Claire Moore (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

The President has received a letter from Senator Parry proposing that a definite matter of public importance be submitted to the Senate for discussion, namely:

The impact of the government’s ill-considered super tax on small quarries and on the cost of living.

I call upon those senators who approve of the proposed discussion to rise in their places.

More than the number of senators required by the standing orders having risen in their places—

I understand that informal arrangements have been made to allocate specific times to each of the speakers in today’s debate. With the concurrence of the Senate, I shall ask the clerks to set the clock accordingly.

Barnaby Joyce (Queensland, National Party, Shadow Minister for Finance and Debt Reduction) Share this | Link to this | Hansard source

The Prime Minister’s latest incarnation of the nationalisation of the mining industry has to be seen to be believed. Australia is going down a path and who knows where it is going to finish. But just on one issue, the issue of quarrying and the impacts that this tax will have on it, it seems that Mr Rudd, Mr Swan, Mr Tanner and Ms Gillard are oblivious to the effect that this is going to have on that sector of the economy.

There are approximately 2,200 quarries operating across the country. They are excavating about 130 million tonnes of stone, limestone, gypsum, gravel and sand. These are used in such things as construction, and 18,000 people work in this industry. We have about half a million people working in the mining industry itself, and the Labor government seems to be oblivious to the fate of working families, to the prosperity of this nation and to where this tax goes.

The economics of Australia are so heavily reliant on our export of minerals that the reality is that if we do not have those boats parked off our west coast collecting the red rocks and the boats parked off our east coast collecting the black rocks then our nation would be in such dire financial circumstances that it would be beyond belief. We fool ourselves if we think that we are the sort of manufacturing powerhouse that Japan or the United States are; or the sort of financial centre that London is. We are a nation that has as the cornerstone of its prosperity our mining resources, and we are lucky that we are blessed that it is in situ—in the ground in Australia. The capacity to live, to act and to have all of the luxuries that so many other nations in the world crave would not be there if we did not have the mining industry. It is absolutely negligent to start putting pressure on an industry where if it topples over the ramifications will come home to everybody. You do not have to love miners or hate them; you just have to understand the basic premise of the economics and how our nation works.

If we drill down to a microform of what the effect of this tax will be, from where I am standing I can look around me and see steel purlins that are holding up this building. Underneath me would be concrete and running those lights is a coal-fired power station somewhere. All these are going to be affected by this tax. Through the process of this debate we have also seen almost the debauchery and prostitution of the Treasury. The sorts of things that the Treasury have been wheeled out to say just do not pass muster; they just do not make sense.

The latest one is where Dr Henry, who has said in the past that I have an oversimplistic view of things, stated that from high school he knows that if you have a tax on profits—even if it is at 40 per cent—it does not affect the motivations and the aggregate size of the economy. Then, when pushed, he said that it would not affect it if it were 60, 70 or 80 per cent. In fact, the only that time he conceded that there might be an effect is if you taxed all the profits. This is very peculiar indeed. Lately, we also had the pie charts. Remember the pie charts that they brought out? They looked awfully like a complete and utter botch.

We asked a question on notice of the Treasury—who are putting their credentials on the line to stand behind this—about where on earth the figures came from that said that in 2008-09 royalties and resources were at 14 per cent and in 2008-09 royalties, resources, taxes and company taxes were at 27 per cent. It is just so blatantly absurd: the figures are bunkum; they just do not pass muster. The answer to the question on notice has come back, and I must say that I am more confused now than when we first asked the question. The answer is just completely absurd. They have constructed and misconstrued the numbers. As poor old Mrs Mrakovcic from the Treasury said, they are not their numbers; they are Wayne Swan’s numbers and the Treasury are putting their imprimatur on them. Why would they do that? Why would they take themselves down this path?

Going into the numbers that they have supplied, we find that the resource rents from 2007-08 to 2008-09 went from $40.7 billion up to $91.2 billion. That was a remarkable year: it went up by 124 per cent. And do you know what is amazing about it going up by 124 per cent? It did this in the global financial crisis—the greatest crisis that we have had! Remember that they said we had to spend all this money to save us from the crisis? If these figures are correct, why bother? It was a boom year; the place was going ballistic. And if we go back through the figures before that we see a more regimented line of proportions of 47 per cent—that seems like a fair take on their profits; 45.8 per cent—that seems like a fair take on their profits; and 37.5 per cent from resources and company taxes as a portion of their profits. Then we have one year—surprise, surprise—the miraculous year 2008-09 where it just drops down 27 per cent.

So it just neatly fits into this graph—the problem being that they have had to jack up their resource rents by 124 per cent. Where were these mines? Where did they open up? What happened? Did we double the Hunter Valley that year in the middle of this crisis where there was $90 billion worth of discretionary spending by the Labor Party to try and keep us away from the crisis? Everything about the economic management of the Labor Party is implausible and they have sucked the Department of Treasury into the vortex of implausibility. To be honest, it is starting to look like the Treasury department and key figures in there have been sullied and in some instances may have been fatally damaged trying to prop up the insanity of the Labor Party.

We have a big football game on tonight: the Maroons are playing the Blues, and the Maroons are going to win. There are some very interesting blues that we should be concentrating on, but they will not be playing tonight. The very interesting blue that we should be concentrating on is the Gray versus Tanner blue—Gary Gray versus Lindsay Tanner—as they start seeing their seats peel off and disappear. Another interesting blue to have a close look at would be the Hutchins versus Kevin Rudd blue—I reckon that blue would be a ripper. Then we have the Kevin versus ‘every sane man, woman and child’ blue, another blue that would be an interesting one to watch. Then we have the Labor versus ‘any person who looks like they are gaining a profit’ blue, another one we would want to look at. One of the best ones is going to be ‘marginal seats and the probability of survival after the Kevin Rudd epic’ blue—that is going to be the best one.

For some unknown reason you have in your first term managed to completely and utterly debunk the mechanism, the reason and the critique you gave for attaining office—that you were apparently economic conservatives, that you would be a safe set of hands and that we had nothing to worry about. Now we find that one of the key groups that is most concerned about your tax is women. Why? It is because they can see what this is going to do to the economy and the overwhelming sense of uncertainty because you are manipulating and meddling with the financial prosperity that is going to pay for their houses, their children and the welfare of this nation into the future. This has been a disaster under the Labor Party, a disaster that has cost us up to $2 billion a week in extra borrowing.

But this resource tax just takes the cake. How we have come to live in a nation where the government has decided to nationalise the mining industry is beyond comprehension. This will come home—of course it will with a new Labor Party tax—as any person who can pass the cost on will pass the cost on to the housewife and to the working family. In this case it might be passed on by putting them out of work. With this tax they have gone to the good people of Western Australia and basically relieved them of their wealth. They have basically picked up the wealth of Western Australia and wandered back to Canberra with it. In Queensland they are doing the same thing. They cannot even keep the left wing of their own party onside in Queensland because they see this as a ticket for Kevin’s insanity. This has to stop and it is our duty to stop it.

Claire Moore (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

Senator Joyce, I remind you that you should call the various people you have named in your contribution by their right names.

Barnaby Joyce (Queensland, National Party, Shadow Minister for Finance and Debt Reduction) Share this | Link to this | Hansard source

The Prime Minister’s complete lack of judgment.

Annette Hurley (SA, Australian Labor Party) Share this | Link to this | Hansard source

As Senator Joyce noted, he has found himself many times at odds with Treasury advice and it seems not to have occurred to him that he might be wrong. I would back the expertise of the economists in Treasury over Senator Joyce any time and it appears that Mr Tony Abbott would too because he has stripped Senator Joyce of any responsibility for finance. But I have come prepared to talk about the resource super profits tax. Senator Joyce apparently did not because he spent most of the time addressing a political take on it—his own political take on it—and not the tax at all. I think that illustrates how little the opposition choose to understand this tax. Whether it is a deliberate omission or simply ignorance I do not know, but let us talk about the resource super profits tax and let us talk about how it will affect smaller miners and quarries. Let us take a look at some facts rather than standing on our soapbox and talking generally about things.

I turn to the profitability of mining companies in the first place and I refer to an excellent couple of articles on the pollytics.com website about an analysis of the profitability of mining companies. The conclusion was that:

Only 51.2% of all mining firms were actually profitable in 2008/9—the lowest of all industry classifications—even though the industry wide aggregate profit margin for mining was the highest for any industry classification in Australia, coming in at a whopping 37.1%, and where the aggregate profit margin for large mining firms was an even larger 46.1%

It goes on to say:

It would be accurate to say here that a majority of firms—and probably a very large majority of firms at that—would actually be better off under the proposed RSPT than the existing regime.

They are facts and the facts are that some mining companies are making a very handy profit indeed, in the order of 46.1 per cent. That is because the price of some ores and commodities has gone up to exceptionally high levels. This is at a time when Australia needs to address the infrastructure deficiencies that were left to us as the legacy of the Howard government, and the government is proposing to do something about that.

We look at the scare campaign which is being conducted by businesses and we find that in Australia there are a large number of commodities in which we hold a substantial share of the world’s resources: over 20 per cent, for example, of silver, cobalt, brown coal and zinc, and over 30 per cent of lead, uranium, zircon, rutile, nickel and tantalum. And we have mining companies saying that they will get up and leave, that they will not invest in Australian resources anymore! As the Pollytics blog says:

When mining companies … say that their investment … will cease … as a result of the RSPT, they are effectively stating that their firm will not exploit these immobile, finite resources which make up to nearly 40% of the total global supply of these minerals.

That of course is a nonsense. So the question becomes: how do we, for the future, best take advantage of these scarce resources which belong to Australians? What the tax has been carefully designed to do is not disadvantage those smaller companies, the small mines and small quarries, which are not making these superprofits. Where quarries or other mines do make the superprofits, why shouldn’t they be taxed at that rate? Why shouldn’t they contribute more to the future of Australian society?

It has been bandied around quite often that the Henry review said that we should not tax quarries, which is not accurate, as so many of the arguments are not from the opposition and other mining interests. What the Henry review said was:

The resource rent tax should be applied to non-renewable resources other than those expected to generate low rent where the administration and compliance costs are likely to outweigh any gains from a rent-based tax …

That is, the recommendation is that where the administrative costs outweigh the benefits of the tax then it might not be a sensible thing to do. There was no recommendation at all that these resources should not be taxed in line with other resources. This is all part of the negotiation which the government is conducting at the moment and which the government has always said that it would conduct.

Finally, I would like to address the ‘disaster’ that Senator Joyce talked about, this idea that if the bosses of the big mining companies like Gina Rinehart and Andrew Forrest do not continue to receive their income then Australia will be in huge economic trouble. I would like to quote from an article written by Vanessa Cicchini in the Australian late last month. She said:

Lately, barber shop talk has revolved heavily around the tax and my anecdotal surveys have all reaped similar results. People in the western suburbs—

that is, the western suburbs of Perth—

staunchly oppose it. Those with the wrong opinions are infidels.

Here lies my gripe. This small but wealthy section of Perth with its vitriolic hatred of this proposed tax are also the most vocal and are viewed almost unquestionably as the authority on what’s best for the west.

But did they ever get out of their social-business circles to consult with people from other areas, let alone those more socioeconomically challenged? Hell no!

The mining boom has not rocked everyone’s world. Here in WA it has made day-to-day living hideously expensive, with most transactions tantamount to extortion. The social aspect is just as grim. Putting aside the muted phenomena of the “cashed-up bogan”, there really is a huge gap between haves and have-nots.

This is what the Labor government intends to address. The opposition, of course, listen to big business all the time. They listen to those people who have vested interests in making sure that the mountains of cash keep rolling in. But the Labor government wants to make sure that some of that cash reaches other people in the community in the form of improved superannuation payments and also lower company tax to stimulate further productivity improvement in our economy. That is what the Rudd Labor government is all about. The opposition are about kowtowing to their big business mates.

Julian McGauran (Victoria, National Party) Share this | Link to this | Hansard source

The Senate is debating a matter of public importance. This is a time reserved for serious debate on the issues of the day, and this surely is the issue of the day. But anyone listening in to the previous speaker would have heard her very lacklustre performance. There was certainly no true belief or heart to put into it—and I have looked at the other speakers to follow her, and it is not going to get much better at all.

Anne McEwen (SA, Australian Labor Party) Share this | Link to this | Hansard source

How do you feel about that, Michaelia?

Julian McGauran (Victoria, National Party) Share this | Link to this | Hansard source

From the government side, I should add, of course. Falling short of an argument five minutes into her 10 minutes, the previous speaker broke into what Labor have been breaking into for the last month or so when defending this tax: a class war, talking about mountains of cash rolling in and how we are defending the big boys. But you in no way addressed the matter of public importance before the Senate today about small mining industries and small quarries. You conveniently avoided that.

I think you started to quote some figures you got off the internet. From what I could gather, you glanced over, saying that the smaller quarries were getting returns of something like 40 per cent. That is absurd. You say that this tax is not designed to capture those smaller quarries. There happen to be 42 around the Bendigo area alone in Victoria. Are you telling me that this tax is not designed to capture those small quarries and those small companies—in Ballarat and Bendigo alone? That is what you said. What an absurdity. Your idea of supertax—the cash rolling in, as you say—is anything above the risk-free rate, the bond rate, of six per cent. That is your idea of supertax. That is why, after five minutes, you lapsed into the old class war. That is the sum of the defence for introducing this tax.

What an unhappy time the three senators opposite have had in government. What a wasted experience you have had in government. You have spent months defending this tax. Prior to that you spent months defending the pink batts scheme, months defending the emissions trading scheme, another supertax—if you fail in one supertax try and try again—and months defending your budget. You need not worry. It will all be over soon. What an unhappy, miserable time you have had in office while the kitchen cabinet runs this government, and you have no say in it at all.

Whatever trust the Australian people put in electing the Rudd government has been crushed in just one term alone. Nothing cements the disappointment more than the introduction of this tax. It epitomises and brings to its very point that disappointment and the incompetence and deceit that surround the government. The government brought in this tax without consulting with their own party let alone with the industry. It has no detail and no design at all. There is no understanding of the cascading effects of the tax. What is more, it is a policy cooked up just to cover over a short-term problem that they have in their budget. In no way did the previous government speaker—I expect no more from government speakers that will follow—address the core issue.

It is worth reading out the core issue of this matter of public importance submitted to the Senate for discussion:

The impact of the Government’s ill-considered Super Tax on small quarries, and on the cost of living.

The previous speaker avoided it meticulously. She was unable to address how this tax is going to affect small and medium operations. It is because the Treasurer and the Prime Minister—and the Treasury, as our lead speaker rightly pointed out—had no concept of how this tax was going to affect businesses, from large to small, from auxiliary to household. For example, Selkirk bricks in Ballarat, where I have an office, are a family company some hundred years old. They do not know whether they are caught up in this tax or not, but if they are they will close. They are greatly affected. There is a cloud over them. They do not know what the effect is but it is not good at all. What about the cement works in Geelong or all the quarries that surround the township of Bendigo?

This is nothing short of a tax grab. This is not tax reform. This was laid out to be a tax grab on BHP and Rio Tinto. Not even a thought was put into this; there was not even any knowledge of these smaller operations. That is what we are debating today. Yes, it is going to hurt Rio Tinto and BHP, but what of the hundreds and hundreds of smaller operations? Those opposite have reverted to a class war and that is a very brittle strategy that is not working out with the public. It is not even working with your own supporters. The pawns walk in here and repeat that argument. It is outdated, divisive and false.

The truth is that this tax will cut a swathe through family businesses like Selkirk, through medium-sized businesses. We already know that there has been a downgrading of many investments, a cut in many investments—Xstrata, for example. In Stawell, a small township outside Melbourne, a mining company is now reviewing its operations, which means job losses. Gekko in Ballarat, which supplies mining equipment, has already laid off six workers directly because of this tax. The uncertainty is now cascading through the share market, affecting the value of these companies and future investment. We heard today at question time that our main competitors, like Canada and Chile, are salivating at the chance to grab some of our markets.

There are three falsehoods spun by the Labor Party. One is that this is in fact tax reform. It is a tax grab to prop up an ailing budget. When you had to abolish your emissions trading scheme—that other supertax—you had the audacity to introduce this tax and you further have the audacity to have Senator Wong stand up in question time to defend it. Her previous failure was the emissions trading scheme tax.

The second falsehood is that this is a tax on superprofits. It is in fact a supertax on profits, as it kicks in at the six per cent bond rate. No mining company is going to sit there and expect returns of six per cent. They outlay hundreds of millions of dollars. It is the most risky business of any industry or sector.  It is a supertax on profits—on the most minimal, risk-free profits, in fact. Because of this tax, the extension of the Olympic Dam project in South Australia is also now under a cloud.

The third falsehood is that the mining industry should pay a fair share. There is the class warfare again. There is the beat-up again. They are paying a fair share. Senator Sherry ran that through question time over and over again. Company tax is progressive. When their profits go up, so does the tax. They are the greatest contributors to the Treasury coffers. They got us through the global financial crisis. It is acknowledged. You don’t think the pink batts scheme got us through, do you? You don’t think the building revolution got us through—that sort of wasted money! It was the mining industry that got us through.

Time does not permit me to source my references, but it is well known that the tax rate of the companies averages out at 41 per cent. That is royalties and company tax. That is before you even get to payroll tax or any local government taxes that are placed on this industry. They pay more tax than any other industry. They contribute more to the Treasury than any other group.

You ought to start listening, not just watching the polls and getting nervous about it all—which you should be and which Gary Gray is as he jumps up and down in his seat in aeroplanes back to Perth. You ought to start listening to people who have some experience and wisdom, not the boys that run the Prime Minister’s office. Start listening to the likes of Rod Eddington—who has your interests at heart, believe it or not, seeing as you gave him a job—and David Murray, the chairman of the Future Fund. Today we heard from the chief of the Wesfarmers, Mr Every. I know what the next person will get up and say— (Time expired)

Louise Pratt (WA, Australian Labor Party) Share this | Link to 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.

Michaelia Cash (WA, Liberal Party) Share this | Link to this | Hansard source

To coin a very well-known phrase: ‘Tell ‘em they’re dreaming.’ If those on the other side actually believe that this tax is in any way going to increase production in this country they are living in la-la land, quite literally. Their pattern of failure—their failure to think things through, their failure of judgment, their failure to consult and their failure to follow any sort of process whatsoever—is now creating real damage to Australians and to the Australian economy. This is more apparent than ever after listening to the speeches of those on the other side on this very important issue in this matter of public importance debate. This tax is nothing more and nothing less than a triple whammy on the Australian people. It is a tax on the half a million Australians whose jobs depend either directly or indirectly on the mining industry. Yes, that is right, the mining industry is actually a huge employer in this country. Industry creates jobs. Governments, and in particular Labor governments, do not create jobs; they destroy jobs. This is a tax on the millions of Australian retirees whose incomes are drawn from the shares and dividends that the mining companies pay. It is a triple whammy because it is a tax that will hit the back pockets of Australian families. It is going to impact on their budgets. You cannot raise the price of oil and gas, building materials and fertiliser, which is exactly what this tax is going to do, without having a flow-on effect on the price that Australian families are going to pay for essential items.

You will recall that the Henry tax review, a review that we all waited with bated breath for, had 138 recommendations. But Mr Rudd, the Prime Minister of this country is a weak and insipid leader and did not have the guts to undertake full-bodied tax reform in this country. So what did he do? He woke up one morning and said: ‘That is it, I’m going to go for the blatant tax grab. What will I impose? I will impose a resource super profits tax.’ He chose this over genuine taxation reform. That would hardly be surprising to the Australian people because it is so typical of a Labor government. Rudd Labor have no other way than to rob the mining industry blind to pay off the debt that they are incurring in this country.

The problem with Mr Rudd is this: he is at great pains to tell Australians that what the big mining companies are saying about the impact of this tax should be taken with a grain of salt, but he fails to understand that it is not just the big mining companies that are telling us they have real problems with this tax. What Mr Rudd fails to understand is that, while he talks tough about targeting Rio Tinto and BHP Billiton, the small businesses, the family quarry operators—and we all know them; we have all got them in our home states—are the ones that are really going to feel the impact of this tax. These businesses operate across Australia. They produce sand, gravel, road base, lime and phosphate. And guess what? All of those materials are crucial inputs to housing and construction and agriculture in Australia. So guess what? If you tax those products, those companies will have to pass the tax on to the consumer, and mums and dads in Australia will actually end up paying more and there will be an increase in the cost of living.

I would like to put to bed a myth the Labor Party consistently raises, which is that Treasury Secretary Ken Henry, in his recommendations, said these small companies should be taxed. Well, he did not. Mr Henry did not recommend the taxing of low-value commodities. There is actually a table in his report, table C1.1, that lists resources that may merit exemption from the resource tax. It was not Mr Henry’s recommendation that the Labor Party go down this path. If this tax does go through, when it hits the local quarries—and it will—it will ultimately hit the hip pockets of mums and dads in Australia. Why? Because local quarries produce clay, gravel, monumental stone, gypsum, limestone, cement and plaster, and all of those products are used to build the great Australian dream—that is, your own home. Local quarries have made it very clear that they will have a choice if this tax goes through. They can either pass the additional cost on to the consumer or, alternatively, they can close down their businesses. The choice is a very simple one. They are not going to close down their businesses, so these costs will be passed through to the mums and dads of Australia.

Merrill Lynch, one of the world’s leading financial management and advisory companies, came out with a report today. They have done some numbers. And guess what? They say the supertax will quite literally ‘hit home’. Merrill Lynch estimate that it will add no less than $800 to the price of the concrete used in an average home costing approximately $500,000. And there have been other estimates that the tax will add no less than $20,000 to the price of a new home. That is a consequence of imposing this tax on small quarries. It will reach into every Australian household through higher power bills, higher gas bills and higher prices for bricks and mortar and gravel. These very basic commodities will all be affected by this tax.

What if the tax were to hit phosphate mining? The logical effect is that the price of fertiliser would go up. What does that mean for Mr Rudd’s working families, whom he keeps telling us he strives so hard to defend? It is bad news, Mr Rudd. Guess what? Your tax will mean that the price of food will go up. That is right—under Rudd Labor’s tax the mums and dads of Australia will be paying more for food. Ultimately this tax, if placed on mining quarries, will flow through to the people of Australia. The bottom line is this: if you are a young person or a mum or dad and you are thinking about going out and purchasing a new home, if you want to fulfil the great Australian dream, if this government is re-elected and this tax goes through forget about the Australian dream because it is quite possible that you will not be able to afford it. That is the end result of an ill-thought-out concept.

The bottom line is this: what we have in Australia today is a big-spending government and this mining tax is designed to do nothing more and nothing less than satiate their out-of-control spending. To implement what is nothing more than a blatant tax grab which will have devastating effects on our economy—in particular, our quarries—is economic lunacy. This tax is economic vandalism and economic lunacy from a Labor government that does not have a clue about economic management in Australia.

Mark Furner (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I rise as a senator for Queensland and I am proud to defend the Rudd Labor government’s resource super profits tax, from which Queenslanders will benefit with more than $2 billion for infrastructure funding for roads, rail and ports. As a senator from a state which has 40 per cent of this country’s mining production, I am proud to defend the $6 billion infrastructure fund that will be established by the government to reinvest the proceeds from the RSPT. The RSPT is about building a stronger economy and delivering a fairer share of profits from our resource industry to Australian families. And why shouldn’t they benefit from it? Australians own 100 per cent of this nation’s natural resources, yet their share of the profits has fallen while the mining companies’ profits have risen. Before the industry was booming, Australians received $1 in every $3 of profits through royalties and charges, but at the end of the boom they only received $1 in every $7 of profit. The government collected only an additional $9 billion in revenue, yet profits were over $80 billion higher in 2008-09 than they were at the beginning of the decade.

By replacing mining royalties with an RSPT, a fairer share of the mining boom will enable superannuation for working Australians to be increased from nine per cent to 12 per cent, which will assist 8.4 million working people. It will provide a tax break for 2.4 million small businesses and will reduce the company tax rate from 31.7 per cent to 28 per cent. And let us not forget the $6 billion infrastructure fund, which will benefit our mining states for roads, rail, ports and economic infrastructure. This tax reform will strengthen our economy.

But we understand it will not be an easy task. The opposition, along with their pinup boy, Clive Palmer, have started a massive scare campaign telling Australians that share prices have dropped because of the proposed RSPT. Opposition leader Tony Abbott said on 25 May that ‘our share market is under pressure, at least in part because the government has totally mismanaged its proposal for a great big new tax on mining’. However, conversely, Richard Grace, the chief currency strategist of the Commonwealth Bank of Australia, said on 25 May on the 7.30 Report:

We’ve seen a 10 per cent fall in the global MSCI stock market, 11 per cent fall in the S&P 500. We’ve seen oil prices fall over 20 per cent. We have seen base metal commodity prices fall over 20 per cent, and this is all since the start of May or late April. These are the sort of factors that have been going on which are not at all related to the mining tax. And just to further push that point home, some of the shares of the big offshore mining companies such as Vale have fallen by similar magnitude.

In fact, Australian shares have not fallen as much as they have in other countries. The London stock market has fallen by 10.4 per cent, the US Standard and Poor’s index dropped by 11.5 per cent and the Japanese stock market fell by 12.8 per cent, while Australian shares have only fallen by 10 per cent. Australian mining shares have fallen even less at 8.9 per cent and the bank shares have fallen by 12.3 per cent. Clearly the opposition is not listening to its own scare campaign when the member for Dickson raced out recently and purchased $2,000 worth of shares in BHP. If he thought the shares were going to drop, why did he rush out to make such an investment?

The opposition also claims that the cost of living would increase with the introduction of the RSPT, and we have heard some of that here in this chamber this afternoon. Tony Abbott said on 21 May that it is ‘an assault on our standard of living’. Then on 27 May the shadow Treasurer, Joe Hockey, said that mining companies are going to pass it on to everyone.

They’re going to pass it on to their clients … and it will flow through to every home. Everything—you think for a moment about everything in your life that comes from mining. Your car … Everything in your house comes from mining and energy.

It is just another blatant lie.

According to the Federation Fellow in Economics, someone who is a lot more knowledgeable about the economy, Professor John Quiggin, the scare campaign is hurting the debate. He said on 26 May:

A number of the arguments we’ve seen raised against the tax simply have no credibility at all … I think that’s about the least defensible. The reason that there are super profits to be taxed is because of high world prices for these minerals that are set on world markets. So there’s no reason at all to think that the tax is going to affect the world price of these minerals, and therefore that that’s going to feed in any way into Australian consumer prices. On the other hand, there’s potentially some benefit for consumers in the offsetting reductions in the general rate of company tax. So it certainly is depressing to see this kind of scare tactic put up, it really is just distorting the debate.

In fact, according to Econtech modelling, the tax reform will reduce the price of food and housing over time, making our economy more effective. According to the Econtech report, food is set to decrease in the long term by 0.9 per cent; tobacco and alcohol by 1.1 per cent; clothing and footwear by 1.3 per cent; housing, household contents and services by 1.1 per cent; health costs by 0.6 per cent; transportation by 1.7 per cent; communication by 1.4 per cent; recreation by 1.3 per cent; and education by 0.3 per cent. Financial and insurance services will drop by 0.8 per cent.

Commodities which are traded on the world market will have their prices set by that market. The myth about electricity prices going up because of the RSPT is exactly that: a myth. Because the RSPT is aimed at superprofits, coal-fired electricity stations are unlikely to be affected as they use low value coal therefore unlikely to make superprofits.

I am proud to stand here today and say that the Rudd Labor government has been nothing but upfront with Australians about the RSPT. We have established the Resource Tax Consultation Panel and have been open at every step—a practice which demonstrates our government’s willingness to discuss this very important tax reform and a practice which is completely different to the previous government’s. In 1995 John Howard promised ‘never ever’ to introduce a goods and services tax. In fact, he said, ‘There’s no way that a GST will ever be part of our policy—never ever—it’s dead,’ and five years later everyone knew what the letters GST stood for as a result of that broken promise.

We understand that tax reform is not easy, but it has been done before successfully. The Minister for Small Business, Independent Contractors and the Service Economy, the Hon. Craig Emerson, recently said the petroleum resource rent tax was just as controversial. He said:

It was just as difficult; it was an important tax reform and we implemented a profits-based tax that’s been in place for 25 years and has been consistent with the go-ahead of major projects like the Gorgon gas project and the Pluto project, and the extension of the life of Bass Strait for 30 years.

Even John Howard’s right-hand man, former Prime Minister and Cabinet secretary Max Moore-Wilton, and Tony Abbott’s finance spokesman, Andrew Robb, support reforming the current system. In fact, Tony Abbott seems to be the only one who doesn’t support this tax reform.

On 12 June Andrew Robb said:

Well we will look at any reform that is offered and if we think it will, um, you know improve incentives, improve fairness, you know, reduce the tax avoidance, all of those, be more efficient, less paperwork, there’s enormous scope in the tax system to do work.

On 11 June Max Moore-Wilton said, ‘Everyone likes the idea of a profits tax; it makes sense.’ In terms of the impact on small quarries, the RSPT will only be taxing superprofits. If the quarry is not making superprofits, it will not pay net tax. Depending on profits, some companies will pay more tax than others, but the mining industry is still expected to have 5.5 per cent growth in production. The Rudd Labor government is committed to building a stronger economy and providing a fairer share to Australians. The RSPT will benefit this economy by investing in our much needed infrastructure and assisting our small businesses and companies.

The opposition’s lack of support for this important tax reform shows that Mr Abbott is against a superannuation increase for working Australians. He denies small businesses a well-deserved tax break and instant tax write-off of up to $5,000 and denies a tax cut to companies to improve their competitiveness. Mr Abbott cannot be trusted to run this country, let alone a proposed budget— (Time expired)

Judith Troeth (Victoria, Liberal Party) Share this | Link to this | Hansard source

Order! That concludes the debate.