Last week Greens Leader Bob Brown told the National Press Club that Kevin Rudd’s resources super-profits tax was a “good idea” and the party is polling at record levels this year.
The Labor party has struck a preferences deal with the emerging third force in politics and is poised to win the August 21 election by a wide margin.
While the revised Minerals Resource Rent Tax proposal only hits coal and iron ore operations, one could question the credibility of promises made in the lead up to an election.
As with the Goods and Services Tax in the late 1990s, it appears the Treasury understated the amount of tax to be milked under the resources super-profits tax.
Treasurer Wayne Swan recently conceded the RSPT would have taxed the mining industry $A24 billion in the first two years from mid-2012 – double the amount touted in the May budget.
The MRRT – despite all the concessions won by the trio of BHP Billiton, Rio Tinto and Xstrata – is still expected to raise $10.5 billion, but this is only due to recent Treasury forecasts of higher commodity prices.
While predicting commodity prices is no easy game during these turbulent economic times, guessing the next moves from Canberra is even harder.
For quite some time Mine Life senior resources analyst Gavin Wendt was on the money with his forecast that the Rudd government would not back down from the RSPT – and he was right – but not even Rudd saw an execution coming from union factional warlords.
With the election campaign underway and mainstay issues of health, education and interest rates starting to re-emerge, Wendt feels the mining industry has been largely “outwitted and out outmanoeuvred” by the federal government.
“Essentially Labor was going out the back door this federal election about a month ago,” he told ILN.
While the big three are looking at a good outcome with the MRRT as it raises their effective tax rates to a bearable degree, they might not be prepared for the impact of the Greens in the Senate.
Wendt warned the Gillard government has a good excuse ready to break its promises with the major miners.
“There is no guarantee there in any shape or form. They can change the goal posts as soon as they get back in. They can say ‘circumstances have changed – we have looked into this in more detail’.
“They could use the argument they have been pressured by the Greens because the Greens could well end up with the balance of power.
“The Greens have said that they want the original tax back in place effectively – they want something that what was going to bring in close to the $12 billion that the original tax was going to bring in.”
Wendt said the industry made a strategic error in pulling its advertising campaign against the mining tax.
“The logical thing for resource companies to be doing is to be making this an election issue once again and they should resume their advertising campaign.
“I cannot understand why they ever stopped the advertising campaign because to think that this tax is damaging anyway, even if it doesn’t affect you, even if you’re not an iron ore or a coking coal producer, it’s a very damaging tax particularly from the perception point of view.
“And it is going to have an impact and of course you [have] got to get the tax wiped out in the first place because you can’t let it go through as it is because these things change, the goal posts get moved – it’s going to be applied to other commodities down the track.”
While the MRRT might have a stronger impact on some of the smaller compatriots of the big three, Wendt does not expect that merely speaking out on the issue will get much traction during the election campaign.
“Since most of them are in WA they can speak out as much as they like but they’re not going to get any air time over here in the east.
“That’s the real issue, people that read the Age and the Sydney Morning Herald and listen to radio here – mining doesn’t figure on the radar screen – unless they turn on the tele and see an advertisement.
“I would think they should be drumming up more support for the Liberal party in that regard to actually get rid of the tax because if you go through with some sort of agreement that can easily be changed – I think that’s the big danger – that once the election is over the gloves could come off.
“And as far as Labor is concerned they could start ratcheting up the tax – you know they have got three years to bash it through and they could well use the pretext of being pressured by the Greens.”