FYI | Aug 16 2010
By Gavin Wendt, Senior Resource Analyst MineLife
Has Mitch Hooke left the building? That’s the question the mining industry is asking itself as the election campaign enters its final week.
Mitch Hooke, who assumed an enormously high profile during the initial stages of the Resource Tax fight, has quietly faded into obscurity since the amended tax deal was struck between the Government and the nation’s three biggest miners, BHP, Rio and Xstrata.
Instead, it’s been left to industry foot-soldiers like Andrew Forrest to champion the mining sector’s fight against the most opportune, outrageous and ill-conceived of taxes.
The Minerals Council of Australia (MCA) reputedly speaks and lobbies on behalf of the entire industry, not just the nation’s biggest miners. But the cessation of the MCA anti-tax advertising campaign, following the compromise tax deal struck between the Government and the big miners, tells a different story.
Smaller miners were not part of the negotiation process with respect to either Mining Tax Versions 1 or 2, so were relying on the MCA to press their case. Instead, what was achieved has to be regarded as a deal formulated to suit the big miners’ interests.
With the ‘big three’s’ concerns alleviated, the MCA subsequently dropped its advertising campaign. This was the clearest evidence that the broader industry’s welfare was not being taken into account. Mitch Hooke’s comments that the revised resources tax “delivered a positive outcome for Australia and its minerals industry”, were not been shared by the majority of those within the industry.
The abandonment of the MCA advertising campaign was a major strategic blunder that greatly reduced the profile of the Mining Tax as an election issue, in turn handing Labor strategists a key and unexpected victory.
And even the minority happy with outcome, Rio, BHP and Xstrata, should not be feeling too comfortable. As Labor heads towards a probable election win, most likely with a Greens-controlled Senate, there is every likelihood that the original, more onerous version of the Mining Tax will be put back on the agenda.
And Labor, hand on heart, will be able to argue that it wasn’t contemplating reneging on the revised deal, but that it’s hand will have been forced by the Green majority in the Senate.
There are so many things wrong with the proposed tax that it’s almost embarrassing. Firstly, the fact it is so narrowly based, applying to just two commodities – iron ore and coal. Secondly, we’ve seen the huge miscalculations from Treasury with respect to forecasts of revenue and commodity prices, all within a matter of weeks.
This shows that the tax really has nothing to do with tax reform or ‘Australians getting a fair share of their nation’s resources’, as the Government’s propaganda would have us believe. It’s more about a blatant tax grab from our most successful industry.
In the first two months following the release of the Henry Review, Treasurer Wayne Swan conceded the original RSPT would have taxed the mining industry around $A24 billion in the first two years from mid-2012 – double the amount touted in the May budget.
But Mr Swan then said his revised MRRT just weeks after it was announced was likely to see a revenue shortfall of $7.5 billion from the $10.5 billion previously predicted. But Treasury on the same day conveniently ratcheted up iron ore and coal prices assumptions for the coming years to effectively plug the shortfall. This was a completely scandalous act of accounting deception.
And if the tax was all about the nation’s broader interests being served, why then are major world-class projects like Cannington and Olympic Dam exempt from the tax?
Those companies operating in sectors that aren’t currently affected by the tax changes will inevitably feel the impact through higher foreign risk perceptions and higher financing costs.
And let’s not rule out the potential for the tax to be broadened to include other commodities down the track. The government knows a cash cow when it sees one.
The Government ignores the smaller end of the mining industry at its own peril. If the emerging companies suffer, then the likelihood of identifying these deposits that the Government keeps talking about as being rightfully ours diminishes.
Those valuable resources assets are only ours and can only be exploited when they're actually discovered.
The views expressed above are the author's, not FNArena's (see our disclaimer).
