Transcript - Radio National - 5 May 2010

SUBJECTS: Mining super tax, latest Newspoll results

Fran Kelly: Chris Bowen is the Federal Minister for Financial Services. He's been very busy over the last couple of weeks bringing in the changes to the financial planning industry and also of course having a big hand in the development of the response to the Henry Tax Review. And Christopher Pyne, the manager of Opposition Business and Shadow Minister for Education. Good morning to you both.

Chris Bowen, let's start with you. Equity market backlash; that's what we've been hearing this morning.  Is your 40 per cent proposed mining tax killing off the mining boom already? It's not even law.

Chris Bowen: Certainly not Fran. I think BHP closed yesterday at 38 dollars sixty. The range for BHP over the last 12 months has been 31 dollars to 44. It's a similar story with Rio and other mining companies. So the overseas stock market prices go up and down in response to Government announcements regularly and also in response to commentary and scare campaigns. That's going to have an impact as well. This is a fair tax Fran. It's a tax that has many elements that the mining industry's been calling for as long as I can remember. Improved rebates for exploration, improved treatment of smaller minerals companies that are taking risks and going out ploughing marginal fields etc. But it also provides a fair share for what are some very substantial profits built on what is the end of the day the property of all Australians, the minerals under our ground.

Kelly: Well it might be fair, but is it smart and is it smart timing. Some mining companies are already talking about scrapping projects. Cape Lambert resources announced yesterday it's going to stop exploration in Australia because of uncertainty around this tax. Don Argus the former BHP Chairman is talking of an increase in Australia's sovereign risk because of this tax.

Bowen: Well I think it reduces sovereign risk because it's a much more sustainable tax rate and a much more sustainable tax base. At the moment we have taxes based on royalties, which is based on volume, which means that in the bad times mining companies continue to pay a flat rate of tax regardless whatever profit they're making. Which might be substantially reduced which makes mines that might otherwise be viable unviable. This is a tax based on profits: and so when the commodity boom is roaring along, then there will be more tax paid. When the downtime comes, which it inevitably does, there's less tax paid. So actually I think it improves sovereign risk. It's a similar basis to the petroleum resource rent tax which has applied in Australian for 20 years, which applied to the Gorgon investment; one of the biggest if not the biggest investments in Australian exploration ever, 50 billion dollars. That tax didn't kill off that investment. There's no grounds at all to believe it would have the sort of effects that we're seeing in some of the pretty predictable scare campaigns that are rolling out across the country.

Kelly: It's not just across the country though. We heard from John Meyer who's a resource analyst in London talking about the sell off of Australian mining shares. Let's just have a listen to that:

John Meyer: It was getting hard to convince investors to invest in Australia anyway, because of the very strong Australian dollar, and this just gives investors more reason to turn away from the nation and invest their cash elsewhere.

Kelly: This isn't a scare campaign, this is reality. That same mining analyst says he's advising his clients to sell Australian mining stock.

Bowen: Well as I say Fran, you are going to see those sorts of commentaries and those sorts of impacts whenever the Government considers and announces a significant change. But this is about us strengthening the economy. The super profits tax will pay for a corporate tax reduction. It will also pay for a very significant enhancement and strengthening of our superannuation savings; half a trillion dollars over the next 25 years as our society ages.

Kelly: Well let me just look at it because actually the mining tax is not going to pay for the super cut, small business will be paying that.

Bowen: Well that's going to pay for the tax concessions, which increases as super goes up; and the tax concessions for super are being enhanced. And as you increase the superannuation guarantee it's a significant reduction in the Government's bottom line and that's a fact Fran.

Kelly: Let's be clear here though. It'll be business that pays that three per cent increase from nine per cent to 12 per cent won't it?

Bowen: As business paid the increases from three per cent to nine per cent, and it was built into wage negotiations over that time and productivity increased over that time; similarly we're actually increasing from nine to 12 per cent, even more gradually than it went from three to nine.

Kelly: But that's not paid for by the profits tax?

Bowen: But the tax concessions are Fran, and that's an important point. As we increase the superannuation guarantee, that leads to a very significant reduction in our bottom line in the increased tax concessions. And of course we're also paying for the improved tax treatment of low income earners; people under 37 thousand dollars, making the tax treatment of superannuation more equitable and allowing people over 50 to catch up on their superannuation payments, particularly women.

Kelly: Christopher Pyne you've been sitting very quietly and very patiently now. Uncharacteristically I might say. What does the Opposition think? Will you vote for or against this tax? Do you Australian generally deserve a better share of the mining boom?

Christopher Pyne: Well Fran, the reason I've been sitting patiently and quietly is because this is far too serious an issue for just usual party politics and what the Government is discovering I think is that you can't run the 14^th largest economy in the world on spin. And what we've heard this morning from Chris Bowen is the usual spin from the Government, which is all about winning the election. And unfortunately what they aren't doing is governing the country successfully.

Yesterday we had an interest rate rise. Why? Because they are spending, they are addicted to spending and even though everyone keeps telling them to stop spending money, the Reserve Bank has to keep pushing up interest rates as the only method that they've got to try and rein in inflation. Because the Government won't stop spending money.

On the resources rent tax, we are seeing the destruction of the mining industry in this country because the Government doesn't understand that in a globalised world a mining company like BHP Billiton can mothball Olympic Dam tomorrow and open another copper mine in Chile as soon as possible. Now in the old days that wasn't possible, but these days it is. And I listened to the person you had on this morning from Fairfax in Great Britain and I was shocked by what he said. Because of course the resources rent tax is killing, will kill the mining sector with seven billion dollars wiped off the value of the mining sector yesterday, and every Australian knows that whatever else happens in our economy, mining is the ballast that gives us our extraordinary standard of living. And this Government is so irresponsible and inexperienced that they are putting that at risk.

Kelly: Just on that; mining is the ballast, no doubt about it, which is the Government's argument why this moment when the mining profits are booming, because booms don't last forever, the Australian people should share in these non-renewable resources. They'll only be dug up once and now's the time to get the proper share of them. Do you support that notion?

Pyne: Well Fran that kind of sounds like East Germany in the 1960s, that kind of socialist logic. I mean mining companies pay company tax. Every time they make an extra dollar of profit, they pay company tax, just like every other company in Australia.

Kelly: Just like every company in Australia they probably dodge some of it too.

Pyne: Well it's the responsibility of every taxpayer to try and make sure they pay the tax that they're supposed to pay, that's hardly an argument. The problem we've got is the mining sector is critically, vitally important to our national security. It's vitally important to our national economy. It directly employs half a million Australians. As a South Australian, I am very concerned that BHP Billiton will decide not to expand the Olympic Dam because they'll choose to expand another mind elsewhere.

Kelly: Had any intel on that?

Pyne: Well, the head of BHP Billiton has been talking vociferously over the last 48 hours about the impact on decisions companies will make. We've already seen Queensland mining companies not to go ahead with planned expansions. As you mentioned this morning, I think its Cape Lambert has decided not to go ahead with an exploration in Australia. The Labor Party is killing the "goose that laid the golden egg."

Kelly: Ok.

Pyne: Why? Because they need to raise more taxes. Why? Because they are addicted to spending

Kelly: Chris Bowen, we'll move off this in a second. Just one last question. It has been suggested that mining industry executives are a bit flummoxed by the fact that they haven't been consulted by the Government before this announcement. Is that true and is that mistake or is it just something that you just can't float the idea of a new tax before it's announced?

Bowen: Fran, I know that the Treasurer and the Resources Minister were in discussion with senior executives from large mining companies. Obviously we didn't' go into the finer details of what we were announcing, but there were a substantial number of discussions about the parameters and about what potential impacts of various options would be. The Government had various options in front of it in this outcome, and we talked to mining companies about what the impacts would be of various options and I know that that was the case. The Treasurer and the Resources Minister were in very regular contact and I think any assertion to the contrary is incorrect.

Kelly: Ok, so there were no clues that there would be this kind of ferocious response from the mining industry?

Bowen: Well, they had very extensive discussions Fran. I wasn't in the room for them, but I know for a fact that there were very extensive discussions.

Kelly: Let's change direction now because another significant event happened this week and that is a Newspoll which showed for the first time in four years the Coalition ahead of the Labor Government on a two party preferred basis, which means of course if an election were held now, that the Coalition would win. An election won't be held now, it's probably some months away, especially given that result. But Christopher Pyne, there's not that much to be happy about in this Newspoll is it? Because the voters who left Labor didn't necessarily come to you.

Pyne: Well on the two party preferred basis Fran, there was a ten point turnaround....

Kelly: Sure, I guess I'm talking about the primary vote, they didn't.

Pyne: You'd have to be pleased if you were a pollster for the Liberal Party with that outcome. But the polls come and go, and this was a good poll for the Opposition. We've had bad polls in the past. What I would say though as a local member of Parliament is that the satisfaction, the huge negative figure for Kevin Rudd, where he's gone to negative 11 points in terms of satisfaction reflects exactly what I am hearing in the electorate in the last five or six weeks out and about in this break. And that is people are extremely disappointed with Kevin Rudd. They think that he is all spin and no substance, and all talk and no action and I think that is a real problem for the Labor Party. Because when he makes a new promise - like for example the health reforms - people will say, "well you haven't delivered anything for the last two years. Why should we believe you now?" And I think Kevin Rudd is entering that very dangerous period for a leader, whether it's a Leader of the Opposition or a Prime Minister, where everything they say is doubted by the public because of the record in the past. Because he hasn't got a record of achievement.

Kelly: Ok, we've only got two minutes left and Chris Bowen, you've got the last word. So Chris Bowen, briefly to you. Is this a dangerous period and is the danger a voter backlash against the PM rather than against Labor?

Bowen: Well Fran I remember saying in this segment a couple of months ago that this election was going to be tight. I think people were a little incredulous when I said that, when at that stage Labor had a big lead, and I meant it then and I mean it now. The risk of Tony Abbott becoming Prime Minister is a real one. People think it's an historical rule that first term Government's don't get defeated. It's not. It's an historical accident. Most first term Government's come very close. Most first term Government's have a really tough election in their first election. I don't expect we'll be any different.

Kelly: Ok, Chris Pyne, a brief final word from you today.

Pyne: Well the final word is that interest rates went up yesterday again Fran for the sixth time in eight months. Kevin Rudd said before the 2007 election that he'd make housing more affordable. That's he'd make the cost of living reduced as well. Fujitsu consulting has just warned that mortgage stress is affecting nearly 40 per cent of the 270 thousand families who've entered the property market in the last two years. So interest rates is a direct result of the Rudd Government being addicted to spending and addicted to taxes.

Kelly: Christopher Pyne, Chris Bowen, thanks very much for joining us on "Poles Apart".

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