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ยป Taxes undue punishment for mining sector
Date published: 21/07/2011
Taxes undue punishment for mining sector
The resources industry is very much under attack from politicians on a dual-front, in the form of a revised and onerous mining tax, combined with the carbon tax.
Perhaps it’s due to a heightened level of complacency, but meddling politicians in this country want to interfere and hamstring the one sector of our economy that’s actually working well – the mining industry.
At a time when we should be doing everything in our power to encourage investment in our sector, our politicians instead seem to be doing everything they can to drive investors away.
Politicians point to the intelligence of their sizeable spending programs in helping to keep Australia out of recession. If only that were the case. The truth is that if it was spending alone that helped keep the financial wolves from the door in this country, then the United States and Western Europe would not be in the financial mire that they are now.
After all, they spent a much greater sum in terms of stimulus measures, representing a much larger proportion of their respective GDPs.
The key differentiating factor between us and the economic strugglers has been the fact that we are fortunate enough to have a strong, vibrant and efficient mining industry. A mining industry located just a relatively short shipping-distance away from the world’s modern-day economic powerhouse, China. China is purchasing whatever we can supply, as quickly as we can produce it.
But to envious politicians in Canberra, the resource sector is viewed as a necessary evil. Greens party leader Bob Brown’s recent comments about the industry are both naive and dangerous, as they highlight a Greens’ agenda aimed at phasing out Australia’s coal industry – an act that can only be viewed as economic vandalism.
His attacks on the level of foreign investment in our resource sector are also misinformed, as he focuses merely on the earnings and dividends that flow out of the country. He conveniently ignores the much greater sum that’s reinvested in the country. The many hundreds of billions of dollars of taxation and royalties that have been captured by state and federal governments over recent years, in addition to the salaries and benefits paid to employees and the sums invested in exploration and development.
Putting things firmly into perspective, if it were not for foreign investment dating back to the 1850s, we would not have a mining industry to speak of in this country.
Investment dollars from all over the world – initially from Britain, Europe, North America and Japan, and now emerging economic juggernauts China and India – have helped establish over the past 150 years the resources industry that our politicians now seemingly take for granted.
The Pilbara iron ore operations and the Eastern States coal industries that now supply the bulk of the export revenues that helped keep us out of recession were established by companies with long-term vision, roughly 40 years ago. Such massive investment decisions aren’t made lightly. They reflect a level of confidence in the future financial and political stability of our country.
But our politicians conveniently ignore this. In a thinly-veiled, politically-motivated cash-grab, they appear comfortable to threaten the long-term health and investment appeal of our standout industry, the mining sector.
I don’t know of any situation where greater levels of taxation, no matter what the level of offsetting compensation, have led to prosperity and growth in an industry. The carbon tax will in reality affect everyone, not just the “top polluters” as the government rather disparagingly likes to call them.
At the end of the day the tax is illogical and ill-timed and will hit ordinary people at a time when they are already nervous about spending. Do ordinary voters really think that they will be better off under a carbon tax? Does the government really think the tax will not have a serious negative impact on consumer sentiment?
The move to so-called “renewable” is farcical. In reality, wind, wave, solar and whatever else falls into that category will only ever account for around 20% (at best) of baseload power generation. The bulk of power generation will still have to be provided by a combination of coal, gas and nuclear energy. That is the harsh reality, no matter what your politics might be.
Inevitably the impacts of greater economic imposts on our minerals industry will not necessarily be immediately evident, but will escalate as time passes. While mineral deposits are of course not transportable, investment dollars are.
Our mid-cap and junior players, which now account for the bulk of greenfields exploration in this country, will increasingly shift their investment focus offshore as a result of greater government financial disincentives. As a result, the next generation of Pilbaras, Olympic Dams, Prominent Hills and Bowen Basins won’t be found here in Australia, but increasingly in Africa, Central Asia and South America.
The real effects of this fundamental investment shift on Australia, which may not be immediately apparent, will be felt a decade down the track and beyond, when fewer, newer operations are brought on stream in this country.
When politicians refer to the supposed damage being done to future generations by inaction on the climate change front, they blindly ignore the damage they themselves are doing to future generations through the systematic degradation of our most lucrative and best performing industry, the mining sector. Labor and Greens politicians should jointly be held to account for their actions.
For more information, or to discuss your specific situation, please contact me directly.
Gavin Wendt
Founding Director & Senior Resource Analyst
MineLife Pty Ltd
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