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Thursday, 3 June 2010
Page: 5282

Mr HAASE (11:47 AM) —I rise to address the Appropriation Bill (No. 1) 2010-2011 and related bills. The third budget handed down by the current Labor government will go down in Australian history books as being the hypothetical budget. It is based on a wing and a prayer. It is based on robbing the resource industry and it is based on dreams and hypotheses. This budget is not worth the paper it has been written on. The Rudd government took office with a coalition created surplus to the tune of $45 billion. Three years later, here we are looking down the barrel of debt, debt and more debt. Reckless spending and gross mismanagement of taxpayers’ dollars will result in Australian families wearing the millstone of debt for many years to come. Prime Minister Rudd’s unfettered access to the taxpayers’ money is akin to Scrooge McDuck going for a daily dip in his cash filled bins. I can picture Mr Rudd throwing the cash in the air and yelling: ‘Ah, mirth and be merry. My worries are over! I will kill the golden goose. I will make resource companies pay the highest tax in the world, and that should make Australia the richest land in duck world.’

It is now time for the Labor government to put their comic books down, to stop imagining themselves as cartoon characters and superheroes and to understand the gravity of the situation they are about to place all Australians in with the introduction of what they call a tax on ‘superprofits’. Superprofits are apparently profits in excess of just six per cent. The Labor government believe that, by taxing the resource industry at the highest rate in the world, they will increase investment. This creative and imaginative thinking may be applicable in duck world but the reality is that it will not work in the real world.

So why is the Rudd government willing to put at risk the living standards of all Australians? I will tell you. Firstly, he needs to claw back revenue to cover the cost of his cash splash that is now costing all Australians in higher interest rates. Secondly, his polling of south-eastern Australia has convinced him that he can keep people from the truth and con them into believing he is some sort of modern day Robin Hood, robbing the rich to give to the poor. And thirdly, he believes, or so he tells us, that miners are not paying enough tax.

On Monday, 31 May in the House, the Prime Minister said in defence of his great big new tax on mining: ‘Whichever way you cut the cake the return to the Australian people via the taxation system is infinitely less than it was a decade ago.’ On Tuesday, in a question to the Prime Minister, I asked him how he could reconcile that statement with data compiled by Access Economics, Treasury, ATO and ABS which show that the total tax-take from mining over the last decade has increased from $2.6 billion to $21.9 billion. How could he describe tax revenues, which have increased by more than eight times, as ‘infinitely less’? Mr Rudd gave no explanation whatsoever.

Let us look at some cold, hard facts. Australian projects compete with other projects in other countries for capital. Obviously, less profitable projects will not be looked upon as favourably by investors as those which are more profitable. This is just plain common sense. The Labor government has assumed there will be no change to the perceived level of sovereign risk in Australia with this new super tax. Capital and currency market initial reactions to the announcement suggest the perceived sovereign risk has increased. According to the Australian, Macquarie Bank advised clients that Australia was ‘now seen as being a high sovereign risk destination to invest’ and there was a ‘significant risk of major capital flight out of Australia’. BHP Billiton CEO Marius Kloppers warned that Australia was in danger of ‘tarnishing’ its reputation as the ‘gold standard’ of investment destination for mining companies. According to Mr Kloppers, ‘it would be extremely unlikely to think that we can approve a major investment while this uncertainty hangs over us’.

The impact that this tax will have on investment and projects is immeasurable. The resource industry of Australia, the very same industry that has fed and clothed Australians for many years, did not happen by chance. Ingenuity, planning, resourcefulness, belief and, most importantly, hard work, often in the face of great adversity, have all contributed to the now successful industry. Many towns in regional Australia have been built on the back of resource companies. These companies provide the population with infrastructure such as airstrips, hospitals, schools, police stations, ports and roads that local towns and communities enjoy.

The mining sector has paid $80 billion in tax over the last decade. That is $80 billion dollars back into the communities of Australia, and the Rudd government has the audacity to tell us that putting this tax collection at risk will not affect the living standards of everyday Australians. What gibberish! This same sector paid eight times more tax last year than it did a decade ago.

The Treasurer’s Economic Note dated 23 May 2010 stated:

…  wholly-domestic mining companies paid an effective tax rate of only 17 per cent and multinational mining companies paid an effective tax rate of only 13 per cent—both dramatically below the headline company tax rate of 30 per cent.

In reality ATO statistics show that for 2007-08 the mining industry as a whole paid 27.8 per cent effective corporate tax rate, and that rate equates to 41.3 per cent when royalties are included. BHP Billiton, year ending June 2009, had an effective tax rate inclusive of royalties of 43 per cent. BHP Billiton alone, between 2004 and 2009, paid total taxes of over $24 billion. These taxes are helping to support the entire nation—a nation where the majority of the population is on the eastern seaboard and the majority of whom have never even seen a remote mine site. Yet these same people are being conned by the Labor government and lulled into a false sense of security that there will be more money in the coffers for them. Well, let me tell you: there will be no extra cash coming from my patch if this great big new tax is introduced.

Already Fortescue Metals has put $17.5 billion of its projects on hold, due entirely to this great big new tax and its far-reaching effects. Steve de Kruijff, Chief Operating Officer for Xstrata Copper North Queensland, said in a press release:

We have decided to suspend exploration activities in north Queensland until there is greater certainty on the fiscal regime for future mining developments. Exploration activities are high risk and, while the targets we had identified are prospective, the proposed tax has introduced great uncertainty about the potential impact on the economics of developing resources into viable operations in Australia. It would also change the relative economics of these prospects compared with exploration programs that Xstrata Copper is pursuing in other parts of the world.

Oz Minerals chief executive, Terry Burgess, in a statement to shareholders regarding the impact of this great big new tax on the Western Copper project in South Australia, stated:

… in light of the proposed resources industry tax, we will be unable to make a decision on this project until we have certainty on the proposed tax arrangements and therefore the economics of the project.

According to Ivor Ries, Head of Research at EL&C Baillieu Stockbroking, as published in the Eureka Report:

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 about 120,000 people during the construction phase. The Resources Super Profits Tax has stopped them dead in their tracks. All of those projects are now frozen.

Never before has a proposed government policy had such a direct effect on my electorate. You, Mr Rudd, are dudding the people in my patch and we won’t stand for it.

Ashok Parekh, a local chartered accountant with over 3,000 clients in the Goldfields, has been a chartered accountant for 32 years and has been operating his own company for 25 years. In 2003 he received a Centenary Medal from the government and last year he was awarded the highest award of the Institute of Chartered Accountants, the Meritorious Service Award. Here is what he has to say:

I have lost faith due to the recent performance of the Rudd Government. I think they have lost the plot. What the Federal Government is doing is very similar to the old communist system. The tax is bad for all Australians. We have suddenly become a sovereign risk with all the mining companies in the world. Already mining companies are finding it difficult to raise funds because of this tax. We are also finding in the Goldfields there is reduction in turnover for retailers because the general public are scared of what is going to happen. The idea that lots of small businesses are going to benefit from the company tax, reducing from 30 to 20 per cent is misleading. Most small business are set up in structure of either number one, a sole trader, number two, a partnership and number three, a family trust. None of the structures will get the benefit in the company tax because they are not companies.

In Kalgoorlie we have an electronic notice board, or a ticker board, on the Palace Hotel, the most prominent position in town. While it usually displays financial information, right now it says ‘Kevin Super Tax, High-Interest, Insulation Rudd has got to go, no batts about it.’ If this does not indicate the feeling of true Australians, true Australians who have not fallen prey to Kevin Rudd’s spin about the great big new tax, what does? The Labor Party need to listen to the people of Australia, the people who are about to have the rug pulled out from under them.

Two people aware of this are Derek Johnston of JNS Mine Management and Pat Schimanski of GWH Equipment. On Saturday, 29 May, they took it upon themselves to inform the people of Kalgoorlie of the dire consequences of the resource tax. Nearly 600 people signed their petition in the few hours they were in St Barbara’s Square in Kalgoorlie. Pat Schimanski of GWH Equipment said:

The purpose of the petition is to raise awareness of the tax. These politicians—

and I am sure he was not speaking of me—

think miners are an easy target. They think we are easy beats. If these Labor clowns don’t get kicked out we here in Western Australia should cut the cord to the rest of Australia. This tax will affect the food on the table of all Australians.

JNS’s Derek Johnston said:

My business has dropped since the announcement of the tax; it has dropped off because everyone is now looking at costs.

Let us look at what some of the profits from some of these resource companies do for local communities, something our eastern seaboard friends are either unaware of or unashamedly do not care about. You see, our friends in the eastern cities have doctors, nurses, teachers, bitumen roads and the flashest coffee beans you can buy, all at their fingertips. This is not so over in remote Western Australia.

Let us look at the Telfer mine. Telfer provide between $5m and $6m a year for the Martu people—who cover six language groups from Wiluna to Fitzroy Crossing; that is an area about the size of New South Wales—through the following community programs: health, education, training, employment, sport and recreation, and community, cultural and social events. They ensure that remote community stores have fresh fruit and vegetables, and they are installing bar code systems in stores. They have supplied fuel to communities that have run out. They fix community sporting ovals, and Telfer’s airstrip has been used to bring up support specialists for schools and to enable nurses and teachers to go home on R and R. Many Martu communities have no doctors, no post office and no police station.

Many houses in the communities have no phone lines, and there is no mobile communication. The chances of members of Indigenous communities getting employment in this remote area is severely restricted. Telfer recognise the need for Indigenous employees and mine managers to balance Martu cultural traditions and beliefs, such as the need to attend funerals in various parts of the state. Telfer’s emergency response is the only emergency response team in the area, thus providing an essential service to remote communities. This company and other mining companies in Western Australia are providing essential services and jobs to remote communities. Keep this in mind: bigger tax equals less profit equals fewer jobs—it is as simple as ABC.

Rio Tinto have engaged in comprehensive efforts to maximise Aboriginal participation in the resources industry. A $200 million contract going to a joint venture with a strong local Aboriginal participation will help traditional owners to build capacity in mining services, and in this way traditional owners will increasingly participate in the resource development taking place on their own country. This initiative is over and above the $112 million that Rio Tinto will spend through Aboriginal contractors this year. More than $50 million of this will be spent through members of the Pilbara Aboriginal Contractors Association, or PACA. Again, bigger tax equals less profit equals fewer jobs—it is as simple as ABC. Eight out of 10 jobless Indigenous people are presently unable to work because of illiteracy, alcohol or other psychological problems. In some rural areas, 70 per cent of children do not regularly attend school. The Indigenous unemployment rate is around three times higher than that of non-Indigenous people. Rio will spend more than $10 million this year on Indigenous education and training in the Pilbara. Remember: bigger tax equals less profit equals fewer jobs—it is as simple as ABC.

These companies and many more like them provide life opportunities for the people of rural and regional Western Australia—not just an existence, which is what the Labor government want the people in my patch to return to. If this super profits tax is such a great thing, such a godsend for Australia, why the need for the Labor government’s obscene spending on advertising it? It has been confirmed that the government began doing market research in March and had prepared an advertising campaign by April—before the tax was announced in May. That completely blows apart Mr Swan’s argument that the mining industry’s campaign against the tax justifies the government’s decision to do its own advertising.

The Rudd government has breached its own advertising guideline on the basis of a national emergency and is spending $38.5 million on a taxpayer-funded television and newspaper advertising blitz promoting the resource super profits tax. Mr Rudd’s excuse for losing his moral compass is that we have a national emergency. Let me assure you: a greater threat to the nation is the introduction of a great big new tax on mining. This threat will impact all Australians and is cause for real concern. Killing the golden goose will do nothing to secure investment, jobs, taxes and royalties into the future. The only way to guarantee the future prosperity of this country is to drop this dud government and elect a Liberal coalition government.