Senator CASH (6:59 PM) —I rise to address an issue that is of supreme importance to the state of Western Australia and to all Western Australians—that is, the impact of the Rudd Labor government’s proposed resource super profits tax on the state of Western Australia.

Soon after the Rudd Labor government was elected on 24 November 2007, it became patently obvious that the Rudd government was to become a big-spending, high-taxing government. In May 2008, just six months after its election, and as a consequence of its extravagant, wasteful and reckless spending, the Rudd government realised it would need to raise taxes to fund its prolific spending. So what did it do? It announced a review of Australia’s tax system. The crass political objective of the review, which became known as the Henry tax review, was to extract more tax from the Australian taxpayer and from corporate Australia.

Rather than signal that the review was designed to raise taxes, the Rudd government clothed the review in its political spin and claimed that it would examine Australia’s tax and transfer system, including state taxes, and make recommendations to position Australia to deal with the demographic, social, economic and environmental challenges of the 21st century. The long-awaited tax review by Treasury secretary Ken Henry has now been published. There are 138 recommendations in the Henry tax review, but because Mr Rudd is a weak person, because he is an insipid person and because he does not have the guts for full-bodied tax reform, Mr Rudd, the Prime Minister of Australia, chose to accept only 2½ of Mr Henry’s 138 recommendations. Mr Rudd chose a blatant tax grab rather than measured tax reform. Clearly, the Henry tax review represents a lost opportunity for taxation reform in Australia given that the centrepiece of the proposal is the addition of a new supertax, which will destroy Australia’s resources sector rather than streamline and refine the current tax system.

As a senator for Western Australia, which has the biggest mining industry of all the Australian states and territories, I am very concerned about the impact this additional resource tax grab will have on my state. Let’s face it: if it impacts on Western Australia, there will be a consequential flow-on to the rest of the nation. If the Rudd Labor government implements its proposed resource tax grab we will see a new supertax being imposed on the mining industry in addition to the $21 billion that is currently paid by companies in royalties, income tax, payroll tax, fringe benefits tax and taxes paid by individuals working in the mining industry. The imposition of a mining supertax is likely to have a significant adverse effect on export earnings in Western Australia and this will be to the detriment of the state and the nation.

Mining is a globally competitive industry which makes investment decisions based on the perceived sovereign risk of a host country and the relevant taxation regimes. It is estimated that there are currently in excess of $100 billion worth of new mining projects being considered by mining companies around Australia. Because of the extended life of mining projects, which are measured in years rather than months or seasons, decision makers in the mining industry look for certainty and stability, particularly in the area of taxation. This certainty and stability is often reflected in state agreements where a state government will enshrine in legislation the terms and conditions that are to be applied to a particular mining project. In Western Australia there are many examples of such state agreements.

It is in the Australian people’s interests to expand our mineral exports so that the resulting economic benefits can be used to continue to raise our standard of living and provide a secure future for generations to follow. Clearly a tax grab on mining projects, which is now being contemplated by the Rudd Labor government, raises the issue of sovereign risk and will adversely affect future investment decisions in the mining industry, particularly in Western Australia.

Then there is the impact this tax will have on jobs. Western Australia is one of the world’s most diversified mineral mining regions, and is the economic powerhouse that drives development throughout Australia. In WA there are more than 75,000 direct employees and contractors in the mining industry. If the economic multiplier is applied to mining expenditure, it is obvious that this results in huge numbers in indirect employment and a huge increase in aggregate demand, resulting in both economic and social benefits to Western Australia and the nation. Clearly, the introduction of a mining supertax will have an adverse effect on mining employment and indirectly on other employment in Western Australia.

 Then there is the impact on mining exploration. The mining industry is underpinned by continued growth in both exploration and investment. Without both the industry will without a doubt decline. Mineral exploration in Australia in 2008-09 was worth $2.2 billion, of which 56 per cent was expended in Western Australia. About 63 per cent of Western Australia’s exploration expenditure was on existing deposits, with the remaining 37 per cent on greenfields sites. Exploration is the lifeblood that finds new mineral deposits and it provides the catalyst to unlock Western Australia’s mineral wealth.

Contrary to the Rudd Labor government, which is intent on damaging the mining industry by the imposition of a resource super profits tax, the Western Australian government is actively encouraging the mining industry and last year introduced an $80 million Exploration Incentive Scheme aimed at encouraging exploration in underexplored greenfields regions of WA. I believe that the imposition of a mining supertax is likely to have a significant adverse effect on exploration in Western Australia and this will be to the detriment of the state and the nation.

Research and development is crucial to the mining industry as it can identify and create new technologies that have a direct impact on the operations and profitability of a mining venture. Research and development can identify opportunities to reduce production costs, add value to recovery techniques and identify safety enhancement opportunities to benefit employees. I believe that the imposition of a mining supertax is likely to have a significant adverse effect on mining research and development, and this will be not only to the detriment of Western Australia but to the detriment of the nation.

In 2009 the Western Australian government received more than $2.5 billion in royalties from mineral and petroleum producers in Western Australia, of which about $1.5 billion was from mining. As Western Australians know, royalties are a payment for access to and extraction of a particular mineral resource and relate to the land management function that is a constitutional right of a state. Western Australian voters are well aware of the contempt Mr Rudd has for Western Australia, which is reflected in his complete disdain for the Federation and his continued failure to uphold the principles of federalism.

Let us not forget that as a result of the recent Grants Commission 2010 report on revenue-sharing relativities, which sets out how the GST should be distributed between states and territories, in 2010 and 2011 WA’s share will fall by $222 million or nearly $100 on a per capita basis. Western Australia now keeps only 68c of its per capita GST dollar at a time when the overall national GST revenue is growing. It is critical that Mr Rudd knows that if he introduces his new mining supertax Western Australia will not forgo its constitutional right to impose a royalty on mining operations in that state. Any mining supertax imposed by the Prime Minister of Australia, Mr Rudd, will be in addition to any applicable state royalty. The bottom line is that the Rudd government is a big-spending government and this mining supertax is designed to satiate the out-of-control spending pattern that has become a hallmark of Rudd Labor.

The facts are clear, particularly to the people of Western Australia. Mr Rudd has failed the test as a fiscal conservative as with so many of his promises and he has become the nation’s biggest underachiever. I hear this from so many people back in Western Australia. No wonder his colleagues in the west now refer to Mr Rudd as the worst Prime Minister since Billy McMahon. Then they offer their apologies to Billy McMahon for putting him in the same category as Mr Rudd, the underachiever.

The federal opposition will oppose Rudd Labor’s great big new tax on the mining sector. The so-called superprofits tax has dire consequences for Australia’s most successful industry, with significant flow-on effects right across the economy. This tax is economic vandalism and it is economic lunacy from a government that does not have a clue about economic management. Rudd Labor should axe the tax.