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Wednesday, 26 May 2010
Page: 4329

Mrs MOYLAN (5:21 PM) —It is the first opportunity I have had to congratulate you, Mr Deputy Speaker Ramsey, on being elevated to the Deputy Speakers panel.

The DEPUTY SPEAKER (Mr RE Ramsey)—Thank you.

Mrs MOYLAN —On budget night the Treasurer made a statement that stretches the boundaries of believability. He said:

Tonight we meet the highest standards of responsible economic management.

The Treasurer then outlined the government’s new super tax on the mining sector, a devastating blow to the driving force of our economy. This is a sector that has done more to sustain Australia during the global financial crisis than the profligate stimulus spending of the government, which has left us with rising inflation, rising interest rates and the accumulation of a mass of national debt in the 2½ years that this government has sat on the Treasury benches—and this despite being left a $40 billion surplus by the outgoing Howard-led government.

The government argument that the $9 billion raised from this tax will pay for a reduction in the company tax rate, to top up superannuation and to fund infrastructure, also needs some careful analysis and clarification because the fact is that it will be the small business sector that will face additional costs of $20 billion out of their profits to fund the increase in the superannuation guarantee levy. This will not be paid for by the government. The government will be responsible for superannuation payments in the public sector, but our government put aside the Future Fund to meet those commitments, and that has been raided by this government, so that money has been diminished as well. Seventy per cent of, or over two million, small businesses will get no benefit from the decrease in the company tax rate because they are not incorporated companies. We heard the Prime Minister in question time today, and he admitted that there are only 30 per cent of small businesses that are incorporated and that will benefit from this cash grab from the mining sector.

This is more about delivering cash to a government that needs to plug the deep hole of debt and deficit rather than delivering benefits to the community. Now, despite the fragile state of the global economy, the government believes that it is economically responsible to advocate a lethal injection to a sector worth $61 billion last year to Western Australia alone. The Treasurer’s logic is hard to fathom, and the public is confused. Why should people worry about the new tax on mining? Because the ramifications are already reverberating across the economy. This ill-conceived and ill-timed tax will affect every person in every corner of Australia. Make no mistake about it: this will have widespread impacts across this economy.

On coming to government, the Prime Minister made a strong commitment to reduce the cost of living pressures. Instead, the cost of living pressures have already risen alarmingly and this tax will further exacerbate this pressure. It will reduce the value of superannuation, it will drive up new house prices, it will drive up electricity prices, it will dampen economic development and it will stifle job growth. Such reckless measures continue to be a theme of the government, and this new mining tax should go the way of their other ill conceived, failed policies and be dumped before it does more harm to the Australian economy and the living standards of all Australians.

In just 2½ years, $4 billion in taxpayers’ funds have been squandered. The public was promised national GroceryWatch and Fuelwatch websites to take off some of the cost of living pressures, but both of these were scrapped. Both of them failed at a cost of over $10 million to taxpayers. There have been cost blowouts of $1.5 billion in the school building program on top of the widespread overcharging that is beginning to emerge now. Fifty million dollars will need to be spent auditing the 240,000 incorrectly insulated houses which resulted in four people losing their lives and well over 100 houses burning to the ground, including one that I am aware of in my electorate. The actual cost of fixing the mistakes in this $2.5 billion program we probably cannot yet fully quantify, but, if my memory serves me rightly, a billion dollars was allocated in the budget for that purpose. Green Loans have been axed after the cost overruns of $48 million. The list of failures is long and the expenditure of public money to fix the mistakes is an outrage.

Now, to fund their profligate spending and to fix their mistakes, this government wants to introduce a new tax on mining. Despite increases in taxes, Australia’s net public debt will exceed $75 billion each year over the next four years, with the government borrowing $700 million each week for the next three years to fund their spending. That equates to over $69,944 a minute, or $4.166 million an hour for the next three years. The rate of borrowing is alarming. A constituent in my electorate of Pearce is so worried about the rate of spending by the government and the way they talk in billions and splash billions around the place that he sent an email to me the other day, visualising the government’s spending: I quote from his email:

I wanted to get my head around the term ‘billion’. I did a bit of maths, and the results were a bit scary. Imagine watching an ATM spitting out three 10-dollar notes every second, 24 hours a day, seven days a week for one year. That would demonstrate a literal cash flow of $1 billion.

Then I wondered what it would look like. You could line the tenners up, end to end, on the side of the road and watch them go by for 14,000 kilometres. Then I realised I had only quantified $1 billion.

He has a great capacity for maths, and I thought that although his email was amusing it was also very serious. I understand that he has submitted it to the West Australian newspaper, but I did not see it get printed, so I thought that we should give it some airing in this place. It tends to focus the mind.

The budget reveals that in the financial year 2010-11 the government will pay $4.6 billion in interest repayments. The figure will increase in 2011-12 to $6.1 billion and then to $6.5 billion in 2012-13. That is $17.2 billion in interest payments in just three years. Rather than being applied for useful purposes it is simply paying the interest on government debt. To put this amount in perspective, the building of Fiona Stanley Hospital, in Western Australia, is estimated to cost $2 billion. In total, the interest this government will pay on its debt could have built nine hospitals around Australia over three years and gone some way to fixing the nation’s health system. But, unfortunately, the hard earned tax dollars of Australian workers will instead be paying for the government’s debt and reckless spending. For $78.5 billion of debt this year, $90.5 billion next year and $93.7 billion in 2012-13, Australians are rightly asking: ‘What has been achieved? What do you have to show for this high level of debt?’

One thing is certain: governments rarely add to national prosperity through the creation of new enterprises, interventions and services. We must ultimately look to our wealth and job generators, in the private sector, to help us build a prosperous economy. It is the miners, farmers, fruit and vegetable growers, horticulturists, shopkeepers, tradespeople, service providers, manufacturers and all of those engaged in commerce and industry who provide the wealth and job creation of this country. Primarily, they are small businesses. A lot of them, the bulk of them, are small businesses.

The government’s justification for imposing this new tax on miners is a paper referenced in the Henry review. The government has asserted that miners do not pay their fair share. The study looked at American domestic corporations versus multinational corporations operating abroad. It also looked only at company tax paid. The study, on page 28, even ends with a warning not heeded by our government. The authors write:

 … we close by reminding the reader of an important caveat discussed above, namely that—

the average effective tax rates—

computed in this study do not use actual tax return data … To the extent our measures suffer from differences in the role of accounting information and the rules governing financial reporting, our tests may be flawed.

It begs the question: why has the government designed a tax relying on an overseas report which does not include all taxes paid by Australian miners, and which the authors admit may be flawed? Wide did the government not utilise the Australian Taxation Office’s own data? Tables 8 and 9 of the corporations tax statistics, freely available on the ATO’s web site—you can google them, Mr Deputy Speaker—clearly show that, without royalties included, the mining sector in Australia pays 27.81 per cent effective tax. Add in existing royalties, which of course must be paid, the actual amount the mining sector currently pays is 41.34 per cent—the highest of all the 20 sectors of the Australian Taxation Office rates. The Taxation Office’s own data is completely at odds with the 13 to 17 per cent tax quoted by the government. But, incredibly, the Treasurer has accused mining companies of fundamental dishonesty. To counter such claims, BHP released an official statement on 24 May declaring the effective tax rate on Australian operations was 43 per cent in 2009, amounting to $6.3 billion in tax revenue for the government—and, might I say, for the people of Australia.

Jennifer Hewett’s words in her article ‘Envy politics a risky business’, published on 25 May in the Australian, resonate loudly. She points out:

Given the company is under legal obligation to state its tax rates correctly, it is hard to imagine why the government was so confident it had superior information from the US.

It defies belief that the government would use a study taken from the internet rather than the Australian Taxation Office’s own information. BHP stressed that on top of current tax, ‘earnings are almost fully reinvested into Australia, including capital for new and existing projects as well as dividends’ on shares.

This is an important point to note. Many superannuation funds hold shares in blue-chip companies and other miners which will be affected by this tax. Reinvesting in further expansion usually increases a company’s share price. Declared dividends are paid into superannuation accounts. Both increase the value of an individual’s superannuation holdings, but this tax threatens the viability of mining projects and future dividends, potentially decreasing the amount of money available for today’s working families to retire on.

Yesterday and again today I asked the Prime Minister a question about how the resource tax would impact on self-funded retirees, whether the government had done any analysis of that impact and, if so, whether they would release it. There are 778,000 self-funded retirees out there, including some in my electorate, who would like to know the answer to that, but we have not received an answer yesterday or today. It appears that the government has not done any modelling—or certainly the Prime Minister is not prepared to release it if he has done it—to determine what the impact would be.

I took the opportunity yesterday to read from a letter, and I am going to read it into this speech today. My constituent, as I said in question time, wrote to the Prime Minister. He said:

I am particularly concerned with the tax on super profits for the mining industry …

It is not just money at stake, what about employment, housing and small business viability; they are all at risk …

It is bad policy as it has been proposed and one which I cannot support …

I am not involved in any way to mining industry. I am just a simple man who is trying to keep my head above water and looking forward to a happy retirement in 10 or so years.

I think that probably echoes the thoughts of many, many Australians across this country. Certainly I know from my electorate that that has been the case.

But the impact on individuals does not end with retirees. This government’s policy goes no way toward promoting job creation. In fact, prospective jobs are under threat. In a statement to the Stock Exchange on 19 May, Fortescue Metals Group alone advised that three expansion projects have been placed on hold due to the financial impact of the proposed Resource Super Profits Tax. Fortescue’s flagship Solomon Hub project, the Western Hub project and the proposed Pilbara port at Anketell Point have all been put on hold. These projects are worth more than $16 billion. Combined, they would employ 10,000 personnel in operations and 22,500 in construction, and this is just one company.

The enormous damage this tax can cause was summed up by Ivor Ries, head of research at EL and C Baillieu Stockbroking, an Australian firm founded over a hundred years ago that has a strategic alliance with the global investment bank Credit Suisse. In the 7 May addition of the Eureka Report, Mr Ries comments:

There are 270 major resource projects in Australia undergoing feasibility studies and financing with a total capital value of $320 billion. These projects would have employed somewhere around 120,000 people during peak construction phase. The Resource Super Profits Tax has stopped them dead in their tracks.

The impact will also be felt by homeowners, despite the government promising to keep the cost of housing low. They are introducing a tax that may increase the cost to build new homes. This is on top, of course, of six interest rate rises in eight months. One of Western Australia’s biggest land developers, Nigel Satterley, believes that the tax will add $20,000 to the cost of a new home. Mr Satterley’s comments were published in the West Australian on 19 May. He says:

An average house costs $200,000 to build. About $100,000 goes on labour costs, and about $70,000 is spent on things that come out of the ground. The tax on that could be $15,000 to $20,000.

How can the housing crisis be eased when the cost of building a house continues to rise? How can young families aspire to build their own home when the cost, which is already high, will be put further out of their reach?

The damage is not limited to those building new homes. Existing homeowners and renters could directly feel the impact of this tax through increased electricity prices. Grant King is the Managing Director of Origin Energy, the nation’s second biggest energy retailer. Speaking to the Australian on 6 May, he bluntly said:

The proposed RSPT will place additional upward pressure on coal and gas prices, increasing energy costs further.

So the ramifications of this will touch every Australian in every corner of this continent. The resource tax is a short-sighted, poorly designed measure which forgets the interconnections of the mining sector across Australia’s economy. The government is also jeopardising future larger tax receipts from the projects now being placed on hold for short-term gain. People are entitled to expect action from their government, not just empty promises and misinformation.

Last night on The 7.30 Report Lindsay Tanner emphatically put the point: ‘What this government is about is getting a fair return for Australian people.’ I ask the government: is diminishing the superannuation savings of Australians a fair return? Is halting billions of dollars worth of investment and stifling hundreds of thousands of potential jobs a good return? What about the potential increase in new house prices? What about the effect on the economy? Are these really the returns that the Australian people want? Is the cost imposed on small business without the clawback of the reduction in company tax fair to the Australian small business community? I think not. I think this policy should be dumped and reconsidered in light of fairness and equity across the tax system.