Tuesday, 18 March 2014
Minerals Resource Rent Tax Repeal and Other Measures Bill 2013; Second Reading
I rise today to denounce the coalition's insistence on scrapping the minerals resource rent tax and to explain why the minerals resource rent tax is so important to the future prosperity of Australia. From beginning to end, the hypocrisy of the coalition on this issue has been nothing short of breathtaking. The original plan was to introduce a resource super profits tax which would have applied to all resources at a rate of 40 per cent. It followed a recommendation featured in the Henry tax review, which found that scrapping the state based royalty taxes that apply to mining projects and replacing them with a uniform national resource rent tax would raise billions more dollars. As the review noted, it would not be without precedent either. In fact, the planned new tax would have been modelled on the petroleum resource rent tax levied on products, including crude oil and natural gas, mined in Australian waters. The effective tax rate in the mining industry was just 17c in the dollar, yet in Canada it is 23 per cent, in Russia it is 30 per cent and in South Africa it is 33 per cent.
It was clear what needed to be done. The state based royalty system was outdated and reform was needed, based in part on the principle that the Australian community expects—and should expect—to receive a fair return from its natural resources that can be dug out of the ground and sold just once. During a once-in-a-lifetime mining boom of a type which few could have predicted, Australia's special circumstances suggested the need for an additional tax.
As then Treasurer Wayne Swan announced:
… we will now tax mining profits in a way that supports the growth of the industry and the economy and ensures the community gets a fair return.
Almost at once the coalition became hysterical, claiming that the sky would fall in. The mining industry would crumble, we were told. Australian prosperity and jobs were at risk, they thundered. There is the prospect of sovereign risk, they shrilled. Then began a concerted and cynical campaign in lockstep with big mining, one that had possibly never been seen in Australia before on such a large scale. Never mind the public interest or a sober analysis of just what the Henry review recommended, the coalition sensed blood in the water and an opportunity to boost their election war chests.
The mining industry spent an estimated $22 million on a disingenuous campaign attacking the tax. To give an overall breakdown: BHP Billiton spent $4.2 million; Rio Tinto spent just over $537,000; the Association of Mining and Exploration Companies spent just under $274,000; and the industry's national body, the Minerals Council of Australia, spent $17.2 million. Several companies donated another $1.9 million to the Liberal Party and the Nationals. This included Clive Palmer's own company, which donated $700,000. The way the mining giants saw it was that Australia had the best democracy money can buy and they did not hesitate for a second to take advantage. Was any of this really fair? Would a superprofits tax actually benefit the nation in the long run? Those questions were not really of concern to the mining sector or the coalition in opposition at the time.
It was after an unrelenting attack of an intensity rarely seen in Australia that Labor instead introduced the minerals resource rent tax, with an effective rate of 22.5 per cent. The coalition and big mining called off the hounds. But, of course, the result was not one that benefited the nation as a whole, just vested mining interests reaping extraordinary profits. Richard Denniss, a former adjunct professor of the Crawford School at the Australian National University, is just one of many who realised that the wool was being pulled over the eyes of the Australian public. He noted:
The mining industry employs around 2% of the workforce and pays the lowest rate of tax on its profits of any industry in Australia.
The original mining tax would have ensured that the mining industry made the kind of contribution to the taxpayer that their expensive advertisements claim they do.
Today’s figures show that the 98% of Australians who don’t work in mining will see very little return from the high prices that foreign companies can seek Australia’s scarce resources for. We are missing out on a once in a generation opportunity.
That is what the concentrated and aggressive campaign of the coalition and big mining means for Australia: we missed out on a once-in-a-generation opportunity. It was an opportunity that the vast majority of countries around the world can only dream of.
But of course the coalition's line of attack on this matter is not without precedent. In fact, we have seen this sort of response from the coalition and mining and energy interests before. It is par for the course for those opposite. During the 1990s, native title legislation provoked a very similar response from the mining industry and the Liberal Party. In 1993, for example, the head of Western Mining Corporation, Hugh Morgan, said:
The economic and political future of Australia has been put at risk and our territorial integrity is under threat … our freehold titles will slump in value if the earning capacity of our mining, pastoral, tourist, fishing and forestry industries is wound down as a result of the consequences of Mabo.
But freehold titles did not slump in value and the earning capacity of the mining sector accelerated rapidly in ways that could not even have been imagined.
I spoke a moment ago about how the Hawke government introduced a petroleum resource rent tax in 1987, at a rate of 40 per cent. These tax reforms were also strongly opposed by the coalition, as well as the energy sector. In fact, the exploration manager of energy giant Esso claimed:
Any introduction of additional taxation runs a substantial risk of shattering industry confidence and drastically delaying exploration activity so that future production will never have any chance of satisfying Australia’s oil requirements.
But that did not happen. The investment continued and the industry thrived. In fact, several years ago, Gorgon famously initiated the biggest ever single investment in Australia's history.
The mining tax was just part of this broader trend. It is pure self-interest, cloaked in a broader concern for the Australian economy, jobs and freedom. That is why comments like those that I just referred to from energy and mining interests and their whip boys in the Liberal and National parties should be taken with a grain of salt, if not ignored altogether. Instead of paying attention to such opinions, we should calmly and rationally explore why the minerals resource rent tax is so important.
It almost goes without saying that there are many ways to view the mining resource rent tax. Some on the right view it as part of a socialist agenda to unfairly seize hard-won profits. Others view it as a form of retribution against mining giants like Gina Rinehart, who are quick to champion conservative causes in their own interest. But there is one aspect of the mining resource rent tax that seems to have been conveniently ignored by many commentators that, quite simply, it makes economic sense.
Every federal government has a responsibility to ensure not only that the nation's economy prospers but also that it will prosper and grow for years to come. We cannot just be concerned about the here and now. Responsible governments anticipate future challenges and work in the long-term interests of all areas of the economy, not just those that are reaping the highest tax revenues right now.
Australia is a rich country, with a population of just 22 million people. I admit that I was surprised to learn that we are currently the 12th largest economy in the entire world. Australia enjoys an incredibly high standard of living and we were one of the very few industrialised economies not to fall into recession during the global financial crisis, thanks to the previous Labor governments. Whilst it is true that the Australian economy has grown for several decades, it is reasonable to say that right now we are relishing the gravitational pull of the largest industrialisation to occur in human history.
China is accomplishing something that is transforming global macro-economic trends and we are positioned perfectly to take advantage of it. Once considered a laconic British outpost, occupied by sheep and with a sunburnt landscape, it was only in relatively recent times that we began to realise just how valuable our raw materials were. Geographically close to East Asia, it is obvious that with the rise of the tiger economies that we are in the right place at the right time. Between 2004 and 2009, the rise in commodity exports accounted for more than 50 per cent of all Australian economic growth. China's share of our total resources exports hit 40 per cent in 2011. At the beginning of the last decade, it was just seven per cent.
So why rock the boat? Why change anything? Why implement new taxes? The reason is that, even though we are a lucky country, it does not mean that we should be complacent. Australia faces numerous challenges which restrict the potential of various sectors. The tyranny of distance and our high dollar, caused in large part by the sugar hit of the mining profits, makes life particularly difficult for businesses across the country. Put simply, we are a long way from almost everyone else and the dollar has been trading far above its historical average of between US70c and US75c for longer than anyone would have expected. The recent demise of manufacturing giants in the automotive and food-processing industries, not to mention Alcoa, is proof of that.
The coalition has repeatedly and falsely claimed that the price on carbon was the cause of Alcoa's demise. But the company itself actually said that the carbon price was not to blame for its decision to shut its Point Henry smelter in Victoria. Instead, the operation was closed due to a range of reasons, such as falling aluminium prices and also notably the high Australian dollar. Doing business in Australia can be hard for this very reason.
The coalition has repeatedly—and, again, falsely—claimed that unions were to blame for the automotive giant Toyota leaving Australia. But that is not the case. In fact, Toyota Australia went out of its way to reject Treasurer Joe Hockey's claim that the manufacturing union's actions were behind the decision to stop making cars in Australia in 2017. Instead, the real reason why it was not sustainable to make cars in Australia anymore was the high Australian dollar and low economies of scale.
So it is clear that, because of facts such as our location and our high dollar, we face special circumstances. The threat that Labor has been keen to combat at every turn is that of a dual-track or dual-speed economy, with mining companies reaping ludicrous profits whilst almost all of our other sectors suffer.
I want to be clear—we are a country susceptible to Dutch disease, where one particular industry benefits at the expense of another. In Australia, the export of raw commodities such as iron ore has seen the Australian dollar rise and rise in the last decade. What this means is that labour and other costs in the manufacturing sector in particular have soared, making it even more difficult for local companies to compete on price with foreign providers. Compounding this problem is the fact that skilled workers have been quick to switch to higher paid jobs in the resources sector. As Australian Industry Group head Heather Ridout explained several years ago, we effectively have two economies in Australia. One is for those enjoying the spoils of the mining industry. On the other hand, we have those in areas such as manufacturing and tourism who cannot compete with the distorting impact of the high Australian dollar.
If we want Australia to be nothing more than a giant quarry supplying China and India with the minerals they need to supercharge their economies, then we really should not act. But if we want to prepare for the fluctuations of demand for our minerals that will arise, if we want other sectors in Australia to survive, then we do need to act. I guarantee you this: whilst we are blessed with a bounty of riches across the continent, we should never rely solely on mining because the minerals are finite and the demand will ebb and flow according to trends and dynamics beyond our control. Any responsible government would not look ahead 10 years; it would look ahead at the next 50 years.
The duplicity of some conservative politicians enjoying the current spoils of mining has been incredible. Western Australia's Premier, Colin Barnett, has on numerous occasions criticised those who blame the mining boom for weaknesses in other sectors. Yet he has also agreed that the strong dollar hurts trade-exposed industries such as tourism. In his state, local manufacturing has been in free fall, in part because of the high Australian dollar but also because multinational mining companies have not awarded more contracts locally.
Across Australia, many aspects of the mining sector have often been unable to capitalise on the China boom. In fact, the figures demonstrate again and again that companies that form part of the mining sector have struggled to survive during the boom. This was demonstrated pointedly a little over two years ago when BlueScope Steel announced it would abandon exports because of the high dollar and low steel prices, in the same week that BHP Billiton reported an 86 per cent increase in profits to just under $23 billion. As one operator of a company that produces steel and piping for mine sites in Western Australia noted in relation to the big players who run the mining boom:
They want all this money for themselves, but they expect us to live on a bowl of rice.
It is not fair and it is not sustainable. Although the focus of late has of course been on Toyota, Alcoa and SPC, they are not the only ones that have been struggling. Everyone from winemakers and food producers to aerospace engineers have had to deal with the problems associated with a high Australian dollar.
Some in the coalition may well ask: is there really a problem? So some companies may be struggling, but this is how markets work—freeing people up to produce things we cannot import and directing workers where pay is highest. The mining boom will continue and Australia will prosper. 'Let the good times roll on.' But of course it is not as simple as that, because the mining boom will not last forever. When it ends we do not want to be left with no remaining non-mining sectors. If we do not act carefully, all the factories, the knowledge and the skills that have been built up over decades, will have been left to rust.
Any political party with any sense of responsibility would recognise that the mining boom will not last forever and that we need to benefit from the wealth it creates right now and prepare for the future. A report partly funded by the federal Department of Resources, Energy and Tourism and authored by Australian National University economist Luke Hurst in 2012 found that iron ore prices are likely to fall in coming years. The report even found that, if capacity in Africa comes on stream, prices would fall to $60 per tonne in the next seven years. It seems ridiculous not to prepare for the future by ensuring that the Australian economy remains diverse and competitive in multiple areas.
By taxing the superprofits of the mining companies enjoying once-in-a-lifetime rewards, we can ensure that Australia does not suffer unnecessarily from a dual-speed economy. This is not about class warfare, it is not about the richer states such as Western Australia propping up poorer states and it is not about the federal government greedily snatching away hard-earned profits. It is about common sense and proper economic management. We need to prepare for the future. We need to support other sectors. We need a diversified economy. Most importantly, we need leaders who stand up to the mining companies and deliver policies that benefit the economy as a whole, not just vested mining interests. We need a party and a government with vision, and I can tell you right now that those opposite me are failing this important test. That is not a secret. It is one of the few things that they are not trying to keep secret, and that is their incompetence in planning for the future. It is a big miner's dream, but it is Australia's nightmare. Therefore, I cannot support this bill. I urge others to oppose it most strongly.
I am pleased to take part in this debate as a Western Australian senator and I certainly look forward to defeating the bill when it finally comes to a vote. This, I think, is a great example of why you can do opposition by slogan—as the Prime Minister, then the Leader of the Opposition, Tony Abbott, was so adept at doing—and what a disaster it is when you try governing by slogan. The whole 'stop the boats, axe the tax' rhetoric that carried the Prime Minister into office now poses a real and present threat to the budget bottom line.
There is a real sense of irony, I suppose, having just heard Senator Helen Polley, my Tasmanian colleague, speak about the evils of the mining industry and how it is so important to stand up to them. If only you had. If only you had not allowed the mining companies to rewrite the mining tax so that it would collect no actual revenue. Having heard the mining tax bills described in recent weeks as among the worst pieces of public policy that we have ever seen, I find it hard to disagree, because effectively the bills were amended to the point where they were unrecognisable from the model that former Treasury secretary Ken Henry put forward.
It leaves us with a shell of a bill that brought the Labor Party all of the pain and none of the gain. They copped a brutal attack—and there are no two ways about it. The $22 million advertising campaign paid for by, among others, the Minerals Council and the determined advocacy of Mitch Hooke and his allies saved the companies—again, by Treasury estimates—roughly $160 billion. After Mr Rudd was deposed, Prime Minister Julia Gillard sat down—under the crafty authorship of who better than Martin Ferguson—with the three big miners, to rewrite their own tax law. I wish I could write my own tax law; I would end up paying a lot less tax, but fortunately the law of the land is not written that way. When Martin Ferguson and the three big mining companies sat down to write tax codes to suit themselves, they realised a return of investment of about 730,000 per cent on their $22 million advertising campaign. I feel a bit sorry for the Labor Party in stepping up to apply a fair tax regime that, when the industry reached a certain threshold of superprofits, would have returned some of those profits to the taxpayer.
As a Western Australian I pay very close attention to that kind of public policy, because our state government—the Barnett government—has managed to blow away a triple-A credit rating in the middle of the greatest commodities boom that our state has ever seen. It cannot afford to put in public transport anymore; it cannot afford affordable housing; it cannot afford to keep schools open. The whole idea of this tax is that it does not kick in until you are doing very well. It would not apply to the small players or those mid-tier explorers or those who are doing it hard, because they would not be affected by the mining superprofits tax; it would only apply to those generating superprofits. For that $22 million advertising campaign, a Prime Minister was rolled out of office and a new one, on coming into office, immediately deputised Martin Ferguson to sit down and rewrite the tax law. Admittedly, the mining tax has very high compliance costs. I am inclined to agree with one element of the industry's reading of this: they are paying huge compliance costs in order to fill out the paperwork for a tax measure that collects almost nothing.
We knew the fix was on at the time that the Labor Party had the tax rewritten. The Greens, with then Senator Bob Brown, did move amendments, but at the time we were in the position where we could either accept a tax was fundamentally broken and would collect very little revenue or vote with the coalition and collect nothing at all. That, I think, is one of the great public policy rip-offs of the Australian public in modern history. The industry wrote a tax that they knew they would never have to pay. That is why the Prime Minister, on his fly-in fly-out visit to Perth last week, said that this would be a referendum on the mining tax. There are no ads on TV; there are no riots in the streets; there are no public demonstrations; there is nothing—because the tax does not work. In fact if the tax had worked we might have been able to afford the light rail project by now. We might have some patients into the Fiona Stanley Hospital; we might not be attacking state school teachers and threatening the education of Western Australian kids. The fact is that the mining industry is 80 per cent foreign owned and senators will no doubt have seen Mr Ross Gittins in the press commenting on the fact that this is effectively a betrayal. This is what he said yesterday morning about the repeal of the minerals resources rent tax:
For the income earned by an industry to generate jobs in Australia, it has to be spent in Australia. And our mining industry is about 80 per cent foreign-owned.
Got the message yet? For our economy and our workers to benefit adequately from the exploitation of our natural endowment by mainly foreign companies, our government has to ensure it gets a fair whack of the economic rents those foreigners generate.
Long before then, however, Tony Abbott will have rewarded the Liberal Party's foreign donors by abolishing the tax.
This will be an act of major fiscal vandalism, of little or no benefit to the economy and at great cost to job creation.
That is why I am pleased to stand here today and lend my vote in opposition to the Liberal Party's act of major fiscal vandalism.
Those opposite cannot march around the landscape, demanding cuts to health care, cuts to education, cuts to the ABC, cuts to disability support while at the same abolishing tax measures that raise revenue. Senator Fifield and Senator Back—or Senator Cormann when he wants to come out of his office—could have come in here and proposed amendments to this bill, including some of those that the Greens put up when this was last debated. Why don't we raise the rate back to 40 per cent? Why don't we cover commodities like gold? Why don't we cover commodities like uranium? Why don't we actually impose a tax on superprofits, most of which leave the country and the economy, so that we can stand down this aggressive cuts agenda that you have brought to the national debate. But you cannot have it both ways: you cannot be proposing to axe revenue measures, or not improve the revenue measures that are clearly on the table, and at the same time be threatening cuts right across the board—across all portfolios. That is the act of major fiscal vandalism by which you stand condemned today.
I do not think that the by-election in Western Australia is going to be a referendum on the mining tax. I think something very different is going on, which is why we are not seeing the screaming attack ads that so terrified the Labor Party into submission. I think what we have here is Liberal Party advocacy on behalf of politically powerful major donors masquerading as public policy. They got away with it last year—and power to you—but it does not work so well when you are on the treasury bench and need to balance the books. I challenge Liberal senators from Western Australia to a debate on the economy in Western Australia before Western Australians cast their votes on 5 April. Let's have a debate about jobs. Do you really think that as the mining boom tapers off and we move from the construction phase into an operations phase, which is one of the factors behind rising unemployment in Western Australia, that all you need to do is simply repeat mining industry slogans in order to win a by-election? Western Australians are a little more politically astute and sophisticated than that. I challenge Western Australian senators—Senator Back, you are here today. You are not up for re-election but you might have a quiet word to your colleagues. If you are so proud of your economic record of abolishing taxes while proposing cuts, then let us put these views to the people of Western Australia before 5 April, on a level playing field. You choose the time and the place. Let us have a debate on jobs and the economy.
On the weekend the member for Melbourne, Adam Bandt, and I launched the Greens jobs policy for Western Australia. Mining is no doubt going to remain an important part of the Western Australian economy. In fact, as long as you can put up a wind turbine containing 200 or 300 tonnes of steel and other metals, mining will remain an important part of the economy. But the fact is that it is a small section of the Western Australian employment base and we cannot rely on it in the deeply uncertain age which we are moving into, the age of climate change and the age of peak oil. We cannot continue to rely on extractive industries and mining to provide a stable employment base, particularly given the enormous risks that we are exposed to in world commodity markets. We saw last week the iron ore price take a big tumble and that again sent nervous jitters through the Western Australian economy.
So what is your plan? The jobs plan that Mr Bandt and I launched talked about the huge jobs potential in renewable energy—up to 26,000 jobs forecast in the energy 2029 plan to take Western Australia to a mature renewable energy economy. But it is not just clean energy or what you might traditionally consider to be a green jobs, mind you; these are blue-collar jobs. This is kids in Welshpool and Kalgoorlie welding heliostats, it is not anything particularly esoteric. That is 26,000 jobs. What about housing and construction and affordable, innovative, modular prefab housing? We have a housing affordability crisis, a skilled manufacturing crisis, a crisis in south-west timber towns, where native forests are becoming rarer and rarer and we are running out of 400-year-old trees to cut down. We need to put a stable employment base under those towns. What about the affordable housing industry? That is a very jobs-rich agenda. What about agriculture and horticulture? What about telecommunications as you are going about dismantling the end-to-end fibre National Broadband Network? We have launched our jobs plan: let us see yours. We call on coalition senators next time Mr Abbott is in town to maybe do a little bit more than just call a press conference and then put himself back on a plane. Let us see your economic and jobs plan for WA if you have one.
And let us bring this matter, this vote, very swiftly to a conclusion, because this is pantomime. We know why this is happening. If you come in here with amendments to improve the revenue-gathering measures, maybe take us back towards the original Treasury model that would only have kicked in once the industry was generating enormous profits, then let us have a debate, then let us debate amendments. But this at the moment is an attempt to govern by slogan and, like so many other areas of public policy into which you have blundered, it is something of a disaster. I look forward to putting this measure to the vote.
This debate offers a unique opportunity for the Australian Labor Party and particularly its leader, Mr Shorten, to come into this chamber through the Leader of the Opposition in the Senate and support the repeal of this mining resource rent tax. Mr Shorten has the opportunity to right a wrong. He has the opportunity to stop the cheap political game scoring that we saw last evening with the filibustering on the carbon tax. He has the opportunity to actually take some leadership, which he at the moment is so badly lacking. A lifeline has been thrown to him by none other than three people this morning who actually have assisted him in his decision making: the Australian Chamber of Commerce and Industry, the Business Council of Australia and the Minerals Council of Australia.
Last week Mr Shorten was in Perth, and Perth is a long way from Canberra, Mr Acting Deputy President Whish-Wilson, as you know and you recall, having once been a Western Australian. The closer he got to Perth, the more the heat went on him about the need to repeal this mining tax. So what did he do? He vacillated and said, 'I can't make a decision now, I have got to consult with industry.' Well, these three people have helped him from having to make the trip to Perth with the enormous cost associated with it and no doubt the cost of the carbon tax in the airline flight. These three people have said to him through their agencies that it is important that the mining tax should be repealed now. They went on and made the point that the industry pays some $20 billion a year in company tax to the Commonwealth, and if we were to listen to the last two contributors you would think the mining industry pays nothing to this country. Since 2006-07 the mining industry alone has paid $117 billion in company tax and state royalties. This is just the company tax and the state royalties, not all the income taxes, not all the other impositions, not all the payments to local governments et cetera—since 2006-07, $117 billion. I call on the Leader of the Opposition, Mr Shorten, today to come in here and to join with the government and do what he knows must be done, and that is to repeal this legislation.
There are two issues that Mr Shorten would have learnt about in Perth the other day that have caused the Labor Party to be held in such low regard in my home state of Western Australia. They are the minerals resource rent tax and the carbon dioxide tax. Why have they affected Western Australia so greatly? It is because, as you know, Mr Acting Deputy President, we are the state most affected. We are geographically the largest state with the cost impositions on the transport industry, which of course has an impact on every Western Australian, and with the impact of the mining tax on iron ore, and we know very well that WA leads the nation by providing some 47 per cent of the export-earning wealth. Mr Shorten has the opportunity to win back some respectability lost by the then Labor government, including statements like, and not exclusively, that of Prime Minister Gillard winning the 2010 election with a statement, 'There will be no carbon tax under a government I lead.' There would not be a person in Australia who would dispute the fact that the Labor-Greens government governed from 2010 to 2013 because of that duplicitous statement.
We know that the first iteration of the mining tax, the resource super profits tax, got nowhere and never was it going to. The impact it would have had on the Australian economy through the Western Australian economy would have been disastrous. Contrary to the advice of Senator Ludlam a moment ago, when he was making the point that Mr Martin Ferguson rewrote the tax policy, Mr Martin Ferguson, as I understand it, was excluded from the dialogue between then Prime Minister Gillard and then Treasurer Swan in their negotiations with the three majors—BHP, Xstrata and Rio. Imagine putting those two, with the number of years of business experience that they have, with the chief financial officers of those three major mining companies. All of the small mining companies were excluded. We in fact know the end result of that: it got nowhere.
Mr Shorten has the opportunity to right the wrong of the incompetence delivered by the last Labor government on the people of Australia, particularly when it comes to the mining tax on Western Australians. The government at the time were told by many, many people—the coalition itself, industry and others—that there would be no nett revenue from the mining tax. The prediction was for some $3 billion in revenue in the first year and $22.5 billion in revenue over the first four years. We know now, as history records, what the government of the day were told. Indeed, the Leader of the Opposition in the Senate, Senator Wong, who is here now with us, can confirm that she was told again, again and again how little it would yield. It yielded $126 million in the first six months and $400 million for the first year, and it was paid for by some 20 companies. It is conveniently forgotten that there was $40 million in costs to advertise its advantages, $50 million in set-up costs and some $20 million a year to administer it. Imagine having a tax that costs the economy! As Treasurer Hockey has said in repealing it: we will be saving the budget some $13.4 billion.
But this is not just about those who paid the mining tax. There are 145 companies that had administrative burdens cast on them; they had to account and be accountable for the fact that they would not be paying the tax. They told the Labor government that they would not have to pay it. Fortescue Metals Group estimates that it paid some $3 million to $5 million in compliance costs—moneys that could have well gone to employment, moneys that could have well gone to further exploration. The then Prime Minister Rudd said:
No government should ever take a backward step in pursuit of the national interest.
I say: neither should they in opposition. Senator Wong and Mr Shorten should reverse that wrong now. Then Special Minister of State, Gary Gray, a person who should have known better as a senior Western Australian minister at the time, himself out of the resources sector, said:
… I don't think it should—
be a burden—
It's a profit-based tax and over the course of the last six and eight months, we've seen significant volatility in the price indexes, particularly for iron ore.
You bet we have. You bet we have seen price volatility. It is the very reason why the Labor opposition should now not stand in the road of repealing this tax. Mr Gray went on to say:
"I think it's worth having in mind there were circumstances surrounding the design of the mining tax that meant the government had to do the best job it could do in the circumstances available to it …
Possibly so. Now the opposition, Mr Shorten and Senator Wong, have the opportunity to right the wrong so eloquently stated by then Prime Minister Rudd, when he said:
No government should ever take a backward step in pursuit of the national interest.
But even more incompetent was the fact that the then government, in predicting that it would earn this $3-odd billion then went and spent it. From your days in business, Mr Acting Deputy President Whish-Wilson, could you ever imagine a circumstance at the beginning of a financial year when you would actually predict: 'I'm going to make $30,000, $300,000, $3 million or $3 billion this year, and I'm going to go out and spend the money'? Worst of all, it was taxpayers' money that was spent.
The then government were making promises associated with superannuation when the money was not there in the bin. They were offering concessions to small business when in fact the money was not there. Small business wants government out of the way. Small business in Western Australia wants the carbon tax and the mining tax repealed so that small business can get on with the business of employing more people and returning their businesses to profitability. Then there was the schoolkids bonus; it is a saving of $1.1 billion. Of course, we would all like to give money now to schoolkids for bonuses, but when you borrow against the funds that those children will to have pay back as adults, is that good business? Is that good common sense? Of course it is not good common sense. The then government went out and borrowed money. They went out and took taxpayers' money to spend in advance of the funds that they thought they were going to get in, and of course, as Senator Nash and I both know and as the world knows, they never, ever were going to get that money in.
It is the sovereign reputation of our country that we have to restore in all of this. As I indicated earlier, Treasurer Hockey made the comment that we will save some $13.4 billion in scrapping a tax that was never, ever going to make any money. Let me make an interesting point to you, if I can, in connection to the sovereign risk and Australia's reputation. Last year, I had the opportunity to spend some time in the United States—and I must say at my own expense—visiting New York, Washington and Texas. When I spoke to businesspeople who knew Western Australia well, they would continually say to me: 'What has happened in your country? You were once a safe place to invest. You were once a place that was a predictable place to invest, where we could spend funds, where we could employ people and where we could create opportunities. What has happened?'
The best example I can give you, Mr Acting Deputy President Whish-Wilson, of the impact of the carbon and mining taxes is the impact on Australian Stock Exchange listed mining exploration companies. As you well know, exploration today means a yield from the mines in 20 years time. If we are not exploring today, the mines will not be there in 20 years time. In the year 2012, ASX-listed mining exploration companies spent two-thirds of their investment time and money in Australia. By the middle of 2013, they were spending two-thirds of their exploration effort, time and money outside Australia. That was the drop in the confidence of the mining exploration industry. And where were they spending it? They were spending it in Canada—Canada was welcoming, with open arms, Australian miners and explorers—and in Asia; in Africa in particular; and in Eastern Europe.
I met with the then shadow minister, now the Minister for Industry, Mr Macfarlane, in Kalgoorlie with a dozen mining explorers—people who do work all around the world, not people who drill small holes in the backyard. One fellow had just brought back his equipment, designed and built in Kalgoorlie, from a project that he had been undertaking, I understand, in Eastern Europe. It had sunk a drilling hole six metres wide and 2,000 feet deep. Imagine the level of technology and expertise to enable that. They were all back in Kalgoorlie and they had no work on.
That was largely the reason why in opposition we undertook to develop the Exploration Development Incentive scheme. It was so that those willing to invest their funds in mining exploration companies, the small companies—not the big boys that end up exporting but those that actually go out there and do the exploring—would get a tax credit for the costs directly associated with their mining activity. That at least gave some increase to the confidence levels of that sector.
What is and what has been the impact of the mining tax on the companies themselves? As I have just prefaced in my comments, it has had the result of sending mining explorers overseas. When CHOGM was on in Perth in November 2012, at the end of the week a group of African leaders sought a meeting with the Premier of Western Australia, Mr Barnett, and they said to him in that meeting, 'Mr Barnett, we didn't realise that the vast majority of the mining activity in our countries is actually administered from within two kilometres of your office here in West Perth.' That is the impact that Western Australian and Australian mining expertise is having around the world in developing countries—countries that can get themselves out of economic demise by virtue of the opportunities associated with the resources sector. How proud are we.
But the simple fact of the matter is that we know very well that there should be the activity and encouragement in our state to actually make this happen. Iron ore contributes some $56 billion of the total mineral sales in Western Australia, and, as I said earlier, our state has the privilege of earning some 47 per cent of the export wealth for this country. We know that coal and iron ore, both affected by the mining tax, are two of the highest export earning commodities in this country.
Senator Polley made a comment earlier, in her contribution, about royalties. It seems to escape those opposite in the Australian Labor Party that there is an Australian Constitution and that, under the Australian Constitution, minerals and royalties related to them are in fact the province and under the ownership of the state. She also said there was a capacity for everybody to enjoy the benefits, and I will in a moment advise how that happens.
The resources sector, as I indicated earlier, paid in the last year and pays on an annual basis $20 billion in tax revenue to the Australian Taxation Office and $4 billion in revenue to the state in royalties. Rio Tinto—not a bank, not an insurance company, but a mining company—is the largest taxpayer in this nation. Forget the nonsense you will hear from others that in some way the resources sector is not paying its way tax-wise. It has paid $117 billion in company taxes alone. Mr Acting Deputy President Whish-Wilson, from your business background, which I understand was extensive, you would know as well as I do how you end up getting more tax revenue from companies: you encourage employment; you create a climate in which business activity is encouraged; you remove red tape; you help companies increase their pre-tax profits so they pay more tax; you remove a carbon tax or a mining tax. I call on the Leader of the Opposition, Mr Shorten, a person who has clearly been found wanting in his role, to turn around his leadership aspirations today and support the repeal of those taxes. I ask: where is Senator Louise Pratt—
Senator Wong—through you, Mr Acting Deputy President—has there been a circumstance when you have walked away from your responsibility in the chamber? I say to the people of Western Australia: if you want to confirm the mandate that Western Australia so richly gave the Prime Minister in September, the mandate to remove the carbon tax and the mining tax, then in April you must return at least three Liberal senators. I say to the Labor opposition: you must cease standing in the way of the repeal of the mining tax and the carbon tax. We have to have a circumstance in which, in this Senate, we can do the business of the people.
In Tasmania last week, we saw the decision of the Tasmanian people. They want to see a return to growth, a return to industry, a return to economics, a return to optimism. One of the reasons I sold my own business in the state of Tasmania, in the year 2000, was that I was so depressed by the lack of optimism. Young parents who worked for me were saying, 'I've got to leave the island for the mainland because I've got children in primary school and, if I don't get out of the island, what am I going to give them for their future?' We want to see Tasmania lifted, as I know everybody does.
I will address the question that Senator Polley asked, and that is: where is the distribution of the wealth? Let me give you these figures quickly, Mr Acting Deputy President Whish-Wilson, and they relate to the GST distribution. The state of Western Australia is contributing a net $15.5 billion, and that is $6,447 per person. New South Wales is contributing a net $2 billion, which is $300 per person. Victoria is contributing $1.3 billion, or $235 per person. As opposed to that, the state of Tasmania is a recipient of $3.4 billion, which is $6,600 per person—roughly equivalent to the per person amount that Western Australians are contributing. So there is Senator Polley's square-up; there is the equalisation process. South Australia is a recipient of $5.1 billion, or $4,000 per person. Queensland at the moment receives $6 billion, which is $1,270 per person—and I know very well that Queensland is looking forward to the repeal of this mining tax so that we can get the place running again.
In the final minutes available to me, I will refer to those people with a rich background in the Labor Party who are urging Mr Shorten and his colleagues to do the right thing—that is, to join us in repealing the tax. These include Mr Martin Ferguson, one of the most highly respected people in the resources sector; past Prime Minister Rudd; Mr Graham Richardson; and Mr Paul Howes. Only this morning Mr Mark Olson from the nurses union— (Time expired)
The Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 says everything that needs to be said about the skewed values of the Abbott government. At the heart of this bill is a fundamental injustice and at the heart of this bill is a fundamental deception of the Australian people. The government present this bill as being only about repealing a tax—and we have just heard a lengthy dissertation from Senator Back in which he continued this. Let us remind ourselves what is in this bill that they do not want to talk about. It includes increased taxes on low- and middle-income families, increased taxes on workers saving for their retirement, increased taxes on small business, cuts to benefits for working families and cuts to investment in regional Australia.
The bill gives with one hand but takes and takes and takes with the other. It really should not be called the minerals resource rent tax repeal bill; it should be called the 'hitting those who can least afford it' bill. It gives a tax cut worth $3.3 billion to the biggest mining companies in the world but hits Australian families and small business owners with $16.3 billion in higher taxes and cuts to benefits. That is the financial arithmetic at the heart of this bill, the financial arithmetic lauded by those opposite—a $3.3 billion handout for mining companies and a $16.3 billion slug for battlers.
This bill shows that, under this Abbott government, there is indeed a new age of entitlement—an age of twisted priorities where there are tax cuts for the few and tax hikes for the many, where millions of Australian families are slugged while big mining companies are given a tax cut. This bill hurts low- and middle-income earners, erodes the superannuation savings of working Australians, makes small businesses pay higher taxes—this is the Liberal Party supporting higher taxes on small business!—and cuts investment in communities and regional Australia. No doubt the doormats in the Nationals will simply ignore that fact. They will simply gloss over it.
This piece of legislation is entitled the Minerals Resource Rent Tax Repeal and Other Measures Bill. As with so much that this government does, the sting is in the tail—the 'other measures' which are included in the bill. I will take the Senate through some of these other measures. They are regressive, they are unfair, they should not be supported and they hit those in our community who can least afford it. These other measures fall into four main categories.
First there are the hits to low- and middle-income families. This bill abolishes the former Labor government's schoolkids bonus. This bonus provides payments to around 1.3 million families—low- and middle-income families whose children are at school. The payments are worth $410 a year per primary school student and $820 a year for high school students. They go to eligible families receiving family tax benefit part A and to schoolchildren receiving youth allowance or payments from the Department of Veterans' Affairs. This bill scraps those payments from January next year, just when parents will need help with the cost of children going back to school. The Senate Economics Legislation Committee heard evidence from the Australian Council of Social Services that more than half a million children in Australia are currently living in poverty. Scrapping the schoolkids bonus hits those children and their families and many more. You do not hear those over on that side talking much about that aspect of the bill, do you? The explanatory memorandum to this bill shows that this cut will hit families to the tune of $4½ billion over the four years from 2013-14 to 2016-17.
The bill also seeks to scrap the Labor government's income support bonus. The income support bonus provides eligible social security recipients with $250 a year for singles and $350 a year for most couples. It helps people on low incomes to meet unexpected living costs, such as medical expenses or the cost of getting a car repaired. For people struggling to make ends meet, these unexpected costs can be financially crippling. Scrapping the income support bonus will hit 1.1 million people on low incomes, mainly Australians receiving Newstart or youth allowance. The hit is $1.1 billion over the four years of the forward estimates from 2013-14 to 2016-17.
As we have heard in recent days—reaffirmed again by the Prime Minister—the cut to the income support bonus includes taking money away from the children of war veterans who have been injured or killed while serving their country. That is one of the most obnoxious aspects of this legislation and one that the Prime Minister of this country defended stoutly in the House of Representatives. 'Yes,' he told us, 'I do want to pay billions of dollars over the next few years to wealthy families for paid parental leave, but I am going to take money away from the children of veterans who have served this country and who have been injured or killed whilst doing so.' What an obnoxious set of priorities from this government! Yet they come in here and proudly declaim about the end of the age of entitlement. I remind those opposite that the cost of the income support bonus to children of war veterans is $260,000 a year. They are cutting that support at the same time as they are proposing a multibillion-dollar paid parental leave scheme.
The next category of this bill's regressive 'other measures' is a set of major attacks on the retirement savings of working Australians. It delays the increase in the superannuation guarantee entitlement. Under reforms introduced by Labor to ensure Australians have a decent retirement income, the superannuation guarantee entitlement is legislated to increase from 9.25 per cent to 9½ per cent in July 2014. Under this bill, that increase will be delayed for two years. That also means that the long-term goal, which is to get the superannuation guarantee entitlement to 12 per cent, will also be delayed by two years. Twelve per cent is widely acknowledged as the level of superannuation contribution that Australians will need in order to ensure they have an adequate retirement income.
The explanatory memorandum discloses a budget impact from delaying the increase to the super guarantee entitlement of just under $1.6 billion. But of course that impact is only the effect of cutting the government's own superannuation contributions, because the negative effect on the Australian workforce will be much larger. This is a measure that will directly cut into the retirement savings of every Australian employee who relies on the superannuation guarantee—and that is millions and millions of Australian workers.
As if that were not bad enough, this bill also abolishes the low-income superannuation contribution. This was a measure which involved a government payment of up to $500 a year to help workers on incomes up to $37,000 to save for their retirement. It is effectively a refund for low-income earners of the 15 per cent superannuation contributions tax. The reason it needed to be introduced is that those who benefit most from the current concession system for superannuation are high-income earners. Those who do not currently benefit from the system of concessions for superannuation are working people, people earning up to $37,000 a year. They do not benefit from the current concession system for superannuation, so this measure redressed that unfairness. By scrapping the contribution, the bill puts a tax hike on the superannuation of millions of Australian workers, Australia's lowest-paid workers.
Do you know who is hit the hardest by this in that group? It is women. Of the 3.6 million workers who benefit from this contribution, 2.1 million are women. We know that women are less likely to finish their working lives with adequate savings for their retirement, and the Abbott government's cuts and the Abbott government's policies do nothing except worsen this. Not only do they say this is okay, they actually do not mind making the current inequality worse.
I think that superannuation does give a stark insight into the values of this government. They boosted superannuation for around 16,000 people with superannuation balances of more than a couple of million dollars; now they want to cut superannuation for millions of workers earning less than $37,000 a year. It is another example of their regressive philosophy: you slug the many and you pay for the largess for the few. It is not just socially regressive; it is economically regressive and short-sighted. It is an incredibly short-sighted, myopic policy.
Hitting the retirement savings of working Australians will only increase pressure on the age pension in coming years. It also reduces the nation's pool of savings available to fund investment and growth in our economy. Industry Super Australia estimates that these two measures—the two I have just described: delaying the increases to the superannuation guarantee and scrapping the low-income super contribution—will reduce national savings by $53 billion by 2021-22. It is quite clear from this legislation that you just cannot trust the government when it comes to superannuation for working people.
The third category of tax hikes and cuts in this bill is targeted at the nation's small business owners. Those opposite claim to be the friends of small business. This bill exposes those claims as fraudulent because in this bill the Abbott government is increasing taxes on small businesses and they do so to pay for a tax cut to mining companies. The former Labor government provided a small business tax cut by increasing the instant asset write-off threshold from $1,000 to $6½ thousand. This boosts small business cash flows by allowing the business to claim an up-front tax deduction for the value of an asset worth up to $6½ thousand in the income year when the asset is first used or installed. This bill reduces that write-off threshold. That means it cuts tax deductions for 2.7 million small business owners across Australia when they choose to invest in new equipment and assets to grow their businesses—a tax slug on small business worth $2.3 billion over four years.
And the hits on small business continue. The bill closes the loss carry-back scheme which provides incentives for investment by small and medium-sized enterprises. Scrapping these provisions will remove tax breaks for up to 110,000 businesses, increasing the Abbott government tax take by just under $1 billion over four years. The bill also winds back accelerated depreciation for motor vehicles—another tax measure which gives cash flow relief to small business. This is a move that slugs small business by another $450 million over four years.
These adverse changes to the taxation of small business have been opposed by COSBOA, the Council of Small Business Organisations of Australia. They are policies which are both regressive and economically wrongheaded. The Abbott government lectures everybody about the importance of investment. Senator Back did it here again today. He suggested that the Labor government was anti-investment. The fact that the largest investment boom the nation had ever seen occurred while we were in government is something he conveniently ignores.
Senator Back interjecting—
Importantly, he is in here, as are all the coalition senators, the government senators, saying, 'We really want to ensure we increase taxes on small business—yay, us! We want to tax small business heavily.' That is what they are doing. They come in here and try to pretend that they are pro small business and pro investment just as they are increasing the tax measures which would give a disincentive to such investment.
Just on that, the tax hikes and the tax burden on small business and particularly on investment are precisely at the wrong time for an economy which is undergoing transition. We are moving, in terms of where our economy is at, from a mining boom in its investment and construction phase to a production phase that is going to have significant consequences for employment and significant challenges for the economy. It is a time when you want to give incentives to other parts of the economy to invest, and all the government is doing by removing these incentives for investment is making that transition more difficult.
I turn now to the final set of cuts that the government is making in this legislation: the scrapping of the Regional Infrastructure Fund and the Regional Development Australia Fund. The Regional Development Australia Fund is supporting the infrastructure needs and economic growth of many regional areas in this nation. It funds capital infrastructure projects which local communities identify as priorities. What we have seen is cuts by this government to that fund which will mean that hundreds of approved projects will not go ahead—devastating news for local communities. The cuts to the RIF, the Regional Infrastructure Fund, will also mean that important projects for local economies will not proceed. So the government is taking $2.7 billion out of regional communities in this legislation and it is being supported in doing so by members of the National Party and regional members of the Liberal Party.
In summary, this bill delivers a $3.3 billion tax break to mining companies; it cuts benefits to families by $5.6 billion over four years; it cuts superannuation entitlements and hikes superannuation taxes by $4.3 billion; it hikes the tax take on small business by $3.7 billion; and it cuts regional investment by $2.7 billion. What we have before the chamber is $16.3 billion in unfair, economically damaging tax hikes and spending cuts. Unsurprisingly, the Labor opposition opposes this bill. We oppose the government's tax hikes and cuts targeting low- and middle-income families, small businesses and regional communities. We also oppose the government's short-sighted stance on the MRRT itself. Australians deserve to share in the benefits of minerals we all own, and that is the purpose of a resource rent tax like the MRRT.
The government, as is its wont, has conducted yet another deceitful scare campaign over the MRRT. It is a deceit which is exposed by the internal contradictions of its position. On the one hand it claims the MRRT is devastating the economy—it is an onerous cost burden, stifling investment, jobs and growth in the mining industry—but in the same breath it says it is a policy failure because it is not collecting significant amounts of revenue. You cannot have it both ways. You cannot have a position that says, 'This is a tax which is crushing the economy, but it's a tax that doesn't do anything.' But that is the specious position that is put forward by those opposite.
This is a profit based tax. When profits are high revenue is up, and when profits are low revenue is down. That is how the tax was designed to work. The MRRT was not put in place for the next six months; it was intended to look to the next generation. Labor recognises and supports the important role played by the resources industry in generating wealth, exports, jobs and incomes for all Australians, and we accept there is scope for improving the MRRT, but we say that the fundamental principle underpinning a minerals resource rent tax remains sound. That principle is this: this country's endowments of mineral resources are owned by all Australians, and all Australians are entitled to a fair share of the wealth generated from those resources. I for one am very happy to defend that principle against the government's alternative argument, because the alternative vision embodied in this bill is to slug millions of families and small businesses to pay for a tax refund to large mining companies.
Almost two years ago to the day, I stood in this chamber and likened the mining tax to a pinata: no matter where you stood, it was pretty easy to take a swipe at it. But, while pinatas are fun, the mining tax has been nothing but disadvantage to Australians, who were led down the garden path by the previous government. Last week the media reported the ALP was standing by its disastrous tax. When pushed by Sky News for a straight answer, opposition leader Bill Shorten was reported as saying:
… the principle … is a good principle and one which Labor supports.
This is notwithstanding the fact that the minerals resource rent tax has been held responsible for increasing the sovereign risk of investment in Australia and has led to international miners diverting their investment to other parts of the world, particularly Africa. Australia as a nation has lost out very heavily, because mining was one of the key pillars of our economy.
The Labor government conceived this tax in secrecy as a result of a deal with the big three mining companies: BHP, Rio and Xstrata. We were told at a Senate economics committee inquiry held last year that there were no Treasury officials present when Julia Gillard and Wayne Swan met with the people from Xstrata, BHP and Rio; they were on the end of a phone. When the mining companies proposed that the costs of development of their mines be offset against the tax, Julia Gillard and Wayne Swan wagged their tails and agreed. But, if they had rung the Treasury, they might not have been quite so happy about it, because they failed to understand the billions of dollars which it costs to develop these large mining projects, which Gillard and Swan had just agreed to allow to be offset against any tax liability. This really explains why the returns from the tax have been so small. As Andrew Forrest of Fortescue Metals Group said back then:
… it is amusing that … [Don Argus]—
former chairman of BHP—
chaired the so-called independent committee—
that developed the plan for the MRRT. This crafty plan was concocted by three big companies to service their own interests while, in its operation, it very severely damaged the smaller miners.
And what a plan it was, as the three big miners got the naive government representatives to agree to the costs of development of their mines being offset against their revenue. It is like having a negatively geared house: you can offset the interest against the rental income and in the end you have a lower income, which means you pay less tax. Very similar to negatively gearing a house, the miners were offsetting the whole cost of development of their mines against their revenue and, as I have said, the cost of development of the mines was billions and billions of dollars, which the government representatives did not quite understand.
In July 2010 we were told the tax would raise an estimated $10.5 billion over the first two years—but things changed. Later, in the MYEFO document of that year, revenue was downgraded quite substantially, by almost $3 billion, to $7.4 billion. In the 2011 budget, however, the revenue from total tax raised magically increased to $7.7 billion in the first two years—this is projected revenue—and to $11.1 billion for the first three years. But these projections proved to be quite wrong. In fact, the tax delivered just $232 million—not billion dollars, but million dollars—when the original promise from Labor was, as I have said, some $6 billion in this year alone.
This year, 2014, the tax will be lucky to raise some 10 per cent of what former Prime Minister Julia Gillard said that it would be more than 3½ years ago. The only thing the tax bred was red tape through an exorbitant series of compliance costs. As The Australian reported on Friday, the cost of the Greens' and Labor's failure to support abolishing the mining tax will reach something like $900 million this year. Failure to repeal the tax will burden every single Australian man, woman and child with the equivalent of an extra $1,800 a year in debt. The opposite, ridding the nation of this scourge, this mining tax, will result in $13.8 billion in net budget savings. To my mind, those numbers are pretty clear as to which option the Senate should be taking. We surely should be abolishing this tax for the benefit of ordinary Australians.
Andrew Forrest's FMG—Fortescue Metals Group—is one of the world's largest iron ore producers and seaborne traders in iron ore. In its first full year of operations, FMG mined, railed and shipped more than 27 million tonnes of iron ore to customers in China and other parts of South-East Asia. Mr Forrest is on the public record as saying that his company, FMG, would not have even got started if the MRRT had been in place when he established his company. That statement should ring alarm bells in every Labor member's and senator's office because clearly the mining tax was seen as an impediment to investment in Australia, and that means an impediment to the creation of new jobs.
In 2012, the then shadow Treasurer, Mr Hockey, said that it was nothing short of 'economic vandalism' for the government to be imposing this mining tax on Australian industry, and on the mining industry in particular. He warned that both the mining and carbon taxes stood to decimate business activity and destroy jobs, ripping at the heart of the Australian economy and leaving in its wake a trail of bankrupt businesses and struggling families. During questioning at a Senate Economics Legislation Committee hearing into the mining tax legislation in February 2012, representatives from the Association of Mining and Exploration Companies, AMEC—an industry body for smaller Australian mining companies based in Western Australia—said the design of the tax created a bias which favoured the three big companies who negotiated this mining tax deal. By contrast, it negatively impacted on the smaller miners. It negatively impacted on the smaller miners because the smaller miners did not have the same level of development costs to trade off against the tax on the mining operations.
AMEC's chief executive, Simon Bennison, said the tax represented an injustice against emerging companies, who would pay a higher effective tax rate of four to six per cent above the large companies such as BHP, Rio and Xstrata. The small and emerging companies are a very important sector of the mining industry. It is the smaller companies that go out and find new mineral deposits and, as they grow into bigger enterprises, they continue to put Australia on the mining map of the world. FMG, which I have referred to already, is an example of this, as is Atlas Iron, which began as a very small mining operation in the Pilbara and is now quite a substantial company. The mining tax has been a disincentive to these smaller miners to go out and find new deposits of various minerals, and in that sense it has very much been a disadvantage to the future development of the mining industry in Australia.
This point has been reinforced by an independent study undertaken by the University of Western Australia, which shows the mining resource rent tax is not competitively neutral between emerging mining companies and mature mining companies and that it does in fact discriminate very heavily against emerging mining companies. As I have said, this means that there will be fewer new mines developed because these smaller mining companies are not going to have the financial capacity to go out and develop new mines. Dr Pietro Guj, a research professor at the Centre for Exploration Targeting at UWA, has written:
Financial modelling of the iron ore mine development example provided by the Commonwealth in their MRRT legislation Exposure Draft and Explanatory Material, indicates that there may be significant differences between the Net MRRT and consequently the total level of taxation (corporate income tax + Net MRRT + Royalties) paid by projects which existed before 2 May 2010 (when the MRRT was first announced) and those that will start after the introduction of the MRRT on 1 July 2012.
Research has also pointed out that part of the tax's design allows a mature miner to claim large starting base allowances as a tax shield for some 25 years. I have referred to this already as the larger, well-established companies being able to offset their costs of development against their income from mining at the present time. The then Labor government seemed to have forgotten the fact that BHP and Rio had deducted their capital outlay once already and received stamp duty discounts. The ALP government, perhaps unwittingly, with great generosity was offering these companies a second opportunity to deduct their development expenses from their profits. I doubt very much whether the ALP intended that, but that is what they did, and I suppose one can only wonder at their naivete in agreeing to such an arrangement.
It has always been far from a level playing field in the mining industry. The question must be asked : what message does Labor want to send to new and potential investors? Does it want to stifle competition and promote monopolies in the mining industry rather than seeing many new developments occur? New developments will, as I said, be inhibited by this mining tax. The then government needed only to look at the impact that even talk of the tax had had on investment in the sector to understand that the MRRT was seen as a negative to the development of future mining. Even in the lead-up to the tax's introduction, an increasing proportion of new funds raised in Australia were flowing offshore to mineral projects in Africa, South America, Canada and other jurisdictions.
In a media release issued in November 2011—again, prior to the tax's introduction—AMEC said its members were already experiencing problems raising capital for projects in Australia. The CEO said many small and emerging miners were looking to transfer their work overseas to similarly resource rich but less hostile environments. Even Treasury admitted during questioning that the mining tax was a highly volatile revenue source which could potentially be downward trending. For example, in 2011, there was an almost 30 per cent drop in the iron ore price. This tax was already making Australia uncompetitive in the international arena, yet Labor persisted with the tax, and today it is the Australian economy and the Australian people that have paid the price for Labor's foolishness. My friend and former Treasurer Peter Costello summed it up nicely when he said:
… there was the dog with no bark, the pub with no beer and now the tax with no revenue.
If Labor and the Greens have any credibility, they will not be the parties with no sense and they will vote to repeal this mining tax.
I am pleased to rise to speak to the bill before the House, the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013. I want to put on the record some fundamental differences between the Labor Party's attitude towards the wealth of this nation and the attitude of those opposite. Fundamental to Labor values is the belief that Australians deserve a fair share of the wealth generated by the minerals they own. This belief is the founding principle of Labor's minerals resource rent tax—a profit based tax that ensures revenue is reflective of mining companies' profitability. It allows for a lower tax rate during the construction phase to encourage and stimulate investment and to ensure high returns when the ventures become profitable. That is in the interest of all Australians. Let me state again: Labor's fundamental belief is that all Australians, not just some wealthy Australians, deserve a fair share of the wealth generated by the minerals they own. This is why revenue under the MRRT is currently low. As envisaged in its design, the MRRT seeks to stimulate growth in the mining industry so that both mineral companies and the Australian public can benefit from the wealth generated by that growth when the company profits are high.
The government's position on the MRRT is self-deluding. They criticise the tax as being too low and then, in the same breath, ironically describe it as a huge impediment to growth in the sector. They simply cannot have it both ways. This legislation proves the coalition is clearly opposed to Australians receiving a fair share. It is a testament to all that is wrong with this Abbott government. This government is so bereft of principles and lacking in common decency that it seeks to rip away support from those in society most in need of it to favour those who need it the least. It is almost as if this Abbott government regime is set on introducing a form of reverse class warfare.
Listening to members opposite walk out their tired lines and sound bites, a vain attempt to justify the unjustifiable, the Australian public can bear witness to the perverse set of priorities that fixate the Abbott regime. Gifting billions of dollars to multinational corporations while ripping away the Australian public's birthright of benefiting from the wealth generated by their own mineral assets is simply a reproachable attitude. Having introduced legislation to cut tens of billions of tax dollars by repealing the carbon price and the MRRT, having ripped away that source of support for the Australian economy, the Abbott government now has the cheek to cry poor. In seeking to recoup these foregone billions through its legislation, the coalition has moved to attack the incomes of Australian workers, Australian families and Australian small businesses.