Such is the impact of the 24 hour news cycle and the eternal present it creates that commentators seem unable to contemplate what comes next, and seem to assume that what has happened before will always happen again. So we’ve seen a stack of the usual suspects proclaiming that Labor will seek to ‘clear the decks’ again – to make the mining industry campaign against the RSPT go away.
What doesn’t appear to have been considered is that it might be the mining industry that might back down.
Discounting the Clive Palmers of the world, it might well have occurred to mining industry execs that the government, not Tony Abbott, is the government and that the odds are that the government will still be there after the next election. It might have also occurred to them that there will be another ETS down the track, and that this time around they’ll hardly have a lot of political capital to extract concessions, particularly if there’s a Green balance of power in the Senate.
Kevin Rudd’s need to avoid a perception of another backflip gives him a strong negotiating hand.
I think Tony Abbott was unwise to turn up at the Mining Industry shindig on Wednesday night. The Liberals might be obsessed about the importance of ‘third party support’ in an election campaign, but mining companies aren’t necessarily partisan players in the same way that unions are, nor as effective allies.
If, say, the government agrees to exempt existing projects and fiddle a bit with the tax’s design, under the guise of the promised “generous transitional arrangements”, where will that leave Tony Abbott and the Coalition?
I don’t think they’ll exempt existing projects in toto. They’d be giving up far too much revenue, as I understand it.
But your basic point remains – if the miners’ only plan is to defeat Rudd, it’s a pretty dumb plan. Labor is still a pretty warm favourite to win the election, and if Labor does win they’ll have the Senate numbers to impose the RSPT (Bob Brown has already announced he supports the RSPT in principle, and it’s impossible to imagine that the Greens will negotiate a more miner-friendly version).
I don’t think they’ll exempt existing projects in toto. They’d be giving up far too much revenue, as I understand it.
But your basic point remains – if the miners’ only plan is to defeat Rudd, it’s a pretty dumb plan. Labor is still a pretty warm favourite to win the election, and if Labor does win they’ll have the Senate numbers to impose the RSPT (Bob Brown has already announced he supports the RSPT in principle, and it’s impossible to imagine that the Greens will negotiate a more miner-friendly version).
THe government is far more likely to offer a much higer hurdle rate for the tax while removing the subsidy for those below the hurdle. That’s actually an inferior design for the tax, which unlike the current one could deter some particularly risky projects, but the optics would be far btter and it will let them put the hurdle at something they can sell as an actual super-profit (say 10%) without any net loss of revenue. They should have gone for a design with better optics in the first place.
THe government is far more likely to offer a much higer hurdle rate for the tax while removing the subsidy for those below the hurdle. That’s actually an inferior design for the tax, which unlike the current one could deter some particularly risky projects, but the optics would be far btter and it will let them put the hurdle at something they can sell as an actual super-profit (say 10%) without any net loss of revenue. They should have gone for a design with better optics in the first place.
It is an interesting negotiation. Rudd has been criticised by some commentators for taking such a hardline stance and not giving himself any wiggle room. Odysseus Rudd has tied himself to the RSPT mast. But this could work to his advantage. If the miners think that Rudd is irrevocably committed, they might come to the view that they have no choice to accept what is on the table, with perhaps a few save-saving concessions thrown in by Rudd so that he doesn’t humiliate them totally.
On the other hand, the miners might go for the gold and punt on Abbott winning the election, which is unlikely but not impossible.
One thing is for sure. If Rudd caves now, he is toast. Everyone knows this and will act accordingly.
It is an interesting negotiation. Rudd has been criticised by some commentators for taking such a hardline stance and not giving himself any wiggle room. Odysseus Rudd has tied himself to the RSPT mast. But this could work to his advantage. If the miners think that Rudd is irrevocably committed, they might come to the view that they have no choice to accept what is on the table, with perhaps a few save-saving concessions thrown in by Rudd so that he doesn’t humiliate them totally.
On the other hand, the miners might go for the gold and punt on Abbott winning the election, which is unlikely but not impossible.
One thing is for sure. If Rudd caves now, he is toast. Everyone knows this and will act accordingly.
That might be right about existing projects, Rob, but I thought Martin Ferguson was dropping some pretty heavy hints about the nature of the “generous transition agreements”. I note too that the mining execs went off and had drinks with Rudd at the Lodge on Wednesday night.
In any case, from my point of view, a much cleaner EST with compensation for households rather than concessions for extractive industries would be a good outcome.
That might be right about existing projects, Rob, but I thought Martin Ferguson was dropping some pretty heavy hints about the nature of the “generous transition agreements”. I note too that the mining execs went off and had drinks with Rudd at the Lodge on Wednesday night.
In any case, from my point of view, a much cleaner EST with compensation for households rather than concessions for extractive industries would be a good outcome.
@3 – Sam, I think that’s an accurate characterisation of the negotiating gambits.
@3 – Sam, I think that’s an accurate characterisation of the negotiating gambits.
Thats right Mark – but isn’t that already part of the background here? The generous concessions to extractive industries were the main thing that made the ETS Mark 1 such a dud in the first place.
They went in hard there, and got a pretty good ride – to the expense of the package as a whole. So there’s a fair bit of recent history behind this stoush. They seem to be expecting to win twice, and hope no one notices they’re double dipping their luck.
Thats right Mark – but isn’t that already part of the background here? The generous concessions to extractive industries were the main thing that made the ETS Mark 1 such a dud in the first place.
They went in hard there, and got a pretty good ride – to the expense of the package as a whole. So there’s a fair bit of recent history behind this stoush. They seem to be expecting to win twice, and hope no one notices they’re double dipping their luck.
And oh look! Here’s Xstrata threatenting to sack those very same workers if an ETS is introduced, back in March 2009. http://www.theage.com.au/business/mining-giant-angry-over-release-of-sensitive-data-20090318-9271.html
Xero credibility.
The CFMEU captures the industry guff well: http://www.youtube.com/watch?v=H4PcQfz0MfU&feature=youtu.be
And oh look! Here’s Xstrata threatenting to sack those very same workers if an ETS is introduced, back in March 2009. http://www.theage.com.au/business/mining-giant-angry-over-release-of-sensitive-data-20090318-9271.html
Xero credibility.
The CFMEU captures the industry guff well: http://www.youtube.com/watch?v=H4PcQfz0MfU&feature=youtu.be
While never placing a particular large weight on their public standing, the miners nevertheless will be reluctant to be seen to be too closely associated with one side of politics in what will be a closely fought and bitter election campaign.
Add to that the possibility of a Green-dominated Senate after this poll and there clearly is a strong argument for them forging a deal with Rudd ahead of the election.
However, no-one here should under-estimate the ability of the media – particularly the Murdoch press and their echo-chamber the ABC – to depict any compromise as a proverbial “backflip” by Rudd. You can virtually write The Australian’s front page lead now:
It should be clear to even the least cynical observor that whatever happens in this debate, the media will paint it as a Rudd backdown and a win for the miners.
Put money on it.
While never placing a particular large weight on their public standing, the miners nevertheless will be reluctant to be seen to be too closely associated with one side of politics in what will be a closely fought and bitter election campaign.
Add to that the possibility of a Green-dominated Senate after this poll and there clearly is a strong argument for them forging a deal with Rudd ahead of the election.
However, no-one here should under-estimate the ability of the media – particularly the Murdoch press and their echo-chamber the ABC – to depict any compromise as a proverbial “backflip” by Rudd. You can virtually write The Australian’s front page lead now:
It should be clear to even the least cynical observor that whatever happens in this debate, the media will paint it as a Rudd backdown and a win for the miners.
Put money on it.
The industry has done itself no favours in all this.
Sure, they were entitled to oppose it, but their shrillness and over the top comments and posturing has left Rudd with little room to move.
The likelihood of concessions they already have being heavily scrutinised rises every day.
Me, I’d give them a billion or so now, but once re-elected, I’d scotch the diesel rebate scheme and take more back than I gave them.
And as others have pointed out, Abbott’s oppostion to the ETS could well result in a far more onerous one being put on the industry – if the Green’s have the BOP, as expected.
They have pursued a very short term game on both fronts – surely not banking all on Abbott’s march to power?
The industry has done itself no favours in all this.
Sure, they were entitled to oppose it, but their shrillness and over the top comments and posturing has left Rudd with little room to move.
The likelihood of concessions they already have being heavily scrutinised rises every day.
Me, I’d give them a billion or so now, but once re-elected, I’d scotch the diesel rebate scheme and take more back than I gave them.
And as others have pointed out, Abbott’s oppostion to the ETS could well result in a far more onerous one being put on the industry – if the Green’s have the BOP, as expected.
They have pursued a very short term game on both fronts – surely not banking all on Abbott’s march to power?
I agree Sam. Rudd cannot afford to be seen as backing down. Were he to do so, he’d never be able again to netioate with anyone without them suspecting that settling early was a bad option. He;d be finsihed as a leader even if he won the election.
IMO, they have made such a song and dance about the bond rate and the level of the tax, that I can’t see how these could be seriously varied, nor can it be purely prospective as the definition of prospective would soon be narrowed to anything not on an existing site or onw being scoped out.
I think Rudd needfs more leverage. Personally I think he should “discover” that extractive industry is getting a diesel fuel rebate and put that into the mix of his “consultation”. Surely they don’t expect a subsidy to use scarce fossil fuels, at the expense of all the poor schmoes who don’t get one? There’s a couple of billion right now — and by 2012, about half what they were pitching at.
So he says, look, here’s the go. You say you’re willing to carry downside risk? Done. We remove the diesel fuel subsidy. It’s distorting. Anything else we can do for you? No? Maybe we should remove carbon-based fuel costs from allowable deductions? I think this idea of course should be taken to the electorate.
Let’s have some mongrel in the government. One where we have a knock ‘em down and drag ‘em out contest.
One of the funny sidelights to this is the backwash that seems to be accruing on the news coverage. My partner now turns off the news everytime Tony Abbott or some extractive industry honcho comes on. He says it makes him angry to hear it.
I assumed that this was purely a left-wing household thing but I was chatting to one of the kids parents up at the school the other day and she said, apropos of nothing in particular how annoying the constant coverage was. She said she’d vote for someone who could make the mining companies and Abbott shut the f*** up. Yes she used the term. Her son, in that naively 13 year old way, said “that’s a rude word mummy. Can’t we just vote them out?”
I had to laugh — the idea of having a vote to tell the mining bosses or their fawning media harpies to take a hike. Briliantly democratic in spirit but utterly at odds with reality.
I agree Sam. Rudd cannot afford to be seen as backing down. Were he to do so, he’d never be able again to netioate with anyone without them suspecting that settling early was a bad option. He;d be finsihed as a leader even if he won the election.
IMO, they have made such a song and dance about the bond rate and the level of the tax, that I can’t see how these could be seriously varied, nor can it be purely prospective as the definition of prospective would soon be narrowed to anything not on an existing site or onw being scoped out.
I think Rudd needfs more leverage. Personally I think he should “discover” that extractive industry is getting a diesel fuel rebate and put that into the mix of his “consultation”. Surely they don’t expect a subsidy to use scarce fossil fuels, at the expense of all the poor schmoes who don’t get one? There’s a couple of billion right now — and by 2012, about half what they were pitching at.
So he says, look, here’s the go. You say you’re willing to carry downside risk? Done. We remove the diesel fuel subsidy. It’s distorting. Anything else we can do for you? No? Maybe we should remove carbon-based fuel costs from allowable deductions? I think this idea of course should be taken to the electorate.
Let’s have some mongrel in the government. One where we have a knock ‘em down and drag ‘em out contest.
One of the funny sidelights to this is the backwash that seems to be accruing on the news coverage. My partner now turns off the news everytime Tony Abbott or some extractive industry honcho comes on. He says it makes him angry to hear it.
I assumed that this was purely a left-wing household thing but I was chatting to one of the kids parents up at the school the other day and she said, apropos of nothing in particular how annoying the constant coverage was. She said she’d vote for someone who could make the mining companies and Abbott shut the f*** up. Yes she used the term. Her son, in that naively 13 year old way, said “that’s a rude word mummy. Can’t we just vote them out?”
I had to laugh — the idea of having a vote to tell the mining bosses or their fawning media harpies to take a hike. Briliantly democratic in spirit but utterly at odds with reality.
I am wondering why the odds on a Labor election win haven’t changed, nor have the coalitions….
I am wondering why the odds on a Labor election win haven’t changed, nor have the coalitions….
Here’s the other reason why Rudd can’t back down. EVERYONE would be going back to Canberra to ask for a new tax agreement on their terms. First cab of the ranks would be the tobacco companies.
For all the spend the government has I’ve seen the Gov mining adverts once or twice (via the news) where as the mining comapanies adverts have been on so often that my wife has stopped watching TV real time preferring to tape things and fast forward. And she’s not interested in politics.
Could the miners have played their hand too hard?
Here’s the other reason why Rudd can’t back down. EVERYONE would be going back to Canberra to ask for a new tax agreement on their terms. First cab of the ranks would be the tobacco companies.
For all the spend the government has I’ve seen the Gov mining adverts once or twice (via the news) where as the mining comapanies adverts have been on so often that my wife has stopped watching TV real time preferring to tape things and fast forward. And she’s not interested in politics.
Could the miners have played their hand too hard?
Sam, They may not need Tony to win, all they may need to do is get him to hold on to all of his senate places (Hard, but still possible) or at least as many as he can and cost the ALP/Greens one or two against independents, minor parties and eachother. Leaving control of the senate impossible without a few parties (ALP + Greeen + ?). It would leave Rudd a difficult task in getting it to pass int he upper house.
If they run out of negotiating options, that would represent the best, cheepest and quite possibly effective option.
Mark, your exactly right, if Tony is going to even come close to retaining a donations base he may think about developing a economic/business/IR policy that fits their needs, instead of playing toady for the miners.
PinkyOz
Sam, They may not need Tony to win, all they may need to do is get him to hold on to all of his senate places (Hard, but still possible) or at least as many as he can and cost the ALP/Greens one or two against independents, minor parties and eachother. Leaving control of the senate impossible without a few parties (ALP + Greeen + ?). It would leave Rudd a difficult task in getting it to pass int he upper house.
If they run out of negotiating options, that would represent the best, cheepest and quite possibly effective option.
Mark, your exactly right, if Tony is going to even come close to retaining a donations base he may think about developing a economic/business/IR policy that fits their needs, instead of playing toady for the miners.
PinkyOz
And here’s another option for Rudd … he declares that any mining project cancelled is forfeit to the state. Not worth it? Fine, leave it with us and we will assess its viability and if it is viable, we will run it. We have a pile of cash and a line of credit and we will then get 100% of the project profits.
And here’s another option for Rudd … he declares that any mining project cancelled is forfeit to the state. Not worth it? Fine, leave it with us and we will assess its viability and if it is viable, we will run it. We have a pile of cash and a line of credit and we will then get 100% of the project profits.
Good post Mark. Abbott has played a bad hand. Looks like a rich man’s company suck up. Good point about the Greens. Apparently ABC 2 Breakfast News was flooded w/ emails criticising the mining companies…I think Labor is on a winner here.
This is a goodie:
Good post Mark. Abbott has played a bad hand. Looks like a rich man’s company suck up. Good point about the Greens. Apparently ABC 2 Breakfast News was flooded w/ emails criticising the mining companies…I think Labor is on a winner here.
This is a goodie:
Is it just me, or did others find the footage of the jogging, twin T-shirted Abbott and Bishop, complete with slogans for a lobby group, a rediculous sight?
Those twerps are really missing a little dignity, wouldn’t you say?
Imagine them as our future leadership??? Ugghh!
Is it just me, or did others find the footage of the jogging, twin T-shirted Abbott and Bishop, complete with slogans for a lobby group, a rediculous sight?
Those twerps are really missing a little dignity, wouldn’t you say?
Imagine them as our future leadership??? Ugghh!
Nasking: I didn’t know miners used Amigas in 1986
Now back to your regularly scheduled thread…
Nasking: I didn’t know miners used Amigas in 1986
Now back to your regularly scheduled thread…
I’m not surprised to hear reports of people being turned off by the constant drum beat of mining industry propaganda. I think they probably have over played their hand – the equation of their private interests and the public interest is pretty tenuous, and what we’re left with is a bunch of extremely wealthy people protesting about paying more tax. I think it’s been a mistake to have the CEOs so upfront in the campaign as well – and it really isn’t a good look for the opposition to reduce itself to being a cheer squad for a rent seeking industry.
I’m not surprised to hear reports of people being turned off by the constant drum beat of mining industry propaganda. I think they probably have over played their hand – the equation of their private interests and the public interest is pretty tenuous, and what we’re left with is a bunch of extremely wealthy people protesting about paying more tax. I think it’s been a mistake to have the CEOs so upfront in the campaign as well – and it really isn’t a good look for the opposition to reduce itself to being a cheer squad for a rent seeking industry.
And in no way would this ever turn into a loss-making suckhole for taxpayer dollars.
And in no way would this ever turn into a loss-making suckhole for taxpayer dollars.
“we will run it”
How? There is no state mining company. Fran, you are letting your Spart tendencies get the better of you.
Back to reality, Rudd should be saying (by proxy) to the mining companies, if you try to bend us over on this, we will bend you over re-doubled on the next generation ETS.
“we will run it”
How? There is no state mining company. Fran, you are letting your Spart tendencies get the better of you.
Back to reality, Rudd should be saying (by proxy) to the mining companies, if you try to bend us over on this, we will bend you over re-doubled on the next generation ETS.
In answer to your question at the end of your post, Mark : Up Shit Creek.
Rudd is on a winner here (and so are the Greens if they play it right, but they’ve become a bit unpredictable here.
Hope the ALP back-room boys read LP. Fran’s suggestions are right on the money. If Rudd has the bottle for it.
In answer to your question at the end of your post, Mark : Up Shit Creek.
Rudd is on a winner here (and so are the Greens if they play it right, but they’ve become a bit unpredictable here.
Hope the ALP back-room boys read LP. Fran’s suggestions are right on the money. If Rudd has the bottle for it.
@20, Sam, wouldn’t be at all surprised if he’s already conveyed that message.
@20, Sam, wouldn’t be at all surprised if he’s already conveyed that message.
Yep, Paul.
He could either continue his campaign despite the mining industry’s backdown, or?
What else is he going to talk about?
Yep, Paul.
He could either continue his campaign despite the mining industry’s backdown, or?
What else is he going to talk about?
Anyway, if Rudd wins and has a friendly Senate, he’ll get his way entirely. Existing projects, the rate, the rebate, all of it. Mining projects already operating in the Pilbara, Queensland and the NT will continue to operate. Rudd and Swan will receive a massive financial windfall and proceed to piss it away.
Exploration by the majors will drop to much lower levels and they will instead place their free cashflow into projects overseas. In a decade the money coming from the RSPT will begin to slow down.
As and when the price of commodities falls again, small and medium-sized miners will begin to ask for their 40% rebates. Whoever is in opposition will complain bitterly about subsidising “the rich”, “the big end of town”, foreigners etc. If it happens to be the ALP in opposition than LP will agree; otherwise LP will be filled with posts excoriating “the rich”, “the big end of town” etc etc.
Eventually every capital-intensive, late-payoff project will struggle to get funding. The cost of borrowing for roads, rail, ports, airports, power stations and yes, mines will rise to handle the risk premium. The Big 4 banks, who must surely be next on the populist tax-the-rich hitlist, will find borrowing international funds more expensive and will pass on the costs.
Enjoy your neutral tax folks.
Anyway, if Rudd wins and has a friendly Senate, he’ll get his way entirely. Existing projects, the rate, the rebate, all of it. Mining projects already operating in the Pilbara, Queensland and the NT will continue to operate. Rudd and Swan will receive a massive financial windfall and proceed to piss it away.
Exploration by the majors will drop to much lower levels and they will instead place their free cashflow into projects overseas. In a decade the money coming from the RSPT will begin to slow down.
As and when the price of commodities falls again, small and medium-sized miners will begin to ask for their 40% rebates. Whoever is in opposition will complain bitterly about subsidising “the rich”, “the big end of town”, foreigners etc. If it happens to be the ALP in opposition than LP will agree; otherwise LP will be filled with posts excoriating “the rich”, “the big end of town” etc etc.
Eventually every capital-intensive, late-payoff project will struggle to get funding. The cost of borrowing for roads, rail, ports, airports, power stations and yes, mines will rise to handle the risk premium. The Big 4 banks, who must surely be next on the populist tax-the-rich hitlist, will find borrowing international funds more expensive and will pass on the costs.
Enjoy your neutral tax folks.
Sam said:
Maybe. It does have a delicious ring to it though. To be fair, I doubt that this position would be a Spart monopoly. I suspect it would be a fairly typical socialist position.
A state-based mining commissioning company — (essentially a funding vehicle) — could be set up. We contract out the project development and specs after we do an independent audit of the prospect. I fancy the CFMEU would love it.
That would taint both claims. The ETS should not be presented as an attack on extractive industry. It stands as a policy to abate emissions. The mining companies don’t need to be told this explicitly — they can infer this all on their own.
On my proposal, the state can say: look, it’s clear that the mining companies are using people as hostages to bully the government and by that means, hold the entire popualtion to ransom. We mean to get to the bottom of this and to protect jobs rather than company super profits. If they say they can’t get finance, despite state backing or that the people they are throwing on the scrap heap are chump change in their desperat bid to extort money from the taxpayer and steal Australia’s mineral wealth, and say they must withdraw, then we will step in and run all viable mines. If the project is not viable the Australian people shall have the true reason and not the mining company’s spin and we will ensure that those who have lost their jobs are looked after by us. It was not our desire to get into this business, but if the mining companies want to threaten the public, then the government will respond
I like the politics of that and I suspect that pretty much every ALP-leaning person would too.
Sam said:
Maybe. It does have a delicious ring to it though. To be fair, I doubt that this position would be a Spart monopoly. I suspect it would be a fairly typical socialist position.
A state-based mining commissioning company — (essentially a funding vehicle) — could be set up. We contract out the project development and specs after we do an independent audit of the prospect. I fancy the CFMEU would love it.
That would taint both claims. The ETS should not be presented as an attack on extractive industry. It stands as a policy to abate emissions. The mining companies don’t need to be told this explicitly — they can infer this all on their own.
On my proposal, the state can say: look, it’s clear that the mining companies are using people as hostages to bully the government and by that means, hold the entire popualtion to ransom. We mean to get to the bottom of this and to protect jobs rather than company super profits. If they say they can’t get finance, despite state backing or that the people they are throwing on the scrap heap are chump change in their desperat bid to extort money from the taxpayer and steal Australia’s mineral wealth, and say they must withdraw, then we will step in and run all viable mines. If the project is not viable the Australian people shall have the true reason and not the mining company’s spin and we will ensure that those who have lost their jobs are looked after by us. It was not our desire to get into this business, but if the mining companies want to threaten the public, then the government will respond
I like the politics of that and I suspect that pretty much every ALP-leaning person would too.
if that were true, Mark and Sam… is there any possibility that Rudd saw a benefit in shelving the ETS and fighting this fight first?
if that were true, Mark and Sam… is there any possibility that Rudd saw a benefit in shelving the ETS and fighting this fight first?
I respectfully suggest that such a view is more likely to be taken by those who feel their sinecure is safe regardless of the outcome of the RSPT.
Those who stand to lose/win jobs etc discussion of the RSPT is (or has potential to be) one of the biggest events in their lives. They are soaking up the to & fro of the advertising campaigns just as the families of servicemen overseas soak up every snippet of news from the active service zone in Afghanistan (whereas plenty of people tune out or go & cut themselves a sandwich during that part of the news)
Almost certainly, if the (any) government was battling for (say) a complete & immediate cancelling of ALL public funding for higher education, many on this site would not be “tuning out” of the resulting fierce advertising campaign between Universities & the govt.
Nor would there be talk of University bosses having “mistakenly” nailed their colours to the opposition mast, nor of a parliamentary opposition party having “overplayed” their hand by opposing such a scheme.
I respectfully suggest that such a view is more likely to be taken by those who feel their sinecure is safe regardless of the outcome of the RSPT.
Those who stand to lose/win jobs etc discussion of the RSPT is (or has potential to be) one of the biggest events in their lives. They are soaking up the to & fro of the advertising campaigns just as the families of servicemen overseas soak up every snippet of news from the active service zone in Afghanistan (whereas plenty of people tune out or go & cut themselves a sandwich during that part of the news)
Almost certainly, if the (any) government was battling for (say) a complete & immediate cancelling of ALL public funding for higher education, many on this site would not be “tuning out” of the resulting fierce advertising campaign between Universities & the govt.
Nor would there be talk of University bosses having “mistakenly” nailed their colours to the opposition mast, nor of a parliamentary opposition party having “overplayed” their hand by opposing such a scheme.
Well, yes, SATP, but not even the mining industry is saying that the mining industry will completely close, so your analogy doesn’t fit.
Back to Rudd, I don’t think (in answer to sg) that Rudd shelved the ETS to have this fight. But I do think the ETS process, from start to finish to aftermath, might have convinced him, on reflection, of the need to grow a pair.
Well, yes, SATP, but not even the mining industry is saying that the mining industry will completely close, so your analogy doesn’t fit.
Back to Rudd, I don’t think (in answer to sg) that Rudd shelved the ETS to have this fight. But I do think the ETS process, from start to finish to aftermath, might have convinced him, on reflection, of the need to grow a pair.
The Xtrata decision got a lot of coverage on BBC World yesterday. The gist of the discussion was that the Australian government’s decision is one based on sovereignty issues, and that they want the miners to pay more tax because they are making so much money out of China. It wasn’t necessarily seen as a vote-winning decision, but arguments that miners may respond to sovereign risk by moving their capital to countries such as Angola, Niger or the Democratic Republic of Congo were treated with pretty short shrift. From outside of Australia, the more interesting question is whether this is an idea that other governments, such as Brazil, India and South Africa, might be interested in adopting.
The Xtrata decision got a lot of coverage on BBC World yesterday. The gist of the discussion was that the Australian government’s decision is one based on sovereignty issues, and that they want the miners to pay more tax because they are making so much money out of China. It wasn’t necessarily seen as a vote-winning decision, but arguments that miners may respond to sovereign risk by moving their capital to countries such as Angola, Niger or the Democratic Republic of Congo were treated with pretty short shrift. From outside of Australia, the more interesting question is whether this is an idea that other governments, such as Brazil, India and South Africa, might be interested in adopting.
Fran; it could more simply be done on the basis of “you don’t think this development is feasible? Fine. You don’t need to hold the rights to that area then. We’ll just take them back and put it out to tender to see if anyone else may think differently. No probs, don’t let the door hit you on the way out.”
That would be a rather effective message; use it or lose it.
Fran; it could more simply be done on the basis of “you don’t think this development is feasible? Fine. You don’t need to hold the rights to that area then. We’ll just take them back and put it out to tender to see if anyone else may think differently. No probs, don’t let the door hit you on the way out.”
That would be a rather effective message; use it or lose it.
Sam, there are shades of grey between “mining industry will completely close” and “mining industry will soar like an eagle”
If you callously think people whose jobs are at risk are saying my “analogy” doesn’t fit, think again.
Just saying.
Sam, there are shades of grey between “mining industry will completely close” and “mining industry will soar like an eagle”
If you callously think people whose jobs are at risk are saying my “analogy” doesn’t fit, think again.
Just saying.
I would have thought those people are fairly used to the ritual of their jobs being “at risk”.
“Oh, Bruce, come and see on the TV, the company are saying they’re going to pull out of Australia if the government doesn’t……”
Bruce returns to the crossword.
It’s noise.
I would have thought those people are fairly used to the ritual of their jobs being “at risk”.
“Oh, Bruce, come and see on the TV, the company are saying they’re going to pull out of Australia if the government doesn’t……”
Bruce returns to the crossword.
It’s noise.
Brett #30: Mining leases are already on much that basis. Your sentiment is clear, but implementing it will have complexities.
There are minerals of some sort of another on almost every mining lease in the nation. Who will arbitrate that a mineral is viably extractable?
Brett #30: Mining leases are already on much that basis. Your sentiment is clear, but implementing it will have complexities.
There are minerals of some sort of another on almost every mining lease in the nation. Who will arbitrate that a mineral is viably extractable?
Fran #25
That kind of posture would be a vote winner. Xstrata and the other mining CEO’s are trying to bully the government. If he doubled down and called their bluff, then yes, I agree it would show that he’s going to fight until the end.
The trouble is, is Rudd capable of this plain speaking or maybe the better question is, can he sell it?
Fran #25
That kind of posture would be a vote winner. Xstrata and the other mining CEO’s are trying to bully the government. If he doubled down and called their bluff, then yes, I agree it would show that he’s going to fight until the end.
The trouble is, is Rudd capable of this plain speaking or maybe the better question is, can he sell it?
Put Mr. Denmore down as another whose livlihood isn’t at risk from the RSPT.
Put Mr. Denmore down as another whose livlihood isn’t at risk from the RSPT.
SATP, your analogy was that all public funding to universities would be immediately cancelled, which means they would all close.
I agree that there are shades of grey, but your analogy was the blackest of lacks.
Unlike some who support the government’s position, I don’t believe this fight to be a morality tale. I think the mining industry is a good industry that makes a large positive contribution to the economy. However, their rhetoric that equates their interest with the national interest is a crock. As I’ve said all along on this blog, this is just a fight over money. I reckon the owners of the mines should get less, and the owners of the minerals should get more. It’s as simple as that.
SATP, your analogy was that all public funding to universities would be immediately cancelled, which means they would all close.
I agree that there are shades of grey, but your analogy was the blackest of lacks.
Unlike some who support the government’s position, I don’t believe this fight to be a morality tale. I think the mining industry is a good industry that makes a large positive contribution to the economy. However, their rhetoric that equates their interest with the national interest is a crock. As I’ve said all along on this blog, this is just a fight over money. I reckon the owners of the mines should get less, and the owners of the minerals should get more. It’s as simple as that.
Sam, feel free to change my analogy to “cancel SOME government funding” for universities.
The pedant in you should be satisfied with that.
That aside, your position on the tax is clear & understandable. I was merely making a point that there are many for who will be having the living daylights scared out of them by (all aspects of) the RSPT campaign. And that whilst some here may feel there is a public mood of irritation of the intrusion of ads into their recreational TV viewing, for many it is of vital interest, & barring a personal family tragedy, will be trumping all else for their attention.
Sam, feel free to change my analogy to “cancel SOME government funding” for universities.
The pedant in you should be satisfied with that.
That aside, your position on the tax is clear & understandable. I was merely making a point that there are many for who will be having the living daylights scared out of them by (all aspects of) the RSPT campaign. And that whilst some here may feel there is a public mood of irritation of the intrusion of ads into their recreational TV viewing, for many it is of vital interest, & barring a personal family tragedy, will be trumping all else for their attention.
“I reckon the owners of the mines should get less, and the owners of the minerals should get more.”
Yep. And as the economist Ross Gittins pointed out recently (video) the mining co’s are desperate to stop it not becuase its a bad tax – but a good one – which other countries are likely to adopt if it gets up here.
“I reckon the owners of the mines should get less, and the owners of the minerals should get more.”
Yep. And as the economist Ross Gittins pointed out recently (video) the mining co’s are desperate to stop it not becuase its a bad tax – but a good one – which other countries are likely to adopt if it gets up here.
SATP: Yes, I know that’s how leases are run, but change/withdrawal of lease etc is not something brought to public notice.
In this instance, it would be rather opportune to test the solidarity of the mining companies; if Xstrata announce its bit of leased dirt is not economic, let’s see if that’s what everyone else thinks. May test the seriousness of Xstrata’s decision, too.
Let’s call it the Barry Hall approach.
SATP: Yes, I know that’s how leases are run, but change/withdrawal of lease etc is not something brought to public notice.
In this instance, it would be rather opportune to test the solidarity of the mining companies; if Xstrata announce its bit of leased dirt is not economic, let’s see if that’s what everyone else thinks. May test the seriousness of Xstrata’s decision, too.
Let’s call it the Barry Hall approach.
Plainly AJ, I think he could sell it, and the other upside would be that the “Rudd stands for nothing” tag would be gone. In one move, he would become the standard bearer for the national interest in just the way that Presidents of the US doing wag the dog do all the time. I daresay the extractive industry people would be horrified and quiter uncertain whether they should stake the lot on defeating Rudd at the polls when Abbott looks so improbable. My guess is that they would cave, though I’d prefer they didn’t.
I have to say that if he were to adopt this posture I’d find it very hard not to vote for him, as it would be a kind of plebiscite on who owned the mineral wealth of the country — and clearly I’m not going to side with extractive industry. As disgusted as I always am with the ALP, especially over union laws and the CPRS, I don’t see how I could cop out.
Downside, I think the first preference votes for The Greens might suffer as ALP voters returned to the fold, but refuting the Minerals Council and Abbott? That would be well worth it.
Plainly AJ, I think he could sell it, and the other upside would be that the “Rudd stands for nothing” tag would be gone. In one move, he would become the standard bearer for the national interest in just the way that Presidents of the US doing wag the dog do all the time. I daresay the extractive industry people would be horrified and quiter uncertain whether they should stake the lot on defeating Rudd at the polls when Abbott looks so improbable. My guess is that they would cave, though I’d prefer they didn’t.
I have to say that if he were to adopt this posture I’d find it very hard not to vote for him, as it would be a kind of plebiscite on who owned the mineral wealth of the country — and clearly I’m not going to side with extractive industry. As disgusted as I always am with the ALP, especially over union laws and the CPRS, I don’t see how I could cop out.
Downside, I think the first preference votes for The Greens might suffer as ALP voters returned to the fold, but refuting the Minerals Council and Abbott? That would be well worth it.
SATP, I am a Rio shareholder and I’m not in the least interested in the ads, but perhaps I am a special case
SATP, I am a Rio shareholder and I’m not in the least interested in the ads, but perhaps I am a special case
There are already reports that the miners are having meetings with the Green’s next week so they are probably thinking of the future. Not sure what they’ve really got to give the Greens though.
I think Rudd and the miners will come to some sort of settlement before an election is called. If the election gets close (and I don’t think it is at the moment), Rudd won’t want them pulling a swifty and announce a bunch of retrenchments 2 weeks into an election campaign even if they never mean to follow through with them.
There are already reports that the miners are having meetings with the Green’s next week so they are probably thinking of the future. Not sure what they’ve really got to give the Greens though.
I think Rudd and the miners will come to some sort of settlement before an election is called. If the election gets close (and I don’t think it is at the moment), Rudd won’t want them pulling a swifty and announce a bunch of retrenchments 2 weeks into an election campaign even if they never mean to follow through with them.
That’s OK Sam as now you can be attacked as a self hating shareholder. Besides, you don’t represent ALLLLLLLLL shareholders.
etc….
That’s OK Sam as now you can be attacked as a self hating shareholder. Besides, you don’t represent ALLLLLLLLL shareholders.
etc….
Elise @16, it made me change the channel, sharpish!
Elise @16, it made me change the channel, sharpish!
Fran, I note that Rudd has already been accused of nationalising the mining industry:
Nationalising mining
Also, Peter Dutton has accused him of nationalising the health system.
Bit of a theme here.
Fran, I note that Rudd has already been accused of nationalising the mining industry:
Nationalising mining
Also, Peter Dutton has accused him of nationalising the health system.
Bit of a theme here.
Terry, the Libs are probably hoping for a repeat of 1949 … with Abbott as the new Menzies.
Terry, the Libs are probably hoping for a repeat of 1949 … with Abbott as the new Menzies.
“Put Mr. Denmore down as another whose livlihood isn’t at risk from the RSPT.”
I don’t know where your pub is Steve but here in my resource town, the one thing conspicuous by it’s absence at my local last night was any discussion of the RSPT. A pub filled with fluro orange and yellow shirts and steel-capped boots and I didn’t hear a word mentioned about it. Not that much concern by resource sector workers here it would seem.
“Put Mr. Denmore down as another whose livlihood isn’t at risk from the RSPT.”
I don’t know where your pub is Steve but here in my resource town, the one thing conspicuous by it’s absence at my local last night was any discussion of the RSPT. A pub filled with fluro orange and yellow shirts and steel-capped boots and I didn’t hear a word mentioned about it. Not that much concern by resource sector workers here it would seem.
Here’s Dutton on nationalising the health system (can’t seem to put two links in the one post):
Nationalising health
DINR, I think the parallel being sought is 1975 rather than 1949, although not with Tony Abbott as Malcolm Fraser, for obvious reasons.
Here’s Dutton on nationalising the health system (can’t seem to put two links in the one post):
Nationalising health
DINR, I think the parallel being sought is 1975 rather than 1949, although not with Tony Abbott as Malcolm Fraser, for obvious reasons.
Terry, it’s funny isn’t the health system already nationalised?? I’m scratching my head at that one. This theme is exactly like the repugs and teabaggers used in the US health debate. It’s becoming a SOP to copy everything the repugs are doing and saying.
I would think that Dutton and ex police officer paid by state government and a parliamentarian paid by federal government, shouldn’t be scared of government.
Terry, it’s funny isn’t the health system already nationalised?? I’m scratching my head at that one. This theme is exactly like the repugs and teabaggers used in the US health debate. It’s becoming a SOP to copy everything the repugs are doing and saying.
I would think that Dutton and ex police officer paid by state government and a parliamentarian paid by federal government, shouldn’t be scared of government.
@26 – sg, I suspect it wasn’t thought through that way, though I really don’t know. But I think there is some potential benefit in having this fight first.
I wouldn’t be totally surprised if there’s some sort of announcement about a new ETS before or during the campaign.
@26 – sg, I suspect it wasn’t thought through that way, though I really don’t know. But I think there is some potential benefit in having this fight first.
I wouldn’t be totally surprised if there’s some sort of announcement about a new ETS before or during the campaign.
The tough, frontier “Yosemite Sam” persona these mining tycoons tried to portray has certainly collapsed.
They are revealed as fat, spiteful GPS boys who cannot entertain any degree of altruism.
The tough, frontier “Yosemite Sam” persona these mining tycoons tried to portray has certainly collapsed.
They are revealed as fat, spiteful GPS boys who cannot entertain any degree of altruism.
Terry @ 45, 48: ROTFLMAO!
So, Twiggy exposes himself as a hysterical exaggerator, while Dutton reveals a level of sheer ignorance that Pauline Hanson’s most primitive ancestors could barely have dreamt of.
This donkey is obviously unaware that Medicare has been publicly owned for a long time, that the mix of public and private in Oz is already very similar to that in the UK, and has been for a similarly long time, or that if anything, the public purse is subsidising nominally private health insurers at the moment. He is obviously from the planet Zorg, and hence eminently qualified to be the Coalition spokesman on Health.
I just don’t know how they manage to keep the total disrespect for reality, truth, or competence up for so long. Is there some kind of Special Viagra for that?
Terry @ 45, 48: ROTFLMAO!
So, Twiggy exposes himself as a hysterical exaggerator, while Dutton reveals a level of sheer ignorance that Pauline Hanson’s most primitive ancestors could barely have dreamt of.
This donkey is obviously unaware that Medicare has been publicly owned for a long time, that the mix of public and private in Oz is already very similar to that in the UK, and has been for a similarly long time, or that if anything, the public purse is subsidising nominally private health insurers at the moment. He is obviously from the planet Zorg, and hence eminently qualified to be the Coalition spokesman on Health.
I just don’t know how they manage to keep the total disrespect for reality, truth, or competence up for so long. Is there some kind of Special Viagra for that?
I don’t often do this, but I’ve read through every single comment here and have found the discussion very interesting indeed. Seeing a distinct but unacknowledged link with the Government’s failure on the ETS, I’m drawn particularly to Sam@20, Mark@22, Jacques Chester@24, sg@26 and Mark@50.
My position is that this is very much a fight the Government needs to win as a fundamental question of the role of Government in pursuing the public interest. It also needs to follow up with effective climate action to win back the votes currently being lost to the Greens (whether I want them to win those votes back is another matter).
First of all, I find the mining lobby’s predictions of doom particularly hollow and disingenuous when Dr Henry commented that there would have been massive unemployment if mining industry job cuts had been repeated across industries during the GFC – despite their claims of being our saviour during the crisis.
Then there’s former Minerals Council head David Buckingham’s comments on Radio National Breakfast that mining royalties have declined as a percentage of mining company profits. They should be paying more tax on that basis alone. The real kicker, though, is the absence of the climate cost of the mining industry in the analysis of their costs and benefits for Australia.
To cite just one example, Michael Coulter, writing in The Sunday Age, said that minerals have no value until someone digs them out of the ground. Not so. If you consider that our carbon budget – within which we must remain to avoid dangerous global warming – will likely be exceeded unless we leave in the ground any coal that is not then burnt using CCS as of now, I think there’s a strong case for leaving coal where it is, naturally sequestered. Not doing so is a cost, not a benefit. That’s the problem with the lack of effective carbon accounting in our economy.
If we move on to the advertising campaign, I think the Government’s response is entirely justified, and should go further. However, as I’ve said in The Age and on my blog, I think a climate campaign could readily have been justified on the same emergency basis. The Government has, in effect, chosen which emergency to advertise.
Part of their rationale, of course, is that any truly honest climate campaign – based on the science – would highlight just how inadequate has been their climate (in)action to date. Mark’s comments re the possible re-emergence of a new scheme during the campaign are therefore most interesting.
Finally, the Government must not water down the RSPT. I see one of Ferguson’s minders has gone off to work for the resources industry, and I imagine the minister himself must be feeling conflicted in pressing his beloved mining industry to swallow the tax. Trouble is, he seems intent on listening to them, possibly having missed the droves of their Canberra lobbyists. On Radio National, he told Fran Kelly that he wouldn’t be negotiating with the mining industry through the media. I think, however, that the public needs to be clear on the basis of any “settlement” Ferguson puts forward. Let’s have it out in the open and assess the benefits or otherwise for the public interest.
Interesting post and comments, LP – keep up the good work!
I don’t often do this, but I’ve read through every single comment here and have found the discussion very interesting indeed. Seeing a distinct but unacknowledged link with the Government’s failure on the ETS, I’m drawn particularly to Sam@20, Mark@22, Jacques Chester@24, sg@26 and Mark@50.
My position is that this is very much a fight the Government needs to win as a fundamental question of the role of Government in pursuing the public interest. It also needs to follow up with effective climate action to win back the votes currently being lost to the Greens (whether I want them to win those votes back is another matter).
First of all, I find the mining lobby’s predictions of doom particularly hollow and disingenuous when Dr Henry commented that there would have been massive unemployment if mining industry job cuts had been repeated across industries during the GFC – despite their claims of being our saviour during the crisis.
Then there’s former Minerals Council head David Buckingham’s comments on Radio National Breakfast that mining royalties have declined as a percentage of mining company profits. They should be paying more tax on that basis alone. The real kicker, though, is the absence of the climate cost of the mining industry in the analysis of their costs and benefits for Australia.
To cite just one example, Michael Coulter, writing in The Sunday Age, said that minerals have no value until someone digs them out of the ground. Not so. If you consider that our carbon budget – within which we must remain to avoid dangerous global warming – will likely be exceeded unless we leave in the ground any coal that is not then burnt using CCS as of now, I think there’s a strong case for leaving coal where it is, naturally sequestered. Not doing so is a cost, not a benefit. That’s the problem with the lack of effective carbon accounting in our economy.
If we move on to the advertising campaign, I think the Government’s response is entirely justified, and should go further. However, as I’ve said in The Age and on my blog, I think a climate campaign could readily have been justified on the same emergency basis. The Government has, in effect, chosen which emergency to advertise.
Part of their rationale, of course, is that any truly honest climate campaign – based on the science – would highlight just how inadequate has been their climate (in)action to date. Mark’s comments re the possible re-emergence of a new scheme during the campaign are therefore most interesting.
Finally, the Government must not water down the RSPT. I see one of Ferguson’s minders has gone off to work for the resources industry, and I imagine the minister himself must be feeling conflicted in pressing his beloved mining industry to swallow the tax. Trouble is, he seems intent on listening to them, possibly having missed the droves of their Canberra lobbyists. On Radio National, he told Fran Kelly that he wouldn’t be negotiating with the mining industry through the media. I think, however, that the public needs to be clear on the basis of any “settlement” Ferguson puts forward. Let’s have it out in the open and assess the benefits or otherwise for the public interest.
Interesting post and comments, LP – keep up the good work!
Difference between Menzies and Abbott: Despite his sometimes awful politics, Menzies was very very bright. And he could read.
Difference between Menzies and Abbott: Despite his sometimes awful politics, Menzies was very very bright. And he could read.
SATP @37: “Sam, feel free to change my analogy to “cancel SOME government funding” for universities.”
It has probably escaped your notice, Steve, but that is exactly what universities have been experiencing every year for a lot of years, now. And yet, by doing more, for longer, more efficiently, with less, we survive. Mining companies, take note.
SATP @37: “Sam, feel free to change my analogy to “cancel SOME government funding” for universities.”
It has probably escaped your notice, Steve, but that is exactly what universities have been experiencing every year for a lot of years, now. And yet, by doing more, for longer, more efficiently, with less, we survive. Mining companies, take note.
Miners saying they are going to cancel new projects is like Richmond saying they have decided not to play in this years Grand Final
Miners saying they are going to cancel new projects is like Richmond saying they have decided not to play in this years Grand Final
@53 – Thanks, Darren.
@53 – Thanks, Darren.
Nationalising mining and health. LOL.
Seriously – how did a smart guy like Turnbull put up with these knuckleheads?
Nationalising mining and health. LOL.
Seriously – how did a smart guy like Turnbull put up with these knuckleheads?
Has it occurred to anybody, in the middle of all the circle-jerking over mining co’s “bluffing”, that the Mining companies may actually be for real?
Has it occurred to anybody, in the middle of all the circle-jerking over mining co’s “bluffing”, that the Mining companies may actually be for real?
SATP – I don’t think anyone doubts the larger mining companies see a significant risk to their short-term bottomlines with these new changes, or they wouldn’t bother to mount such a campaign. So sure, they’re “for real”. But I haven’t seen an even slightly convincing argument yet to suggest the proposal is going to be damaging to the economy as a whole over any sort of time-frame worth caring about.
SATP – I don’t think anyone doubts the larger mining companies see a significant risk to their short-term bottomlines with these new changes, or they wouldn’t bother to mount such a campaign. So sure, they’re “for real”. But I haven’t seen an even slightly convincing argument yet to suggest the proposal is going to be damaging to the economy as a whole over any sort of time-frame worth caring about.
Fran Barlow @ #40 said:
For the past 18 months or so I have been predicting that the ALP would “swing sharply to the Left” in the run-up to the 2010 election. On 11 MAR 09:
My reasoning was that Rudd-ALP had to take some of the steam out of the GREEN juggernaut. Rudd had to do some thing Lefty in order to stop preference shifting to the GREENs who will hold the BoP in the SEN once Howard’s 2004 cohort get their marching orders.
I thought the Rudd would do this by toughening up the ETS in order to do a victory lap around Copenhagen with Obama. Obviously I was wrong about the passage of the ETS, the Tea Party and Minchin’s martyrdom operation has put the kibosh on Cap and Trade for the forseeable future. But I was right about Rudd’s pre-2010 political tilt. I give myself a B- for that effort.
But a mining super-profits tax fits the political bill perfectly in that it hits super-rich foreigners, not a big voting constituency. And is unlikely to cause to much general economic havoc.
The RRPT represents the first major cleavage between the parties since WC. If it gets through it presages the most significant shift to the Left in the AUS polity in the past generation. Which isnt saying much.
Fran Barlow @ #40 said:
For the past 18 months or so I have been predicting that the ALP would “swing sharply to the Left” in the run-up to the 2010 election. On 11 MAR 09:
My reasoning was that Rudd-ALP had to take some of the steam out of the GREEN juggernaut. Rudd had to do some thing Lefty in order to stop preference shifting to the GREENs who will hold the BoP in the SEN once Howard’s 2004 cohort get their marching orders.
I thought the Rudd would do this by toughening up the ETS in order to do a victory lap around Copenhagen with Obama. Obviously I was wrong about the passage of the ETS, the Tea Party and Minchin’s martyrdom operation has put the kibosh on Cap and Trade for the forseeable future. But I was right about Rudd’s pre-2010 political tilt. I give myself a B- for that effort.
But a mining super-profits tax fits the political bill perfectly in that it hits super-rich foreigners, not a big voting constituency. And is unlikely to cause to much general economic havoc.
The RRPT represents the first major cleavage between the parties since WC. If it gets through it presages the most significant shift to the Left in the AUS polity in the past generation. Which isnt saying much.
Darren Lewin-Hill @ #53 said:
The RRPT is more about GREEN politics rather than GREEN policy. To stop the GREENs from becoming the dominant third party the ALP need to contain their votes to ~ 10% of the electorate. That means serving up some red meat to the Left in the run-up to 2010. The RRPT is the policy that fits that politics, particularly given Rudd’s other back-downs on election mandates (on CPRS, Border Protection, Bill of Rights).
The govt pointedly failed to deliver a CPRS to wave around at election time. Rudd-ALP had a mandate to legislate. THey couldn’t do it, perhaps due to circumstances beyond their control (although controlling circumstances are the reason we give politicians power).
Consequently a fair slab of the broad Left voting constituency are determined to punish Rudd-ALP whilst not rewarding Abbott-L/NP. Hence the swing is to the GREENs more than the L/NP.
I did see this on the horizon last year but discounted it since I did not see the Minchin martyrdom operation. Minchin effectively derailed the political careers of the two most successful men in Parliament: Turnbull and Rudd. Impressive parting shot.
If it goes through it will take the steam out of the GREENs whilst making the L/NP look like they pander to foreign Fat Cats.
Very canny bit of politics from Rudd. I am impressed. Kevin “Chavez” Rudd!
Darren Lewin-Hill @ #53 said:
The RRPT is more about GREEN politics rather than GREEN policy. To stop the GREENs from becoming the dominant third party the ALP need to contain their votes to ~ 10% of the electorate. That means serving up some red meat to the Left in the run-up to 2010. The RRPT is the policy that fits that politics, particularly given Rudd’s other back-downs on election mandates (on CPRS, Border Protection, Bill of Rights).
The govt pointedly failed to deliver a CPRS to wave around at election time. Rudd-ALP had a mandate to legislate. THey couldn’t do it, perhaps due to circumstances beyond their control (although controlling circumstances are the reason we give politicians power).
Consequently a fair slab of the broad Left voting constituency are determined to punish Rudd-ALP whilst not rewarding Abbott-L/NP. Hence the swing is to the GREENs more than the L/NP.
I did see this on the horizon last year but discounted it since I did not see the Minchin martyrdom operation. Minchin effectively derailed the political careers of the two most successful men in Parliament: Turnbull and Rudd. Impressive parting shot.
If it goes through it will take the steam out of the GREENs whilst making the L/NP look like they pander to foreign Fat Cats.
Very canny bit of politics from Rudd. I am impressed. Kevin “Chavez” Rudd!
People are discussing “If Rudd gets a friendly Senate”.
In 2004 the right (Coalition + Fielding) one 4-2 Senate splits in two states: 3 Liberals and a National in Queensland and 2 Liberals, 1 National and Fielding in Victoria.
I think there is pretty much zero chance of the right maintaining a 4-2 split in either of those states. Having lost those seats, Labor + Greens is a majority, end of story. Of course, it is possible that the left could win a majority in a state, by the Greens winning a seat off Liberals in the ACT or by a 4-2 split in another state, but it isn’t relevant to the balance of power.
People are discussing “If Rudd gets a friendly Senate”.
In 2004 the right (Coalition + Fielding) one 4-2 Senate splits in two states: 3 Liberals and a National in Queensland and 2 Liberals, 1 National and Fielding in Victoria.
I think there is pretty much zero chance of the right maintaining a 4-2 split in either of those states. Having lost those seats, Labor + Greens is a majority, end of story. Of course, it is possible that the left could win a majority in a state, by the Greens winning a seat off Liberals in the ACT or by a 4-2 split in another state, but it isn’t relevant to the balance of power.
Dr Henry is pretty keen on the tax, since it is (after mutation) his proposal. And his personality is one of robust, even combative argument. Personally I don’t think he strikes the appropriate tone; but that is no reason not to address his arguments or think him unworthy of the Secretariat.
As it happens, Sinclair Davidson has spent a lot of time lately questioning Dr Henry’s and Treasury’s statements. Perhaps they aren’t the solid-gold gospel truth that people in politics take them as (when they agree with the conclusion).
Anyhow, if, as Treasury and Dr Henry say, the tax is truly neutral on the industry — or even encourages investment — why not jack it up to 100%?
Dr Henry is pretty keen on the tax, since it is (after mutation) his proposal. And his personality is one of robust, even combative argument. Personally I don’t think he strikes the appropriate tone; but that is no reason not to address his arguments or think him unworthy of the Secretariat.
As it happens, Sinclair Davidson has spent a lot of time lately questioning Dr Henry’s and Treasury’s statements. Perhaps they aren’t the solid-gold gospel truth that people in politics take them as (when they agree with the conclusion).
Anyhow, if, as Treasury and Dr Henry say, the tax is truly neutral on the industry — or even encourages investment — why not jack it up to 100%?
wizofaus,
If not, then you have either not bothered to read, or have discounted without reply, several of my comments on the topic.
To put my argument into one blog comment:
This tax will not significantly affect existing investments for the simple reason that once the investment is committed then to withdraw it will cause a loss over and above the likely return on the investment, so doing that makes no sense. Existing projects with investment that has already been made will not be affected.
Where this will have an impact is on any new investment decisions. All mining companies, whether a junior explorer or a major integrated firm forecast, in some form or another, their return on investment (ROI – whether a return on assets, equity or other measures) from any projected project. Any tax increase will probably (and this one in particular will definitely) reduce the forecast ROI of any investment. It must.
That, in and of itself, may not prove fatal if the risk of the project is similarly reduced. This tax is designed to do that, to an extent, as it is a Brown tax, designed to pay out if the project underperforms. Two problems here, though – their is a risk (substantial IMHO) that the government will not pay out on the underperformance part if there is a substantial amount (say like Ravensthorpe, where the payout would have been over $1bn). Banks and other financiers may have good grounds not to trust the government on this (part of the sovereign risk argument against this tax).
The second problem here is the threshold at which this pays out. The level is set at the government bond rate (by design – this is the rate the government is using for its cost of capital), not the cost of capital for the firm considering the project. This means that, in the area between the government bond rate (around 6%) and the company’s cost of capital (10% for the biggest of the majors, considerably more for the tiddlers) there is a straight deadweight loss from this.
.
That means that, overall, the returns to future investments in Australia must be depressed from what they would otherwise be. This would not be a problem if capital were immobile. The problem here is that it is not. If returns in Australia are depressed then the people making the decisions on where to invest not only may decide to invest elsewhere, they must do so. The Corporation Law requires company directors to seek the best returns for the shareholders of the company. Emotion, loyalty etc. may not enter into it.
If the difference in return is small or the other risks in the other country are strong factors then it is easy to overlook.
The problem in this area with the RSPT is simple – it is likely to both depress returns (by up to 30%) and increase the evaluation of sovereign risk in Australia as it represents a substantial additional impost on existing investment.
Either problem would be forgivable – and one that could be ignored. Having both of these and the other problems identified above is, at the very least, one bridge too far.
Existing investment will stay. New investment is unlikely, meaning the entire industry will just gradually close down as existing projects wind down. There may be some new investment in some very highly prospective areas, but this will (IMHO) be the exception, not the rule.
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Sorry for the very long comment, but I think it is worth actually going through this proposal carefully.
wizofaus,
If not, then you have either not bothered to read, or have discounted without reply, several of my comments on the topic.
To put my argument into one blog comment:
This tax will not significantly affect existing investments for the simple reason that once the investment is committed then to withdraw it will cause a loss over and above the likely return on the investment, so doing that makes no sense. Existing projects with investment that has already been made will not be affected.
Where this will have an impact is on any new investment decisions. All mining companies, whether a junior explorer or a major integrated firm forecast, in some form or another, their return on investment (ROI – whether a return on assets, equity or other measures) from any projected project. Any tax increase will probably (and this one in particular will definitely) reduce the forecast ROI of any investment. It must.
That, in and of itself, may not prove fatal if the risk of the project is similarly reduced. This tax is designed to do that, to an extent, as it is a Brown tax, designed to pay out if the project underperforms. Two problems here, though – their is a risk (substantial IMHO) that the government will not pay out on the underperformance part if there is a substantial amount (say like Ravensthorpe, where the payout would have been over $1bn). Banks and other financiers may have good grounds not to trust the government on this (part of the sovereign risk argument against this tax).
The second problem here is the threshold at which this pays out. The level is set at the government bond rate (by design – this is the rate the government is using for its cost of capital), not the cost of capital for the firm considering the project. This means that, in the area between the government bond rate (around 6%) and the company’s cost of capital (10% for the biggest of the majors, considerably more for the tiddlers) there is a straight deadweight loss from this.
.
That means that, overall, the returns to future investments in Australia must be depressed from what they would otherwise be. This would not be a problem if capital were immobile. The problem here is that it is not. If returns in Australia are depressed then the people making the decisions on where to invest not only may decide to invest elsewhere, they must do so. The Corporation Law requires company directors to seek the best returns for the shareholders of the company. Emotion, loyalty etc. may not enter into it.
If the difference in return is small or the other risks in the other country are strong factors then it is easy to overlook.
The problem in this area with the RSPT is simple – it is likely to both depress returns (by up to 30%) and increase the evaluation of sovereign risk in Australia as it represents a substantial additional impost on existing investment.
Either problem would be forgivable – and one that could be ignored. Having both of these and the other problems identified above is, at the very least, one bridge too far.
Existing investment will stay. New investment is unlikely, meaning the entire industry will just gradually close down as existing projects wind down. There may be some new investment in some very highly prospective areas, but this will (IMHO) be the exception, not the rule.
.
Sorry for the very long comment, but I think it is worth actually going through this proposal carefully.
So what you’re saying Andrew then is that the government could lend extractive industry the money at the bond rate and then there’d be no problem. The government would simply allow the companies to take the downside risk in exchange for the cheap finance and take a 40% slice of that above the bond rate.
So what you’re saying Andrew then is that the government could lend extractive industry the money at the bond rate and then there’d be no problem. The government would simply allow the companies to take the downside risk in exchange for the cheap finance and take a 40% slice of that above the bond rate.
Jacques, I’m surprised at you = you normally get the detail right, but you’re way. way off beam on them here.
That the RSPT liability replaces royalty payments (as the latter are dollar-for-dollar deductible) is not some marginal detail. It means that a revenue-neutral RSPT would massively INCREASE exploration and development incentives (you’re replacing a tax that does have disincentive effects with one that has far less such effects). Now the RSPT is not revenue neutral, but the essence of the
Treasury modelling is that the reduced incentive created by a taking an extra $9 billion from the industry through a weak-disincentive tax is less than the large increase in incentives created by the revenue-neutral component. Hence the government can legitimately claim the RSPT is still a net improvement in incentives – only it’s a bit too complicated an argument for a soundbite.
As I’ve said elsewhere, the mining companies are not afraid this tax will reduce mining activity – they’re afraid it wont!
All around the world governments let miners make untaxed super-profits because they’re not game to raise royalties for fear of discouraging development. If it turns out you can tax those profits and still get the mining activity then they’ll all do it. THAT is why the miners are so over=the-top about this.
Jacques, I’m surprised at you = you normally get the detail right, but you’re way. way off beam on them here.
That the RSPT liability replaces royalty payments (as the latter are dollar-for-dollar deductible) is not some marginal detail. It means that a revenue-neutral RSPT would massively INCREASE exploration and development incentives (you’re replacing a tax that does have disincentive effects with one that has far less such effects). Now the RSPT is not revenue neutral, but the essence of the
Treasury modelling is that the reduced incentive created by a taking an extra $9 billion from the industry through a weak-disincentive tax is less than the large increase in incentives created by the revenue-neutral component. Hence the government can legitimately claim the RSPT is still a net improvement in incentives – only it’s a bit too complicated an argument for a soundbite.
As I’ve said elsewhere, the mining companies are not afraid this tax will reduce mining activity – they’re afraid it wont!
All around the world governments let miners make untaxed super-profits because they’re not game to raise royalties for fear of discouraging development. If it turns out you can tax those profits and still get the mining activity then they’ll all do it. THAT is why the miners are so over=the-top about this.
No, Fran – that only reduces one of the problems. They are still reducing the return below what return they may get from other possible investments (this is one of the main differences with the Norway example, in that StatOil had no other investment possibilities – the other being that no pool of savings is being created), increasing the sovereign risk that the return may not happen if losses are incurred. This still would mean that there is a good argument that the Corps law would require overseas investment.
I am also not sure at all that the mining game is one I would be happy having my government invest in. The record of government directed mining adventures is not a good one, either on return or environment grounds.
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dd,
This is not revenue neutral for the mining companies. Your argument would hold water if all mining companies in all mining territories around the planet were facing this sort of impost. Unfortunately for your argument, they are not.
No, Fran – that only reduces one of the problems. They are still reducing the return below what return they may get from other possible investments (this is one of the main differences with the Norway example, in that StatOil had no other investment possibilities – the other being that no pool of savings is being created), increasing the sovereign risk that the return may not happen if losses are incurred. This still would mean that there is a good argument that the Corps law would require overseas investment.
I am also not sure at all that the mining game is one I would be happy having my government invest in. The record of government directed mining adventures is not a good one, either on return or environment grounds.
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dd,
This is not revenue neutral for the mining companies. Your argument would hold water if all mining companies in all mining territories around the planet were facing this sort of impost. Unfortunately for your argument, they are not.
Jacques Chester @62 I actually don’t care if it’s neutral on the industry. I think there’s been no accounting of the carbon impact of resources in all the talk about the tax. There’s a positive value for us to leaving coal in the ground relative to burning it without carbon capture and storage, which, as James Hansen has noted, is pretty much a pipedream. So digging it up and burning it here or elsewhere without CCS has a negative cost. I would argue if the tax does put a break on mining investment, that would be a good thing for the climate. You might ask what then happens to the economy, but I would ask what happens to the economy with an increasing number of increasingly serious climate impacts? If the miners want to refer to their balance sheets, let’s make sure they include everything. None of this means they shouldn’t also be served up with a science-based ETS. Ferguson would splutter at this, of course, but then again I’m not into “listening tours” of the mining industry.
Jacques Chester @62 I actually don’t care if it’s neutral on the industry. I think there’s been no accounting of the carbon impact of resources in all the talk about the tax. There’s a positive value for us to leaving coal in the ground relative to burning it without carbon capture and storage, which, as James Hansen has noted, is pretty much a pipedream. So digging it up and burning it here or elsewhere without CCS has a negative cost. I would argue if the tax does put a break on mining investment, that would be a good thing for the climate. You might ask what then happens to the economy, but I would ask what happens to the economy with an increasing number of increasingly serious climate impacts? If the miners want to refer to their balance sheets, let’s make sure they include everything. None of this means they shouldn’t also be served up with a science-based ETS. Ferguson would splutter at this, of course, but then again I’m not into “listening tours” of the mining industry.
Hartcher has also come on board to the view that the RSPT is a progressive policy being tossed to the ALP’s Left-wing political base. He argues that Rudd’s mining tax is a ploy to get the Left back on-side before the election.
Early last year I correctly predicted that Rudd would swing to the Left. But I thought he would do it by giving more teeth to the CPRS. However Minchin closed off this option with his martyrdom operation. So I was wrong about the pre-election stiffening of the CPRS.
Hence the mining tax is an alternative Lefty policy to appease the GREENies. Which has the added benefit of making the PM look like a stand-up guy who can take on the Big End of Town, impressing the MoR voters who have doubts about Rudd’s bottle.
This is a brilliant move by Rudd and makes him look like a very capable Machiavellian. He is learning on the job how to use power to help his friends and hurt his foes.
Hartcher has also come on board to the view that the RSPT is a progressive policy being tossed to the ALP’s Left-wing political base. He argues that Rudd’s mining tax is a ploy to get the Left back on-side before the election.
Early last year I correctly predicted that Rudd would swing to the Left. But I thought he would do it by giving more teeth to the CPRS. However Minchin closed off this option with his martyrdom operation. So I was wrong about the pre-election stiffening of the CPRS.
Hence the mining tax is an alternative Lefty policy to appease the GREENies. Which has the added benefit of making the PM look like a stand-up guy who can take on the Big End of Town, impressing the MoR voters who have doubts about Rudd’s bottle.
This is a brilliant move by Rudd and makes him look like a very capable Machiavellian. He is learning on the job how to use power to help his friends and hurt his foes.
Well as I said Andrew, my approach would be that anyone who declares than a project hgas been shelved because of the tax gets an immediate audit with no protection of related “commercial-in-confidence” at all — since they have waived that right by making a claim of MAE. Investors are entitled to know the facts.
If the project would be viable, then we give them first refusal. If they pass they forfeit to the state without compensation.
The state steps in and finances the operation with a suitable partner on terms reflecting the government exposure to risk. Simple.
Well as I said Andrew, my approach would be that anyone who declares than a project hgas been shelved because of the tax gets an immediate audit with no protection of related “commercial-in-confidence” at all — since they have waived that right by making a claim of MAE. Investors are entitled to know the facts.
If the project would be viable, then we give them first refusal. If they pass they forfeit to the state without compensation.
The state steps in and finances the operation with a suitable partner on terms reflecting the government exposure to risk. Simple.
Andrew R I don’t doubt that even in the long term the mining industry as it exists now might be slightly less profitable than it has been up to now – though I’d say it’s more likely that mining companies (new and existing) will simply adapt their activites to remain as profitable as they can. Whether this has a negative impact on the economy as a whole depends largely on how the government uses this revenue (vs how those that are currently profiting the most from mining are spending their money). For a start it’s partly funding a cut in company tax rate, which in itself may well provide more than enough stimulus to make up for any mining losses, but I’d like to think it would also help fund better income redistribution and possibly environmental initiatives that would produce better truly long term economic results.
Andrew R I don’t doubt that even in the long term the mining industry as it exists now might be slightly less profitable than it has been up to now – though I’d say it’s more likely that mining companies (new and existing) will simply adapt their activites to remain as profitable as they can. Whether this has a negative impact on the economy as a whole depends largely on how the government uses this revenue (vs how those that are currently profiting the most from mining are spending their money). For a start it’s partly funding a cut in company tax rate, which in itself may well provide more than enough stimulus to make up for any mining losses, but I’d like to think it would also help fund better income redistribution and possibly environmental initiatives that would produce better truly long term economic results.
You may recall that CO2 and other GHGs got discussed a little while back. Chairman Rudd, All Hail The Chairman, decided that now was not the time to address the greatest moral challenge of our time.
You may recall that CO2 and other GHGs got discussed a little while back. Chairman Rudd, All Hail The Chairman, decided that now was not the time to address the greatest moral challenge of our time.
wizofaus,
The problem, of course, is that if I am right there will be a pool of tax revenue that diminishes over time as current projects wind up. It is (IMHO) unlikely that they will return rapidly as there is always the risk that, if the tax is taken off to try to attract them back, it will be re-imposed later (more sovereign risk issues).
This means that tax revenue will drop below what is being currently raised through royalties and company tax as the projects wind up – perhaps to return later, possibly much later, or perhaps not. This would represent a pure loss to us all.
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Fran,
In this case, if they are taking decisions other than in the interests of the company then they would be subject to companies law anyway. If they close a project then the investors are going to want to know why and the disclosures that happen (again, by law) in their annual report on discontinued projects would show this up. If they deliberately make a false statement in their annual report than they are subject to criminal sanction for doing that. All directors know this.
In any case, state laws require them to sell on the leases they have after a relatively short period if they have not actually done anything with them, so that would not be needed.
wizofaus,
The problem, of course, is that if I am right there will be a pool of tax revenue that diminishes over time as current projects wind up. It is (IMHO) unlikely that they will return rapidly as there is always the risk that, if the tax is taken off to try to attract them back, it will be re-imposed later (more sovereign risk issues).
This means that tax revenue will drop below what is being currently raised through royalties and company tax as the projects wind up – perhaps to return later, possibly much later, or perhaps not. This would represent a pure loss to us all.
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Fran,
In this case, if they are taking decisions other than in the interests of the company then they would be subject to companies law anyway. If they close a project then the investors are going to want to know why and the disclosures that happen (again, by law) in their annual report on discontinued projects would show this up. If they deliberately make a false statement in their annual report than they are subject to criminal sanction for doing that. All directors know this.
In any case, state laws require them to sell on the leases they have after a relatively short period if they have not actually done anything with them, so that would not be needed.
Andrew Said:
That’s not relevant.
The annual report isn’t going to occur before the election and if there is an adequate reason for not continuing the project then they are covered. The fact that it had nothing to do with RSPT is beside the point and if the government loses they can even claim they have done right by shareholders. If the whole thing was a furphy they can take the project off the shelf. They haven’t actually cancelled yet.
We of course want to know the truth right now as they are manipulating the public discussion.
Again irrelevant. What they do after the election is not relevant. They will have milked the issue and got as much as they wanted. People will have been blackmailed successfully. We want to put the wind up them and refute their blackmailing by making them pay for it with forefeiture and early exposure as frauds.
Andrew Said:
That’s not relevant.
The annual report isn’t going to occur before the election and if there is an adequate reason for not continuing the project then they are covered. The fact that it had nothing to do with RSPT is beside the point and if the government loses they can even claim they have done right by shareholders. If the whole thing was a furphy they can take the project off the shelf. They haven’t actually cancelled yet.
We of course want to know the truth right now as they are manipulating the public discussion.
Again irrelevant. What they do after the election is not relevant. They will have milked the issue and got as much as they wanted. People will have been blackmailed successfully. We want to put the wind up them and refute their blackmailing by making them pay for it with forefeiture and early exposure as frauds.
Company directors must continuously disclose this sort of information to the ASX and their shareholders. Deceptive statements render directorys personally liable to criminal sanction.
If Xstrata say they’re pulling out of a project because they see too much downside, then they’re pulling out because they see too much downside. Otherwise ASIC will have grounds to prosecute the directors severally and individually.
Unlike politicians, directors can go to jail for lying to their constituents.
Company directors must continuously disclose this sort of information to the ASX and their shareholders. Deceptive statements render directorys personally liable to criminal sanction.
If Xstrata say they’re pulling out of a project because they see too much downside, then they’re pulling out because they see too much downside. Otherwise ASIC will have grounds to prosecute the directors severally and individually.
Unlike politicians, directors can go to jail for lying to their constituents.
JC said:
Easy to say, hard to disprove in real time. This is a judgement call. As Paul Norton quite rightly points out though, they must have thought they were in prospect of paying super profits tax otherwise they’d have been ahead on the deal or at worst, not behind. The analysis would have been interesting.
As you’d know, ASIC processes grind slowly and getting into a politcal case would not have been something they would rush into. How long did Jody Rich take to get through all this? Years. So the threat from ASIC is utterly moot in real time.
JC said:
Easy to say, hard to disprove in real time. This is a judgement call. As Paul Norton quite rightly points out though, they must have thought they were in prospect of paying super profits tax otherwise they’d have been ahead on the deal or at worst, not behind. The analysis would have been interesting.
As you’d know, ASIC processes grind slowly and getting into a politcal case would not have been something they would rush into. How long did Jody Rich take to get through all this? Years. So the threat from ASIC is utterly moot in real time.
Expect a huge amount of sucking up.
Labor’s skittishness will vanish, replaced by an invincible arrogance. Even when their last election does come, when the wheels finally fall off and the Coalition do get their act together, dire warnings will be fobbed off with: “Ah yeah, but that’s what they said back in 2010 and we won that, didn’t we?”.
The Coalition will turn on Abbott. Business will declare no confidence in him, as happened to Nelson and Downer, and is happening to NSW Labor now. Turnbull will stand up and say “now we’re going to do things my way”, which they won’t cop.
JC: the whole reason why the campaigns against the RSPT and the ETS are completely bogus is because no announcements were made to the ASX which in any way parallel the hysterical bleating through a gullible media and an even more gullible Coalition. That dissonance between stated impacts on profits and quantifiable impacts on profits is one of the main reasons why one can have confidence that these campaigns have no substance at all – except for ivory-tower dwellers in the CIS and strung out entitlements-junkies in the Coalition.
Expect a huge amount of sucking up.
Labor’s skittishness will vanish, replaced by an invincible arrogance. Even when their last election does come, when the wheels finally fall off and the Coalition do get their act together, dire warnings will be fobbed off with: “Ah yeah, but that’s what they said back in 2010 and we won that, didn’t we?”.
The Coalition will turn on Abbott. Business will declare no confidence in him, as happened to Nelson and Downer, and is happening to NSW Labor now. Turnbull will stand up and say “now we’re going to do things my way”, which they won’t cop.
JC: the whole reason why the campaigns against the RSPT and the ETS are completely bogus is because no announcements were made to the ASX which in any way parallel the hysterical bleating through a gullible media and an even more gullible Coalition. That dissonance between stated impacts on profits and quantifiable impacts on profits is one of the main reasons why one can have confidence that these campaigns have no substance at all – except for ivory-tower dwellers in the CIS and strung out entitlements-junkies in the Coalition.
Sure. Basically they probably determined that their internal rate of return will not cover their actual cost of capital. Given that as Andrew Reynolds pointed out, most mining companies have high capital costs (it’s a risky industry), the IRR is diminished for those projects which will be profitable.
Sure there’s dissonance. But in the case of Xstrata they said the project is no longer viable, partly because of uncertainty about the new tax. I imagine that as other firms crunch the numbers, other projects will be slowed or suspended.
Sure. Basically they probably determined that their internal rate of return will not cover their actual cost of capital. Given that as Andrew Reynolds pointed out, most mining companies have high capital costs (it’s a risky industry), the IRR is diminished for those projects which will be profitable.
Sure there’s dissonance. But in the case of Xstrata they said the project is no longer viable, partly because of uncertainty about the new tax. I imagine that as other firms crunch the numbers, other projects will be slowed or suspended.
Jacques,
This has already happened to several projects across quite a few companies, so there is no need to imagine. The response here seems to have been reasonably uniform – if a company states what they are going to do if a certain government policy is not changed it is a threat to the government and an attempt to undermine the democratic process. If a union does the same it is an indication that government policy is wrong and needs to be changed.
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Andrew E,
I have, in the past, pointed to several of these. In Xstrata’s case they have not made an announcement to the ASX for the simple reason that they are not listed here.
To the LSE, though, they have made exactly that announcement –
So, Andrew E – they are pulling investment due to the tax and it is costing jobs. This is exactly the effect I pointed out would happen as a result of this tax. I would suggest that before making statements that are very easy to disprove you at least check your facts. That one took me about 2 minutes to falsify.
Jacques,
This has already happened to several projects across quite a few companies, so there is no need to imagine. The response here seems to have been reasonably uniform – if a company states what they are going to do if a certain government policy is not changed it is a threat to the government and an attempt to undermine the democratic process. If a union does the same it is an indication that government policy is wrong and needs to be changed.
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Andrew E,
I have, in the past, pointed to several of these. In Xstrata’s case they have not made an announcement to the ASX for the simple reason that they are not listed here.
To the LSE, though, they have made exactly that announcement –
So, Andrew E – they are pulling investment due to the tax and it is costing jobs. This is exactly the effect I pointed out would happen as a result of this tax. I would suggest that before making statements that are very easy to disprove you at least check your facts. That one took me about 2 minutes to falsify.
So some miners will be able to say to themselves “unemployed at last”. This is probably a good thing for them. One door closes another opens.
So some miners will be able to say to themselves “unemployed at last”. This is probably a good thing for them. One door closes another opens.
Andrew, the guts of what Xstrata said to the LSE seems to be this:
On the face of it I find it hard to believe that a tax on super profits would render the Wandoan project practically worthless. But I can’t see how there is enough information given to challenge the statement. We simply have to take their word for it.
Andrew, the guts of what Xstrata said to the LSE seems to be this:
On the face of it I find it hard to believe that a tax on super profits would render the Wandoan project practically worthless. But I can’t see how there is enough information given to challenge the statement. We simply have to take their word for it.
@80.
Bit of a weird announcement of you ask me. Appears to contain no facts whatsoever. I’m surprised that you take it on face value. As it doesn’t have any information that would have a material effect on the company’s share price I doubt it’s actually information required to be released under the exchange rule. In fact if you scroll down a bit you find this:
“London Stock Exchange plc is not responsible for and does not check content on this Website.”
On dear, look like you need to be a bit careful when quoting from mining company PR briefs that are dressed up to look like stock exchange announcements. The ASX has a similar new service and it not the same as the official announcement service.
@80.
Bit of a weird announcement of you ask me. Appears to contain no facts whatsoever. I’m surprised that you take it on face value. As it doesn’t have any information that would have a material effect on the company’s share price I doubt it’s actually information required to be released under the exchange rule. In fact if you scroll down a bit you find this:
“London Stock Exchange plc is not responsible for and does not check content on this Website.”
On dear, look like you need to be a bit careful when quoting from mining company PR briefs that are dressed up to look like stock exchange announcements. The ASX has a similar new service and it not the same as the official announcement service.
Andrew Reynolds @68, I don’t think you’ve understood my argument @67.
Yes, the RSPT is not a revenue neutral replacement for royalties. If it was, well-founded economic theory says it would unambiguously increase risky developments. But because part of the RSPT is in excess of royalties, then theory is ambiguous as to whether the disincentive effect of the extra revenue-raising outweighs the incentive effect of replacing royalties.
Each dollar of RSPT you raise deters much less investment than each dollar of royalties you raise, but you’re raising more dollars. So you need to measure the relative effects of a royalty dollar versus an RSPT dollar and multiply out by the number of dollars you’re going to raise [1].
Which is why you need a well-parameterised (ie empirically founded) model to predict what the net incentive effect will be. And Treasury’s well-parameterised model predicts that at the proposed rates the net effect will be to modestly increase risky investment relative to the current tax regime.
[1] Yes, yes, I know it’s not quite that simple because you need to properly distinguish inframarginal and marginal effects, but its close enough for a blog.
Andrew Reynolds @68, I don’t think you’ve understood my argument @67.
Yes, the RSPT is not a revenue neutral replacement for royalties. If it was, well-founded economic theory says it would unambiguously increase risky developments. But because part of the RSPT is in excess of royalties, then theory is ambiguous as to whether the disincentive effect of the extra revenue-raising outweighs the incentive effect of replacing royalties.
Each dollar of RSPT you raise deters much less investment than each dollar of royalties you raise, but you’re raising more dollars. So you need to measure the relative effects of a royalty dollar versus an RSPT dollar and multiply out by the number of dollars you’re going to raise [1].
Which is why you need a well-parameterised (ie empirically founded) model to predict what the net incentive effect will be. And Treasury’s well-parameterised model predicts that at the proposed rates the net effect will be to modestly increase risky investment relative to the current tax regime.
[1] Yes, yes, I know it’s not quite that simple because you need to properly distinguish inframarginal and marginal effects, but its close enough for a blog.
…. really? A $22 billion portfolio of projects has no material effect on a company’s shares?
…. really? A $22 billion portfolio of projects has no material effect on a company’s shares?
dd,
I would not put much faith on the treasury models. Having just been through a period where economic and financial models have been severely criticised (in part IIRC, by many on this website) I would have thought that we should all exercise a little more scepticism in this area. In any case, the Federal Treasury would never have had to model this sort of tax before and have little experience in the area of modelling mining revenues to the sort of detail needed to get this right.
On the first point – I would agree, which is why I have said several times I am not opposed to an RRT per se, just this one at these levels. If it were revenue neutral over time then I would expect the mining companies would love it. Even if it were mildly revenue accretive it would be welcomed.
dd,
I would not put much faith on the treasury models. Having just been through a period where economic and financial models have been severely criticised (in part IIRC, by many on this website) I would have thought that we should all exercise a little more scepticism in this area. In any case, the Federal Treasury would never have had to model this sort of tax before and have little experience in the area of modelling mining revenues to the sort of detail needed to get this right.
On the first point – I would agree, which is why I have said several times I am not opposed to an RRT per se, just this one at these levels. If it were revenue neutral over time then I would expect the mining companies would love it. Even if it were mildly revenue accretive it would be welcomed.
Andrew, in the Fin Review yesterday I read that Wesfarmers is increasing the capacity of its Curragh coal mine and are in the swim to buy the $1.5 billion Griffin coal assets. These guys don’t invest in dud projects.
On Wandoan, if we can’t trust the Treasury modelling, why should we trust Xstratas? I really would like to see some expert critique of it before I buy it.
It simply doesn’t pass the commonsense test. How can a tax on profits that cuts in above the long-term bond rate render the project worthless? It’s more likely that Xstrata found that the RSPT brought the profit margin down below their threshold for investment. In the past the big banks have closed profitable branches simply because they were not profitable enough and they could find better uses for their money.
Andrew, in the Fin Review yesterday I read that Wesfarmers is increasing the capacity of its Curragh coal mine and are in the swim to buy the $1.5 billion Griffin coal assets. These guys don’t invest in dud projects.
On Wandoan, if we can’t trust the Treasury modelling, why should we trust Xstratas? I really would like to see some expert critique of it before I buy it.
It simply doesn’t pass the commonsense test. How can a tax on profits that cuts in above the long-term bond rate render the project worthless? It’s more likely that Xstrata found that the RSPT brought the profit margin down below their threshold for investment. In the past the big banks have closed profitable branches simply because they were not profitable enough and they could find better uses for their money.
The analogy Brian would be like deciding that backing the screaming favourite in a race wouldn’t be worth it because you are only getting 5/4 and that backing the fourth favourite at 8/1 for the place would be a better risk trade.
Of course, that doesn’t mean that others won’t happily take the 5/4 bet on the most likely winner.
The analogy Brian would be like deciding that backing the screaming favourite in a race wouldn’t be worth it because you are only getting 5/4 and that backing the fourth favourite at 8/1 for the place would be a better risk trade.
Of course, that doesn’t mean that others won’t happily take the 5/4 bet on the most likely winner.
Brian,
You are right, Wesfarmers do not (but they have made some mistakes in the past). They probably are having an each way bet – given the recent poll numbers they may be betting that the tax will never occur, that it will be watered down or that the project is so profitable that it would be worth doing anyway. You seem to be putting more weight on Wesfarmer’s modelling (which you can’t see) than on Xstrata’s (which you also can’t see).
I would also advise you to read up on NPV calculations (I put a link up on the other thread) if you are asking the question on how Xstrata’s calculations can do that. Just briefly, though – something that may be profitable at a 6% discount (or other government bond) rate may be be unprofitable at the rate that Xstrata should be using. Large mining companies normally have a WACC of 10% or more and, given the political risk around at the moment in Australia I would suggest that a rate higher than this may be appropriate for them. To put it very simply, if you have to pay 10% financing costs to receive back 6% return then, on the billions invested, you are losing a substantial amount of money on that investment.
In Wesfarmer’s case, given it is an extension to an existing project the risk premium to be applied probably results in it being less risky than a new project, so bringing the discount rate to be used down closer (but never actually) to the 6% (or so) government bond rate.
Brian,
You are right, Wesfarmers do not (but they have made some mistakes in the past). They probably are having an each way bet – given the recent poll numbers they may be betting that the tax will never occur, that it will be watered down or that the project is so profitable that it would be worth doing anyway. You seem to be putting more weight on Wesfarmer’s modelling (which you can’t see) than on Xstrata’s (which you also can’t see).
I would also advise you to read up on NPV calculations (I put a link up on the other thread) if you are asking the question on how Xstrata’s calculations can do that. Just briefly, though – something that may be profitable at a 6% discount (or other government bond) rate may be be unprofitable at the rate that Xstrata should be using. Large mining companies normally have a WACC of 10% or more and, given the political risk around at the moment in Australia I would suggest that a rate higher than this may be appropriate for them. To put it very simply, if you have to pay 10% financing costs to receive back 6% return then, on the billions invested, you are losing a substantial amount of money on that investment.
In Wesfarmer’s case, given it is an extension to an existing project the risk premium to be applied probably results in it being less risky than a new project, so bringing the discount rate to be used down closer (but never actually) to the 6% (or so) government bond rate.
And now XStrata admist their claims have caused “confusion”. Gosh … who’d have thought that within a few weeks so many of the key players on the Liberals’ side would have to admit to dissembling.
What a pack of fraudsters they all are …
And now XStrata admist their claims have caused “confusion”. Gosh … who’d have thought that within a few weeks so many of the key players on the Liberals’ side would have to admit to dissembling.
What a pack of fraudsters they all are …
Fran,
If causing confusion was fraud then there would be plenty here guilty of it from time to time and, I have to admit, one of the guilty may be me. I am not always as clear as I wish I could be.
Fran,
If causing confusion was fraud then there would be plenty here guilty of it from time to time and, I have to admit, one of the guilty may be me. I am not always as clear as I wish I could be.
These guys (Wesfarmers) don’t invest in dud projects.
I don’t know… Who was it that bought Coles at the top of the market?
These guys (Wesfarmers) don’t invest in dud projects.
I don’t know… Who was it that bought Coles at the top of the market?
So what you’re saying Andrew is that they accidentally caused confusion by speaking in a way that assisted a campaign by them to subvert public policy discussion on a proposal to force them to share some of their profits with the taxpayers.
That is not the kind of reputation for credulity you want, IMO.
So what you’re saying Andrew is that they accidentally caused confusion by speaking in a way that assisted a campaign by them to subvert public policy discussion on a proposal to force them to share some of their profits with the taxpayers.
That is not the kind of reputation for credulity you want, IMO.
Fran,
If you actually read what they wrote, Fran, it is clear. I can see how those who wish to misunderstand could do so – so they have made it more clear. I can’t see how that is “fraud”.
.
Tim,
IIRC they said it would take five years to turn around. Let’s see how they do at the end of that. Personally, though, I do not hold any shares in them.
Fran,
If you actually read what they wrote, Fran, it is clear. I can see how those who wish to misunderstand could do so – so they have made it more clear. I can’t see how that is “fraud”.
.
Tim,
IIRC they said it would take five years to turn around. Let’s see how they do at the end of that. Personally, though, I do not hold any shares in them.