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Tuesday, 15 June 2010
Page: 3233

Senator BRANDIS (3:02 PM) —I move:

That the Senate take note of the answers given by the Minister for Climate Change, Energy Efficiency and Water (Senator Wong) to questions without notice asked by the Leader of the Opposition in the Senate (Senator Abetz) and Senators Cash and Williams today relating to the proposed new tax on resources.

When the Australian people elected Kevin Rudd as Prime Minister 2½ years ago, they were promised an economic conservative and after 2½ years they have woken up to the fact that they have an economic vandal, an economic wrecker, a man whom Mr Forrest, one of Australia’s leading miners, described only last week as an economic moron. There must be very few people left in this country who have not worked out by now that Mr Rudd is less than he seemed to be when he was elected Prime Minister. He is a Prime Minister who stands for nothing, leading a government which is incapable of doing anything. And that is seen nowhere more so than in the public policy catastrophe which is the mining supertax.

Do not take it from me. Mary Kissel, one of the region’s most respected journalists, wrote in the Wall Street Journal Asia last month:

This economic thinking—

referring to the mining tax—

runs counter to everything that made Australia rich over three decades—namely: the embrace of competition and capitalism, which rewards high risk and high returns.

She went on to wonder at the idiocy of making Australia one of the most burdensome places to mine in the world. She said:

The increased tax burden would reduce profitability, discourage future investment and restrict companies’ ability to return cash to shareholders through dividends.

There is so much to be said against the mining supertax, but let us start with one proposition: the concept that a rate of return on capital at anything above the Commonwealth bond rate of six per cent is a superprofit. Mr Deputy President you know, and anybody listening to this broadcast today knows, that if you want the most conservative investment available you put your money in the bank or buy a Commonwealth bond and get the Commonwealth bond rate. It is the most conservative investment you can have and, as a result, it generates the lowest rate of return on capital because there is no element of risk.

To regard the bond rate as the benchmark for a superproft and then apply that to the mining industry, which depends upon long-term decisions in a highly risky sector of the economy, is the quintessence of economic idiocy. In fact, the average rate of return of Australia’s thousand largest companies over the last five years has been more than double the bond rate. The average rate of return over the last five years for Australia’s thousand largest companies has been 13.3 per cent. But do you know what the average rate of return for the companies listed on the Australian stock exchange in the mining sector has been over the last five years? It has been 6.6 per cent.

So you have an industry characterised by very high risks and investment decisions requiring very long-term commitment of vast amounts of capital in a highly competitive, highly mobile global industry which yields an average rate of return less than half the average rate of return of Australia’s major companies. And the Rudd government, in a fit of economic genius, decided that any return companies received above the most conservative investment available—that is, an investment in Commonwealth bonds—should be deemed a superproft, and the rate of tax paid by those companies should be increased effectively from 42 per cent to 57 per cent! What economic idiocy is this? No wonder then that the mining sector of the Australian stock market has collapsed, communities are at risk and superannuation funds are threatened by this idiotic decision of the Rudd government.