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Friday, 16 March 2012
Page: 2040

Senator SINGH (Tasmania) (13:12): I rise to speak to the minerals resource rent tax package of legislation, a long-term Labor commitment delivered by the Gillard Labor government. Over the past decade, Australia has experienced an unprecedented boom in demand for its minerals resources, especially iron ore and coal. Demand is driven by the massive amounts of development going on overseas, especially in markets to our north in what has been coined the Asian Century. Enterprising Australian companies and no small number of overseas investors have been willing to oblige this demand. The mining industry has grown into one of the largest single sectors in the Australian economy, involving extensive capital investment and returning huge profits on that investment.

There is no doubt that the mining sector contributes significantly to the Australian economy. Indeed, mining has been one of the most constant and productive sources of jobs in my home state of Tasmania for more than a century. In fact, in Tasmania, whole towns and communities have been created around the mines, from Beaconsfield to Rosebery, from Queenstown to Zeehan. And the Labor Party has always supported industry that creates jobs and supports communities, as many companies in the mining sector have done. But while we should always value those individuals and companies willing to take risks in responding to demand, we should also remember that mining companies use resources that belong to the community and turn those resources into a private profit. At the turn of the 20th century, state and territory governments around Australia took the wise step of taking ownership of Australia's mineral resources, licensing out rights to particular deposits. Permission to do so has been on the basis that companies will pay royalties to the Australian people commensurate with the volume of our minerals that they are taking from the ground. This system was put in place on the simple grounds that the wealth generated from mineral extraction is based on the exploitation of an asset that belongs to the Australian people and they deserve a fair share of our revenue generated. But, while profits from the resources boom have grown dramatically, the revenue returned to Australians has not kept pace. We are no longer receiving a reasonable share of the wealth generated for private individuals from our resources.

The failure of the mining sector to return a fair share of its wealth has created a number of problems for the Australian community and the Australian economy. Most obvious­ly, there has been the manifest unfairness of companies exploiting community resources but not returning a proper benefit to the community through taxes. Like all businesses, mining companies depend on the conditions created by society for their success. The wealth generated by companies operating within Australia is, first of all, a reflection of a society that fosters and supports industry and enterprise. Giving back to that society is a foundational principle on the social contract and on the social licence that grounds the operations of our most successful companies. This problem is even more acute when we consider the fact that, even more than other businesses, mining companies draw an asset that the community literally owns.

Secondly, there is the disparity between the effect of the mining boom and that of typical growth in a sector of the economy. The mining industry is extremely capital-intensive—one of the reasons that entry to the industry is dependent on access to a large amount of capital. But, following capital costs, mining employs relatively few people, with the mining industry accounting for about 1.9 per cent of Australian workers. While profits in the mining industry grew by 262 per cent over the last decade, only seven per cent of Australia's job growth was due to the mining sector. While typically the benefits of industry are dispersed through higher levels of participation in growth sectors, the benefits are much less with the mining industry. There are relatively few secondary or tertiary industries to the mining industry, and the normal rules of prosperity flowing on to workers and their families do not apply—or at least not to the extent that one might expect given the scale of revenues that are being generated by mining companies.

Thirdly, the extraordinary growth in the mining sector has had the effect of crowding out investment in other sectors of the economy, taking opportunities that might otherwise have been present for different industries to grow. The effect has been to create a two-speed economy and the inequity that involves for business, workers and families across the country. Those who are lucky enough to participate in the mining industry are streets ahead of some in other industries, creating pockets of prosperity that most Australians simply do not have access to. This is not about envying those who, through either their hard work or their good fortune, have succeeded in a successful industry, nor is it about attempting to handicap or slow those who have prospered. Instead it is about recognising that the development of a society is about using the economic and social tools at our disposal to take the whole community forward. A boom in the Australian economy should be good news. It should be celebrated as the boon it is for our country. But without this tax we have been in danger of squandering this opportunity.

The minerals resource rent tax is about using the prosperity generated by the mining boom to benefit the whole country. It is about ensuring that resources that we dig up and ship off overseas are invested properly and provide a return into the future. This tax will be levied on 30 per cent of the profits over $75 million made by mining companies after a number of deductions for some expenditure, after state royalties have been deducted and after extraction allowance. The tax is not punitive, and since the scheme was announced the mining sector has continued to grow. Mining investment has skyrocketed from some $35 billion in 2009-10 to $47 billion in 2010-11, with no signs of it stopping. Nor is there any sign of the mining sector having trouble turning a profit. Indeed, more often than not the kind of superprofit covered by the tax is unimaginable to most Australians. As a tax on profits rather than the volume of minerals extracted, this tax is flexible and fair, continuing to provide a sizeable return on investment as an incentive for the sector to continue to grow.

This tax does not distort or discourage investment in the mining sector. Instead its effect and the government's intention is very much to encourage investment, growth and prosperity right across our Australian society. It is designed to ensure that the extraordinary profits that the Australian mining companies make—the almost inconceivable figures that Australian families hear reported on the evening news—go towards the things that can be harnessed for the common good.

The most important factor for the security of the Australian economy is a strong and substantial superannuation sector. Compuls­ory superannuation, supported for a long time by a forward-thinking labour movement and introduced by the Keating Labor government, is the key to ensuring decent quality of living for Australians when they retire. It is key to ensuring that we are able to deal with the challenges that Australians will inevitably face with an ageing population, when people reach retirement age and have the very reasonable expectation that they will still be able to contribute to the society to which they have contributed so much throughout their lives. While superannuation is about personal financial security, it is also about the nation's financial security, ensuring that we can use the benefits of the hard work of Australians to support investment across our country. Strong, secure superannuation benefits every Australian and it is vital to assist Australia's future prosperity. That is why I believe that superannuation needs to continue to be supported and its contribution rate increased, and that is exactly what this Labor government intends to do with the billions of dollars in revenue that this tax will create. The MRRT will be used to lift compulsory superannuation to 12 per cent for all Australian workers, increasing retirement savings by around $500 billion by 2035—a longer commitment that will aid in the challenges that Australia will inevitably face with an ageing population. This boost, which will affect the super entitlements of some 8.4 million Australian workers, will guarantee a quality of life that our workers deserve when they reach their retirement. With the increase phased over the next eight years, businesses will also have time to adjust to the additional costs. All Australian businesses will receive a one per cent tax cut from 1 July 2013, and 2.7 million small businesses will receive other benefits, like the instant asset write-off of up to $6½ thousand, making tax benefits simpler and more immediate to access.

It is curious to me that, while the coalition is willing to invoke the most base of commentators in people like Rush Limbaugh to rail against any form of taxation, they oppose this tax cut for all Australian businesses. They do not share Labor's notion that, if revenue can be generated through something like the minerals resource rent tax without a substantial effect on the incentives that drive entrepreneurship, that policy should be pursued and the tax burden in areas needing support should be reduced. They do not share Labor's notion that all Australians should have access to decent opportunities to succeed in business, not just in one part of the economy but all parts of the economy, supporting all businesses. The coalition do not share Labor's notion that it is better to guarantee the prosperity of all workers now and into their retirement rather than allowing a small number of Australians to revel in incredible but temporary wealth. They do not share Labor's values that economic growth needs to be about more than seeing profit margins climb higher and higher, and that growth needs to be about seeing more Australians succeed and more businesses opening their doors and having those doors stay open, with more older Australians enjoying living rather than just surviving into their retirement. These bills are about turning a mining boom into an Australian boom that will support this nation and its people well into the future. I am very pleased to support the MRRT bills package.