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Thursday, 3 November 2011
Page: 12722


Ms JULIE BISHOP (CurtinDeputy Leader of the Opposition) (12:16): As a proud Western Australian I am an avowed supporter of the mining industry in Australia because of the enormous benefits that flow through our economy and the boost that it gives to our overall prosperity. But those in the government cannot make that claim, as they seek to impose an unfair, complex, divisive, fiscally irresponsible and distorting tax that will reduce our international competitiveness and cost jobs and which has been developed through a deeply flawed and improper process.

Government members are talking of the success of the mining industry but in terms of the problem that it is causing for Australia in creating a patchwork economy. The government appears blind to the obvious threat of a recession in the Australian economy were it not for the mining industry. Our mining industry is critical for our nation's success but only if it can remain competitive against other great mining nations.

The story of mining in Australia is the story of achievement, rising national prosperity, development, opportunity and jobs. That is why I am opposed to any measures that would cripple our mining industry. The talk from the government is all doom and gloom, lamenting the impact of the mining sector on other areas of the economy, particularly manufacturing, and acting as if we have previously lived in a one-speed economy. With the unions and the government's coalition partner the Greens reverting to protectionist rhetoric, I fear that the old socialist mindset is creeping back into the national debate as Labor seeks ways to soak money out of the most productive part of the economy.

The coalition are opposed to the mining tax. Rather than adding cost burdens to the mining sector, we believe that it should be as internationally competitive as possible because we recognise that in a global economy capital can easily move to countries where the rate of return is the greatest. The buyers of our commodities have alternatives. Other countries have or are developing mining sectors that could well rival ours. The development of Asia's great economies explains the level of investment we are currently witnessing in the sector. The strong growth in mining investment over the last decade has reached its highest level in history. The huge demand for Australia's mineral commodities in 2009 increased mining investment to above four per cent of GDP, around eight times its share just 50 years ago.

Australia is currently enjoying the best terms of trade in 140 years on the back of high commodity prices and strong levels of demand, yet still this government cannot manage the budget. They have an appalling fiscal record of a cumulative total of $150 billion in budget deficits over the past four years; in other words, they have spent $150 billion more than they have raised in revenue at a time of record terms of trade. That means that they are entirely dependent upon the strength of the Asian economies, particularly China and India, to continue to drive Australia's economic growth. That cannot be taken for granted. As the dark clouds continue to gather on the global economic horizon, this government is putting in place one of the most burdensome tax regimes in the world on our most productive sector.

The government likes to take credit for Australia's enviable position in the world economy, but it fails to acknowledge that it is derived in large part from our reputation as a safe, reliable exporter of mineral resources and energy. We are a world leader in the export of black coal and iron ore. In 2009 Australia's mineral resources sector contributed close to $160 billion to export earnings. This is compared to around $36 billion for the rural sector and $38 billion for manufacturing. During that period the sector accounted for eight per cent of Australia's gross national product. According to the Minerals Council of Australia, mining companies contributed more than $7 billion in royalties as part of $21 billion paid in state and federal taxes in that year alone.

Mining companies have invested more than $125 billion in Australia over the last decade, including in new capital, exploration, and research and development. Today the mining sector is responsible for the direct employment of over 180,000 people and almost 600,000 people benefit through indirect employment in support industries. As Reserve Bank Governor Glenn Stevens recently highlighted, there is positive spillover from the mining sector to other parts of the Australian economy. He said:

… beyond the benefits being experienced by equipment hire, engineering, surveying and consulting firms, businesses as diverse as those supplying modular housing, laboratory services and the training of semi-skilled, trade and other workers are seeing effects of the expansion.

There are also thousands of additional jobs in broader sections of the service economy, including retail. Since 2007, many of the challenges facing Australia and the mining sector have come from the federal government, first under Prime Minister Rudd and now under Prime Minister Gillard. The superprofits tax announced last year would have had a massive impact on Australia's international competitiveness, and it hit hard our reputation as a safe investment haven. The way the tax was announced and the way it was allegedly sold to the public made it clear that this government just does not get mining; it just does not get the Australian economy. From publicly deriding mining companies as being foreign owned and ripping off taxpayers, to claiming that mining companies only pay minimal tax—and they relied on a student paper from an American university to make that claim rather than the actual tax paid according to the Australian tax office—this was evidence of a government with absolutely no understanding of a vital element of the Australian economy.

On 23 June last year—and the member for Mackellar, who is at the table, will remember that date well—I referred in question time to the comments of the Chief Executive Officer of the Mining Association of Canada, who had called Prime Minister Rudd the mining man of the year in Canada because he would bring a lot of investment their way, and I asked the then Prime Minister if he intended picking up his award when he was in Toronto the following week for the G20 meeting. Well, that was the very last question that I ever got to ask Prime Minister Rudd, for that very night the forces of darkness moved against him—the faceless men of the Labor Party staged a midnight coup. But it does appear as if history is about to repeat itself.

Having unceremoniously removed Prime Minister Rudd from office because of his failures over the superprofits tax, amongst other things, the Gillard government is now seeking to implement an even worse tax, based on the deeply flawed agreement that she reached with the big three mining companies over 12 months ago. This version of the tax is extraordinarily complex, and it introduces a new federal tax on top of corporate tax, payroll tax and the existing state royalties.

There are serious questions as to how much tax will actually be raised and upon which companies the burden will fall. But, due to the extraordinarily clumsy negotiations with the three mining companies—to the exclusion of the 3½ thousand other mining companies in this country—the federal budget is now hostage to decisions by state governments, who are perfectly entitled and constitutionally enabled to raise their royalty rates. The federal government now has to repay all of the royalties that the state governments, whether Liberal or Labor, around the country impose on the mining companies. What an extraordinarily inept negotiating performance by this Prime Minister.

There are serious questions about the constitutional validity of the proposed tax. And, after the government's humiliating loss in the High Court over the legality of its Malaysia asylum-seeker swap deal, we have every reason to be sceptical in the face of the government's assurances that it could win a High Court challenge to its mining tax laws.

Following recent mining tax profit announcements, the Prime Minister is now under renewed pressure from her coalition partner the Greens to claw back an even greater tax take from the mining companies. Senator Bob Brown has labelled the new arrangements 'a perverse outcome' and has called on the government to revive its original tax of 40 per cent on mining profits, although Senator Brown muses that '50 per cent would be more like it'. So watch this space.

I did not ever think that I would see the day when 'Australia' and 'sovereign risk' would be uttered in the same sentence. But reports of investor concern continue as the government continues its assault on our mining sector. A couple of months ago I attended an Australia-central Africa trade forum in Sydney. Ministers and representatives from central African governments—Cameroon, Chad, the Congo and Gabon—were present. I was somewhat taken aback when they announced that they were in Australia to promote investment in their countries because, as Australia was now a sovereign risk, central Africa was a more attractive option. And they knew the details of this mining tax debacle chapter and verse.

There were similar discussions at the Commonwealth Business Forum in Perth last week as part of CHOGM, as delegates from African nations promoted the fact that investment in mining in Africa would be a better bet than investing in Australia under this government's burdensome tax regime. As the chief executive officer of South African gold miner AngloGold Ashanti, Mark Cutifani, said, Australia is:

… one of the top sovereign-risk countries in the world on the basis of government policy and its demonstrated behaviour in terms of taxation policy and its inconsistency in policy.

Having introduced the mining tax measures to increase the government's share of iron ore and coal companies' profits, the Gillard government is now set to increase the cost of a mining company's overheads as well.

Despite having solemnly promised at the last election that she would not introduce a carbon tax, the Gillard government has introduced legislation to implement a carbon tax, which is essentially a tax on energy. So the dangers posed to Australia's economy by this mining tax policy—as well as those posed by the carbon tax policy, which will cascade throughout the economy—are well documented. Yet the Australian mining sector will be amongst the hardest hit. In a statement to the ASX in July, Rio Tinto expressed the widespread concern of the mining sector, and said that the company was:

… deeply concerned the proposed carbon tax fails to shield Australia’s export sector and leaves it at a disadvantage compared to international competitors.

This sentiment has been echoed by others. Marius Kloppers of BHP Billiton has described the government's carbon tax as an economic deadweight cost and a tax on exports.

For small to medium sized companies with lesser profit margins to absorb these additional costs, this new tax will be hard felt. This is likely to be the case with Australia's goldmining industry, and I mention the goldmining industry because, while it is currently not included in this mining tax, we should be very well aware that the Greens are calling for its inclusion. So it is only a matter of time before the mining tax will be expanded to include every conceivable mining activity, including quarries, as their superprofits tax did last year. That was included in their resource superprofits tax—an absolute disgrace. So the Greens are calling for its inclusion; the government will fold.

Earlier this year the Department of Climate Change and Energy Efficiency released data which showed that a typical size goldmining company will be hit hard by the carbon tax, which will directly increase operating costs by more than 13 per cent, putting pressure on contractors and their ability to employ people. Currently the goldmining industry employs 7½ thousand people nationwide—but clearly that is of no concern or no interest to this government. Other participants in the mining industry supply chain—such as transport companies, cleaning companies and accommodation providers—will also be affected by increased operating costs.

There has been discussion in Australia recently about the desirability of a sovereign wealth fund to capture the benefits of our mining boom, but it is a fact that the Howard government established such a fund with the Future Fund. However, virtually no money has been added to that fund since Labor took office. We also established the Higher Education Endowment Fund, which was designed to be a fund in perpetuity to receive surplus moneys and, with income earned, to help make our higher education sector world class. That fund has been gutted by Labor.

The point is, of course, that we ran successive budget surpluses and paid down the $96 billion debt we inherited from the last Labor government. But it can only be hypothetical to talk about establishing a sovereign wealth fund any time soon while the government is billions and billions of dollars in debt. The first priority must be to repay the government's debt, which today stands at around $110 billion to $120 billion. The sooner we pay off that debt, the sooner we can recoup the billions in dead money being paid in interest each year.

The coalition's priorities are to get the budget back into surplus, pay down debt and ensure that Australia is in the best possible position to withstand further external economic shocks. But this government just does not understand mining, whether it is imposing a $2 billion condensate tax on Woodside without notice, announcing a superprofits tax that destroyed our international reputation, announcing an economy-wide carbon tax that no other country in the world is implementing, unleashing the militant unions or placing a blanket heritage listing the size of the state of Victoria over Kimberley and Western Australia.

The Gillard-Greens government is no friend of mining, no friend of the Australian people and no friend of this economy. As a nation we should be playing to our strengths. We are world leaders in mining, yet this government wants to drag our mining sector down to the back of the pack with taxes that our competitors will not be paying. We oppose this mining tax and so should all members of this House.