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Tuesday, 25 May 2010
Page: 4006

Dr JENSEN (6:45 PM) —To the member for Parramatta, the stimulus did not save our economy from the North Atlantic financial crisis. Every single OECD country took out stimulus and yet they went into recession regardless. It was the mining industry that you are intending to punish that in fact saved the economy.

In his inaugural address as the newly elected third President of the United States, Thomas Jefferson outlined what he felt were the constraints on government necessary in order that a free people would continue to prosper and remain happy. His message was a simple one—only one paragraph:

… a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government …

It took only one paragraph of his speech for Jefferson to outline what he felt the correct role of government is—and it is still as true now as it was then.

This government has strayed far from this simple message of restraint and freedom. Jefferson’s message is particularly pertinent as Australia finds itself in the grip of a nanny state government that feels it can encroach on the freedoms of all Australians through oppressive tax rates and socialist overtures. The government feels it is okay to use a word like ‘superprofit’, the language of the failed socialist ideologue Karl Marx, as an excuse for interfering in the economic affairs of free industry and a free country. Too much government and too much taxation—my constituents are sick of it. Bracket creep is one of the most insidious attacks on economic freedom. This government decided to ignore the ‘creep’ part and simply steal from one industry to pay for its reckless spending and lack of frugality.

There is a thief living amongst us. Under the veil of working families and the national good, the government has announced a great big new tax to redistribute the wealth and implement its socialist agenda. Thieving from the real economic heroes of the North Atlantic crisis, the government is falsely claiming credit for the recovery it had nothing to do with from the recession we never had. We should all be concerned about this thievery because history has all too many examples of people acting in an oppressive manner on behalf of the national need yet delivering nothing but oppression. And really is there anything more insidious than taxing hardworking people to engage in social engineering and electioneering.

Our great country was built on equal opportunity, but this does not always lead to equal outcomes. The government that tries to socially engineer outcomes ignores our national culture of hard work and self-reliance. This country was built not on big government but by hardworking Australians. Look at the resource industry; it has not always been as profitable as it is today. It took trailblazing pioneers and entrepreneurs to set up the industry we see today. Under their own direction these early miners built their small companies into thriving, vibrant contributors to Australia’s economic development. What do these companies get in return for all the jobs they have created, all the wealth they have given to this country, all the companies that have been set up to support their needs and all the Australians who have a bright future because of the risks they took? They get slugged with a profits tax of 40 per cent. Would these same pioneers and entrepreneurs have taken the initial risk if they new the government would tax 40 per cent of their profits? It is doubtful.

Exorbitant taxation is still a major consideration for companies making future investment decisions. The final slap for miners is the name of the tax—superprofits. I cannot even bring myself to say the word ‘super’ when discussing the tax. It is the free man’s oratorical equivalent of swearing in front of the pope. The term superprofit is nasty, filthy, hammer-and-sickle language that should be confined to the annals of socialist history.

Western Australians in particular are angry at the new resource tax, which will hit not only resources companies but the state more generally. Recent consumer sentiment indices have shown falls in confidence, with the lacklustre budget unlikely to improve the mood of investors. Much of this drop in confidence is a direct result of the uncertainty caused by the mining tax. This pessimism created by the government’s new tax is contagious, with market conditions and confidence in the economy dropping. Western Australian companies seem to be those most under pressure. The benchmark ASX200 saw a fall of 10 per cent, while in the same period 30 listed WA companies saw falls of 17 per cent. The new tax demonstrates the distortion created in markets when the government interferes unnecessarily. It also demonstrates the disproportionate effect of the tax on my state of Western Australia.

There are now daily reports of major mining projects being shelved or reviewed, and these are not isolated incidents or small-time projects. Oz Minerals have announced that their Prominent Hill mine expansion is on hold. Chief executive of BHP Billiton, Marius Kloppers, has been reported as confirming that any expansion of the Olympic Dam project would be frozen. Gas producer Santos has said it is holding off on the final investment decision on an LNG project in Queensland because of the tax. This project alone had the potential to create 5,000 jobs. Fortescue Metals have announced it will halt Pilbara projects worth $15 billion dollars, which could have created more than 30,000 jobs. Many of those jobs would have gone to Western Australians. Fortescue executive director Andrew Forrest said he tried getting hold of Wayne Swan and Kevin Rudd, but they did not return his calls.

Why should the mining industry have to bail out Labor’s $94 billion debt and $57.1 billion deficit? It is because certain people live in parliament house land and did not pick up the phone when the mining industry called looking for answers or consultation. Potentially 30,000 people have missed out on work, many of them Western Australians. I am sure my state will let the government know what they think of their new tax at the next election. This tax is not an academic adventure into theoretical outcomes of heavy taxation. These are real businesses that need to make decisions on the viability of projects, and a 40 per cent reduction in revenue may make some projects unviable or unprofitable.

Under a coalition government we would save a combined $46.7 billion in total cuts and eliminate bureaucratic wastage. Included in those measures would of course be the abolition of the mining tax. A coalition government would save Australians more of their tax dollars as well as saving the future of our mining industry. The government needs to think beyond the here and now of its political necessity. This is about the future of governance in our country. What kind of precedence does this tax set? What is this government going to do whenever it needs to raise some money to offset its profligate spending? Will it just introduce a new tax on now vulnerable profitable industries? How is this responsible governance? How does this provide certainty for business?

In no uncertain terms this resource tax represents the single greatest threat to profitable industry and wider political and economic freedom in this country. The government should ask itself when it became okay for it to wake up one day and decide that this was the correct role of government. The key theme of the story of Robin Hood was not robbing from the rich and giving to the poor, but the oppressive tax rates that made the poor so desperate that they had to steal. Even if the government gets its new tax, is there any certainty that big business will not just move to reduce its liabilities? Maybe the government’s indignation about the mining industry’s opposition to its tax would be a little easier to bear if it were not for the millions allocated in the budget to the government’s propaganda advertising campaign and union trust funds. This Labor government is robbing the miners to pay for their taxpayer funded re-election campaign.

How does the government justify its tax? They use public opinion polls and claim a moral mandate. The most absurd public opinion polls are always those on tax. If there is one thing we know about taxes, it is that people do not want to pay them. If they did, there would be no need for taxes. People would gladly figure out how much of their money the government deserved and mail it in. Yet we routinely hear from the government and their union mates about how opinion polls reveal that the public likes their tax rates and might even like them higher. Worse still is the argument that higher tax will be good for industry. Next the government will tell us the public thinks the crime rate is too low or that people would really like to be in more car accidents. If this was such a good thing for the mining industry, why not let them set their own tax rates—I am sure they would do what is right.

It is amusing to see who Labor has rolled out of the woodwork to stand up for its tax. The now climatically irrelevant Ross Garnaut has given his two cents worth. Dr Garnaut is the chairman of gold mining company Lihir, so he has scope to comment. It is strange, though, that Dr Garnaut came out in favour of the tax, considering his fellow mining executives have all been ardently opposed to it. Maybe it is not so strange when you consider Lihir has most of its mining operations in West Africa and Papua New Guinea. I am also assuming Dr Garnaut wrote his book Taxation of mineral rents before his current position with Lihir. He probably regrets writing this academic adventure into socialist thought now he lives in the real world as the head of a real company. Dr Garnaut also has much to say about what he feels is a scare campaign being run by the mining industry. Yet he has nothing to say about trade union leaders running their own campaigns against the tax. It is odd, because it really has nothing to do with them at all. Maybe Dr Garnaut could encourage union leaders to butt out of public debates that do not concern them.

Please do not get me wrong or twist my words here—nobody is suggesting government does not have a role to play in regulating markets or the wider economy. This is about government knowing its place as a facilitator and not as the key driver of economic growth. Government is a zero sum gain, and even if some net social gain is achieved, money in does not equal money out.

I would also like to address the arguments about government debt. While we hear these arguments about having the lowest debt of all developed nations, I am far from impressed. There is a myth that government deficits do not have a crowding-out effect on private investment, yet logic tells you that if savings and investment go into government bonds there is less productive investment and savings in the market than there would have been. As well as deficits, excessive government spending also crowds out private investment and saving. The government must judiciously keep tax rates low to avoid economic stagnation and allow maximum economic freedom.

In 1901-02, the first full year of Commonwealth government, Commonwealth spending represented five per cent of GDP. This year government expenditure will reach close to $340 billion or 26 per cent of GDP. This is a lot of government, and it is run by a lot of bureaucrats. When he was in opposition, Kevin Rudd said that the public service needed a ‘meat axe’ taken to it. Since he took office the federal public service has swollen by 10,000 people. A meat axe administered by a vegetarian perhaps! Staff positions in the Prime Minister’s own department, the Department of the Prime Minister and Cabinet, will grow to more than 700, a 32 per cent increase compared with last year. Staff numbers will continue to grow in those federal departments that deal chiefly with policy, yet so-called operational divisions, like Fisheries, the Family Court and even Centrelink, are all expected to lose staff. Somehow the Department of Climate Change received funding for new offices to prepare for a higher intake of staff. What these people will be doing, as the government has no policy on climate change, I have no idea. Positions at the senior executive level on salaries which start at $130,000 a year have hit 2,900. The Prime Minister has no razor and no gang. He is expanding the size of government and at the same time reducing the productive capacity of the private sector. Worse still, as reported in the budget papers, the government’s Career Transition and Support Centre in the Australian Public Service Commission will assist staff and agencies affected by downsizing. This commission itself is expecting a 20 per cent growth in its staff levels over the coming year. This is bureaucracy on steroids and Jefferson’s words are ringing in my ears: ‘a wise and frugal government’.

I read recently that the trade minister was approached by Chinese officials worried that the new 40 per cent tax will push commodity prices even higher. You would expect him to respond with, ‘This tax will be good for our industry and wider economy.’ He did not. Simon Crean asked the Chinese to have a say in how the tax should be implemented. If not for the seriousness of a government cabinet minister asking a foreign country how to run our taxation system and almost committing treason, his comments demonstrate the problems internally that this tax is creating for the government.

The Australian tax office reported statistics recently showing that profitability across the mining sector was lower than for various other industries, including health care, real estate and agricultural companies. Are Australians really better off when taxation is increased? This tax will not only affect the mining industry but will affect all related industries, including the finance sector, which has investments in mining equities. Australia does not have a monopoly on minerals and must compete for funds internationally to develop its mineral projects. Foreign investment will find the projects of best value. Unlike petroleum, where the demand on our resources is relatively inelastic due to relatively limited supply, for other resources the situation is vastly different. This new tax will weaken the ability of mining and resource companies to compete for investment in future projects.

Yes, big mining has much to lose from this tax but it is because of this potential loss that all of Australia, especially Western Australia and my electorate of Tangney, have much to lose if this tax is approved. This tax challenges fundamentally the correct role of government in a free society. This government has overstepped its role as the facilitator of growth and in doing so puts in jeopardy our free market system. This tax puts in danger the future of our industry and of our nation. It is already damaging us. For Julia Gillard to say that the precipitous fall of our dollar is due to the weakening European economic situation and other nations going to the greenback is both misleading and shows a scary misunderstanding of the actual situation. Perhaps she should explain why our dollar has fallen against the pound and the euro in addition to the US dollar? I urge the government to rethink its great big new tax and its approach to sensible governance in what should be a free country.