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Friday, 16 March 2012
Page: 2014


Senator BACK (Western Australia) (11:12): I rise to violently and vehemently oppose the proposed minerals resource rent tax legislation and the proposed petroleum resource rent tax legislation as amended. I do so because the legislation is built on the four pillars of envy, greed, contempt and ignorance. One will see, of course, when the coalition is back in government that the foundations upon which those four pillars stand are as weak as they can be, they will collapse and this legislation will be reversed.

I start with envy. The only bright thing that Senator Thistlethwaite made reference to was the fact that the assets along the New South Wales coast in the ships that are going to take them away are 'New South Wales assets'. The other thing that he seems to know little about—and perhaps we should arrange for him to visit Western Australia so he can have a look at the big minerals projects—is that, with the billions of dollars of investment that goes into the risk, the exploration and the exporting of those products, a $75 million profit, Senator Thistlethwaite, through you, Madam Acting Deputy President, is not a high figure. Why do I say envy is the first of these pillars? Because it is setting state against state. My own state of Western Australia will pay 65 per cent of this proposed mining resource rent tax, on top, of course, of the carbon tax, which is going to hurt Western Australia as the largest state with the largest transport challenges of them all. But why would this worry a Labor government, when they hold only three seats in Western Australia—Fremantle, Brand and Perth—all of them declared by the Australian Electoral Commission now to be marginal?

I assure you that if an election were held today it would be unlikely that even Ms Parkes in the seat of Fremantle would retain her seat. There goes Mr Stephen Smith—and he richly deserves to go as a result of his comments against the Australian military—and there goes the member for Brand as well. So it does not surprise me that the Labor government is attacking the state of Western Australia. But it is also attacking Queensland. Queensland is about to go to an election. It was said in this House yesterday that the Hawke-Keating government left a legacy after 13 years of $96 billion to be repaid by about 20 million people. I understand that the state of Queensland on its own under Labor now has a state debt of some $80 billion. When I was a student in Queensland, Madam Acting Deputy President Moore—and it is some years ago—your state had no net debt. You did not charge any state excise on fuel and you had all these benefits right throughout regional Queensland. What happened in Queensland? The answer is one word: the answer is Labor, and one can only hope that by next Sunday week that will have changed.

When I speak of envy I look at the ridiculous attack by the Treasurer and Deputy Prime Minister of this country, that of Mr Wayne Swan attacking people like Forrest, Rinehart and the others who generate wealth in this country. Why would he attack Mr Forrest from Fortescue Minerals Group? Let me give you a summary of this. The company had made no profit. So how can it be paying a tax when it has made no profit? This is the man whose company was built mainly on overseas investors—not Australian investors, so no risk to the Australian community and no risk to the Australian government. And yet Wayne Swan, for reasons I suppose of irrelevance—the poor man, he is now so far out of the equation that he now has relevance deprivation syndrome, and we know who he was kowtowing to: the union movement—attacks Mr Forrest and his company, Fortescue, which, incidentally, will pay $1 billion in tax and royalties this year and will pay $2 billion in royalties and tax next year. There was no risk or investment by the Australian government, and this man has created more than 1,000 meaningful jobs for Indigenous people. Why would the Deputy Prime Minister of this country attack him?

I have had questions asked of me overseas recently, in Rio de Janeiro, in Singapore and in Norway. They asked: 'What is your government doing? Aren't these the wealth creators of your country?'

Senator Di Natale interjecting

Senator BACK: Norway, Senator Di Natale—the Norwegians about whom you spoke a minute ago. They are nonplussed about what is happening in this country. I do not understand why the Deputy Prime Minister would put that message out and I call on him to retract it.

My second pillar as to why this legislation should not go ahead is that of greed. Under our Constitution—and the last time I checked we do still have one—the minerals are the assets of the states, and the royalties upon which those minerals are charged are state revenues. I heard yesterday Senator Pratt, a Western Australian senator—not sent from an electorate but sent from the parliament of our state, and one who was in the Western Australian state parliament—making the comment that the state government has been inefficient and derelict in its management. Well, heavens above! If Western Australia is derelict I would hate to wonder what is happening to Tasmania at this particular moment.

But why would she do that, coming from that party? I will just use the one word—Inpex—to embarrass the then state Labor government of Western Australia under then Premier Carpenter and then Treasurer, Mr Ripper. Inpex, if you recall, is a project that is now going to the Northern Territory. It is an LNG project way off the north-west coast of Western Australia. And why, do we think, it is now going 1,000 kilometres on a long subsea pipeline to the Northern Territory? Because Messrs Carpenter and Ripper thought there were too many environmental aspects. So, hello? What did the Japanese do?

Senator Crossin interjecting

Senator BACK: I join you, Senator Crossin. I am pleased to see that this is being shared, but let me share with you the environmental stupidity of the then Carpenter and Ripper government. They decided it was actually too dangerous environmentally to extrude the gas and bring it onshore in Western Australia, so the Japanese—long-trusted partners of Western Australia—have made a decision using Western Australian iron ore with Western Australian gas or Queensland coal in their furnaces to produce a pipeline 1,000 kilometres long over some of the most difficult seabeds in the world. So if there are environmental challenges, Senator Pratt should absolutely hang her head in shame that she would criticise the Western Australian government. She should be in here on this side fighting this legislation because it is so poor.

Do we think for one minute that this legislation is going to stop at iron ore and coal? We know that the Leader of the Greens political party, Senator Brown, has already said he wants it to be applied to gold and to uranium and, no doubt, to the range of other minerals that Senator Thistlethwaite just read out for us. Do we think it is going to stop at coal and iron ore? I happen to have a branch office in the city of Kalgoorlie in the electorate of O'Connor, for the purpose, hopefully, of winning O'Connor back for the Liberal Party and therefore the coalition. You can understand the concern in the goldfields of WA about this particular tax on top of the carbon tax. Only recently did we have a Labor senator in this place—a Tasmanian Labor senator—going on about the cost of the carbon tax because it is not going to affect trucks under three tonnes of weight. I do not know what she knows about Western Australia but I can assure you, Madam Acting Deputy President, that there are not too many trucks that convey freight from the coast to the goldfields that are three tonnes. Most of the tyres would weigh three tonnes or more. So we are now going to be faced not just with a carbon tax but also with a mining resource rent tax.

I will share for one moment, if I may, about the emergence of the magnetite iron ore industry in my home state. People would be familiar with haematite which, basically, is the iron ore of the Pilbara which requires to be mined, to be crushed, to be put on a train, to be put on a ship and sold. Magnetite, on the other hand, is an entirely different beast. It requires intensive value adding and enormous use of power to crush the magnetite down into talcum powder, hydrate it with water and usually pump it, desiccate it and then treat it. Then away it goes on the ship. The implication here is that the cost of the electricity with the added cost of the carbon dioxide tax will probably make this uneconomic. We already have a Chinese project at Cape Preston, south of Karratha in the Pilbara, nearing completion and the Chinese are asking, 'Where are the ground rules of this country that we come into this project without there being a carbon tax, without there being a mining resource rent tax?' They sought exemption. Did they get exemption? No, of course they did not.

I had the opportunity on Australia Day to fly to Yakabindie Station north of Kalgoorlie to see the amount of mining activity going on which will now be placed at risk. Nobody can understand why people would do this. I speak of contempt as one of the pillars of this legislation. Premier Barnett spoke recently of the failure of Ms Gillard, Mr Swan and Mr Ferguson to negotiate with the states and territories when, behind closed doors, they negotiated with three large multinational multiproduct companies and did a deal which is blessed in heaven for those three companies. As background, the Chinese and Japanese now regard Mr Barnett as the foreign affairs voice of Australia because they do not understand what goes on here in Canberra. Mr Barnett, not himself an inexperienced Premier, said:

… it was the most extraordinary example of political naivety I have ever seen, and that was the assumption … that the States would have over sovereignty or ownership of their minerals, or if not that, that the States would allow the Commonwealth to tax the mining industry and the States would be happy to get a cheque from Canberra. They had assumed that would be the case without bothering to ask myself or Anna Bligh or anyone else. Just for anyone who follows politics, I don't think I've ever seen anything quite so stupid as that.

They are pretty powerful words from the Premier of the state that is the powerhouse of this nation.

He went on to talk about intimidation in that same meeting. When these people were not getting their own way, federal ministers Wayne Swan and Martin Ferguson actually threatened Western Australia that the federal government would withdraw funding for projects, including that which Senator Thistlethwaite spoke about—that is, the roads around the Perth airport. Interesting, isn't it, that it happens to be a Common­wealth asset and Commonwealth property?

Why has this negotiation with the three major multinational multiproduct companies, done in secret behind closed doors—the facts of which have never been made available to the Australian people—not been the subject of investigation by the Australian Competi­tion and Consumer Commission? On the ACCC's website this morning it said:

The ACCC promotes competition and fair trade in the market place to benefit consumers, businesses and the community. It also regulates national infrastructure services. Its primary responsibility is to ensure that individuals and businesses comply with the Commonwealth competition, fair trading and consumer protection laws.

I am quoting from the ACCC's own website. Time does not permit me to reiterate comments made in full recently by the chairman of the ACCC. In a speech recently he said the ACCC would:

Make full use of the profound changes in Australian Consumer Law … including by working more closely with—

Who? Major companies, mining companies, Aunty Maude? No, the states and territories. What happened to that? He spoke about closer economic engagement with our Asian neighbours under this legislation. I call, as part of this contribution, on the ACCC to investigate this deal done in secret, done behind closed doors with three major multinational companies who not only stand to benefit from the legislation as it is proposed and in front of us, but also stand to gain enormously commercially at the expense of the new, emerging and smaller players. This is something that we should not, in my view, allow to go unchallenged.

The fourth of the pillars upon which I believe this is flawed is that of ignorance. Speaking again of royalties and striking at the Constitution, I was listening this morning to Senator Wong. In an interjection she asked are the assets the property of the states or the property of the people? I reflected on that and thought to myself: 'Hello, Senator Wong, you are a senior minister in this government. I would have thought that people reside in the states and territories and are a part of the federation of Australia.' Is Senator Wong suggesting that we rip up the Constitution? I certainly hope she is not. I certainly hope she has a better understanding of the flow that occurs.

I talk about royalties, talk about assets and talk about distribution of wealth. Of course there is the horizontal fiscal integration called the GST. Again, why do we in Western Australia look upon it askance? The reason being that we are continually seeing an erosion of the funds coming back to our state, usually to support the very infrastructure projects that are going to maximise the returns to the Australian people. What concerns us most is you heard this morning that up to 20 per cent of the state's revenue comes from mining royalties. We are having to share that, as we should, through the GST process. But then you look at the Grants Commission and you start to look at two things. First of all, most of the eastern states enjoy gambling revenues and up to 10 per cent of state revenues come from gambling. Is gambling revenue inclu­ded in the Grants Commission's calcula­tions? No, it is not. The other point upon which I rail often is that there is nothing in the Grants Commission process that requires a state or territory to try and maximise its own revenues and its own returns.

Treasurer Swan and then Secretary of the Treasury Ken Henry discussed with Premier Barnett the fact that royalties are inefficient. I will not go too far into this for Senator Cameron, who has no understanding at all of the ad valorem aspect of royalties. But Premier Barnett put to Mr Swan and to Mr Henry whether they could give him any example—because this was the reason they were attacking it—in which the royalties system discourages production or stops projects going ahead. That was in 2011. To date, as far as I understand, I do not think Mr Swan or Mr Henry have actually come up with a single, solitary project. Their argument is out the window.

In the final couple of minutes I have I will go to the other 500 mining companies and projects around WA—and I could add in those for the other states. What are going to be the issues associated with this new legislation for them? Where are the disadvantages for the small and mid-cap miners amongst it? The question is asked, 'How do you create a small business in Australia?' The answer is simple: let the Labor government loose on a large or mid-size business and it will become small fairly soon.

But the disadvantages that were put to the various committees by the small and mid-caps were these: lower economies of scale and, consequently, higher costs of product­ion; inability to fund dedicated transport and infrastructure; and the fact that they are often single-project-status projects and therefore cannot transfer unutilised losses and royalty allowances to other projects. And who can do that? You guessed it: the three major, multinational, multiprod­uct companies. The smaller companies have a higher risk profile, reducing the availability and increasing the cost of equity. And of course now there is the inability to attract and retain high-quality key professional personnel. None of these factors were taken into account.

We have already seen evidence, as provided to the joint committee, that Australian miners are amongst the highest taxpaying companies in the mining world. In the case of iron ore, Australian companies are paying higher taxes than Canada, Brazil and China. In the case of coal, they are higher than in South Africa and China. Those are the sorts of issues we are dealing with. This will simply discourage expansion of business.

Perhaps I can finish by noting something Senator Cameron said this morning. He criticised Atlas Iron, a company that started up with one person in 2004. David Flanagan built that up to 500 staff by 2012. And what did Labor Senator Cameron do? He criticised the man roundly, for some reason, because he could not stand to see that he was creating employment in this country.