A force or a farce?

SINCE the August federal election there has been much commentary on the rise of the Greens in our political system. By Minerals Council of Australia CEO Mitch Hooke
A force or a farce? A force or a farce? A force or a farce? A force or a farce? A force or a farce?

Minerals Council of Australia chief executive Mitchell H Hooke

Staff Reporter

Published in the December 2010 Australia’s Mining Monthly

Depending on who you believe, they are either the new force of left-wing politics or a passing political fad.

Irrespective of what commentators say, the reality is that in addition to a Lower House seat, the Greens’ nine senators will hold the balance of power in the Upper House from July 1, 2011.

This will give the Greens significant political influence as the Gillard government seeks to move contentious legislation through Parliament, including the proposed mining tax and policy measures to deal with climate change.

It should cast a real spotlight of scrutiny and accountability on the Greens’ policies and performance.

The Greens’ policy platform provides some insight into what the Australian minerals industry can expect. On the positive, the party states it is committed to a “viable mining and mineral exploration sector”. It prescribes a platform of rigorous environmental and social impact assessments preceding mining projects, recognition of the desires and needs of indigenous Australians and a rather convoluted approach to reclamation/rehabilitation and financial surety.

On the surface it is consistent with the minerals industry’s commitment to the pursuit of sustainable development. On the negative side of the ledger, the party advocates prohibiting the exploration, mining and export of uranium and the prohibition of new coal mines and the expansion of existing mines.

In other words, the Greens would shut down the uranium and coal industries in Australia, with no apparent regard for the significant adverse impact this would have on the economy. Our competitors would relish the opportunity to take our market share.

It is hard to see how the Greens’ policy of “shut down” accords with its stated goal of a “viable” mining sector. According to the Australian Bureau of Agricultural and Resource Economics, coal and uranium generate about $52 billion in export revenue for Australia and support about half of the 170,000 people directly employed in mining.

This revenue and these jobs (not to mention the multiplier effects on indirect employment generated by these two mining sectors) would simply vanish from the Australian minerals industry if the Greens’ policies were enacted. The Greens have no stated economic alternative to replace the revenue and jobs lost other than the mantra of creating a “sustainable” economy built on the substitution of renewable energies for fossil fuels. This seems to misread the sheer magnitude of the modern economy.

Replacing one of Victoria’s 1.6-gigawatt power plants, for example, would require around 3600 wind turbines.

When you extrapolate this kind of thinking to the big policy issues to be sorted next year – the Minerals Resource Rent Tax and carbon pricing key among them – the minerals industry has cause for concern. Greens leader Bob Brown has declared his party will seek to amend the MRRT. While we are working constructively with the MRRT Policy Transition Group, chaired by Resources Minister Martin Ferguson and Don Argus, the crediting of state or territory royalties within the terms of the heads of agreement between BHP Billiton, Rio Tinto and Xstrata, and the prime minister and treasurer, remains contentious.

The HoA clearly states “all” royalties will be credited not “some”. Any compromise of this position runs the risk of increasing the effective tax rate (the combination of royalties + company tax + MRRT) above 45%. This is the tipping point where our tax regime becomes internationally uncompetitive.

The prime minister has signalled that 2011 will be the year Australia decides on how to price carbon – the government’s principle policy response to climate change. We will strongly urge the government to not revisit the flaws of the Carbon Pollution Reduction Scheme – its previous emissions trading scheme. The MCA supports a price on carbon in a carbon constrained world, and we strongly advocate the necessity for a global protocol and the development and deployment of low emissions technologies. But, we objected to the design of the CPRS, which would have imposed the highest carbon costs on Australia.

This would place the Australian industry at a significant disadvantage without materially reducing global carbon emissions. We expect there will be a global carbon price as more countries move to low emission economies and carbon constraints.

Australia’s challenge in pricing carbon is to establish a “policy framework” that provides confidence in a carbon pricing regime reconciled with the business case for change and global developments.

On behalf of the MCA, I wish everyone a merry Christmas and a safe and happy New Year. It has been a tumultuous year for the Australian minerals industry and there are likely to be even greater challenges and more upheaval in 2011.