Tuesday, 22 November 2011
Minerals Resource Rent Tax Bill 2011, Minerals Resource Rent Tax (Consequential Amendments and Transitional Provisions) Bill 2011, Minerals Resource Rent Tax (Imposition — General) Bill 2011, Minerals Resource Rent Tax (Imposition — Customs) Bill 2011, Minerals Resource Rent Tax (Imposition — Excise) Bill 2011, Petroleum Resource Rent Tax Assessment Amendment Bill 2011, Petroleum Resource Rent Tax (Imposition — General) Bill 2011, Petroleum Resource Rent Tax (Imposition — Customs) Bill 2011, Petroleum Resource Rent Tax (Imposition — Excise) Bill 2011, Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011, Superannuation Guarantee (Administration) Amendment Bill 2011; Second Reading
Debate resumed on the motion:
That this bill be now read a second time.
It is a great privilege to be able to speak on this legislation which really does complete the package of economic reforms that the government is pursuing this year. It was very interesting to follow the comments of the member for Bowman, who highlighted the fact that our mineral resources in this nation are, in fact, finite. He also delineated some of the time limits for some of those resources, and that is the entire point. You only get one go at those resources: you dig them up, you sell them and they are gone. They do not come back as they are non-renewable resources. One of the things that he forgot to highlight in his speech is that the price of resources fluctuates during their lifetime. If we have 100 years worth of coal, we may well have that length of time for that resource, but the price will go up and down during that time. What does any prudent person in business and any prudent government do in managing resources? They make sure that they get the best possible price they can while they have the resources in a good price bracket. This is the situation we are in at the present time. We are enjoying good prices for our commodities; some would even say we are enjoying super prices. In fact, if we take one example, BHP-Billiton, and look at the profits that they made last year, we see that they made $22.48 billion in profits. This is an extraordinary sum of money. It is an 86 per cent increase on their profits from the previous year, which were up by about 116 per cent on their profits the year before that. Obviously, when you are looking at a sum like that, you are looking at a figure that is greater than the GDP of some countries, so by any definition you are talking about superprofits.
The thing we are discussing here is simply, at the end of the day, taxation efficiency. This is really a very simple point to grasp, which is why I do not understand why some members of the coalition do not grasp it. I know that many do, and I would ask that the Leader of the Opposition listen to his backbench and to those members of the coalition who would dearly love to be able to get behind a vote for this legislation because they do understand the principles behind it. As I said, effectively we are dealing here with efficiency in taxation. The issue is that the tax expands and contracts with the profitability of a company. Instead of being a fixed royalty system, it is a system based on the actual profits that the company has earned. It is a very simple proposition, and the mining companies themselves support and understand it. In fact, they were advocating it before we endeavoured to go down this road.
I do have to laugh at the member for Bowman's suggestion that we are picking on defenceless mining companies. They do so seem to be so hard up and in such difficult circumstances in being able to mount a case! However, a simple $20 million advertising campaign occasionally thrown out before the public indicates that perhaps they do not deserve the sympathy that the member for Bowman has bestowed upon them. He has talked about the sovereign risk that this tax presents to the country. Of course, this is a complete fallacy and a complete fantasy; it is another element of the theme of misinformation that the opposition leader has pursued. We know that, despite the fact that this measure is being introduced, there is some $430 billion marching this way in investment in the minerals resource sector. In the country area I represent we have a saying: 'money talks, bulldust walks'. Money is talking, and money is moving. The investors do not regard this tax as a sovereign risk, and there are several reasons that it is not a sovereign risk.
I have mentioned the flexibility that it introduces into the system based on the profitability of companies, and there are other reasons that Australia is an attractive location for investment. One reason is the geological convenience of the minerals that we possess and the easy winning of those resources, as opposed to the difficult winning of resources in many other countries. Another very important reason is geographic proximity. Australia is well positioned in relation to the markets that are absorbing these resources and the people who are buying our stuff: China and India, which are dynamic economies in our region. There are others, including some in the Asian-Pacific area, who are also buying our resources. They are creating the Asian-Pacific century that we are talking about with rising affluent communities and the rising demand of the booming economies of those regions. Our market is close to them, and there are cost savings in transporting and delivering resources to these proximate markets. So geographic proximity is another advantage.
Political stability is another reason. In Africa and other locations there may be mineral resources, but the political stability there is a distinct factor, and it is a distinct question to be asked in assessing whether or not to make sovereign investments in those places. Obviously, Australia compares extremely well. Infrastructure efficiency is another reason. In some of these countries infrastructure problems much worse than those than exist in Australia are presented to companies. Of course, we have a long way to go in improving the efficiency of our infrastructure. We could be better, we could do better—and this goes to the real issue: in the 12 years of the Howard 'Rip Van Winkle' period of government, they were reaping in what they could get from the mining boom at the same time as they were not investing in the critical infrastructure that this country needed. Also, they were not dealing with the difficulties posed to our economy by the 'Dutch disease' which we often talk about—that is, the imbalance that is caused in the rest of the economy by a mining boom, the pressures it puts on the dollar to rise and the flow-on impact that has on other businesses in a country. The coalition missed the opportunity to do something about that during Mining Boom Mark 1. This government has been determined not to miss such an opportunity, and we are acting to use this mining boom to deal with the inequitable effects on the rest of the economy and the damage caused to the rest of the economy. We will do that by creating a reduction in company tax.
The Leader of the Opposition gets out there and tells people he is supporting small business. When he goes out to Queanbeyan—he doesn't spend any money when he goes out there, unfortunately—he invades our small businesses and tells them all sorts of porkies. At the end of the day, he is the major threat to those small businesses. He has always been their major threat. He is attempting to deny them access to this reduction in their company tax. He is attempting to deny them access to a $6,500 instant write-off for their assets, which can be multiple assets adding up to $6,500—a huge opportunity for small businesses. Of course, there are the benefits that will flow to our workforce as well, which is also at the heart of this legislation. Our workforce is going to benefit so much from the superannuation reforms we are talking about here. The minerals resource rent tax is helping to fund those reforms, not only through the reduction of the company tax but also through the generous provisions that will apply with the 15 per cent tax concessional arrangements for those in the $37,000 bracket. This has to be paid for, and it will be paid for by the tax.
We know the opposition have flip-flopped over superannuation; there has been great division there. The member for Goldstein has famously been out there saying that he was not consulted on superannuation. But superannuation has to be paid for, and we know that the coalition has no plan. The funding of super is part of the expanding $70 billion black hole of the coalition's approach to economic issues—a black hole whose scope and size would shock even Stephen Hawking.
This package is one of the ways we are going to pay for that superannuation reform, which will provide for the retirement incomes that our workforce needs and that the people of my region need. It will also take the long-term burden off the government in funding the pensions we might face with an ageing population. So my workers in Eden-Monaro will welcome this package; they do welcome it. My 18,200 small businesses welcome and are looking forward to the extra support that will be provided through this package.
It is part of the broader economic agenda that this government has set, which is a story of unbroken success. This is the only government in the history of Australia that has avoided recession in the context of an international recession. Look at the other indicia: we have got interest rates now at 4.5 per cent, which is another factor providing relief not only to the workforce but also to small businesses; inflation is at 3.5 per cent; unemployment is at 5.2 per cent; we have record terms of trade; and, as I mentioned, a record flow of investment dollars. These are numbers that the coalition was never able to match. They are outstanding numbers and do represent the fact that this government has been the most successful in this country's history at addressing the economic challenges that we face. It is a key distinguishing point: we address these issues of productivity through dealing with infrastructure, skills and innovation, whereas the coalition would seek to make workers pay to achieve productivity gains. That is the key philosophical difference between us.
It is the Leader of the Opposition who wants to hurt the working people of this country. He slept while we put in place measures that saved 200,000 jobs. He opposed the Clean Energy Future initiative, which will deliver 1.6 million jobs. He opposed the steel package, which is out there and accepted by the steel industry and saving workers jobs. So his position is to hurt workers and to hurt the economy. We will not allow that to happen. We are going to pursue this reform. We are going to make sure the workers of this country get the support they deserve for a prosperous future with satisfying jobs and that we deal with the challenges that this country faces.
It is a pleasure to discuss these important resource tax bills—the bundle of them that are before the chamber today—and to follow the member for Eden-Monaro claiming some world-class championship performance from the Labor government. He did not mention, though, that there have been 300,000 jobs lost in small business since the election of Labor. More than 20,000 fewer small businesses are now contributing to our economy, yet it is the small business community that Labor seeks to use and misuse as the justification for this cash grab from the mining sector.
I will come back to the implications of a number of these bills for the small business community, but is very interesting to hear Labor members talk about all the goodies they claim will be funded from this mining tax and try to blissfully skate over the complete confusion and lack of certainty about just what revenue this mining tax will raise, about how the government has failed to provide any credible modelling for the revenue streams that will flow from this measure, and about how it persists in asserting certain revenue will come into the Commonwealth coffers when all the industry analysis and all the companies that have an obligation of continuous disclosure to the share market are making different claims. Everyone is looking around wondering just which mining companies are going to be paying this tax. It is quite amazing. We hear that this is designed to target the 'big three', but the big three miners have done quite a deft move on a Prime Minister out of her depth in the negotiations on the minerals resource rent tax.
The concessions the government has entertained in order to achieve peace have brought a great grin and a great smile to the big three miners because they have done over the government—and you know that, Mr Deputy Speaker Scott. There are concessions around offsetting and rebating state royalties, which are the cost of the goods—the price paid by miners to extract these minerals—the very thing that the government claims it is addressing. So when state governments—the proper jurisdiction that holds the Crown's interest in these resources—choose to increase royalties, those states are then penalised by the Commonwealth through the Grants Commission process, and the miners are inoculated as well because they are rebated against the minerals resource rent tax. These resources—and I will quote the Labor language here—are 'the property of the Australian people', the property right is exercised through the state governments, and the decision about the price at which those resources are made available is the level of royalties. So, in the very design of this tax, whenever the state governments exercise their constitutional responsibilities to revisit the cost of goods, they get penalised by the Commonwealth—not to the disadvantage of the mining companies but to the disadvantage of the state governments doing what they are constitutionally obliged to do. It is interesting that you hear the Labor government and its members talk about the 'big three' and say that Herculean profits are the motive, but the big three have managed to cut a deal that cuts them out of the impact of the mining tax for at least the forward estimates.
They have been able to say, 'Offset any royalty movements,' and the government said that is okay. Then they said, 'Apply the tax to EBIT, earnings before interest and taxation.' That is a great idea if you are a big miner that has not had to borrow money to undertake the project, because you have no interest payments. So they think that is fantastic. But other miners that have had to borrow funds to undertake a mining project are going to cop it in the neck. That is a big win for the big miners, who can draw from their own resources to finance a project. The third thing is the opportunity for the big mining companies to depreciate their assets all over again. These long-run and, in the words of the government, highly profitable mines have been depreciated, often with accelerated depreciation and other allowances, to a point where their book value is quite minimal. Those miners can now revalue those mines, mark them to market and start depreciating them all over again. So what they have done is absolutely stooge the government about these concessions to the point where they will not be paying any of this tax. We have seen that reported in market analyst reports and in reports to the stock market.
So where is the money going to come from? The government refuse to disclose that. With all this uncertainty and the fiction about the revenue streams this is going to generate, not only have the government gone and spent all that fictitious revenue; they have gone and spent a whole lot more. On the assumption of a 140-year high in our terms of trade—that is, where we are getting the highest return for our resources compared to what we are spending on imports—having let the big miners off the hook by being outsmarted and then spending more than the fictitious amount of revenue the tax is going to raise, the government comes in here and spruiks the supposed benefits of the tax. What the benefits are doing is simply adding to the already enormous structural deficit in the Commonwealth budget. What the government are doing is again overspending money they have no certainty they will receive on conditions that they hope will stay the best they have been in 140 years and then they end up overspending money they are not going to get anyway. That is what this is about. This is why people are rightly concerned about how ham-fistedly and incompetently the government has gone about the various incarnations of this mining tax.
What is interesting too is that this attack on the royalty system is actually about the Commonwealth government saying to the states and the miners: 'We don't think the cost of goods matters any longer; it is about the profit that is derived from them.' If you are a well-run mine that is generating profits, you will be paying more in tax. If you are not running so well and you are not making big profits, you will be paying less tax. But if the state says, 'Regardless of whether you are profitable or not, these finite natural resources have a value that is captured in the royalty as the cost of goods,' they are giving away that proper valuation of the cost of those resources by the very design of this system. They are saying to the states, 'We'll punish you if you want to apply a higher cost of goods for these scarce natural resources.' But if the company makes a hash of the way in which they extract those resources and cannot derive major profits, the resources will actually generate less for the Australian taxpayer than if they happen to be extracted by someone who is operating profitably. So you have multiple values for these scarce resources depending not on the value of the commodity and what it might reap in the international market but on how profitable the company that extracts them is. So you are actually devaluing those natural resources by saying royalties, the cost of goods, do not matter any longer and if a state government goes there you are going to punish them for it. What a bizarre approach it is when government tries to argue that it is all about securing proper value for those scarce resources for the Australian public when they are actually putting aside and penalising the very mechanism that ensures we get proper value for those resources regardless of how profitable the company extracting them might be.
But also embedded among these 11 bills are some other quite extraordinary changes. I do not know whether people realise that the 400,000 smallest businesses in Australia are going to cop it in the neck because of these bills. Phillip Hudson captured it perfectly in this Herald Sun headline on Monday: 'Small business tax bomb'. Whilst the government runs around saying this is going to be great for small business, in these bills is the removal of the entrepreneurs tax offset—a 25 per cent discount on the tax paid on the incomes of our 400,000 smallest businesses. These are home based businesses, micro-enterprises, start-up retail operations, even people juggling part-time work with retirement who might consult and bring in a little bit of income. That 25 per cent discount is being ripped away by this package of bills. People earning incomes of up to $50,000, which is not an enormous income in anyone's mind, are going to be paying 25 per cent more tax because the removal of that 25 per cent discount, being the entrepreneurs tax offset, is part of this package of bills.
You do not hear the government saying anything about that, do you? What an enormous surprise that will come for a home based business, for a retailer just starting out, for someone who might offer their skills and experience as a professional service provider or for someone postponing retirement while they work a few days a week and maybe consult. You do not hear any of that. The government wants to maintain the fiction that what it is doing is good for small business. These are some 400,000 of our smallest businesses. Those that earn up to $75,000 get some benefit; the offset tapers out at $75,000; no ETO is available above an income of $75,000. But people earning up to $50,000 get the full 25 per cent discount and it tapers down as income increases to $75,000. They are going to get a tax bill rise. Many of them will get a tax bill rise of well over $10 a week and for some of them it is as much is $16 a week. But you never hear a word from the government about that. This is supposedly the package that is great news for small business. This package is supposedly spreading the benefits of the booming mining sector. The big three, who I have already outlined, expect to pay no extra tax, and may even end up paying less, yet the 400,000 smallest businesses in Australia will be paying more tax.
That is how we are spreading the benefit. We are giving it in the neck with a small business tax bomb by the abolition of the entrepreneurs tax offset while the big three miners laugh at the government's incompetence for caving in on deals that mean they will be paying hardly anything under these new arrangements.
But it gets worse. The government then goes and talks about things like the accelerated depreciation that is available for some small business purchases. I am all for helping small business out and tax changes need to be beneficial and affordable. I have already touched on the structural deficit that puts a big question mark over affordability. But if you are a cash-strapped small business, what comfort would you gain from the Treasurer telling you, 'You can rock on out and go and buy a new car and there will be cash-flow benefit.'? What kind of warped logic tells you that you spend $30,000 on a new ute to get $1,500 or $1,600 back as a cash benefit? What sort of cash-flow ignoramus would come up with such an assertion, that that is cash-flow positive for a small business? Spend 30 grand of your cash, no matter how cash-strapped you are, and you might get $1,600 back. What a cunning plan. I wonder how many small businesses have thought that is good for their cash flow. But that is embedded in here as well and that is being sold as another advantage: spend a lot to get a little back, in the context of small businesses doing it really hard in this difficult economic climate where there seems to be no-one interested in their plight within the government ranks.
It goes even further. You heard earlier speakers talking about the increase in the superannuation guarantee contribution, as if the mining tax is going to pay for that. News flash to the Labor members: employer funded superannuation is funded by employers. So when the government is running around saying to Australian working men and women, 'You're going to get extra super and the mining tax is going to pay for it,' uh uh, not right. Employers will be paying that. Let us go back to that cash-strapped small business. They are going to have a three per cent increase in their payroll costs. There is no locked-in trade-off for reduction in wage claims, not like the Accord days when the unions and the Labor government of the day said, 'We will deny working men and women full wage increases. We will offset them by an increase in superannuation contributions.' There is no trade-off of that kind whatsoever, just an added cost on small businesses trying to survive and create opportunities for others in a very difficult trading environment.
We have rightly said we will oppose that because the Henry tax review did not even recommend that change. They actually said that with the current contributions through the superannuation guarantee levy you can achieve improved adequacy and coverage for retirement incomes by looking at the way contributions and earnings are taxed. The Henry tax review did not advocate an increase. I understand that the Henry tax review was sensitive to the limited capacity for particularly small businesses to keep paying more and more and more at a time when their profitability and their viability are under great duress. That is why the opposition opposes that measure, because the outcome it seeks to achieve can, according to Henry, be achieved in another way that does not make a difficult situation even worse for small business. But we cannot get hold of any of that Henry tax review modelling despite it being $22 million worth of work funded by the taxpayer. The government keeps it so close that you cannot even tease these things out. The government wants to push on with this plan and then criticises the opposition for saying, 'If you legislate for these changes and then they are factored into future wage arrangements, unravelling that is a pretty challenging thing to do.' The smart thing to do is not proceed with it at this time and actually bring out the Henry tax review recommendations.
So let us have none of this fiction that this is somehow sharing the benefits of the mining sector. Let us have none of this nonsense that this package is good for small business, because at every turn it is a pea and thimble trick where the benefits are modest and the impacts are severe. It just goes to show that this government does not understand small business and does nothing to help them out in these difficult times. (Time expired)
This Minerals Resource Rent Tax Bill is an important bill because the economy is in transition. How well we manage the transition is going to determine our future, and this bill is important in helping us make that transition. The more that I visit regional Australia, which is the patches in the patchwork economy, the more I am convinced that we are on the cusp of a new era of sustained long-term growth. The world and the region are not just demanding our resources, they are demanding our skills. They have always sought our comparative advantage; now they look to our competitive advantage, our capabilities. That means ensuring the current resources boom is redistributed to secure the longer-term opportunities in so many of these other spaces. That is why the bill is important.
The minerals resource rent tax is not a tax for general revenue purposes. It is specifically designed to take a slice of the excess profits of the nation's natural resources enjoying incredibly high prices and reinvesting that. It is a tax on the profits of an extraordinary resource boom. These are resources owned by the nation, and it is only appropriate that the benefits of the boom should be spread accordingly back into the nation. None of the proceeds of this tax goes to government coffers; all of it, and more, is going to lower the company tax rate, increase the superannuation guarantee and invest in much-needed infrastructure around the nation. The MRRT will be the community dividend from the resources boom, assisting our many and diverse regions to better diversify their economic base to secure the basis upon which they can better themselves and secure their future.
Under this tax we will redistribute in a way that cuts the company tax rate and in addition gives 2.7 million small businesses additional tax breaks. The superannuation guarantee will be lifted from nine to 12 per cent. This is continuing the great Labor legacy of compulsory superannuation in this country, one which has been fought every inch of the way by those who sit opposite. As a consequence it will see retirement income boosted, with 8.4 million members benefiting. It will see national savings boosted. Already the funds under management equal $1.3 trillion.
This is bigger than our national GDP. With the increase in the super guarantee, this will increase by one-third by the end of the decade. It also will grow our financial services sector, already a growth export, and it will encourage greater investment both here and overseas.
In addition, the nation's infrastructure is going to be boosted—$6 billion will go toward road, rail, ports and social infrastructure, particularly in Western Australia, Queensland and New South Wales, the companies in which states are going to be paying the bulk of those taxes. But this investment in infrastructure is important because it will avoid the capacity constraints that held us back earlier this decade. Almost $600 million will go to regional infrastructure through our Regional Development Australia Fund. But this will only happen when this bill passes and the threat of repeal dissipates.
The only threat to these benefits that I have outlined is the opposition. Tony Abbott is the most negative Leader of the Opposition this country has ever seen. He stands for nothing and he opposes everything. If he were to win the election, company taxes would go back up, tax breaks for small businesses would be taken away and vital infrastructure for regional Australia would be stopped in its tracks. On his recent promise to keep the increase in the superannuation guarantee, the big question that has to be asked is: how is he going to pay for it? If he repeals the tax, how will he fund the superannuation? This is a credibility gap the opposition already suffers from because it has already run up a $70 billion black hole in unfunded election promises. In Tony Abbott and his cohorts saying no to this tax, they are saying no to company tax cuts, no to superannuation, no to tax cuts benefits to small business and no to infrastructure.
Let's look at some of the regional infrastructure at direct risk from Tony Abbott. I mentioned the additional $600 million in the Regional Development Australia Fund. Already this fund has allocated $150 million in the first round, recently announced. The second round, which we have increased to $200 million, is now out for consideration. Some of the proposals that were funded under the first round were: airport upgrades at Ballina, Griffith and Port Lincoln; leisure and recreation facilities at Hamilton, Rockhampton, Karratha, Streaky Bay and the Barossa; arts and culture institutions in Newcastle, Bendigo, Geelong, Clunes, Glenorchy, Rockingham and the APY Lands; and community centre resources in North Gosford, Armidale in New South Wales, the Gold Coast, Esk, Wide Bay and Port Pirie. I can go on. There are the sheep saleyards at Katanning, the Kimberley Land Council improvements at Broome and the solar installations at the Flinders Ranges. All those are just in the first round. As I said, the second round will be $200 million, and there is the potential for three additional rounds, all around that amount, in the next couple of years—but only if this legislation passes and the threat of its repeal is taken away.
I am surprised at how many members come to my office, not just from those on our side of the parliament but from those who sit opposite.
People who live in the regions come advocating their causes. I welcome this, because this is what these funds should be about. As the member at the table says, those opposition members who come to my office are good local members—that is true. But, I tell you what, they could be better local members by telling their opposition leader to stop his blind opposition to this tax, because it is denying this vital investment in regional infrastructure, denying the opportunities for regions to grasp the opportunity in a two-speed economy, in a patchwork economy, to strengthen their economic and social base.
It is important, because the two common themes that all the regional bodies around the country talk about is the need to diversify their economic base. They looked at the regions that have done it and they understand those regions are the ones that have better employment prospects. They also know that their communities have to be more liveable. If they are going to attract people to their communities they have to provide the services and the facilities. That is what this Regional Development Australia Fund is about, and that is what investing in infrastructure is about. All those bids that the members come to me about are contingent on this tax passing. The risk to regional infrastructure in the regions is in the blind opposition from those that sit opposite.
It is also the case that the MRRT is a better designed tax for the mining sector than the royalties proposed by the states, because this is a tax that is only paid when a profit level is reached—unlike royalties, which are levied at the point of extraction, before any profit is made. I must say I find it strange that those in the mining sector, who continue to run the campaign against our tax, have said nothing about the royalties tax being increased in New South Wales and in Western Australia.
I say it is duplicitous. I also call it hypocritical, particularly when there are some who admit to having paid no tax in the mining sector for a significant number of years and think they should be paying less! What sort of a situation do they think they are in? This is the nonsense that they peddle.
The MRRT is not only important for regional Australia and for diversifying our economic base, but also is a fairer tax. It is a tax that redistributes the nation's wealth to secure the nation's future. It is about nation building and the creative transitioning of the nation. Just as we transitioned this economy for long-term sustainable growth in the eighties and nineties, Labor is using this as part of the exercise to look to the future and secure it.
These are bold reforms. Yes; they can be unpopular. Any vested interest group will complain if they think it is going to impact upon them. Unpopular it might be, but just as the floating of the dollar, the cutting of tariffs, the opening of the Australian economy, the introduction of superannuation and the introduction of Medicare were also unpopular, and opposed, these were decisions that Labor governments of the past persisted with.
And we are doing the same with this—not because we want to impose burdens, but because we want to spread the benefits to secure the future for the great opportunities that are ahead. Just think of the challenges that are in our region—the challenges of food security, water security, energy and resource security and skills development. These are all spaces that Australia not only plays well in but excels in.
If we want to continue to encourage diversification of the economy, investment in infrastructure and development of skills, energy and creativity, then we have to pursue these types of reforms. That is why our budgets—all of them—have invested so heavily in the drivers of economic growth: skills, innovation and infrastructure. The biggest infrastructure of the lot has been the National Broadband Network to connect the nation better, not just with itself but with the rest of the world.
This bill enables that investment to be built upon. That is why it needs to be seen as an important cog in the wheel. In the history of this country Labor governments have always been the dynamic leaders and provided the momentum for regional development, ultimately leading to significant national development. That is what this tax is about and that is why I join with all of those on our side of the parliament in urging this House to pass it.
While the minister is still in the chamber I would like to remind him that the Auditor-General will be looking at the first round of funding of RDA. We will be looking at that very closely, because what the Auditor-General has to say will be—
The point that I am making is that in the RDA spending that has already taken place the Auditor-General smelt something. The Auditor-General is having a look at it and we will be looking very closely at what the Auditor-General has to say about where that money went.
The Minerals Resource Rent Tax Bill 2011 is what we are debating today. This is a tax out of Kevin Rudd by Julia Gillard. It is a dog's breakfast. It is another tax by a government committed to taxing. Let's take a quick look. We have had the alcopops tax and the new tax on Australians working overseas. We have had the cut in what Australians can put into superannuation tax-free. There are restrictions on business losses and changes to the employee share scheme. There has been a cigarette tax hike of 25 per cent and the impost of ethanol taxation increases and LPG excise increases. There have been tightening restrictions on medical expenses you can claim on tax. There has been an increase in luxury car tax and the impost of the flood levy. There has been a tax increase on company cars and the abolition of the entrepreneur tax offset. I could go on and on and on. And I still have not mentioned the great big new mother of them all—the carbon tax.
This is a government that is committed to taxing. As a matter of fact, we need a bit of mandatory pre-commitment on the government's ability to tax! That might be the only way we can get them to stop their addiction to taxing people. We on the coalition side of the chamber, on the other hand, are committed to delivering lower, fairer and simpler taxes. And we will be spelling out how we are going to do this in very good time.
Look at the process this government has undertaken. It decided that it should have the Henry tax review but it chose to ignore the majority of its findings. The Henry tax review took two years, cost over $10 million, received over 1,500 submissions, consisted of a panel of five experts and produced a report with 1,332 pages and 138 recommendations. And what did this government do with the Henry tax review? It decided that it would just grab a very small part of it and then make sure that even with that small part—the concept of a resources rent tax—it would do its best to twist, buckle, disturb and distort it in a way that would make this tax a complete and utter dog's breakfast.
The minerals resource rent tax is divisive. It is complex. It is unfair. It is fiscally irresponsible and distorting. It reduces our international competitiveness and was developed through a highly flawed and improper process. It is a bad tax, which came out of a deeply flawed process.
The initial tax was announced without consultation. There was no consultation with either industry or with the state and territory governments even though it was going to have an impact on how state governments tax resources. A very small committee was then put together, which left out all the small miners, to finally come up with what we have before us today: a very flawed tax. The Henry tax review was supposed to be about root-and-branch reform to deliver a simpler, fairer tax system. Instead, the Gillard mining tax is much more complex and less fair. Another 287 pages of tax law have been created by this bill. That is up from 161 pages when the government released its first draft.
The minerals resource rent tax gives an unfair competitive advantage to the big three companies, who were allowed to design the mining tax. For example, the introduction of the market valuation system to calculate applicable deductions gives the big three a significant tax shield not available to small- and mid-tier companies. Smaller miners will either pay the minerals resource rent tax sooner or continue to pay royalties on production while also subject to an increased compliance burden. It makes me again ask the question that has been asked by the opposition in this place quite often in recent times: what happened to that 'one regulation comes in, one regulation goes out' policy which the government proposed in opposition and took to the 2007 election? It seems to have disappeared by the way, very sadly, because the increase in the regulatory burden on Australian companies and on Australian small businesses continues to increase. This tax is just another addition to that increase in the red-tape burden.
The Henry tax review recommended a lower tax burden for smaller mining ventures. I wonder whether Ken Henry, in his new role in advising the Prime Minister, is sitting there and saying to the Prime Minister: 'You got this a little bit wrong, Prime Minister. What I recommended, which was meant to happen for the smaller companies, you're allowing now for the bigger companies.' I hope he continues to get into the Prime Minister's ear on that. The idea was to help start-up ventures grow and prosper and to keep mining ventures in their decline phase alive longer. Instead, smaller and mid-tier mining ventures will pay a higher effective tax rate under the Gillard MRRT than the big three, who were given exclusive access to the negotiations with the government—a flawed process which has led to a flawed tax.
The Gillard mining tax will reduce our international competitiveness in attracting further investment. The focus should be on growing the size of the pie, not on cutting the pie into smaller and smaller pieces. We need to grow those smaller companies so that they can provide competition to the big three, not make it harder for them.
The Gillard mining tax package, believe it or not, will also leave the budget worse off. In particular—and this, sadly, is the history of this government—over the medium to long term it will worsen the current structural deficit. While we have the Minister for Regional Australia, Regional Development and Local Government in here talking about the money which will go into the regions, we have a government introducing a tax which will make the structural deficit in the medium to long term worse. What does that mean? It means that ultimately there will have to be a tightening of the belt. There is no doubt, if the Labor Party is still in government, where that belt tightening will take place: it will be regional and rural Australia that they will hit first. It is Labor being true to form, and I have no doubt that regional and rural Australia will be hit the hardest. It beggars belief that a government could design a tax and a package that goes with it that would make the medium- to long-term structural deficit worse when, as the BCA so eloquently highlighted in a report recently, the medium- to long-term structural deficit facing the Australian economy is one of the key things that we should be dealing with.
The Gillard mining tax deal makes the federal budget hostage to state and territory government decisions to increase royalties on iron ore and coal. Only this government could design a tax that cannot properly forecast what the forward revenue received from it will be. They did not negotiate with the states, they did not sit down with the states and work out how this tax could be sustainable; they just bludgeoned through and left the whole tax captive to what state and territory governments do to their royalties from iron ore and coal. If those states rightly want to increase those royalties because of their own budgetary circumstances, it impacts on the federal budget. That is untenable. Only a prime minister as weak at negotiating as this current Prime Minister could deliver such an option for the federal budget. It has left us in a position where we cannot look to the medium to long term and say with surety that we can fix the structural issues, which are growing and growing under this government, with our budget. The MRRT will impose a significant additional compliance cost and reduce the efficiency of our tax system. As I outlined earlier, the red-tape burden of this tax is significant.
There is also a question mark over the constitutional validity of the MRRT. Ken Henry confirmed that the federal government never sought advice on the constitutional validity of the MRRT. Hopefully he is passing on that advice again in his role as an adviser to the Prime Minister. The MRRT is divisive. It has pitted the big miners against the small miners. Once again, only this Labor government is capable of designing a tax which is divisive, which increases the red-tape burden, which reduces the efficiency of our tax system and which is beholden to state governments to make sure that the long-term and medium-term structural deficit does not grow.
There is a better way. Genuine and sustainable tax reform can be achieved only through an open, transparent and inclusive process involving all relevant stakeholders—not just a chosen few. The parliament should stop the MRRT from going ahead and it should force the government to start again. When you have a tax which is out of Kevin Rudd and by Julia Gillard—
it is going to be a dog's breakfast. We have to step back, we have to start again. We have to go back to the Henry tax review. If we are to introduce a resource tax, we have to do it in a way which will benefit the long-term interests of the Australian economy. This tax will not do this. The government needs to get its taxation addiction under control. It needs to get its spending addiction under control. The focus on lower, simpler, fairer taxes and genuine tax reform, based on a proper process giving everyone a fair opportunity to have their say and be heard, should form the basis of how the government goes about putting together a tax policy. Sadly, it seems that this government is incapable of doing that. We have seen it with the carbon tax and now we are seeing it with the Gillard minerals resource rent tax—
with Prime Minister Gillard's minerals resource rent tax. It is sad that, given the challenges that the Australian economy is going to face in the next five to 10 years, we have a government that is introducing taxes which will reduce our international competitiveness and make it harder for Australian businesses, both large and small, to continue to operate in the international environment. (Time expired)
I rise to speak in support of the Minerals Resource Rent Tax Bill 2011 and associated cognate bills that will implement the minerals resource rent tax and extend the petroleum resource rent tax. Clearly, the mining boom will not last forever. The non-renewable resources extracted from our economy can only be dug up once. It is only right that the profits from those finite resources are shared with all Australians.
While mining profits have increased by 262 per cent in the last decade, the Australian people's share in the profits of our natural resources has declined. Fortescue Metals' tax manager conceded to a parliamentary committee earlier this month that they have not paid corporate tax for seven years, despite the company being valued at $16 billion. That is socially irresponsible at best and obscenely greedy at worst. As a government, we cannot justify a taxation framework in which the proceeds from the mining of iron ore, coal, oil and gas are not equitably distributed but benefit only a privileged minority.
Mining is clearly an important part of the Australian economy. Entrepreneurs and miners are important to Australia. I am the granddaughter of a miner, and most people in my electorate have a mining history somewhere in their genealogy. In the Hunter, 5.1 per cent of the workforce are employed in mining, with flow-on effects for other sectors and the entire community. There is already a $430 billion pipeline of investment flowing to mining projects throughout the nation. Much of that is in the Hunter, and that will continue to grow. Australia is a good place to do business, despite the hype and hysteria from the ranks of the opposition.
Mining remains important to Australia in the future, but the economy of the past will not be the economy we need in the future. Our priority as a government is to build the long-term foundations for a stronger and fairer economy that matches our strategic goals for this nation—a strong economy and a fair Australia. That is why the Minerals Resource Rent Tax Bill provides for the taxation of the above-normal profits from mining iron ore and coal. Collectively these bills are designed to restructure our economy and future-proof it against international market volatility by strengthening our domestic industries and distributing the proceeds of our mineral wealth to every Australian via a sustainable and internationally competitive taxation framework.
Although our economy has not suffered as most economies worldwide have for these past years, our economy is a patchwork economy and we have a responsibility to manage the resultant competing pressures. As rising interest rates and the high terms of trade push up the Australian dollar and decrease export demand, we must ensure that our manufacturers and small exporters outside the resource sector do not suffer. The MRRT is an indicator of this government's efforts to manage our patchwork economy and distribute the proceeds more equitably. The tax replaces the previous royalty tax and directs the revenue towards vital investment in infrastructure—roads, rail and ports—tax breaks for businesses struggling with the pressures of a patchwork economy and an increase in the superannuation guarantee to boost national savings and provide secure retirement incomes for future generations.
The MRRT will apply at a rate of 30 per cent to all new and existing iron ore and coal projects, subject to an extraction allowance that reduces its effective rate to 22.5 per cent. Small miners with annual profits below $75 million will not be affected by the MRRT, while miners with profits between $75 million and $125 million will benefit from a partial reduction in their MRRT liability. Interestingly, the Minerals Council has admitted that there is a strong argument to reform the basis of determining royalty payments to a profits-based criteria from a revenue one. Of course, that is exactly what we are doing.
What is clear to the Minerals Council, clear to economists and clear to those on this side of the House is that a profits based tax is far better and more efficient than a tax levied on either the volume or value of production.
A royalty based system can actually deter mineral development. But those opposite do not seem to understand that. The Leader of the Opposition has said:
… if people feel that the mining industry is under-taxed, there's nothing to stop the states increasing royalties.
But unfortunately the states are not prepared to do the heavy lifting for the nation's economy and, sadly, the opposition just do not seem to do fiscal policy anymore.
The MRRT is expected to raise an estimated $3.7 billion in 2012-13, $4 billion in the following year, and $3.4 billion the year after. Over 10 years, the tax is expected to deliver an extra $38.5 billion in government revenue to the Australian people. The MRRT will allow for an increase to superannuation contributions, gradually lifting the mandatory superannuation rate from nine per cent to 12 per cent, beginning from 1 July 2013. In New South Wales, this will boost the savings of over 2½ million people, including 170,000 working people in the Hunter.
This is a visionary policy. It's visionary for Australia's retirement outcomes and it's visionary for the Australian economy.
He subsequently counselled his former colleagues to reconsider their position because:
Twelve per cent superannuation we think sees more than half of the Australian population have an adequate retirement, and that's the difference between heavily relying on the pension and having part pension or no pension.
The former federal leader of the Liberal Party, Dr John Hewson, likewise, has said that, despite posturing from the mining industry, in policy terms, this tax is right. Fortunately, it is right.
There have been major concerns in communities regarding coal seam gas, and I for one am very pleased to see that we have taken on that challenge in this legislation. We have improved the governance arrangements for coal seam gas to ensure that future decisions about coal seam gas projects and large coalmining developments are based on the most rigorous scientific evidence available in order to maintain community confidence, especially in regard to impacts on water. In my electorate that is particularly important as we have Eastern Star Gas. Santos are now looking at CSG exploration at Fullerton Cove near my electorate, and that sits right next to the Tomago Sandbeds. We are blessed in our region with a water supply that is natural and persistent. We would hate to see that compromised.
So the government has listened to community concerns and will provide $150 million to establish a new, independent, expert scientific committee to provide scientific advice to governments about relevant coal seam gas and large coalmining approvals where they have significant impacts on water. They will oversee research and they will establish a new national partnership agreement with the states through COAG, agreeing that the Commonwealth and states have to take into account the advice of that committee in their assessment and approval decisions. I have to say that it is very much the case that in most states we are not confident in the state planning processes. We are not confident that those approvals are based on rigour and not just financial outcomes. This legislation takes that into account and I hope we will see much better outcomes. The coal seam methane gas industry is important to this country but so are our quality of life, the quality of our environment and our water security. The federal government are now bringing about an intervention that I think will give us much more confidence that this will be done in a scientific and evidence based way.
Critical for my region, there will be investment in mining related infrastructure through the Regional Infrastructure Fund and Regional Development Australia Fund, and I would like to put some of my little wish list on the table. In my city of Newcastle we export over 100 million tonnes of coal every year. That is a massive amount of coal coming through our city. What we have noticed is that, as NCIG and PWCS terminals have expanded, the quality of our air has decreased. It has become more evident in Newcastle since the Orica spill into our atmosphere that now we have an industrial area where, when you look at the scale of developments, there is a cumulative impact. When development approvals are granted, they are done one-by-one. We do not look at the cumulative impact on air quality, water quality or the environment of these combined developments. It is time we did that.
In Newcastle, much of that coal—not all of it, but some of it—comes right through the suburbs. People open their back fences and look at coal wagons that are 50 to 80 carriages long, all uncovered. It is not right that coal goes through the middle of a city like Newcastle. It is time that new infrastructure was built, with separation of freight and passenger rail from Fassifern to Hexham and then through along Steel River and into the Port of Newcastle. I know that people have an expectation that the MRRT will fund mining related infrastructure and of course we have seen a great deal of expenditure by ARTC in my region already on improving the coal chain. This government has made that investment and we will continue to make that investment, but it is now time to think about what the community is paying in terms of their quality of life because of the impact of mining. We in Newcastle have certainly been a resilient community. We like our industrial history and we like our industrial present, but we want our future to be one that is not compromised by it.
Fortunately, this legislation does offer those opportunities to better manage the impact of mining through responding to its infrastructure needs for communities and certainly for the mining industry. This sort of investment will ensure that the mining boom remains strong, as mining projects can draw on the benefits of the local infrastructure while the negative impacts of mining can be addressed to keep our communities strong and safe. I must say that as a result of the Orica spill the community are strongly determined to see the introduction of a 2.5 microns measure for air quality and they want to see publicly assessable 24/7 monitoring. We want to know about the air we are breathing. We want to know about the quality of the water we are gaining our fish stock from and that people are depending upon. In the Newcastle Herald Michael Pascoe wrote:
The immediate test of whether a party is fit to govern is the minerals resources rent tax (MRRT). In economic terms, it's a no-brainer—
And, yes, it is. The benefits are not just great; they are diverse, they prop up the future of our economy, they invest in Australians and they also make sure that this mining boom is well managed and can continue in a good and balanced way.
We know that the Leader of the Opposition once said that he found economics boring. We know that those opposite preach an irrational market fundamentalism—voodoo economics, we would call it. We know that they do not understand these bills. They do not understand economic management and they undoubtedly do not understand the exigencies of life for many Australians.
For 12 years they sat indolent at the helm of our nation, comforted by their market extremism.
On Sky News last year the Deputy Leader of the Opposition said that mining companies 'are paying a fair amount of tax'. The following day, the shadow Treasurer said that he thought that mining companies 'pay a fair share'. Then the Leader of the Opposition told 2GB listeners that mining companies 'are paying more than their fair share'. It seems that they want miners to pay less tax than the public would expect. So we do disagree.
Mining profits for the year ending 30 June 2011 were approximately $93 billion, or more than two-thirds the size of the New Zealand economy. Twiggy Forrest's Fortescue Metals Group had a net profit of $985 million; Xstrata had an operating profit of $4.25 billion; Rio Tinto had a first-half profit of $7.6 billion; and BHP Billiton had a yearly profit of $22.48 billion. Apparently they are paying quite enough tax, according to the opposition.
The opposition leader tried to tell us that this tax is 'almost guaranteed to kill the mining boom stone dead'. That is not true; that is just self-serving rhetoric. The opposition opposed the petroleum resource rent tax with the same approach when it was introduced by the Hawke government in 1986 but happily collected the revenue throughout the Howard years. In the headlines, we hear from those with the money and we see the scare campaigns. We have seen the advertising campaigns from the mining companies of the past, and that certainly grabs a lot of headlines. But what we do not see on the front pages of the newspapers or hear on the evening news are stories about the hardworking Australians who will benefit from this legislation, like the small businesses that dominate the economy of most regional communities.
The government will use the revenue from the MRRT bills to reduce the tax rate for all companies to 29 per cent, effective from 1 July 2013. They will give Australia's 2.7 million small businesses a $6,500 instant asset write-off from 1 July next year. Almost 890,000 small businesses in New South Wales will benefit from this legislation, including almost 50,000 small businesses in the Hunter. These bills are part of a new deal; they are a new compact with the Australian people. They deliver on our mission to deliver a strong economy and a fair Australia. I commend these bills to the House.
I rise to speak on the Minerals Resource Rent Tax Bill 2011 and cognate bills before the House. I cannot describe these bills any better than the Senate committee report from the Senate Select Committee on the Scrutiny of New Taxes, compiled largely by Senator Mathias Cormann, who has done an outstanding job in largely revealing the truth about this flawed process and this flawed tax. The report was named The mining tax: a bad tax out of a flawed process.
We all remember the process. The foreign minister particularly remembers the original process, because this was the initiative of the foreign minister and the former Prime Minister when he announced the original version of the mining tax in early May 2010. It was what led to his downfall just seven weeks later. The process that evolved from that has given us this new version of the mining tax. There was negotiation with the then new Prime Minister and several major mining companies—I think it was four of the major mining companies—who sat in a room over a couple of days.
Madam Deputy Speaker Burke, you will remember that there were several things on a list that the Prime Minister wanted to get done before calling an election: stopping the boats, which of course has failed; the East Timor solution, which sank without a trace; and the mining tax was one of the to-do items, and we have ended up with the process and tax before us. It will be a disaster for our economy. Taxing the industry which is performing so well at the moment makes no sense at all.
In the last few weeks we have seen the Prime Minister at several international fora, including here last week with the President of the United States, talking about the Asia-Pacific century and what an important role Australia plays in the Asia-Pacific century. I agree that this is a unique opportunity for our country in the coming years. Probably the major reason is that we have such an abundance of minerals wealth in our country. We are blessed with the opportunities that it provides us.
Those on the other side often say that the minerals in the ground are in the ownership of all Australian people. They say that we all own the minerals in the ground and therefore we should be getting as much from them as we possibly can, which of course is simply not true. The minerals are useless until someone invests a significant amount of capital, takes a chance and employs a lot of Australians to take the minerals out and process them—which, granted, is sometimes done in other countries. They need to go through the process of extracting the minerals in the first place. What this government does not understand is that, if you put more tax in the way of companies and entrepreneurs seeking to do this, you will have fewer people seeking to do it in the first place. We will not always have the unique opportunity of a growing China and a growing India and for our minerals to have such value in a growing world. It reminds me of my favourite President Reagan quote—and he was probably the best President of the United States in its history. The quote could be perfect for this government. He said:
Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
The minister at the table, Mr Butler, would have been at many protests in his student union days in the eighties against President Reagan and all the things those opposite now stand for—selling uranium to places like India, and so forth—but Reagan was a great President and summed up this government perfectly.
'Profit' is a dirty word to those on the other side. How dare a company make a profit in an economy! It would be a terrible outcome if a company invested its capital, employed a lot of people, made a profit and paid a lot of company tax and royalties along the way! The other side would say we will have to find a new way to tax it because it is a river of gold and nothing we do will get in its way. That is simply not true.
I think the most damaging aspect of this tax is the signal it sends to overseas investors—which is you can no longer trust that the Australian government will have a consistency of policy approach. The consistency of policy approach in tax in this area has been that the states have always looked after the royalty taxes and the royalty arrangements when it comes to the extraction of minerals in our country. This process seeks to circumvent that to a large degree—and, of course, we have already seen it run into a massive hole because of it, with the states standing up for their constitutional rights when it comes to their ability to tax and raise revenue from the extraction of minerals in their territories.
That leads to the first genuine problem with this tax, and that is that, like the carbon tax, this is yet another tax that the government seeks to implement on the economy—and it does not even pay for itself. It is going to cost the budget more than what the tax will raise. The shadow Treasurer rightly pointed out yesterday in question time, and Senator Mathias Cormann has been saying this for some time, including in the Senate report, that this tax will take less than it will raise. Just like the carbon tax, it will cost the budget more.
This government cannot manage money. It spends more money that it earns. It came to government with a $20 billion surplus, and we are now some $110 billion in net debt and over $200 billion in gross debt. We have two big new taxes being foisted on the economy that do not even pay for themselves. They cost more than what they will raise. That just shows the economic incompetence of this government and its Treasurer, who simply do not understand how these decisions impact on the future opportunities of our country—all at a time when we are seeing Europe in complete tatters because governments for too long have spent too much money, have not taken care of the books and have not ensured their policies are fiscally well costed and that they are sustainable for the future.
Again we are seeing a big black hole in the mining tax, in the bills before the House. There is some $3 billion unaccounted for. I know it is mere petty change to those on the other side, with the waste and mismanagement we see all the time from this government, but it is a millstone around the future of our country, the employment opportunities for people in the future and for businesses to be able to invest with some certainty that the government of the day, the national government, has some competence in knowing what it is actually doing in what the Prime Minister describes as the Asia-Pacific century.
I think the greatest furphy that those opposite are running is that this is somehow good for small business, that there is a great bonus here for small business, with the revenue being raised out of the tax somehow being invested back in tax cuts for small business. This is not quite true, because what the government is doing as part of this process is actually getting rid of the Howard government entrepreneurs tax offset, which benefited the smallest of our businesses—the microbusinesses, the home based businesses, the mums trying to get back into the workforce, people who might have just entered retirement and are doing bits and pieces and those taking a chance on the idea that they have had. We know that those on the other side do not like that, because those people do not join unions. They would much prefer that these people were in a workforce and that they signed up with either the SDA or the 'MISOs' union—as the minister at the table would much more appreciate—than for these people to invest their own money, their own capital and their own opportunity in creating their own future and a future for their children.
The abolition of the entrepreneurs tax offset will cost these people. For those earning, for instance, up to $35,000 in their small business—which is many of them—it will cost them $563 a year. For those earning $50,000, it will cost them about $800 per year. For those people, that is a significant amount of money—all because this government cannot manage the economy properly and they have to find new revenue sources through taxes that will impact on future opportunities. In its place they have an asset offset program. Small businesses need money in the first place to spend to get the benefit of it. Therefore, that so-called tax break does not actually benefit most small businesses, because they do not have the capital in the first place to make those investments—made worse, of course, by a carbon tax which will send their electricity costs, their water costs and their rental costs through the roof. There are all these additional pressures on small business, and these people have the gall to stand there and say that this new tax is somehow going to be an economic paradise for them. Well, of course, that is baloney.
Worse than that, what these businesses will have to face in coming years is higher superannuation payments. We hear much about this great benefit that the additional three per cent will have for working people. Of course, we want people to be saving for their retirement, because we want them to be sustainable in their own retirement. But we on this side of the House believe that people are best able to make their own decisions with their own lives, and we do not think that putting significant additional pressure on small business at this moment and into the future is a good idea at all.
We know that what they have done with superannuation. Through the Fair Work Act they have required employers to put money into union super funds. We know that this is in part building these union super funds and that they are building more and more the percentage take of superannuation investment into union-run industry superannuation funds. This is an additional effort in pushing along that barrow. It is bad policy and it will have a genuine employment effect in the future.
It will either reduce wage increases, because businesses will not be able to pay, or—and I fear, more likely—businesses will have to foot this bill. This will yet again—like the state based payroll taxes, stamp duties and so forth which restrict the ability of a business to employ so much—be another employment disincentive now and into the future. We want people to be able to get opportunities. We want people to take their own opportunities with their own capital, with their own investment and with their own abilities. We want people to take a chance in their economy by starting their own small business and investing in their own small business.
Every step of the way, this government is putting hurdles in their way. Whether it is reregulation of the workplace, which I have mentioned in this place on a couple of previous occasions, or whether it is increasing taxes, which is increasing the amount of superannuation they will have to make for their employees, someone has to pay.
We are seeing in Europe right now that there is no magic pudding; there is no money tree at the top of Parliament House; the flagpole is not some sort of revenue channel which brings money down from the heavens and distributes it amongst the economy. Someone has to pay. The taxpayers pay their taxes and the government should spend that money wisely. Unfortunately, this government does not understand how to do that and they are therefore looking for way after way of implementing new taxes.
This is a bad tax out of a bad process, a process which cost one Prime Minister his job and is adding to the reasons that this Prime Minister is so unpopular in the electorate. People cannot trust this Prime Minister. They cannot trust this government. The government is spending far too much money. They are spending Australia into debt. They are burdening the economy with bad taxes at a time when we should be freeing our economy to take the advantage of the great opportunities that come out of the growth in China and India. The worst thing that we should be doing is trying to tax the strongest industry. We should be encouraging other industries to be like the mining industry and take these opportunities while they are there. We are opposed to this tax because it is a bad tax with a bad process to get there. We stand opposed to it and we will continue to stand opposed to it.
The member for Mayo continues in the tradition of the opposition leader in saying no, no, no—no to any reforms that are going to deliver to Australian people. He is on the side of big businesses that are making superprofits and not on the side of the average Australian. He is arguing in favour of large mining companies making superprofits from the sale of Australian minerals whilst at the same time not returning anything to our country.
I think that is really the line in the sand, the difference between the government and the opposition. We believe that all companies should have a responsibility and that, if they are making superprofits, then they should give something back to the community that they are operating in, and that community is Australia. As Australians, we deserve to have some of those profits returned. These bills will implement the minerals resource rent tax, the MRRT, and extend the petroleum resource rent tax regime as part of a stronger, fairer, simpler package of reforms to obtain a fairer return on our non-resources. Once non-renewable resources are dug up and sold, they are gone. We cannot sell them again.
The legislation provides for the taxation of above-normal profits from mining ore and coal. It is a tax on the superprofits of the really big companies. It is a tax on the realised profits, from the selling of the ore or coal, that are attributable to the condition and location of the iron ore or coal just after it has been extracted. The MRRT regime will apply to mining for iron ore and coal in Australia from July 2012. The extension of the existing PRRT regime to include onshore oil and gas projects and offshore projects will also apply from 1 July next year. The design of the MRRT and the PRRT extension aims to strike an effective balance between the government's policy objective of ensuring that all Australians receive a fair return for the use of our valuable mineral and petroleum resources and provide an efficient, internationally competitive and sustainable tax framework that supports continued investment in these industries.
I come from an area that has a rich history in coalmining. Shortland electorate comprises three state electorates, and one of those state electorates is the Swansea electorate. In the 1980s Swansea electorate was the electorate that had the most coalmines in New South Wales. That has changed. Now there is only one coalmine remaining. BHP and Rio Tinto were lead companies in mining in that area. BHP and Rio have both gone. What did they leave behind: denuded land. They had no obligation to return anything to the community. Instead, they walked away and the community is left to clean up their mess. This is about ensuring that during the time of operation and extraction, those large companies will be required to pay their way on the profit they make.
The MRRT and PRRT revenue will be used to fund important tax and superannuation reform that is giving back to Australians. There is a company tax cut for all companies to 29 per cent on the 1 July 2013. There is a new tax break for up to 2.7 million small businesses from July 2012. There will be investment in our regions through a regional infrastructure fund and a regional development fund, and simplified personal tax for 6.4 million Australians with a $500 standard deduction from July 2012 and a $1,000 deduction from July 2013. So the mining companies pay the tax and the Australian people benefit from that.
Over five million Australians will receive a 50 per cent tax discount on up to $500 of interest income from 1 July 2012, increasing to $1,000 of interest income from 1 July 2013—once again, rewarding Australians. There will be a boost to superannuation for 8.4 million Australians, with the first increase on 1 July 2013. And superannuation concessions will expand for 3.5 million low-income earners and about 275,000 people over 50 from 2012. These are big changes.
In the electorate of Shortland, which I represent in this parliament, that means that 41,007 people will benefit from stronger superannuation; superannuation guarantee beneficiaries will number 40,200; and 11,100 small businesses will be beneficiaries of the $6,500 instant asset write-off. This is delivering real saving and benefit to the community I represent in this parliament. This is as opposed to allowing mining companies to mine and take the wealth of our country out without paying their rightful contribution.
In the Hunter, you only have to go to the coal loader at Newcastle port and see that there was once one coal loader but there are now three coal loaders, and that they work overtime. That is coal coming out of our country and it is the big mining companies that are taking this coal out and not contributing to our society. We need them to pay their way just as every other Australian does.
This government is committed to spreading the benefits of the mining boom to all Australians. I hear members on the other side talking about how we should not impose any liability on these mining companies. But it happens in other countries: we have heard this week about China and how they are putting a resource tax on the companies over in their country. They recognise, just as we do on this side of the parliament, that mining companies need to contribute just as every other Australian does.
I listen to the rhetoric from the other side of this House, I listen to the words of the Leader of the Opposition and I hear what the member for Mayo says about fiscal responsibility. I hear how the Leader of the Opposition is going to repeal this legislation and how he is going to repeal the carbon pricing legislation. I also hear from the other side about how he is going to continue all the payments. I noticed that the member for Mayo was strongly opposed to the superannuation guarantee increase, but his leader has agreed to it. I say: where is he going to get the money from?
Where is the money coming from? We have already seen the opposition's accounting ability with the $70 billion black hole that has shown up in their policies in the past. I urge this parliament to support this legislation, even those on the other side of this House. It is good legislation, and the message from my electorate is that they strongly support that mining companies pay their way.
I am mindful of the fact that there are a number of members who wish to speak in this debate and so I will end my contribution here. In doing so, I urge the members on the other side of this House who do have some doubts about the direction the opposition is going in to actually have a bit of internal fortitude, to come over to this side of the House and to vote with us on this legislation.
I rise to speak on the Superannuation Guarantee (Administration) Amendment Bill 2011. Curiously, this bill forms part of the package of bills that the House is presently debating, dealing in the main with the minerals resource rent tax. But we have here a rather unusual, almost US-style bundling together of fundamentally unrelated issues.
The government is seeking to create the impression in the public mind that there is some linkage—that in some way the revenues raised from the minerals resource rent tax are going to fund the increase in superannuation guarantee contributions. Of course that is wrong. The extra contributions will come from the pockets of employers and employees and represent money that would otherwise go directly into the pay packets of employees.
The substance of this bill is to increase in a gradual fashion, beginning in 2013-14, the percentage of an employee's wage which must be paid by the employer into a superannuation fund. Today that rate is nine per cent, and under this bill it is going to rise to 12 per cent by 2019-20.
In the brief time available to me I want to make three points in relation to this bill. First of all, whether it serves the interests of workers is questionable; secondly, it clearly serves the interests of superannuation funds and particularly industry superannuation funds; and, thirdly, therefore the increase from nine per cent should not be contemplated in the absence of significant reforms to superannuation governance overall.
Let me turn to the first point, which is whether this bill serves the interest of workers is questionable. We have had this assertion from the government that to increase the superannuation guarantee charge levy from nine per cent to 12 per cent is in the interests of working Australians. But this money does not come out of thin air; it comes from employers. It increases the total employment cost to the employer of the particular employee. It is common sense that a dollar paid in increased superannuation contributions is a dollar which will not go into the employee's pay packet directly.
Indeed, if you look at the history of the introduction of today's superannuation arrangements, which emerged in a signature Hawke government style negotiation with the ACTU—in the typical corporatist, 'Let's get everybody around a table smoking cigars and dividing up the pie,' style of deal—that trade-off between money in the pay packet and money going into superannuation contributions was made quite explicit, so it is not a contentious proposition that there is a trade-off between money going either in increased contributions or directly into employees' wages.
This raises the obvious question: why are working Australians not being given a choice about this matter? Is it not likely that many of them might prefer more cash in their pockets now rather than a bigger superannuation payout in 30 or 40 years time? Is it not likely that many young people living in the big cities of our country, such as younger constituents in Bradfield who face the challenge of trying to break into Australia's extortionately expensive housing market, would prefer more cash in their pocket now?
Let me be clear: I am very much in favour of a strong retirement saving system and I agree with the argument that Australia's large pool of retirement savings is to our national advantage, but we already have some $1.3 trillion in the superannuation system and it is growing strongly. So the question before the House is not whether we should maintain our strong and successful superannuation system; the question is whether we should be compelling employees to accept lower wage increases over the next few years in exchange for compelling employers to deliver them the balance of their expected wage increases in the form of increased superannuation guarantee contributions.
It is striking that the government have made little effort to make the case for this change. They simply assert that it serves the interests of working Australians. It is also striking that they have not considered more creative alternatives. One which appeals to me is the adoption of the kind of approach argued in the recent book Nudge by American academics Sunstein and Thaler. They argue for so-called soft compulsion as a way of getting people to do things which are in their interests but also preserving their right to choose for themselves.
Why would we not use a nudge approach so that the increase to 12 per cent would be the default that would apply to all workers unless they made the choice to opt out of it by filling in a form at their pay office indicating that they wish to take the extra contribution amount in the form of ordinary pay taxed at ordinary rates? This would very likely deliver nearly the same benefits in the increase in the retirement savings of most workers but would preserve choice for those who, for example, prefer to take the increase as cash in hand to assist them in making the repayments on a home loan. Alternatively, why do we not consider the approach used in Singapore where the Central Provident Fund, the equivalent of our superannuation system, allows for the withdrawal from an individual's account to contribute towards the cost of buying a home?
Let me turn to the second point I wish to make. While it is far from clear that these changes serve the interests of Australian workers, it is very clear that they do serve the interests of superannuation funds, particularly industry funds. Last year the four types of large superannuation funds—corporate funds, industry funds, public sector funds and retail funds—received $78 billion in contributions, according to the regulator, the Australian Prudential Regulation Authority. Of this, 31.3 per cent went to industry funds. In fact, industry funds received a bigger share of contributions than their share of assets. In economics jargon: their share of flows exceeded their share of stocks. So industry funds are well on the way to becoming the dominant sector within the superannuation industry.
Typically, industry funds have rules specifying that up to half of all directors are appointed by unions. These arrangements were specifically designed in the industry superannuation fund system when it was set up by the Hawke and Keating Labor government, ensuring that that government's friends in the union movement were entrenched at the centre of the governance system of industry super funds. That entrenchment is very much still in place today. According to figures from APRA, in 2004 industry funds held 20.3 per cent of the total assets of the four fund types and only five years later, by 2009, this had reached 27.2 per cent. The changes in this bill are going to deliver substantial benefits to industry funds. Based on 2010 contribution levels, an increase from nine per cent to 12 per cent will bring a further $8 billion a year of contributions into the industry fund sector each year.
Why is it that the industry funds are doing so well and winning a large and growing share of contributions? A key reason is Labor's new modern award system, which is streaming a growing share of compulsory superannuation contributions into the industry funds. Modern awards contain a clause specifying the superannuation fund into which the employer must pay the employee's superannuation contributions and this is the default fund that will receive the payments unless the employee has specifically chosen a fund. In the main, employees do not that; therefore, to be nominated as a default fund is a very valuable thing.
An analysis conducted by the Institute of Public Affairs last year found that across 166 modern awards approved by Fair Work Australia there were a total of 566 superannuation funds specified and 513 of these were either industry funds or public sector funds. The largest industry fund, AustralianSuper, is specified as a default fund in over 70 awards. The Fair Work Australia and modern awards arrangements have been a case of the Rudd and Gillard governments looking after their union backers very nicely by using the modern award system to direct a growing flow of superannuation contributions to the industry funds. The further increase being debated by the House today from nine per cent to 12 per cent in contributions will also serve the interests of the industry super funds very nicely indeed.
It cannot be a coincidence that this bill is the handiwork of the Assistant Treasurer, Bill Shorten, a former union official and former director of an industry superannuation fund. No doubt his former colleagues sitting on the boards of industry superannuation funds will be thankful because a key feature of the industry superannuation system is the large number of well-paid directorships to be allocated amongst the union mates.
The annual report of one industry fund, Cbus, reveals that two directors—one presumably the chair—receive over $90,000 a year and several other directors receive more than $50,000 a year. Disclosure in this area is scanty but it seems that, in some cases, fees paid to directors of industry superannuation funds are pocketed by the individual union nominated directors and, in other cases, the fees are paid to the union. In either case the arrangements suit the union movement very nicely.
I now turn to my third point. The increase from nine per cent to 12 per cent should not be contemplated in the absence of significant reforms to superannuation governance. If the parliament is to consider this proposed increase it must be fully cognisant of who is going to benefit from it. In 2010 only 18.3 per cent of Australians were union members in their main job. There were 1.8 million people in a workforce of around 10 million. Yet APRA figures show that in 2010 there were 11.5 million member accounts in industry superannuation funds. How does it serve the interests of the millions of Australians in these funds, who are not union members, that up to half of the directors of their fund are directly appointed by a union?
The boards of industry super funds are stuffed with union bosses. They include Australian Workers Union boss Paul Howes, Queensland Australian Labor Party heavyweight and AWU strongman Bill Ludwig, Transport Workers Union secretary Tony Sheldon, Health Services Union chief Kathy Jackson and New South Wales Electrical Trades Union supremo Bernie Riordan. AustralianSuper, for example, has six union appointed directors including the chair. The current six come from the Australian Workers Union, the Australian Manufacturing Workers Union, United Voice and the Australian Council of Trade Unions.
It is noteworthy that the Cooper review, which recently explored the whole issue of superannuation, was critical of the current model of third party organisations such as unions directly appointing superannuation fund directors. It is also noteworthy that the Assistant Treasurer, former union official and industry superannuation fund director has done very little in response to that particular recommendation, yet he has been racing to implement other recommendations and, of course, racing to deliver this remarkable increase in the contributions flow that is going to come into the industry superannuation fund sector.
There is an extremely cosy set of arrangements between the industry super funds, the union movement and, of course, Fair Work Australia, which is in the position of approving the modern awards that determine where default contributions go. One might ask why it is that Fair Work Australia so readily signs off on modern awards which entrench the flow of contributions to union friendly superannuation funds. One reason, I venture to speculate, might be that Fair Work Australia is stacked with ex-union officials. Of the 10 people appointed as Fair Work Australia commissioners by the Rudd-Gillard governments since December 2009, eight have been from union backgrounds.
Policy decisions about the superannuation system should be made in the best interests of superannuation fund members and in the best interests of all Australians having regard to the need to trade off their current consumption requirements and the imperative to save for retirement. It is against this backdrop that this parliament should consider the proposed increase in superannuation contributions from nine per cent to 12 per cent. As I have demonstrated, the government has barely bothered to make the case that these changes will benefit Australian workers and, in fact, on closer analysis there are very strong arguments that in depriving workers of choice we are not necessarily serving the interests of ordinary Australians. It is also troublingly clear that there is a very cosy and convenient arrangement and relationship between this government, the union movement and industry superannuation funds. That raises real questions as to what is really motivating this government in increasing contributions from nine per cent to 12 per cent.
I come to this debate to proudly support measures which will achieve some of the most fundamental and worthy policy objectives to be brought before this parliament including, firstly, taking the benefits of the mining boom, the ownership of our sovereign assets by each Australian citizen—which can be dug up only once—and sharing that wealth across all our communities. It is a fact that, as I consult with my constituents, there is a clear understanding and desire for these benefits to flow to Blacktown, Pendle Hill and Glenwood, and not merely remain confined to the mansions of Peppermint Grove in Perth. Secondly, these measures will recognise in law the fact that a superannuation guarantee rate of nine per cent is simply not enough for an adequate retirement either today or in the future. Thirdly, they will take action through the proceeds of the minerals rent resource tax to address the historic and perpetuating imbalance between the retirement savings of working women versus men. Whilst women statistically continue to live longer than men, our superannuation balances are in fact on average around 40 per cent lower.
This package of bills has a range of significant benefits including a $6,500 tax cut for 2.7 million small businesses—13,500 of them in my electorate of Greenway alone—and a tax exemption for workers earning less than $37,000, which will allow these workers to receive much needed superannuation to prepare for retirement. Finally, the suite of bills will increase the superannuation guarantee providing working Australians with more superannuation savings than has ever been received by an Australian in the history of our nation.
I will focus on the measures contained in the Superannuation Guarantee (Administration) Amendment Bill because I believe its reforms will confer benefits that will be felt close to home for working Australians. Many of my constituents of my electorate of Greenway—55,100 of them in fact—will benefit from the boost to their superannuation as a result of these measures.
It is instructive to revisit exactly how the superannuation guarantee works and how it will be affected by the reforms before us. Employers currently contribute nine per cent of the salary of their employees to a superannuation fund to be held in trust for the employees until they retire. However, in many cases, the amount of superannuation available to an employee will not be sufficient to provide for a comfortable and dignified retirement. In fact, a recent poll by the Australian Institute of Superannuation Trustees found that only 14 per cent of Australians feel their retirement savings are sufficient to maintain their current standard of life—and they are right. Furthermore, the poll found that 38 per cent of Australians have less than $30,000 in superannuation savings.
These statistics bring into sharp focus issues which are of ever greater importance as more Australians live longer and therefore need a greater retirement income. This government recognises the importance of ensuring all Australians can afford to retire with dignity and has resolved to take steps to ensure this need is fulfilled.
This package of bills will increase the superannuation guarantee from nine per cent to 12 per cent of each employee's salary. This will ensure that a 30-year-old employee today will have an extra $108,000 in retirement, which will mean having an extra $2,900 available to spend annually. This increase is significant; it will go a long way to addressing the shortfall in retirement savings of the Australian public. This increase to the superannuation guarantee rests upon a solid economic foundation, regardless of what we heard from the previous speaker, the member for Bradfield. The design of the increase is to minimise the impact upon employers and will occur in small increments over a seven-year period, which will allow time for employers and the economy to adjust. As Pauline Vamos, the CEO of the Association of Superannuation Funds of Australia, has said:
This is a policy where the long-term benefit is that it becomes self-funding to the Budget.
This is because, far from being akin to a tax, the increase to the superannuation guarantee will help to build our national savings, create consumerism amongst retirees and enhance a multi-trillion dollar investment pool which can be used to fund outcomes, such as infrastructure projects.
This year we celebrate the 20th anniversary of superannuation in Australia, one of the most transformational economic and social reforms in our history. I would like to reiterate some of the salient points I have made on previous occasions in this place regarding the importance of superannuation and lifting the guarantee from nine to 12 per cent. This government, like the Hawke and Keating governments before us, believes in building our capacity for lifetime income security to ensure comfort and financial wellbeing after one's working life, not just during it. Not only has the superannuation guarantee made all workers shareholders in their own destiny; it has improved the economy for generations to come. The more private savings people have to retire on, the less younger workers need to pay in tax to support those retirees. The more of our own money we have in retirement, the less we must rely on the age pension. The more we build our national savings pool, the better the capacity for Australia's investment funds. It is a virtuous and logical cycle. That is why the introduction of the superannuation guarantee was such a visionary and progressive piece of policy, a policy which we are seeking to progress even more by the passage of these bills.
The member for Bradfield has not let us down today: when it comes to superannuation reform, he simply cannot bring himself to do it. I will come back to that in a minute. When it comes to executive salaries, those opposite are very happy to line up on the bosses' side, but they cannot resist true-to-form rants when it comes to working men and women daring to put their money in industry super funds, which are all overseen by a regulator, and regarding the people in these positions as somehow not running these funds in the best interests of members. It is totally false to suggest this. This was a policy born of a cooperation of the union movement, the government and the industry itself and has now progressed to be a multi-trillion dollar industry in this country.
I have raised the issue of superannuation and reform in this parliament on many occasions and I have done so because, as the Assistant Treasurer has so eloquently described it, I believe it is one of the fundamental pillars of Australia's social and economic fabric. Like one of my other great passions, the National Broadband Network, it is a policy area where the government and the opposition are at polar extremes. The people of Australia have a clear choice when it comes to retirement incomes policy: you can be either for it—that is, with us—or against it. Let us remember this: the coalition went to August 2010 election with a so-called plan for real action on superannuation. They were so concerned about superannuation they could only muster up four dot points and less than two pages in their plan for action on this critical area of public policy. When it comes to what they actually stand for today on the proposal in this bill to increase the superannuation guarantee from nine to 12 per cent, they are in complete and embarrassing disarray.
Here are some choice points to illustrate this fact. In June last year, we heard the shadow Treasurer confirm the coalition's opposition to plans to increase the retirement savings from nine to 12 per cent in the guarantee. Their spokesperson, Senator Cormann, bumbled around on the issue for a few months on the superannuation conference circuit, getting bad reviews everywhere he went. Then, on 7 November, the Australian reported 'Coalition feared backlash if it pressed on with policy to rescind super rise'. And Phil Coorey in the Sydney Morning Herald noted:
… the shadow assistant Treasurer … had told a group of superannuation executives a Coalition government would unwind any increases to the superannuation guarantee it inherited.
Senator Cormann confirmed this to the Herald, saying increasing compulsory super would erode people's take-home pay.
What complete nonsense, Madam Deputy Speaker!
On 13 November the Fairfax press ran the headline 'Coalition divisions widen on superannuation'. On 18 November, Money Management reported 'Abbott reiterates opposition to superannuation guarantee rise'. As those opposite were succumbing to economic populism, a leadership group of senior coalition members was established to discuss how best to tackle the economic challenges that our nation faces. It featured the usual suspects, but excluded, of all people, the shadow finance minister, who was replaced by the man who does not know his millions from billions, Senator Barnaby Joyce.
It is clear that this legislation has polarised the coalition and we see today reports that a growing group of those opposite are urging a rethink on rescinding this, because they know that by repealing this reform their budgetary black hole will grow even bigger and they know that the communities they represent are not enjoying the benefits from the resources boom. As reported in the Australian on 7 November, the shadow assistant Treasurer and the shadow finance minister have both argued against matching this government's commitment to lifting the super rate to 12 per cent, because they know that without the MRRT they cannot afford to do it. Irrespective of all this policy bungling by those opposite, let me make it clear: if this reform does not happen now, under this package of bills, it simply will not happen.
It should not be forgotten that 20 years ago the naysayers were loud in opposition to the introduction of the superannuation guarantee and calamity was widely forecasted. However, far from the sky falling in, the resulting pool of super savings has contributed to the explosive growth of the Australian financial services industry, which now accounts for a larger percentage of GDP than the mining sector. It is also widely appreciated that our wealth of superannuation contributions formed the ballast needed to help our nation navigate the recent financial storm by easing liquidity and providing funds for continuing investment. Nevertheless, in a sadly predictable mimicry of 20 years ago, today we have the opposition opposing this increase. This is despite this measure receiving support from about 70 per cent of the Australian population, according to research undertaken by both ASFA and the AIST.
Importantly, this is also despite the measure enjoying a 69 per cent approval rating amongst Liberal and National Party voters, many of whom are, after all, working Australians. I encourage these Liberal and National Party voters to ask the opposition why they would deny them up to $108,000 more upon retirement, and I remind them that, when many people in this place, including the Leader of the Opposition, retire from parliament, they will receive a very generous benefit far in excess of the 12 per cent he is opposing for his own supporters.
That is the nub: what hypocrisy there is from some people in this place who enjoy parliamentary entitlements that far exceed the nine per cent contribution currently enjoyed by most Australians, and how disgraceful that those opposite who were elected to parliament prior to 2004 enjoy defined benefits and notional contributions well in excess of the proposed 12 per cent.
This is a profound and historic measure which I will vote for wholeheartedly. John Brogden, CEO of the Investment and Financial Services Association, aptly described it as 'a once-in-a-generation boost to superannuation in Australia'. Fiona Reynolds, CEO of the AIST, said that the increase is 'long overdue, and will mean the difference between just getting by and enjoying retirement for millions of Australians'. Most importantly, this initiative, as I said, is supported by around 70 per cent of the Australian people, which shows how strongly Australians value their ability to retire comfortably and how important it is that we act now to achieve this.
I want to end by saying how important these reforms are for Australian women. As the Minister for the Status of Women noted last week, a new report has revealed 60 per cent of women are retiring with no superannuation and just over 70 per cent of all single pensioners are female. At a superannuation forum last week, it was noted that the majority of Australian women reaching retirement age have no superannuation savings behind them.
That is why these superannuation reforms have been welcomed in traditional female dominated professions, such as nursing. As the Australian Nursing Federation has noted, these reforms will mean that the superannuation savings of 2.1 million women earning less than $37,000 will be increased by more than $500 million in 2012-13, as a result of the changes to the superannuation guarantee rate. As noted by the ANF assistant federal secretary:
… in Australia's under-resourced aged care sector, women make up more than 90 per cent of the workforce. The increase in superannuation is welcome news, delivering greater financial security for these workers and others across the entire nursing workforce. The ANF, on behalf of our growing membership, commends Minister Shorten on these reforms to the country's superannuation laws.
This package of bills demonstrates the commitment of the government to locking in the gains of the mining boom and ensuring that all Australians receive a share of its rewards. This government recognises that these resources can only be sold once. We understand the importance of sharing these gains fairly, especially with Australians and Australian small businesses doing it tough. Australians can be confident that this government is acting decisively to spread the wealth of the mining boom in order to alleviate the burdens of small businesses and to ensure that every Australian can retire with dignity in the future.
I rise to talk on the minerals resource rent tax package of bills. This is a very bad tax. It has been very poorly conceived, it is fundamentally flawed and, as is the hallmark of this government, it has been completely hopelessly implemented. It is a tax that will be very bad for the country but will be particularly bad for my home state of Western Australia, which is going to provide the vast bulk of the revenue to the Commonwealth, if you believe the federal government's projections, which are relatively questionable. The Labor Party is seeking to impose on the industry a tax that is complex, unfair and fiscally irresponsible—and, worse than that, it is going to reduce our international competitiveness and has already flagged to international investors the idea of sovereign risk in Australia, something that was dead and buried under the previous government when business and companies investing overseas knew they could do so in a stable environment that was not subject to capricious government decisions.
The first thing I want to address is whether it is a good idea to tax the mining industry specifically. There has been a lot of talk about the idea of a mining tax. There is some support for it amongst the Australian population, but the whole idea of singling out a particular industry, particularly when the industry is clearly doing well under a terms of trade boom, for a specific tax measure is incredibly bad precedent for this parliament. It is an exceptionally bad idea that you can look around and see an industry doing well and say, 'We're going to target them for an extra tax beyond the taxes they already pay like every other Australian company'. It should send out warning signals to anyone doing business in Australia. It is as if, in the year 2000, we had seen that the IT industry was doing particularly well so we targeted a specific tax against them. It is incredibly bad policy, and the way that it has been designed makes that bad policy even worse.
The idea of taxing this specific industry is not clever. Mining companies already pay tax like everybody else in Australia; they pay a company tax rate. The argument that they are extracting resources that can only be extracted once is a reasonable argument, but it is already catered for in our taxation system by mining royalties. That is the tax that mining companies pay to state governments because they are the governments that these resources are vested in, according to the Constitution. That is the tax that mining companies pay to extract those resources. There has been a reasonable case to increase mining royalties in line with the fact that the industry is doing significantly well and that they were offered concessional rates for royalties when they started their companies, particularly in my home state of Western Australia. There was a reasonable case to rebalance mining royalties, and state governments in New South Wales and Western Australia particularly have gone ahead and done that.
That is right and proper because that is the way the Constitution was set up. Minerals are vested within the state governments. That is why, if this parliament does make the very bad decision to pass this tax, clearly we will find ourselves in the High Court, where the states will legitimately challenge the right of the Commonwealth parliament to tax resources that were vested in them when Federation was established.
We in the coalition recognise that the mining industry is crucial to maintaining our nation's economy. Mining companies do not have to invest in Australia because the resources are located here. Mining companies have a limited pool of capital and they will invest it where they see themselves getting the best return. They can easily invest it in a competing jurisdiction.
The Australian Association of Mining and Exploration Companies, which is a very active industry lobby group within my home state and which represents the junior miners in Western Australia, ran some very good ads that I think outline just how foolish this tax is. They had spokespeople—or actors acting as spokespeople—allegedly from other countries who were thanking the Australian government for its decision. They had a Canadian saying how wonderful it was that the Australian government would make such a stupid decision which resulted in more investment in Canada. They had a South African saying how wonderful it was that the Australian government would make it easier for people to invest in South Africa. This, of course, is what this tax does. Mining capital is globally mobile, and mining companies will look around and find places to invest where they believe that investment is going to give them the best return. The idea that because we have iron ore or particular resources in the ground they have to come and invest here is completely erroneous. If we make it too hard for them to do business then Australia will not be a competitive location for that investment to take place.
The minerals resource rent tax is a tax that Labor seeks to impose on economic rents that miners make from taxable resources—specifically iron ore, coal and some gases—at a rate of 22½ per cent. One of the greatest flaws of this tax is the way it has been implemented by the government. Even if you accept that a mining tax is a good idea—which I do not; I think it is a bad idea—the way that it has been designed and implemented by the Labor Party is surely a textbook analysis of how not to do public policy. The final version that we are discussing here today was a hastily cobbled-together arrangement with the federal government and the three largest resource companies: BHP Billiton, Rio Tinto and Xstrata. Those mining executives came to Canberra, sat down with Wayne Swan and his officials and completely and utterly ran rings around them. So now we have a mining tax that is going to penalise junior miners. It is going to penalise up-and-comers within the industry in favour of the largest resource companies, who are going to enjoy a very considerable tax shield because of the way this tax has been designed.
So it is a stupid tax in the first place, and then the way it has been implemented is going to impact on junior miners more than it will impact on big miners, who are going to enjoy a tax shield courtesy of the fact that those big miners came down to Canberra, sat down with the federal government and completely ran rings around it—because, of course, these guys know the mining industry and the federal government does not. A good example of that is that, after this was negotiated, we had Commonwealth Treasury officials calling Western Australian Treasury officials and saying, 'Look, can you tell us a little bit about this mining industry,' because the Commonwealth does not know anything about it. It has been completely outflanked by the big resources companies, who have given themselves an enormous competitive advantage through the Commonwealth government's and the Labor Party's complete inability to understand the mining industry. They have given themselves an enormous competitive advantage that will even help to possibly eliminate some of the competition for them. So the federal government sitting down with the three big resources companies, coming up with a tax that is good for them and bad for other players in the industry, is surely a textbook example of bad public policy making—even for this government, which has a history of gross incompetence.
That is why this tax is particularly divisive. It is overly complex and it will, of course, impact on some of those junior and up-and-coming miners, particularly in Western Australia—because that, of course, is the hub of mining activity around the country. I am deeply concerned about the impact that this tax is going to have on my home state, and of course it will directly impact on my constituents in Stirling as well. There was no consultation with anyone outside the big three within the industry, so no other mining company got a look-in to negotiate with the Commonwealth government on this ridiculous tax.
On top of that, there was no consultation with the states. There are officials and politicians in Western Australia that actually understand the mining industry. They live it. They breathe it. There is a Minister for Mines and Petroleum over there who knows the industry backwards. Of course, this is not expertise that was available through the federal Treasurer—certainly not—but neither was it available through the federal Treasury, because they are new to the mining game. Surely, if they had any understanding about what they were deciding, they would not have put forward such a flawed proposal as we are discussing here today.
Western Australia is going to be particularly adversely impacted by this tax. We have seen an arrangement over the last 24 hours where Western Australians will actually be penalised because our state government did the right thing and increased mining royalties on a resource which is vested within its control. It is well known that Western Australia has one of the largest and most diverse mining and petroleum industries in the world, and the state produces over 50 different minerals. In Western Australia, 75,000 people are directly employed by the mining industry, but for every one job that is directly created by the mining industry there are another three jobs that could legitimately be seen to be created through that mining industry activity. So, when we are talking about the levels of employment in Western Australia, it is clear that an enormous number of Western Australians are directly employed because of the efforts of the mining industry, and there is no doubt that this tax will cost some of them their jobs. You cannot isolate an industry for punitive taxation—an industry that employs so many people—and not expect that there is going to be a bad outcome for people employed within the industry.
This was made very clear in Western Australia in the 2010 election, when Western Australians overwhelmingly rejected this proposed mining tax. There are 15 federal seats in Western Australia, and the Labor Party held on by its fingernails to three, and we are looking forward to campaigning in those three in the upcoming federal election. Those three members—the members for Brand, Fremantle and Perth—will feel the concern and fury of Western Australians at being singled out for this particularly punitive tax.
As I have said, I think the idea of a mining tax is ill conceived, but if we were to have one then surely it makes sense to have one that at least conforms with the tax that was originally proposed by the Henry tax review. Ken Henry proposed a national profit based resources rent tax to replace state and territory royalties. I think it is a terrible idea, but at least that did not complicate the accounting and did not make life more difficult for the industry in the way that this tax is going to if it is passed.
It is impossible to be serious about having genuine resources taxation or royalty arrangement reform without actively talking to the states and territories. As I said, the consultation involved in creating this tax was only with the three largest resource companies. There was no contact prior to this tax being finalised with state and territory governments, which seems extraordinary given that state and territory governments are the ones that levy royalties and are the ones that control mining assets within their jurisdictions.
I have listened to some other contributions in this debate. Members opposite have been complaining that state governments have been increasing state mining royalties in light of this tax. That is just a great indication of how flawed the design of this tax is. The Commonwealth designed it so they will need to rebate those royalties if state governments increase the royalties that they levy on the resources within their jurisdiction. In Western Australia in particular, the idea of increasing mining royalties has been around for a long time. Indeed, the Premier has been on record as saying that he believes that mining companies should pay more royalties to the state for extracting those resources, and he implemented that when he came into government. The mining companies seemed to think that was a reasonable thing as well because they had enjoyed what were considered to be 'honeymoon rates' since the industry was opened up some 40 years ago.
An example of how flawed was the design of this tax is that the Commonwealth did not take into account that they were going to have to rebate royalties when they were increased by state governments. This is a great example of how hastily cobbled together this tax was and what a badly designed tax this is. There has been talk of a deal with the Independents that will alleviate the impact on Commonwealth revenues because of that design flaw. We will await the details of that, which presumably we will see once it has been introduced via amendments into the parliament.
This is a terrible tax. To single out a profitable industry for a specific tax because it is doing well is a terrible precedent for Australia. It sends all the wrong signals to international investment on which Australia so heavily relies. It raises the spectre of sovereign risk that has not existed in Australia for a long time. People expect the Australian government not to behave like some tin pot Third World dictatorship. They rightly expect the government to provide certainty for the business environment. If this tax goes ahead, it will drive a dagger through the heart of mining investment in my home state of Western Australia, it will cost jobs and it will stop junior miners from being able to compete with their more senior and well-established colleagues. It is a bad tax. We will repeal it in government, and I will oppose it with every breath in my body. (Time expired)
On a passion monitor, the member for Stirling would not have registered at all because deep down he understands that this is a fair tax, that this tax is popular and that it taxes a resource that belongs to the Australian people. For all his words, there was not much passion behind it because he does not believe in what he was talking about.
On Monday, the House of Representatives Standing Committee on Economics report on the Minerals Resource Rent Tax Bill and related bills not only recommended that they pass through parliament but also provided information that mining companies generated profits of $92.8 billion to June and plan to invest $430 billion to expand their industry. In the last decade, mining profits have jumped 262 per cent—and that is good. This legislation and the bills associated with it intend to get a fair return for that resource that belongs to Australia, to in no way inhibit the growth of that industry and, indeed, contrary to claims on the other side, to actually act and provide incentives for that industry to continue to employ. So much for the rhetoric about how it is going to be a dagger in the heart of the industry, particularly in Western Australia. You have only to look at those figures. Jack Hill, the blind miner, can work out that there is enough there as an incentive, there is enough there for a fair return to the Australian people and there is enough there to continue what is a very lucrative industry.
The minerals resource rent tax is an amended form of the proposed resource superprofits tax, which others have spoken about here, first announced on 2 May 2010. It is part of a suite of reform measures in response to the Henry tax review and, indeed, is part and parcel of a taxation review for this country. It became the MRRT on 2 July 2010 following the government's consultations with key mining companies that resulted in an agreement with the mining industry. The agreement included a number of amendments to the original reform proposal, and that is where we are at the moment. I mentioned that Australia has a large, high-quality non-renewable resource base. The rights to the majority of this resource base are vested in the people of Australia and in the Crown. The fact that these resources are nonrenewable allows exploitation to generate above normal profit or what we call economic rent.
There are two main types of resource taxes: royalties, which have been mentioned by many in this House previous to my speech and which are typically charged by Australian state governments, and resource rent taxes. Royalties do not take into account the profitability of a mining operation and, as such, will still tax mining operations when no economic rent is present and will recover only a small proportion of profits when rents are high. The Australia's Future Tax System Review found that royalty regimes currently applied by states and territories in Australia to be some of the most distorting taxes in the country; hence, tax reform. Resource rent taxes are profit based, cash-flow taxes. A resource rent tax collects a percentage of the resource project's economic rent.
And, contrary to what the member for Stirling said, there is precedent in Australia for resource rent taxes—it is in the petroleum resource rent tax, and that has not diminished interest in investment in those industries. So this talk of a 'dagger in the heart' stuff—I mean, really and truly, it is no wonder we cannot have much of a debate in this country with that type of overblown rhetoric and nonsense.
So what does the amended tax reform package contain, in essence? It introduces a minerals resource rent tax at a rate of 30 per cent for coal and iron ore, and extends the petroleum resource rent tax to cover all onshore and offshore oil, gas and coal seam methane projects at a rate of 40 per cent. By cutting the company tax rate to 29 per cent in 2012-13, as I mentioned earlier, among all the rhetoric, we are talking about tax reforms, providing revenue to allow for taxation incentives and reductions for businesses and individuals in our country; giving small business an early start to the reduced company tax rate from 2011-12; allowing instant asset write-off for small business—a very important incentive; establishing a state infrastructure fund, one of the major beneficiaries being Western Australia; increasing the superannuation guarantee to 12 per cent; introducing a government superannuation contribution for low-income earners; raising the superannuation guarantee age limit from 70 to 75; and changing concessional contribution caps for people over 50 with low superannuation balances. Most importantly, and again often forgotten in this debate, essentially the revenue the government will receive from the tax on resources will be channelled into increased superannuation benefits, into infrastructure and into business tax cuts. That is where the revenue will be channelled.
Under the MRRT the government taxes mining profits and allows mining operations to carry forward and uplift losses with interest for use in later years. As the MRRT taxes profits from minerals that are commonly subject to state and territory royalties, it will provide a credit for royalties. Iron ore and coal will be subject to the new profits based tax at a rate, as I mentioned earlier, of 30 per cent. The MRRT also applies to profits from gas extracted as a necessary incident of coal mining and gas produced by the in situ combustion of coal. Other commodities will not be included, so the number of affected companies will be around 320—and many fewer, I suspect.
The MRRT assessable profits are calculated on the value of the commodity, determined at its first saleable form—that is, at the mine gate—less all costs to that point. Projects will be entitled to a 25 per cent extraction allowance that reduces taxable profits subject to the MRRT. This allowance recognises the contribution of miners' expertise to profits at the mine gate, as I mentioned earlier. Small miners with resource profits below $75 million per annum will not have an MRRT liability. Miners may elect to use book or market value as the starting base for project assets, with depreciation accelerated over five years when book value, excluding mining rights, is used; or effective life up to 25 years when market value at 1 May 2010, including mining rights, is used. Those are just some of the aspects that are involved with this package deal.
I mentioned earlier that the MRRT will provide our community with a commensurate return when substantial profits are made—substantial profits—from the extraction of iron ore and coal. I also mentioned earlier that the integration of the state and territory royalty regimes and the Australian government resource tax regime is to be achieved through state and territory royalties being creditable against MRRT liabilities.
So, in returning a fairer share of the nation's wealth to Australians, the revenue will be used to fund important tax and superannuation reforms. I would like to elaborate a little bit more on those. The company tax rate for all companies will be reduced to 29 per cent on 1 July 2013, and there will be a new tax break for up to 2.7 million small businesses from 1 July 2012. This will provide really important incentives to business: a reduction in the company tax rate and a new tax break for 2.7 million small businesses.
It will also mean an investment in our regions through the Regional Infrastructure Fund and Regional Development Australia Fund. It will simplify personal tax for 6.4 million Australians, with a $500 standard deduction from 1 July 2012 and a $1,000 deduction from 1 July 2013—again, it is part and parcel of a large package of tax reforms that will affect companies, small businesses and individual Australians. It will reward personal saving of over five million Australians with a 50 per cent tax discount on up to $500 of interest income from 1 July 2012, increasing to $1,000 of interest income from 1 July 2013.
Importantly, it will boost superannuation for 8.4 million Australians with the first increase from 1 July 2013, and we know that is going to have important, long-term beneficial consequences for so many Australians into the future. It will also expand superannuation concessions for 3.5 million low-income earners and about 275,000 over-50s from 1 July 2012.
Contrary to claims made by the opposition—particularly by the member for Stirling—and some within the industry, the MRRT has the same rate of tax for mines big and small; and it has a range of benefits for smaller miners. It has a full exemption for miners, as I mentioned, with up to $75 million per year in profit; and has a partial exemption for miners with up to $125 million per year in profit.
Small mining companies will also be able to access concessional arrangements for complying with the MRRT, including a safe harbour methodology for calculating the value of the resource at the taxing point, which I mentioned earlier.
Finally, the MRRT provides miners who are investing to grow with immediate deductibility for their new investments. I wanted to put that on the record, because we hear so much from those opposite and from some sections of the industry that the package of legislation will discriminate against small miners, and that is not the case.
In summation, this is a fair tax. It is part and parcel of a package of tax reforms that will be beneficial to the whole of the Australian community. It is a tax on a resource that belongs largely to the Australian people. It will be beneficial for individuals, particularly through superannuation and tax offsets, it will be important to companies, reducing taxes to 29 per cent, and it will be important to small business. All are very important to our economy. I am very glad to support this legislation.
I rise to speak on the Minerals Resource Rent Tax Bill 2011 and related bills, including the Superannuation Guarantee (Administration) Amendment Bill 2011. I will just pick up from the member for Braddon. He is a good bloke, and he is sitting there saying that this new tax on the mining industry is not only a tax but an incentive and that they should be feeling great about it. Honestly, it is the same as the carbon tax. Nine out of 10 households are going to be better off, and what do they say? Give us three or four of them. Give us a half dozen of each. Load us up and, before you know it, we will all be rolling in the money.
This government has taken a bad idea and managed to make it worse. This is a tax on smaller and emerging miners and a tax on development. This is a tax that allows the three biggest mining companies to write government policy in return for giving this bad government a free ride at the last election. This overtax and overspend government, as the member for Mayo said so correctly in his great speech in here, simply cannot handle money. The popular spending agenda they have tied to these bills is completely ignorant of the revenue that this tax will generate, adding around $20 billion to the deficit in the long run—on optimistic forecasts. And the spending is locked in even if the optimistic forecasts do not come to fruition.
Treasury estimates for the MRRT revenue have jumped between extremes of $7.4 billion and $24 billion. This should be a warning sign of just how volatile international resource markets are. Resource prices are at a record high at the moment, but this will not always be the case. With economic turmoil in Europe and sluggish economic conditions in America, Britain and elsewhere, there are far from any guarantees that the good times will continue, yet that is exactly what this government has assumed when spending the MRRT revenue. Even if everything does go according to plan, we know this boom will come to an end. Both the Reserve Bank and Access Economics have stated that their beliefs are that commodity prices have already hit their high water mark and are in decline. This has fallen on the deaf ears of this government. As the boom finishes up and revenue from this tax drops, the spending does not. In fact, the cost to the government of the proposed superannuation increases will only begin to take full effect as the mining boom and the tax revenue starts to wind down.
This brings me to the false claim that the government has been making about superannuation. Let me be very clear about this: neither this tax nor this government is paying for superannuation increases for anyone other than government employees. It is employers who will be paying for the vast majority of workers. This is despite the Labor Party's endless bragging about providing a super increase for all Australians. I think every member in this House will get a phone call from people saying: 'How are we getting this? Who is paying for this? Is this mining tax really going to fund my super increase?' No, it is not.
At every stage of policy formation the Labor Party has managed to mess this up. They have ignored the Henry tax review recommendations to use superprofits to replace royalties. We have seen a Prime Minister backstabbed over this tax. We have seen the Labor Party antagonise an industry that propped up our economy during the GFC. We have seen them make a rushed, behind-closed-doors deal with only the three big mining companies to keep them company, and the whole purpose of that was to keep them quiet during an election campaign. We have seen them make yet another change to the policy that further punishes smaller miners to benefit the three biggest mining companies, which were given exclusive negotiations. It has been blunder after blunder after blunder on policy that should never have seen the light of day in the first place.
This is not just a mining tax. This is a targeted tax aimed directly at the small and emerging miners, and that is how it was designed to work. There were 135 recommendations in the Henry tax review that this government completely ignored. One of them advocated a lower tax burden on smaller mining ventures to foster them and to help struggling businesses survive. Instead we have a government that now wants to throw the burden of a new tax on these emerging miners to benefit the three big mining companies in the industry. And is that any surprise when they refuse to negotiate with anyone from the industry other than the executives from the three big mining companies? There are around 3,500 companies in our mining sector, and the government would only listen to three of them. Not even Treasury officials were allowed at this behind closed doors meeting. It is clear that an absurd negotiation process like this one could not be anything other than a purely political stunt. They were looking not to improve this tax but to give Rio Tinto, BHP and Xstrata whatever it took to end their advertising campaign during the election. So how much tax will these big mining companies be paying after this top secret meeting? According to a BDO study of BHP and Rio Tinto, neither of them will have to pay a cent of this tax for the first five years. This leaves the small and emerging enterprises to shoulder the burden of this tax's revenue.
It is outrageous that this government can justify a carbon tax, because they are only going after the big polluters—an absurd excuse in itself as everyone will pay—and then turn around and negotiate a mining industry policy with only the three biggest mining companies. There is more to the mining industry than BHP, Rio Tinto and Xstrata. To restrict industry negotiations to just three companies is anticompetitive and will serve to only further entrench their dominance. The Labor government has claimed this tax will allow all Australians to get the benefits of the mining boom. How does burdening small businesses help us get the benefits of the mining boom? How does discouraging new companies from entering the industry help us get the benefits of the mining boom? That those on the other side genuinely believe this is good for Australians is a sober reminder of how out of touch this government is with Australia's mining industry.
The government has labelled this a superprofits tax. I strongly object to the principle that we should tax companies for being successful. Where does that end? Should we put the handbrake on every part of our economy that is doing well? Only this Labor government could take a thriving industry, which employs over 180,000 people directly and 600,000 indirectly, and see nothing but a money grab. These bills are yet another sign that the Gillard government is taking the mining industry for granted. It was the mining industry and China's demand that pulled us through the GFC with minimal damage. We need to see this boom as an opportunity to foster growth in the industry, not an opportunity to cripple it with taxes. This is tall poppy syndrome at its absolute worst. It attacks our egalitarian ideal that, with a bit of hard work, anyone can be successful. Instead, the Labor Party is looking to punish mining companies for doing so well.
Make no mistake: this is just the beginning. Already we have the Labor Party's partner in government, the Greens, looking to expand the tax to gold mining and uranium mining. The Prime Minister had barely announced that Labor would reconsider uranium sales to India before the Greens decided to add that to the mining tax bandwagon. On top of that, Senator Bob Brown, the Greens leader, has made it clear that he thinks the tax rate should be set at 50 per cent. Given that they seem to be the ones calling the shots, it is only a matter of time before we are back here debating another blow they want to inflict on Australian mining.
We operate in a highly connected world. Multinational mining companies can easily move their investment focus to other resource countries. Canada, South America and a range of African countries are not blind to this reality. They eagerly await the opportunities for their own mining sectors that a superprofits mining tax presents. At the moment we are considered a safe place for mining companies to invest, but we cannot take this for granted. This mining tax will serve to reduce our international competitiveness in attracting further investment. Surely the Labor Party are not naive enough to think that we are the only resource-abundant country. The advent of ships with 300,000- and 400,000-tonne capacity has largely removed our greatest competitive advantage: proximity. Those ships bring a real economy of scale.
In pursuing this tax agenda, the government has continuously spread the idea that the industry does not pay its fair share of tax. Of course, this is a complete furphy. The industry already pays corporate tax, payroll tax and royalties. In 2010-11, mining companies were paying in excess of $23 billion. That includes close to $15 billion in company tax paid to the federal government and around $2.6 billion in royalties revenue for my state of Queensland.
That brings me to my next point. Our Constitution outlines that resources are owned by the states, not the Crown. If the government believes that mining companies do not pay their fair share of tax—and I certainly do not agree with that statement—then it is up to each state government to re-examine the rate of royalties; it is not up to the federal government to put a new tax on state government property. The states are already overly reliant on distorted and discriminating taxes such as payroll tax and stamp duties. Now the federal government is seeking to further take over state responsibilities by looking at taxing state property, and they are doing this without having consulted any of the state or territory governments. How can you pretend to have real minerals tax reform without even including other levels of government in negotiations? That, my friend, is a furphy.
It is hardly a surprise to have Ken Henry confirm that they also did not consult anyone on the constitutional validity of the MRRT. Maybe, if there had been some intergovernmental communication, the federal budget would not now be held hostage to state government decisions on royalty rates. This poorly constructed package promises mining companies full reimbursement for state royalties. We have already seen the state governments in Western Australia, New South Wales, South Australia and Tasmania move to increase their iron ore and coal royalties to the $3 billion detriment of the federal bottom line, and that is just the beginning. The spending keeps on going.
If this government wants to enhance the benefits of the mining boom, it should help the industry, not hinder it. The CopperString project in North Queensland is a perfect example of how this can happen. The north-west minerals province is rich in mining opportunities that would stimulate the region's economy, but vital infrastructure like CopperString is needed to provide power to this area. Instead, with the project at risk in recent weeks, we have seen the government refuse to come to the table and make this possible. This government is not capable of making the most of our mining boom. All it wants to do is tax enterprises and ignore vital infrastructure projects. That completely ignores the possibility of renewable energy and renewable energy targets being able to feed directly into the national grid. If the government wants to be serious about tax reform in Australia it is not too late, but a true transformation of our minerals tax base has to come on the back of transparent discussions with every group affected. It must coordinate all levels of government and it must be driven by policy outcomes, not political ones. The minerals resource rent tax is the product of behind-closed-doors negotiation between just three of the mining companies involved—a negotiation undertaken purely to make sure that a public relations campaign that sank one Prime Minister would not sink another one.
I do not support poorly designed, politically motivated, quick-fix taxes, and I certainly do not support this one. I have no mining in my electorate, but I have miners. I have airlines that fly them in and fly them out. I have engineers who produce equipment for them. I have caterers who feed them. I have schools that educate them. I have a port that takes care of their equipment. I have a railway that takes care of stuff. Every part of my community is part of their success or failure. Hamstringing them with the mining tax is like asking Don Bradman to bat left-handed just to make more of a game of it: 'Don, it's not fair that you're so good. What we should be doing is making it more fair.' They killed Phar Lap; let's not kill the mining industry.
I would indicate to the member who preceded me that, as a descendant of five generations of coalminers, with many of my family still in the industry, and coming from an electorate that does have coalmines, I absolutely support the range of bills before the House today. I am, in fact, very pleased to speak in support of the Minerals Resource Rent Tax Bill 2011. This bill has very simple objectives. Its first objective is to tax the above-normal profits from mining the ore and coal that belong to the people of Australia. Its second objective is to return the revenue raised by this tax to the people of Australia.
The MRRT will fund a comprehensive policy package which reforms the taxation system, invests in infrastructure and increases the retirement incomes of Australians. It will cut the company tax rate for all companies to 29 per cent by 1 July 2013. It will provide an immediate new tax break for up to 2.7 million small businesses across Australia from 1 July 2012. It will simplify the tax affairs of 6.4 million Australians, with a $500 standard deduction from 1 July 2010 and a further $1,000 from 1 July 2013. It will reward Australians who save money, with a 50 per cent discount on up to $500 of interest income from 1 July 2012, increasing up to $1,000 of interest income from 1 July 2013. It will boost the superannuation incomes of 8.4 million Australians, with the first increase from 1 July 2013, and expand the superannuation concessions to 3.5 million low-income earners and about 275,000 over 50s from 1 July 2012. Crucially, it will invest in our regions through the Regional Infrastructure Fund and the Regional Development Australia Fund.
The only political party in Australia standing in opposition to tax reform and investment in infrastructure remains the Liberal-National party. In an astonishing move, the Liberal-National party clearly do not consider that Australia's minerals and energy resources belong to the people of Australia. Instead, they clearly, by their arguments, believe that these natural resources are owned only by the mining companies. How is it possible for the alternative Commonwealth government to stand by and allow mining companies to rip out of the ground resources owned by all Australians without a thought for how we turn that to the benefit of all Australians? How is it possible for the alternative government to defend an inefficient state-based royalty system which hits all companies—big and small—in good times and in bad, regardless of their profitability?
It is simply impossible to understand the policy position of the Liberal-National Party in this debate. They say they stand for lower taxes and yet they oppose cutting company tax. They say they stand for small business and yet they oppose the instant tax write-off for small businesses, cutting red tape and increasing small business cash flow. They say they want to increase investment in infrastructure in regional areas of Australia and yet they oppose the revenue base which would do just that. However, there does appear to be growing division within the Liberal-National Party, as reported in yesterday's Sydney Morning Herald column by Phil Coorey under the title 'Mining tax now a coalition dilemma'. It does appear there is a ginger group in the coalition which is urging a rethink of the opposition to the introduction of the MRRT. There are deep contradictions in the opposition's history and approach to policy and its bedrock philosophy in dealing with these particular bills. This is finally being realised, obviously, by some members of the opposition.
The MRRT will apply to the mining of coal and iron ore in Australia from 1 July 2012. The extension of the petroleum resource rent tax to include onshore oil and gas projects and all offshore projects will also apply from 1 July 2012. The revenue to be collected from the MRRT is estimated to be $3.7 billion next year, $4 billion in 2013-14 and $3.4 billion in 2014-15. The MRRT is designed to apply to profits attributable to the resource close to the point of extraction. Its design avoids taxing the value-add of the miner after that point, such as the processing and transportation of the resource. As a result, the MRRT is a tax on the limited portion of miniprofits, unlike the company tax, which applies to all income.
The design of the MRRT is fair and ensures that small miners, with an annual MRRT profit of $74 million or less, pay no tax. It is also designed to counter the effects of the state based royalty system, which is inefficient and usually takes a flat amount of value for production regardless of profitability. In other words, it hits companies with the same flat rate no matter what the business environment—good or bad. To add insult to injury, the current taxation system on minerals has failed to keep pace with the boom. Royalties have been in decline as a share of operating profits before tax over the last 10 years. Yet the Liberal-National Party remain in defence of this taxation system that does not help mining and resource companies in lean times but does rip off Australian people during boom times.
The MRRT is a progressive form of tax—the higher the mining company profits, the more tax paid. And remember exactly where the tax starts—at the point of extraction. The end result is that Australian people keep getting a fair return for the exploitation of the nation's mineral wealth.
I want to indicate in my remarks that Australians have been subject to a gigantic scare campaign by some mining companies and peak representative organisations on these issues. They have tried to assert during the MRRT debate—and, indeed, during the debate on the introduction of the carbon price—that investment in mining and resources will come to a standstill. Indeed, we have heard that from many speakers on the other side in this debate. The facts, however, can be seen in the ABS figures on investment. Since the government announced the MRRT, mining investment has increased from $35 billion in 2009-10 to $47 billion in 2010-11 and is expected to increase further—to $82 billion in 2011-12.
ABARES's major development project listing released in April this year shows a total planned capital investment of $430 billion. Indeed, with my colleague the member for Throsby, I recently attended NRE Gujarat mining site for their announcement of the expansion of a mine in my own area with significant new investment.
Mining employment has also increased substantially, by 24.3 per cent compared to just 2.1 per cent for the whole of the economy over the same period. The MRRT and the PRRT have been the subject of an exhaustive consultation process since the announcement of the heads of agreement between government and industry in July 2010. The MRRT draft legislation was released for two rounds of consultation in July and September this year. The PRRT draft legislation was released for public consultation in August this year. These bills implement the recommendations of the Policy Transition Group and the principles outlined in the heads of agreement.
The constituency in my electorate understand the basic premise of both the MRRT and the PRRT. My constituents know that they share the ownership of the minerals and energy resources with every other Australian. They know that the mining industry provides a great deal of wealth and employment for Australia. The majority of my constituents support the mining industry, and always will, I suspect. But they also want to know that they are able to share in the wealth of the nation and that generations of the future are able to share in that wealth. The MRRT is important to my constituents because they will be able to share in the commodities boom currently underway.
The region that I represent in this place is an example of the patchwork Australian economy. If you are involved in mining related businesses, you are doing pretty well. But, if you are involved in manufacturing related business or retail, business can be pretty tough. Why shouldn't the Australians living in my electorate who work in or own small businesses not be able to share in the profitability of this period of the mining sector? Why shouldn't the small businesses in Wollongong share a tax break worth up to $6,500 for new plant and equipment? Why shouldn't the part-time worker benefit from a simplified tax system providing automatic deductions for work expenses? Why shouldn't a worker benefit from higher superannuation to retire on a better income? Why shouldn't a self-funded retiree or pensioner or a first home owner benefit from a tax concession on their savings? Why shouldn't the local community organisations and local councils benefit from more funding to develop community infrastructure in the third round of the RDA Fund?
As I indicated at the outset, I am very pleased to indicate my support for the MRRT and PRRT. I am extremely disappointed that the Liberal-National Party in choosing to stand for vested interests and opportunism will try to defeat this bill. But I am confident that the people of Australia will recognise that the government has stood up for each of them and that the government has stood up for the future. The government, determined in the face of a tough campaign by mining companies and the opposition, wants to ensure that all Australians benefit from the proceeds of Australia's mineral and energy resources and are able to translate the current boom into a long-term future for all Australians.
I move the amendment circulated in my name:
That all the words after "That" be omitted with a view to substituting the following words:
"the House is of the opinion that:
(1) 20 per cent of all revenue from the mining tax be put into a Regional Mining and Infrastructure Fund to be used to facilitate further mining and other development in regional areas from which they have been taken and surrounding regions where necessary; and
(2) this arrangement would be administered by a separate authority and the funding would come on top of normal funding and financial allocations from State and Federal Governments".
The honourable member for Herbert from Townsville mentioned the CopperString proposal. But, if the state and federal governments of Australia give us electricity and a port outlet in the gulf, then we can give back the Guildford coalmine at Hughenden; the three uranium mines—Westmoreland, Valhalla and resurrecting the Mary Kathleen; Roseby; Cannington; CuDECO at Cloncurry; Gunpowder, Legends Phosphate; Dougall River—copper, silver, lead and zinc in that case; Duchess; Ardmore, if you like to be technical; phosphate deposits in the Northern Territory; the three iron ore deposits at Constance Range; Ernest Henry; Monakoff E1 Camp at Kuridala, the old mining town being resurrected once again; and Merlin. That is 17 mines, bringing in $12,000 million dollars a year to the Australian economy. I have not included dozens of others which are on the mining map of Queensland. These are the most prominent ones that I am aware of. I have not included the other 10 here, and I have not included Julia Creek which, arguably, has the biggest vanadium deposits in the world and the fourth-biggest oil shale deposits in Australia.
We can deliver to you if you give us the infrastructure. We can deliver to you some $12,000 million dollars of revenue. If you build the CopperString line out to Mount Isa, we can provide for you the second-biggest wind farm in the world at Hughenden, Windlab. These people are not whistling Dixie or living in fantasy land. They have spent tens of millions of dollars on these projects between Charters Towers and Pentland, which will provide for you a duplication of a third of the Australian sugar industry, some 10 to 12 million tonnes of sugar a year from that project.
We can do all these wonderful things for you. We can provide some 25,000 jobs for you. All we are asking from you is assistance. We thank the federal government for their assistance on the CopperString line. We thank the federal government for their assistance in the Pentland proposal, and we thank the opposition, and the member for Herbert too, for their support for these proposals which are so vital for all of North Queensland.
As time makes my delivery rather disjointed, I will conclude by saying that, whilst we need most certainly the electricity—25 per cent of the cost of mining is the cost of electricity—unless we have the electricity there, we have to go not from grid system power at about $80 a megawatt but to diesel at $240 a megawatt— (Time expired)