Melissa Parke (Fremantle, Australian Labor Party) Share this | Link to this | Hansard source

Mr Speaker, my question is to the Minister for Resources and Energy and Minister for Tourism. How will the decision by the Western Australian government to increase royalties on iron ore impact upon the mining industry and the government's Minerals Resource Rent Tax?

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

I thank the member for Fremantle for her question. She understands the importance of the mining industry in Western Australia and perhaps more importantly cooperative Commonwealth-state relations. Last week, for the second time since it was elected, the Barnett government has substantially increased iron ore royalties without any consultation with industry. This represents a major challenge to the future growth of the mining industry in Western Australia. It also represents a major challenge to the whole Western Australian community.

Ms Julie Bishop interjecting—

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

Order! 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

There are a number of key issues that go to those concerns. Firstly, the truth of the matter is that by its decision the Western Australia government may have created an outcome that means it has kicked an own goal. The outcome of the increase in royalties has sent a very strong message to the Commonwealth Grants Commission that the WA economy has a huge capacity to actually increase its revenue. In essence, we could end up with a situation by which the Western Australian government could very likely lose more in GST revenue than it gains in additional royalty payments. Despite that, we remain committed to the independent review of Commonwealth Grants Commission arrangements, which we have already announced in cooperation with the Western Australian government.

I turn now to the issue of the Western Australian mining industry. We remain committed to our undertaking to the mining industry to credit royalties. In that context, the challenge for the Western Australian mining industry is that the second increase in royalties is paid by mining companies in Western Australia, which are paid in both good times and bad times. For the small end of the mining industry in Western Australia, I remind the House that very few of them, under the MRRT, will actually pay a dividend to the Commonwealth because we are only taxing super-profits. For those companies, therefore, there is nothing to be credited in terms of the operation of the MRRT. They will bear the full impact of the increase in mining royalties, the second increase put in place by the Western Australian government since it was elected.

I turn now to the issue of infrastructure spending. The Commonwealth government stands by its commitment to increase infrastructure spending in Western Australia, especially the Gateway project, which goes to a potential huge improvement in productivity because of the problems around the Western Australia airport not only for the mining industry but for the whole of the Western Australian economy, including the all-important tourism industry. The only potential reduction in infrastructure spending will arise from a potential decision by the WA government not to spend its increase in royalties on infrastructure spending in Western Australia—because, in essence, you cannot reduce the Commonwealth take, which was going to be spent on infrastructure, and then expect the same revenue stream to be spent on Western Australian infrastructure in the future. I encourage the Western Australian government to do what the Commonwealth was going to do out of the MRRT—substantially increase infrastructure spending in Western Australia.

I also want to raise the all-important question of the underlying assumptions of the budget. If you actually examine the Western Australian budget proposition in terms of the impact on the Commonwealth budget it is just plain wrong because the assumptions are entirely different. We will be able to maintain our surplus and meet all our commitments for small business infrastructure spending—and, I might say, our capacity to increase superannuation—as a result of the introduction of the MRRT and the PRRT. What amazes me is the deafening silence from the opposition about the revenue grab by the Western Australia government.; it borders on hypocrisy. During the course of last year they walked up and down St Georges Terrace, led by the member for Curtin, taking every donation they could get and promising to oppose increases in mining tax. (Time expired)