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

My question is to the Prime Minister. It relates to the terms of reference for consultation with the resource industry through the resource tax consultative panel, which has been instructed by the government that it will not be consulting on the key parameters determined by the Australian government. I refer the Prime Minister to comments of his resources minister, who last week said the government’s great big new tax on mining would cause the resource companies to review their investment plans given that these projects were ‘finely balanced’. Will the Prime Minister continue to rule out any modifications to the parameters of his great big new resource tax?

Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

I thank the Minister for Resources and Energy for his sterling work in recent days in working with a mining industry which is comprised of miners who want to get on with the business of their work. There are a number of them out there who have been making a range of public statements, some of which have been true and others not. As I said in response to the question asked before on the implementation of the government’s new proposed Resource Super Profits Tax, we are engaged in a process of consultation with the mining industry, as I said before, and as I have said before in Perth and elsewhere, on the detail of, the implementation of and the transition to these arrangements. That is what we intend to do. We are currently in the process, through the minister and through the Treasurer, of doing so with a large number of companies right across Australia.

I would also say to the member for Groom, who has just asked this question, that he should pay very close attention to the submission given to the Henry review by the head of the mining industry council himself when he recommended a resource rent tax for the future. It is interesting to see how things change once action is taken in order to bring about fundamental tax reform. I noticed in particular that the member for Groom has not referred to the measures contained in the government’s tax reform proposal to assist the exploration industry—$1.1 billion of additional assistance. I noticed also that the member for Groom did not draw attention to the fact that we are also assisting smaller to medium miners who may not be bringing in profits in their initial years of operation. I would draw the member for Groom’s attention to the modelling done independently through Econtech for the Treasury in producing this set of reforms. For the mining industry it is projected that this will result in an overall growth in the industry of some 6.5 per cent. Those opposite do not care about these individual elements of reform. Consistent with so many other things they do in this place, they are first and foremost about a fear campaign devoid of fact. We intend to get on with the business of reform, and reform which does three things: provides super savings for working Australians—all of them; secondly, provides tax breaks for corporate Australia, including small business; and, thirdly, provides support for investment in our long-term infrastructure needs. These are the three driving elements of the reform, broadening the base of the mining industry through a series of changes which we have reflected on carefully based on submissions from the mining industry as well. We intend to get on with it.

Tony Zappia (Makin, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Resources and Energy and Minister for Tourism. Will the minister advise the House on the implications of the new tax plan for the resources sector and the nation?

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

I thank the member for Makin for his question. Clearly from the Australian government’s point of view, and I might say from the point of view of the non-renewables sector of the Australian economy, the time has come for fundamental reform of the Australian taxation system when it comes to the petroleum and mining industry in Australia. That is not just the view of the Australian government; it is also the view of the Minerals Council of Australia in its submission to the Henry review. When it comes to tough decisions and fundamental reform which goes to where Australia goes in the 21st century, the government is prepared to make the hard decisions. The opposition is never prepared to meet us halfway. Having said that, the Australian government understands that this is a complex issue. For those reasons we are committed to not only putting in place a genuine process of consultation but also in engaging in open consultation to make sure we get the system right.

Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

What? Open consultation?

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

The Deputy Leader of the Opposition!

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

I remind the House that this proposal is no different from the controversy that surrounded the decision of the then government 25 years ago to introduce a national petroleum resource rent tax.

Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

Ms Julie Bishop interjecting

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

The Deputy Leader of the Opposition!

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

That tax is now regarded as one of the most stable systems in the world.

Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

Ms Julie Bishop interjecting

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

The Deputy Leader of the Opposition is warned!

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

Exploration and development in the oil and gas industries have flourished under that system. That is the very tax that brought to Australia the $12 billion Pluto petroleum investment in the 2007 and the $43 billion petroleum investment in Gorgon by the joint venture partners in 2009. Compare that with the inconsistencies that exist at a state and territory level when it comes to mining and resources in Australia. There are complex arrangements with no consistency across state and territory boundaries. If you have any doubts about that, just think about the coalmining industry in New South Wales and Queensland. The systems of coal royalties are different and complex. I also remind you, Mr Speaker, that both those state governments have increased coal royalties over the last 12 months. But that is no different from the state of Western Australia, where we have in place a coalition Premier and where we have yet another variable royalty system. We should also appreciate that in many ways the Western Australian Premier actually supports the endeavours of the Australian government to front up with some hard decisions when it comes to royalties. On 25 February of this year the Western Australian Premier said:

I have to say that a few people who work around the mining industry came up to me over summer and said, ‘By the way, Colin, the mining companies are getting away with murder; they’re not paying enough’.

It is for that very reason that in the forthcoming Western Australian budget that will be brought down next week the Western Australian government is going to rip out of two major iron ore companies an increase in iron ore royalties of the order of $300 million. We will put in place a new tax regime which creates certainty and a proper investment horizon for the resources sector in Australia. But, perhaps more importantly, we will be investing in things with part of the proceeds of that new tax regime that the previous government absolutely failed to invest in.

First, let us go to the issue of infrastructure. Over the previous decade, because of lack of action by the Howard government, we lived off the back of increases in resource commodity prices whilst we lost market share because the Howard government failed to invest in infrastructure. A key part of the Australian government’s proposal will be to establish for the first time ever, through a budget process, a resource infrastructure fund aimed at working with state and territory governments and, I might say, the private sector to actually bring forward resource infrastructure investment, which has held back the expansion of the industry in the past. I would also say that the resources sector, like the rest of the Australian business community, will benefit from a reduction in corporate taxation.

But then we go to the issue of exploration, something that I am sure the member for Groom is vitally interested in because he, like other resources ministers, sought on a number of occasions, during the 12 long years of the Howard government, to put in place resource exploration incentives to encourage brownfields and greenfields exploration in Australia. For the first time ever we will be putting in place a new resource exploration benefit that benefits small preprofit exploration companies.

Opposition Members:

Opposition members interjecting—

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

Also, for the information for the member for Flinders, that will be extended to the geothermal industry from 1 July next year to also facilitate investment in renewable energy in Australia. I accept that our responsibility is to actually get the balance right between promoting investment in the mining sector and ensuring a fair return to the Australian community for the development of their resources. It is a privilege for these mining companies to actually be able to develop our resources. All the Australian community expects is a fair return for the development of those resources. We have consulted and we will continue to consult to actually get the finer detail of this proposal right for the purposes of guaranteeing Australia’s economic future.

Warren Truss (Wide Bay, National Party, Leader of the Nationals) Share this | Link to this | Hansard source

My question is directed to the Prime Minister. I refer the Prime Minister to his rejection of concerns raised by the mining industry over the government’s proposed great big new mining tax. Does the Prime Minister also reject the concerns of the Queensland Premier, Anna Bligh, and the South Australian Treasurer, Kevin Foley, who are both now loudly and vigorously urging the Prime Minister to rethink his ill-conceived tax grab?

Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

On the question of tax reform for the mining industry, can I go to one core point as was elaborated on and advanced just then by the minister for resources. For the mining industry itself why are we doing this? To make sure that we move from a regime which is based on volume to one which is based on profit.

Opposition Members:

Opposition members interjecting—

Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

I know that the Leader of the Opposition has no interest in economics; he has said so. I know that the former Treasurer, Peter Costello, said he could never have him as a Treasurer because he has no interest in economics. But I will ask him to focus on one core concept, which is this: a tax based on volume in the resources sector penalises those firms which do not generate profits in their early years and throttles the long-term development of the industry. That is why we are moving to a profits based tax. That is why, for example, the work done a quarter of a century ago on the petroleum resource rent tax was right, because in the period since then we have seen the phenomenal growth of our offshore developments. That is the reason we have done this. It is good intrinsically for the long-term development of the industry because the tax regime changes the architecture to one which is profit based and not volume based. Secondly, as I said before in relation to companies, we will also of course be consulting the state governments on detail, on implementation and on transition and my advice from the Treasurer is that those consultations are proceeding well.

Shayne Neumann (Blair, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Deregulation. Why is a resource superprofits tax necessary to deliver balanced economic growth for Australia’s future?

Lindsay Tanner (Melbourne, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I thank the member for Blair for his question. Members of the House would be well aware that global prices for Australia’s commodities, Australia’s resources, have soared in recent years and that, after a dip during the global financial crisis, those prices have returned to record levels and are expected to be at very high levels for some years to come. As a result of that, the proportion of the returns that the Australian community, the owners of those resources, get from the sale of those resources has dropped significantly. It is critical to note that these resources are non-renewable; they can only be sold once. A tonne of coal or a tonne of iron ore, once it is extracted and sold, cannot be sold again. The mining boom has also been putting pressure on other sectors of the economy. It inevitably draws labour and capital from other sectors and increases prices for labour in particular, thereby generating higher costs for other sectors. It puts upward pressure on the Australian dollar, which in turn puts pressure on other sectors like tourism and manufacturing, and of course it increases the cost to governments, both state and federal, due to the provision costs of infrastructure and skills.

Last week the Australian government announced a new taxation regime with respect to resources, a resource superprofits tax. It is designed to impact on profits above a basic return on capital and is similar to the petroleum resource rent tax, which has been in place for 25 years. It is a more efficient regime than royalties which tax volume and which tax production. It is a more efficient regime of taxation because it taxes profits and therefore gets a genuine return to the Australian community, the owners of these resources, in return for the exploitation of these resources. Independent economic modelling by KPMG Econtech, which is up on their website, has indicated that in the long haul this change in taxation will improve Australia’s output, it will improve investment, it will improve jobs in the sector and it will increase our GDP by 0.7 per cent in the longer term. But there is a critical point here that the opposition need to really understand before they embark on yet another sabotage effort, yet another attempt to block reform by this government.

The question is: where are the proceeds from this tax reform going? The proceeds of this tax are not going to reduce the deficit and they are not going towards social spending. They are going towards wealth creation overwhelmingly through cuts in business taxes, cuts in tax on small business and cuts in tax on business generally through greater investment in superannuation as a result of cuts in tax and through greater investment in infrastructure for resource states. That is where the proceeds of the government’s Resource Super Profits Tax are headed.

The opposition—the party that says it is the party of small business—is proposing to stand in the way of a company tax cut for small business. It is proposing to stand right in the way of a big increase in the amount that small businesses can write off immediately for tax purposes from capital expenditures from $1,000, where it is at the moment, to $5,000. It is proposing to stand right in the way of major new investment in infrastructure in mining dominated states. It is proposing to stand right in the way of a big increase in Australia’s superannuation system which, in turn, feeds into investment in Australia’s economy.

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

The Minister for Finance and Deregulation will resume his seat. The member for Dunkley on a point of order.

Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Deregulation, Competition Policy and Sustainable Cities) Share this | Link to this | Hansard source

Mr Speaker, to assist the minister, the increase in employer funded superannuation is paid for by employers.

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

Order! What is the member for Dunkley’s point of order?

Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Deregulation, Competition Policy and Sustainable Cities) Share this | Link to this | Hansard source

I am just assisting the minister to be accurate in his statements.

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

The member for Dunkley will leave the chamber under standing order 94(a) for one hour.

The member for Dunkley then left the chamber.

Lindsay Tanner (Melbourne, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

Thank you, Mr Speaker. I can correct the observation made by the member for Dunkley. The increase in the superannuation guarantee from nine per cent to 12 per cent does, in fact, have a significant cost to the budget of lost revenue because of increased concessionality of superannuation contributions. And guess how that cost to the budget is going to be paid? From revenue from the Resource Super Profits Tax along with a cut in tax on small business, along with a cut in company tax generally and along with a greater investment in infrastructure for resource dominated states. That is where the money is going.

In conclusion, the Australian people deserve a better return from the resources that are exploited in their name and they deserve that return being dedicated to investment in wealth creation for the long-term sustainable growth of the Australian economy. That is precisely what this government is proposing to do, and that is precisely what the opposition is trying to stop.