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SELECT COMMITTEE ON THE SCRUTINY OF NEW TAXES
19/11/2010
Mining taxes

CHAIR —Welcome. Dr Manning and Mr Armstrong, would you like to make a brief opening statement?

Dr Manning —You have our submission. There is not much need to underline anything. On the mining side, we would like to emphasise that, as recently discussed, it is a matter of the price of the sale of state assets and that, to that extent, in referring to resources rent taxation—thought technically accurate, it is a bit of a public relations disaster—you are trying to say, ‘We are taxing you for what is in fact a sale of assets.’ Our experience with the mining industry has been that it is very good at blowing its own trumpet and therefore very often the benefits of mining are overstated, or at least put in a very favourable light, in that industry’s press releases and so forth, so we are simply saying that you should beware of that.

As to resources rent taxation, I think it is just probably a bit too sophisticated. It is a lovely theorem from an economic point of view, but the idea that the states should assist the mining industry with risk management is really probably past its date. The industry actually manages its risks very well indeed, largely in the form of very big multinational companies with a wide portfolio of assets which allows them to spread risk. That being the case, I am inclined to think that a simple ad valorem royalty has a lot going for it and may well be the path of the future. If I were being mischievous I should suggest that the royalty should be stipulated in an overseas currency and, since the US dollar is no longer the king of currencies, we might stick our necks out and make it in yuan—but that is being naughty.

On the carbon-pricing side, we have done a lot more work recently and we have simply emphasised that our recent documents were actually quite critical of Professor Garnaut’s report on the grounds that he has underestimated transition costs but, on the other hand, he has tended to forget the spin-off benefits of greenhouse gas abatement, which are in the form of greater production efficiency and also favourable balance of payments effects. Mr Armstrong?

Mr Armstrong —My background is that I am an economist. I started my work in economics in Canada in the 1960s and 1970s, where I was concerned with the mining industry, particularly in northern Canada. When I first came back to Australia in the 1980s I did some work for BHP petroleum on petroleum resource rent tax. Since then I have tended to specialise in energy economics, particularly with respect to electricity and gas, so I have not particularly done any work on resource rent taxes and mining taxes over the last 15 years, but I am familiar with the theories and the developments since then.

My major concern, I suppose, is, with the MRRT and PRRT, the differential impact and also resource misallocation that could come about if you apply different rates to gas and coal. So, as the MRRT is going to affect coal, my concern is that people drawing up the legislation pay a lot of attention to the distortions that might arise by taxing gas in a different way to coal. At the moment, about 80 per cent of Australia’s electricity production is from coal—what we call thermal coal as distinct from coking coal; used for steam generation and electricity generation—but, in a climate change environment, we are tending to build many more gas generation plants. If one looks at the generation plants under construction in Australia and committed over the next five years, there is basically only one coal project going ahead and the rest, about 20 or 30, are either gas or renewables, so one has to be very careful in taxing gas and coal differentially, particularly in this very complex environment we have where we are looking at some form of carbon tax or regulation. Of course, it is very uncertain. As one sees many, many times, there is a lot of uncertainty in the electricity generation industry about where they should put their dollars for new electricity generation projects.

For example, coal is produced and can go straight into electricity generation or underground coal gasification. It can get gasification and then it goes into electricity production, or you can have coalmine methane from coalmines, which is used in electricity production. There are a number of mines around Australia. So it is going to be very important to get very clear the distinction between the two regimes and what their impacts could be differentially if coal is going to be taxed differently than gas. That is all I would like to say at the moment, but that is my major concern in my current work: the impact on the electricity industry.

CHAIR —That is a very fascinating argument. I have not heard that raised with us before—the tax differential treatment between gas and coal. I would not mind exploring that a bit. You were involved in the PRRT introduction offshore, were you?

Mr Armstrong —Yes, 25 years ago.

CHAIR —That is really interesting. Offshore at the time—that was of course in Commonwealth waters, wasn’t it?

Mr Armstrong —Correct, yes.

CHAIR —And in Commonwealth waters there was no state royalty regime that applied, was there?

Mr Armstrong —No, not that I recall. I would be happy to make my paper available that I did 25 years ago, but that is what it was about at that time.

CHAIR —The point is that, when the PRRT was introduced, for those projects that were subject to PRRT offshore, that was the only resource tax arrangement that was in place, other than company taxes that apply to companies overall.

Mr Armstong —Correct.

CHAIR —There is no state royalty that would apply after that—nothing like that?

Mr Armstong —Not as I recall. Do you recall, Ian?

Dr Manning —No, there is not. It is not constitutional.

CHAIR —In terms of the expansion of the petroleum resource rent tax onshore, under this proposal there will be both a state royalty regime and the tax arrangement at the same time.

Mr Armstong —Yes.

Dr Manning —That is right.

CHAIR —Do you foresee any complications with that?

Mr Armstong —Yes, definitely, unless there is a clear distinction made as to the treatment of gas and coal with respect to electricity generation particularly. That is what I am mainly concerned with.

CHAIR —Let’s leave coal to one side at the moment, because coal comes under the MRRT. Let’s focus on the PRRT for a moment and we will get back to the MRRT. State royalty regimes will stay in place and PRRT arrangements are proposed to be put in place. Talk us through what is involved with the petroleum resource rent tax in terms of the compliance mechanisms, the administrative processes, the calculations and so on.

Mr Armstong —Unfortunately, it is quite some time since—

CHAIR —Not the detail, the principles.

Mr Armstong —The problem is that under rent taxation in the general economic sense, most super profits or above normal profits are very difficult to define. If you take Victoria, which I am more familiar with, the royalties for coal are for brown coal and they are on a specific basis and have increased to some extent. But, of course, brown coal is different because it really has no use other than in electricity production.

CHAIR —Going back to the PRRT, as I understand it all of the capital costs and exploration expenses can be deducted before you start paying PRRT. Various formulas apply, but you obviously have to be able to demonstrate that you have incurred those costs and there is all that paperwork involved.

Mr Armstong —Correct.

CHAIR —Then you still have the state regime to comply with.

Mr Armstong —That is right.

CHAIR —It is a more complex proposition onshore than it was offshore, isn’t it?

Mr Armstong —Yes, you could say that. I am not familiar these days with the Western Australian onshore regime, for example, but that is where it would be really important to look at—

CHAIR —Let me tell you something about the Western Australian onshore regime. They have just decided to reduce royalties because they are worried about a shortage of gas supply domestically and attracting investment in gas production.

Mr Armstong —Yes, and they have put certain bounds on gas for export, restricting a certain amount for the domestic market. There is a very substantial domestic market for gas, of course, for electricity generation in Western Australia, but a lot of it is around Kwinana for the industries there and particularly for alumina production. As distinct from aluminium, which is very electricity intensive, alumina is very gas intensive, so there is a particular need to make sure that there are adequate supplies at a reasonable price. Of course, there has been a lot of debate over the past year on the wholesale price of gas in Western Australia, which has jumped considerably in the last 12 months.

CHAIR —There are petroleum resource rent tax projects offshore. Given the significant deductions that are part of that, it takes many years before they actually start paying the tax, doesn’t it?

Mr Armstong —I am not familiar with the details, but it would depend on the field that it applied to—I really do not know. It is very specific, so you might have some fields which are very expensive to develop and others that are less expensive to develop, which would pay it earlier than those that are more expensive to develop.

CHAIR —Treasury and the department have variously told us that it takes between five and 10 years after they start production before they start paying PRRT on these offshore projects. That is because of the significant capital investment involved. Of course, they continue to pay state royalties onshore at the same time. Doesn’t it reduce the capacity of individual states to provide incentives for increased gas production by reducing their royalties if the Commonwealth comes over the top with a uniform tax?

Mr Armstrong —It would depend on the resource base that their royalty would apply to. So if they had a considerable resource base, it may not make much difference. In Western Australia basically gas production is offshore although there is some onshore production, but that tends to be dedicated to the domestic market. There may be some competition but not a lot because the offshore tends to go to LNG processors with some coming onshore.

CHAIR —Twenty per cent of it coming onshore.

Mr Armstrong —Yes.

Senator HUTCHINS —In principle, do you prefer a tax on profits or a tax on production and, if so, why?

Dr Manning —In this case I think that for public consumption, to get the principle straight, if it is a sale of a resource then it is not actually even a tax.

Senator HUTCHINS —Yes.

Dr Manning —Therefore, if it is at all possible, I would like to get the word ‘tax’ out of the vocabulary for this particular item. It also means, of course, that it has to be put in a different category in government accounting. There are strong arguments that revenue from the sale of resources should be devoted to investment in alternative productive capacities—in other words, it should not be just creamed off into the general government budget but kept apart. That also means that, for simplicity and to avoid the opportunities for interesting calculations in the determination of things that are profit based, I have come back towards the old-fashioned ad valorem: by quantity, which is all you need to know, and by an imputed price, which is on the international markets.

CHAIR —The point here, though, is in order to ensure a fair return to the community we have both. We have a sale price for access to the resource, which is the royalty, and we have a profit based tax, which is company tax. So mining companies that exploit resources in Australia pay both, don’t they?

Dr Manning —Yes.

CHAIR —Rather than having, as you describe it, a cost to access the resource, which is the sale price, and a profit based tax, which is company tax, should we have two profit based taxes? That is really the question that the government has asked us to consider. If we have two profit based taxes and you do not make a profit, the community gets no return at all, does it?

Senator HUTCHINS —I’m going to interview you in a minute!

CHAIR —Isn’t it true that if we have two profit based taxes and they don’t have to pay a royalty at all, mining companies would actually get access to the resource for free?

Dr Manning —I think that that has, in fact, occurred in the Northern Territory, where the state royalty regime was profit based.

CHAIR —I have had this discussion with Dr Henry too and he had to concede this point. Don’t profit based taxes also drive behaviour—the way companies structure their affairs and conduct their business, and their business model?

Dr Manning —You are speaking in terms of a dinky-di incentive response or creative accounting. There are opportunities for both. The creative-accounting possibilities for multinational corporations are rather considerable and it is perhaps best not to tempt them. On the incentive side of it, the resources rent tax as originally conceived was in some ways a risk-sharing device whereby if you got below the target profit rate you actually got a refund. On that kind of specification, I do not really think that is necessary, given that the multinational corporations that run the greater part of mining already have perfectly adequate risk management procedures.

CHAIR —Let me ask it in a different way: what incentive is there for mining companies to maximise their profits in Australia, if they are going to be more heavily taxed here than elsewhere, rather than to maximise their profits offshore?

Dr Manning —Their calculations in this respect are extremely complex because they have a lot to do with, for example, their political outlook in different places. It may be that they have access to a resource in a country where they think they may lose that access—a revolution-prone country or whatever—and they want to mine up and get out. In Australia, being a country where you can, to some extent, sit on resources—you do have to keep going at a certain level of activity, otherwise you lose your licence to mine—it is quite possible that they will be warehousing because of political stability, given the opportunities elsewhere if they perceive those to be fleeting.

CHAIR —Royalties are a more certain way of ensuring a definite return to the community than profits, by its taxes, aren’t they?

Dr Manning —Yes.

CHAIR —The debate then is about what level they should appropriately be. Because it is irrespective of profits—as you take it out of the ground you have to pay a price for it—it is a more certain return for the community.

Dr Manning —It is more certain except that, as you were talking about with Dr Moran, competition between states means that the state royalty regimes probably do not exhaust the level. State royalties have been, by and large, a bit too low. I found this out when dealing with the land councils in the Northern Territory. We would argue for a little bit extra for the Aboriginal land trusts and it hardly seemed to have any effect on the level of exploration activity.

Senator HUTCHINS —On the issue of taxes—maybe Mr Armstrong would like to join in on my original, simple question—in its recent economic survey of Australia, the OECD said that the proposed level of the MRRT is too low. How would the NIEIR respond that, in light of your comments just then that the OECD said it is too low?

Mr Armstrong —I would like to see the basis for the OECD report. It is very difficult to comment without knowing why they think it would be too low. I do not know. On the question of royalties and the resource rent tax, and that sort of stuff, one distinction between that and income tax is that corporations tax comes under the income tax act and has specific requirements, but royalties or resource rent are basically returns to the owner of the resource. The owner of the resource will set the rate that it wants from that on the basis of, in a sense, how much you can charge without losing that activity. If you keep putting your royalties up, at some point people will not mine or be involved.

Senator HUTCHINS —Earlier, when I was accused by the chairman of doing an editorial—

CHAIR —In a very friendly way.

Senator HUTCHINS —I detailed a number of areas where it does not look like there has been any impact on investment at all, including by small to junior miners.

Mr Armstrong —We have a big advantage in Australia in that our sovereign risk is quite low. The MRRT increases your sovereign risk to some extent. I was recently in Canada—I was not in this field—and it would be interesting to know what my Canadian contacts would have said about this. They would probably think it is a quite interesting development. They will watch it very closely to see if they might do something similar in the future.

Senator HUTCHINS —I am pretty sure that they are looking at it and, as soon as we get it through, they will find a reason to impose it themselves.

Mr Armstrong —The difference in Canada is that they have a much more mature mining industry than Australia. We are not late starters but we are not nearly as mature. If you look at the nickel belt around Sudbury in northern Ontario, it has been there for many years. They have a different operating environment. The owner of the resource will try to take as much as it can from that resource, as the owner of the resource, without putting at risk the activity on which that resource is based. You need to draw a distinction between the return to the owner of the resource and the corporations tax as we have it in Australia, or any other regime.

Dr Manning —As a footnote, the minister for mines in Alberta, who introduced the present royalty regime there, and was excoriated by the industry at the time, is now something of a folk hero.

Senator HUTCHINS —Can I ask again on the OECD report—I know you said you have not—

Mr Armstrong —I have seen a reference to it but I have not read it.

Senator HUTCHINS —It also warned the government against spending the revenue the tax generates and suggested that a special reserve fund should be established. Some have suggested following the Norwegian approach and investing offshore. Would this reduce the effect on the exchange rate and avoid the Dutch disease? Does your group have a view on this?

Mr Armstrong —I will pass to Ian. I am familiar with the Dutch disease argument.

Dr Manning —That is a very real risk here. It is very difficult to determine what determines the exchange rate. It is not behaving according to good economic theories and in fact it moves in contrary directions.

CHAIR —It is not always consistent with good economic theory, is it?

Dr Manning —It depends what you mean by good economic theory.

CHAIR —Good economic theory catches up, doesn’t it, and seeks to explain post the events?

Mr Armstrong —Yes. We are economists of, I think, quite broad thinking, so we would not agree with some of the thoughts put forward by, for example, economists of the Productivity Commission. We are much more liberal.

Senator HUTCHINS —Laissez-faire.

Mr Armstrong —Yes, we tend to take broader approaches to what economics is.

Dr Manning —From our point of view, the Dutch disease is a very real threat. If we have a resources boom which simply results in a high exchange rate, which results in the worst of all worlds, which is serious destruction in manufacturing and agriculture, coupled with a balance-of-payments deficit and accumulation of yet more debt, you can say that it is the curse of resources; it is not a boom at all. Therefore any measure which would change the perceptions of the foreign exchange markets towards minerals prices in setting the Australian dollar exchange rate and make them take less notice of it and tend to put it down would be helpful from a national point of view.

Whether a Norwegian-style corralling of revenue from a resources boom would have this effect on the foreign exchange markets is the weak link in the argument. If that link were there, there would be a lot to be said for that approach. Australia, of course, is a larger country than Norway, and the effect of relatively small amounts of revenue compared to our total foreign exchanges put into a fund may not be all that great. We still, of course, have to remember that the multiplier effects of resource activity are actually diminishing all the time because of the increasing overseas content in the capital investment.

CHAIR —As a result of the deal that Julia Gillard and Wayne Swan did with the big three, they have abolished the mining tax on all resources with the exception of iron ore and coal. What does that do in terms of distorting or not distorting investment decisions and economic activity in those particular industries—iron ore and coal—as compared to the other parts of the mining industry?

Dr Manning —It depends a bit what the states do with respect to their royalties.

CHAIR —The royalties, I suppose, will be all credited so that should not really have any influence.

Dr Manning —No, but what I am then saying is that, if the states actually put up the ad valorem rate on nickel, copper and so forth, you would not necessarily get a switch of effort.

CHAIR —Let us leave the states to one side for a moment, because the only thing we have got in front of us is what the Commonwealth is proposing to do. The Commonwealth, before even introducing it, has abolished the super profits tax on all resources other than iron ore and coal. All other things being equal, what impact is that going to have?

Dr Manning —I think it will be the obvious. In a sense, it is to switch activity to non-iron-ore and non-coal. How far that is a major incentive in view of all the other influences on activity such as price incentives—

CHAIR —So it is hard to quantify.

Dr Manning —Yes.

Mr Armstrong —The major Indian generator and importer of coal into India, Adani, has recently announced an enormous investment in the coal mining industry. They would be aware of the MRRT but, because of the magnitude and quality of the resources, they are going to put a lot of investment in. At its peak, the mine they are developing will be the largest coal mine in Australia. That has only been announced in the last six months. They would be well aware of the MRRT. So the investment is driven by resources, the infrastructure we have et cetera. The debate over the MRRT has not changed Adani’s view on Australian resources.

Dr Manning —An important thing for them is that in Australia they do not have to depend on the Indian railways. Similarly, the Chinese when they invest do not have to depend on the Chinese railways either.

Mr Armstrong —And Ian knows the Indian railways very well.

CHAIR —Can you see a rational reason why the government would have picked iron ore and coal and excluded, for example, uranium?

Dr Manning —If rational, yes: it would simply be that these are large and have had reasonably high price increases. But from an economic point of view—

CHAIR —There is no rational reason why you would pick those as opposed to others?

Dr Manning —No. The only reason would have to do with simple economies of size. You could perhaps argue that the exploration to final production revenue ratio is higher for minerals other than iron ore and coal. For example, to find gold, base metals and so on the investment in exploration is probably a bit higher than for equivalent value of iron ore and coal. But that is the only argument I can think of.

Mr Armstrong —I agree.

CHAIR —How long do you think it would last before a government would add other resources to a mineral resources rent tax once it is in place?

Dr Manning —You are the politicians.

Mr Armstrong —It would have to be seen that the other particular industries are very profitable.

CHAIR —Do you know roughly what the profitability of the uranium industry is in Australia?

Mr Armstrong —I would not have any idea. It varies.

CHAIR —I think it went up about 50 per cent over the last financial year.

Dr Manning —It was terrible in the nineties.

CHAIR —Iron ore was terrible in the nineties too, wasn’t it?

Dr Manning —Not quite so bad. The uranium price fluctuated far more. You are quite right.

Mr Armstrong —Uranium went up about 20 times in the nineties, from about $7 or $8 a pound up to, at its peak, about $120 a pound. It has now settled back at about $51 a pound. It depends on when your contracts were drawn up to sell that uranium.

CHAIR —The same happens with iron ore. Between the time the RSPT was announced and the time of the MRRT, the iron ore price came down 30 per cent worldwide. You get these huge fluctuations.

Mr Armstrong —I think the volatility in uranium is probably higher. It has been very significant.

CHAIR —When there is a high price you get a supply response, don’t you?

Mr Armstrong —Uranium is very different.

Dr Manning —It is a slow supply response. You can get a quick supply response if the equipment is already sitting in the mine and the capacity is there. As soon as you have to develop new mines, if you have a proven resource that is a three- or four-year time lag. If you really get into the exploration pipeline then that is something like 10 years.

CHAIR —Who do you think owns the actual resource?

Dr Manning —It is the Crown in the right of the states except for offshore, where it is the Crown in the right of the Commonwealth, and with uranium in the Northern Territory, which is the Commonwealth. I am not quite sure of old title in New South Wales.

CHAIR —But it is essentially the property of the states except where it is offshore.

Dr Manning —Yes.

Senator HUTCHINS —It is not a related argument.

Dr Manning —In the United States it is different owing to their different constitutional history where the surface land-holder has rather greater rights.

CHAIR —That was a very clear statement and I am grateful for it. You would then disagree with the government’s assertion that it is the property of the Australian people.

Dr Manning —In political philosophy I am hard put to say that the Crown is the property of the people—

CHAIR —Providing it is on a state-by-state basis.

Dr Manning —The Crown in the right of the states represents the people of that state.

CHAIR —Which means that iron ore in Western Australia is not owned by the people of Australia across Australia. Is that the point you are making?

Dr Manning —The people of Western Australia; that is the logic.

CHAIR —We have already established that it is 98 per cent of iron ore production in Western Australia. If there is a tax on iron ore production and you see iron ore being the property of the people of Western Australia, that is a tax on WA, isn’t it?

Dr Manning —Provided the amounts are not returned to WA, yes.

CHAIR —Are you aware that there is any proposal to return the amounts to WA?

Dr Manning —I am not aware of any such proposal.

CHAIR —We have got a very bad track record on those sorts of things. The money normally goes east but have never comes back.

Dr Manning —There was a time when money went to WA. Remember it was a mendicant state.

Mr Armstrong —It is also important to note that it tends to go to Canberra and not to the states. A huge problem that I have looked out over the years is that the federal-state fiscal relationships are in serious need of reform yet there is virtually no debate on this issue. That is a very substantial issue. There was a very good article by Tim Colebatch in Age about a week ago which clearly sets it out and is the best statement I have seen about it for many years.

Senator HUTCHINS —A substantial amount of infrastructure spending is going to go to the major resource states of WA and Queensland.

CHAIR —Is it? It is a tax that is supposed to raise about $60 billion over 10 years and $2 billion of it is going to supposedly come back to Western Australia over those 10 years. Let us leave that to one side. A final question from me. You sort of say that we should not overestimate the impact of the mining industry on our economy and we should be looking at the contribution to national income rather than to GDP. Isn’t it true to say, though, that the contribution of mining to the economy is not just the direct contribution, there is a significant service sector that is attached to it? I would say that in Western Australia most of the economy is in one way or another related to the mining industry.

Dr Manning —And yet it is related to the income generated in the mining industry, so the two remarks are not contradictory. I am saying that you should watch the incomes, not the gross product, because a very large proportion of the gross product goes immediately back overseas in returns to shareholders and in purchases of materials. As you know, mining companies I think pay more for diesel than they pay in wages. That said, the mining industry has provided the basis for development in Australian—not least in the west—of a world competitive mining equipment industry and that should be credited to them. Other services to mining, yes, we also have developed geological assessment and all those kinds of consulting services which we export, again not least from Perth. So those impacts should be credited to the industry.

CHAIR —So do you think it is in our national interest to keep mining strong?

Dr Manning —I think yes, and in fact another reason is that it actually makes good defence policy, because if we were seen to be hogging our resources and not making them available to the resource hungry countries they may look at us with envy. Again, I am in favour of letting the mining industry have its head but subject to environmental, land title and all those constraints.

What we are actually talking about is a fairly small dispute over the division between the sale price and the mark-up which the mining companies get, between the price that we sell the resource and the price that they sell it for on the international market, from which they recoup their various expenses.

Mr Armstrong —I would concur. Australia is in a sense lucky to have such substantial reserves of world-class resources. From the liquids point of view of course we are deficient and we now import about 50 per cent of our petroleum requirements. But, if you look at the rest of the resources, we are very strong and competitive in the world because of the quality of those resources around the country. Western Australia obviously has a very significant resource. Victoria had gold and we have brown coal, which is something of a debate—

CHAIR —It all started off in Victoria, didn’t it—the gold rushes?

Dr Manning —Indeed. Australian mining legislation started off in Victoria.

CHAIR —It was the Victorians that built Western Australia.

Dr Manning —Yes, my grandfather was among them. The importance of the mining votes, the diggers, meant that Victorian mining legislation was fairly favourably disposed towards the industry.

CHAIR —Going back, have you got an awareness of the differences in business models in their iron ore operations between BHP or Rio versus FMG, Atlas Iron and BC Iron? Have you got a sense as to where the different business models are?

Dr Manning —No.

CHAIR —Let me ask you a more general question then. Do you think it is appropriate for a government to negotiate the design of a tax with three taxpayers with a particular perspective and exclude everybody else that has a separate interest in the same industry?

Dr Manning —No.

Mr Armstrong —No. I would concur. You need to have consultation and look at all the implications of what you are doing with all the players. I would say that is a general policy.

CHAIR —If a government wanted to introduce a profits based tax—leaving the merits of that to one side—what would have been a better way of going about it?

Mr Armstrong —What you think, Ian?

CHAIR —Should there have been a discussion paper and consultation giving everybody an opportunity to—

Mr Armstrong —Yes. It would be ideal, I would think, to canvass opinions.

CHAIR —That is what happened with the PRRT. You said you were involved in that 20 years ago. To the great benefit of the Hawke government, they consulted, obviously.

Mr Armstrong —As I recall, there were nowhere near the contentious issues raised during the—

CHAIR —It was not dropped on people overnight.

Mr Armstrong —No.

CHAIR —I suspect that is part of the reason.

Dr Manning —One has to add that the lobbying skills of a whole lot of interests have increased substantially since then, and that means that the temperature is higher as the negotiations proceed.

CHAIR —Do you think that it is appropriate for people who are taken by surprise to express their perspective and their views on these sorts of matters?

Dr Manning —I am happy with that—and in fact the widest group of stakeholders possible. Fairly obviously, the agricultural and manufacturing interests who may be hurt by Dutch disease if this actually happens have an interest as well.

CHAIR —Senator Hutchins, are there more questions from you?

Senator HUTCHINS —No, just those. They are interesting lobbyists, that is all!

CHAIR —Some are better than others because some of them get themselves inside the room and close the door behind them and others have to sit outside and look in. People should not get favourable treatment from the government based on whether they can get themselves inside the room or not, I would have thought.

Dr Manning —I do not think so either.

Mr Armstrong —No, I agree.

Dr Manning —It is a democratic principle, I would have thought.

Mr Armstrong —One of the fears about the political process is that it has become too ‘insider’.

CHAIR —Thank you very much for your contributions today.

Proceedings suspended from 10.59 am to 11.47 am