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Wednesday, 2 June 2010
Page: 5131

Mr IRONS (6:17 PM) —I rise to talk on the Appropriation Bill (No. 2) 2010-2011 and the Appropriation (Parliamentary Departments) Bill (No. 1) 2010-2011 or, as the member for Cunningham referred to them, the budget bills. I appreciate her view on the rent resource tax. I do not agree with it but I appreciate that she has the right to have a different view. Coming from a state that is built on resources and survives purely on resources, I am sure that the member for Cunningham will understand that I will have a different view from hers. I will try to put some of those reasons out here tonight.

Three years ago when I gave my first speech to the House of Representatives I reminded the government of the many commitments it made to the people of Swan and Western Australia before the last election. Members will remember some of these promises the Prime Minister made to Australia. The first was to bring down petrol and grocery prices and all we saw was the failure of the boy wonder, the member for Prospect, in overseeing the disastrous Fuelwatch and the equally disastrous GroceryWatch. The cost blowout and failure of these two programs cost taxpayers a mere estimated $8 million—and that was just for the Fuelwatch program. Why do I say ‘mere’? Because it is mere compared to the total cost to the taxpayers of this government’s waste and expenditure, which is budgeted at a loss of $57 billion this year.

Next we had the Prime Minister promise to take over hospitals by mid-2009 and all we got was a Prime Minister with spin and headlines about an historic agreement being reached. Luckily, no agreement has been reached because Colin Barnett, the Premier of Western Australia, did not get sucked in to supporting just another layer of bureaucrats—but this will not stop the government wasting more of taxpayers’ money on propaganda promoting the Labor Party’s historic agreement which has not been reached.

What about building 36 new GP superclinics around Australia? Members of the public should be asking: how many are actually completed and operating? That is another failure for this government. We were going to get the building of 260 childcare centres to avoid the double drop-off, but that program has now been scrapped—another failure and backflip by this government. The Prime Minister promised faithfully, as he does with most things he announces, that the government would not touch the private healthcare rebate, that he would keep the budget in surplus and that he would be an economic conservative—fail, fail, fail.

This government promised a laptop for every secondary school student. As at 21 April this year, there have only been 609 computers delivered to the electorate of Swan, which in 2½ years is pretty poor. It is actually the second lowest nationally. The only electorate with less is Lyons and I am sure that the member for Lyons would be disappointed that his electorate is ranked lowest on the rollout of school computers in the whole of Australia. The rollout of computers by this government is well below what they promised. This is poor, particularly with my electorate being the second lowest.

Today in the House we saw the member for Melbourne get up and talk about expenditure in my seat of Swan. We also heard him pick out particular areas of Swan. As you would understand from being a member from South Australia, Deputy Speaker Georganas, Western Australia is a very parochial state. One of the things we do not like in Western Australia is—hearing the bells!

A division having been called in the House of Representatives—

Sitting suspended from 6.21 pm to 6.53 pm

Mr IRONS —Before the division I was saying how parochial we are in WA. I know that in South Australia similar sentiments particularly relating to football evoke the same parochial spirit we have in Western Australia. It was good to see the member for Hindmarsh, who is sitting in the chair, tossing the coin at the football the other week. I was very impressed to see that he tossed a tail and did a great job there.

The people in Western Australia are parochial as well and they would be annoyed that the member for Melbourne, who was having a crack at me in question time today, included a part of Western Australia which is not even in my electorate. That just proves to the people in Western Australia, and particularly the people in Swan, that the Labor Party people based in the eastern states know nothing about our state and have no respect for it. This is proven by the fact that they have introduced a resource rent tax which will decimate any further and future projects that are envisaged for Western Australia, particularly the financing of them. I think that this government just does not get how important the resources and mining industry is to Western Australia.

As well, the Prime Minister made commitments on government advertising prior to the last election. He called it a ‘cancer in our democracy’. It looks as though we must be at war, if a state of emergency has been declared, where we have more taxpayers’ money being used to fight our very own mining industry that pays millions of dollars through taxes into our economy. They pay in many ways, including royalties and through GST on the purchase of multimillion-dollar equipment, and I know that for a fact. My company supplied air-conditioning equipment for years into the north-west to mining companies. The company I worked for, which was based in Melbourne, had a manufacturing plant and survived also because of the West Australian mining industry. So it is not only going to affect companies in Western Australia; it will affect manufacturing companies in the eastern states. I know from talking to some of the mining companies that they still buy large equipment from companies in the eastern states, particularly Victoria. They pay PAYG tax on behalf of all the people they employ. They also pay payroll tax and they all pay income tax. So they do pay their fair share.

In Western Australia we are parochial. Premier Colin Barnett recently stood up for the state on health. He gave a speech to the CCI of WA on 21 May. It was a good speech about the resource super profits tax. It was so good that I am actually going to quote parts of speech. He said:

Western Australia is the world’s leading mining economy. We produce $70 billion worth of mining and petroleum projects. Five weeks ago, I was in the United States. Rupert Murdoch, who I don’t pretend to know, but he very graciously hosted a lunch had about 20 or 30 of the leading financial people of New York, Wall Street. And I was able to proudly outline the size, the scale and the sophistication of our mining and petroleum industry, and I passed around a list of about $170 billion of projects that I, from my own judgment I guess, expect to proceed. So I didn’t put everything in there, these are the ones that I thought had a very strong probability of going ahead. And it was an awareness of Western Australia and its mining industry but many of the major sort of investors there, particularly the private equity groups, you know, sort of said well we traditionally haven’t been investing in resources, we stay away from commodity areas, but we might have another look at that. And there was great enthusiasm, great interest in the oil and gas industry, which I … I’d just spoken at the gathering in Houston, some of that, obviously the world’s major companies made the comment to me … there’s only two places in the world we’re interested in. The Gulf of Mexico and the west coast of Australia, they’re the only two places we really want to invest, in big projects. So we are on the radar screen, well and truly.

Since that five weeks, we’ve had this proposal from this resources super profits tax, we’ve seen share prices collapse, projects stalled and abandoned, companies saying they’re going to now explore offshore. We’ve seen the dollar fall, other factors, but a fair bit to do with that … is this proposal. My guess is that we’ll probably lose 25 percent of those $170 billion of projects. I’m not suggesting the mining of petroleum industry is going to collapse or even decline. It will continue to grow but it won’t grow at the pace at which it could have.

I have been concerned for some time that the rhetoric coming from the Federal Government is that the global financial crisis is all behind us and we’re heading into another resources boom. But I’ve been saying to the Prime Minister and to the Federal Treasurer, in my judgement that is not the case. The economy is still fragile, including the mining industry. Yes, we can be optimistic that we’ve got through the hardest part, and yes, the stimulus package did work, but it’s not boom time; it’s a long way from that, that’s why I banned the word ‘boom’ from the vocabulary in Western Australia.

I would also make the point that … as I said before, Australia and Western Australia … but Australia as a whole is a commodity trading economy—mining, petroleum and agriculture, that’s what we’re known for, that’s what we’re seen as, and the Australian dollar is a commodity currency. It’s a highly traded currency, and it will bounce around and according to people’s perceptions of Australia as a place to invest for Australia’s future, as a generator of export income. All those factors seem to be being glossed over.

Now the arguments that have been put forward to try and justify this, by Ken Henry and now by the Federal Government, are many and varied, but they just deserve some critical examination. The first point is, they argue the mining companies don’t pay enough. Okay, maybe you know that arguments, but at the same time, they argue, that many projects don’t go ahead because state royalties are too high.

In my 20 years around its industry, probably longer, I have never come across a mining project that couldn’t get up because it had to pay state royalties, and I’ve never seen a project that failed because of royalties. They simply are not that high, they are not deal makers or breakers.

It is said Australians, all Australians, own the resources. Well, no, they don’t. The resources are owned individually by the people in each individual state, so the Tasmanians don’t own the Pilbara iron ore resources—we do. Important difference, and there may be some constitutional issues about that.

It’s then been said that the companies are foreign owned. Yes, the mining industry has grown on the back of foreign investment. We would not have had the Pilbara without the investment and the take or pay contracts entered into by the Japanese involved in the European and American businesses. It would never have happened. And now we’re seeing the flow of investment from China, from India, from other emerging and developing economies that’s the reality. We need foreign investment. We need foreign investment for that capital inflow to help cover our current account deficit and in the long term, we need that foreign investment to stimulate the exports to support living standards of Australians into the future.

It’s said that we need this new tax to pay for company tax break … cuts and superannuation. Well yes, you can fund company tax cuts out of it, small as they might be. They won’t pay superannuation. I think everyone in this room knows, employers will pay superannuation as it goes from nine to 12 percent. Income from the mining industry will not be used to pay your superannuation bill, you’ll be paying that.

It’s also been said that state royalties are based on the tons of iron, not the value of the product. Well I would have thought Federal Treasury could have done better research than that. The royalty is an ad valorem value royalty, it’s priced on its quantity; it’s value-based, not tonnage-based. And it’s said that the petroleum industry has a petroleum resource rent tax then it’s just fine.

Yes, it was introduced in 1987, it was the only taxation measure in the Commonwealth offshore resources. At the time the North West Shelf Project was under construction and therefore was exempted, and it has only applied prospectively. What is proposed under this new tax is it … applies retrospectively across all existing projects, not just future projects.

Then the argument goes on, well it won’t really have much impact. In fact it’s been argued that it will help the mining industry grow and prosper. Not a lot of evidence of that so far. We’ve seen a whole lot of companies just sort of basically say we’re not going to proceed. I had a meeting with about a dozen of the mid-level mining companies, not the [inaudible] ones, but nevertheless significant companies that are looking at spending hundreds of millions of dollars, in some cases billions. The general consensus was that the value, the net present value of those companies and of their resources have been discounted by about 15 to 20 per cent, some say more; so it’s just basically driven say 20 per cent of the value of that … those mining companies. And ironically they are the Australian companies. They are the new emerging companies. They’re the ones that have been hit. The very large internationally based companies if they want to go ahead with a project, well they can fund it out of their own cash flow, they have secure financing, but ones that are vulnerable are the mid-level Australian-based companies.

It has a multiplier effect. It won’t just be the mining companies—

it will be the—

service, supply, transport, catering, fabricators—that’s where it’ll be hit. And while major mining companies might be able to say, well, we go and explore in central Asia or Africa or Southern America, the service and supply companies and West Australian businesses don’t have that option in reality.

Balance of payments, I’ve mentioned that. But if you then look at the structure, as people are starting now to do, obviously it actually gets worse. A six per cent threshold, it’s assumed or declared that any return above six per cent is a super profit. I don’t know anyone who would go into a mining investment to make seven per cent. I mean you would stay home, put your feet up, open a tinny and watch television all day. You would not do it. You probably want at least 15 per cent, maybe more depending on the risk. It is a risk investment. The projects are difficult. Capital cost risk, construction risk, risk of commodity prices, all of those things demand a return way, way above six per cent. And even the resource rent tax has got a six per cent plus a five per cent buffer, so they basically cut in at about 11 per cent. So that just shows a complete naivety and lack of understanding of investment decisions in the mining industry. I’m astounded by that. I’m astounded that so much work could go into producing such a bad policy.

It makes us far less competitive internationally. Major companies, and I think BHP has estimated that it brings the effective rate of taxation here from 43 to 57 per cent on a mining project. That compares with 23 per cent in Canada and about 35 per cent in Brazil. They are the countries we compete with. We’re not competing with the United States and the United Kingdom, we are competing with similar resource-based economies like Canada, and emergence economies like Brazil, African nations, Central Asian nations, many of which of course have far lower labour costs than we would have here. The tax rate: 40 per cent just way too high. I was stunned when that came out at 40 per cent, which is way, way over the top. No need to say more.

Then there’s another argument, that don’t worry because when you pay this tax the Commonwealth will refund what you’ve paid in state royalties. Okay, I guess if you’re a mining company you’d think well that’s … one good positive part. But just think about where is the logic in that. It is the state that owns the minerals, constitutionally the iron ore, the alumina belongs to the people, therefore the Government of Western Australia. The state royalty is not a tax, it is a sale price, it is a price at which this state agrees to sell its minerals to private companies. That’s what it is, it’s a sale price. So if under this so-called Federal mining tax royalties are to be refunded, the great irony is we will be giving away our natural resources for nothing. We will be the only country in the world that actually gives …

Three years on and not one of these promises has been kept. What a disappointment. Yet the numbers in this budget make this lack of delivery quite difficult to understand. By 2012-13 government debt will be a massive $94 billion, requiring $6.5 billion a year of debt interest payments. Mr Rudd will have to borrow over $700 million a week to fund his reckless and wasteful spending, putting upward pressure on interest rates and the cost of living for Australian families. Remember this number.

All this after the Rudd government inherited a $20 billion surplus from the previous coalition government. How can the federal government have spent all this money, including plenty it does not have, yet not delivered on the comparatively modest spending commitments that it made before the last election? Perhaps the answer lies in the waste that is backed up on an almost daily basis by stories in the national newspapers. Today we have parents protesting outside federal parliament about the Julia Gillard school halls program that has blown out by unprecedented figures. The disastrous Home Insulation Program has seen an additional $1 billion blow-out in this budget, yet the government still will not undertake to provide a safety inspection to every single house as it should. On top of this is a $29.5 million advertising campaign to sell health changes, even though Western Australia has not signed on and new beds will not be delivered until 2013-14.

Confronted with such a bad balance sheet and out of control spending, this government had a choice in this budget. They could have chosen, as most responsible governments would have done, to rein in their reckless spending and to start paying back the deficit in a responsible way. That is what the Howard government did in the 1990s, when confronted with the huge bill left by Paul Keating. However, this government chose the easy way out. They chose to tax more so they could continue to spend. They chose to make our mining industry the most heavily taxed in the world and, in doing so, they chose to put at risk the jobs, the superannuation and the standard of living of the people of my electorate of Swan.

This resource rent tax, which appears to be holding together the Rudd government’s entire budget, is a $9 billion tax on mining that will put a handbrake on the resources industry in Western Australia. Up to 500,000 Australian families and individuals depend on mining for their jobs and these are at risk. The $6 billion plunge in Australia’s superannuation retirement savings on the announcement of the tax shows how important the strength of the resources sector is to all Australians, particularly to Western Australians.

Make no mistake, local people are not happy about this tax. The sign outside the working-class Redcliffe tavern declaring, ‘Miners in, Rudd out,’ tells its own story. The fact that the government has made these tax changes without any community consultation is not surprising. The residents of my electorate of Swan have been living with the consequences of the federal government’s failure to consult on the flight path changes it introduced in November 2008. This is a government that does not listen but dictates. This is a Prime Minister that increasingly stands for nothing. Australians have a right to question whether the government believes in anything any more. A government that believes in nothing will deliver nothing.

This budget does little to address the very real problems in my electorate of Swan, as I mentioned earlier in my speech. There is nothing to address the major environmental issues in my electorate—the withdrawal of the NRM and the lack of river wall infrastructure. There is nothing to address the aircraft noise issue in my electorate. I assure my constituents that I will continue to fight for an airport noise insulation scheme for Perth. Road infrastructure requirements have been sidelined and there was a shameless re-announcement of funding promised before the last election in the House on Monday.

You may remember how in 2007, following a commitment from the Howard government, Kevin Rudd promised to fix the Great Eastern Highway. It was a ‘me too’. However, three years on the government has failed to deliver any improvement to this important arterial road in Perth and we have now been informed the work will not start until mid-2011. As a small businessman, I am disappointed that only old-news initiatives have been announced in this budget. The Australian Retailers Association were right to proclaim the federal budget had disregarded the engine room of this economy. (Time expired)