on to say:
If passed, Australia's international competitiveness will be in turmoil, leaving less money in Australia for investment and our current investments will move overseas.
The iron ore is here. The coal is here. Am I to assume, through Senator Eggleston's wording, that somehow we are going to pull the iron ore and coal from Australia out of some other country, that we are going offshore? This is just ridiculous. I would also like to add that Australia is gifted. We are so lucky to be gifted with natural resources. I was a former truck driver who made my living, for 16 years, running into mining towns. I was the furniture removalist for miners and associated services moving in and out. With all the global turmoil we have seen, as soon as the price of aluminium or bauxite comes down mining companies will close their mines.
Let us have a look at the nickel project out of Ravensthorpe. A couple of years ago BHP, 'the great Australian'—that was tongue in cheek, Mr Deputy President—fired up a mine down in Ravensthorpe. Fifteen hundred people were employed. Fantastic. Local people in Ravensthorpe thought that they could make a decent living and a good business out of promoting the town of Ravensthorpe. As soon as that price of nickel went south, what did BHP do? What did the great Australian do? Shut it down. Fifteen hundred jobs gone. Did the opposition come out and go, 'Oh, dash, BHP; how dare you'? Of course, they did. That is the trouble when you are beholden to big miners. Fortunately we are not beholden to big miners.
I want to talk about one of the absolute positives about the mining tax, and there are a number of them. Prime Minister Gillard has committed to Western Australia no less than $480 million of mining tax into the Gateway WA project. The Gateway WA project is a complete upgrade of the roads surrounding the Perth Airport. With all fairness, Westralia Airports Corporation under the leadership of their CEO Bradley Geatches has contributed about $1 billion over 10 years for upgrades on the airport's land. The federal government and the state government will be contributing money to roads surrounding Perth Airport.
For those who do not know the Perth Airport, it is situated about six kilometres from the CBD. We are lucky in WA because we do not have a curfew. We are very lucky in WA because of successive governments, state and federal. Not only is WA the engine room of the economy but also our airport is absolutely paramount to the resources boom and to the work that is going on in regional WA. Our airport operates 24 hours a day. Fortunately, although some have suggested on that side that we should talk about curfew, that nonsense was put to bed very clearly.
Our airport handles some 2,000-plus flights a week. The majority of our flights out of Perth Airport are heading to regional centres—not for tourism, unfortunately, not for fishing expeditions, not for sporting events, but for servicing the mining industry. We have a number of commodities. We have just about every commodity you could imagine in WA and we have regular flights in and out. We have three terminals at Perth Airport. We have the domestic terminal, which Qantas operates out of. We have our FIFO terminal, which Virgin, Skywest and the regional airlines operate out of. You walk into that FIFO airport and it is just as busy as the Qantas domestic terminal. I have not met one Western Australian who has said to me, 'Will you pass a message on to the Prime Minister about how dare she spend mining-tax money on upgrading roads in and around our airport? Around Perth Airport we have our major trucking hub. This is all in the one area. We also have our major retail hub, where Woolies and Coles have their distribution centres. We also have a major railhead. In Western Australia we rely very heavily on eastern states freight movement not only by road but also by rail.
We have a perfect storm, if you may, of activity around the airport. This is not to mention traffic in and out of the airport or travellers on and off that road network or B-doubles and pocket road trains around that area. If you have the misfortune of being on the Tonkin Highway trying to get through the set of traffic lights to get to the outer suburbs you will understand that the sooner the mining tax contributes to the building of the Gateway project, Senator Nash, it will be a wonderful event for WA. Even the Western Australian government cannot wait for that to happen. But they are not capable of funding that project on their own.
If you are going to start condemning projects that the mining tax will fund through the regional infrastructure fund, senators on the opposition side, at least do yourselves a favour: do your homework—through you, Mr Deputy President. Make your considerations based on fact, not just on the latest message from the 'no' campaign running out of your leader's office.
I also want to talk a bit more about the benefits of the mining tax for Western Australia. Mining is a significant contributor to our economy. There is absolutely no doubt about that. Senators on this side of the chamber recognise that, particularly senators who come from Western Australia and I have no doubt also senators from Queensland and those from other states. But it is rather infuriating when we are somehow bedevilled, belittled or abused because we dare to take on and upset these major miners. How bad it is for Rio Tinto, BHP and Xstrata and for the majority of employers in the mining industry, and we are going to put all these people out of work—if you listen to those on the other side of the chamber.
Mining contributes 1½ per cent of employment to our great nation. That is not to belittle the industry. It has been a fantastic industry, there is no doubt about that. We have 1½ per cent of Australian workers engaged in mining and yet we can have the likes of Ms Rinehart, Clive Palmer and Andrew Forrest—and I must admit Andrew Forrest has been a bit quiet lately—coming out and calling us everything under the sun. They say we are going to kill off investment.
I have an interesting piece of information that should be shared with everyone here. Probably around early- or mid-year 2010 there was a full-page ad taken out in the West Australian newspaper. I do not know if it got to other newspapers because I was in the west that day. It was a message from Ms Gina Rinehart. Now, good luck to Ms Gina Rinehart. She has inherited some family fortune and she has gone off and run a business. That is all great, and let do her own thing. But she was calling on the federal government to introduce economic-free zones—this was the heading, 'economic-free zones'. And when I read a little bit further it went along—and I cannot give you word-for-word, Mr Deputy President, but I think you will get the gist—'Ms Rinehart was alluding to the fact that if we do not have economic-free zones in the wild West we will not be able to afford to build mines and we would not be able to afford to get these projects off the ground.'
Ms Rinehart can challenge me on any occasion; I will step 30 paces to the left and say the same thing out there. I am not hiding behind parliamentary privilege. Ms Rinehart had a massive concern about why she and other miners should have to pay—wait for it—Australian wages and conditions to get these mines off the ground. How unfair it was on her and her fellow miners to be dared to have to pay Australian wages and conditions! So she was calling for an economic-free zone so that these projects could be ring fenced and she could bring in foreign workers—and good luck to foreign workers, whose skills we need—at the expense of Australian workers. At the expense of Australian wages and Australian conditions!
I will stand to my last breath and I will never, ever, ever—while I am in this building or outside it—support a billionaire who wants to lower Australian wages and conditions or to exploit foreign workers, for that matter, so she can get her major project built. Do you know the insulting thing about this, Mr Deputy President? There was a follow-up article, and I cannot for the life of me remember how much further down the track it was. It may have been two weeks, I do not know. But she ran it again, and this time she had 30 of her mates—senior CEOs of companies—saying, 'We support Gina.'
Let us get back to the mining tax. Let us get back to the tax you may have to pay if you make $75 million profit. Every single one on that side of the chamber sings in unison in support of the rich miners. But what are they going to do? I will tell you what they are going to do. They are going to tax us to support the miners. They cannot wait, and you will see them. I will name them: Senator Cormann, the first one to pop up, running the Mr Forrest line, running the Ms Rinehart line and running the Mr Palmer line. They cannot wait. Do you know what, ladies and gentlemen? Here is the itch; here is the little sticky bit—this is the bit that they cannot smother over. A major donor—or the major donor—to the National Party is no other than one Clive Palmer. Mineralogy: poor Mr Palmer: 'I am going to go broke. This is killing off jobs, because if I get the $75 million profit I have to pay a tax.'
There they all are. You will hear them. You will hear them in question time. If you are unfortunate enough to still be here in question time, watch it pop up. Watch them pop up and talk about the jobs. They are running the Clive Palmer line. I am going to make this statement, and I will stand corrected. I reckon it is getting to the stage where he will be writing your questions for you! That is what he will be doing because you all parrot it. You parrot the same thing all the time, and about poor Ms Rinehart!
There is another crack—have a listen to this one, Madam Acting Deputy President. Last week we knew there was an unfortunate situation. There is nothing worse when families get into a buddle. Trust me, I am half Italian! There is nothing worse, but we are good at it. All of a sudden, there is a very high profile—
You are from Queensland, Senator Boyce, so is Mr Palmer writing your speeches too?
All of a sudden we see that we have Senator—none other than—Barnaby Joyce, coming to the defence of Ms Rinehart, writing letters to her daughter—I do not know if he has ever met her—telling her virtually that it is a bit unfair and to back off. I do not know; Senator Joyce should table the letter and defend himself. What the hell is a Senator from Queensland doing interfering in a family dispute?
Then they all started. Then there was a Mr Shultz, I believe, so Ms Rinehart is calling in her favours. But that is what happens when you take donations from mining companies. You are beholden to them, and you are too scared to stand up and go, 'Hang on, it's a $75 million profit before you get taxed,' so I did start feeling sorry for you. But now I do not, because the old saying is that you reap what you sow. You lot are now saying, 'That's it,' and you are reaping it.
Going back to the mining tax, I challenge anyone on that side to get up and show us—show us, do not make stupid, glib statements through Mr Abbott and his office—and when you are on song as a team, which I do not think has happened since about 2007, tell us where these jobs are going to go. Tell us! Come here and tell me—challenge me out there, and challenge me in any Western Australian mining community about where these jobs are going to go and why they are going to go.
This comes from the party of 'profit is good'. And I support profit—let me tell you: I love profit. Do you know why I love profit, Madam Acting Deputy President? Because when companies make profit they employ people, and when people are employed they spend money, and they spend money with small businesses, they spend money in hospitality, they spend money in tourism and it is a wonderful thing. I wish they would spend more in the great state of Western Australia. I really do. But, come on, here is the challenge: drag me out there, get the media and pull me up. Bring a miner in here, challenge me, bash me and around the ears and tell me one mine that is going to put off workers because all of a sudden they have cracked a $75 million profit and they are paying a little bit of tax. Rio Tinto, BHP and Xstrata are the major employers in the mining industry—and I am not for one minute even alluding to belittling or downgrading the importance of the small miners—but, with the greatest of respect, what the heck is a small miner?
This is the trickiness of the Liberal Party. They use this terminology, 'the small miner'. They try to incorporate the small miner along the same lines as a small business person or a small family operation. Let me tell you, about small family operations. Coming from the trucking industry, no-one knows the pain that small businesses suffer more than me, because I was a small businessman too at one stage. But, do you know what?
Senator Boyce interjecting—
I worked it out for you, Senator Boyce, and for you Madam Acting Deputy President. Do you know how to make a small fortune out of transport? You start with a large one. Let me tell you, I know that very well.
So just check the terminology. Stop standing up for the billionaires club and start standing up for Australian families, for Australian workers and for Australian small businesses. Start standing up for the real communities. I have to tell you, through you, Madam Acting Deputy President, to get off your backsides and get out into some of those north-west towns and have a look at the lack of infrastructure. The miners are very good at one thing: they are very good at taking up and digging out nonrenewable resources. There is no argument about that. But the days when the miner built the hall, the swimming pool, the football club and the netball club—guess what on that side—are long gone. They do not have to do it anymore. Talk to the shire councillors and see how they are suffering because they do not get the money coming in through ratepayers for the land. Thank you.
After that contribution from Senator Sterle we cannot claim that the government is not singing from the same song sheet. They are singing the song of the politics of envy nonstop. That was perhaps one of the most malicious and revolting contributions I think I have heard in this chamber. In case Senator Sterle was not aware, most large businesses started out as small businesses. Let us look at the transport industry and Lindsay Fox's business and Sir Peter Abeles' business. They were people who started out and used their own intelligence and their own sheer hard physical labour to create something big and worthwhile and profitable. And guess what? They used those profits to pay wages and to build their companies—to invest in more products, more technology and more research. That is what small businesses do in this country, but they certainly will not be able to under this disgusting government.
I was rather hoping that after the fracas, the latest little effort of Ms Gillard and Mr Rudd, had settled down and we finally worked out who the Prime Minister was it would mean the government would get on with government. But it has not. The same song of mismanagement and envy just goes on and on. Today I have been reviewing the report done by the Senate Economics Committee on the minerals resource rent tax and two other reports that are going to come down today—one on the personally controlled e-health records and one on the MySuper legislation. With each of them, you do not have to read our dissenting reports to realise how poorly managed they are, what a mishmash there is with the lack of negotiation and 'Oops, we got that wrong; we'd better change that.' A litany of mistakes applies to every one of these reports. You can read the government report. The only thing that is missing at the end of every one of the government's reports—with this long litany of a lack of consultation, a lack of understanding, poor timing and poor leadership—is 'and so we need to fix it'. This government limps along trying to put bandaids on whenever they discover 'Oh goodness, we can't even try to pretend that we'll put that through!'
These bills relating to the minerals resource rent tax are a classic example of what this government do not know about business and will never know about business—and one hopes they will be out of government before they destroy any opportunities there are for business. Let us look, for example, at Senator Sterle's laughable comment that 'there aren't small miners'. Just because you have six zeros on the company balance sheet does not mean you are big; it means that you are in an industry that requires very deep and long-term investment to make a profit. And that is what the people in the mining industry in Australia have done over centuries. We are very lucky in Australia. This government is extraordinarily lucky that the mining industry and the profits from the mining industry are currently masking their extraordinary ineptitude. It beggars belief that this government cannot even recognise that what they are doing is destroying their own golden goose. The only thing that will keep them in government is good profits from the mining industry—because they are just useless at anything else.
Let us look, for example, at the profit mark of $75 million. I first made these comments in relation to the BAS. We have this wonderful view that, if someone makes a $1 billion profit, we have to get in there and rip it from them. A $1 billion profit can be a huge profit or it can be quite a small profit. We should not be talking about the profit, we should be talking about the return on investment. If you have invested $1 billion and made $1 million you have not really done very well, it is not a large return on investment. To have set an actual figure of $75 million is the most bizarre, fiscally irresponsible and completely ignorant way to approach this legislation. Why $75 million? As Senator Sterle said, if is $74.9 million you are all right. It will not matter whether you have invested $150 million or $10 billion to make that $75 million, you will still pay the tax. How bizarre, how completely outside any reality, any assessment.
One of the biggest issues, of course, is that mining expenditure is the cost a miner incurs in bringing the taxable resources to the valuation point—and the government still has not quite worked out how they are going to deal with the market issues they have developed there. In my own state of Queensland we are very lucky to have a strong flow of royalties from the mining industry—not just coal but particularly in the coal area with the Surat and Bowen basins. Nine per cent of Queensland government revenue currently comes from state royalties. But this is the boom, this is as good as it gets with getting money out of the mining industry. Everyone assumes that it will steady and then, over the next 50 or 60 years, begin to taper. Queensland is getting its cut, particularly out of the coal industry and many other industries, and they get nine per cent in royalties. So, Senator Sterle, while we are looking at how well Labor governments perform, you might want to ask: is the Queensland government in surplus? No, they are not in surplus. Have they had a downgrade of their credit rating in the last three years?
I am not quite sure what Senator Sterle is talking about. The coal seam gas industry will be a major contributor to Queensland's economy and has been a steady contributor to Queensland's economy for 50 years, Senator Sterle. Certainly there needs to be a balance, and thank goodness from next Saturday there will be an economically responsible government in Queensland under the premiership of Campbell Newman that will actually get the balance right between the development of coal seam gas and the protection of farm and food production areas. That may well be beyond the wit of Senator Sterle and his colleagues, but it is not beyond the wit of the LNP government that will be installed in Queensland next Saturday.
It is hard to think of a worse way to have gone about developing this legislation than the way this government has. We had the old super resource tax under former Prime Minister Rudd. A bizarre 287 pages of new tax law is what we have got out of this. As I said earlier, the introduction of the market valuation scheme to calculate applicable deductions gives the big three companies a significant tax shield that is not available to small- and mid-tier mining companies. There are small- and mid-tier mining companies. Every industry is relative. Certainly, if we are talking about milk bars, there are small milk bars and large milk bars, Senator Sterle, in the same way there are small mining companies and large mining companies. You would think that this government would be pleased that every one of those small mining companies is working assiduously to try to turn into a large mining company. That is what Australia's prosperity and the availability of jobs is based on. It is based on individuals who have worked furiously to go from being sole traders in many cases through to being national and multinational companies and there is nothing wrong with doing that. I must admit I was somewhat appalled by Senator Sterle's suggestion that apparently Ms Rinehart cannot have friends. The fact that both Senator Joyce and Mr Schultz have written to her children is on the public record.
Senator Sterle interjecting—
It would have been better, you are dead right Senator Sterle, if all those family problems had stayed out of the spotlight and I think your contribution to keeping them out of the spotlight was hypocritical to say the very least. But what is the suggestion? Is it that Ms Rinehart cannot have friends? What is the suggestion? Is it that Mr Forrest and Mr Palmer cannot make the same attempts to—
Senator Sterle interjecting—
Every individual in Australia is entitled to do what they can to affect government policies, especially when they think it is wrong—every individual. I know Mr Craig Thomson and his mates certainly tried very hard. If you look at the Your Rights at Work campaign, I think we are talking here about a little more than some of the donations that Mr Palmer has made to the LNP. To suggest that making a donation is somehow equivalent to bribing people is a disgusting, dishonest comment to make, particularly given that we are talking here about individuals. These donations are well known and any results thereof are well documented so that you have a transparent and accountable system not like the insidious, incestuous relationship between the Labor Party and the unions where there is no accountability and Fair Work Australia apparently has to learn to read before they can work out how to produce a report sometime hopefully before the next election, although the likelihood of that, I would think, is very small.
I want to go back and mention the superannuation legislation and the so-called company tax cut that the government has tried to attach to the mining tax. They are not tax cuts; they are tax cons. In fact, if you look at some of the figures that have been produced recently over the weekend, you would have noticed an analysis that shows that, in the end, both the super changes and the company tax cuts will cost money because employers will end up in a negative situation. I would like to just remind the Senate what the Henry tax review said about the superannuation guarantee rate. It said:
The superannuation guarantee rate should remain at 9 per cent. The Panel has considered carefully submissions proposing an increase in the superannuation guarantee rate. Such an increase could be expected to lift the retirement incomes of most workers. However, the Panel considers the rate of compulsory saving to be adequate. The Age Pension and the 9 per cent superannuation guarantee (when mature) can be expected to provide the opportunity for people on low to average wages with an average working life of 35 years to have a substantial replacement of their income, well above that provided by the Age Pension.
This is the government's own review, the Henry review of taxation, which said 'Leave it at nine per cent; don't change it.' We could ask Senator Sterle perhaps what Machiavellian movement went on behind the scenes because, when you think about it, who wanted a 12 per cent superannuation rate? Gee, who was that? Was that the union movement that was pushing for that, especially funded by people outside the wages system. 'Let's go find someone rich and get some money out of them' so that we can increase the superannuation guarantee above the rate that that Henry tax review says it needs to be to give people adequate incomes.
The coalition supports a reduction in the company tax rate. We do not support the mishmash, piecemeal approach yet again that this government is taking. 'What does it matter? We've distorted so many markets now' is the Labor government's mantra. 'What does it matter if we distort a few more? Let's go for a tax cut for small business and just ignore everybody else for a bit longer.'
It beggars belief and causes me great distress that this government might be in power for another 12 months. It is really worrying what else they can damage or destroy in that time. As I have said, the mining industry—and Treasurer Swan loves looking at averages—is the only thing that is masking the serious problems in manufacturing, in retail, in services, in building in Australia.
Senator Sterle interjecting—
I am not sure which ideal little world Senator Sterle lives in, but most consumers when faced with a $50 Australian-made product and a $30 made-in-China product—Senator Sterle, do you know what happens? In most cases, they buy the made-in-China products, Senator Sterle. I think you need to go back to the bottom of this before you start worrying about where the wages come from. I know from personal experience that vast numbers of manufacturers are now importing some of their product. It was that or go out of business. Would that have been preferable in Senator Sterle's view? Because when he finds the consumers who are prepared to pay between 30 and 80 per cent more for a product so that they can buy an Australian-made product that will be fantastic. Vast numbers of products have to be imported because of the competition in the industry, and perhaps Senator Sterle should even look at the truck manufacturing business: Senator Sterle, how many of those are made here right now and used?
Quite a lot, Yes, we must be over 15 per cent, are we, Senator Carr? It beggars belief that this government would continue in area after area to not give a damn about business and growing business to simply say, 'Wow, $75 million!' Irrespective of what that means as a return on investment, it does not matter. It does not matter if it is a one per cent return on investment or a 100 per cent return on investment, but 'Wow, if it's $75 million, you must be rich. You must be a really rich company, so we'll go and rip some money off you. We'll continue to distort the market even more.' Never mind that mining companies already pay high rates of corporate tax and pay the royalties to the states. Never mind that there is a legal question over whether the federal government can even tax what is state property: the coal and iron ore profits.
The Gillard government mining tax is divisive, complex, unfair, fiscally irresponsible and distorting. It reduces our international competitiveness and was developed through a highly flawed and improper process. It will damage our economy. It will in the long term be the sort of retrograde and extraordinarily inept process that we have come to expect from this government.
I rise to speak in support of the mineral resources rent tax. This debate is bringing out the best and worst speeches of parliamentary debate—and perhaps the most entertaining as well after the contributions from Senator Sterle and Senator Boyce. I would like to address three main points in this debate: one is in relation to price competition and supply for iron ore and black coal; the sovereign risk, which has been alluded to at great length; and, finally, spreading the wealth.
One of the most valuable resources in the parliament is the Parliamentary Library, and I will pay tribute to their facts in relation to iron ore statistics. Australia and Brazil dominate the global iron ore export market. Quite obviously, China dominates the global import market. Iron ore exports have increased from 966 million tonnes in 2009 to 1,081 million tonnes in 2010—clearly, an increase of 12 per cent. Companies which we are mainly competing against—Brazil, India, South Africa , Canada, Russia and Kazakhstan—are all in the iron ore trade. Of total global exports, Australian and international companies in Australian exported 427 million tonnes, or about 40 per cent of the global market, followed closely by Brazil, with 311 million tonnes or about 29 per cent. Competition then fell away to India with 104 million tonnes or about 10 per cent of the global market and South Africa with 48 million tonnes or four per cent.
The average export price of iron ore in early 2005 was around US$30 per tonne. It steadily increased until the GFC and then, due to the severe scaling down of international trade associated with the GFC, the average price fell from mid-2008 until the middle of 2009, before increasing again in 2010. Since then they have increased substantially. By mid-2011 the average price peaked at US$145 a tonne before a slight decline. Australia has mostly exported in recent times, from 2009, at around US$60 a tonne, which was the higher priced end of the market. Brazil exported at around US$40 a tonne. In 2009 India's export prices were around US$60 a tonne.
In the first seven months of 2011 most of Australia's exports were priced between US$140 and US$160 a tonne. Our competition, Brazil, exported at US$130 a tonne, while India's export prices were US$120 to US$140 per tonne. Thus, prices have more than doubled in the past few years for iron ore, and that has been associated with much increased demand from China. The price differential, which much is made about, is generally based on the quality of the iron ore that is being produced in each country. So there we have the situation with respect to iron ore: there has been a steady increase in demand, at about 12 per cent or more per year; there has been a doubling of the price; and we are still at the top end of the market, based on our price competitiveness and the quality of our product.
In relation to black coal, on the supply side of the global market, companies in Australia are mainly competing against companies in Indonesia, Russia, Colombia, South Africa and Kazakhstan. Of total exports of 1,090 million short tonnes in 2009, companies in Australia exported 289 million short tonnes or about 27 per cent, followed closely by Indonesia with about 24 per cent, Russia with 12 per cent, Colombia with about seven per cent and South Africa also with about seven per cent. So, once again, we are leading in the number of tonnes exported.
We compete with countries right across the globe—Indonesia, Russia, Colombia, South Africa, United States, China, Canada, Vietnam, Kazakhstan and others—but, importantly, we are right at the top in supplying our coal to the rest of the world. In the market for coal exports, our most important customer is Japan. Unfortunately and tragically, Japan has had an energy crisis resulting from the Fukushima disaster, but clearly that is not going to diminish their demand for energy, whether it be in the form of gas or coal. Eighteen per cent of our global exports go to Japan; followed by China, 15 per cent; South Korea, 11 per cent; and India, seven per cent. Clearly those markets are all emerging, growth, high-value economies. Their demand for resources is unlikely to be diminished. So we lead the tables both in iron ore and in coal.
World coal prices were volatile in the wake of the global uncertainty. However, with the increased demand of China, the average price of thermal coal in October 2011 was 14 per cent higher than a year earlier, reaching a record high of US$134 per tonne following eight consecutive weeks of increases. The expectation of a coal supply shortage and surging demand is expected to push prices up further. As the world's largest coal consumer, China consumed 2.28 billion tonnes of coal in the first nine months of 2011, a 10.3 per cent increase year on year. China became a net importer of coal in the first nine months of 2011, with net imports of 111 million tonnes. During the month of September 2011 the country imported 19.12 million tonnes, up 25 per cent year on year.
So the picture is becoming very clear. We are right at the top of world exporters in terms of quantity, we are achieving a competitive price, our product is of the highest order, our supply chains are able to meet the demand and, thus, we are in a boom cycle and the capacity to pay the minerals resource rent tax is evident from even a cursory glance at the underlying price pressures. I will say that again: clearly, if you look at the supply, the quality of the resources, the supply chain efficiency and the competitiveness amongst our peer group, we really are in a boom cycle and the capacity to pay the minerals resource rent tax is evident with only a cursory glance at the underlying price pressures.
Much has been made recently in this debate about sovereign risk. I find it absolutely appalling that those opposite could raise the issue of sovereign risk. There are countries out there striving to provide proper systems of law, justice and infrastructure and facing enormous social challenges with respect to improving the situation for their people. They should not be used as cannon fodder in a debate in the Australian parliament. If a West African nation is able to attract investment and get an iron ore field up or a coalmine going, we should be applauding that. We should not be coming into this place acting as if it were somehow detrimental.
Australia is fortunate, very fortunate, and our history will say that we are a safe investment destination. Our reputation is such that there are simply no grounds for making the argument that a resources rent tax will drive investment away from Australia. The quality of our resources, the efficiency of our supply chain, the efficiency of our workforce, the long-standing rule of law and the demonstrated history of returns on investment will simply not give any weight to that argument. For people to come in and use that sovereign risk argument is denigrating Australia, I think, and is not helpful to those countries that may be seeking to get their leg up, if you like, and get some investment in some of their mining and export opportunities.
So the facts are quite simple. Australia can and will continue to be an attractive destination for global miners to invest. The rule of law, as I have said, the certainty of supply, the efficiency of our workforce and the quality of our resources will continue to ensure that. And I would like to put on the record that, clearly, the facts lay out a case that the global miners are not doing it tough. They can choose, and they will, to determine where their investment goes but the quality of our resources, the size and availability of our resources, the continuity of supply and the added features of the rule of law and a demonstrated history of return on investment will continue to ensure Australia's future prosperity in respect of mineral extraction and export.
Spreading the wealth is another consideration. The history of mining in Australia shows that mining companies have always contributed to infrastructure improvements. In fact many of them have built towns, schools, sporting facilities and houses. They operated stores and all of those appropriate things from another age, if you like. With the wider take-up of fly-in fly-out arrangements, that is changing. I happen to believe that fly-in fly-out arrangements are mutually beneficial. Most Australians live near the coast or on the coast or in cities close to the coast and it is fair enough. If you work hard, you want to go home and enjoy all of the benefits of your labour and all of the things that make you happy in your lifestyle, so people fly in and fly out. They fly home to a nice place and they fly back into fairly severe accommodation with little or no recreational facilities, and given that most of them work 12-hour shifts, there is probably not a lot of time for any recreation anyway.
Conversely, the mining companies now have less demand on them for provisions of facilities on mine sites. There is less demand on them for the provision of stores, social clubs, football ovals and the things that I have seen in mine sites all round Australia from the previous generation. Why then is it not fair and reasonable to take some of the increased profits that these mining companies are making and spread them around a bit? They have a vastly reduced cost for infrastructure. The Minerals Resource Rent Tax will spread the wealth created by a resource owned by all Australians. There is the significant tax cut for small business, for almost 5,000,000 Australians working in 2.7 million small businesses. Small business will benefit from the instant tax write-offs, going from $1,000 up to $6½ thousand. The Minerals Resource Rent Tax will fund new roads, bridges and important infrastructure.
Most importantly, the MRRT will allow the superannuation guarantee to increase from nine to 12 per cent. Much has been made of the use of these funds but, just on this particular point, what better use than building a national pool of long-term savings owned by Australians and invested by Australians in the best interests of their retirement outcomes? A national savings pool would stand at almost a trillion dollars now and with the addition coming from the nine to 12 per cent, it will increase perhaps threefold. What better use than to put in the long-term savings accounts of Australians significant amounts of money? It will be there for their retirement income but along the way, for the 30-year horizon that most people will be in the workforce, this national savings pool will grow to dominate the investment markets of Australia. It will provide funding for infrastructure and the myriad capital requirements in our great nation's future. I can think of no better use than increasing the nation's savings pool, because that is long-term capital. It is Australian capital and we will start funding our own ventures and will be less capital-reliant on the rest of the world. We may even be able to use some of that capital to help out our near neighbours and perhaps provide some capital for investment in mining in Indonesia or wherever it may be. But I can think of no better use than to build the long-term national savings of the nation. That is what superannuation has done. If the Mineral Resources Rent Tax is remembered for only one thing, that it increased the foundation stone of our national savings pool, it will be well worth it and generations of future Australians will long remember that.
Mining companies, boisterous individuals though they are with all of the frailties of human nature, have only one thing in common—self-interest. Their opposition to this tax is self-interested and it is their right to be self-interested. It is what makes great nations and great countries. But the government's self-interest in this is the national interest. Mining companies have had increased profits over the last 10 years of 262 per cent. I commend the legislation and in the national interest suggest that it is absolutely the right course to follow.
I rise today to speak on the Minerals Resource Rent Tax Bill 2011 and 10 related bills. As a Victorian, there may seem to be not much here that we would disagree with. Why not distribute all that wealth from Western Australia's and Queensland's mining boom to the south? It sounds logical and egalitarian, even if you do not buy into the whole bashing a millionaire rhetoric that the other side seems to specialise in since Treasurer Swan's TheMonthly opening salvo. After all our—and I mean Victorians'—GST revenue has been going to prop up other states for the past 10 years.
Our significant manufacturing sector is feeling the pinch of increased input costs and the low Australian dollar and, as other speakers have mentioned, the mining sector is doing incredibly well at the moment. The mining sector employs over 780,000 Australians. A significant number of workers from Victoria and the eastern seaboard either relocate or work in fly-in fly-out operations in other states. They spend their money at home in Victoria on their mortgages, school fees, groceries and cars. So Victoria receives a share of the mining boom through increased GST revenues generated by the increased wealth of the employment generated through the mining boom.
The typical way we have taxed mineral extraction in this country is through state-based royalties. The Leader of the Nationals, Warren Truss, articulated the social licence inherent in the existing mineral compact with state and federal governments. The concept of royalties tied to extraction, not profit, is befitting the current and past circumstances as this is a non-renewable resource and the people of Australia are entitled to receive a benefit. That is where I think we all do agree. We all do agree that these minerals are a non-renewable resource and that Australia, as a nation, needs to be assured that that is being recognised, particularly where some sectors and states are doing better than others, as is the case at the moment. But it is not the first time that, as a nation, we have experienced a two-speed economy.
In fact, when we had our mining boom in my home state of Victoria in the mid-1800s, people travelled from all over the world to get a piece of the action. Not a dime of the revenue collected went to Western Australia, not a penny or a farthing or a shilling went to Queensland. Any revenue taken from the goldfields in Victoria was jealously guarded and helped to build the magnificent public infrastructure that exists today in our state. It is great to see another fellow Victorian, Senator Ryan, agreeing.
The gold rush offered a new opportunity for governments to raise revenue. New South Wales and Victoria introduced a gold licensing fee for the right to mine allotted sections. This was considered the most feasible option for collecting revenue because of its ease of administration. In Ballarat the licence fees were the trigger for a significant uprising of Victorian miners against the colonial authority, resulting in what we now know as the Eureka Stockade. It became quite symbolic for the labour movement because, back then, individuals did the mining. The primary reason for the uprising was the high level of licence fees, but other contributing reasons included the fact that the fees had no link to gold discoveries, miners rarely saw the benefit of public expenditure and the inequity of taxes compared with the light taxation of wealthy landholders.
Following the riots and rebellion at the Eureka Stockade, gold licence fees were replaced with a gold export tax. I make this point because I would hate to be seen in this conversation as a Luddite, somebody who harks back to the past and believes in state rights. I do believe in state rights passionately; however, I do also recognise that, as our nation changes and as the industry of mining changes from individuals mining their allotted plots to companies doing the mining, that we also need to examine different ways to ensure an appropriate contribution is made. As a state that is powered by brown coal, Victoria is concerned about the application of the tax to the brown coal industry and the capacity of the state to set appropriate royalties on the resource that the state owns. I have not heard anything in the debate thus far that assures me about the sovereignty of the states in this context.
There are many issues both philosophical and economic that I have an issue with on this legislation. Today I will touch on two. They are consultation with the states and wider issues with the process for getting to the end point of this legislation. Firstly, our Constitution clearly states that these resources belong not to Australians but to the states. This government is recommending taking over the states' right to charge royalties for the minerals. I realise that our Federation has changed in form and function over the last 100 years. However, it does not mean that any members of said Federation can ride roughshod over our Constitution and disrespectfully fail to consult and include each other in discussions and decisions that will materially affect each other.
I suggest that the senators proclaiming this tax as the boon for all Australians be a little more proactive at the local level and directly lobby their state governments for an increase of revenue extraction from their miners or on how that is spent. Let us take the Royalties for Regions program in Western Australia, a Nationals initiative which has delivered a financial windfall to the regions of WA. Those people in communities directly affected by the impact of said mining projects receive recompense—a contribution towards infrastructure, education, environmental projects and service provision in recognition that those in regional Western Australia are directly affected, both positively and negatively, by the mineral boom. These finite non-renewable resources are not those of Australians. They are the property of Western Australia, just as the gold dug up in Ballarat, Bendigo and Erica in the 1800s was the property of Victorians. It makes sense. This is where the positive and negative impacts—social, economic and environmental—of the mining projects are felt and, by applying the tax at that point, a localised response seems most sensible. Similarly, when miners leave an area, it is the state government who will have to assist a community to get back onto its feet. Doesn't this make more sense?
The Labor Party and the Greens have been waxing lyrical about the need to share in the boom, about the miners paying their fair share and about all the wonderful projects that could be achieved if this tax existed. I listened incredulously as they listed schools, tourism project and roads. Senator Gallacher just now mentioned foreign investment in mining projects in Indonesia. Anyone would think that that the governments had been asleep at the wheel for the past two decades. Each jurisdiction in this conversation needs to talk to the other. There needs to be consultation. It requires collaboration to ensure that all the people in this conversation get a valuable contribution from the mining industry and Ken Henry knew it.
The minerals resource rent tax stems from a government review of the Australian taxation system. The recommendations of that review by the former Secretary to the Treasury Ken Henry outline a shift from taxation based around individuals and businesses to one based around resources and land. It is clear that recommendations 45 through to 50, which deal with changing the arrangements relating to the taxation of resources, were made in the context of a whole-of-system change. Restructuring how we tax in this country needs a whole range of measures. Instead, this government, in its wisdom, under its former leader and now again under its current leader, took a small proportion of those recommendations, failed to consult and flipped and flopped. And now we are dealing with the legislation. I cannot wait to see the implementation given the government's past track record.
The second thing Ken Henry recognised was that this would be a negotiated agreement with the states. He had actually read the Constitution. Recommendation 48 states:
The Australian and State governments should negotiate an appropriate allocation of the revenues and risks from the resource rent tax.
Not the three biggest players, not some watered-down kitchen cabinet but the states and the Commonwealth coming to a modern interpretation of revenue and risk when examining our finite mineral resources.
Unlike the previous speakers on the topic, particularly those from the other side, today I will not be critiquing miners, will not be criticising workers and their communities or the families left behind. I will not be criticising the skills that are developed by this industry or its contribution to our nation. I will not be critical of the people who work hard, who earn a living and who carry the risk. I will not be critical of those that employ them.
Another issue with this tax is the process by which it has arrived at this point. The Henry tax review recommended a resources rent tax. This recommendation was then developed further by Prime Minister Rudd and Treasurer Wayne Swan and included all miners. Following the first version announced by the Labor government in 2010—which ended up, as I said earlier, a selective pick from the review—the government, in the Senate Standing Committees on Economics report, said 'the government decided not to pursue the RSPT'. That is all the mention they made of it. There was no mention of the fact that it was incredibly unpopular or that they were under pressure internally and externally; it was just that the government decided not to pursue it at that time. Essentially, in the face of mining and public pressure, they backed off. They backed off, sacked a PM and renegotiated the whole deal with the three big miners.
This tax has been cobbled together. It is a policy which is difficult to determine the parentage of. Was it Henry? Was it the then Prime Minister? Was it the current Prime Minister? Was it the Treasurer? Was it the Three Musketeers? Was it Bob the Builder? Who can say? I dare say that they have all had a little bit of an input there. One thing is clear: whoever the parents of this tax are, what we do know is that it will stunt the growth and development of the resource sector. It will make us less competitive internationally, especially as it may be increased by future governments from the present amount set. Senator Evans commented on that this morning on TV. It will tax the one sector of our economy which is powering ahead, the sector which is driving spending in other areas. The miners take with them when they go home to Perth or to other states their hard earned money for spending and investment.
This tax has been poorly designed. Juan-Carlos Fernàndez, a renowned architect, has a lovely quote that I think applies beautifully to the design of this tax. He said bad design is smoke while good design is a mirror. Why is this badly designed public policy? Seeing Senator Bushby is in the chamber, I will go to the coalition senators' dissenting report of the Senate Standing Committees on Economics inquiry into the tax as a reference point. I also note Senator Eggleston is in the chamber today. It reduces our international competitiveness. It raises constitutional issues. The dissenting report also mentioned the unfair competitive advantage to the three big multinational miners that were part of the behind-closed-doors conversation about the reconstruction of this tax. It is quite farcical—audacious even—that the conception and development of this tax was behind closed doors. This policy was developed to ensure that the tax would minimise potential impact on the three big companies while disadvantaging smaller companies—those which provide competition in the sector, the nimble innovators who, as Senator Boyce mentioned earlier, hope to one day become big miners. The government and the Greens are in the back pocket of the big miners. What a joke. To hear the rhetoric over the last day and a half on this is quite laughable.
Why develop policy in backroom deals? Why not hold consultations with all stakeholders? Why not develop public policy with the national interest in mind, not the Labor Party's political interest? Ask our irrigation communities, ask our manufacturing communities about the level of consultation by this government on the impact of this legislation on community. Let us get real: this legislation was a political fix from the start to get it out of the papers, off the table and out of people's minds. Rent taxes, particularly the petroleum resources tax, have played a significant role in the overall contribution to government revenue as they apply to profits. The formula used to calculate the tax payable under the legislation before us means that the take-home profit of the miners under the MRRT excludes such things as state royalties. We have heard from other senators about New South Wales and WA, stating that they will be putting up their royalties and, hence, affecting the take-home pay of the federal government as a result, all because the federal government thinks the Constitution is a piece of paper not worth noting. The government did not include the states in its conversation and has now had to amend the terms of reference for the GST distribution review to include an examination of its own legislation's impact on revenue.
Other issues raised in the coalition senators' dissenting report were around the proposed linkages, such as superannuation and company tax. This goes directly to the concept of balancing the budget. The 2013-14 budget deficit, as result of this legislation—and I think the lack of consultation has played into the fact that this will occur—will be about $3.5 billion. For those of us in the chamber concerned about the National Disability Insurance Scheme, that $3.5 billion is about half of it saved right there in one fiscal year if we do not implement it—not money coming in but money saved if we do not implement this. As the costs of the linked measures rise, the input from the profit is essentially going to decline, setting up a future of fiscal challenges. This is the 'little red tax that does not': it huffs and it puffs and it tries its best, but it just does not deliver. It is hardly surprising.
What does surprise me, though, is that the champions of small business, and note that I am being sarcastic, the government and their Greens partners—and for a day and a half I have heard how great this will be for small business—are giving the tax cut to only 25 or 30 per cent of those working in small business, as the tax cut only applies to those entities when they are companies. Regarding the small business community such as that of my own family and, I am sure, many of us here and in the community, those with a company structure make up only 30 per cent. So please do not tell me that Labor 'gets' small business, because this shows that they do not. What a surprise: a quick political fix which, because it is not part of a holistic overhaul of the taxation system, ends in fiscal failure again for this government intent on getting it wrong, it seems, every time.
I have listened to the debate and am surprised by the commentary of those opposite. The underlying assumption at the current time seems to be around the language of 'big', 'bad', 'rich'—insert sneer—'dirty'—borrowed from the carbon tax debate—miners who can afford to pay more, so let's make them. The Australian voter is being duped into believing that these companies and individuals do not already pay tax and do not already contribute.
I was really pleased to see Senator Gallacher commenting so wonderfully about the contributions that miners have made to our communities over time in this country. I love that we are not entitled to make a profit! Whilst there are issues with FIFO, let's deal with those rather than assuming this will be the fix for it. I have digressed.
The government's commentary is insulting. It is belittling, it is mediocre and it is benign. If taken up, this rhetoric moves beyond the pages of The Monthly and this chamber and will risk turning Australia into a very beige version of the 1970s Eastern Europe. This government and its Green cronies, through poorly thought out policy, poor consultation and poorly applied and rushed through legislation, do not further the national interest as they intend; rather, through a smoky haze of political uncertainty, they seek to architect social change right under our very watch. Of course Australians need to ensure there is a contribution from the extraction of our minerals. I just do not think this is the way to go about it.
I rise today to also speak on the Minerals Resource Rent Tax Bill 2011 and associated bills. It is a suite of bills that are deeply flawed and can only be described as quintessentially Labor. I say that for a number of reasons. First, like so many pieces of legislation we see before us in this chamber, these bills have been poorly drafted with little consultation, particularly across the industry to be impacted by the new tax. It is widely acknowledged that the MRRT was developed through a highly flawed process, completely lacking transparency.
In true Labor style, the details of the MRRT were nutted out behind closed doors, with Prime Minister Gillard only inviting a select few multinationals to join in the consultation process. None of the small or mid-tier mining companies that contribute so much to the Australian economy were even invited to the drawing board. It was only the top three. This invitation was issued by the Prime Minister and the Treasurer only after the Australian mining industry was forced to launch a public campaign against the government, born out of sheer desperation as their pleas to Labor for a thorough consultation process fell on deaf ears. The exclusion of companies like Fortescue Metals, Atlas Iron et cetera from the consultation process not only demonstrates the sheer trademark arrogance of this Gillard Labor government but also has divided the mining industry as the small and mid-tier companies are aggrieved, and rightly so, that their competitors were exclusively invited to devise the tax. It was not just the small and mid-tier companies that were excluded from the consultation process; Treasury and departmental officials were not invited to those closed-door meetings either. Consequently, Labor has devised a truly unjust tax which gives the larger established mining companies a huge competitive advantage over Australia's smaller and developing mining companies.
Also, these bills are quintessentially Labor because, so typical of this government, the bills aim to impose a great big new tax on the Australian economy. Just like the carbon tax, the mining tax is another deeply flawed assault on the Australian economy by the Labor government. Labor claims that a rent tax is a more equitable way of distributing the wealth derived from Australia's minerals resources than the current royalty system. However, a cynic may be forgiven for thinking that perhaps the main issue that the Gillard Labor government has with the current mineral royalty system is the fact that it is paid to the states and not to the government. Despite using the royalty system as the philosophy behind this great big new tax on the mining industry, the mining tax does not actually get rid of it—it just imposes yet another layer of tax on the mining industry—one that goes against the recommendation of the Henry review, which Labor itself commissioned.
The Henry review recommended that the MRRT be a replacement tax and that the federal government should negotiate the details of it with state and territory governments, particularly in relation to the federal-state financial issues arising from any change to taxation policy. But, just to prove to us all how meaningless stakeholder consultation is to this government, Labor failed to discuss the MRRT with the states and instead presented them with a package they had no option but to agree to or reject. This new government imposed double whammy of MRRT and royalties will be extremely prohibitive for start-up miners looking to fund new ventures. This is because the MRRT taxes projects on the basis of their rates of return, so high-risk projects which by their very nature need to have high rates of return will be taxed more heavily than larger, more stable projects which require a lower rate of return in order to be viable. This creates, without a doubt, a disincentive to invest.
There are other options for potential investors looking to put money into mining investments, and Australia is not the only place that has minerals that are accessible on a viable basis. They just have to look at the many countries in Africa, in Asia and, certainly, in South America for alternatives. When an investor is considering where to put their money the rate of return is a highly valid consideration, and in Australia, if this MRRT is passed, the rate of return available to investors will effectively be capped.
At the inquiry into the MRRT bills the committee heard from Atlas Iron. The Executive Chairman of Atlas Iron, Mr David Flanagan, said at the inquiry that it was the aim of Atlas to be the BHP of tomorrow, and then some. Atlas Iron is a successful Australian mining company which is most certainly punching above its weight but which, at this point in time, could by no means be considered large enough to be compared against the likes of BHP and Rio Tinto. Atlas Iron operates in and around Port Hedland, currently producing around six million tonnes of iron ore per year and employing 500 people within Australia. Under the promised MRRT it will be extremely difficult for the Atlas Irons of today to become the BHPs of tomorrow.
I asked Mr Flanagan how much the company had spent in Australia since starting up in 2004. Mr Flanagan estimated that Atlas Iron had spent $800 million in Australia on job creation, wages, superannuation, infrastructure, paying local suppliers and paying Indigenous royalties. Eight hundred million dollars in eight years is a significant contribution to the Australian economy, and this is just one example of how much one small mining company is capable of creating. It is not an $800 million that I would like to have seen spent in Africa, South America or Asia.
I went on to ask Mr Flanagan whether, if the MRRT had been in place when they were looking to start up back in 2004, the tax would have been a disincentive to making an investment of that size in the company. Mr Flanagan stated quite clearly on the record that, had the MRRT been in place at the time, it would have been a prohibitive factor to starting up Atlas Iron. He then explained to the committee, by referring to Andrew Forrest's comments, that even a company like Fortescue Metals Group would have been unable to get up off the ground under the MRRT. What he was saying was that, if the MRRT had been in place, Fortescue Metals, which is now one of the major mining companies in Australia, would not have got up off the ground. I think that is a huge statement to have made.
He then went on to say that if a company like Fortescue had not paved the way for smaller operations—in other words, if it had not got up off the ground and then put in place infrastructure and other facilities—in his opinion Atlas Iron would not have been able to raise the necessary funding for it to get up off the ground. So Fortescue, in a sense, was a catalyst for attracting the funding that made it possible for Atlas and other companies to get up and running. So, if the MRRT had been in place, there goes the $800 million, plus the investments that are likely to be made by Atlas and all those other companies in the future. Presumably, looking forward, the same impact would occur for future companies looking to get up off the ground.
Atlas Iron is no doubt a great Australian success story, and it has done fantastic things since 2004, but the Executive Chairman is adamant that under the tax structure of the MRRT which Labor is proposing, and which we are debating in this place today, the company would not be here employing hundreds of Australians and injecting millions of dollars into the economy. The higher effective marginal tax rate the MRRT will impose on new, high-risk ventures will place significant limitations on Australia's potential. It must, therefore, be extremely difficult for executives in the mining industry who have worked so tirelessly to get high-risk projects off the ground for the benefit of this country and to create jobs for workers and revenue streams for the government to then hear the fruits of their labours referred to by the Gillard Labor government and the unions as windfall gains that must be punished with a higher tax.
As we all know, this Labor government likes to tax success. Treasurer Wayne Swan, through his comments in an article published in the Monthly earlier this month, has left us in no doubt about what he thinks about the stalwarts of Australia's mining industry. Treasurer Swan's comments that successful Australians like Gina Rinehart, Clive Palmer and Andrew Forrest are threats to Australia's democracy are unbelievably ignorant and demonstrate the Treasurer's economic ignorance. Mr Swan went on to try to justify his despicable statements by saying that politicians have to choose 'between standing up for workers and kneeling down at the feet of the Gina Rineharts and the Clive Palmers'. Mr Swan clearly does not realise that without the Gina Rineharts, the Clive Palmers and the Andrew Forrests of this country there would be significantly fewer workers for him to stand up for and far less government revenue for this government to waste.
Mr Swan's vitriolic personal attacks on three of Australia's highest achievers have only served to demonstrate that this government lacks any sort of economic credibility whatsoever. Economically speaking, Mr Swan should know better. As Fortescue Metals pointed out in its retaliation to the Treasurer's attack, years of investment and losses generally precede any taxable income, and for every high-profile successful mining venture there are hundreds—maybe even thousands—that did not make it. It is a high-risk industry. On the contrary, the victims of the Treasurer's crude and obtuse public stoush epitomise the very heart of what it is to be Australian: to work hard, start from scratch and make a go of the opportunities our great country can offer to those who are willing to take the risk and to make the investment and personal sacrifice that is necessary to successfully grow a company—what Mark Latham once described as the 'ladder of opportunity'. Mr Swan's comments proved that the MRRT is a tax on the fundamental Australian belief in a fair go.
Another dubious claim of this Labor government is that the MRRT will alleviate the pressures of Dutch disease on Australia's economy. That is right: in one fell swoop and with one great big tax, they plan to magically alleviate a complex economic problem. The mining tax is not the panacea for the effects of Dutch disease on the Australian economy. Whilst there is no denying that Australia is currently experiencing a two- or even multispeed economy, it defies belief that, instead of identifying and implementing reform for the weaker areas of the economy, Labor would prefer to address Dutch disease by stifling our strongest industry instead. Typical of Labor: bring everyone down to the lowest common denominator rather than build up the worst performers.
Of course the unions have publicly backed this theory. The ACTU in its submission to the Senate Economics Legislation Committee stated that the new system of resource taxation is needed on macroeconomic grounds as the tax and its revenue can be used to ameliorate the negative effects of the mining boom on other industries and deliver a more balanced economy overall. The CFMEU echoed similar sentiments. Amongst claiming it is causing fatigue, family breakdown and alcohol and drug problems in its submission to the economics committee, the CFMEU also claims that the resource boom is causing Dutch disease and that the only way to resolve it is to implement Labor's great big new tax on the resource sector. In fact, both unions claimed in their submissions that the MRRT does not go far enough and that they would have preferred the resource super profits tax just to really drive the final nail in the mining industry's coffin.
Interestingly, though, just last week the Australian Financial Review ran an article referring to a paper in relation to the MRRT written by University of Melbourne economist Professor Max Corden. Professor Corden is considered the father of the Dutch disease theory. He claimed that for the MRRT to curb the resources-driven high dollar enough to stop it hurting non-resource sectors, taxation on mining would have to occur at a level that significantly reduced not just after-profit tax but total output of the industry. But by doing this, Professor Corden is quoted as saying in the Australian Financial Review that the government would indeed be killing the golden goose. Professor Corden is further quoted in the article as saying that Labor should in fact rely less on its mining tax and more on big budget surpluses if it wants to spread Australia's resource riches and reduce the impact of Dutch disease on the economy.
But, as all of us on this side of the chamber know, Labor does not have a particularly stellar record when it comes to big budget surpluses. In fact, Labor's predicted budget surpluses change from one day to the next. So far this financial year, we have been told by Labor that they would achieve not a surplus but a $12 billion deficit. Then it was a $32 billion deficit, and now that figure has been revised to a $37 billion deficit—and this is all in one year. Labor are not in a position to rely on big budget surpluses, because they are incapable of delivering them. Further examination of this year's so-called budget reveals that it is nothing more than creative accounting. Shuffling money, taking spending forward or back and removing items from the budget is not delivering a surplus. It is merely this Labor government confirming how truly inept they are at managing the budget and delivering their promises. So, although Professor Corden's advice makes economic sense, it is not achievable under a Gillard Labor government.
However, what this Labor government lacks in delivering surpluses, it does make up for in imposing high taxes. They have an impeccable record for high taxing. Labor has announced 20 new or increased taxes since 2007. It is Labor's default solution for every problem, and it does not matter what it is. Be it alcohol, motor vehicles, private health insurance, carbon or, in this case, mining, nothing is safe from this government's desperate clamouring to get the budget back to what they can spin as a respectable position before the next election, after years of their waste and mismanagement.
The economics committee also heard throughout the inquiry process from a number of mining companies concerned that the MRRT will significantly reduce Australia's competitiveness for international investment. Witnesses to the inquiry said that their companies had made strategic decisions, based on the impact the MRRT will have, to deliberately invest in places like Brazil and Africa instead of Australia. It absolutely defies belief that Labor has allowed Australia to fall behind regions such as Africa in terms of investment competitiveness. I am simply astounded that in the 21st century Australia is seen in some investment circles as a bigger sovereign risk than some African or South American nations. Other witnesses to the inquiry, such as Megan Anwyl, Executive Director of the Magnetite Network, told the committee how the magnetite industry is concerned about the impact the MRRT will have on unfinanced projects in a relatively new and emerging industry. The fact is that Labor's great big taxes are destroying Australia's reputation as a safe and reliable place to invest.
There is also the issue of the huge compliance costs and administrative burden this tax will place on the mining industry, especially for sectors such as onshore oil and the gas sector that may not have a large liability but will still be forced to comply with the requirements of the tax. The MRRT, like just about everything that this government tries to implement, such as the failed Green Loans scheme, the failed cash for clunkers scheme, the failed solar rebate scheme, the failed pink batts scheme and the failed computers in schools program, to name a few—and I could go on—is set to be yet another calamitous Labor policy failure.
Incredulously, despite getting a significant proportion of the mining industry off side, despite spending millions of dollars on advertising, despite falling polls and significant infighting among the Labor Party, the MRRT will not actually improve the government's budget position. In fact, it will significantly widen Australia's structural budget deficit over time. This is because the cost of Labor's related commitments is significantly higher than the expected revenue raised from the MRRT. Their own figures show that the mining tax will raise about $4 billion less over the forward estimates than is required. For example, Treasury modelling shows that the proposed increase in compulsory super alone will cost more every year, once fully implemented, than the MRRT will raise. This will only get worse over time as the cost of all related measures continue to increase and as the MRRT revenue decreases as the current resources boom dissipates, as it surely will. Only the Gillard Labor government would be foolish enough to use a highly volatile and downward trending revenue stream to fund a number of costly commitments and tax cuts. And let's face it: a tax cut is not a tax cut if it is funded from a great big new tax designed to annihilate the strongest performing sector of the economy. This has been revealed just from the Treasury modelling that we have been allowed to see, because let us not forget that the government has refused to release the entire Treasury modelling undertaken for the MRRT and the assumptions that underpin it.
They are still to release the underlying mining tax revenue assumptions on commodity prices and production volume. And why have they not released them? It is because those assumptions, just like the way the MRRT was designed, is a big secret. By their own admission it is because they based it on information provided to them in their secret talks with the top three and therefore the details of one of the biggest taxes ever imposed on this country is commercial-in-confidence.
The Queensland and Western Australian state governments manage to publish this information in their budget papers so that their royalty revenue estimates may be subject to public scrutiny, but it would seem the Gillard Labor government is a law unto itself. Transparency has never been their strong point and they avoid public scrutiny at all costs, because Labor do not care about how they are perceived by the public. They are too busy trying to appease the faceless men instead. These include not just the New South Wales Right but also, in this case, the Greens. The Greens are increasingly looking to demonise the mining industry and have been very keen to jump on the back of this MRRT. The only hesitation they have shown is that they do not think it goes far enough. In the end though, they will be voting for it.
When the Henry tax review was commissioned the Labor government promised Australians a simpler and fairer system of taxation. The Henry tax review recommendations on resource taxation reform were supposed to make resource taxation arrangements simpler, more equitable across the whole of industry and less distorting. The MRRT does not do this and Labor is flogging a dead horse by trying to say that it does. The MRRT is a bad tax. Like most pieces of legislation from this government, it is poorly designed. It is inequitable. It gives the larger mining companies a competitive advantage and, just like the Gillard Labor government, it is divisive and fiscally irresponsible. The MRRT is a distortion and a number of important questions about the tax remain unanswered. It is only the will of the Prime Minister, the Treasurer, the unions that control the Labor Party and the top three mining companies in the country, and it is distorted by input from the Greens. Mining investment in Australia as a percentage of global investment is already falling and the MRRT will make it much worse.
I rise to join my colleagues in speaking against the Minerals Resource Rent Tax Bill 2011 and associated bills. There has been much discussion by members opposite and many accusations have been made about bad business, big bad miners, dirty miners and mining daring to be profitable. But the baddest thing—if there be such a word—as far as I am concerned, in the context of this issue, is the minerals resource rent tax itself and the process whence it was delivered to the Australian people. It is bad policy. It has come from a bad process. It is a bad tax. It is bad for jobs, it is bad for the economy, it is bad for investment and it is particularly bad for my home state of South Australia. It has come out of a bad process.
It has essentially been hatched in secret, with very little and certainly insufficient consultation with many of those who will be acutely affected by its imposition. It essentially rewards vested interests of those who have been inside the Labor government's consultation tent. In that sense it is not a lot different from some other proposals before this parliament and the South Australian parliament by the state Labor government.
The proposals being put before this parliament by this Labor government are bad and are hatched out of a bad process as a result of an outcome hatched in secret. I refer by way of example to the dirty deal done between this Labor government and the Greens in the lower house, the bill to effectively abolish the Australian building and construction industry—in particular, the amendments agreed to by this government to ensure that no investigations can be conducted and no action can be taken by the policing authority where a perpetrator to a wrong does a deal to settle the matter with another perpetrator of that wrong or victim of that wrong.
In terms of dirty deals hatched and leading to bad policy in South Australia, I refer to the proposal put by Premier Jay Weatherill to the South Australian parliament that there be some so-called freeing up of shop trading hours—which admittedly has been a very vexed issue in South Australia—the price for which is tampering with public holidays legislation and hooking into the federal workplace relations system. It is a bad deal, it is not what it says it is and it is being hatched in secret, arguably by those who do not represent people who are most acutely affected by it, as has been the minerals resource rent tax.
The coalition report into the mining resources rent tax more than adequately lays out many of the reasons we think this tax is bad policy. Reasons include the tax's poor design and the fact that it is discriminatory to miners; it reduces Australia's international competitiveness, where otherwise we are an attractive investment destination; and it gives an unfair advantage to the three big multinationals, who seem happy with the proposition—mainly because they are multinational, multicommodity and multiproject companies. As recorded in the coalition senators' dissenting report, it also makes the federal budget hostage to outcomes of decisions by state and territory governments about their royalty issues and it raises serious constitutional issues. But perhaps most concerning for the future of this parliament, for so long as it continues in its current permutation, is the politics of envy and class warfare that seems to be constantly referred to by members of the government in a very poor attempt to justify the mining tax. It is, it would appear, a tax based on class warfare and the politics of envy that are alive not only in the Australian parliament but in the pages of the Monthly whenever Treasurer Swan puts his poisoned pen to work. Some of Australia's most successful and most prominent businesspeople, that is, people seen as tall poppies, have been maligned by members of this government in the process of discussion about or comment upon—I would not even call it debate—the proposed tax. Senator Doug Cameron, one of my good colleagues opposite, seems to be fascinated habitually with the likes of Gina Rinehart, Twiggy Forrest and Clive Palmer. It does not seem to matter much to Senator Cameron whether he is making accusations against them in relation to their incomes, their companies or their private health insurance. The fact that they are successful and have a high profile seems to be sufficient for Senator Cameron and many of his colleagues to attack them on things they would like to take from them.
It is bad economics as well as bad policy to single out a particular sector for the imposition of a tax. It is also bad policy to promote the politics of envy in discriminating between business interests within the one sector—and I will say more about that later. Australian mining companies already pay double taxation through company taxes and government royalties. Of course, with the minerals resource rent tax they will now be hit with triple taxation.
In the South Australian economy we have some success stories, but it is also a very vulnerable time for South Australians. South Australians deserve to know what their representatives on the other side are doing for the South Australian economy and for South Australian jobs, when Labor members of parliament like the member for Adelaide, Kate Ellis, and Senators Wong, Farrell, McEwen and Gallacher are supporting the mining tax and, of course, the job-destroying carbon tax. I will refer to a few statistics about what is happening in South Australia. Australian Bureau of Statistics figures show that our economy had the worst economic growth in Australia for both the December 2011 quarter and the calendar year 2011. Growth figures in SA for the September 2011 quarter showed a negative growth of 0.3 per cent and a negative growth of 0.3 per cent again in the December 2011 quarter. Our exports have declined in two consecutive quarters—by 0.7 per cent in the September quarter and by 0.4 per cent in the December quarter. Now the South Australian economy will be hit by both the carbon tax and the mining tax. As far as small businesses are concerned, as the so-called Fair Work rubber hits the road, this is happening at a time when they are realising, as are many small businesses across the country, the price imposts of and inflexibilities imposed upon their businesses by the so-called Fair Work legislation. South Australians are right to ask: what good is it having South Australian MPs like the member for Adelaide, Kate Ellis, and Senators Wong, Farrell, McEwen and Gallacher supposedly representing their interests?
On the subject of jobs in South Australia, Senator Wong responded to a question during question time about modelling that showed that the carbon tax would cost 1,500 jobs in South Australia, yet, somewhat miraculously, the South Australian Minister for Employment, Mr Kenyon, denied knowledge of the modelling. What did Minister Wong say when she was asked about it? She said, 'Oh, well, it's simply part of the fear campaign about the carbon tax.' So if South Australian unemployment goes up that is just a fear campaign. If 1,500 jobs are to disappear, that is 75 per cent of the total new jobs the Olympic Dam expansion is expected to create in South Australia. So on the one hand you give and on the other hand you take away—all but 25 per cent. Mining is supposed to be South Australia's future. That is what we are told and that is what we would like to believe. Premier Weatherill has been pretty bullish about the mining future in South Australia. In February, he told the Australian:
We are in the early stages of this exploration boom that is transforming to a mining boom. It won't just fall into our lap and we'll have to take positive steps.
Wham!—carbon tax; wham!—mining tax. Of course, he did not say those last two things; that was me.
Premier Weatherill should talk to his federal colleagues about the carbon tax and the mining tax if he thinks we should be taking positive steps, because those as sure as hell are not positive steps. They are as sure as hell not considered positive steps for, by example, OneSteel in Whyalla. We have a curious inconsistency and unacceptable inequity when, for example, we compare the situation at Olympic Dam with OneSteel and other mining companies in South Australia. Because the mining tax will only apply to iron ore and coal, not affected by the imposition of the mining tax in SA will be BHP Billiton at Olympic Dam, with copper, uranium and gold, or OZ Minerals' Prominent Hill gold and copper mine.
There is some good news amongst all of this for mining in South Australia, where the expansion of the Olympic Dam will take four years to get to the ore body, so there will obviously be the creation of jobs in the quest in the meanwhile. It will use 110 350-tonne trucks 24/7 and the mine is projected to last for some 80 years. That is pretty good news. Olympic Dam is the world's fourth largest copper resource, has the largest known deposit of uranium and has rich deposits of silver and gold. By 2050, the size of the open pit for the redevelopment is likely to be more than four kilometres long, about 3½ kilometres wide and one kilometre deep—yet BHP Billiton will not pay this minerals resource rent tax for Olympic Dam. You have got to be feeling good about that if you are a competitor of BHP Billiton and you have to pay the mining tax.
Arguably South Australia is the birthplace of Australian iron ore and the steel industry. Clearly it plays an important role as an iron ore and steel producer, and it wants to continue to play an important role as an iron ore and steel producer. Had the government bothered to ask the 4,000 people directly employed at OneSteel in Whyalla and the thousands of others whose job in the community relies on OneSteel what they think about the minerals resources rent tax, I am sure they would not be getting the positive that Jay Weatherill says South Australia's mining industry needs. In 2011 OneSteel commented in its annual report:
OneSteel is a miner and seller of iron ore and also uses iron ore internally for steel production. If the proposed MRRT is introduced, it will have an adverse effect upon the financial performance of OneSteel.
In addition to all of that, as if the impact on jobs and on the economy and mining in particular in South Australia were not enough, there is the red tape that will be created for business, particularly smaller companies. This is at a time when the government says it will set about reducing red tape and create a commissioner for small business at the end of 2012—a commissioner which Ken Phillips, on behalf of COSBOA, quite correctly says will be a toothless tiger unless it is given power to compel the government, when doing business with small business, to step up to the plate and act like a model commercial player. At the moment the government is simply saying, as it often does, that it will create a small business commissioner and that will be enough for small business and shows that they are standing up for small business. At the same time, they are whamming small business with a carbon tax, the mining tax and the red tape that goes with it. Companies will now have to run separate accounting systems—one for their annual returns and one for their calculations of the mining tax. So that is more red tape for companies that are supposed to be leading the South Australian economy, among others, out of the economic wilderness.
Business SA, one of the state's employer organisations, in their submission to the inquiry said:
The design of the MRRT is flawed. There will soon be two different types of mining tax regimes in place. Indeed, while companies subject to the MRRT receive a refund from the Commonwealth Government on the State mining royalties that they also pay, the administrative and compliance costs of two different mining tax regimes are far higher than they should be.
Red tape, and negotiated in secret. The chairman of OneSteel, Peter Smedley, quoted in the Advertiser in 2011, said of the mining tax 'there was not sufficient certainty around outcomes to provide guidance on its financial impact'. Why was there not sufficient certainty? Because he was out of the loop, as were many of his colleagues—as was everybody other than the big three. The mining tax was negotiated exclusively and in secret with the three big miners, and the public was presented with the outcome in the shape of the minerals resource rent tax heads of agreement, which of course was signed by the MDs of BHP Billiton, Rio Tinto and Xstrata. So a Labor government comes up with a bad tax, a bad policy, as a result of a bad process. The minerals resource rent tax is nothing other than a tax on success, and the Australian parliament should reject it.
I rise to make a contribution to the debate on yet another piece of bad tax legislation proposed by this government. It follows on from a number of others. As has been said by a number of people on this side of the chamber, there is a cumulative range of taxes that are having an impact on the Australian economy. We hear a lot about how we deal with and manage the two-speed Australian economy. But it seems to me that, instead of encouraging the part of the economy that is doing well and keeping it rolling, the Labor government want to tax it and slow it down to bring it back to the level of the rest of the economy. Rather than trying to lift the part of the Australian economy that is doing it tough, the government's strategy is to tax the part of the economy that is doing well and bring it back down to the rest of the field. That is completely the inverse of what they ought to be doing.
The process that we have been through to get to this particular point just demonstrates the government's lack of capacity to actually manage proper policy implementation. I have said on a number of other occasions that the government talk about evidence based policy, yet here is another demonstration of a completely ridiculous process. The government say that this tax was brought in because it was a recommendation of the Henry tax review. Of course, the Henry tax review said that, if we went down this track, it would be a replacement tax for other taxes that are currently in the system—in other words, a replacement tax for existing state royalties. But are the government doing that? Of course they are not. They are taking a piece of an approach and applying it badly—they are not conforming to the actual recommendations in the Henry tax review document—on top of everything that currently exists. And then they are saying it is only fair that these people who are making these big profits should pay their fair share of tax, the obvious implication being that they are not paying any tax as it is. Of course, if you are earning profits as a company at all, you are paying tax, you are making a contribution to the Commonwealth coffers. There has been plenty of discussion over recent years of the additional revenues flowing into federal government coffers from the profits of mining companies. What this government wants to do is to take that a bit further. It wants to get extra money out of these companies.
The government did not tell anyone about what they were going to do. They did not talk to the state governments whom they were overlaying with this new tax. They did not have any conversations about it with the state governments. They did not tell the mining companies about it. They just came out and made an announcement: 'We're going to share the profits. We're going to make sure the whole country gets the benefit of this mining tax.' They did not talk to the states; they did not talk to the mining companies. After the justifiable outcry by the mining industry, we ended up losing a Prime Minister over this process. The new Prime Minister came in and said, 'We will sort this out. We will make sure that we get a good result, and that we properly consult.' So what does the new Prime Minister do? She takes three mining companies, the three largest mining companies, into a room and negotiates a deal with them.
The revenues in the initial proposal of the mining tax have been vastly reduced in the revised version. So when the government accuses the opposition of wanting to give money back to the mining companies, the government, through the concessions it made in the negotiations following the initial incarnation of this bad tax, has given away billions of dollars more than the opposition might be considering by opposing this tax. The one who has made the greatest concession to the mining industry as part of this process is Prime Minister Gillard, not the opposition, by a factor of billions of dollars. The concessions that the government has made make what the opposition is proposing pale into insignificance. It has been a completely and utterly terrible process. Why could you then blame the smaller mining companies for complaining?
There has been a debate in the chamber this morning that I have heard about scale. Let us talk about the mega companies, the big three global mining companies, who were invited into that room. Why wouldn't the other mining companies—those who are the next level down; the Australian based mining companies—legitimately complain about the process? Why wouldn't they say: 'This is not fair. We have not been given a fair go in negotiating this process.' Why wouldn't they legitimately say that? It is quite reasonable that they say that.
Let us look at some of the specifics—a company mining magnetite, for example. Magnetite has very little value when it comes out of the ground. The government says that the mining tax is not going to hold back any mines; it is not going to stop anything. But, in the context of magnetite, the tax has the very real capacity to do that. Magnetite is a mineral that is mined in my home state of Tasmania, and the company that is mining that mineral there has turned around a mine which was effectively at the end of its life. The company made a significant change to the profitability of that mine and it is now actually making a significant amount of money. The profits from that mine are going to develop other projects in Western Australia. This tax puts that investment in doubt because magnetite has very little value when it is taken out of the ground. It is only when it is processed and either pelletised or made into a powder for export that it has value. It then potentially attracts the mining tax. The company is saying, 'This raises real questions for us.' The actual processing of the material is quite energy intensive. Not only does the company get hit with the mining tax; they also have to deal with the carbon tax because their energy costs are going to go up by potentially 10 per cent for power and nine per cent, we are told from the government's modelling, for gas, and they utilise both of those commodities. So they are potentially impacted by this tax. This is one classic example of where this tax will have a negative impact on the mining industry and where it will potentially stop investment.
The government tells us that this tax is about making sure that the country gets a fair share of the wealth from the mining boom; that the wealth is spread. But they then neglect to say that we already have a process in place to ensure that that occurs. I had a bit of look through the latest report, the 2012 update, from the Commonwealth Grants Commission on GST revenue sharing relativities. I know that my colleagues from Western Australia are a little grumpy about the fact that the percentage of revenue that they receive from the GST is receding. I get that. As a senator from Tasmania, my state gets the highest return for dollar that is paid. And I do acknowledge the comments of Western Australian Premier Barnett in relation to where Tasmania sits with mining, and to an extent I have to say that I agree with him. Some people in Tasmania are really grumpy about the statements that he has made but there is some legitimacy to them. We in Tasmania have to make up our minds as to whether or not we are going to play our role in the economic wealth of the country or whether we are going to become the country's national park. I think we should be making a reasonable contribution to the economics of the country. We have the capacity to do that, unless people who would like to turn us into a national park get their way. I do not support that process. I think we ought to be making a contribution.
The executive summary of the Commonwealth Grants Commission 2012 report on GST revenue relativities talks about the fact that Western Australia is receiving less revenue because its cost of providing services is subsidised to a large extent by its capacity to raise revenue. Western Australia has a much higher capacity to raise revenue because of its mining royalties. So we come back to the topic which has been raised a number of times in this debate and, unfortunately, largely ignored by the government members: that mining royalties are a state entitlement. It is the way that the Constitution was set up. Mining royalties go to the states and, in the allocation of other revenues through the Commonwealth Grants Commission process and through the GST revenues, that is taken into account. There is a calculation of the cost of delivering services in a state and then there is an equalisation of the amount of money that a state can actually raise itself and of what additional funding it might need from the Commonwealth to make sure that it can reasonably provide those services to its citizens. This is done so that no state is unfairly disadvantaged. It is one of the things that was set up as part of the process of looking after people across the country so that they all had reasonable access to similar services—a very fine principle. Western Australia has some service delivery costs that are much higher than, for example, Tasmania's because it is such a large state and because there are such large distances to consider. Some services cost more to provide than they do in Tasmania. For some services it is completely inverse. In the circumstance of equalisation, when you look at the executive summary, it says:
Western Australia is the State experiencing the most significant structural change to its fiscal capacity. We have assessed that it needs, in 2012-13, to spend some $724 more per person to deliver the average level of services, and invest some $126 more per person to accommodate its faster population growth.
So there are issues that Western Australia has to deal with obviously—
However these demands are more than offset by the fact that it can raise $1 859 more per capita from its own revenue sources, mainly mining royalties. In net terms it needs far less than the average GST (and the other States far more) if all States are to have the same capacity to deliver services and acquire infrastructure.
That is not me. That is not the opposition; this is the Commonwealth Grants Commission that applies a formula negotiated between all of the states and the Commonwealth to fairly distribute the revenues that the states and Commonwealth have so that there is a fair distribution at a reasonable price for delivery of services. It goes on to say:
The magnitude and speed of the change in Western Australia’s fiscal situation is demonstrated by the fact that over the past five years it has collected an additional $4.5 billion in its own revenues or $1 469 per person. In other States the increase is $473 per person. This has contributed to Western Australia’s GST per person falling by $505 over the same period.
The point is that because of Western Australia's mineral wealth—and we all are more than happy that that is the circumstance that Western Australia is in. The reality is that the myth that the government tries to put that we are trying to spread the wealth of mining boom because it is not already happening—that is the obvious implication from the government's words—is already happening through the grants commission process and the systems that are already in place to deal with it. I think that is an important point to make as part of this debate. The government tries to perpetuate the myth that the rest of the country is missing out. It certainly is not; the contribution is already being made and it is happening through the processes that we already have in place.
I want to make a couple of comments in response to some words put on the record by Senator Milne the other day. I was somewhat surprised during her presentation to get an indication of how bad she thought this tax was. She put a number of complaints about this tax on the table, not the least of which was that it was not broad enough. The Greens are obviously going to attempt to modify this tax to broaden its reach, and I suppose that is their right as a political party represented in the chamber. But it comes back to: if this tax is so bad, why are they actually supporting it in the first place?
The answer to that is demonstrated in some publicity that was recently received by Green groups who are going to use every possible method to delay, frustrate, obstruct, take legal challenge to coal projects in Australia. The real reason is that they just do not like mining. So, even if it is a bad tax in their eyes, they will support it because anything that puts a financial obstacle in the way of the mining industry is a good thing as far as the Greens are concerned. Whether that is good for the rest of the country is another question but, as far as the Greens are concerned, that is a good thing.
They do not support the mining industry, and it will be very interesting to see what the broader response to the threats to the coal industry are when that process starts. As a senator from Tasmania, it brings me back to the comments I made earlier about Tasmania effectively becoming Australia's national park. The tactics that the Greens will use on the coal industry are exactly the same tactics that the Greens have used against any reasonably sized projects in Tasmania for the last 20 or 30 years. The Meander Dam comes to mind. The site was first prepared for the construction of that dam in the early 1980s. It did not occur. When it really got momentum in the early 2000s, the process started. We found a plant: an epacris. It only exists in this river. It will be devastated by this dam being built.
Two years later, the inconvenient discovery was that it was not an epacris. It would not be devastated by the dam but it had delayed the dam for two years with millions of dollars of increased costs. By the time that process of delay tactic, of appeal, of legal action, had occurred, the dam was effectively uneconomic. It was only due to the actions of the state and the federal governments at the end of the day who were prepared to put up the money to see the project occur that it happened. The exact same process will occur to mining projects and you are actually seeing a very similar process occurring around coal seam gas: you demonise, you make it so that nothing the industry says is trusted in the public arena, and then you use every single process that you can to delay the project. And if you can delay it long enough there is a real chance that it will become economically unviable. That has happened in Tasmania to the forest industry and to a number of other industries. We are looking at the prospective listing of regions of Tasmania at the moment under the National Heritage Trust. People might think that makes sense, that it is a reasonable thing to do to protect our natural heritage. But the Greens spokesman in Tasmania has said it gives 'that little extra layer of protection' to that area from the mining industry. But what is that code for? It means it is another piece of red tape; it is another process 'through which we can appeal against a proposed development'. And what is happening? Surprise, surprise—business is walking away. Just last week we had a company say, 'We will no longer invest in this project in that region because of the prospect of its listing by the federal government.' So they use all of these layers of red tape, or should I say green tape, to stand in the way of a project, delay its commencement, delay its implementation, so that they can make it uneconomic. That is what is coming to the coal industry, and if it wants to get a good example of how those things have worked it need look no further than Tasmania.
This is a bad piece of legislation. It is founded on very bad foundations. It comes out of the Henry tax review and was misrepresented out of that process. It has not had the genuine, effective and honest negotiation with the industry that it is supposed to be applied to. It has not and does not do what the government pretends that it is going to do, because that is already happening anyway, and there are a whole range of other claims that the government makes in relation to this bill which should not be supported.
It is a pleasure to follow Senator Colbeck who, as always, has provided a very wise and thoughtful contribution. Certainly on this Minerals Resource Rent Tax Bill 2011 and associated bills, his contribution and analysis are spot on. I thought it would be useful in this debate today to go back to the genesis of it all, to go back to where we started talking about mining taxes, a minerals resource rent tax and tax reform in the mining space. It has been easy in the tumultuous times that have followed to forget the reality, that this all started as a result of what was meant to be a root-and-branch overhaul of Australia's tax system.
When Mr Swan became Treasurer he promised to look at everything to do with the tax system from top to bottom—lock, stock and barrel. He said that in doing so he wanted to achieve a simpler tax system, a fairer tax system, a more efficient tax system. He wanted to ensure that, in the end, Australia had a tax system that was as good as you could possibly get. He tasked the then Secretary of the Treasury, with the resources of Treasury to back him up, to undertake this root-and-branch review of the tax system. Ken Henry did that, looked at it from top to bottom, and produced a sweeping report. When his report was released, Ken Henry had 138 different recommendations for reform of Australia's tax system. What did Mr Swan do in response to that? Did he say, 'That is an outstanding body of work, we will systematically work through them, we have concerns about a handful of them but otherwise we will plough on'? Or did he say, 'It's terribly challenging and we're going to take the time to sit down with all the various parties, including the states and territories and perhaps even the opposition parties as well as business and industry and all other stakeholder groups, and work through all the recommendations in a sensible way'? No. The government released a response to the Henry review and said that of the 138 recommendations it would adopt essentially 2½ of them—it would adopt two, and one in part, and within that was the proposal to reform mining tax.
What was Dr Henry's recommendation to reform mining tax? It was recommendation 45 in the Henry review and you can find it in the summary of recommendations on page 89 of his document. The recommendation was:
The current resource charging arrangements imposed on non-renewable resources by the Australian and State governments should be replaced by a uniform resource rent tax imposed and administered by the Australian government ...
There is one word I would like everybody in the chamber and everybody who thinks about this debate to focus on in that recommendation, and that is the word 'replaced'. Ken Henry's recommendation was very clear. It was that the existing framework of state and territory taxes should be replaced by a uniform minerals resource rent tax.
Oftentimes during this debate I have heard those opposite in this chamber and Mr Swan and Ms Gillard and her predecessor, Mr Rudd, all claim that industry wanted this type of tax reform, that industry wanted to see something that taxed mining activities based on profits rather than just on what it dug out of the ground. But industry did not want to get lumbered with both—and that is what the proposal before us does; it lumbers industry with both. Dr Henry went through the arguments in great detail. People can argue one way or the other as to whether his approach, that we should have this replacement, was valid. He highlighted on page of 226 of his report:
In Australia, governments allow private businesses to exploit non-renewable resources and in return collect a charge for resource production, predominantly through taxation arrangements. The form of tax varies across jurisdictions.
That is a statement of fact that is of course at the heart of much of the argument; that we do all recognise in this debate the resources we are talking about are nonrenewable. You can only dig them out of the ground once, and I hear that line said many, many times.
So there is a good reason why taxpayers should expect some return, some support, from the use and extraction of these resources. Traditionally, rightly—and I suspect my colleague Senator Johnston will touch on this—this has been clearly the domain of the states, that the resources are seen to be vested in the states, that that is the constitutional approach that has been taken and therefore, of course, the tax is applied at the states and has been applied through the application of tax in the form of royalties. Mr Henry went on in his report to refer to 'output based royalties', which is what we are talking about here, and he highlighted the impact of applying output based royalties in good times and bad times for the mining industry. He said:
Output-based royalties collect a greater share of the returns to non-renewable resources when profitability is low or negative and collect a smaller share of returns when profitability is high.
Again, it is a fairly simple fact. When you are taxing the sheer volume that is dug out of the ground, you get a situation where, if there is a lot being dug out but profitability is low, there is still a lot of tax paid. If profitability is high, there is actually no more tax being paid for that lot or little, because it is based on volume. This was at the heart of his argument as to why we needed to have this type of change. He argued:
Under output-based royalties, firms are likely to invest and produce less than they otherwise would. The calculation of such royalties does not take production costs into account. This leads to less exploration, lower industry output and earlier closure of projects.
These are the arguments that Mr Henry made for why we should have a significant change in mining tax arrangements.
But remember what that significant change was: it was to replace the regime of output based royalties that exist in all the states of the Commonwealth with a different regime. This legislation does no such thing. It leaves that output based regime totally in place, and instead applies a whole new regime. Is this what Mr Henry recommended? Certainly not. On page 238 of his report, he made it crystal clear when he said:
Existing resource projects should be subject to the new resource rent tax ... Leaving existing projects outside of the new regime would increase administration costs by requiring multiple schemes operating in parallel.
That is exactly the outcome we are getting. We are going to have to use Mr Henry's own words, 'multiple schemes operating in parallel' as a result of this tax and this legislation going through.
So we will have miners and businesses across the country who have put their own capital on the line, who have made the investments to extract these resources, who are taking a gamble in doing so but in doing so, hopefully, where they are successful, employing Australians and generating wealth for their local communities and generating valuable export dollars for the people of Australia and, indeed, for our trade balance. We have those businesses and those companies taking that gamble, but they face the reality that under Labor's proposal they will have to operate under multiple taxation schemes. So effectively, they get none of the benefits talked about in Mr Henry's paper, whether they are right or wrong. They get none of those benefits from having this new tax in place, because they are still having to pay all the old tax royalties based, output based instruments. They are still getting the downside of everything they were doing and they are just getting a new layer put on top of them.
How did it all go so wrong? How is it that the Ken Henry review went so far off the track? Of course it went so far off the track because of the hopeless handling of this matter in particular by Mr Swan. The Treasurer was just unable, unwilling and incapable of sitting down, once given the Henry review, with the states and the companies and negotiating a sensible outcome to start with, negotiating exactly what Henry had recommended: the replacement of existing regimes with a new regime.
We know from the recent leadership spat within the Labor Party that of course he was incapable of doing this, because Mr Rudd blew the whistle on him. Mr Rudd made it clear that the Treasurer had not just mishandled this, but also misled Mr Rudd as Prime Minister in terms of what was being undertaken. Mr Rudd apparently said—we have seen the media reports of this now as the government aired their dirty linen—that his old friend's handling of the issue caused the mining industry to accuse the government of a complete breach of faith over the original 40 per cent resource super profits tax. The Treasurer reportedly assured Mr Rudd that mining companies and the Western Australian government were onside and that this assurance was based partially on the understanding that the RSPT announcement in early May 2010 would not come with budget estimates of the amount revenue it would generate thereby allowing further consultation and discussion.
However, in the end what did Mr Swan do? He released the proposal with those budget numbers, which Mr Rudd claimed was viewed as a complete breach of faith by the states and the industry. So rather than going down the process of setting in train an opportunity for further consultation and discussion, what these comments that Mr Rudd exposed was that in reality Mr Swan had never bothered to undertake any consultation or discussion in the first place.
He announced it, there was a bit of a stunned silence—
as one imagines there might be—
and I said that Western Australia would not support that, we would never support that and his [Mr Rudd's] jaw just about hit the table, he looked across in absolute dismay and said, 'I thought you had agreed to it'. I said, 'No, prime minister, I haven't and I never would'.
Now Wayne Swan had not done his homework, and maybe he had let the then prime minister believe that the states had agreed.
Mr Rudd claims that Mr Swan left him with the impression that the states had agreed. Mr Barnett appears to back up Mr Rudd's version of events that it came as a complete surprise when Mr Barnett said, 'There is no way we are agreeing, there is no way we have and there is no way we ever will.' So Mr Swan just led Mr Rudd down the garden path on this resource superprofits tax and, in doing so, led him into an almighty trap that ultimately saw the demise of Mr Rudd's prime ministership. This has been a botched arrangement from day one.
As it has progressed, we have seen further distortions to the proposal that further undermine any logic whatsoever in what is being undertaken. To ensure that companies did not end up in a spiral of ever-increasing taxation where they would be worse off, the government said that, if there were increases to royalties before this legislation was passed, those increases would be refunded to the states. So we are going to have an arrangement where, firstly, mining companies around the states will pay the level of royalties they always have to the states; secondly, mining companies in the states of New South Wales and Western Australia will pay an increased level of royalties beyond what they were paying before this proposal was announced; thirdly, they will then pay the new mining tax, the so-called minerals resource rent tax; and, fourthly, the Commonwealth will then refund the mining companies for the second component of the increases in the royalty tax paid in addition to the longstanding royalties taxes in New South Wales and Western Australia.
Is anybody confused? I suspect they are, because what we are creating here is an absolute administrative and bureaucratic nightmare. Of the funds received by the Commonwealth from this mining tax, over the forward estimates some $944 million—nearly $1 billion—will be paid back to New South Wales. They saw an opportunity where, if the companies were going to be paying this tax, the states might as well secure a bit more of it for themselves. More than $2 billion of it will be repaid to Western Australia for the same reason. It is up to the states, of course. Historically, the states have made these decisions and they make a valid decision to say, 'We think our taxpayers deserve a better return on these extracted resources,' but in the back of their minds they are no doubt also thinking not only do their taxpayers deserve a better return but, if the Commonwealth is going to tax them anyway, they might as well make sure that they get the money and have some control over it. Frankly, I can appreciate their sentiment because I certainly trust the judgment of the O'Farrell and Barnett governments to manage these billions of extra dollars better than I trust the Gillard government to do so. If there is one silver lining when this thing goes through, it is that at least $3 billion over the forward estimates of the billions raised will go to governments that might have some concept of what to do with the money in a sensible way rather than have it used and wasted by this Labor government opposite us.
Has the root and branch reform of the tax system of Ken Henry delivered a simpler arrangement? Has it delivered something simpler for the mining industry? No. What we will get when this legislation passes is another 287 pages of tax law to add to the already voluminous amounts of tax law that exist in Australia today—not one jot of simplification but instead a whole new layer of tax layered upon existing taxes at the state level, hundreds of pages of new tax law, a complex arrangement of the Commonwealth refunding the states for certain taxation arrangements and businesses facing the spiral of having to pay more tax in more places.
Equally, the Henry review recommended that there should be a lower tax burden for smaller mining ventures to help start-ups grow and prosper and to keep the mining ventures in their declining phase alive for longer. Instead, it will be smaller and mid-tier mining ventures that will pay a higher effective tax rate under this legislation because of the deal done. When the Treasurer finally did sit down and try to negotiate something about the mining tax, he did a deal with just the big three miners rather than something that recognised what was necessary for all of the industry.
The mining industry is critically important to Australia. It is the one industry that saved this country going into recession during the global financial crisis. It is an industry that is providing a bounty of wealth. Yes, Australians should share in it, but Australians are sharing in it already. There have been vast increases to the royalty payments by mining companies to state governments. There have been huge gains in the number of Australians employed. People are benefiting from it. It is a tragedy that this botched implementation of tax reform will now see this industry not only pay more but also deal with a gigantically increased bureaucratic burden, the exact opposite of what was promised. That is the core reason the government should go back to the drawing board, start again and come back with a proposal that makes sense rather than this one. (Time expired)
I commence my address on the Mineral Resources Rent Tax Bill and related bills by reciting section 114 of the Australian Constitution, which says:
A State shall not, without the consent of the Parliament of the Commonwealth, raise or maintain any naval or military force, or impose any tax on property of any kind belonging to the Commonwealth, nor shall the Commonwealth impose any tax on property of any kind belonging to a State.
The Commonwealth shall not impose any tax on property of any kind belonging to a state. Many High Court cases have dealt with this. There is a dichotomy between a broad and a narrow interpretation. In taking this tax as close as it does to the mine gate and taxing the minerals in a saleable form, it ties this tax to the resource.
I remind the Senate that minerals are contained within Crown land in Australia—that is, Crown land in right of each of the Australian states. That is why there is a very distinct different set of mining legislation and administrations throughout Australia, each controlled by the individual state mining ministers. Accordingly, each of the states exercises its proprietary entitlement over such mineralisation through the imposition of royalties. In Western Australia, the royalty upon iron ore is at a rate of 7.5 per cent ad valorem.
State mining royalties are one of the principal sources of revenue for each of our Australian states. Mining royalty payments to the Western Australian state government reached some $4.8 billion in 2010-11. Next year, it is predicted they will reach $5.8 million. This is based on the 2010-11 total value of WA mineral production of $101 billion, which represents 95 per cent of Western Australia's total merchandise exports and 41 per cent of Australia's total merchandise exports. No other state or state economy is as dependent upon mining as is Western Australia. Indeed, 65 per cent of this mining resource rent tax revenue comes from my home state of Western Australia.
I have been extremely surprised in listening to this debate that almost every Labor senator has come into this place and, in dealing with this important legislation, has said that the minerals in the ground belong to all Australians. Not only does such a statement disclose an alarming degree of gross ignorance of the specific tenor and terms of the Australian Constitution and, indeed, their own state constitutions—and I am not surprised about that—but they fail to acknowledge one of the principal constitutional tenants which brings them to hold a seat in this chamber: our Federation and its legal and historical foundation. Let us just pause to be in no doubt about one thing: the government senators in this place have no concern whatsoever about trampling upon the very basis for their presence in this place. They are trampling upon the Australian Constitution and its federal structure. Minerals in Australia belong to and are the property of the states. As such, Western Australia has to provide roads, airstrips, communications, hospitals, schools and services to one-quarter of the area of our country in support of mining industries in the Pilbara, the Kimberley, the Murchison, the north-eastern goldfields and the goldfields.
The other myth that has been brought to this chamber by ALP senators, put as politely as I can—some might call it a barefaced lie—is that the Australian mining industry does not pay its way in tax. Currently, the total tax take from miners in the last four years averages 41 per cent, with the estimated tax payable by miners in 2010-11 at $23.4 billion. The minerals resource rent tax will lift Australian mining tax rates above that of competing countries comprising exploration and development and act as a massive disincentive to investment in this very important economic sector in our economy. It should be noted that mining pays a 41 per cent effective tax rate compared to agriculture, fishing and forestry taxation at 29.06 per cent, manufacturing at 30.25 per cent, construction at 28.62 per cent and retail trade at 31.24 per cent. Across the board, mining is already paying a clear 10 per cent more tax to government than any other sector of our economy.
This government believes that it can impose a significant new tax on a capital intensive industry with no consequence to production. Mining investment in 2010 made up 40 per cent of total private investment within the Australian economy. At 41 per cent, Australia will be the highest taxed mining industry against our principal competitors. In the USA they pay 40 per cent, in Brazil they pay 38 per cent, in South Africa they pay 33 per cent and in Canada they pay 23 per cent. All of them are celebrating this tax. All of them are ripping the corks out of their champagne and saying that this is going to be a real kick in the guts for the Australian mining industry.
It all began from a budgetary perspective that saw us with a deficit of $57 billion in 2009-10 and a $41 billion deficit in 2010-11. What is this year's deficit going to be? My bet is it will be about $45 billion. It is an absolute scandal that the mining industry, which has done amazing things in outback Australia, has been the target of this government seeking a bailout for its economic incompetence.
The original Henry plan was to simplify the current royalty system across six regimes. The Henry taxation review concurred with the prevailing economic view that a simplification and a reduction in taxes on corporate income would not only attract investment but encourage innovation and entrepreneurial conduct. In turn, national income would be increased as larger and more productive capital stock was developed and would improve the productivity of businesses and employees. The government has taken the Henry tax review and advice and has headed in precisely the opposite direction while telling us all that a one per cent reduction in the corporate tax rate is a modern-day miracle. A one per cent reduction in the corporate tax rate is a modern-day miracle from this government while knocking over a 30 per cent hike, over and above 41 per cent tax paid to government, to the mining industry. The government, quite obviously, as has been said to me by Western Australian ministers, does not understand the industry and how it is administered by the states. Their ignorance was exposed in factual form during the process when the Western Australian government increased royalties for lump iron ore from 5.5 per cent to 7.5 per cent. This caused a $2 billion hit to the revenue to be raised in this tax.
I need not say much more about what Queensland will do and what New South Wales has already promised to do. Even Tasmania is saying it will increase the royalties. The Henry proposal sought to alleviate this problem by refunding the royalty to the states. This mining resource rent tax model and the revenue it generates will be reduced by state royalties. Having been painted into a corner by principally Western Australia, the Treasurer, in his really pathetic ignorance, then threatened the states with a reduction in their GST revenue to punish them for increasing those royalties. Again, his stupidity does not account for the fact that all states are likely to hike their royalties. Of course, the Commonwealth has to return all GST revenue to the states. If they all put up their royalties, who is going to get punished? None of them will be punished, because the Treasurer does not understand the system and he does not understand royalties.
Turning to the way this tax works practically, it is complex in the extreme, sailing, as it does, in completely uncharted waters. The most crucial thing to remember and consider, in addition to the matters I have set out on a constitutional basis and the fact that it is not reform in any shape or form, is that it is not going to raise any revenue. It will not be revenue positive. Why do I say that? Because the resource super profits tax has been completely watered down and the whole tax is premised on the day-to-day, month-to-month price of minerals. Currently, minerals prices are coming back at a thousand miles an hour. They fluctuate. Anybody from Western Australia knows minerals fluctuate wildly in price. This is a measurement taken on the saleable value, as close as possible, to the mine gate. You only need a few percentage points in price reductions and this tax is out the window. It is completely phoney. It is clear that the reconfiguration of this mining resource rent tax has substantially more limited scope than its predecessor, the resource super profits tax. The mining resource rent tax, levied on current valuations of assets in contrast to the historical written-down values, removes a substantially lucrative element of retrospectivity which applied to the previous tax in its previous form. When considered in light of the fact that it only applies to iron ore and coal now and that it has been reduced from 40 per cent to 30 per cent, and then, taking account of the 25 per cent extraction allowance, the irresistible inference and conclusion is that it will not raise anything near what the government is saying.
If it were going to be revenue positive, you would think the government would be able to present the figures. If it were such a great tax and the formulas were irresistibly in favour of a positive revenue outcome for the Commonwealth, the government would be busting a gut to get the documents on the table for all of us to see and analyse. They will not show us the modelling. They will not show us the predictions of what this tax will generate in the out years. Why? Because they know it is not revenue positive and it is completely hostage to mineral prices.
With respect to iron ore, there is the removal of state royalties with the tax to be levied as close as possible to the point of extraction in its first saleable form—a calculation before the inclusion of royalties and yet including processing. This requires a quantum calculation that substantially reduces the available revenue in this tax. Treasury says that the mining resource rent tax will take only $1.5 billion less than the resource super profits tax. There is nobody in the industry or in economics who thinks that is a credible statement. The government has argued that this new tax would provide miners with increased assurance that the future tax regime will be more stable. Indeed, Senator Wong has said that the mining resource rent tax would 'strengthen the Australian economy, increase productivity and increase mining output'. You have got to be kidding. Treasury even have the audacity to insult people's intelligence by claiming its modelling showed that the resource super profits tax, as it was then, would lead to an incredible 5.5 per cent increase in the resource sector's output. You have got to be kidding. Labor has, as always, a wonderful history of explaining how black is really white when it comes to taxation, rivalled only by the spin and the untruths of Labor's economic ministers.
I pause to deal with something that happened in Western Australia some two weeks ago. Under the headline 'WA should pay ES bills: Greens'—ES being eastern states—the West Australian newspaper of 9 March said that Greens MHR Adam Bandt had said that more revenue had to be raised from the mining states to fund stimulus packages for South-East Australia. You have got to be kidding. The article went on to say:
Mr Bandt's plan would be on top of the Commonwealth Grants Commission's recommendation to take $600 million of WA GST payments in the coming financial year.
What I really want to know is whether Senator Siewert—who I note is now in the chamber—and Senator Ludlam support this. I want to hear Senator Siewert stand up and say that she supports Adam Bandt's requirement that, over and above the $600 million coming off the bottom line for Western Australia this year, the resources tax be increased and that the money be redistributed to Victoria and Tasmania. Western Australia's share of GST is somewhere below 70c in the dollar. This crazy plan will take it to 55c in the dollar. I want to hear the two Western Australian Greens justify that. I want them to come in here and tell us that it is what they want to do to Western Australia. More importantly, I want to hear the Labor senators from Western Australia come in here and tell us that it is what they want to do, because that is what this tax does.
Turning to the mining industry, in 2008-09 it had an eight per cent share of GDP compared with finance and insurance, which had 12 per cent, and manufacturing, which had 10 per cent. Services in the Australian economy accounted for more than 60 per cent of GDP. As of May 2010, 179,000 people were directly employed in the mining industry in comparison to some 74,000 10 years ago. More than 60 per cent of these jobs are to be found in Western Australia and in Queensland. They are good jobs with high pay rates for skilled workers—something we would want in this country, surely. The mining workforce consists of drillers, miners, shot firers, metal fitters and machinists, engineers, truck drivers, metallurgists, plant operators, chemists, geologists, geophysicists, accountants and project managers to name a few. Nearly two-thirds of the workforce have completed education beyond high school.
The process of this tax has been staggering. The states were not even consulted. Only the three largest mining companies were consulted, with some 340 other producers left out in the cold. This is a competitive industry—iron ore and coal have to be marketed—and the government took advice from only the three biggest players. It is offensive, it is unfair, it is absolutely outrageously poor governance and it derogates and corrupts the process. Let us talk about an emerging industry in Australia—the magnetite industry. We have millions of tonnes of low-grade iron ore: around 30 per cent compared with haematite's 65 to 75 per cent. This industry requires capital. We will never get it going with a bottom line that is grossly and adversely affected by this tax.
I pause, as I run out of time, to say that Atlas Iron is a great Western Australian company. It has grown from a zero value 10 years ago to more than $3 billion today. It produces about six million tonnes currently and will produce about 46 million tonnes by 2017. With a workforce of 440 and more than 29,000 mum-and-dad shareholders it is, in my view, a great story of hard work, innovation and victorious commercial struggle. I admire this company, its founders and its vision—all of us on this side of the chamber do. We admire these commercial people who got off their butts and risked their capital. The shareholders and investors put $400 million into this business, and they got their first dividend last year, with 3c a share, or $26 million across those 29,000 shareholders. It is a great Western Australian story.
But what has happened to this company? It has been pilloried by every Labor senator who has come in here. It has been attacked as if it is a bludger. It pays $155 million in tax every year, starting from zero, and Labor senators come in here and pillory these people. I know who the parasites in this country really are, and they are not Atlas Iron. Atlas Iron are a paragon of virtue. They are a great example of what could be and what might be with innovation and imagination. I take my hat off to them. (Time expired)
I rise to speak on the Minerals Resource Rent Tax Bill and the related bills. The coalition has consistently said that it will oppose the Australian Labor Party's mining tax and all the legislation associated with it. It is yet another of the Alp's taxes on success. Previous speakers have made it very clear that miners already pay company tax and state royalties, but now they will be slugged by Julia Gillard and Wayne Swan as part of—
Mining investment in Australia, as a percentage of global investment, is already falling, and this will make it much worse. Labor's claim that it will provide tax cuts is just another con based simply on a tax increase. The only genuine tax cut—and one would have thought that they would have worked this one out by now—is one funded through expenditure restraint. The coalition demonstrated at the last federal election that it can deliver tax cuts based on modest expenditure cuts, and that the ALP is really all about waste. Labor is now borrowing $100 million a day, and by the time it has run this country into the ground it will be up to the coalition to pick up the pieces.
The Gillard government's mining tax is divisive, complex, unfair, fiscally irresponsible and distorting. It will reduce our international competitiveness and was developed through a highly flawed and improper process. I come, in particular, to one aspect of it, and that is the constitutional validity of this legislation. Ken Henry has confirmed that the federal government never sought advice on the constitutional validity of this legislation. There are serious question marks over whether this tax, as a tax on the resource at the point of extraction, is in fact a tax on state property, as prohibited by the Constitution. Let us recall the last time that the Australian Labor Party told us that about the constitutional validity of legislation. Remember the Malaysian solution, the Malaysian solution that was supposedly a watertight case? We saw what the High Court did in relation to it. It threw it out. So this government does not have a very good track record in terms of its assertions about the constitutional validity of its policies and of its legislation. The migration legislation was one example and now, in the health area, the tobacco legislation will be litigated before the High Court. I see Senator McLucas here in the chamber. She will recall that, in the debate prior to the passage of this legislation, I asked her about whether the government had set aside funds in relation to litigation over the tobacco legislation and she told me that it was all hypothetical. So we will see how the government fares with the tobacco legislation going before the High Court. As various other speakers have said, already a number of mining ventures and the state government in Western Australia have flagged High Court action if this legislation should pass the parliament. There is also a valid question about the discrimination between states, which is also prohibited in the Constitution.
This legislation has a number of other flaws. As I said, it is a bad tax that came out of a deeply flawed process. The initial resources super tax was announced without consultation with anyone—no consultation with industry and no consultation with state and territory governments, despite serious implications for their own source revenue.
Let me take the Senate back to the Henry tax review recommendation that a national profit based resource rent tax replace state and territory royalties and that the Australian government should negotiate the federal-state financial relations implications of such a move. Of course, this government did not have the gumption or the fortitude to engage with the states and to do the hard yards on genuine tax reform. So we came up with various workarounds, making the system more complex and messy. Of course this is not the first time that this government has undertaken changes which it did not consult anyone about. In the area of health and ageing I have traversed on many various occasions this government's record in relation to lack of consultation. It simply undertakes a particular course of action to cut something. We have seen it again recently with the solar panel rebate system. The government just cuts without any consultation. Most recently, in my own area of mental health, without any consultation with the medical profession, without any consultation with allied health professionals, this government simply cut sessions that were available to mentally ill Australians without any consultation, with no consideration whatsoever, as to the effect that it would have on their health or on their treatment. If one is going to undertake major change, whether it be in health or any other area, it is vitally important that there be proper consultation. But this government has not been about consultation. And, yes, Senator Johnston did mention they did have some consultation, but they limited it to the three top miners without consulting with the rest of the industry, where it was going to have a vital impact.
The Henry tax review was supposed to be about root-and-branch reform to deliver a simpler, fairer tax system. Instead, this government's mining tax is much more complex and less fair than was originally intended. The Henry tax review also recommended a lower tax burden for smaller mining ventures, to help start-ups grow and prosper and to keep mining ventures in their decline phase alive longer. Instead, smaller and mid-tier mining ventures will pay a higher effective tax rate under the Gillard government's legislation than the big three, who were given exclusive access to negotiations with the government. The Gillard government's mining tax will also reduce our international competitiveness in attracting further investment. The Gillard mining tax package will leave the budget worse off. In particular, over the medium to long term it will worsen the current structural deficit.
So what is all this about? This is about the tired old policies of old Labor, and we have seen it bared in recent times with the class warfare and the billionaire bashing. I will take the opportunity in this debate to raise the fact that I could not help noticing that those opposite in the Australian Labor Party have reduced their side of this chamber to basically a used car yard, with all of its idiosyncrasies. Through the recent episode with the class warfare and the billionaire bashing, we are witnessing what can only be described as a reinvigorated hard sell of tired old banger policies peddled by the usual dodgy salespeople you see lined up there in the front row of every dubious used car yard ready to swoop on the unsuspecting customer. We all know the Australian Labor Party's policies are designed to reduce all to the lowest common denominator. Quite frankly, it is enough to make George Orwell roll over in his grave. We are all equal but, of course, some are more equal than others. What a disgrace! What a tired and flawed philosophy the ALP is following with its policy of winding clocks back yet again by dodgy salespeople through the introduction of bigger bureaucracies, bigger taxes, bigger spending et cetera.
I cannot help but notice that there are plenty of old retreads fitted in the car yard as well. As I said, when all else fails, they will return to their old class warfare strategy—the billionaire bashing. Forget about hope, reward and opportunity, and what it means to Australians who want to get ahead. They might go out and bash the billionaires but ultimately their policies every day, increasingly, are hurting more and more ordinary Australians. But, returning to the old retreads that are now fitted into the used car yard: the targeting of the private schools funding, targeting the successful tall poppies in society—these are their tired old policies. The targeting of the health rebate, which has seen another disgraceful broken promise by the Gillard Labor government, the reintroduction of the issue and a whole range of other retreaded old policies—there are dodgy brakes everywhere in the car yard and they just cannot stop. They cannot stop spending other people's money.
The Australian Labor Party loves red ink. They know little about economic management; they are the economic mismanagers because of their vigorous pursuit of sovereign debt at every opportunity. Whenever and wherever the Australian Labor Party has been in power for any length of time, it has left a trail of red ink for us to fix. Senator Conroy! Senator Conroy is going to leave us the biggest trail of red ink—$50 billion worth—and you smile. Anyone can spend money but it takes discipline and planning to spend within one's means. People are expected to manage their finances and to live within their means. The Australian people expect their governments to live within their means. But given its record to date, near and far, the concept of balanced budgets, surpluses and savings, such as the Future Fund, are alien concepts to the Australian Labor Party and, more particularly, the incompetent Treasurer, Mr Swan.
The Australian Labor Party hides the tired old socialist policies of wealth distribution to screen its incompetence at managing other people's money. Results are the measure of successful policies, not words and spin. With respect to foreign policy, all of the excellent work done by foreign ministers like Alexander Downer over the years has been undone by the incompetent bullying tactics of Mr Smith, Mr Rudd and now Senator Bob Carr, leading with his chin, mouth in top gear and brain in neutral—evident in his dealings with PNG.
We have a lot of work to do employing sophisticated diplomacy around the world to clean up the mess after this lot. You have to admit, it is a tired looking old car yard over there. One does not have to lift the bonnet to locate the source of the problem because the rust, the bald tyres, the dodgy brakes and clocks wound back are evident everywhere and in many cases, I suspect, are terminal. As I and other senators on this side have said, bring on a federal election so that some of these jalopies can be either scrapped or retired to the junk yard.
Senator Conroy, at the end of this process it will not be me who will be so described, it will be you. Just remember the epitaph on your political grave after we have to pay back that $50 billion that you are squandering with your silly NBN process that you dreamt up on the back of a coaster in some aeroplane at the back of Woop Woop.
Honourable senators interjecting—
Yes, absolutely. I return, if I may, to the issue of the mining tax. As I said, the coalition will be opposing this legislation and all the legislation associated with it. If there is anything to do with success, anything to do with Australians getting ahead, this government will tax them. The government is not interested in Australian families working hard to get ahead for themselves and for their children. The government is only interested in taxing Australians. As I have said, Australian mining companies pay company tax and state royalties but now they will be slugged by yet another impost. The failure to consult properly has now resulted in a piece of legislation that is so complex that it will be so difficult to navigate, not just for the big companies but also for smaller companies.
On constitutional validity, what are the issues about discrimination between states? Has this government got legal advice about this legislation? They are prepared to ridicule people like Clive Palmer who has indicated that—
Thank you, Senator Brandis, just because it is his right to challenge—of course he has a vested interest—this legislation. Those opposite denigrate his right as an Australian to challenge this absolutely atrocious piece of legislation.