Govt creating sovereign risk: Hockey

FEDERAL shadow treasurer Joe Hockey has expressed bewilderment over Australia’s increased sovereign risk in the wake of the proposed Mineral Resources Rent Tax and has promised to repeal it as soon as the Liberal Party regains power.

Kristie Batten
Govt creating sovereign risk: Hockey

Addressing the Australian Metals and Mining Association National Conference on the Gold Coast on Friday morning, Hockey said the MRRT was damaging a mining industry that relied heavily on foreign investment.

According to Hockey, around 15% of all foreign investment in 2000 was directed to the mining industry, which has swelled to more than 50% today.

Hockey said investment is now under threat as a result of the mining tax.

“From my perspective, the great lesson out of the global financial crisis is that sovereign risk remains a big issue,” he said.

“How on God’s earth could there be increasing sovereign risk in a nation that has an ever increasing demand for its natural resources?

“How could the risk be even greater when we have essentially political stability, we have a good rule of law – how could it be that we have greater sovereign risk?”

He blamed the Gillard government for being uncertain about its own surprise decisions.

“The market and investors do not like surprises,” Hockey said.

“If mining has a strong level of investment today, think of what it could have been and the stability that could have been there had there not been, as of today, three different remunerations of the mining tax, three different remunerations of the carbon tax and a government that delivers on its word.”

He said he was surprised by the Minerals Council of Australia’s submission to the Henry Tax Review that Canberra be the sole collector of taxes and said it was an “unwise move”

“I’ll give you a little insight into politics – the last thing you want to do is stop paying the person that makes the hard decisions,” Hockey said.

“It’s the state governments that make the decisions about environmental management, the state governments that have to approve development applications, it is the state government land and if the money goes to Canberra it is going to be a disincentive for the states that make the hard decisions that involve the mining industry and exploration and development.”

Hockey said he now expected other state governments to follow Western Australia’s lead and raise state royalties.

He said out of the comprehensive Henry Tax Review just two recommendations out of 132 were adopted, one of which was the mining tax, which wasn’t in the form the review recommended.

“Clearly it was more about gouging money than it was about actually delivering a fairer tax system,” he said.

Hockey said it is highly likely that the resources tax is still not in its final form.

“What is perfectly clear is that the mining tax still has a long way to go in a hung parliament with the dramatic uncertainty of what the Greens may do, let alone what some of the independents might do.

“What I will say to you with absolute conviction is the Coalition is opposed to the mining tax and if the mining tax comes through, when we get into government we will repeal the mining tax.

“For every boom there is a bust and this is a sunny day tax with everyday expenditure against it and that just leaves us with an increased structural deficit at the end of the day.”


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