Louise Pratt (WA, Australian Labor Party) Share this | Hansard source

I will begin my contribution to this debate by quoting head of Treasury Ken Henry, who during estimates gave senators opposite a lesson in high school economics. He said:

I learnt in high school in the study of economics that profits based taxes cannot affect prices.

So that immediately dismisses the premise of the motion before us. Secondly, he said:

I also learnt in high school if you shift the supply curve down into the right, which is what a cut in company tax rates would do, you get a reduction in prices; I remember that. But when you impose a tax on the pure profit, you do not actually shift the demand and supply curves—I remember learning that—so the price should not be affected.

So there you have it—basic economics 101. Firstly, the RSPT will not affect prices because it is a profits based tax. Furthermore, Australian consumers stand to benefit from downward pressure on the cost of living from a cut in the company tax rate. All companies are subject to company tax, and company tax will go down under our tax reform package. This will benefit companies big and small across Western Australia and across the nation. It will benefit consumers. Many mining companies already pay less company tax than many other industries in Australia, and that is because of generous deductions and concessions that our system offers them. So, when it comes to the mining industry, this debate is not really about a company tax.

The heart of this debate is about what charge, if any, this nation should levy on mining companies for the use of Australia’s non-renewable resources—resources that belong to the Australian people and not to mining companies. Our argument is this: we should charge a levy that reflects the level of profits mining companies make out of the use of those resources. That way when projects are highly profitable the Australian people will get their fair share of the value generated from their resources and when projects are less profitable the charge will be reduced or eliminated so that less profitable projects can still go ahead. This is a win-win situation for the Australian people. They get their fair share of value generated from their non-renewable resources when that is possible and when it is not they still get to benefit from the production and employment generated by less profitable projects.

The problem with the current royalties system is that it operates in the opposite manner. That is why it is an inefficient tax. It penalises less profitable projects by subjecting them to charges that they are not always able to bear, making some projects unviable. Worse still, when projects become more profitable, the charge levied for the use of Australia’s commodities does not keep pace with rising profits. So when profits rise rapidly, as they did during the last resources boom, the share of those profits going to the Australian people for the use of those resources goes down. In the last mining boom it went down from one-third of the profits being made to one-seventh of the profits being made. If one-third of the profits was a fair and reasonable charge prior to the last boom then why is it not fair and reasonable now? Why was it not fair and reasonable during the last boom? What possible justification could there be for mining companies to be charged less relative to profits just because higher prices are making those companies more profitable? Why should the share of profits going to the Australian people for the use of their resources go down simply because higher prices are driving mining companies’ profits up? Why?

This is not only unjust; it in fact defies logic and common sense. The RSPT will take the charge levied by the Australian people for the use of their resources back up to the same level in relation to profits as it was prior to the last boom. Just as this level of charge did not destroy the mining industry prior to the last boom, it will not destroy the industry now. The major challenge for Australia as it seeks to seize the opportunities presented by a rise in demand for commodities from Asia is not the RSPT. No, the major challenge for Australia as it seeks to seize these opportunities is capacity constraints on the mining industry. The major challenge is ensuring that we have human capital and infrastructure to support a growing resources sector. It is these capacity constraints that this tax will help address—in particular, through the $6 billion infrastructure fund this tax will generate. It is a fund that will help ensure that resource-rich states like Western Australia have the roads, rail and ports necessary to support our growing resources sector.

The RSPT is specifically designed to enhance investment, production and employment, because unlike royalties, which tax production regardless of profitability, the RSPT only taxes superprofits. It is by definition set at a level that enables companies to remain reasonably profitable. This is why the RSPT will in fact encourage, rather than discourage, investment, production and employment. Unlike royalties, the RSPT will fall most heavily on those companies and projects that can most afford to pay. That is why all those billionaires are screaming so loudly. It does not fall on those who cannot bear the burden. This applies to small quarries just as it does to other projects. To the extent that small quarries are not making superprofits they should not pay any extra tax. Twenty-two of this nation’s most reputable economists have concluded that there is no reason to expect a net contraction in mining as a result of the RSPT—their words, not mine. David Buckingham, the former head of the Minerals Council, has commended the very deliberate design of the RSPT to lighten the tax burden on less profitable projects, encouraging investment in the projects that might otherwise have stayed on the drawing board. I repeat: the RSPT will encourage investment in projects that might otherwise have stayed on the drawing board—again, Mr Buckingham’s words, not mine.

Investment in projects that would have stayed on the drawing board means more production and more employment. It also means an increased supply of these commodities, and increased supply generally means lower prices. This is about returning Australia’s share of our resources to where it was prior to the last boom. It is about ensuring that Australians get a fair share of the profits generated from the last boom and investing in Australia’s future the extra revenue generated. It is about investing it in resource-rich states like my own so that we can maximise growth in the mining industry. It is about investing it in superannuation, especially for women and the low paid. It is about giving more working Australians access to a secure retirement. It is about less tax, especially for small business. It is about boosting employment and reducing cost-of-living pressures throughout the economy. Just as during the last global recession we refused to sit idly by when decisive action was required, we are taking this action in Australia’s interests, despite the scare campaigns of those opposite. Again, we will take decisive action to protect Australia’s interests during the coming resources boom. Just as we did not bury our heads in the sand when danger loomed on the world stage in the form of a global recession, we will not squander the boom times like those opposite. We will act to seize the opportunities presented for and on behalf of all Australians.