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Friday, 16 March 2012
Page: 1997

Senator CASH (Western Australia) (09:50): I rise to participate in the debate on the Minerals Resource Rent Tax Bill 2011 and associated bills. Only an incompetent Labor government could come up with a tax that not only will destroy the most productive industry in Australia—

Senator Wong: That's not what the Minerals Council says!

Senator CASH: but on its own figures will actually leave the budget position worse off.

The ACTING DEPUTY PRESIDENT ( Senator Back ): Order! Senator Cash is entitled to be heard in silence and she will be.

Senator CASH: On the Treasurer's own figures it will leave the budget position worse off by $4 billion. Let us give a big round of applause to the incompetent Labor government. Before the tax is even implemented, the Australian economy is actually going to be worse off on their own figures. Can you believe it? They going to impose a tax that will leave the country worse off. Why do we say that? Because, on Treasurer Swan's own analysis of this grossly flawed package, in typical socialist Labor government style the Labor government have committed more than they are actually going to raise by way of revenue from this tax. It is anticipated they will spend in excess of $3 billion more than the revenue they will get from the mining companies. But, on top of that, they have failed to factor in the increase in the royalties coming out of New South Wales, which has announced it will be increasing royalties on coal by $1 billion. So already, before the tax has commenced the Australian economy is behind. This socialist Labor government cannot help itself. When they are not criticising the most productive people in Australia—people who employ average Australians to ensure that they have jobs; people who pay tax so that the government coffers are full; people who, unlike those on the other side, contribute to the economic prosperity of this country—the Labor government are defending their own mates who are the most unproductive people in Australia. When it is not ripping off the Australian taxpayer to fill the black holes that it has created since we left them a $22 billion surplus in 2007, it is proposing to kill the one industry that should be attracting investment into this country, expanding its markets in this country and building new international links.

The reality for Australians is that a smart government actually backs its strongest economy; it does not take steps to destroy it. Yet, what do we have under the Labor government? We have the imposition of yet another great big new tax that will destroy industry growth. And if you destroy industry growth the natural flow-on effect is that you destroy jobs in this country.

To put these bills into perspective we need to look at their history. Soon after the Rudd government was elected in 2011, despite Mr Rudd telling the Australian people time and time again, like a broken record—it was as the new foreign minister said; hypnotising the Australian people into a false sense of belief—that he was an economic conservative, it became patently clear to all of us, and the figures over the last four years have proved it, that the Rudd government was to become one of the biggest spending and highest taxing governments in Australia's history.

So what did they need to do? They needed to work out a way in which they could cover up the mess that they were slowly creating. So the former Rudd government announced a tax review. They would review the taxation structure in Australia. The crass political objective of the review which became known as the Henry tax review was to extract more tax from the Australian taxpayer and from corporate Australia. That is exactly what the Labor government did. Despite there being 138 recommendations in the Henry tax review, what did we get from the socialist Labor government? They did not have the guts for full-bodied tax reform because that would be tough. That would be a challenge that they were unable to rise to meet. So, in typical Labor style, instead of full-blown tax reform they opted for the easy answer: a blatant tax grab from corporate Australia.

Senator Williams interjecting

Senator CASH: Senator Williams, that is exactly my next point. The Labor government introduced the proposed resource super profits tax, a tax which heralded the destruction of Australia's resources sector rather than streamlining and refining the current tax system. Following the proposal of this tax the mining sector quite rightly rallied against it. And as Senator Williams said, the Labor Party realised they had a problem. So what did they do? They chose the easy option: 'We will just politically execute the current Prime Minister of Australia. We will just get rid of the architect of the problem.' That is exactly what they did. They politically executed the man who has now got the word 'former' so many times before his name that it is embarrassing: former Prime Minister Rudd, former foreign minister Rudd and now merely the member for Griffith.

The installation of Prime Minister Gillard saw an announcement by the current government that they would negotiate with the mining industry over the imposition of this type of tax. Negotiate they did. But the only problem for the mining industry was that when the Gillard government says it is going to negotiate, it negotiates in typical style. It negotiated not with the mining industry but with the three big players in the mining industry, who, I might say, are very happy with the outcome of this proposed legislation: BHP Billiton, Rio Tinto and Xstrata. They negotiated with the three big mining companies and came up with a deal. They completely excluded the other 320 big mining companies within every state and territory.

The result is what we have before us today: the minerals resource rent tax. Like Acting Deputy President Back, I come from WA, which has the biggest mining industry of all the Australian states and territories. Quite rightly, like the majority of Western Australians, we hold the mining and resources sector quite dear. We understand what it contributes not only to Western Australia but to the rest of Australia in terms of economic prosperity. And we have very genuine concerns about the impact of this grossly flawed tax on the great resources industry in our state.

Clearly, those on the other side of the chamber do not understand the very basics when it comes to Australia's mining industry. I wonder how many of those on the other side of the chamber have been up to the north of Western Australia at midnight and seen a mining operation, which goes on 24/7, actually functioning. They do not have an appreciation of exactly how this industry works.

The Deputy Leader of the Opposition in her speech on this issue related that she had attended an Australia-Central Africa trade forum in Sydney. Ministers and representa­tives from Central African governments—the Cameroon, Chad, Congo and Gabon—were present. She said that she was some­what taken aback when they announced that they were in Australia to promote investment in their own countries, because as Australia was now a sovereign risk Central Africa was a more attractive option. As the Deputy Leader of the Opposition said, they knew the details of Labor's mining tax chapter and verse.

Many will recall that last year in Perth we hosted CHOGM, the Commonwealth Heads of Government Meeting. As the chief executive officer of South African goldminer, AngloGold Ashanti, Mark Cutifani, said at one of the meetings:

… we have Australia as one of the top sovereign risk countries in the world and places where government policy has demonstrated failure in terms of taxation policy and its inconsistency in policy.

That is hardly a singing endorsement of this legislation.

It is in the Australian people's interest to expand—not restrict—our mineral exports so that the resulting economic benefits can be used to continue to raise the standard of living for Australians and to provide a secure economy for the future generations. This tax grab on mining projects raises the issue of sovereign risk and will adversely affect future investment decisions in the mining industry, particularly in Western Australia. As the Premier of Western Australia observed in his keynote address to the Commonwealth Business Forum—and I am going to read this into the Hansard:

… from my 20 years involvement in politics and around the resources industry, I have never come across such an inept proposal as this. The tax is discriminatory; it's bureaucratic; it's cumbersome. It falls heavily on Western Australia; 65 per cent of the revenue will be collected from this State. It is discouraging investment in certain sectors, particularly in the magnetite iron ore sector where costs are relatively higher. And it is causing great nervousness and uncertainty in other sectors, which wonder, when will I be taxed? And if you're in the gold industry or the uranium industry I can appreciate how nervous you might be. Bob Brown, after all, is advocating just that.

But without doubt the most significant consequence of this proposal, this new tax on mining, is what it has done to Australia's reputation in world markets. I spend more time as Premier of this State in Asia than I do in Canberra, and I'll continue to do so. And I met with business leaders, steel mills, trading houses in Japan, state-owned enterprises, political leadership in China, and so on. And I can say for the last 12 months virtually every meeting I have held, been at, has started with a complaint, usually quietly expressed, about the proposed Mineral Resource Rent Tax. It is offending our most important trading partners and investors. It is adding risk to their investment—it is causing a reassessment. And I am dismayed that for the first time in those 20 years our friends, our trading partners, are using the term sovereign risk in an Australian context. I do my best, as an Australian, to try and explain, to try and ameliorate some of their negative consequences. But this is highly damaging. I mean if ever a country kicked an own goal it was Australia on this proposal.

The applause that the Premier of Western Australia received was deafening.

Western Australia is one of the world's most diversified mining regions, and is the economic powerhouse that drives develop­ment throughout Australia. If Western Australia is prosperous, the rest of Australia is prosperous. If Western Australia suffers, the rest of Australia will suffer. In WA there are more than 75,000 direct employees and contractors in mining employment. If the economic multiplier is applied to mining expenditure it is obvious that this results in huge numbers of indirect employment and a huge increase in aggregate demand, resulting in both economic and social benefits not only to Western Australia but to the Australian nation. Clearly, the introduction of the minerals resource rent tax will have an adverse effect on mining employment and, indirectly, on other employment in Western Australia and therefore on the Australian economy.

The mining industry is also underpinned by continued growth in both exploration and investment. Without both exploration and investment the mining industry will decline. Exploration is the lifeblood that finds new mineral deposits and it provides the catalyst to unlock Western Australia's mineral wealth. Again, the imposition of the minerals resource rent tax is likely to have a significant adverse effect on exploration in Western Australia, and this will be to the detriment of the state and the nation.

The other issue that the government has failed to take properly into account in presenting this flawed legislation to the Senate is the impact of state royalties on the revenue that is allegedly going to be derived from this tax. In 2009 the WA government received more than $2.5 billion in royalties from mineral and petroleum producers in Western Australia, of which about $1.5 billion was from mining. It is critical that the government understands that if it introduces the minerals resource rent tax Western Australia will not forgo its constitutional right to impose a royalty on mining operations in Western Australia, because that is the right way to do it. That is what the Constitution says. Any minerals resource rent tax imposed by the Labor government will be in addition to royalties that are imposed by the respective states.

Western Australia is well aware of the contempt that the former Rudd government and the current Gillard Labor government have for it as a state. My comments are well timed because Western Australia has just received a slap in the face from the Commonwealth Grants Commission follow­ing its recommendation that almost $600 million be slashed from WA's GST share from 2013 to 2014. The Commonwealth Grants Commission 2012 update has reduced WA's share of the GST to a mere 55c in the dollar when the overall national GST is actually growing. You can see why Western Australia and why Western Australians have very genuine concerns about the impact of the MRRT on our economy. Why? Because over 65 per cent of this tax will be derived from the great state of Western Australia. The mining tax will have dire consequences for Australia's most successful industry sector with significant flow-on effects right across the Australian economy. This tax is economic vandalism and it is economic lunacy from a government that has proven over the last four years that it does not have a clue when it comes to economic manage­ment and that it is hell bent on destroying its strongest performer in the Australian economy.

We talk about a two-speed economy. When this legislation goes through next week, we may as well start talking about a stalled economy because this mining tax will reduce the international competitiveness of our mining sector and will reduce the incentive for further investment. When will those on the other side, who for some very strange reason are intent on practising socialism in the great nation of Australia, realise that hampering Australia's compara­tive advantage in resources is hardly a recipe for the continued economic prosperity of this country? When you have a two-speed economy, it is incumbent on the government to focus on speeding up the slow lane, not slowing down the fast lane. You do not reduce the fast lane to the lowest possible position that you can.

As I said at the commencement of my speech, Labor is hell bent on killing the one industry in Australia that should be attracting major investment, that should be looking at expanding its markets, that should be building new international links. If the resources sector in Australia is going gang busters, that is fantastic news. I will always celebrate the success of productive economies in Australia, unlike the Labor Party, which only ever wants to pull them down. A smart government will back its strongest economy. It will actually go in to bat for those people in Australia who are productive, for those people in Australia who employ people, for those people in Australia who pay tax, for those people in Australia who actually, unlike those on the other side, contribute to the national economic prosperity. I remind those opposite: you cannot legislate the poor into prosperity by legislating the wealthy out of prosperity. (Time expired)