Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

The Speaker has received a letter from the honourable member for Groom proposing that a definite matter of public importance be submitted to the House for discussion, namely:

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

I call upon those members who approve of the proposed discussion to rise in their places.

More than the number of members required by the standing orders having risen in their places—

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Infrastructure and Water) Share this | Link to this | Hansard source

This resource super tax will hurt all Australians. It will not just hurt those who work in the mining industry; it will not just hurt those who work in the industries that support the mining industry; it will not just hurt those people who rely on income from the mining industry through shares or superannuation. Its tentacles reach into every household in Australia. It will produce higher power bills. It will produce higher house prices because bricks and mortar and sand and gravel will all be affected by this tax. It will increase fertiliser prices for farmers who grow the food for this nation and earn export income. As observed by a journalist in one of this morning’s newspapers, ‘The RSPT actually stands for a really stupid political tax.’ And that is what this is: this is a stupid political tax grab by a government that has lost complete control of its budget, has lost complete control of its debt and has completely lost its vision for the future of this country. The mining industry has been delivered a sledgehammer blow by a government that only thinks in 24-hour spin media cycles and does not think of the impact that this tax is going to have on the future investment in Australian mining, the jobs that that creates and the impact of making Australia’s mining industry so uncompetitive that miners will simply base their new operations overseas.

I am not suggesting there are going to be widespread mine closures in Australia. There is going to be a continuation of those mines, but as most people who understand the mining industry know—and probably the only two people in the government who do are sitting opposite me: the minister for resources and the member for Brand—mines have finite lives. Mines close; other mines open. Miners move from one mine to the next, often only a few kilometres, sometimes hundreds of kilometres, sometimes interstate. The new mines that replace the old mines will, under this tax, be located in Canada, in Brazil, in Peru, in Chile, in Indonesia and in Africa—everywhere else has a lower tax on its mining than Australia as a result of this tax.

The resource industry in Australia has protected us and our economy through many ups and downs and it is Australia’s largest export earner. This year it is estimated it will earn $150 billion in export earnings. It is already paying above the norm in terms of taxes. It is paying somewhere between 37 and 43 per cent—about 40 per cent—in government taxes already. It represents eight per cent of the economy over the last decade and yet pays 18 per cent of the company tax. Yet we have a Prime Minister who has the audacity to say that these people are raping the profits out of Australia and taking them back to their homelands. Most of the companies that operate in Australia either have Australian shareholders or have in fact in the last five years invested more money here than they have taken away. This just highlights the fact that the Prime Minister knows nothing about this industry. He certainly does not understand that Australia was built on a philosophy that, if you invested money and took a risk, you did not ever get an assurance that you would get a return, but if you did then you were entitled to make a profit. This Prime Minister belittles people who make profits. He belittles people who are successful in their own right. He belittles people who are millionaires, and on one or two occasions billionaires, as a result of their own risks and their own efforts.

We have a Prime Minister who demonises foreign ownership, who pulls out the racist card against foreign companies and says that they are not welcome here. That is xenophobia. Foreign investment built this country—it made this country what it is today, along with the blood, sweat and toil of farmers, miners and people in the city going about their day-to-day work. Yet this government, this Prime Minister, has chosen to single out one industry and say, ‘You are already paying 40 per cent tax when the company tax rate is 30 per cent, but we are going to make you pay 57 per cent tax’. In some cases it will be 80 per cent of their profits because the parameters of this super tax are not the same as they are for the petroleum resource rent tax; they are not based on allowing companies to deduct all their costs, particularly in terms of how they deal with those costs. It is a super super tax—a tax that will simply drive investment overseas.

This issue is not just about the future of the mining industry; it is about the future of the jobs of the people who work in it. It is not just about the future of the miners, the men and women who go down these dark holes and drive heavy machinery in open cuts; it is about the men and women who work in the fabrication shops, in the engineering works, in the air-conditioned offices across this country, in Sydney, in Melbourne, in Perth and in Brisbane—the people whose livelihood is linked directly and quite unashamedly to the mining industry and the risks it takes. And it is about the people that they employ—the gardener who works in their gardens when they are at work or the cleaner who assists them in cleaning up the office after work. All these people will be affected by this super tax. It will flow through and affect every city and town in Australia, and particularly it will hurt the regional towns—country towns like Cloncurry, which had a $30 million project cancelled yesterday; Karratha, which in time could see the investment that is going on there at the moment suddenly shift to a new focus; and Ballarat and Parkes. These are towns that rely on significant income from their mining industries. One in eight Queenslanders is employed by the mining industry. We wonder about their future in regional Australia.

This is also about people who have already done their toil for this country and have invested their retirement moneys in stocks and shares or in superannuation funds that are now being decimated by the news of this super tax and the effect that it will potentially have on the country’s resource industry. We saw figures released this week that around 9.3 per cent of Australia’s superannuation is invested in resource industry stock. At the close of trading on Monday, 10 May, yesterday, Australians had lost around $13.4 billion in superannuation earnings and capital in superannuation funds as a result of the fall in stocks.

Abraham Lincoln, that fantastic American statesman and leader—the Prime Minister should look to him at times to see what a leader is—said that you cannot strengthen the weak by weakening the strong. Yet this government is happy to weaken the strong. It is happy to do anything that will prop up its excessive spending, its excessive debt and its inability to manage money. I want to quote from people who do not have a political interest in this debate. The Globe, a Canadian publication, has said that as a result of this tax:

Mining company shares, particularly those with operations in Australia, were roundly pummelled …

Another quote pertinent to this debate states:

Slowing down the development of Australia’s mining and energy resource industries would be a scandalous wasted opportunity to lock in future prosperity and achieve social and environmental goals such as supporting school students in disadvantaged communities, Australians with disabilities, those with mental illnesses and others who are too sick to work, and preserving Australia’s unique biological diversity.

Who said that? A member of the government—a minister, the member for Rankin, said that not very long ago. I wonder what he says today. I wonder whether he has had that thought purged from his mind. Let us go back to what this is doing to Australia. A Southern Cross Equities publication states:

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

The member for Rankin, Craig Emerson, agrees with that. But I bet he is not allowed to say it anymore. Going back overseas, the Wall Street Journal says:

It’s a new day Down Under when a government starts setting rates of return for private industry in a nominally capitalist economy.

That is government interference in the economy in a way which is sending shock waves through the industry.

Let us go to a Labor source. What does the Premier of Queensland think of this? She says:

You can’t expect international companies to make those investment decisions unless they’ve got absolute certainty about the costs of doing business.

I could not agree more. There is no certainty anymore—everything changes every day. Again, it is said that Anna Bligh ‘fears the Rudd government’s Resource Super Profits Tax will undermine her election pledge to create 100,000 new jobs’. She says:

… it will not only impact on jobs in Queensland, but jobs around the country.

Let us move to South Australia. This is a quote by Kevin Foley, the Deputy Premier and Treasurer:

… but there are clearly desired issues that need to be rectified to ensure that it—

the resource rent tax—

is not as impacting as it would appear to be on particularly some of the new mines coming on stream.

Kevin Foley can see the damage coming. I have here a transcript that is too long to read. It is about the Prime Minister, who tried to explain this tax on 6PR in Perth last week. I will seek to table that transcript because it is a public document. Clearly the Prime Minister does not understand that tax. He says it is the same as the petroleum resource rent tax. It is not. The red crosses on the document that I am holding up are the things that are not similar.

We have to do something about this tax. We on this side of the House are going to stop this tax, not for our political gain but because of what is in this document I am holding: this is Australia, second only to America at the moment; we are going to move to here, 58 per cent. What has our largest competitor, Canada, got in terms of company taxes and resource taxes? Twenty three per cent. It is any wonder that the Canadian minister could hardly wait to get on the radio to tell Australia what he believes: ‘If you don’t want them there, send them over here.’ Brad Trost says:

Well money goes where the biggest profits are and when you raise taxes profits tend to go down. So I’m sending out the message—Canada wants Australian business.

The final document I have here is by Moody’s, the people who make credit ratings around Australia. They are not a political organisation. They are not stockbrokers. They are an organisation which rates risk. They say:

If enacted, the so-called ‘Resources Super Profits Tax’ would have a negative credit impact on Australia’s resource sector …

This government has gone berserk with this tax. This government has lost complete control of the economic agenda. This government wants to take the money now. It wants to kill the golden goose, take the golden eggs and not worry about what happens in five years time when there is no golden goose, there are no more golden eggs and no more mines being opened. (Time expired)

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

Is leave granted for the document to be tabled?

Leave not granted.

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

Paul Neville (Hinkler, National Party) Share this | Link to this | Hansard source

Once again, we are presented with a big new tax. This tax purports to be a resources superprofits tax, with the emphasis, no doubt, on profits. By so doing, it sounds good, safe and acceptable to attack the big, rich mining companies, and for good measure we throw in the fact that many of these companies are no longer in majority Australian ownership—a touch of xenophobia, as the shadow minister just put it.

I wonder what the Prime Minister’s motivation might be for this tax. Maybe he wants to be seen as a tough guy. Maybe he wants to show the unions he can slap down the big miners. But I suspect, above all, he wants to create yet another distraction from his broken promises, his woeful performances on such matters as health, the BER, the pink batts, the CPRS, GroceryWatch, Fuelwatch and other debacles—it goes on and on.

But this particular move is so inept that its downside effects and its implementation are creating lives of their own. Let me explain how. As the economist Tim Hughes said in the opening paragraph of his article in the Courier Mail yesterday:

The Prime Minister’s resources super profits tax is, without a doubt, the worst tax decision ever made by an Australian government. And the day after announcing it he could not even explain how it worked.

I just pose a rhetorical question: if John Hewson’s fumble on the application of the GST to a cake—to a cake, mind you—became the flashpoint for the 1993 election, how much worse is this tax, striking at the heart of Australia’s currently most successful industry, as a flashpoint for the 2010 election? Worse still, it is an attack on our international reputation as a secure home for investment. It raises important questions of sovereign risk as well as capital investment leaving our shores.

One example is Queensland’s gas resources and the effect of this tax on the development of Gladstone, which I represented for 14 years. The port city of Gladstone was born of industry and its future is industry, but this government has condemned it to the scrap heap. In recent years, investors have poured millions of dollars into the city on the back of the LNG boom which is about to occur. Families have moved there for work and people have set up businesses on the back of the anticipated growth. Because of the uncertainty arising from the government’s actions, we see at least one company, Santos, putting its plans for Gladstone on hold. If it had escaped the Prime Minister’s notice, there are $50 billion worth of coal seam gas to LNG projects in Queensland alone that are now at risk, in varying degrees. I have been told that that is the equivalent of 18,000 jobs a year, and we need every single one of those jobs for our towns, our state and our country.

Further afield, we hear Xstrata is ceasing exploration activities in the great North West Queensland Mineral Province. What does that mean for Mount Isa, Cloncurry and Townsville? Already, the Western Australian miner Cape Lambert Resources has cancelled exploration projects in Australia in favour of Africa. And no doubt, as we are debating this issue in parliament today, more examples of mining companies going cold on this government are emerging. Ironically, just last week we had the ministers of the Bligh government tripping all over Queensland with their new plans for regionalisation. What a cruel irony—when the federal government has effectively put regional Australia, particularly Queensland, South Australia and Western Australia, on the chopping block.

Is this government deliberately setting out to kill regional communities and economies with this tax? I ask the question. One would have to seriously wonder about it. Even the premiers of the states cannot hide their disbelief and anger—and two of those premiers are Labor premiers. Honourable members will also be aware of pending coal developments throughout Central Queensland and the Surat Basin. Not only are expanding communities like Dalby, Chinchilla, Roma and Wandoan involved but new infrastructure such as railway lines is depending on these projects going ahead.

The trickle-down effect is even more insidious. Not only do we have miners and tradesmen working in the industry directly on site but we have another cohort of minors who fly in and fly out of Queensland’s provincial cities and towns. They support a vast array of shops and services not only on the coalfields but in expanding provincial cities like Bundaberg, Hervey Bay, Rockhampton and Mackay. The mining industry also depends on an expert supply chain of dragline scoops, dozers, heavy trucks, loaders and so on. Engineering firms service equipment. Technicians maintain generators. Small businesses benefit by providing fuel, transport, food and other everyday living items. Health services and education should not be forgotten.

This is a pervasive tax that strikes at the heart of resource based states and—I repeat—particularly Queensland and Western Australia. But it does not even stop there. In the same way that mining is not confined to iron ore, coal and bauxite, this tax affects other forms of mining, such as quarrying and fertiliser extraction. We cry out for better roads and highways, but this tax will vastly increase the costs of gravels and screenings necessary for those roads and highways. Cement for the construction industry will be affected by the tax on the mining of limestone. Here we might reflect again on Gladstone. Not only is it the home of a limestone mine but it has the largest cement works in Australia.

This insidious tax invades the commercial and home construction industries, because not only do we need copious quantities of cement and concrete blocks but we also need bricks, and that involves the mining of clay. Therefore, expect dearer building supplies. Fertiliser is crucial for productive farming and in many instances also for experts. Phosphates are also mined in this country, so there will be a downstream effect on the cost of agricultural and horticultural products.

Some might say, ‘Oh, well: this is the price of progress in and around the mining sector.’ But it does not stop there, either. Let us have a look at the effect on the average investor. It is said that BHP has 400,000 small investors, many of whom would be mums and dads, and even kids, who have extensive or modest holdings in the Big Australian. In less than a fortnight, $90 billion has been written off the value of mining shares and, as such, off the investments of these Australians.

Even more insidious still is the impact on the superannuation sector. The retirement savings of every self-funded retiree and worker in this nation have been struck down by this new tax on mining. At the end of last year, Australian superannuation funds held approximately $1.2 trillion in assets. Around 30 per cent of large Australian superannuation funds were invested in shares. That is the equivalent of $370 billion. Mining shares account for around 30 per cent of our stock market. From that you can extrapolate that about 10 per cent of the assets of superannuation funds are invested in mining shares. This tax will have a profound effect on part-pensioners and self-funded retirees. In electorates like mine, the communities of Hervey Bay, Bundaberg and Bargara will suffer. Why? Because they have one of the highest retirement profiles in Australia. And a lot of the retirees there are self-funded retirees. This tax move will impact severely on them. Since the government’s announcement of this new tax, more than $14 billion has been wiped off the value of the superannuation savings of Australians.

In summary, it is not just a tax—as it has been characterised and as, no doubt, the ALP will continue to present it to their union mates—on ugly mining companies. It is worse than that. It is a slap at national wealth and opportunity and the remarkable industry that has driven this country for so long. It will affect myriads of ordinary Australians, starting from those working in the mining companies—many of which are likely to move their investments to more welcoming environments overseas. It will affect miners and all those working in the downstream industries that flow from mining. It will also affect the regional communities, especially those in Queensland, Western Australia, South Australia and the Northern Territory. (Time expired)

Gary Gray (Brand, Australian Labor Party, Parliamentary Secretary for Western and Northern Australia) Share this | Link to this | Hansard source

The tax proposal to which we are referring today is the superprofit tax on resources companies. We are having this debate because the government has determined that it would be appropriate to discuss and propose an arrangement for an increased tax on our resources sector. Many years ago—30 years ago—I was a student at the Australian National University doing economics. I first heard of the idea of rent taxes—pure profit taxes—in the late 1970s and early 1980s when I was a student. The idea is simple: you tax the economic rent from a project or an entity and in doing so you do not compromise optimal economic decision making by that entity. It is very simple and it is very straightforward. Normal returns are preserved.

In the mid 1980s, the then Labor government proposed the petroleum resource rent tax. It came in with a long-term bond rate and a five per cent uplift factor on production and with a long-term bond rate plus 15 per cent uplift on exploration. It is a tax that has operated quietly for 25 years. It is wrong to think that its quiet and successful operation was not controversial. At the time of its introduction, we had had a move to global oil pricing in Australia—so-called world parity pricing. We had had the debate among states about their own excise regimes and royalty rates and about what we would do in the face of increased global energy prices. The inefficiencies in the oil taxation system in our country were significant.

At that time the resources minister sat down with his adviser—now a minister in this government, Craig Emerson—under the advice of Professor Ross Garnaut and discussed the proposal for a resource rent tax on the petroleum sector. It was not an easy discussion. The minister at that time has since told me of the reaction of the oil industry. It is true, as the shadow minister reflects, that BHP—nowadays BHP Petroleum but in those days BHP—understood the arithmetic that underpinned the idea of a rent tax, but not everyone did. He tells me of the oil entrepreneurs who would call him to their offices to receive their own corporate view of how damaging this new oil tax would be. He told me of how he as the Minister for Resources would refuse to go to their offices and would ask them to come to his. They came to his office and they received both a lesson in politics and a lesson in economics.

I do not think anyone these days, despite the 25 years of successful operation, seriously contends that the resource rent tax on the petroleum sector is not a good tax. But let me make you aware of this: no-one in the oil industry likes it; everyone in the oil and gas industry hates it. When I was an executive in Australia’s largest exploration and production company we would regularly face tirades from senior executives or board members who wished to get rid of that tax, who spent a lot of money doing research on how to get rid of that tax and who would argue that that tax must constrain the development of projects. But in a decade it was not possible to identify one project—not one project—that would have gone ahead if that tax had been removed.

Of course, the Minister for Resources and Energy has told us today of the investment decision by Woodside to go ahead with the Pluto project in a resource rent tax regime and the decision by Chevron and its partners to go ahead with the Gorgon project, a $40 billion plus investment in a resource rent tax regime. We know that the particular form of taxation that we are proposing here is not an exact replica of the resource rent tax. It is not. It contains a number of elements that are in many ways substantial improvements on the resource rent tax. It allows portability of expenses. It allows for incentives for projects into the future. But, most importantly, I was reminded just 24 hours ago of the review of taxation being conducted for those opposite—the opposition—by Henry Ergas, formerly, as I understand it, a department of finance officer. For 15 months or more the coalition has sat on its own tax review. We are told via media reports—one published in February of this year—that the Ergas report recommends a resource rent tax. We are told—and this is the quote: ‘There are significant benefits to the Resource Rent Tax approach because it tries to quarantine tax to economic rents.’ You would only tax above a normal rate of return.

What does that tell you? It tells you that the coalition’s own economic adviser and author of its own tax review has championed the idea of a resource rent tax. We also know that, of the 25 years of quiet operation of the resource rent tax, 12 were under opposition—coalition—governments. And we know that the tax was not dismantled, removed or taken away. We know that the government appreciated the integrity of that tax and we know that the government enjoyed the revenues from it. How do we know that? We simply look at the record.

I remind people again of the quote from Henry Ergas that there are significant benefits to the resource rent tax approach. What does that mean? The tax is structured so that it does not change any of the fundamental project economics behind an investment or an operation. We know that the Minerals Council of Australia supports the tax model, and we know that the Minerals Council of Australia has supported this tax proposal because it creates harmony of the taxation system between the states. We know that bauxite mining in Queensland, the Northern Territory and Western Australia face different taxation regimes. If you are a resource owner looking at tenements in any of those three states, you know that you face different taxation regimes and charges across the board. For iron ore in Queensland, the Northern Territory, Western Australia and South Australia, different royalty regimes operate. For coal in Queensland, New South Wales and Western Australia, again substantially different rates of taxation apply. So it is not surprising that the bosses of the mining industry associations in Queensland, in South Australia, in Western Australia and elsewhere have asked for certainty in the fiscal arrangements and not for political squabbling. They have asked for certainty in the way in which the taxation regime works.

In the course of the last seven or eight days since the announcement of these proposals we have also had substantial industry interaction with the government to negotiate, to understand, to get it right—to engage in dialogue to get the taxation system right. I sometimes wonder if members opposite are at all interested in getting the taxation system right. I have thought that for a long time. Sometimes they will find a good tax and just stay with it because it is a good idea, as they did with the resource rent tax in the petroleum sector. But sometimes they just see a good earner and they lock onto it. Sometimes they see a good idea for party fundraising and they get in behind it with both paws. I quote from a story in today’s Australian:

Senior Liberal Party sources said it would be helpful if mining companies changed their rules to allow political donations to bolster the Coalition’s campaign.

Here we go: we are supposed to be having a debate here about taxes. We are supposed to be having a debate around resource taxes. We are supposed to be having a debate around a resource super tax. But no, what we actually have here is an opportunity to fundraise. Let us not kid ourselves. The debate here is not about a resource tax; the debate here was appropriately pinged in the Australian this morning. The angry miners said they were unlikely to tip a bucket of money to the coalition’s war chest. Do you blame them? They said it would be unwise. Of course it is unwise. It is unwise because the miners fundamentally are most interested in getting a taxation system right. They have been wound up into fever pitch sometimes by their own supporters—fever pitch designed to create less serious consideration around the proposition for a tax. If they can, they will knock it out and not pay it. As I said, I worked for a company that worked very hard to try to get this tax ameliorated, changed or removed because companies—guess what?—just do not like paying tax. The other thing we learn from the newspaper today is that they just do not like making donations to the Liberal Party either. (Time expired)

Steve Irons (Swan, Liberal Party) Share this | Link to this | Hansard source

It is good to be able to follow the member for Groom and the member for Hinkler. But I fear for the member for Brand because he talks about fundraising. I have seen the fundraising letters that go out from the member for Brand. We have seen those go out asking for donations of up to $10,000 because they do not have to be declared. So do not let the member for Brand bring on the fundraising stuff. I fear for him because I know how many fly-in fly-out residents he has in the electorate of Brand. You have a lot, and they are hopping mad.

Make no mistake: the resources supertax is already impacting negatively on the lives and the futures of all Australians, and in particular Western Australians. It is real. We heard last week that Western Australian iron ore miner Cape Lambert Resources will pull out of exploration projects in WA and move to Africa. I fear there will be more to follow. What we should ask is: who is next? This government or this Prime Minister decided that any profit above six per cent is a superprofit. How can someone who has been in business—and I know the member for Brand has been in business—arbitrarily say that above six per cent is a superprofit? How can you he that?

Gary Gray (Brand, Australian Labor Party, Parliamentary Secretary for Western and Northern Australia) Share this | Link to this | Hansard source

Mr Gray interjecting

Steve Irons (Swan, Liberal Party) Share this | Link to this | Hansard source

Did he say six per cent? The member for Brand interjects. Does he say six per cent?

Gary Gray (Brand, Australian Labor Party, Parliamentary Secretary for Western and Northern Australia) Share this | Link to this | Hansard source

It is normal.

Steve Irons (Swan, Liberal Party) Share this | Link to this | Hansard source

Yes, normal! I say to every business in Australia: beware. If you earn more than six per cent, watch out in the future. This government cannot be trusted to stop at the mining industry to support their superspending program. Big and small businesses in WA have condemned the tax. Large mining companies have also expressed major concerns. It seems the only people not concerned are the government. In this House today the PM refused to rule out further industries being taxed by this government that considers profit above six per cent as super.

As a representative for the people of Swan I am urging the government not to ignore the thousands of people, many within my electorate, asking the government not to bring in this supertax. They are worried about their jobs. This will affect the residents of Swan regardless of whether they are connected to the resource industry. There will be job losses in Swan—and, I am sure, also in Brand—which the Rudd Labor government will be held responsible for. Seniors in particular over the last week have contacted my office about the damage of the Rudd Labor government announcement on their superannuation and about the pain they will feel. The residents of Swan expect real action from their government, real action on border protection, real action on reducing the debt and real action on insulation compensation for homes affected by airport noise—not just a new tax to cover up their superspending program. This is not a tax on superprofits; this is a supertax.

According to the statistics in the WA government Department of Mines and Petroleum website, close to 70,000 people are employed in the local mining sector, and the flow-on effect of many people’s future being in doubt will reverberate not only through the WA economy but through the national economy. Before the 2007 election Kevin Rudd promised WA a fairer share of the take and a $100 million infrastructure fund. To all WA people: we have not got them, and we now only get 68c in the dollar for every dollar we contribute in the GST system from our great state. The member for Batman also talked about a fairer system. This is why they want to introduce this tax: a fairer system. Where is the fairness in Western Australia only getting 68c in the GST system?

This is just a grab by the government to nationalise and to centralise funding out of the mining sector. The PM said WA would get more through this new infrastructure fund from this supertax. Well, Mr Rudd, we in WA do not believe you. You cannot be trusted. I have read through the recently completed Radar Group study commissioned by the Minerals Council of Australia, Institutional investor perception study: impact of the proposed resource super profits tax. All the institutional investors surveyed believe the government’s adoption of this tax was ill-conceived and will have a highly detrimental effect on the Australian economy. We are talking about an industry that over the last 10 years has paid $80 billion in royalties and company tax. The Prime Minister talks about $9 billion a year. Multiply that by 10 and that is $90 billion a year he wants to take out of an industry that has only paid $80 billion over the last decade. This is just a government that has lost control of everything it is involved with.

Even in Redcliffe there is something that you would know about. Here is a picture of a sign there that says: ‘Miners in. Rudd out.’ They are getting it there. They are getting it all about this Prime Minister. They know what it is all about. It is all about him.

Anthony Byrne (Holt, Australian Labor Party, Parliamentary Secretary to the Prime Minister) Share this | Link to this | Hansard source

How long did it take you to put up?

Steve Irons (Swan, Liberal Party) Share this | Link to this | Hansard source

If you want to go down to Redcliffe, you should ask the people in Redcliffe how long it took them to get it up. This industry was built on sheer hard work. (Time expired)

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the initiatives that the government has handed down as part of its tax package. It is a tax package that will strengthen the economy and a package that will make our tax system both simpler and fairer. I want to address some of the issues that were raised earlier in this debate, but I think to give this some context we have to remember that the two competing sides in this argument—the parties that come to this debate—have been engaged in this struggle before. There are the builders, those who are committed to securing and sharing the national wealth in the national interest, and there are those who are prepared to preserve sectional interests and to oppose changes that are in the national interest.

Let us have a look at the petroleum resource rent tax, which even those on the other side now seem to acknowledge is a fair tax that ensures Australians are able to capture a fair share of the mineral resources being exploited by companies. Let us go back to when that tax was introduced. No-one wants to talk about the fact that those on the other side, in the same way as they are now running around saying the whole world will fall in, opposed that tax. If I can quote a Liberal Party frontbencher at the time, Alexander Downer—someone, I know, a lot of people on that side of the House have a lot of respect for—he said:

The resource rent tax which will be introduced by this Government will only make matters considerably worse because it will impose a new burden upon those people who are prepared to put money up front and to go out and explore for oil. It will put a new burden on the risk takers in the oil industry, apparently because the Government, for reasons of its own, resents and despises these people.

Sounds familiar. The National Party leader at the time, Ian Sinclair, said:

With the proposed resource rent tax on 40 per cent, very few high risk exploration prospects will be capable of proceeding or are likely to proceed. Indeed, they are likely to be most unattractive.

That is what they said, back when the petroleum resource rent tax was being introduced. What have we seen since then? We no longer see the opposition from those on the other side. In fact, whilst in government they were prepared to take advantage of some of the benefits of having collected that resource rent tax over time. And we see that we have had projects such as the Pluto project, worth $12 billion, and the Gorgon project, the biggest single project in Australian history, worth $43 billion, proceed and progress under this set of tax arrangements. So, when they talk about a resource rent tax or the resource superprofits tax stifling investment, let’s have a look at the record of what actually occurred and was achieved under the petroleum resource rent tax.

One of the big fallacies that is brought forward by those on the other side is where they come in and say, ‘This big scary tax, this big supertax on everything.’ It is not a tax on everything. But ‘this big tax’, they say, has depleted the superannuation savings of poor pensioners, superannuants and retirees all around this country. It is interesting that they should say that, because those who actually know something about superannuation, the Industry Super Network, released a report yesterday dismissing the opposition’s claims. Their research indicates that for a member with a super balance of $50,000, which is the average super balance for members of an industry fund, last week’s volatility in mining shares on the ASX—which they all attribute to the suggestion that we are going to introduce a resource superprofits tax—would amount, for someone with an average balance, to a variation to the fund balance of $57. That is the impact: $57. Most observers would suggest that the impact we have seen on mining shares in the last week is not going to be an ongoing thing and is a temporary reaction to what has occurred.

Bruce Scott (Maranoa, National Party) Share this | Link to this | Hansard source

Order! The time allotted for this discussion has concluded.