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Tuesday, 24 May 2011
Page: 4328

Ms JULIE BISHOP (CurtinDeputy Leader of the Opposition) (15:45): All Australians want to receive a fair share of their state's mining and resource wealth, and state governments have an obligation under their royalty regimes to ensure that occurs. Australia's wealth is shifting west, much of it now located on the west and north-west coasts of Australia. Ninety per cent of our recoverable reserves of natural gas are located in these waters. The Gorgon gas development alone is expected to deliver eight per cent of the world's LNG needs. Ninety-seven per cent of total production of iron ore comes from the west, and Western Australia accounts for well over one-third of Australia's exports. By the end of the decade, this figure is expected to be closer to 50 per cent.

But the federal government has been on a massive tax grab to soak as much revenue out of the west as it can get its grasping fingers on. Last year, we witnessed the fiasco of the resource super profits tax. It was an illogical, ill-conceived tax that assisted in the downfall of Prime Minister Rudd but—miraculously, one would think—left unscathed its principal architect, the hapless Treasurer of this country. After that unmitigated failure, the Gillard government came up with a less ambitious but no less destructive mining resource rent tax. The mining tax has not been finalised despite the fact that the Prime Minister and the Treasurer claimed they secured a deal for it from three large mining companies last year—almost 12 months ago.

Now, in another development in this very sorry saga, the member for Lilley has been caught again 'gilding the lily'. Rather than being economical with his outrageous budget spending, Australians can instead always rely on this Treasurer to be economical with the truth. He has expressed 'surprise' that the Western Australian government has addressed an anomaly in its royalty regime. He has threatened retribution through the Commonwealth Grants Commission. He and the Prime Minister have said they will slash infrastructure funding to Western Australia but, importantly, he said on ABC Radio National last Friday that the decision of the Western Australian government was 'a surprise'. Further, he told the ABC:

Mr Barnett did not communicate that he was going to do this to us.

Today, the Treasurer said this announcement about the royalty regime in Western Australia was 'suddenly out of the blue'. The facts are to the contrary.

But before I detail his deception to this House and to the Australian people, let me briefly explain what was announced in last week's budget in Western Australia. The budget states that the state government will move to increase the royalty rate for iron ore fines to 6.5 per cent from 1 July 2012 and to 7.5 per cent from 1 July 2013, in line with the rate applying to lump ore. In other words, it is not an increase in the royalty rate of 7.5 per cent, which still exists; it is removing a concession, a historical anomaly, to bring in line all iron ore products—fines and lumps—to 7.5 per cent. This will deliver a fairer return to the Western Australian community. The Western Australian community owns those resources.

As I said, this different royalty treatment of iron ore is a historic anomaly—a discount given to iron ore products in the early days of the Pilbara when the industry was getting on its feet. But the Treasurer has said that Premier Barnett 'did not communicate he was going to do this to us'—in other words, to the government. He did not communicate that he was going to lift the fines rate to 7.5 per cent. Oh, really? Is that right? I have a pile of press clippings here from at least 12 months ago detailing how the Barnett government most certainly intended to increase the rate applicable to fines.

Premier Barnett did not say he was going to increase the royalty rate of 7.5 per cent across all minerals, and he has not done so. What he told the Treasurer, what he told the Australian people and the Western Australian public, as recorded in this handful of press clippings, time and time again was that they were going to increase fines to 7.5 per cent. As far back as 18 March 2010, Premier Colin Barnett announced his hopes to scrap all discounts on mining in Western Australia within three years. On 10 April 2010, another article in the West Australian newspaper reported Mr Barnett as saying he would end concessions on mining within three years. This is precisely what he has done.

On 10 May 2010, Premier Barnett again spoke of bringing the iron ore fines rate and the lump rate of 7.5 per cent into line. In the Australian on 13 May 2010, in an article written by Dennis Shanahan, Premier Barnett told the Australian he planned to raise the royalty rate for iron ore fines to 7.5 per cent by July 2011. The plan was so secret that Swanny did not know about it, but even industry bulletins in May last year were talking about the increase in concession for iron ore fines to 7.5 per cent. On 20 May 2010, Colin Barnett said he was going to increase the royalties across the board to 7.5 per cent but it was not going to happen until July 2011, which has happened. If ever evidence were needed that nothing escapes the attention of this Treasurer, he was actually directly asked at a public forum on 19 May 2010 about Premier Barnett's secret plan—the plan that he did not know anything about—to raise the royalty regime on fines to 7.5 per cent. This is a plan that came suddenly out of the blue; a plan that he was not informed about. A journalist says:

Premier Colin Barnett has flagged he wants to increase iron ore royalties to the global rate of 7½ per cent. He has flagged that before the Henry Review.

The Treasurer says, 'Well, they will have to establish that in discussions with Premier Barnett.' This is the plan that the Treasurer said in the House today came suddenly out of the blue.

In question time the government tried to say that last October there was a report that Premier Barnett was not lifting the royalty rate. That is true—he has not lifted the royalty rate beyond 7.5 per cent. In March this year the Treasurer announced that all current and future state royalties would be credited back to mining companies. He knew about the proposed rate. Premier Barnett had already been talking for over 12 months about taking away the concession applicable to iron ore fines. So in March this year the Treasurer knew, and he wrote to the Commonwealth Grants Commission in February of this year asking them not to punish Western Australia when it increased the fines rate to 7.5 per cent.

On 25 March this year, in an article in the Australian, it was spelt out clearly that Premier Barnett was raising fine rates to 7.5 per cent, that the Commonwealth knew about it and that they had already announced crediting back all future and current royalties. This article in the Australian makes it quite clear that Colin Barnett had flagged that his government was already raising the rates on fines from 5.6 to the lump rate of 7.5 per cent. So, again, on 25 March 2011 there was an article in the Australian pointing out that Colin Barnett as Premier of Western Australia was going to raise the fines rate to 7.5 per cent.

Let us assume that the Treasurer does not read the media and that nobody brought it to his attention, and let us assume that he did not understand what the journalists meant when they said that Colin Barnett had a plan to raise the royalty on fines to 7.5 per cent. Even more damaging than those press releases and those press statements are documents released by Treasury under a freedom of information request which make it abundantly clear that the Treasury and the Treasurer were aware of the exact details of these proposed changes in May last year. A letter from the Western Australian Under Treasurer received on 10 May by Dr Ken Henry, then Secretary to the Australian Treasury, explicitly states:

… I seek your urgent confirmation that "scheduled increases" in Western Australia would include the removal of existing iron ore royalty rate concessions, which would see both fine and lump iron ore royalty rates being levied at 7.5% … by 1 July 2012.

That is exactly what has been announced. It is an incremental increase—a per cent increase this year up to 7.5 per cent by July 2012. So the Treasurer knew in May of 2010 precisely what Colin Barnett was going to do. Let us give him the benefit of the doubt and say a letter to the Treasury Secretary is not the same thing as telling the Treasurer himself. However, the FOI documents reveal more. In a Treasury executive minute dated 17 May 2010 entitled 'Mining projects and royalties in Western Australia'—so you get the idea what this is about—the Treasurer himself was advised of this proposal. It is noted in the executive minute that the brief was provided because the Treasurer's office requested it urgently. So the Treasurer himself asked for the Treasury to provide advice on Premier Barnett's plan to raise the fine rates to 7.5 per cent. It states clearly on page 8:

Western Australia indicated at a recent Commonwealth Grants Commission meeting—

this is prior to the announcement of the resource super profits tax—

… it was considering increasing the royalty rate on iron ore fines from the current rate of 5.625 per cent, to the 7.5 per cent rate for lump ore.

So the Treasurer did know; there was communication; there was discussion; there were minutes from Treasury requested by the Treasurer. We now know, following questions from the shadow Treasurer in question time, that there were conversations between the Premier of Western Australia and the Treasurer. There was actually a phone call from the chief of staff of the Premier to the Treasurer's chief of staff before the Western Australian budget that set out explicitly what was going to occur. The Treasurer himself took action by writing to the Grants Commission in February 2011. So, the Treasurer has been well and truly caught out. His statement that this came suddenly out of the blue is a lie. His statement that he knew nothing about this and that they did not communicate to him is a lie.

Mr Martin Ferguson: Mr Speaker, I ask that that unparliamentary term be withdrawn.

The DEPUTY SPEAKER ( Hon. BC Scott ): It would assist the House if the member for Curtin withdrew the use of the word 'lie'.

Ms JULIE BISHOP: I withdraw. It is evident that the Treasurer knew of the Western Australian plans to increase the royalties on iron ore well before he advised the Prime Minister to sign that mining deal with the three big miners. And this is the rub: the Treasurer knew that Western Australia was going to raise the royalty rate across the board to 7.5 per cent. They went into that meeting last year with the big miners—remember how they had to fix the mining tax debacle; they had to sack Kevin Rudd because the government had gone off the rails—knowing that Western Australia was going to raise the royalty rate, and yet they promised those miners that they would credit all current and future royalty rate increases. Now they are screaming blue murder, telling the Australian public they knew nothing about it when they knew all about it. The Treasurer knew before he made the commitment to credit all state and territory royalties against any national mining tax liability. It was interesting during Senate estimates last night how the Prime Minister's own department sought to distance itself from this debacle caused by the Treasurer. The Prime Minister's department pointed out very clearly that the advice to the Prime Minister on the mining tax deal came directly from the Treasurer on this occasion. In fact, the Prime Minister's own department was sidelined—this was all from the Treasurer. The question remains: why did the Treasurer not advise the Prime Minister that signing the mining tax deal would mean that the increases from Western Australia would be credited? Or did the Treasurer tell the Prime Minister and she thought she could get away with it before the election?

We are witnessing a huge deception of the Australian public, an enormous deception by the Treasurer to suggest he knew nothing about the Western Australian increase to 7.5 per cent when he knew all about it. He stood in this House today and said to the parliament and through the parliament to the Australian people that it came suddenly out of the blue. He has had over 12 months notice, in detailed discussions with the Western Australia government. Through a series of press announcements, he knew, yet he stood in this parliament and said it came suddenly out of the blue. This government is not only destroying the Australian mining industry but it also cannot be believed on anything. (Time expired)