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Tuesday, 22 November 2011
Page: 13385

Mr ROBERT (Fadden) (22:09): It is with some hesitation that I rise to lend some comment on the government's minerals resource rent tax, but I make the point categorically that I will not support it and will not vote for it. It is irresponsible; it is a simple grab for cash; and it is simply one more tax from the government. It is almost as if there were not a tax that the government have not looked at attractively. It is almost as if there were not a profit the government did not seek to tax. In coming to office four years ago—indeed, four years ago this Thursday—there have been 13 new, enhanced or emboldened taxes. Is it any wonder that they have asked Treasury to title taxes as savings within Treasury documents? I am not too sure how they reached that degree of hyperbole, but there have been 13 new, enhanced or emboldened taxes.

We have just passed the tax with respect to carbon, a pollutant in the atmosphere. The fact is that no other major advanced economy in the world has put in place an economy wide tax. The President of the United States and the prime ministers of Canada, South Korea and Japan have all indicated they are going nowhere near an economy wide tax. The price of a carbon credit in Europe is about $16 and falling. The price got down to a few cents at the Chicago carbon exchange before it collapsed. I remember the government standing here with its original emissions trading scheme lauding the Chicago exchange as an example of what should be done. I have heard nothing since it collapsed into such a huge hole. We know that in Europe the carbon tax is 1/400th of the impost of the carbon tax upon Australian citizens.

This is a world of great uncertainty, where the 10-year bond rate for Greece is over 25 per cent, Spain's is now over 6.5 per cent and the spread between French and German 10-year bonds has never been greater. This is a time when commentators are speaking of a lost decade approaching us, where most commentators believe Italy cannot afford its repayments and last week the European Central Bank revised projected growth from 1.8 to 0.5 per cent. We are facing the collapse of Italy, the eighth largest economy, amid its inability to pay its debts and the financial contagion that may well eventuate. We have a government building on a carbon tax to make our industry less competitive—and on top of that it is now bringing in a mining tax. It is beyond belief that a government facing such global uncertainties would consider putting greater imposts on our industry, but here it is.

The state of our federal government finances is parlous at best. The quality of the current government spending is less than parlous. Today in question time they lauded the great school hall program: $16 billion to build what I am sure are nice school halls—I have been in quite a number of them—but, in terms of adding economic value to the economy, it is dubious at best, with every cent borrowed and interest being paid on school halls.

The current budget is at the mercy of terms of trade, which are at a 140-year high, with record mineral export prices. A change of just four per cent of these terms of trade will put the much touted 2012-13 budget surplus into pipedream status. We know that resource exports now stand at 57 per cent of Australia's total exports and have increased from 41 per cent in 2005. Iron ore, of course, is the largest and coal the second largest export. This reflects, in most part, a sharp rise in global prices, which have increased at an average annual rate of 23 per cent for iron ore and eight per cent for coal over the same period, measured in Australian dollars. We know that the Australian thermal coal price in October 2006 per Australian dollar per metric tonne was $62.62. It reached a high in 2008 of $200 a metric tonne and as of last month it was $125 a metric tonne. You can see the wild price fluctuation. In between the $200 spike in July 2008 the price dropped below $90 in October 2009 and has upped and downed to $125 today.

The government look upon this as if they are walking into an Orthodox church and all they see is the gold that glitters, as opposed to what the church stands for. In this case they are looking at the graphs and saying, 'We could help our parlous state of finances by taxing this.' The problem is that we have a structural deficit in our economy if mining resource prices come off and that structural deficit will be exacerbated if the threat of European contagion from a default in Italy comes to mind. Economists are putting that as far more likely than not.

We are a small, open economy. We are incredibly vulnerable to export prices. Whilst the Italian default is likely, economists have also said it is too big to bail out at $2.2 trillion worth of debt. The interest on that debt rolling over $300 billion next year at 6.5 per cent is eight per cent of GDP, $140 billion a year in interest. The Italian government under Berlusconi was saying, 'But our budget's in surplus'—quietly, cough-cough—'before interest payments'. Italy is at the point now where it cannot afford the interest let alone keep the economy going. Economists are saying the best case now appears to be a recession in Europe, with the Chinese Vice President yesterday saying a global recession is likely. We pray this is not the case and we will certainly join the government in doing everything we can to ensure it is not the case, although for the most part this is out of our hands.

Public finance is about hoping for the best and planning for the worst, but planning for the worst as storm clouds gather is not about introducing new taxes. If Italy falls, if a degree of financial contagion moves, resource prices will come off. Will they collapse? No-one knows. What if they halve to October 2006 levels of $62? The structural deficit we have will only get worse.

Andrew Robb, the member for Goldstein, made the point that despite the mining boom we have had three record deficits, including of $50 billion and $22 billion or thereabouts, leaving us a net debt of something like $110 billion. Our current 10-year bond rate is fluctuating around four per cent. We need to find $4 billion a year on average upon that debt just in net terms, notwithstanding the fact that we have a gross borrowing approval limit of up to a quarter of a trillion dollars and interest is paid on the gross level. The member for Goldstein made the point that we have a structural deficit in this year's budget which is twice Germany's structural deficit on a per capita basis—an astonishing statement. He goes on to say that on a per capita basis compared with Italy, one of the bigger economies in the world and one of the shakier ones, we have a structural deficit which is 30 per cent greater. On a per capita basis, he argues, we could be seen as twice as risky, twice as bad and twice as big as Germany, and compared to Italy our structural deficit is 30 per cent greater on a per capita basis.

In anyone's language this is a substantial vulnerability. Faced with such a vulnerability the question that needs to be asked of a competent government is: would you, facing such a vulnerability, impose an economy wide carbon price that no other country is doing and a substantial hit in a resource tax on our mineral wealth? I think the answer, if you look at what parliaments across the world have done, is a resounding no. The member for Goldstein continued that, if there is a downturn in commodity prices, we may be facing a $50 to $70 billion deficit for years to come with higher debt and all of the prosperity and the blessings we have had from the mining boom may be squandered. The member for Goldstein makes a sobering point.

This is the government's second attempt at a tax on our mineral resources. Their first attempt was to nationalise 40 per cent of the resource sector. This brings back memories of Chifley in 1947 trying to nationalise the banks, but I digress. Not only did they bungle their first proposal in its design, but 18 months later it is being rushed through. The House will sit all night until this bill gets through. It is only Tuesday and there are a number of sitting days left for debate. It is almost as if this is a symbolic attempt by the PM to be seen to be achieving something.

If you look at what the miners will pay it is instructive. The budget estimates have numbers in the multiple billions of dollars with original estimates towards $8 billion, yet BDO research said the mining tax liability for Rio Tinto for the first five years would be zero. They calculated the mining tax liability for BHP as zero again. They took the real-life numbers of a small emerging miner with revenue of up to $700 million and looked at its mining tax revenue: first year, zero; second year, $49 million; third year, $107 million; fourth year, $96 million; fifth year, $68 million; and the following year, $63 million. This results in an effective total tax rate of 40.18 per cent in the first year, 45.68 per cent in the second, 45.76 per cent in the third, 46.12 per cent in the fourth and 46.2 per cent in the fifth year.

This tax has been described as attacking the goose that laid the golden egg. We are looking at a taxation rate on these miners upwards of 45 per cent for mining companies with revenues of up to $700 million—that is not a large-cap mining house. Companies will need to find those resources to pay it, yet Rio and BHP, who can amortise enormous losses, will not be paying anything at all in the first years. It absolutely reeks of Mark Latham's 2004 hit list, but this time the hit list is of companies who are apparently far two wealthy. I have listened to the speeches of Labor members of this House and all they have done is to attack the wealth of the likes of Gina Rinehart, Clive Palmer and others as if to say: 'You're wealthy; we're going to take it from you and redistribute it because we as the government know best.'

Even the Howard government never professed to know best. This government has tried to denigrate what the Howard government did, but let me tell you what they did with the proceeds of first mining boom. Prime Minister Keating left $106 billion in net debt in 1996 and, by the time that was paid off, a further $57 billion was paid off in interest—over $160 billion was paid off because of Labor's last debt.

A couple of years of sunshine—$60 billion was put away in the bank, in the Future Fund, to offset future liabilities in superannuation for public servants and the military and to deal with an ageing population post 2020; $20 billion was put in the bank from the 2006-07 surplus; and the 2007-08 surplus provided a further $20 billion. One hundred and sixty billion dollars or thereabouts was paid off from Labor's debt, including interest; $100 billion in cash was put aside or in surplus from the 2007-08 budget. It was the world's 10th largest sovereign fund at the time. That was $260 billion that the government put aside from the first mining boom—a quarter of a trillion dollars was put aside. That is what a responsible government does in a mining boom: it lives within its means. It saves and is frugal. It does its best to share the wealth of that around whilst also meeting its responsibilities.

Be under no doubt: the reason why we as a country were able to manage many of the ravages of the GFC was that China was, of course, buying our minerals; we had no debt thanks to the Howard years; we had at least $40 billion in spare cash, putting aside the Future Fund; and our interest rates were comparatively high, so monetary policy could be eased. If writing cheques would see us through the GFC, why did no other country fare so well when they wrote bigger cheques than us? Because it had nothing to do with cheque writing and everything to do with prudent fiscal policy.

What we see here is a tax on mining that is poorly constructed, that is poorly thought through and that is being implemented at the worst possible time, when the world is facing some significant ravages out of Italy. It is hallmark and symptomatic of a government that continues to lose its way. (Time expired)