George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

I move:

That the Senate take note of the answer given by the Minister for Climate Change, Energy Efficiency and Water (Senator Wong) to questions without notice asked by Senator Abetz, Cash and Williams.

When the Australian people elected Kevin Rudd as Prime Minister 2½ years ago, they were promised an economic conservative and after 2½ years they have woken up to the fact that they have an economic vandal, an economic wrecker, a man whom Mr Forrest, one of Australia’s leading miners, described only last week as an economic moron. There must be very few people left in this country who have not worked out by now that Mr Rudd is less than he seemed to be when he was elected Prime Minister. He is a Prime Minister who stands for nothing, leading a government which is incapable of doing anything. And that is seen nowhere more so than in the public policy catastrophe which is the mining supertax.

Do not take it from me. Mary Kissel, one of the region’s most respected journalists, wrote in the Wall Street Journal Asia last month:

This economic thinking—

referring to the mining tax—

runs counter to everything that made Australia rich over three decades—namely: the embrace of competition and capitalism, which rewards high risk and high returns.

She went on to wonder at the idiocy of making Australia one of the most burdensome places to mine in the world. She said:

The increased tax burden would reduce profitability, discourage future investment and restrict companies’ ability to return cash to shareholders through dividends.

There is so much to be said against the mining supertax, but let us start with one proposition: the concept that a rate of return on capital at anything above the Commonwealth bond rate of six per cent is a superprofit. Mr Deputy President you know, and anybody listening to this broadcast today knows, that if you want the most conservative investment available you put your money in the bank or buy a Commonwealth bond and get the Commonwealth bond rate. It is the most conservative investment you can have and, as a result, it generates the lowest rate of return on capital because there is no element of risk.

To regard the bond rate as the benchmark for a superproft and then apply that to the mining industry, which depends upon long-term decisions in a highly risky sector of the economy, is the quintessence of economic idiocy. In fact, the average rate of return of Australia’s thousand largest companies over the last five years has been more than double the bond rate. The average rate of return over the last five years for Australia’s thousand largest companies has been 13.3 per cent. But do you know what the average rate of return for the companies listed on the Australian stock exchange in the mining sector has been over the last five years? It has been 6.6 per cent.

So you have an industry characterised by very high risks and investment decisions requiring very long-term commitment of vast amounts of capital in a highly competitive, highly mobile global industry which yields an average rate of return less than half the average rate of return of Australia’s major companies. And the Rudd government, in a fit of economic genius, decided that any return companies received above the most conservative investment available—that is, an investment in Commonwealth bonds—should be deemed a superproft, and the rate of tax paid by those companies should be increased effectively from 42 per cent to 57 per cent! What economic idiocy is this? No wonder then that the mining sector of the Australian stock market has collapsed, communities are at risk and superannuation funds are threatened by this idiotic decision of the Rudd government.

Don Farrell (SA, Australian Labor Party) Share this | Link to this | Hansard source

It is very hard to believe that Senator Brandis is serious about this issue. What Senator Brandis fails to look at is the benefits for all Australians that are going to flow from this superprofits tax. The government are all about creating a fairer Australia. We intend to create a fairer Australia by introducing this new supertax regime on superprofits that are made as a result of the resources boom.

George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

How is anything above the Commonwealth bond rate a superprofit?

Don Farrell (SA, Australian Labor Party) Share this | Link to this | Hansard source

If you are happy to listen to me, Senator Brandis, I am happy to explain the benefits.

George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

Senator Brandis interjecting—

Don Farrell (SA, Australian Labor Party) Share this | Link to this | Hansard source

Just listen. I sat very quietly, Senator Brandis, while you got stuck into this tax. I would appreciate the same courtesy from you while I explain to you how all Australians, including those people who have superannuation funds, will benefit.

I can remember a time when the only people in Australia who were the beneficiaries of superannuation were men—predominantly in managerial positions—who worked a lifetime for their particular employer. One of the great achievements of the Hawke-Keating government, as you will recall, Mr Deputy President, was the introduction of compulsory industry based superannuation. We started that program. We started it at three per cent—in fact Australian workers had to give up a wage rise in return for getting that three per cent—and over time built it up to nine per cent. I can recall when John Howard promised to continue to lift that figure. He broke that promise as he did so many other promises that he made. That nine per cent was to benefit all Australians so they could have a decent income in retirement.

How is the current Labor government—another reforming Labor government of the ilk of the Hawke-Keating government—going to extend and continue the reforms that were made by the previous Labor government? We are going to do it by trying to share fairly for all Australians the benefit we get from our resources industry. Rather than holding the rate at nine per cent, which to be perfectly frank is not sufficient to get a fair return in your retirement years after a lifetime of employment, we are proposing to lift that amount from nine per cent—the figure that it was left at when Paul Keating was defeated as Prime Minister—to 12 per cent. We are not going to do it overnight; we are going to do it gradually in the way that would have happened had Paul Keating not been defeated in 1996.

Through our reforms in the late eighties and early nineties we introduced compulsory superannuation. We started the process of expanding superannuation so that all working Australians would benefit. Now we are going to complete the job. We are going to complete the job by lifting that rate another 33 per cent: from nine per cent to 12 per cent. Of course, that is not all we are going to do with this new tax. It is not only working families that are going to benefit from this new tax but companies.

Eric Abetz (Tasmania, Liberal Party, Shadow Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

Nonsense!

Don Farrell (SA, Australian Labor Party) Share this | Link to this | Hansard source

No. Companies will benefit, Senator Abetz. Again, please give me the courtesy of listening to me. We are going to reduce company tax, which the Howard government left at 30 per cent, to 29 per cent. We are going to do that from financial year 2013-14. And we will not stop there. We are going to reduce it further to 28 per cent in financial year 2014-15. So it is not just working families that will benefit from this new tax. (Time expired)

Alan Eggleston (WA, Liberal Party) Share this | Link to this | Hansard source

Last week, the Western Australian people showed their anger towards the Rudd government’s proposed resource super profits tax at a huge demonstration in Langley Park across from the Hyatt hotel, where Kevin Rudd was speaking at the Perth Press Club.

Alan Ferguson (SA, Deputy-President) Share this | Link to this | Hansard source

Order! Refer to the Prime Minister by his proper title.

Alan Eggleston (WA, Liberal Party) Share this | Link to this | Hansard source

Prime Minister Kevin Rudd, if that is needed.

Mathias Cormann (WA, Liberal Party, Shadow Minister for Employment Participation, Apprenticeships and Training) Share this | Link to this | Hansard source

Or Mr Rudd!

Alan Eggleston (WA, Liberal Party) Share this | Link to this | Hansard source

Or Mr Rudd. Prime Minister Mr Kevin Rudd. He will never be Sir Kevin. Resentment towards this flawed tax is no doubt more palpable in Western Australia than anywhere else in the country because we in the west have a greater understanding of the link between a healthy mining sector and a healthy economy for the wider population. Although Senator Farrell, after what he has just said, may not agree with that, I think he would find that a healthy mining sector means healthier superannuation and bigger benefits for the average man in the street.

The Labor government maintains the line that they are looking to negotiate with industry to obtain a mutually beneficial outcome. However, after listening to Labor ministers referring to those in the mining sector as arrogant liars, it leaves me wondering what exactly consultation and cooperation mean to this Labor government. It is much more likely, it seems to me, that the time for negotiation has passed and Australians are left with no other option than to flatly reject this tax proposal to protect the economic health of our nation.

Since being announced on 2 May, the Rudd government’s proposed resource super profits tax has faced considerable criticism, but it has not come just from the resources sector. In fact, condemnation of the RSPT has come from many different interest groups in our country. Mum and dad investors who have had their superannuation accounts decimated, international investors who now see Australia’s sovereign risk as higher than that of Indonesia—as someone said quite recently at an Indonesian Australian Business Council breakfast which I attended—small and medium businesses who rely on the mining industry, not to mention workers from all over Australia who are dependent on the resource industry both directly and indirectly for continued employment are condemning this tax.

Some of the wider effects of the new tax include: a loss of jobs in the resource industry as well as occupations reliant on the mining sector; decreased value of superannuation; higher electricity prices, which will have a flow-on effect of increasing the price of supermarket items; and higher material prices, which will similarly be passed on in the form of higher costs of construction.

Unfortunately, already as a result of the proposed tax we have witnessed mines restricting investment. For example, Xstrata immediately suspended a $568 million investment in coal and copper mines in Queensland. BHP is reviewing the expansion of the massive $20 billion Olympic Dam mine in South Australia. International agreement between financiers that the Australian resources sector has become a much less attractive place in which to invest is now acknowledged around the world. This tax will destroy the Australian economy. The only way to stop this tax is to change the government, and that is what I think the Australian people will be doing when the next election occurs.

Carol Brown (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

The Rudd Labor government has announced the implementation of the resource super profits tax, the RSPT, to ensure that we get a fair share from our non-renewable national resources. During the mining boom as mining profits have increased we have seen the share of profits returned to the Australian people decrease. Before the last mining boom, Australians received $1 in every $3 of mining profits through royalties and charges. However, now that return has shrunk to $1 in every $7. In fact, profits were over $80 billion higher in 2008-09 than in 1999-2000 but governments only collected an additional $9 billion in revenue. We need to deliver a fair share of these resource profits for the Australian people, because a fair share will mean higher retirement savings, more roads, rail and ports and less company tax, especially for small business.

Between the mining industry and those opposite we have seen plenty of extraordinary claims during this intensive scare campaign. Whilst there has been plenty of mud-slinging from those opposite on behalf of their mining friends, the fact remains—which has been highlighted by a number of ministers, including the Treasurer and the Prime Minister—that these minerals belong to Australia and Australians. They are owned by Australians and we need to make sure that Australians get a fairer share of resource profits. These are non-renewable resources and we need to ensure that Australia capitalises on the next resources boom. The government is currently consulting with the mining industry on the RSPT and will continue to do so. The Rudd Labor government is committed to investing the RSPT in infrastructure, in superannuation and in reducing company tax.

Unlike those opposite, we do not want to squander the benefits from a resources boom; we want to invest for the future for all Australians. This is in stark contrast to the opposition, who wasted the previous resources boom on handouts and playing short-term populist politics. We will ensure that we take advantage of the revenue generated from the resource super profits tax to help generate more superannuation savings for working families, lower tax for all companies, especially small businesses, and invest in our future infrastructure needs, particularly for mining states.

We will not make the same mistakes as those opposite, who for over a decade rode high on the mining boom but failed to get value for resources owned by the Australian people. While they were busy riding on this boom time they failed to invest in vital infrastructure and productivity needed to help drive the Australian economy forward into the future. As part of our tax plan for the future, the extra revenue gained from the resource tax will help to deliver a resource state infrastructure fund which will make infrastructure spending a part of Commonwealth and state budgets. The fund will be an investment of $6 billion over the next decade, particularly for mining states to build the infrastructure they need for the future. The Prime Minister has highlighted that the recently announced $400 million of funds will allow projects that address infrastructure needs to proceed immediately rather than having to wait for the revenue generated from the RSPT to flow through. The infrastructure funds generated from the RSPT will be directed towards supporting infrastructure and the communities in mining areas. This will mean that vital infrastructure projects in rail, roads and ports will go where they are needed most.

As part of our tax reform measures, the tax plan for the future will help all sectors of the economy grow together so that everyone can share in the prosperity of our strong economy. By reducing company tax, we will create new jobs and grow the Australian economy. It will ultimately be of benefit to all Australians. But we are not just implementing the RSPT as part of our tax plan for the future; we are also committing to gradually increasing the superannuation guarantee to 12 per cent. As well, around 3.5 million lower paid Australians will receive a concession on their superannuation guarantee for the first time. We will deliver a cut in company tax, reducing the rate to 28 per cent, to help Australian businesses remain competitive. Small businesses will reap the benefits as well. (Time expired)

Helen Kroger (Victoria, Liberal Party) Share this | Link to this | Hansard source

It is really concerning to note that despite the growing resistance and despair amongst the Australian public—and even amongst those backbenchers who sit behind Senator Wong—she has yet again failed to address any of the numerous concerns in relation to the resource super profits tax. Wouldn’t you have just loved to have been a fly on the wall in this morning’s caucus meeting to hear those backbenchers telling them what is actually happening on the ground and to open their eyes to what is happening?

Senator Wong today mentioned that the RSPT would strengthen the Australian economy, increase productivity and increase mining output. Senator Farrell suggested that it was a fairer tax that would benefit working families. What planet do these people live on and come from? Only a few hours ago, Wesfarmers joined the mining industry’s cause of opposition to the proposed RSPT, saying it would raise sovereign risk and could threaten dividends. The chairman, Bob Every, said that the consultation process with miners should be restarted and the tax completely revamped.

This government are not listening to anyone. To put it in Mr Every’s words:

Any threat to earnings is clearly a threat to the level of dividend we can pay … our shareholders.

Only last month, BHP Billiton made a similar warning that dividend payments could be hit by the proposed tax. Hello? Is anybody home? Is anybody listening? I think we on this side of the chamber know the answer to that, and the answer is clearly no. Notwithstanding that, the government clearly appreciate that there must be a problem and have invested in a $38½ million advertising blitz to address what they have a termed ‘a campaign of disinformation’ about this tax. A campaign of disinformation: how Orwellian can we get?

I suggest to Senator Wong and the kitchen cabinet that they perhaps listen to their backbenchers, go back to their electorate offices, pick up the phone and listen to what their constituents actually have to say. Only two weeks ago I visited some self-funded retirees in Blackburn, which is hardly what one would call a salubrious suburb. It is certainly no millionaires’ row. Those retirees had just sought and got their recent superannuation statements. They found that in only the last three weeks—and this is a modest superannuation fund—their funds had dropped $44,000 in value. Senator Farrell referred to this being beneficial to working families. Here is a couple who have both worked all their lives and were looking forward to retirement. They do not have any options to redress the drop in value of their superannuation funds. They do not have any options to do that because they are now in retirement and have no option to go back into the workforce. So they cannot address the drop in value. Instead, they can only watch the continued decline in the superannuation value that their statements clearly show.

This new tax is a blight on all working families, and to suggest that it is anything otherwise is total denial by this government. It is a knee-jerk measure that will affect many people and many trades all over Australia. We have seen in the electorate of Deakin, where we have a brickworks, that it is affecting their supply chain and it is ultimately affecting those who are purchasing those bricks. So it does affect the extraction industries; it does affect the quarries. And this government fails to recognise the extraordinary detrimental effect it will have. Anyone who does not believe that it will have a negative impact on any of these industries, with significant flow-on effects, has got their head in the sand, and I would suggest that is what this government has.

Question agreed to.