Nick Xenophon (SA, Independent) Share this | Hansard source

Senator Farrell, for whom I have great regard, has interrupted with a completely irrelevant interjection. Donald Horne called us the Lucky Country but he said so with a great sense of irony. He said we were the Lucky Country but we deserved better leadership. He said our leadership was not up to the task of governing the country—and that was back in the 1960s. I wonder whether that description should also apply now.

I think it is important that we should harness that luck from the minerals boom, but we should not kill the goose that lays the golden egg. I firmly believe that the mining boom ought to bring tremendous benefits to all Australians, but it is important that we do not squander those benefits. It is also important that this bill be implemented appropriately. If this bill has a number of unintended consequences, particularly for smaller and emerging miners as some have suggested, we ought to adjust or amend the bill as a matter of urgency.

The mining sector is generating huge amounts of wealth, as the Senate Economics Legislation Committee sets out in its comprehensive report. Profits in the mining sector have jumped 262 per cent over the past decade, and there is scope for the mining sector to pay more tax. But the design of that tax needs to be right. Senator Urquhart, in her comprehensive contribution, set out what a rent tax is. In common parlance it is basically a tax on super profits well above the average ordinary return on capital. That is what the Henry tax review initially raised. The Henry tax review is an important document which, sadly, the government has largely ignored.

I do not agree with assertions that this tax will drive mining companies away from Australia to other resource-rich countries. There is a clear worldwide trend of countries moving towards and increasing resource rent taxes. For example, Brazil, one of Australia's major iron ore competitors, has proposed a 25 per cent special participation tax. However, I am concerned that the government needs to get the balance right. I do not think it has done so in the design of this tax. But I also believe in the phrase 'the perfect should not be the enemy of the good'. This legislation is far from perfect, but I would not want us to throw away the potential benefits to Australians of mining companies paying a fairer share of tax.

It is also important to look at the effect on the budget bottom line. Senator Cormann touched on this in his contribution, and I think it needs to be reflected on. He asked whether this government has been responsible in the way it has harnessed the mining boom to date and dealt with the budget to date. Peter Hartcher, a senior writer for the Sydney Morning Herald, wrote about the mining boom in a column just a few weeks ago. I think it is worth reflecting on what Mr Hartcher said. He is a well-regarded and balanced commentator. He was critical of the opposition's policies and planning and of the Leader of the Opposition. Mr Hartcher wrote:

… that's not to absolve the government, either. Its budget policy is clearer than the opposition's, and so it should be—it's the one running the country. But its budget performance is feeble. Yes, Australia's projected federal government deficit of $37 billion this fiscal year is tiny by international standards. Yes, Julia Gillard and Wayne Swan promise to have the budget out of deficit and back into surplus next fiscal year. On the current plan, it'll only just be a surplus—$1.5 billion for 2012-13—but a surplus none the less.

How can this be feeble? Consider our circumstances. First, the Labor government inherited surpluses and zero net debt, thanks to Peter Costello.

Second, look at the commodity windfall. The Reserve Bank runs an index of commodity prices. The Howard-Costello government produced 10 budget surpluses when the index was between about 40 and 50. Since Labor has been in power, the index has been between about 80 and 150. It now stands at about 140. In other words, this is a time of extraordinary bounty for a commodity exporter.

If Peter Costello could produce a surplus when the commodity price index was at 40, why is it so hard for Wayne Swan to produce one when it's at 140?

Peter Hartcher is a responsible commentator who has done the analysis. I think we should be concerned that we do not squander the benefits of the mining boom and that the proceeds are spent wisely.

I am also concerned about whether there has been adequate transparency in the design of the MRRT. Its underlying revenue assumptions seem to be best known by the three big miners and the government. It would be preferable for the government to release more information so that these assumptions can be tested. It would be preferable that there be greater transparency in the process. It is vital that we see just how much revenue will be generated so that we can make the best of it, especially if it turns out to be much less than the Treasury modelling of $10.6 billion over the first three years of its operation.

Another matter is the way that the tax was designed. We know that smaller and emerging miners are concerned that they will be disadvantaged and there will not be competitive neutrality in the mining sector. That concerns me. I do not want us to kill the goose that lays the golden egg. I think it is important that the effect on small miners is monitored and those small miners who could turn into big players in the future are not stymied and do not go elsewhere.

It is also important that we have a debate in this country about a sovereign wealth fund. It is too easy to blow the mining boom on spendthrift policies. We need to put money away for the future. The mining boom will not last for ever. The resources can only be dug up and sold once. But by putting this revenue in a sovereign wealth fund, we can ensure the benefits of the mining boom last for generations to come. As Senator Sinodinos said in his maiden speech:

Such a fund could also kick-start a genuine venture capital market … so that more Australian inventions and innovations can be commercialised here.

The member for Wentworth, the Hon. Malcolm Turnbull, has acknowledged:

Many countries, particularly those dependent upon single finite resource commodities, already have such funds—globally they are estimated to hold up to $4 trillion in assets.

This is the time for us to have a debate on a sovereign wealth fund. Given that our mineral resources are finite, why would we not want to preserve some of the wealth for our future rather than taking an approach which I believe is not fiscally responsible for generations to come?

It is also worth considering how revenue from the MRRT can be used to support small businesses. I believe there ought to be a bias towards small businesses. I agree, to a degree, with my colleagues in the Australian Greens that there ought to be a greater emphasis on giving more assistance to small businesses. This tax is supposed to facilitate small business tax cuts, but the sting in the tail is that it will only apply to businesses of $2 million a year in turnover. Some would say that is too narrow, too small a definition, and for fledgling businesses $5 million would be more reasonable. We know that small businesses are the driving force of job creation in this country. They are so significant in creating literally millions of jobs in this country. I think we ought to ensure that it does not apply just to incorporated bodies. It also should apply to sole traders, partnerships, family farms and a whole range of other small businesses, 70 per cent of which will not benefit from these tax cuts—and I think that is important.

The Henry review recommended that the company tax should be cut to 25 per cent. This bill will facilitate a package of measures much more modest than that. What concerns me is the huge number of small businesses run as trusts, sole traders or partnerships which would miss out on any benefits from the tax cuts. A whopping two-thirds of small businesses are not incorporated and thus will not benefit from the cuts. We need to give small businesses a break, but not just a select group of small businesses. It needs to apply to small businesses whether incorporated or not. The small business corporate tax cut was summed up perfectly by the executive director of Independent Contractors Australia, Ken Phillips, who described it to a news outlet as 'political fluffery'. So I am worried that we will not be restructuring our tax system in a way that gives maximum benefit to those that need it most.

I am concerned also about the way the tax was negotiated with the big mining companies, and I note that Treasurer Swan was quite critical recently of three mining magnates. I have never met Gina Rinehart or Clive Palmer, though I have met with Andrew Forrest. It is important to note that those three mining magnates were not responsible for derailing the government's earlier tax, its Resource Super Profits Tax, in the sense that it was not Gina Rinehart, Clive Palmer or Andrew Forrest but BHP Billiton, Rio Tinto and Xstrata that derailed the RSPT—which I think is now acknowledged to have been a very flawed tax in the way it was structured. I note that Mitch Hooke, from the Minerals Council, a formidable lobbyist and advocate for his industry, supports this package of bills—I think it is not with any great enthusiasm, but it is better than the alternative. That is a fair summary, I think, of Mr Hooke's position.

I am concerned about the fact that the states could play a role here—they could increase their royalties and that could distort this tax. If this bill is passed, we face a situation where, if states increase royalties, mining companies could reduce their mining tax bills. State governments in Western Australia, New South Wales, South Australia and Tasmania have either increased their royalties or announced plans to increase royalties. This will have an impact on expected MRRT revenue, as I understand it. We can all imagine the fight that will ensue if revenue from the MRRT is less than expected because of states increasing royalties.

Mining magnate Clive Palmer has announced, I think as recently as last night on 7.30and we all know the program we are talking about—that he will challenge the constitutionality of the MRRT on the basis of it being a tax on states.