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Monday, 24 May 2010
Page: 3736

Ms JULIE BISHOP (6:03 PM) —When the Treasurer rose to his feet on budget night, for a moment or two I thought we had been transported back in time. But no, he was taking us forward in time to 2012 or 2013. The Treasurer spent most of his speech talking about what will happen three years from now. There was very little about what will happen during the next 12 months. It was bordering on the surreal. The Treasurer was supposed to be handing down a budget for the 2010-11 financial year, but all he talked about were events that may occur years from now. I believe there is a good reason for that. The Treasurer is highly embarrassed about his budget. For the second year in a row, the Treasurer is so embarrassed about the state of his budget that he finds it difficult to talk about it in detail. Do you remember last year when the Treasurer could not bring himself to say the word ‘deficit’ within his budget speech? It reached such comical levels of absurdity that the Treasurer was avoiding saying the word ‘deficit’ and the Prime Minister was avoiding saying that the projected government debt was $200 billion. They found themselves physically unable to say the words ‘deficit’ or ‘$200 billion’.

Again this year the Treasurer finds it difficult to talk about what is going to occur in 2010-11. That is because the Rudd government’s spendathon continues unabated. The Treasurer is too embarrassed to admit that the headlong rush into massive debt continues. He is too embarrassed to admit that this government will be borrowing $700 million every week for the next financial year. This government’s reckless spending and borrowing means that the interest bill alone on government debt in 2010-11 will be $4.6 billion. The budget reveals that the interest payments will be $6.5 billion by 2012-13. This is money that has to be found to pay the interest on the government debt. It is money that could and should have been invested in schools, hospitals and other important services for the Australian people.

So how should the Australian people judge the Rudd government? The truth is that the Rudd government inherited the strongest set of national accounts since Federation when they took office in 2007. The Rudd government took over from the Howard government a budget that was more than $20 billion in surplus. There was zero net government debt and there were tens of billions of dollars in investment funds for the long-term future of this country. Members will recall the Higher Education Endowment Fund, the $6 billion fund for universities. There were funds for healthcare research and more. Yet this Treasurer has now presided over the biggest turnaround in the national finances in Australia’s history. This reckless government has spent money like water and plunged the budget deeply into deficit. Government debt will reach nearly $94 billion, and this is a debt that will be repaid by cutting government services or by the Australian people through their taxes. It will not be repaid by this failed Labor Treasurer or this failed Labor Prime Minister. It will be repaid by the Australian people. The government has raided many of the savings and spent, spent, spent.

What does Australia have to show for it? We have witnessed a disaster unfolding in the school building program, which has been rorted to an unbelievable extent. It is a school building program that has fundamentally failed every test of good governance and every test of competent ministerial oversight. We have also witnessed the tragic home insulation program unfold where four young Australians lost their lives and thousands of people are living in homes with unsafe roofs. There have also been dozens of house fires. The program will cost almost as much to fix as it took to roll out in the first place.

We have witnessed the litany of broken promises from the Rudd government. There was the failure to build the promised 260 childcare centres and the failure to build the promised 2,650 trade training centres with only 12 currently operational. The computers in schools program has delivered only a quarter of what the Rudd government promised for double the cost. The backflips and broken promises came so thick and fast in the weeks before the budget that it was impossible to keep track of them all.

Let me turn to one of the Rudd government’s most important policies. The Prime Minister called it the greatest moral challenge of our age. He claimed that climate change was so important, and that it was so necessary for his emissions trading scheme to be enacted before last year’s Copenhagen conference, that to do otherwise would be absolute political cowardice. He said it would be an absolute failure of leadership. Yet the Prime Minister has walked away from what he described as the greatest moral challenge of our age. What kind of Prime Minister would say that climate change was the greatest moral challenge of our age, tell the Australian people he had a policy to deal with it and then walk away from that policy? That is, by the Prime Minister’s own standards, an act of absolute political cowardice and an absolute failure of leadership. It is beyond belief that this Prime Minister can continue to expect the Australian people to believe any future commitment that he makes.

The Treasurer’s entire budget framework is based on a house of cards held up by a great big mining supertax. This tax strikes at the heart of Australia’s future prosperity. We know that the Prime Minister would love for this debate to be about Kevin Rudd versus the big, greedy, foreign mining companies. He would love to portray this as foreign companies taking their profits overseas and ripping off Australians. But the truth is that this is a tax that will impact most severely on the 500,000 people who are employed directly or indirectly by the mining sector. Amongst that group there will be young families struggling to pay off a mortgage and raise a family. There will be thousands of small business owners who have sunk their life savings into ventures that support the mining sector. These are the people who will be casualties of the Prime Minister’s supertax grab. It will not be the mining executives that this government is personally denigrating. It will not be BHP and Rio Tinto for, of course, they have options. They have obligations to their shareholders to operate in the most cost-effective environment to get the best returns on the investment. That is no longer Australia. They have options in other countries overseas, including Canada, whose effective tax rate will be less than half than that of Australia if this supertax is imposed on our mining sector.

One can only wonder what message this government is trying to send to international investors. Surely this government is not intending to send a message that, if you come to Australia, invest billions of dollars in this country and employ thousands of Australians, you can then expect to be subjected to retrospective taxation on your investments and your mining executives can be subjected to vicious, personal attacks from the Prime Minister, no less. The Rudd government has sent a clear message to the international investment community that Australia is now a more risky investment environment. It is hard to believe that the words ‘Australia’ and ‘high sovereign risk’ are being used in the same sentence by the global capital markets. Every Australian government for decades has worked tirelessly to promote Australia as a safe and stable investment destination. This reputation has been trashed by the Prime Minister for the purposes of domestic political gain. To make matters much worse the Prime Minister continues to misrepresent key facts about the impact of this mining supertax.

Question time today was quite a farce as the Prime Minister falsely claimed the status of a document, which he wished to rely upon to support the extraordinary claim of the Deputy Prime Minister and the Treasurer yesterday, that multinational companies in Australia pay 13 per cent tax and other companies pay 17 per cent tax. That claim was made in support of the government’s imposition of this tax. It is just not true. Worse still the document upon which the Treasurer and the Deputy Prime Minister relied was in fact a draft paper written by a student from the university of Carolina. It was not Treasury modelling; it was not a Treasury analysis; it was a paper done for a PhD student’s thesis.

We have to be deeply concerned when the Prime Minister is unable to describe what constitutes a superprofit. The Prime Minister said:

Well, a super profit is calculated in this way. If you have for example, in a mining company, a normal profit is made up of revenues minus expenses. What’s a super profit? Revenues minus expenses minus what we call an ordinary return on investment. How do we define an ordinary return on investment? If you took your investment capital and, for example, invested it at the long term government bond rate, that runs at about six per cent.

That was the Prime Minister’s description of a superprofit. Profits in excess of that he defines as super for profit. The Prime Minister went on to say:

… what we do is say that those companies running those super profits can keep 60 per cent of that but 40 per cent of it, we believe, should come back to the Australian people in investment in better super for working families.

This was another misrepresentation. The government has deliberately sought to mislead and misrepresent every aspect of this new tax. But that is the hallmark of the government. The government has misrepresented the total tax and royalties paid by the mining industry. The Prime Minister and his ministers have claimed the sector has only paid an additional $9 billion in revenue, when in reality it has contributed $80 billion over the period claimed. The government has been caught out using the statistics from the United States graduate student rather than the official published statistics of the Australian Taxation Office to attack the amount of tax paid by the minerals sector. Rarely have we seen an act of such utter desperation from a government rapidly losing control of its agenda. Rather than the 13 to 17 per cent quoted by the Treasurer and the Deputy Prime Minister from the paper by the US student, the government should use the Australian tax office figures which show the effective corporate tax rate paid by the mining sector is 27.81 per cent and when royalties are added the effective rate increases to 41.3 per cent.

In fact, BHP went so far today as to issue a notice to the stock exchange to point out that its effective tax rate for the year 2009 was 43 per cent. The chairman of BHP Billiton, Mr Jack Nasser, sent a letter to shareholders of BHP on 17 May 2010 pointing out that the effective tax rate paid by BHP was 43 per cent and that if this supertax were added to the tax rate, BHP would be paying about a 57 per cent effective tax rate, which would make it the highest taxed mining and resource sector in the world. I asked the Prime Minister in question time today whether he accepted as a fact the statement by the chairman of BHP Billiton that BHP’s effective tax rate was 43 per cent. The Prime Minister pointedly refused to answer.

There has been the very damaging campaign by the Prime Minister in concert with the unions to portray global mining companies as foreign carpetbaggers taking profits overseas. This is simply not true. For example, Xstrata has claimed that it generated $44 billion in revenue and has reinvested a total of $45 billion in Australia —in other words, Xstrata has invested more in Australia than it generated.

The Prime Minister has also sought to compare the mining supertax with the Petroleum Resource Rent Tax, which was introduced in the 1980s. It is important to note that the North West Shelf, a major petroleum project, was exempted from the Petroleum Resource Rent Tax. The government is not able to point to any development that occurred in the 20 years between the introduction of the tax and when the Gorgon project was announced last year. The fact is further development in the oil and gas sector was severely retarded after the Petroleum Resource Rent Tax was introduced. In fact, it is only in recent years, more than 20 years later, that development has begun as the long-term demand for energy appears to be very strong. The Gorgon project, in other words, has taken 20 years to come on-stream. This contrasts with the government’s claim that the Petroleum Resource Rent Tax has made the oil and gas sector prosper as a result of its introduction.

The head of Woodside, Don Voelte, has said that the Pluto project would not have got off the ground had the government’s proposed supertax regime been in place. And we have had a number of mining executives state publicly and to the stock exchange that projects will be put on hold as a result of the government’s mining supertax. It is beyond belief that the government can claim that whacking a 40 per cent tax on the mining sector is somehow good for the mining sector. If it were so good for the mining sector, why aren’t other sectors in the Australian economy lining up and begging the government to impose an additional 40 per cent on their operations? It just beggars belief.

Over the last few weeks we have seen a very damaging campaign by this government to give the impression to the Australian people that the mining sector is not paying its way and that somehow the Australian people are being ripped off. This is causing considerable consternation around the world, particularly in global capital markets and international investment circles. It is strange, because when Kevin Rudd was in opposition he used to speak very highly of the mining sector. Indeed in one of his first overseas trips as Prime Minister he went to Beijing, and in Beijing he said:

Australia is an open market when it comes to foreign investment. And if you look at Australia, we have had a history of relying upon internationally sourced capital to fund the country’s long-term development. In the great state of Western Australia, it’s like that.

I mean, you have a relatively small population, a huge land mass and therefore foreign investment has been necessary.

That is a statement that stands in stark contrast with what the government is now proposing to do. His extraordinary attack on mining companies as foreign owned and having massively increased their profits and denied the Australian people their fair share just does not ring true when you think how effusive the Prime Minister was about the mining sector and its contribution to ensuring that Australia could weather the storm surrounding the global financial crisis.

As the Prime Minister drags Australia’s international reputation through the mud for his own domestic political purposes, we in the opposition will stand firm. We believe that this supertax is bad for the Australian economy. It will cost jobs and drive mining activity and mining investment offshore. It will hurt small business owners. It will harm Australian consumers as the cost of living will rise as a result of the imposition of an additional 40 per cent tax. Housing costs, electricity costs and an increased cost of living will all go through the Australian economy. (Time expired)