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Mining debate drives election apathy -

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The former Victorian Liberal president and AWU national secretary join Lateline to discuss super
profit tax implications.

Transcript

LEIGH SALES, PRESENTER: The battle over the Rudd Government's mining tax raged this week with
miners and ministers facing off in Canberra. But if Tuesday's Newspoll is to be believed,
Australians may have stopped caring about not only who wins this battle, but perhaps the war, by
which I mean this year's federal election.

To discuss why, I'm joined from Melbourne by former Victorian Liberal President Michael Kroger and
in Sydney by AWU national secretary, Paul Howes.

PAUL HOWES, AWU NATIONAL SECRETARY: G'day, Leigh.

MICHAEL KROGER, FMR VICTORIAN LIBERAL PRESIDENT: Thank you, Leigh.

LEIGH SALES: Let's start with the super profits tax, which has been causing the most controversy in
politics this week. When somebody like David Murray, the chairman of the Future Fund, says the tax
needs to be changed or abandoned because it contains several significant flaws, isn't that pretty
persuasive, Paul Howes?

PAUL HOWES: Well it's also pretty persuasive when you listen to 20 of Australia's leading
economists who have also come out and endorsed this tax, when you listen to tax experts who say
that this is an elegant tax, which is very rare to hear tax experts talk that way. Certainly
there's gonna be discussions over the design and the nature of this tax, and that's good; there
should be discussions.

But at the end of the day, the essence and the question that we have to ask ourselves are: "Do our
big mining companies pay a fair level of tax, reinvest a fair level of money back into the
Australian community for the right to mine our resources?" Absolutely not. And that's why we need
to get this framework right because if we don't get it right now, resources aren't renewable, and
once they're dug up, they're gone. And if we don't get it right now, we'll be making the same
mistakes that we made during the last boom when we got the levels of taxation so completely out of
kilter and not the right levels of reinvestment into our infrastructure spending.

LEIGH SALES: Michael Kroger?

MICHAEL KROGER: Well, Leigh, the last time Paul and I were on your program I asked Paul to ring
Lindsay Tanner to tell him to stop Kevin Rudd meddling with the tax system and lo and behold, what
happens? Two days later he comes out with this disaster. All I can say is Sir Rod Eddington, who's
one of Australia's most distinguished businessmen, who helped the Rudd Government earlier on, came
out during the week and said: "Look, this just has to start again".

This is another Kevin Rudd catastrophe from a man who is out of his depth and not qualified to be
Prime Minister. And the worst thing he's doing is he's dragging people along with him in the Labor
Party and discrediting them as well, and he's making people like Paul follow him down this very
dark passage into what I think's probably gonna be a defeat for the Labor Party at the election.

LEIGH SALES: Paul Howes, do you feel you're being forced to follow somebody down a passage that you
don't want to travel down?

PAUL HOWES: Michael, I can always speak for myself and my union's had a position about supporting a
profit-based tax in the resources sector for over 30 years. That pre-dates Kevin Rudd; that
pre-dates me. Labor people support the tax because it's the right thing to do for our country.
Everyone agrees that the taxation levels for the mining industry at the moment are not right.
They're not right.

They are getting away with far too much when you consider that these resources in the ground belong
to all Australians and it's only fair that all Australians share in the massive wealth that's being
generated by our mineral exploration. I think you'll find that people like Lindsay Tanner are very
supportive of this tax. The party is fully united behind Kevin Rudd on this because it is the right
thing to do for the long-term interests of our country.

LEIGH SALES: Well let me bring Michael Kroger in on that, because the trade figures released this
week show a dramatic surge in mining earnings. Doesn't that give weight to Paul Howes' point that
Australians deserve a reasonable share of that?

MICHAEL KROGER: Well, we hear this argument about a reasonable share, these are Australian
resources, they belong to all Australians. I mean, Paul, who owns the fish in the sea?

PAUL HOWES: Michael, that is just a silly analysis and you are better than that.

MICHAEL KROGER: Who owns the old growth forests?

PAUL HOWES: You are better than that. Well, you know - and if you look at old growth forests, most
of that - most old growth forestry work, there is a substantial levy paid by forestry companies to
the state. Now, the mineral ...

MICHAEL KROGER: Well, enough? Can they pay more? Can they pay more?

PAUL HOWES: Possibly, Michael, but ...

MICHAEL KROGER: Can the fishing industry pay more? They're a $2 billion industry. Why aren't the
very wealthy fishermen and women in this country, who are depleting our natural fish resources, why
aren't they paying a tax on super profits?

PAUL HOWES: Well if you're advocating that tax, I'll have a look into it, Michael. I'll have a look
into it.

LEIGH SALES: So, what are you saying, Michael Kroger - that the mining industry's being unfairly
singled out?

MICHAEL KROGER: Well, this is just an absurdity. You bring in a retrospective tax. You see, this
Government doesn't understand how the mining industry works. You spend years and years and years on
feasibility studies, spending millions of dollars, years and years of approvals of sample drillings
employing thousands of people to get to a decision where a board has a decision to mine or not to
mine, and that's based on predicted returns over a mine life. A

nd what we're finding is halfway through a mine life, decisions which were taken in a mine years
and years before, the whole tax regime now changes, which affects the whole profitability of the
mine and may have meant that the companies didn't start these mines in the first time - the first
place. And this is why senior people round the world are now talking about sovereign risk in this
country, which is akin to default of government debt.

LEIGH SALES: Paul Howes, you've been saying that the mining company Xstrata is playing politics
with this, but wouldn't suspending projects worth more than $500 million for reasons of playing
politics be a case of Xstrata cutting off its nose to spite its face?

PAUL HOWES: Well, Xstrata's actions yesterday are extremely duplicitous. Now, I've got a long
history with Earnest Henry and I know, speaking to Xstrata years ago about Earnest Henry, the
company saying: "This project may not be feasible in the long-term". That drilling the extra hole
into the ground may not be the feasible way to go. Now, what's happened over the last couple of
years? Well you've had the copper price on the LME yo-yoin' up and down, up and down, and certainly
this decision could have been made without the RSP and probably would have been made without the
RSPT. Now the fact ...

LEIGH SALES: So they're being opportunistic, you're saying?

PAUL HOWES: Absolutely, absolutely. And Xstrata have form on this. Xstrata has form in bullying
governments around the world on these issues. And Kevin Rudd is right to say that he won't be
intimidated by these people. Now just on that argument about ...

LEIGH SALES: I just wanna pick up on something there. Is the reason Kevin Rudd is digging his heels
in over this policy because he's backflipped on so many others that now he feels like he needs to
somehow rescue his credibility by seeming to be the strong man?

PAUL HOWES: This is the right thing to do for the country. This is the right thing to do for the
country and we can't allow a group of very wealthy individuals to try and buy policy outcomes from
our Government. Now what we know is that if Labor loses the next federal election, Clive Palmer
will have a seat at the Cabinet table, Mitch Hook will have a seat at the Cabinet table, BHP
Billiton and Rio Tinto will because they will buy the outcome if Tony Abbott is elected. It is
right for a government who is elected by the people, unlike the mining companies, to determine
policy in the interests of all Australians.

LEIGH SALES: All right. I want to move on to cover a few other issues.

MICHAEL KROGER: Well, hang on, Leigh. No, no, sorry - I'll just answer that. I just must answer
that. What mandate does Kevin Rudd have for this tax? Where in Labor's 2007 policy manifesto, Paul,
did Kevin Rudd say to anyone at any time at any stage that he was going to bring in, if elected, a
tax on super profits, or what he calls it, a super profit tax above 6 per cent, in the mining
sector?

PAUL HOWES: Michael, you will find that ...

MICHAEL KROGER: What mandate does he have for this?

PAUL HOWES: You will find that Labor went to the election with a clear platform to overhaul our
taxation system.

MICHAEL KROGER: Overhaul. Overhaul. Right, overhaul.

LEIGH SALES: OK, let's move on. I want to explore some other issues. The Victorian Liberal MP Petro
Georgiou delivered his valedictory speech to the Parliament this week and he said, among other
things, that Tony Abbott's plans to turn back asylum-seeker boats was cruel and unworthy of
support. Michael Kroger, is that correct?

MICHAEL KROGER: No, I don't believe that's right, but, look, Petro's stood on these issues for a
long time and you know, good luck to him. He's made a very good contribution as a member of
Parliament. He has one view in the party. Most of the party has a differing view, but he's entitled
to his view.

LEIGH SALES: Do the people who run the party listen to people like Petro Georgiou?

MICHAEL KROGER: Well, the people that run the policy side of the party are the parliamentary party,
not the organisational wing. So the parliamentary party have heard his views. They don't agree with
his views, but they respect them. Of course, if Petro had been a member of the ALP he would have
been called a rat, a traitor and been expelled years ago for crossing the floor. On our side, we
allow that freedom of speech and tolerate those views.

LEIGH SALES: As well as Mr Georgiou's remarks, we've had the revelations in recent weeks that
Malcolm Fraser's no longer a member of the Liberal Party. Let me ask you, Michael Kroger, something
that lots of people have discussed. Did Malcolm Fraser change, or did the Liberal Party change?

MICHAEL KROGER: Well I've got no doubt that Malcolm Fraser changed. I really do believe that. I
mean, a lot of the people that followed Malcolm Fraser in Government were people who were very much
part of his government. I mean, John Howard had been a minister in his government - treasurer in
his government for many years. Lots of people like Philip Ruddock and others were in the Parliament
when Malcolm was prime minister. I think Malcolm changed. I really don't think the Liberal Party
has changed.

LEIGH SALES: Do you think that the Liberal Party's moved further to the right in the years that
you've been involved with it?

MICHAEL KROGER: To the right? I don't think it has, no. I think from the mid-70s onwards when there
was an economic reform worldwide, there was a change in thinking which permeated Western
democracies through Thatcher, through Reagan where we had to lower the size of government, reduce
government intervention in people's lives, have governments sell off institutions that they
shouldn't be running, lower taxes, smaller government, freeing up the workplace, freeing up the
ports - the whole economic revolution that took place post-Thatcher - or during and post-Thatcher
permeated the West and it certainly permeated Australia and it's a very good thing it did.

LEIGH SALES: All right. Let's discuss this week's Newspoll. It shows that one in four voters is now
alienated from the two major parties. Why do you think that is, Paul Howes?

PAUL HOWES: Well, I think the Government's had difficulty selling its achievements over the last
while and certainly this was always gonna happen. I mean, Tony Abbott's been very good at
rebuilding his base. He has - you know, Turnbull moderated a lot of the party's views. He's been
very good at putting the party - his party back into - you know, firmly in the extreme right of
that - motivating that base by harking back to policies like WorkChoices.

LEIGH SALES: Your base must be very concerned though about the just startling drop in Kevin Rudd's
approval rating.

PAUL HOWES: But, look, this is not usual for governments after two years. I mean, ...

LEIGH SALES: You don't think it's unusual to drop, what - almost 30 points in nine months?

PAUL HOWES: Well, you've gotta remember, like, we had unrealistic levels of support for Labor in
the first two years after the election. If you look back at the period between '96 and '98 when,
you know, Labor won the popular vote at the 1998 federal election. This is the same scenario that
John Howard faced in the lead-up to the 2001 election. I think some Labor Party activists in the
lead-up to 2001 were measuring the curtains down in The Lodge and it clearly - it turned during the
campaign.

It turned during the campaign in the 2004 election. This will be a very tight campaign, but there
will be a clear choice. There will be a clear choice between a party that stands for substantial
reform and putting a bit back into Australia and a party that stands for big mining bosses.

LEIGH SALES: Michael Kroger, what do you think is the source of this fairly widespread
disillusionment with both parties and what effect might it have in the election?

MICHAEL KROGER: No, I don't accept it's disaffection with both parties at all. Governments lose
elections in Australia; they always have, and this Government may well lose this next election.
What you're seeing is two things happening. One, people take a middle course. They park their vote
before they come to the Coalition; and secondly, I think the electorate in Australia, they're very
- they don't like saying they got it wrong so quickly.

It's very unusual as we know. The last one-term government federally was December, 1931 when
Scullin was defeated. The Australian electorate are not used to picking a government and then
throwing them out within three years. They just don't do it. They haven't done it for 80 years. So,
the electorate is utterly perplexed by Rudd's performance. He seems to have been a wonderful
campaigner during the election promising all sorts of things and an utterly disastrous and
incompetent Prime Minister, and they're as bewildered as the members of the federal parliamentary
Labor Party are.

LEIGH SALES: OK. We're out of time. Michael Kroger, Paul Howes, a pleasure to have you as always.
Thank you.

PAUL HOWES: Thanks, Leigh.

MICHAEL KROGER: Thank you, Leigh.