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Friday, 16 March 2012
Page: 1993

Senator CAMERON (New South Wales) (09:30): I rise with great pleasure to support the Minerals Resource Rent Tax Bill 2011. I have been fortunate, or unfortunate, to have been involved in a number of inquiries into the Minerals Resource Rent Tax Bill, and I have had Senator Cormann chair some of those hearings that I have been involved in.

Senator Fifield: You've enjoyed it!

Senator CAMERON: I have always enjoyed it. I always enjoy the whole process of inquiries. I love them. But what we have to do here is get back to some reality. What is this about? It is simply about saying that our mineral resources in this country, on some estimations, will be gone in 80 years time. All the reasonably accessible iron ore will be gone in 80 years time, and we are in the middle of a boom, so we need to make sure that we get a fair share for all Australians as a result of this boom.

What are we trying to do? We are trying to deal with some of the proposals that were undertaken by the Henry review. The Henry review outlined the argument for introducing a resource rent tax. The Henry review argued that Australia is underpricing its resources. Just think about it. They will be gone in 80 years time, but we are underpricing them. Dr Henry went on to say that the current taxation arrangements 'fail to collect a suffi­cient return for the community because they are unresponsive to changes in profits'. A resource rent tax is based on the concept of an economic rent. An economic rent is the excess of the return to the enterprise—in this case the mining company—above the amount that is required to sustain the current use of the resource. The Henry review observed:

In most other sectors of the economy, the existence of economic rents would attract new firms, increasing supply and decreasing prices and reducing the value of the rent. However, economic rents can persist in the resource sector because of the finite supply of non-renewable resources. These rents are referred to as resource rent.

There is a massive policy case for the MRRT. We have at the moment an abundance of natural resources, which are assets that belong to all Australians, including Australians not yet born. When selling these assets that are not renewable, we have to treat the sale as a balance sheet transaction—that is, selling an asset rather than merely a source of income that can go on forever to finance recurrent spending. If we as a community undercharge for the right to exploit these resources, the wealth of current and future generations is eroded.

There is a strong policy case for governments to take a very keen interest in obtaining the best price they can for assets they sell on behalf of the Australian community. This is something the Howard government failed to do. For 11½ years they failed to do it. They relied on royalties at the state level, and the royalties levied by the states have not kept pace with the increase in asset value of the resources on which the royalties are levied. Royalties tax volume, not profit. They therefore tax on the same basis a highly profitable mine and a marginal mine that, in the early years of its operation, may not receive optimum marginal returns despite high volumes of mine output. Volume based royalties can exclude new entrants to the industry that do not have the cash flows early in the life of the enterprise to make volume based royalty payments, and volume based royalties are economically inefficient. Even the Minerals Council have conceded that point. Moving from taxing mobile capital towards less mobile tax bases such as mineral resources is entirely consistent with sound economic theory and recent work of the OECD and IMF on the application of economic principles to tax policy.

I have listened to some on the other side in their contributions, and they say this is some socialist plot; it is going to bring down the mining industry. But, in reality, what the IMF—the International Monetary Fund—is saying is: 'This is what you should do.' In fact, the IMF say we should make it wider. So the arguments that this is some socialist plot designed to unfairly attack the mining industry have absolutely no credibility. But, when it comes to credibility and the coalition, they are strangers anyway.

So what are the benefits that we seek to achieve by making sure we do something that the coalition just refused to do? As part of the mining resource rent tax package, the government will introduce legislation aimed at boosting retirement savings for working people. What could be more important than that? These measures include a phased increase to the superannuation guarantee charge from nine per cent to 12 per cent, the abolition of the age limit associated with the superannuation guarantee contributions and the low-income superannuation contribution to help increase the superannuation balance of low-income earners. It is okay for us to sit here and look at superannuation, especially those parliamentarians who have been here for some time and have the benefits of one of the most generous superannuation schemes in the country, but for an ordinary worker retiring at the age of 65 with a few tens of thousands of dollars in superannuation it is a very different option. Those workers do not have the luxury of sitting back and saying, 'Well, you shouldn't increase the superannuation guarantee charge.' It is absolutely essential to the future security of Australian workers that this superannuation proposal is passed, and fundamental to that is making sure that the mining industry pays its fair share.

Australia's retirement income policy faces long-term challenges. The period many Australians will spend in retirement is getting progressively longer as life expectancy increases. The ratio of working-age people to people of retirement age is estimated to decline from five to one in 2010 to 2.7 to one by 2050. And there is a clear gender gap when it comes to the adequacy of retirement savings. Latest APRA data show that women retire with an average super balance of $112,000 while for men the average is $198,000—and that is to see them through probably 15 or maybe 20 or more years after retirement. It is not a lot of money. That is why it is so important that we actually deliver this reform package that the coalition is opposing.

Again, this is not some socialist plot. I will quote from John Quiggin's submission to the Senate Economics Committee inquiry into the Minerals Resource Rent Tax Bill. John Quiggin is an Australian Research Council Federation Fellow. He is from the School of Economics and the School of Political Science and International Studies at the University of Queensland—a highly respected economist. He says:

The case for a Minerals Resource Rent Tax in Australia has three main elements

(i) Mineral resources belong to the people of Australia, and we are entitled to an adequate return on this non-renewable asset.

Senator Williams interjecting

Senator CAMERON: Senator Williams, you inject yourself into this debate, but you should have just waited a few seconds and you would have heard what the professor says, not the National Party. He said current state royalty regimes have failed to deliver such a return. His submission goes on to say:

(ii) Taxes on rents (that is, returns to the exploitation of fixed assets) are more efficient and less distorting of economic activity than other taxes.

And it is not only Professor Quiggin who sees this; it is also the IMF, the OECD and the Minerals Council of Australia. The only people who refuse to see this—purely for base political reasons—are the coalition, because they want to reject everything. They want to say no to everything. They want to stop Australians getting a decent retirement, because they are hidebound to the multibillionaires in the mining industry.

The third point Professor Quiggin raises is:

(iii) A tax on the mineral sector, with revenue used to finance a reduction in the general rate of company tax, will be economically beneficial in Australia's current circumstances.

Here we are with a massive case of Dutch disease, the dollar through the roof and industry struggling in areas across the country because of the effect of the mining industry. Here is one lever that can give some relief to general industry in this country—and what do the coalition say? They say, 'No, you can't have it, because we must make sure that we look after the big end of town in the shape of Gina Rinehart, Twiggy Forrest and Clive Palmer.' That is the reality of where we are.

I said earlier that the IMF said we should expand the mining tax. On 8 October 2011 it was reported in the newspaper:

The International Monetary Fund says Australia's economy is 'enviable' but that it should expand its mining tax.

In its annual report the IMF said there were few weaknesses in the Australian economy.

Australia "was one of the few advanced economies to avoid a recession in recent years, reflecting its strong position at the onset of the crisis and a supportive macro policy response," the IMF said.

Again, is this the destruction of the mining industry? Of course it isn't. To see why there has been such a push back by the mining industry you do not have to go further than to have a look at comments by Perseus Mining's Managing Director Mark Calderwood. On 15 March it was reported in the Sydney Morning Herald:

Canberra created a ''disease'' when the government launched a new tax on mining profits, and that disease had spread around the world, according to a prominent goldmining executive.

Perseus Mining managing director Mark Calderwood's comments follow Indonesia's recent rule change on mine ownership and his own company's battles with rising taxes in Ghana.

So there you have it. Ghana understands that it has to get a fair share for its resources. Indonesia understands that it has to get a fair share for its resources. And what do the mining companies say? They call it a disease. Poor Indonesia and poor Ghana want to look after their own people, their economy and their society. And how do the mining executives describe their attempts to get a fair share out of their mineral resources? They call it a disease—and that is being pushed by the opposition in relation to its views on this MRRT.

Mr Calderwood goes on to say that other nations 'see that's where a government is getting away with it'—and he is talking about Australia—and 'so it's hard to resist it'. The article goes on:

Ghana is reliant on funding from the World Bank and International Monetary Fund, and Mr Calderwood said he could only assume those organisations were sympathetic to bigger taxes on miners.

Well, why wouldn't they be? These countries are supported by the IMF and the World Bank. They have an opportunity to get some economic growth. And what do the mining companies say? They say, 'No, you can't get that.' And that is the position supported by the coalition. It is not just Indonesia that is raising its mining tax. Namibia is raising its taxes, Ghana is raising its taxes and Zambia is being pushed back by the mining companies and is trying to get a fair go.

It gives me some angst to hear some of the arguments that are being put up on this. Mr David Flanagan, the Managing Director of Atlas Iron, appeared before the Senate inquiry on Wednesday, 22 February and basically—I will paraphrase—he said, 'Atlas Iron is a small fairly company struggling to survive, and, if you put in this minerals resource rent tax, then we are going to be in all sorts of trouble. We are not going to survive. You are going to make it so difficult for us.' He went on to say:

We started this company in December 2004. I was the only employee.

He was the only employee, but they were a $9 million company—not a bad start: one employee and a company worth $9 million! He said:

Now we employ a total of about 500 people. We have a $3 billion company. We have 29,000 shareholders, roughly 28,000 are Australian. Basically about 24,000 or 25,000 are what you would call mums and dads. Our business started in the Pilbara.

But the reality is that this company is not a mum and dad company; it is a $3 billion multinational. They came to the Senate inquiry and said, 'Here are all the problems we have. We're going to have real problems', so I asked the question of Mr Flanagan: 'Did you raise any of these issues at your AGM in 2011? Have you told the Stock Exchange that you are in so much trouble with these issues?' Mr Flanagan went round and round the mulberry bush. He tried to avoid the question. He was as evasive as you could possibly be. But he had to concede that, no, they had not told the shareholders at the recent AGM that there were any problems with the minerals resource rent tax. In fact, the minerals resource rent tax did not even get a mention at the Atlas Iron 2011 AGM; that is how much a threat it was to this company. They come out, go public and argue that they are a small mum and dad company. Their 50 biggest shareholders are some of the 50 biggest corporations around the world. They come out and say, 'We've got all these problems' and it is absolute propaganda. It is absolute nonsense. It is about trying to seek a rent from the Australian public.

This was not done just with the MRRT. I will take you now to what was argued in another inquiry I was involved in with the Head of Resource Development and Operational Excellence for Anglo American Metallurgical Coal, Nick Barlow. He said:

we do not support the federal government's proposed carbon pricing mechanism in its current form. The proposed carbon pricing mechanism will severely impact Anglo American. The value of our four planned new mines would be significantly reduced, putting at risk $4 billion of investment, more than 3,200 jobs and $5.7 billion of ongoing royalty payments to state governments.

You hear all this repeated on the other side of the chamber. This was on Thursday, 1 September. Again, I asked, 'Have you told the London or South African stock exchanges that you have got all these problems in Australia?' They said, 'We don't know.' I asked, 'Can you advise us?' and they said they would take it on notice. They came back and said, 'No, we have not advised institutional investors there is a problem in Australia. We have not advised the Stock Exchange there is a problem in Australia', but they come into a Senate economics committee and they financially support a campaign against the tax on the basis that this will destroy their business. It is an absolute fraud! On 1 September 2011 they were saying these things and then, on 6 December 2011, the headline on Anglo American's website was 'Anglo American approves 5 Mtpa Grosvenor metallurgical coal project in Queensland', a $1.7 billion investment.

It is so much nonsense. There are so many lies being told about this minerals resource rent tax and the carbon price. The minerals industry in this country is booming and the Australian public deserves a fair share. Stop looking after your political backers and start putting the national interest before your political interests. Look after Australia. (Time expired)