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Australia Talks

May 18th, 2010

I’ve been flat out with final revisions to my book manuscript and various other things. So I didn’t get time to say I would be on Australia Talks this evening talking about the resource rent tax. It went fairly well, I thought. You can judge for yourselves when the podcast becomes available

Not quite sure when I will surface from my current deluge of work. Light posting until then.

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  1. May 18th, 2010 at 23:05 | #1

    John and others kept saying how miners always complain but implied that it means nothing. How can anyone tell the impact of the resources super tax or, indeed, the impact of the petroleum tax? Unless there is a control group, no-one can tell the past or future impact.

    I don’t think anyone is being straight here. The only logical reason for the resources tax that I can figure out is to slow down the mining sector.

    The reason for slowing the mining sector is not that clear, but it might have to do with wanting to spread the economic base and support less efficient and less profitable sectors. This has some merit in that we need a spread for self-sufficiency – particularly given the world is going to get a bit rough as the climate changes. This is a very long term view and carries considerable risk. We could cut off our nose to spite our face. Particularly given that investment in resources has a much longer time frame than, say, investment in a manufacturing or service company.

    I hope the government gets it right and that we don’t end up with our own recession, having just scraped through the GFC. (I realise that permanent public servants and tenured academics won’t suffer if we do. But most people would.)

  2. May 18th, 2010 at 23:14 | #2

    I listened to the first 10 minutes and decided it was going to be horrible. There were two apparent mining industry shills there — one from CommSec and another, a woman with a South African accent, who was whining about how other countries were lining up to be drilled cheap like 1960s women on Palmer Street and the petroleum RRT had sent Australian deepwater exploration for oil to the Gulf of Mexico — and this comment went unremarked.

    I just had to turn off at that point or hit the radio with a large heavy object.

  3. Ernestine Gross
    May 18th, 2010 at 23:41 | #3

    JQ
    I found the discussion useful. The public relations mantra by Dr Nikki Williams was shown up for what it is, namely economically illiterate pure advocacy. Good on you, JQ, for spelling it out. To confuse profits with the distribution of profits, as she did, is remarkable. The effect on superannuation has not been fully discussed, IMHO, in the sense that the legislation involves a smoothing of rates of return over time, holding all else constant. This aspect of the legislation fits nicely with your paper on the government’s role in risk management.

  4. Jarrah
    May 18th, 2010 at 23:58 | #4

    “This has some merit in that we need a spread for self-sufficiency”

    Self-sufficiency = poverty. Risk management through diversification, on the other hand, is simple prudence.

  5. Freelander
    May 19th, 2010 at 03:29 | #5

    @Sou

    You might be happy to buy the self serving nonsense that the mining industry is spouting so they can continue to put all of our money in their pockets but the rest of us are not so stupid. Being as money grubbing as they are, I have little concern that they will forgo 60 per cent of our money, money they shouldn’t be getting anyway, just because they will not be getting 100 per cent of our money just as they once did.

  6. Freelander
    May 19th, 2010 at 03:35 | #6

    @Jarrah

    Not that what was suggested was a plan to create a measure of self sufficiency but your formula is wrong. Creating a capacity for self sufficiency is risk management.

    Risk management is not putting all your eggs in other people’s baskets.

  7. May 19th, 2010 at 11:36 | #7

    @ Freelander – I take it you would like to see mining stop altogether, and from your previous comments, you do not want an agricultural sector either. I respect that but disagree. Without mining we would not support our population – although I do believe other factors are coming into play in terms of population limits. Eg water.

  8. pablo
    May 19th, 2010 at 12:44 | #8

    I listened and believe it was JQ who briefly mentioned the diesel fuel rebate available to miners toward the end of the program. I haven’t read the Henry Tax Review on this but surely this juicy incentive funded by tax-payers has to go. More howls of pain?

  9. wilful
    May 19th, 2010 at 17:11 | #9

    The only logical reason for the resources tax that I can figure out is to slow down the mining sector.

    Funny, I can think of a far more basic, obvious reason.

    Twelve billion dollars.

    You weren’t thinking too hard, were you?

  10. paul walter
    May 19th, 2010 at 17:34 | #10

    Sou, #7, I doubt whether Freelander and the other mining sceptics want mining stopped. But we don’t want further stuff ups such as the Gulf of Mexico debacle.
    And many of us find it offensive that companies, for no better reason than the fact that they are companies, are encouraged to operate in a predator mode inimicable to a mentality that faciltates a healthy response to the suite of social responsibilities and duties the rest of us are obliged to assume, both for our benefit and the benefit of others and society itself, which nutures and supports us.
    No, Wilful’s comment astutley summed it up.

  11. Freelander
    May 19th, 2010 at 19:30 | #11

    @Sou

    Very silly claim about what I would like to see.

    As far as farmers and mining companies go, I don’t see any reason for government to give them money for nothing, which is what governments too often do. To be precise, governments of the day don’t really give them money for nothing. It is our money and we get nothing for it, but which ever party it is expects votes and donations in return. As a taxpayer and one of the people whose money governments like to squander on feckless mining companies and second-rate farmers (the good ones tend to get little), what I get out of it, nothing, is just not good enough. Actually, worse than nothing as what I get out of it is higher taxes and lower government services.

    What is worse than a bludger on a modest income? It is one on a very good income, like a farmer or a mining mogul, who not only is into wholesale bludging off the taxpayer, but is quite happy to ‘invest’ significant sums of money to ensure they can have a wholesome suck at the public teat at our expense.

    Now before you suggest that some of these farmers are not well off. Yes you are right. Farming is a risky business. Just like mining is a risky business. Some farmers have bad luck and some are just plain awful at the job. As a consequence, although they would have started off with a significant stake they can lose all their money. But no one holds a gun to their heads to make them invest in these risky enterprises. (They could invest their money elsewhere.) And when they win big in these risky investments, they don’t make big donations to the taxpayer to thank us for our largesse when they lose. For both of these groups it is privatise the winnings and socialise the losses. And there is no gratitude. Just lots of whining and ‘acting out’ as though they have some entitlement to taxpayer largesse.

    Lots of other businesses go bung. We don’t bail them out, unless there are wider reasons to do so, and even if we do in those cases I believe the original owners should lose their shirts. And we shouldn’t bail out farmers or miners either simply for their own sakes. And if we do bail them out, then the public should own the bailed out assets, and they should walk away with nothing.

    And that’s what I call business! After all, when they walk away with nothing we do have a variety of benefits they can avail themselves of while they look for another job. And if they are really lucky, Tony will get in, and bring back the ‘flexible’ labour market with Workchoices, mandatory ‘unfair’ dismissals, and no minimum wage.

  12. Alice
    May 19th, 2010 at 19:56 | #12

    @paul walter
    I agree with Freelander and Wilful…12 billion dollars to plough into a budget deficit. Why wouldnt the govt do it? Why shouldnt they? After all…people who dont want to “pay their taxes” are irresponsible and could become like the “the greeks” who havent wanted to pay their taxes, making them “decadent and corrupt” if you subscribe to mouthpieces like Piers Ackerman or Murdoch newspapers…such evil profilgate children, like the Greeks, who dont want to pay tax get their austerity measures….

    OK time for some austerity measures down at the mines…pull in the belts etc

    All roads lead to Athens…

  13. Monkey’s Uncle
    May 20th, 2010 at 00:18 | #13

    The Resource Rent Tax may actually prove to be a masterstroke for the Rudd government. It appears to have wedged the Opposition nicely. Because the tax is going to help fund cuts to corporate tax, the Opposition will have to alienate the rest of the business community in order to appease the resources sector by opposing it.

    And by promising to wind it back if it passes Parliament and the Opposition get elected, it leaves them with a fiscal hole that requires spending cuts to merely maintain a tax cut for mining companies, rather than funding tax breaks or other spending that will actually benefit average voters.

    At worse, this tax could hurt Labor in a few marginal seats in Western Australia and Queensland. But it will play well elsewhere in the country. Probably shore up New South Wales, the state Labor would be most worried about.

  14. Monkey’s Uncle
    May 20th, 2010 at 00:21 | #14

    The Resource Rent Tax won’t, in itself, be enough to plug the structural budget deficit. But it is the first courageous decision the Rudd government has taken. So let’s break open the champagne to celebrate.

  15. May 21st, 2010 at 00:07 | #15

    Freelander has flipped. Those postings are asylum material.

    The efforts of farmers amount to “bludging off the taxpayer”. Freelander, meet straightjacket. Better men than you went up against a wall in 1917, and THEY were normal.

  16. James
    May 21st, 2010 at 10:36 | #16

    @Sou
    You may be interested to know that from 2001 to 2006, gross profits in the mining sector went from 26% of total revenue to over 40% of total revenue, thanks to booming commodity prices. There was a significant increase in total revenue, nearly all of which was captured as profits; a clear sign of rent-seeking.
    To argue that taxing away some of that new profit would cause miners to withdraw from the sector is equivalent to arguing that they should never have invested in the first place, since they were not enjoying record profit levels before the current boom. It is clearly counterfactual.

  17. May 21st, 2010 at 15:24 | #17

    @James, I’m not arguing against any resource tax (although the mineral resources do not belong to ‘all Australians’, so that argument for the tax is fallacious). I am arguing against *this* resource tax.

    In particular – it is a tax on normal profits not super profits and does not provide for the inherent high risk in mining; the tax is too high at 40%; the rebates mean we will all be paying out our taxation to non-productive and inefficient mines, particularly in a commodity downturn when Australia can least afford it; there is no talk of a fund being established for the funds being collected – it’s just going to consolidated revenue. Under the current proposal, mining will be significantly curtailed to the detriment of the entire economy. (I’m not against moderation or slight cooling of the mining sector, but I don’t believe our economy can sustain a sudden and sharp downturn.)

    There are probably more reasons why the approach as outlined is disastrous, but that’ll do for now.

  18. May 21st, 2010 at 19:06 | #18

    Sou at 21: And, pray tell, why should anyone take your opinion against those of the people who made the original recommendation. I refer to Ken Henry (Treasury secretary), Jeff Harmer (Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs) , John Piggott (Professor of Economics and Director of the Centre for Pensions and Superannuation at the University of NSW, Heather Ridout (Australian Industry Group CEO), and Greg Smith (former executive director of the Australian Treasury and now an Adjunct Profesor in Economic and Social Policy at the Australian Catholic University,a Governor of the Australian Tax Research Foundation and a consultant in public policy). Methinks they have far greater qualifications than you.

  19. May 21st, 2010 at 19:07 | #19

    Sorry, that should have been Sou at 17.

  20. Freelander
    May 21st, 2010 at 19:24 | #20

    @Steve at the Pub

    Please stay at the pub. But if you leave take a taxi. I am not concerned for you but others do use the roads.

    @JohnL

    Too right they do. And they could earn a lot more if they were willing to prostitute their talents as ‘consultants’, so you can guarantee that they are saying what they believe to be true. As you have noticed there are a lot of arrogant nitwits out there. But this is where T-baggers come from.

  21. Alice
    May 21st, 2010 at 19:40 | #21

    @Freelander
    Please tell Steve at the pub not to take a Manly Cab.

  22. Alice
    May 21st, 2010 at 19:43 | #22

    @Freelander
    I dont want to have to worry about his mobile phone or Ipod – which is was happens when inebriated people catch taxis….

  23. Alice
    May 21st, 2010 at 21:04 | #23

    @JohnL
    Freelander is right – just why is Granaut pushing the “delay the rent resource tax on mining”??..he of so much global comate warming concern…he who somehow seems to have git himself a board position with a few mining companies.

    If Garnauit is happy to sell out…anyone is capable of it…so why should we believe every arrogant narcissist that happens to walk the face of the planet and talk “whats good for the environment” or “whats good for the economy” because tomorrow they could get offered a bigger paycheck by the greedy and totally give up everything they once stood for….like Garnaut.

    Like lots of them….

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