Save Search

Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Thursday, 15 March 2012
Page: 1944


Senator URQUHART (Tasmania) (20:10): Australia is experiencing an unprecedented boom in our resources sector, specifically in iron ore and coal, which has delivered record profits to mining companies year after year. I want to take this opportunity to praise the great work of Australians who work in the mining industry. On the North West Coast of Tasmania, where I am from, many people work in the mining industry and related industries both in Tasmania and as fly-in fly-out workers. Mining is a success story and we need to celebrate it. But we must also recognise that our mineral resources are nonrenewable and that, together with the resource, a large share of the profit is actually shipped off overseas—resources that can only be dug up once, resources that can be sold overseas only once. All Australians should benefit from the sale of our resources, not just the few who are directly involved in the mining industry. It is vital that the community—who own the resources 100 per cent—gets a fair return on these resources, to strengthen our whole economy for the future.

As the mining industry is extremely capital-intensive, it actually only employs about 1.9 per cent of Australian workers. And, while profits in the mining industry grew by 262 per cent over the last decade, the mining industry has contributed only seven per cent to Australia's jobs growth over the period. The number of new jobs in health and social services was almost four times that of mining during the decade. And, while the manufacturing industry continued the decades long trend of employment decline, it still employs over four times as many people as the mining industry. The metals manufacturing industry, which includes smelting, refining and producing metal products, has not been a significant beneficiary of the mining boom. Increased competition from Chinese smelters and refineries, higher energy prices and the appreciation of the Australian dollar saw value-added in the metals manufacturing sector flat through most of the last decade. The export volume of processed metals fell over the decade as some processing facilities were shut down, with the weakness broad based across a wide range of refined metals. Further, the mining of bauxite, copper, gold, lead, nickel and zinc did not perform as strongly over the last decade as mining in iron ore and coal.

Because of the small number of employees in the mining industry and its capital-intensive nature, the share of the mining boom that has gone to workers is significantly smaller than if the boom had been in a labour-intensive sector. The mining industry is crowding out investment and pushing up labour costs across the economy. While this is great news for those who are investing in mining companies or have been lucky enough to secure employment with a mining company, for the rest of the population it means that the cost of finance is higher and the cost of employing staff is higher and therefore profits are lower. We need to find the right balance in promoting greater equity in our society without reducing economic growth.

Labor's answer is to take some of the super profits in such a way that it does not distort investment. The minerals resource rent tax is a step down this path. It shifts Australian mining from royalty taxes to a profits based tax. We will move to tax the economic rents that accrue to mining companies rather than simply the amount of minerals a company extracts. When prices rise, mining companies will pay more tax. When prices fall, mining companies will pay less tax.

A resource rent, or super profit, is the profit that is over and above a normal return on invested capital. In competitive markets like iron ore, coal and coal seam gas, the cause for this super profit is normally a combination of the rents that arise from three things: a mining company's skill in extracting minerals; the fact that some minerals are cheap to mine; and the fact that high prices arise when there are only a few suppliers of high-demand commodities. The first is due to the skill of the miner, the second and third are not. The 30 per cent tax has therefore been reduced by 25 per cent to 22.5 per cent to account for the miner's specialised skills. This is a fair approach.

This is a fair tax that addresses the problem that the Howard government could not 'fess up to. During the tenure of those opposite, royalties as a percentage of mining profits decreased from around 40 per cent to about 15 per cent. It works out to about $35 billion dollars that could have been invested for the benefit of all Australians. Instead, Labor is delivering tax reform to spread the benefits of the mining boom to all Australians and to strengthen our economy for the future.

Labor recognises the value of superannuation for both the dignity of working Australians in retirement and in building up our national savings. Our national superannuation savings pool is a tremendous asset to this country and we must continue to build it up. We are using the mining tax to boost the superannuation savings of low-income Australians by up to $500 per year by removing the tax on super for people earning up to $37,000. This will assist 3.6 million low-income earners, including 2.1 million women, in saving for a decent retirement. These low-income earners previously received minimal tax benefit from contributions to superannuation given that the 15 per cent superannuation contribution tax is above or equivalent to their income tax rate. This is a tax reform that helps those who need it most to save for their retirement.

We are lifting compulsory superannuation to 12 per cent for all Australian workers, increasing retirement savings by around $500 billion dollars by 2035. This proactive measure will assist around 161,700 people across my home state of Tasmania, and will continue this government's strong record of dealing with the long-term challenges of Australia's ageing population. The challenge is that people will spend longer in retirement and that there will be fewer workers relative to retirees. Acting now to boost the superannuation of 8.4 million Australians will ease pressure on the government's fiscal position in future years and, as the increase will be phased in with small increments over the next eight years, businesses will have time to adjust to the additional costs.

Labor is also using the revenue to boost critical infrastructure across regional Australia, including upgrades and expansions to make sure we can get the wares of all Australians to market. We are moving to cut company tax to 29 per cent for small businesses from July this year, and for all businesses in 2013-14, and to increase the small business instant asset write-off from $1,000 to $6,500. These measures will put $1 billion back into businesses nationwide and increase their capacity to create jobs.

We need a tax system that assists small businesses to grow and to create jobs across our whole economy, and being able to instantly write off assets valued up to $6,500 will be of significant cash flow assistance to those small businesses. Further, as the small business is growing, we will take less in company tax to enable it to reinvest the money and create jobs. It is remarkable that those opposite are so bent on being the 'no-alition' that they will not even support tax cuts to Australian small businesses and businesses that are not in the fast lane of the mining boom.

While Labor moves to provide these benefits to all Australians, the mining industry continues to flourish. Expenditure on mining exploration hit a record $1 billion in the three months to December 2011. Specifically, iron ore exploration expenditure was more than double the amount spent a year earlier and coal exploration was about 80 per cent higher. There is no evidence to suggest that the announcement of the minerals resource rent tax has materially affected investment and activity in the Australian mining industry.

I turn now to how the tax will work. A mining company calculates profits as revenue minus expenditure and allowances for each mining project at the extraction point. The extraction point is the point between upstream—the mining—and downstream—the refining and smelting processes. Profits for the purpose of the MRRT are calculated at this point to ensure that only the extraction of minerals and not any improved value of the resources is taxed through the MRRT.

Miners receive allowances in a number of areas, including state government royalties, to ensure there is no double dipping, for times when the mine has run at a loss and in immediate deductibility for their new investments to encourage miners to continue to grow. After this, if the miner's total mining profit from all its projects is above $75 million it will be subject to the 22.5 per cent MRRT, with a concession for those companies with profits between $75 and $125 million.

This reform continues Labor's tradition of being the party that encourages regional development and that governs in the interests of all Australians—not in the interests of a few mining magnates. This tax will see the benefits of the mining boom shared across our community because it is our community that owns the resource and our community that should receive a fair share of the economic rents realised from extracting this resource. We will give a much needed boost to the retirement savings of Australians, particularly low-income Australians, and while we are at it we will give small businesses a tax cut and invest in much needed infrastructure in regional Australia. Labor understands that, for a stronger Australia, we need to bring all Australians along together. That is why I am very happy to support this legislation.