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Monday, 21 November 2011
Page: 12998

Mr HAWKE (Mitchell) (19:14): It is a great privilege to follow the member for Throsby, who is a good, old-fashioned socialist in this chamber, and I think he gave a good, old-fashioned socialist speech. He is dead wrong about a lot of things but he is right about one thing; this is definitely Labor legislation—we can all tell that. At least he speaks honestly about the redistribution of wealth that is the primary goal and objective of this government.

There is something I want to dispute in his claim about the mining boom being similar to the gold rush. The gold rush was a very different era. When a currency was backed by gold, people used to get pick axes and choose the relatively scarce metal, gold, which is why it became the base for currencies all around the world. Today mining is a very highly technical and complex industry which requires great risk of enormous amounts of capital to extract minerals from deep within the earth's surface, refine them and turn them into useful products. It is not guaranteed of making a return.

Every time we hear a Labor member enter this place and talk about spreading the benefits, sharing the wealth and redistributing the income from this risky activity, I often think that they are not really interested in sharing the risk or sharing the danger associated with these ventures. A lot of mining ventures fail. I do not see Labor members jumping up to say that they will put their hands into their pockets to share the risk of failed ventures in this country or in any other country. That is why redistribution of other people's wealth earned by people who are willing to put up their own capital—shareholders, investors, people who are willing to put together ventures—is their business and there has to be a profit at the end of it. That is the best system that human beings have devised to order their economies and to order their societies.

The notion that the member for Throsby talked about of redistributing the wealth of successful people, essentially, to everybody else on a basis of 'you've been successful' will do exactly what has happened to every country in Europe that has followed that path, whether it be Italy, Greece or others. Socialism heads us to a point where people stop creating, stop innovating and stop investing. They stop digging things out of the earth and refining them at great risk to their own capital and investment because it would not be profitable.

That is what this legislation proposes. It is Labor legislation, of course, as the member for Throsby pointed out, because it is completely unclear what it is about. We have seen so many versions of the proposed minerals resource rent tax that it is very difficult to understand what the government is actually going to do. That is a bad way to handle government. Constantly this government provides legislation which their own backbenchers and frontbenchers cannot explain to ordinary people about how it will function and what it will do, how it will work and when it will kick in, what are the rates and who is going to pay it. We still do not know today.

In fact, going back to that concept of risk and return, the original proposal that was floated by this government for the minerals resource rent tax tried to make the Australian taxpayer a shareholder in every mining venture. That was the way the first minerals resource rent tax draft legislation worked. The Australian taxpayer would have had a stake in every venture and, if it failed, the government would have been liable. They quickly realised that would not be a good idea. The government backed out of that part of the draft legislation very, very quickly as they had made a big error. Why? They do not want to share the risk and they do not want to share the difficulty of mining. They just want to share in the benefits of wealth created and earned by other people and the risk taken by those people.

Mining companies in Australia today pay enormous amounts of taxes. They pay royalties, they pay employment taxes and they pay all the different rates of corporation and other taxes that have to be paid by legal entities in Australia. They pay quite a lot of tax and they probably pay more tax than every single member of this parliament put together. They pay a lot and contribute a lot to our society.

Of course, when you impose a new tax, you are looking for a revenue stream for the government to ensure that it can do worthy things. It is not a great idea to put in place taxes such as the minerals resource rent tax and all of its related measures which collects, in our view, $11 billion and has $14 billion in expenditure. That is a great concern for us, and I do not see that we have a big problem in opposing this legislation. The government constantly tells us that we are 'no' sayers. When your own modelling and figures show that you are going to pull in $11 billion and send out $14 billion, that you are not going to have any loss of investment and everything is going to be dandy, it makes taxation sound like a noble concept that everybody loves and supports, that we all want to see more of and that we want to be taxed more. It is coming on the back of an economy-wide carbon tax applied to every sector and every industry, including mining and large unknown effects on mining, so you start to wonder about this government's addiction to taxing because its expenditure is out of control. This tax will send more money out the door than it will raise. It is a very unusual measure at an unusual time.

Looking at this particular version of this legislation, I do not think tax experts or other people understand. Ken Henry's original proposal was very complex and was not well understood by tax experts. So I do not think any member in this place has a great chance of fully appreciating how this tax works, although we have done our best. When you look at some of the detail of this legislation there is an intrinsic problem with having tax revenue from this legislation linked to volatile commodity prices. The member for Throsby was wrong about a lot of things but he was right in saying that the gold rush came to an end. This minerals boom, although it is not automatic to make a profit out of mining, will come to an end. Commodity prices have been volatile over the past few decades. They do rise and fall and they are capable of rising and falling almost at any moment.

The member for Melbourne just walked in and I know that the Greens often talk about our carbon emissions and reducing them. The biggest thing that reduced our carbon emissions worldwide was the GFC and resultant collapse in demand that came from that. It is the same with commodity prices. Our commodity prices can simply collapse from economic downturn or lack of demand for economic activity. If you think about what is coming up in Europe and other places, there could be a big drop in demand for our commodities. Having this revenue linked to that volatile and unstable notion of commodity prices is a recipe for further government problems and endeavours to try and fix down the track. Never mind a patchwork economy; we tend to get a patchwork approach to legislation. We put out a draft where every taxpayer is a shareholder in every mining venture and then we come back and say: 'Oh gosh, that's not a good idea. Now we are going to lower the rate, send all the money out the door, including more than we are raising, and link it to the volatile commodity prices.' These are things you would not necessarily do if you had to design them.

We are worried about budget deficits. The government has never delivered a surplus. It promises that it will deliver a surplus, but this tax will lose us more revenue. It has also provided a platform for state premiers, who have essentially seen the Treasurer coming and have raised their royalties right before this legislation is passed by this parliament, knowing full well that we as a Commonwealth will be required to compensate the states for those royalty increases, which are now in the order of $3 billion. It is not some technicality, but this is the very real consequence of failing to understand what you were doing and failing to do it properly. Three billion is a lot of money in anyone's language.

I want to address some other concerns here. The government is making much out of its great notion of redistribution of wealth earned by productive people in society to people who have not taken part in the risk of those ventures—people who would not want any part of that risk and who if there were losses would run a million miles, saying, 'No, that was the failure of the corporation.' The government has also talked about how it is raising the superannuation of every Australian. The minerals resource rent tax came out of the Henry review, which of course recommended—and I think Ken Henry was right to say—that nine per cent is about right at the moment. That is what he found in his review. So the government is keen to adopt a recommendation to increase revenue, although we know that it will not, yet it is keen to run away from another recommendation of Ken Henry, which is that nine per cent is about right in the current climate and there is no need to put it up to 12 per cent.

Our estimates show that the government cannot fund the increase to 12 per cent from this revenue completely. The cost of initiatives we worked out for increasing compulsory super to 12 per cent was $16.8 billion. The company tax cut would be $13.2 billion—this is for the 2012-13 to the 2020-21 period. The Regional Infrastructure Fund will cost $6 billion; the small business instant write-off and simplified depreciation, $8.2 billion; refund of super contributions for low-income earners, $6.6 billion; and 50,000 concessional contribution cap balances under $500 would be $6.8 billion. The total is about $57.6 billion in expenditure, all things that the government would laud as noble, worthy and outstanding things. The problem is that the revenue comes to $38.5 billion over the same period, assuming high commodity prices. As a famous lady once said, 'It's very easy to do that when you are spending other people's money.' It is easy to throw around $57.6 billion and say: 'Isn't that worthy? What a great initiative. We will tax the mining sector. They deserve to be taxed.' I know that the member for Melbourne is about to say that gold should be taxed, even though gold has underpinned currencies and still does today. Considering its price, it is still relied upon as a safe haven for investors and for people of capital in times when currencies are so inflated and devalued by socialist governments, which continue to devalue paper money through largesse and foolish policies.

When we go back to the revenue shortfall, we really do have a serious problem with this legislation and what it will cost us in the future. What will happen by committing to expenditure on the forward estimates—and our revenue is already a shortfall—if there is a commodity price drop? From where will this shortfall be raised? How will we produce budget surpluses if there is already a shortfall in the revenue projections over that period? The government is silent on this. Why? Because that has been its approach to government through every piece of legislation. How will the carbon tax affect families and households? You cannot get an answer about the modelling and the assumptions. You cannot get an answer on the modelling and assumptions of the minerals resource rent tax. In question time today, we heard from the government that it is not willing to tell us about the assumptions, that it is on the website, but of course we know that it is not on the website. The remodelled versions and the assumptions it makes are not available to the opposition. These are billion dollar questions that are not being answered.

This policy process is poor. I think the government has in a rush realised that its original minerals resource rent tax was a kind of boutique and bizarre form of taxation. It was an experiment that was proposed by Ken Henry but which has not been tried or tested in any jurisdiction around the world and which has a whole range of risks, including making the Australian taxpayer a shareholder in every single mining venture. We have seen the government run away from that quickly to what we regard as a process of picking winners and losers in the mining sector. It deals just with the big players by saying, 'If you're comfortable with this, if you're happy to pay this rate of tax, then we'll set the benchmark higher for every future mining venture to compete with you, but we will take your advice as big miners yourself.' It is a poor way of doing public policy and of doing legislation and one that will not produce the outcome that it is seeking.

We know that the mining sector is already paying a lot of tax. It is paying all of the legal taxes in Australia today. This contention from the Labor Party or the Greens that somehow this sector has evaded taxes is a complete nonsense. This contention that it has been a drain on the economy or that it is against the ordinary person is a total nonsense. The employment and the infrastructure that has been generated by these major projects is immense. The Special Minister of State, the minister at the table, will tell you that in WA most of these ventures have to build their own infrastructure, whether it be rail or road or port upgrades. They have to build it into the investment risk, to the capital required to be generated to complete their tasks, especially in WA. They are doing it themselves. If they waited for government it would never happen. If they waited for this government it would never happen. These are all the reasons why I oppose this tax. Mainly, as the member for Throsby said, this is just a pure redistribution of people's income on a completely unfair basis from a government that is desperate for revenue, and it has become desperate for revenue because it is addicted to spending. There is a better way than raising taxes and levying charges on all of our most profitable sectors, and that is by reducing expenditure and restricting excessive government spending and waste.