Rowan Ramsey (Grey, Liberal Party) Share this | Link to this | Hansard source

Mr Deputy Speaker, I have a grievance. South Australia has for many years been the cinderella state when it comes to the mining industry. Much of the early infrastructure of the state was based on the super-rich copper mines of Burra and Moonta. Iron ore was first mined at Iron Knob during the last years of the 19th century, and steel making commenced in 1941 with the establishment of a blast furnace. The sixties saw the development of the Cooper Basin gas fields and, in the early eighties, the great experiment of Roxby Downs was established, destined to become one of the world’s great mines—at least, that was until the Rudd government announced a great big new tax on mining.

There have been a considerable number of smaller mines which have had regional impacts without powering the Australian economy. The reason South Australia, representing around one-eighth of the land area of the nation, has not enjoyed the same success as New South Wales, Western Australia and Queensland is largely to do with the geology. It is worth noting that, as the seat of Grey covers most of the land mass of the state, it stands to reason that most of the prospective growth is in my electorate.

Apart from the major copper and iron ore bodies I have just referred to, our mineral deposits are not sticking out of the ground waiting for someone to trip over them. In fact, most of South Australia is covered by a layer of sand and sediment hundreds of feet thick which, until the advent of magnetic surveys, made those deposits invisible. The first of the big finds of the modern era was Olympic Dam, now known as Roxby Downs. With its usual insightful vision, the ALP fought its establishment tooth and nail, and it was once described by the South Australian Premier, Mike Rann, as a mirage in the desert.

Major new mines have been established—Jacinth-Ambrosia by Iluka, Prominent Hill by OZ Minerals, the Challenger gold project and uranium mines at Beverley and Honeymoon—and it seems we have just metaphorically scratched the surface. For many reasons these ore bodies are hard to find, which means they also present high-risk opportunities to the miner. Remote desert locations with no facilities at all, far from adequate ports, poor transport options and high development risks are not for the faint hearted.

There are a string of prospective projects spread right across the electorate: coal to gas, copper, two new iron ore provinces, mineral sands and uranium, including the $20 billion plus expansion of Roxby Downs. We are on the cusp of great success, and now the Prime Minister and his Treasurer, Wayne Swan, have taken the low road to balancing their budget. Unable to control government spending, which has risen by 21 per cent in their three budgets, they have instead taken the low road and gone for a $9 billion a year tax on Australia’s most productive sector. Make no mistake: Kevin Rudd’s plan to slap a 40 per cent tax on mining profits threatens to derail the much anticipated expansion of the mining industry in South Australia and, of all South Australians, my constituents stand to lose the most.

Every successive South Australian electoral redistribution has seen the seat of Grey extend further to the south because the population relative to the rest of the state has been progressively declining. Efficiencies in our traditional agricultural base have fuelled a drift to the cities. The loss of the shipbuilding industry and big reductions in the workforce at the steelworks in Whyalla, the reduction at the railway workshops in Port Augusta and efficiencies at the lead smelter in Port Pirie have all added to the relative loss of population. In effect, if you have no jobs, you have no people. The last 10 years have seen a reversal of fortunes as the mining industry has breathed new life into these communities and, in the case of Roxby Downs, actually created a new town.

The mining industry is the industry offering hope to our Indigenous population. Mining companies have made significant investments in training, engaging and retaining an Indigenous workforce. Coober Pedy is anxiously awaiting announcements on the IMX Resources proposal nearby. The APY lands have encouraged exploration on some very prospective areas under their control, because they know that the only way their communities can make real advances is through their people getting jobs, and local jobs are the best of all.

Mr Rudd’s great big new tax is a threat to all of this promise. Surely the government realises that you cannot just strip away profits and expect that all the sums will still add up the same. Every impediment you put in the way of development goes on top of the impediments that went before and makes possible approval that much harder. This tax will push every project that much closer to the point where it is not worth the investment risk. Every new project will now be seen through the filter of a new tax. BHP’s chief, Marius Kloppers, has said that it will be very difficult to approve the $20 billion-plus Roxby expansion under this tax. Failure to do so will be an enormous blow to South Australia and, in particular, my electorate. Other projects, including large iron ore deposits on Eyre Peninsula, coal to gas proposals in the north, uranium prospects, rare earth elements, and copper on Yorke Peninsula will all be assessed with a new bottom line. I cannot say whether individual projects will be abandoned or not. Even the proponents would not know at this stage. But I do know that some will be, and some is too many.

Without this tax, South Australia should have been looking to increase its royalty regime. This tax will mean that, in the event that the Olympic Dam expansion goes ahead—and it must be said that that is far less likely now—then the state government will not be able to sit down with BHP and consider any changes, because from now on Canberra takes the lion’s share. The government proposes to take 40 per cent of company profits after they have already paid payroll taxes, wages, superannuation, WorkCover et cetera. The company will then have the opportunity to meet any interest on borrowings. What is left will then be subject to a 28 per cent company tax, resulting in a combined tax rate of 57 per cent. The country with the next highest effective tax rate in the world is the US, at 40 per cent. Canada has taxes at 23 per cent.

How on earth can the government believe that this will not damage the Australian economy? How do they believe that a competitive tax disadvantage of up to 34 per cent will not lead to a lessening of investment in Australia and an increase in investment in countries like Canada? How can they honestly believe that six per cent is an adequate return on risk capital? Why would anyone invest in a risky venture for the same interest they can get at the bank? Why is it that shareholders and millions of Australians, either directly or through their superannuation funds, are taxed on projects where they have taken all the risks, where they have made investment decisions based on the best available information at the time only to find that the government is prepared to change the rules midstream?

The coalition have a long history of opposing retrospective legislation, as indeed we did in the recent youth allowance debate. The principle is the same here. Already we have seen a string of cancellations and deferrals from the mining industry, including Oz Minerals at Prominent Hill, and Incitec Pivot have announced that they are suspending their drilling program in Queensland. OneSteel, the biggest employer in Whyalla and the second biggest steelmaker in Australia, has issued a highly significant statement. It reads:

Our USD 400+ million investment in Project Magnet to convert the Whyalla steelworks to magnetite iron ore and allow the commercialization of our hematite iron ore reserves was based on an assessment of risk and reward at the time, including the tax system in place in Australia. To apply such a substantial change to the tax rules retrospectively is unfair to OneSteel and its shareholders and seriously damages Australia’s attractiveness as an investment destination.

As presently proposed, the Resource Super Profits Tax will apply equally to resources sold and those consumed internally as feed to the Whyalla steelworks. This will require OneSteel to absorb a large new cost, placing the business at a significant disadvantage against its import competition.

The reason the steelworks is located at Whyalla is its close proximity to low cost iron ore, and this continues to represent a key driver of the cost competitiveness of those facilities. The Resource Super Profits Tax fundamentally changes the economics of the Whyalla steelworks and threatens the viability and, hence longevity, of our steel businesses.

The statement goes on to say that the six per cent threshold is simply not an attractive level of return for investors and will severely inhibit the company reinvesting in the industry.

The threat to the viability of OneSteel is a threat to the future of Whyalla and the 22,000 people who live there and rely on it either directly or indirectly for their employment. This tax grab is ill conceived, a grab for easy money to plug an enormous budget black hole caused by a government which has no self-control, has enormous cost overruns because it cannot manage projects and is incapable of telling the electorate the truth. The tax threatens the very industry that has carried Australia through the global financial crisis and has a slow-burn element. Investment will not dry up tomorrow. Projects started will finish. Old mines will continue to produce. But, in the longer term, Australians will wonder how we allowed our opportunities to pass us by and wonder why this industry has not reproduced itself as current investment runs down.