EDITORIAL THURSDAY 27.05.10.
There is no doubt that the mining industry has plenty of money. For a start, 25 of the 200 wealthiest people on the BRW magazine Rich List for 2010 are mining magnates, including two out of the top four. BRW has estimated that those 25 have experienced the strongest increase in their wealth out of all the sectors represented on the list, with mining multi-millionaires increasing their wealth by around $9 billion over all. And then of course, you just can’t miss the advertising campaign which has been mounted across all media to protest against the proposed Resource Super Profits Tax. Those TV and radio ads must all add up to a fairly expensive exercise, so it’s just as well that the people paying for it seem to have deep pockets.
Now, there’s nothing wrong with people having deep pockets, and it’s all too easy to allow envy to colour any argument about what constitutes a fair share of the tax burden. But, there seems to be plenty of cynical manipulation of the facts taking place as vested interests seek to defend their positions. It goes without saying that nobody wants to pay more tax, even if they can afford it. As the late Kerry Packer once famously observed, the government isn’t spending it so wisely that we should be in any hurry to give them any more than we must. So do the big mining companies have a valid point when they claim that investment is at risk, jobs will be lost, and the price of consumer goods will be affected? Or is it all just Resource Tax Super Propaganda?
Some of the arguments which have be advanced are just plain wrong. While the common sense view would be that an increase in tax on anything will discourage whatever is taxed, this proposal is not just a simple tax increase. Instead it is a restructuring which will deliver more tax to the government from projects which are more profitable, and less tax from projects which are less profitable. And far from being a grab for cash that somebody else has earned, it represents, theoretically at least, a requirement for the mining companies to pay a share of the booty to the owners of the raw materials involved. That’s you and me, the citizens of the land under which the minerals are found. The rate that should be paid, and the threshold at which it should apply, are quite rightly the subject for debate. But the basic idea is not a threat to investment or jobs.
Secondly, the opposition is arguing that it is was the resources sector that almost single handedly kept Australia out of recession during the Global Financial Crisis, and that it would be foolish in the extreme to do anything which would weaken the sector. That is only a half truth. The fact is that the mining sector actually went backwards quite dramatically during the GFC, with a rate of job losses which would, if replicated throughout the whole economy, amounted to national unemployment at around 19%. Obviously the mining sector has bounced back since then, but at the time it was a very bumpy ride.
The truth however, is that the massive resources boom of the past decade was one of the major sources of the increased tax revenue which drove Peter Costello’s budget surpluses and put truck loads of cash into the nation’s piggy bank. For that reason, the federal budget had the capacity to support the Rudd Government’s economic stimulus spending, keeping cash moving through the economy, and keeping people in jobs. As much as the opposition might deny it, the evidence is there in the national construction figures which quite clearly show public sector expenditure on education and social housing construction has kept the building industry afloat at a time when private projects have plummeted. Despite the obvious problems with mismanagement of both the school halls and the home insulation programs, the fact is the economic aims were achieved.
If anything, the role of the mining sector in keeping Australia afloat during the GFC is actually an argument in favour of the new tax regime. It was the tax revenue from the mining sector which provided the funds for avoiding the worst of the effects of the GFC, so therefore securing an appropriate share of the bonanza profits that are experienced during boom times for the benefit of the taxpayer is actually a sound method of providing for the future prosperity of the Australian people, while also delivering a fair return on risk for investors.
Of course, everything hinges on determining just what amounts to an “appropriate” share.