Martin Ferguson (Batman, Australian Labor Party, Minister for Resources and Energy) Share this | Hansard source

Firstly, I welcome the member for Groom back to the portfolio. I must say he was very disappointed at being moved out of the portfolio after backing the wrong horse in the leadership challenge of last December. Seriously, I appreciate the opportunity to address what are very serious issues before the chair. I note that the letter from the member for Groom which led to this matter of public importance debate goes to, namely:

The effect of the resources super tax on the future jobs and economic security of Australia.

For that reason, let me go firstly to a page of the government document which was released last Sunday week and is entitled Tax policy statement: Stronger. Fairer. Simpler. A tax plan for the future. I take the member for Groom directly to page 13. I will quote from it, because this is important as it goes to the heart of the very issue raised by the member for Groom. It says:

Independent modelling by KPMG Econtech estimates that cutting the company tax rate to 28 per cent and introducing the RSPT—

the Resources Super Profits Tax—

combined with the removal of the impact of royalties will expand mining output by 6.6 per cent in the long run (considered by KPMG Econtech to be 5 to 10 years).

It then goes on to say:

All other industries are expected to expand by 0.3 per cent in the long run.

On the same page, the report says:

The combined effect of introducing the RSPT—

the Resources Super Profits Tax—

which effectively removes royalties and cutting the company tax rate by 2 percentage points, is a long run improvement to GDP of 0.7 per cent.

That goes to the crux of this debate. I also appreciate that it is going to be a long, tough tax debate because reform in Australia has never come easy to the Australian community or to this parliament. I have been through a number of very tough debates—some of which are still part of the proposal before the House today—be they on tax, superannuation, infrastructure or a variety of issues in a variety of forms throughout my political and industrial careers.

For those reasons I also remind the House that the Minerals Council of Australia has actually argued itself:

There is a strong argument to reform the basis of determining royalty payments to a profit based criteria from a revenue one.

I could not agree more with the Minerals Council of Australia. But I also appreciate that the devil is in the detail, and that is where we are really at at the moment. The Commonwealth government has announced its intentions with respect to its headline commitment, which is what it believes is a fair return to the Australian community for the opportunity by companies to actually develop our natural resources and, in doing so, gain a fair return for shareholders who invest in those companies. For those reasons we have established a proper public process to enable the individual companies who employ people in Australia to model the government proposal and to open their books to enable us to assess some of the implementation difficulties announced by the Treasurer only last Sunday week. The resources tax consultation panel is led by David Parker of Treasury. I am also aware that since we announced it a number of companies have been—not once but on a number of occasions—to Treasury and to those involved in that consultation process to go through the detail of the government’s proposal. I also note, for the interest of the House, that some companies who have criticised the tax plan have done so before they have actually modelled it themselves, which they have admitted in private discussions with me, and before they have even registered for the consultation process. So I simply say to those companies that you cannot negotiate through the media, that tax is not easy and that they should take the time and do the modelling and sit down with the tax consultation committee for the purposes of informing both themselves and us about any complications arising from this proposal. I say that because in every reform proposal there is actually room for negotiations around the detail. I also say that for those reasons the panel has been told in no uncertain terms that its responsibility is to run the ruler over the new proposal project by project to assess, through a proper consultation process, how you actually get the finer detail right.

I also want to make it very clear that, from the government’s point of view, it is time for tax reform in the non-renewable sector of the Australian resources industry. Yes, the resources sector is part of our future and a vital part of our economy, but resources are also owned by the whole of the Australian community. The responsibility of government is to attract investment and also to make sure that the Australian community gets a fair return for the development of its resources. That is what this debate is about. It is not a debate confined to the Commonwealth government; it is also a debate that is ongoing before state and territory governments on a regular basis.

Just think about what is going on at a state level at this very moment. Last week we saw the Northern Territory Treasurer in the Northern Territory budget bring down an increase in royalties of two per cent because that government considered that the people of the Northern Territory were not getting a fair return on the development of their resources. We also appreciate—and it is public knowledge—that there is going to be a change by the Western Australian government in the iron ore royalty regime for two major companies as of budget day in Western Australia. That has been suggested as being an outcome of the order of $300 million from two companies just through one hit as a result of the Western Australian budget, which will be brought down in the very near future and imposed on two major companies.

Having spent a fair amount of time in Western Australia over recent weeks I can assure you that there are a number of other royalty proposals in the pipeline, which were known to individual companies and sections of the Western Australian mining industry. By way of interest I note that the Premier gave an undertaking only a matter of a week to 10 days ago that, on this occasion, he would not be acting on the gold royalty for this budget but made no undertakings beyond the forthcoming Western Australian budget.

That takes us to why we actually have to front up to reform. I accept that there is a lot of fear in the Australian community about the process of tax reform. That same fear and scaremongering was very much part of the initiatives of the Hawke and Keating governments when they brought in the petroleum resource rent tax 25 years ago. At that time we went through a process to actually get the detail right. That petroleum resource rent tax has proven to be one of the most stable tax regimes in the world. If you have any doubts about that, as I said in question time today, just think about recent investment decisions. In 2007 there was the Pluto Woodside project of $12 billion, and then the biggest ever single investment in Australia’s history by the Gorgon joint venture partners in 2009 of $43 billion.

I remind you that under that system Esso and BHP have extended the life of the Bass Strait for decades. That is because we actually made sensible changes. I also say that the introduction of that tax regime was—as the Prime Minister said today in question time, ‘What we do in this sector is different to other sectors of the Australian economy’—meant for the petroleum industry through a reduction in compliance costs, the removal of inconsistencies and the establishment of a consistent, simple and effective tax regime. Compare that to what I have already touched on—the inconsistencies and differences that currently exist at the state and territory level.

I dealt with some of these issues in question time today. Why should there be different royalty regimes between New South Wales and Queensland on the issue of coalmining? There is no good reason. Why should there be different royalty regimes amongst the states with respect to the issue of iron ore mining, which extends across a number of state and territory boundaries? The time has come for the Australian government to actually do something about rationalising the nature of the tax system relating to the non-renewable resources sector in the Australian community and, in doing so, to put in place a consistent outcome which not only gives the Australian community a fair return on the development of its resources but also creates an opportunity for the government to plough financial resources back into resolving some of the pressures that the mineral sector is creating in the broader Australian community at this very point in time.

As far as I am concerned, we will get through this difficult dispute around the appropriate tax take in the development of the resources sector in the Australian community. On the way through we are also setting up our future. It is not just about a short-term change in the taxation regime; it is also about creating the opportunity for the long-term development of the industry associated with ongoing private sector investment in a key part of the Australian economy.

That takes me to some of the Australian government initiatives. I start by reminding the member for Groom of his desire, on a number of occasions as the previous minister, to put in place an incentive regime to encourage exploration in Australia. We might have a disagreement about the nature of the exploration incentive, but what we have in place, despite the failure of the previous government on three occasions to create such an incentive, is what I consider to be a major breakthrough for the smaller companies who face a competitive disadvantage in terms of exploration in Australia. I say that because, with respect to those smaller companies, the losses they generate from exploration often cannot be used to offset other taxable income. We actually had a debate about the appropriate form to develop exploration incentive for that sector of the Australian community. Our intention is simply to rebate with significant benefits the issue of exploration investment for small preprofit exploration companies.

The proposal we have on the table with effect from 1 July of next year will also apply to the geothermal sector of the renewable energy industry in Australia. They need some assistance because, to my own way of thinking, that is where we will make one of the breakthroughs in renewable energy. That is akin to a baseload coal fired power station in Australia—rival energy—which is so important to the future of Australia. We also not only put in place an exploration incentive but extended it to the geothermal industry as part of our energy security debate in the future. The proposal, to my way of thinking, is simpler and more effective and will promote investment, more so, I believe, than a flowthrough share scheme. The fact is that small exploration companies do not receive a tax benefit from their deductible exploration expenses until they have become profitable. This is of considerable assistance to the small end of town.

That also takes me to why we have to do this. I remind the House that the number of exploration meters drilled in 2009 fell 25 per cent, to just over seven million meters. Brownfield drilling in 2009, the year of the global financial crisis, represented 67 per cent—which is a real problem for Australia—of all exploration drilling, up from 61 per cent in 2008. That is why I hope, as a result of this incentive, we will not be putting in any rules as to how the incentive will be applied. I hope and encourage some of those exploration companies to trend away from brownfield exploration to invest in greenfield exploration because that exploration has the capacity to establish the opportunities for the big projects in 20 and 30 years time. A similar exploration, years ago, led to the discoveries of such important resources as Olympic Dam, the new Prominent Hill and the Mount Isa opportunities that Australia is benefiting from now.

I also want to go to the issue of infrastructure. For a long time we have underestimated the need for investment in infrastructure, in the resources sector, at Commonwealth level. The states have not been up to the task. In some ways, some of the difficulties we now confront in infrastructure represent the negligence by both state and territory governments and the Commonwealth government of investment in resource sector infrastructure. We are about making sure—through a $5.6 billion package over the next decade—that we have the capacity, federally, to work with state and territory governments and the resources sector to fund the roads, railways, ports and utilities so necessary to unlock Australia’s resource wealth. If you have any doubts about that you should go to the Pilbara. They have major infrastructure issues, and difficulties for the local people in that the cost of a house up there is $1.2 million because of a failure to put more land on the market for the purpose of residential subdivisions.

In conclusion, there are a variety of other benefits to small business, including facilitating investment in superannuation in Australia. This is a complex debate. The government is committed to getting it right through proper consultation. It is not an easy debate—in the mind of the opposition it clearly is an easy political target which is going to achieve huge political donations out of a particular sector. I commend the consultation process to the—(Time expired)

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