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Transcript of interview with Howard Sattler: 6PR, Drive: 9 June 2010: Resources Tax.



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Simon Crean interview with Howard Sattler, 6PR Drive

Topics: Resources Tax

9 June 2010

HOWARD SATTLER: I've just come across from the Hyatt Hotel where the Prime Minister got a bit of a

going over by the assembled people down there, mainly over the mining resource rent tax.

We asked him to come on the program, didn't even get reply. Didn't even get a reply. Gee. So little does he

think of us, I think, today. Maybe it's just me, I don't know.

Anyway, he's not here. But in his place a man who could have been the prime minister of Australia, former

leader of the Opposition, now Minister for Trade, Simon Crean, the Honorable Simon Crean MP. What a

title. Hello.

SIMON CREAN: Hi Howard.

HOWARD SATTLER: How you going?

SIMON CREAN: Good, I haven't had an introduction like that from you ever, so…

HOWARD SATTLER: There you go. I hold you in…

SIMON CREAN: And we've done many interview together.

HOWARD SATTLER: I hold you in high esteem, Simon.

SIMON CREAN: Well thank you, I hold you in high esteem too. But we've done many interviews over the

years…

HOWARD SATTLER: We'll see how you go after this interview, all right?

SIMON CREAN: Yeah, well, I mean, I've had difficult ones with you in the past and we've come through

them, so, never shirk an interview, Howard.

HOWARD SATTLER: Oh, but you're now in a position of power, you're now in a position where you are

making decision that impact on Australia and I thought it was a bit of a joke when I saw that you were

coming in to talk about the great trade opportunities that we have in the Asian region particularly, because

you've been up there recently, at the same time as your government is smashing the mining industry here.

So how can the two fit together?

SIMON CREAN: Well it's not smashing the mining industry in fact it's…

HOWARD SATTLER: Not yet, you're not.

SIMON CREAN: the mining industry is going very strongly. And in fact I was out today at a company called

Immersive Technologies which is the services side of the resources industry, simulators for people driving

heavy equipment selling all round the world. So Australia's strength in mining isn't just the resource, it's the

services that attach to it, Howard.

And there is huge opportunity, not just for selling the commodity, but what makes the industry efficient and

what makes it competitive.

HOWARD SATTLER: But all of those companies are going to be effected by this resource rent, so-called,

super profits tax, aren't they?

SIMON CREAN: Well they're not all going to be affected.

HOWARD SATTLER: No, not directly, but if the contracts…

SIMON CREAN: Not even indirectly. If they're not earning the so-called super profit, they don't pay the tax.

HOWARD SATTLER: Yeah, I know that but mining companies are paying it…

SIMON CREAN: [Interrupts] Well they can't be hurt then.

HOWARD SATTLER: The mining company's profits, because you take 40 per cent of the super profits tax,

if they cut back, and we are just getting - we had a call from Port Hedland a little while ago. Fortescue and

BHP are reportedly cutting staff. Now, I mean, that's not the news you or I wanted to hear.

SIMON CREAN: No, and I think we've got to check out what the true story is because just be…

HOWARD SATTLER: I am.

SIMON CREAN: Well, so are we. Are just before coming on air the Minerals Council hadn't heard of it.

HOWARD SATTLER: Mmm. So you and I both hope it's not true.

SIMON CREAN: Yeah, of course we do.

HOWARD SATTLER: Okay, but there have been cases already where upcoming projects have been

shelved for the time being so that's jobs lost surely?

SIMON CREAN: Well this was interesting because Xstrata, who claimed that there were immediate job

losses from its shelving of projects, had to backtrack on that the other day. And Clive Palmer has also

indicated that he over-egged the story.

Now it's true that with any new proposition, people are going to have to reassess what the impact of that

proposition is, and that will have the effect of putting of a formal decision. But…

HOWARD SATTLER: Delaying decisions.

SIMON CREAN: Well delaying decisions but in circumstances in which a lot of those decisions have been

delayed before too for many other reasons including issues that attached to state governments.

HOWARD SATTLER: But are you suggesting that this tax, this new tax, 40 per cent if they make more than

six per cent, isn't going to effect mining companies?

SIMON CREAN: I'm saying that it will - what it will do is encourage greater investment in the mining

industry because you're only looking at the tax application, Howard. You're not looking at the deductibility

equation.

Now at the moment…

HOWARD SATTLER: This bloke's the formal shadow treasurer, and you were a former treasurer weren't

you?

SIMON CREAN: No, no, I wasn't former treasurer…

HOWARD SATTLER: You were shadow treasurer.

SIMON CREAN: I was shadow treasurer.

HOWARD SATTLER: So he knows his stuff, yeah.

SIMON CREAN: But no, hang on. Let's understand this. At the moment what's the disincentive to invest in

the mining industry? It's the fact that state royalties have to be paid upfront before any profit is turned. What

this new tax does is enable that deduction upfront before any profit's turned. So effectively they don't have

to pay the royalty up front.

HOWARD SATTLER: But the royalty's aren't 40 per cent are they?

SIMON CREAN: No, but royalties are a disincentive upfront. What the tax is applying to, Howard, is the

circumstances in which profits are made over a certain level. That's what it applies to.

It doesn't apply if you're not making the profits. It brings in more marginal operators. Now this is the reason

why - I've just come back from Japan. I've been up in China recently, they're not raising concerns about

what this is doing, about investing…

HOWARD SATTLER: That's not what people like Twiggy Forester are saying.

SIMON CREAN: Well, okay, I've had discussions with Twiggy Forester.

HOWARD SATTLER: He's a mate of your side too.

SIMON CREAN: Yeah well, let's…

HOWARD SATTLER: He was there with a lot of Labor candidates…

SIMON CREAN: There's a lot of assertions that Twiggy makes from time to time and I like him because I

appreciate what he's done up in the Pilbara. I've been up to look at his operations and I always respect

those people that have a go and get off and make it [indistinct].

HOWARD SATTLER: Well don't you respect his opinion then? Or you think he's just hyping it all do you?

SIMON CREAN: Well that's why I was prepared to talk with him, and I asked him for information which I've

never had forthcoming. Now if he wants to settle it, let's settle it. But…

HOWARD SATTLER: But you've made up your minds haven't you?

SIMON CREAN: Well - what we've - we've made…

HOWARD SATTLER: Is that a yes or a no?

SIMON CREAN: We've made up our minds to apply a resource rent tax onshore which currently applies

offshore. Now it's applied in a different way. It's using that deductibility and those upfront costs to be carried

forward. If people are saying: that's not of value, then of course that needs to be taken into account in the

negotiations that we've said we're prepared to undertake to try and resolve this issue.

HOWARD SATTLER: Well, why didn't you negotiate before you made the announcement?

SIMON CREAN: Well that's the decision - the government should have had more consultation, I think that's

true.

HOWARD SATTLER: So you should have consulted more before you came out and made the

announcement.

SIMON CREAN: Yeah, but I - I mean, I've heard this argument and coming from Rio…

HOWARD SATTLER: Yeah I know but who…

SIMON CREAN: No, no, no, hang on. If you want to have the argument about should consultation have

taken place I concede that….

HOWARD SATTLER: Consultation should always take place, surely.

SIMON CREAN: Course it should, and that's always the way in which you should go into it. But it didn't take

place. What we're now saying is let's fix it. We will have the consultation. We've signalled that, and what we

want to do is to get an outcome, to get a result.

HOWARD SATTLER: So, there is room for movement.

SIMON CREAN: Bring certainty.

HOWARD SATTLER: There is room for…

SIMON CREAN: We've always said there was ground to negotiate the implementation and transition

arrangements of this.

HOWARD SATTLER: Ground to negotiate the level at which the tax buds in.

SIMON CREAN: No, that tax we've said clearly that the 40 per cent must remain.

HOWARD SATTLER: What about the six per cent profit?

SIMON CREAN: Look, I'm not going to get into the negotiations. Not my responsibility.

HOWARD SATTLER: No, no, no, I know that, but you're a cabinet Minister, surely you all sat around a

table and said - and talked about the implications of this, you must have.

SIMON CREAN: We wouldn't be sitting around the table negotiating this amongst ourselves. What we're

doing - want to do is talk to talk the mining companies about getting a resolution.

HOWARD SATTLER: No, no, no, but when the government…

SIMON CREAN: So, let's do that.

HOWARD SATTLER: …prior to the government coming out with its decision.

SIMON CREAN: Let's do that.

HOWARD SATTLER: Did you sit around the Cabinet table and talk about the implications. You must have,

surely?

SIMON CREAN: Well we've had…

HOWARD SATTLER: Not just the Prime Minister and Wayne Swan's idea.

SIMON CREAN: Well I'm not going to go into the confidentiality of what goes on in Cabinet meeting

Howard, I don't think you'd expect me to do that. What I am saying to you is the government has signalled

a preparedness to sit down and talk through the application of this tax, that's what we want to do.

HOWARD SATTLER: So there is room for manoeuvring?

SIMON CREAN: Yep, we've said that.

HOWARD SATTLER: Now you've said it.

SIMON CREAN: It's been said from the outset. We've always - what do you think we said.

HOWARD SATTLER: No you didn't, you didn't say it from the outset, you didn't say it prior to announcing it

and you didn't say it when you made the announcement, you're saying it now.

SIMON CREAN: When we made the announcement we set up a panel that we invited people to make

submissions to, if that's not signalling a…

HOWARD SATTLER: But the panel didn't include any mining people, did it? Who do the panel include?

SIMON CREAN: Miners make application to this panel. It invites the miners…

HOWARD SATTLER: But who is the panel? A pack of bureaucrats and government ministers, people like

that?

SIMON CREAN: It's a pack of people that report back to government based on the submissions the mining

industry has made.

HOWARD SATTLER: Bureaucrats.

SIMON CREAN: It's already made that report and government together with the mining industry will resolve

it. If there is good will to do it.

HOWARD SATTLER: Are you prepared to take some calls from the West Australian public?

SIMON CREAN: Yeah.

HOWARD SATTLER: Because the Prime Minister wasn't earlier today, but you are, good on you. Daniel of

Girrawheen…

SIMON CREAN: Well I think he came on an earlier version of this program.

HOWARD SATTLER: I said he wouldn't take calls, that's what I said. Daniel of Girrawheen, hello.

CALLER DANIEL: G'day Howard, g'day Simon.

SIMON CREAN: Hi Daniel.

CALLER DANIEL: Mining drives the economy in Australia. Even though suppliers pay a per cent or just a

bit more of GDP of Australian wealth, the industry supplies a lot of business with GDP as well.

Now Simon, because I think the Labor Party's driven by a radical left agenda, I think Gillard are Rudd are

communists, I think you should keep this super tax all up until the election and I think you'll lose it. And if

you're willing to take that risk I'm sure the Australi…

HOWARD SATTLER: So Daniel, hang on, it's Howard here, are you saying it should be an election issue?

It should be put on the table, if you elect us, this is what will happen.

CALLER DANIEL: I think it certainly will be because it's going to get blocked in the Senate if they try and

put it in before the election. And any political people out there with any common sense, which radical Labor

lefties don't have, will be able to see that Rudd and Gillard will certainly lose this election because they

want to bring in tax to pay for their…

HOWARD SATTLER: You're showing you're political colours, that's all right Daniel, but Simon will reply

now. I think, what can you say? What can you say?

SIMON CREAN: Yeah well, I think Daniel - I can say a lot of things about Kevin and Julia, but they aren't

communists. And they ain't left wing radicals.

Let me just say this though Daniel. I think this is terribly important. What you say about the mining industry

is true, it is a significant source of wealth for the nation and it spreads throughout the nation in many

different ways. But because the demand for resources is so high, the balance sheet of the nation has in

fact gone up.

Any business whose balance sheet went up would be expected by its shareholders to show some stronger

return for that readjustment of the balance sheet. That's all the government's doing. It's saying because the

value of the nation's resource, they don't belong to the mining companies, they belong to the country. And

because the value of it's gone up, the nation should get a better return.

HOWARD SATTLER: Do they also belong to people who are in superannuation funds trying to fund their

retirement who have invested in mining companies who might get less of a return now?

SIMON CREAN: Well who setup superannuation in the first place? Who set up compulsory

superannuation, Howard?

HOWARD SATTLER: Yeah, yeah, I know that.

SIMON CREAN: I mean, you wouldn't even be having this argument if it was a Liberal government.

HOWARD SATTLER: I know that but it's not a history lesson. We're not engaging in a history lesson, but

what I'm saying is the people, and there were people down at that rally today who were superannuants who

are worries that their investments in mining companies through their superannuation are going to go down.

SIMON CREAN: And that's why what we've got to do is to sort this tax out quickly so that that fear

campaign doesn't continue to filter through. If in fact, what we're doing, Howard, is increasing investment in

the resources of this country, then the national income of this country will go up and the returns to those

that develop those resources will also go up.

HOWARD SATTLER: Okay, but the Prime Minister said today you're going to set up some kind of

infrastructure fund, and he said $6 billion, of which West Australia's going to get $2 billion. Is that a fair

share for us when we create probably about two thirds of the we… mining wealth of the country?

SIMON CREAN: I tell you this though, Howard. One of the reasons we got elected last time is because the

previous government had not invested in the infrastructure that this nation needed to be able to take fuller

advantage of the huge growth in demand for resources in the Asian region. We had a infrastructure

deficiency.

Now not only have we committed to try to address that deficiency, physical infrastructure, investment in the

skills needs that this industry needs and you know they need them.

HOWARD SATTLER: 'course they do. I'm not arguing that.

SIMON CREAN: Well, this government through previous budgets has committed to do it. What it's saying

as a result of this new tax, an important proportion of it will go to further increase the investment in the

industry.

HOWARD SATTLER: Guaranteed?

SIMON CREAN: Guaranteed.

HOWARD SATTLER: 'Cause when money goes east it doesn't all come back west. You know that.

SIMON CREAN: Guaranteed. Well, you heard the Prime Minister today. That - you were down there.

But the other thing that this tax is going to do, Howard, is to enable us to reduce company taxes for all

business in Australia.

HOWARD SATTLER: By only two per cent.

SIMON CREAN: By only two per cent? Thirty per cent down to twenty-eight per cent. Some countries

would kill for that.

Now, we're being told all the time that businesses need to be more competitive, drop the tax rate. This is a

mechanism to do it. Investing in infrastructure, increasing the superannuation entitlement of those people

who you say benefits they're concerned about.

HOWARD SATTLER: No, they say.

SIMON CREAN: Well, and I can understand how with all of the confusion, all the misinformation, they

would be concerned, but wh…

HOWARD SATTLER: So, you're just fighting a fear campaign. Is that what you're saying?

SIMON CREAN: No, we're not - I think we've got to - we are fighting to some extent a fear campaign, but

we've also got to address the issue. We've got to get agreement about the future and the direction of this

tax going forward.

HOWARD SATTLER: You've got to consult.

SIMON CREAN: We are consulting.

HOWARD SATTLER: So, how in any way - in any way - can you guarantee that in any way - like we asked

the Prime Minister today, can you guarantee that nobody in the mining sector will lose their jobs as a result

of the resource rents, so-called super profits, tax. Can you guarantee we won't lose out in the tr… on the

trade front as far as our mining industries are concerned, with this tax?

SIMON CREAN: Howard, we won't lose out on the trade front through this tax. As I said, I've been in to

Japan, I've been in to China recently. What those countries want is expanded output in this sector. They're

not threatening to withdraw investment. They're confused like those people that you were talking about in

terms of superannuation, because there's a lot of conflicting information.

But when - what they're concerned about is the high price they have to pay, 'cause the steel sector is so

vital to the Chinese economy, the Japanese economy.

HOWARD SATTLER: But that's good for us, isn't it, if they have to pay higher prices?

SIMON CREAN: Well, it is, but it's not good for them, and the way you don't - you can't distort price. It's

market-driven. What you can do, is if you're increasing supply so that there's more of a match with the

demand, then that will see long-term stabilisation in prices. But you've got to encourage increased

investment. That's what this tax is designed to do.

HOWARD SATTLER: Can that equate to them having increased opportunities to take over our mining

companies? That's what some of the mining bosses are saying.

SIMON CREAN: Yeah, but you hear all that - I mean, this used to be the argument about Japanese

investment in Australia, Howard, and it's still far more significant than anything the Chinese…

HOWARD SATTLER: But the Chinese are showing more inclination to do that than the Japanese ever did,

surely?

SIMON CREAN: No, they did. You have a look at it. Have a look at the profile of Japanese investment in

our resource industry and compare the figures with China. It's true that over recent years China…

HOWARD SATTLER: That's what I'm pointing at.

SIMON CREAN: Well, that's recent years. But Japan, if you look at the stock of investment, goes back a

long time.

Now, the truth is, they're the consumers. Don't you think consumers are also entitled to have the

opportunity to be investors? Because if you don't think that then it's not a very enlightened economy.

HOWARD SATTLER: But not to take over our mining companies, surely? Not to take over.

SIMON CREAN: No-one's talking about taking over. It's sort of taking investments, it's taking equity stakes,

it's doing all sorts of things. There may be circumstances in which the company wants to be taken over. But

we're not saying come in and take over our resources.

We're saying make the investment because it's a win/win outcome. You're investing in securing your supply

for the future. What we're getting is increased foreign investment which has been a driving factor in the

economic development of this country for four decades. Let's not kid ourselves about that. We need the

foreign investment because we haven't got a big enough pool of domestic savings. We need to attract

foreign investment. Investment has been good for the resources sector. We've got to encourage more of it

if we're to expand supply, because that's where our wealth and our future lies.

HOWARD SATTLER: All right. Let's go to another caller. Should be the last caller today for you. Sally of

South Perth.

Hi, Sal.

CALLER SALLY: Hello, Sally. How are you going, Howard?

And Mr Crean, I would just like to point out that according to the Australian constitution the resources in WA

belong to the people in WA, same as the resources in Queensland belong to the people of Queensland.

Not to the people in New South Wales, or Victoria, or South Australia, or Tasmania for that matter. Am I

reading this constitution right or wrong here? Can you answer that?

SIMON CREAN: Well, I think that we've got to look at this as a nation as a whole, Sally. If you want to go to

the question of shares, the reverse argument is true about the Commonwealth-state relations and the

allocations through the loans council, where Victoria and New South Wales are always complaining that

they're paying more in terms of direct taxation and the other states are getting more.

Let's just try and approach this from a national perspective and make sure that the benefits are shared

equally by all Australians. The truth is that we are a nation. We're not just a collection of states.

HOWARD SATTLER: Yeah, but we're not a ca… we're not a state who wants to prop up Victoria and New

South Wales.

SIMON CREAN: Well, no-one's asking you to prop up New South Wales or Victoria. What we're saying

though is that the people of West Australia, just like the people of the nation, are entitled to a better share

for the resources that belong to the nation. They don't belong to the mining companies. The mining

companies extract them. They do it efficiently and they do it very well.

HOWARD SATTLER: And they employ a lot of people.

SIMON CREAN: And they employ a lot of people but what are they extracting? That which belongs to the

nation.

HOWARD SATTLER: All right. Simon, nice to catch up again.

SIMON CREAN: Good to talk to you too, Howard.

HOWARD SATTLER: Simon Crean, Trade Minister in the studio. Now here - I un… before you go too.

Tonight at Como is it? There's a community forum.

SIMON CREAN: Community cabinet, yep.

HOWARD SATTLER: What does that involve?

SIMON CREAN: That involves the whole of the cabinet. We're all over here for the meeting, and

community participation. All of the key groups in the community have been invited and they'll come along…

HOWARD SATTLER: So they can confront you face to face.

SIMON CREAN: They can confront us face to face they - person to person, handshake to handshake. We

have the opportunity for Q and A in the broad meeting.

HOWARD SATTLER: Okay.

SIMON CREAN: And then meetings for those who have expressed an interest in meeting us individually.

HOWARD SATTLER: Good on you. Thanks. Thanks for coming in.

SIMON CREAN: My pleasure, Howard.