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Tag Archives: MRRT

An open letter to Andrew Laming

Andrew Laming (Image from theguardian.com)

Andrew Laming (Image from theguardian.com)

Following Kaye Lee’s article, “To my local member” where she provided an exposé of the number of questionable statements by Lucy Wicks (Federal Member for Robertson), AIMN reader Bill Mavropoulos finds that much of Andrew Laming’s (Federal Member for Bowman) recent statements on a range of issues also need to be further examined. Bill writes as follows:

Dear Mr Andrew Laming,

I write to you regarding your recent video presentation on the guardian website published on 26 June 2014. The presentation attempts to explain the Coalition government’s most recent Federal Budget. To avoid doubt the URL for this presentation is as follows:

http://www.theguardian.com/world/video/2014/jun/26/andrew-laming-budget-whiteboard-video?CMP=soc_567

This seems to be an attempt to counter Anthony Albanese’s video published 14 May 2014 as follows:

http://www.theguardian.com/world/video/2014/may/14/albo-explains-the-budget-video

The number of misleading statements, omissions and inaccuracies littered throughout your presentation was startling. I felt that it was incumbent on someone from the Australian public to deal with the more glaringly omissions, misleading statements and falsehoods.

Saving $550 from the Carbon Tax and Mining Tax repeal

When the Carbon Tax was introduced, it had a number of tax concessions attached to it that negated its economic effect on the majority of the Australian population.

Furthermore, Labor’s official policy was to move from a fixed price on Carbon to a floating Emissions Trading Scheme (ETS) from 1 July 2014. The cost of this scheme on an average household if it is removed from that date is actually estimated at $134 annually compared to this policy (see the ABC Fact Check here). The current law is there because you refuse to have a sensible policy to combat climate change.

The statement in your presentation is a blatant misrepresentation of the difference between the Coalition’s policy and that of the previous government.

In your presentation you mention that the Mining Tax will contribute to this $550 saving per household. This is not just misleading and deceptive, it is a blatant lie. In fact consequential amendments that are buried at the back of the MRRT repeal law will remove the schoolkids bonus, small business tax concessions and concessions for superannuation for low income taxpayers.

This means that, taking these measures together, the net effect of removing these measures will leave an average household worse off rather than better off (as you assert). This takes into consideration the large majority of mining companies are foreign owned. Thus repealing the Mining Tax puts money back in Gina and Co’s pockets (because they get out of paying this tax) by taking it out of ordinary Australian’s pockets, by removing these tax concessions aimed at poor and middle Australia.

This part of your presentation was personally the most offensive.

$50 Billion infrastructure investment

This investment was outlined and explained by Anthony Albanese in his video (linked above). Albanese explained clearly in his well-made and factually correct presentation the make-up of all previously proposed infrastructure spending by Labor. He then went on to explain how the Coalition removed and reallocated large amounts of rail infrastructure to fund big ticket road projects that look good during an election campaign but don’t actually address systemic problems in transport infrastructure.

Transport infrastructure accessibility disproportionately impacts younger and lower income families who generally live further away from large metropolitan centers. The rail infrastructure is less adequately developed the further out from these centers you go. Households in this position are reliant on only one mode of transport. This does two things:

  1. Makes these people reliant on motor vehicles that are subject to increasing cost pressures from the increase in fuel excise you are imposing, increased registration costs that the States have been forced to impose because of cuts you have made to their funding and general increased costs of fuel and maintenance, and
  2. Devalues the property prices of homes in these areas in comparison to areas that are closer to an urban center and also have more than one mode of transport accessible.

What this does Andrew Laming, is create a significant social risk in these places. The measure entrenches inequality by effectively creating ghettos with little or no social mobility because these people will pay a disproportionate amount on transport cost while being subject to a reduced increase in the value of their main asset, their home.

Loan for Apprentices was originally just government grant

The loan to apprentices you mentioned actually replaces a cut of a tool grant of $5,500. The Budget itself anticipates savings of $914.6 million from cutting the tool grant measure. However, despite the measure being linked to the $20,000 loan scheme you did not mention it in your presentation.

This $20,000 loan scheme you spruiked is estimated by that same Budget to cost $439 million. This means the net economic loss to Apprentices from these measures is in the order of $457.6 million.

That you had the gall to smile and tell apprentices they will be better off in your presentation while ripping close to half a billion dollars away from them is frankly appalling.

Hospital Funding indexation

The claim that hospital funding is boosted by certain percentages over the next four years again is not the full story, Andrew Laming. It does not outline the fact that due to changes to funding arrangements the government in its Budget estimates it will save $1.8 Billion of funding from Public hospitals in terms of how the increases are calculated. (Let alone the other cuts to health that are not mentioned)

In short you do not outline that although hospital funding will still go up, it will not go up by as much as originally slated due to a cut to the rates of funding originally envisaged.

Education Funding

The Coalition is increasing education funding by partially adopting the Labor Party’s Gonski funding model. However you say nothing about the Coalition government’s refusal to fund this model fully beyond the forward estimate period.

Further to this, due to changes to indexation and deregulation the costs of obtaining a higher education degree will actually skyrocket. This is coupled with changes to the allocation of the funding that essentially stymie the benefits flowing from Gonski entirely.

$7 Co-Payment and Medical Research Future Fund

The statement that this measure supports the Healthcare system in your presentation is ludicrous. Firstly, introduction of the co-payment will clearly necessitate additional administrative costs borne by doctors that will ultimately need to be passed on to patients. In the shorter term this means increased health care costs for the same or worse level of service.

Further to this any savings generated by Health measures in the Budget are to be allocated to a dedicated medical research fund not into the Medicare system that pays for these health services. Therefore in the medium term the Healthcare system is being deprived of the benefits of this additional funding to alleviate the difference between revenue collected for health and the relevant expenditure.

In the long term, investment in the specialised Medical Research Fund has been criticised by experts. The nature of research and development is very complex. Often completely different areas of research result in the creation of medical applications. These other areas of research are being cut by your budget (think CSIRO). The money collected may therefore not be used as effectively as it otherwise would have been by say, allocating it to a broader range of research activities through established funding mechanisms.

This ‘oversight’ is perhaps as a direct result of the Coalition not having a Science Minister who understands that by creating silos of funding for research you may actually be undermining the long term sustainability of the system.

Full income replacement – Having a child

The statement that the full income of a parent will be replaced when they have a child is outrageously incorrect. I do however love the comment you made along the lines of ‘everyone is happy’ because their full wage gets replaced. Note that; the latest statement in relation to this policy is that the maximum payment to a parent over six months will be capped at $50,000.

Furthermore, this payment is not asset or income tested and so because it replaces income up to this cap it acts to effectively redistributes economic benefit from lower income earners to higher income earners.

I believe from watching this part of your video that you either have a dangerous lack of understanding in relation to how this measure works or are trying to deliberately mislead the public.

Pensions indexed, no changes till after next election

This statement was perhaps the most blatantly misleading one of your entire video. Firstly, from 1 July pension supplements are being removed, this is a well-documented fact. Also, due to the long term nature of receiving pension benefits it is cold comfort that the age and indexation decreases will start in a few years rather than now. This is clearly political as you are banking on people forgetting these changes are in the system by the time the next election rolls around.

The fact that you are legislating changes now to decrease the rate of indexation of pensions and raising the pension age to 70 is not mentioned in any detail at all.

This measure will reduce the absolute dollar value of a pension that citizens will receive when compared to the current arrangements. The fact that indexation effects will compound year on year is another nasty fact you have overlooked.

ABC – Savings can be found without effecting programing

This statement is unhinged and completely contrary to reality. Mark Scott the head of the ABC himself has stated that programs will be cut and staff will be laid off in direct contradiction of your assertion.

Please see his comments ‘here’. Saying something doesn’t make it true Andrew, especially when based on absolutely no evidence.

Conclusion

Please be mindful that the video contained a number of other unsubstantiated, misleading, false and generally ludicrous assertions. It was impossible to address them all in this letter without it running to several more pages.

I note that in response to my protests regarding this Budget Andrew you felt the need to message me on Facebook to say, and I quote:

“Sincerely glad you don’t live in my community”.

This gave me a bit more insight into your mind. It is clear you don’t see me or people like me as, an ordinary Australians, or as being part of the community you are elected to represent. I am unsure whether this is due to the level of our income, our ethnicity or simply the fact that you live in a particular part of Queensland and I live in Victoria.

What this suggests about you Andrew, as a parliamentarian, can best be summarised by my response to you via email as follows:

“I [sic] thought your suggestion that I am not part of “your community” was hurtful and suggests that you are not an elected representative of Australia (my community)”.

Andrew Laming show more respect for the Australian public. I warned you on Facebook that should you attempt to mislead the Australian public regarding the Budget again that I would hold you to account, admittedly in more colourful language than used in this letter. Consider this me fulfilling my promises; at least one of us does that.

Regards,

Vasilios (Bill) Mavropoulos

Tax Specialist

You might also like to read:

Under the shade of a Barcaldine gum tree

An Open Letter to Bill Shorten

Letter to all Coalition MPs

An Open Letter to Frances Abbott

Let’s not forget the poor miners . . .

I'm sure they'll also rejoice to see the end of the mining tax (Image: Sydney Morning Herald)

I’m sure they’ll also rejoice to see the end of the mining tax (Image: Sydney Morning Herald)

The high-fiving over the repeal of the carbon tax made me despair at the ignorance of our government – a battle lost but the war continues.

The Abbott government is preparing to axe the mining tax as its repeal bill passed the lower house for a second time on Thursday, with the government limiting debate to under two hours.

The coalition says the mining tax has failed to do its job, raising only $340 million since its introduction. Parliamentary secretary to the minister for finance Michael McCormack also said the tax undermined confidence in Australia as an investment destination and its reputation as resource supplier, which raises the obvious question asked by Chris Bowen, “If it doesn’t raise enough money, then how does it damage the mining industry?”

The total revenue in 2012 for BHP Billiton, Rio Tinto, Woodside Petroleum, Newcrest and Xstrata was A$167.23 billion. Add to that the revenues of the self-defined “small” miners.  Gina Rinehart’s Hancock Prospecting alone made a $1.2 billion net profit in 2012.  It is projected that in the next decade they will make at least another $600 billion

State governments will hand over $17.6 billion in mining subsidies over the next four years.  The federal government will contribute $4.5 billion a year.  That’s $36 billion over the next four years given to companies who are making superprofits from mining our limited resources.  That would pay for a real NBN, or high speed rail, or all the programs that have been slashed by the Coalition and then some.

We are told we must encourage investment by mining companies because they underpin our economy.  And yet the facts do not bear this out.

Take Glencore for example, our third largest mining company, who, according to an article in the SMH, paid no tax on the $15 billion profit they made over the last three years.  To achieve this they employed aggressive tax avoidance measures, borrowing money at 9% and then relending it in interest free loans.  Their profits largely go offshore to foreign shareholders.

”The truth is that Glencore Coal Investments Australia’s operations in Australia are, because of the Group’s business model, branch operations of the Swiss-domiciled parent entity, which uses the now dormant legal shell of an Australian body corporate in an attempt to hide the reality of its branch business in Australia.”

The company disputes this, saying it has paid approximately $3.4 billion in taxes and royalties in Australia over the last three years.  Even if this is true, it’s a damn fine return for selling something you don’t own.  I wonder how much it has received in subsidies during that time.

Mining companies are also unreliable employers.  They quickly sack employees, often on the basis of what the resource market is doing, because profit is paramount.

In March the Australian reported:

“Glencore’s Ravensworth underground operation will be the first coal mine suspended by the Switzerland-based resources titan due to the sharp slide in prices for the fuel, although this follows hundreds of job cuts over the past year as the company looked to bolster the profitability of its sites.”

Followed by this in the Courier Mail last month:

“SWISS mining giant Glencore will shut its Newlands underground coal mine in central Queensland with the loss of 50 jobs next month, but eventually 196 jobs when production ceases next year.

Last year about 450 workers were axed from Newlands and Oaky Creek as the company restructured.”

Over the past two years, coal producers have slashed 12,000 jobs—more than 1,500 destroyed in the Hunter Valley and 8,000 in Queensland—with impunity.

Glencore’s Peter Freyberg claimed that the industry “isn’t as competitive as it should be,” and warned that “productivity, industrial relations and regulatory settings were factors impacting the industry’s competitiveness.”

The mining companies want the ability to hire and fire at will and “flexibility” to make instantaneous changes to work practices, such as shift rosters and the use of contract labour, to meet shifting production demands.

In February, the Abbott government quietly reopened a visa loophole that will allow employers to hire an unlimited number of foreign workers under a temporary working visa, in a move that unions say will bring back widespread rorting of the system.

Before the loophole was closed in 2013 by the Labor government, companies in the mining, construction and IT industries were knowingly hiring hundreds more foreign workers than they had applied for.

In one example, an employer was granted approval for 100 visas over three years, but in 18 months he had brought in 800 workers under the 457 visa.

In the Coalition’s bid to remove all ”red tape” from the 457 skilled migrant visa, employers will not be penalised or scrutinised if they hire more foreign staff than they applied for.

Before the cap was introduced in 2013, the number of 457 visas was quickly rising. In the financial year 2009/10 there were 67,980 visas granted. By 2012/13 there were 126,350 visas granted, statistics from the Department of Immigration show.

The Coalition has put together a panel to review 457 visas.  In typical fashion, they have changed the rules before the panel has done its review though, considering the panel members, its recommendations will probably be in line with whatever the business sector wants.  There are four members on the panel: John Azarias, from Deloitte Australia; Professor Peter McDonald, of the Australian National University; Katie Malyon, from Ernst & Young; and Jenny Lambert, from the Australian Chamber of Commerce and Industry.

FIFO work arrangements, meant for special circumstances such as geographical isolation, are now increasingly becoming the order of the day.

Gone are the days when companies invested in social infrastructure such as housing, schools and hospitals to make mining towns liveable. These days more than 100,000 workers spend up to 5 weeks at a time away from their families.  FIFO workers report high levels of stress and there is a high level of turnover; one out of three FIFO workers will not last more than a year on the job. And for those who do find themselves living in mining towns, the pressure on local transport, housing and hospitals is creating significant social problems.

Following their A$22 million scaremongering TV ad campaign, the revamped Mining Resources Rent Tax (MRRT) now only applies to 22.5 per cent of the mining magnates’ profits, after a questionable “extraction allowance”. And that 22.5 per cent only applies only on coal and iron ore and only on companies that make over $50m in profit.

The Greens asked the PBO to calculate how much could be raised from increasing the tax rate to 40 per cent, plugging loopholes and including all minerals that make super profits, such as gold.

The office said these measures would raise $26.2 billion in the years to 2016/17.

PEFO anticipated $4.4 billion in revenue would be collected from the watered down mining tax over the forward estimates.  MYEFO cut that to $3.4 billion.  The Coalition intend to give up this revenue at the expense of the following spending commitments:

1. Abolishing the low income superannuation contribution, with an estimated saving of $3.8 billion. This policy required the Commonwealth Government pay up to $500 a year to the superannuation accounts of certain low income earners.

2. Unwinding the instant asset write-off for small business with a $5,000 threshold, saving $2.3 billion. This policy allowed small businesses to write off depreciating assets costing less than $6,500, and the first $5,000 was offset against the mining tax.

3. Slowing the superannuation guarantee increase so it remains fixed at 9.25 per cent until 2016–17 before increasing incrementally to reach 12 per cent by 2021–22. Estimated saving $1.6 billion.

4. Discontinuing the company loss carry-back, a benefit for small businesses, saving $950 million.

5. Dismantling the accelerated depreciation for motor vehicles, saving $450 million.

6. Ending geothermal exploration treatment, saving $10 million.

7. Scrapping the Income Support Bonus, which includes payments to the children of veterans and is a lump-sum supplementary payment made twice a year to people on certain income support payment. Estimated saving $1.1 billion.

8. Abolishing the Schoolkids Bonus, a lump-sum payment to parents of school-aged children twice a year. It is the largest single savings measure in the repeal bill, estimated at over $5.2 billion, even though the Schoolkids Bonus was not from the mining tax, but an alternative payment which replaced the previous Education Tax refund.

Why we are encouraging people to come and dig up our finite resources  with foreign workers to send the profits overseas, subsidising them to do so, eliminating environmental safeguards and workplace conditions, and then repealing a small tax on their superprofits, is absolutely beyond me.  And as can be seen by the above list, it is largely middle and low income earners and small businesses who will pay for this largesse shown to the mining companies who rape our nation to fill their shareholders’ purses.

Life according to the Coalition.

Solving the real problems

 

We have a budget problem.

It’s not a budget emergency. Everyone agrees about that… at least, everyone who understands about national finance and economics, which is unfortunately only a minority of the voting public, and none of the current Coalition government to hear them tell it.

By current standards, by any measures you care to name, Australia is currently doing very well compared to every other nation in the G20. Taking all of the various factors together, it’s impossible to deny that Australia is in the best economic state in the world.

The justification for immediate, sweeping, deep cuts to government expenditure is looking pretty shaky.

With that said, it is prudent for us to realise that Australia does face some severe fiscal challenges in the coming decades. Some of these are the result of demographics. Some are historical, and some are being wilfully ignored or exacerbated by the Coalition government’s policies.

As many commentators have argued, the problem with Australia’s economy is not currently on the spending side of the ledger; despite the Coalition’s rhetoric of “profligate spending”, government expenditure increase was slower under Labor than the previous Howard government. Rather, the challenge is with the decline in revenue. This decline is not going to be fixed by a short-term “deficit levy”. The decline is driven by demographic change as the large baby-boomer demographic leaves the ranks of the taxpayers and is replaced by smaller cohorts of Generation Y and Z. Simply put, we’re an ageing population and that leads to declines in tax revenue. Revenue is further driven down by reductions in the terms of trade for coal, iron and other exports, as international economies both encounter financial headwinds of their own, and bring competing sources of these resources online. And depressed spending in the domestic market, particularly in big-ticket areas such as housing, has been driven by the “near-miss” that was the GFC. When the Australian population saves, there is less money in circulation for the government to take in tax.

The future is looking even more bleak. The already declining revenues from coal and fossil fuels, for so long a mainstay of the Australian economy, are likely to collapse with the increasing push towards renewables and international concern about climate disruption. The brand-new 2014 National Climate Assessment in the US is just the most recent in a long succession of dire reports to the world’s largest economy, and the boulder is
slowly but inexorably starting its downhill roll. As climatic disasters continue to reinforce the immediacy of climate disruption, and as economies like America adopt increasingly stringent carbon-abatement policies, the demand for Australia’s coal and gas is likely to dry up. Many fossil fuel oligarchs are likely to go the wall, a fact that will not provoke a lot of tears, but it’s likely to take Australia’s budget position with it.

An ageing population is one with decreasing health, so just as people drop out of the workforce and stop contributing tax, they start requiring more medical attention and putting more weight onto the healthcare system as well as pensions. Multiple reports are clear that on the current trajectory, over the coming decades the share of government expenditure that social security and healthcare will encompass will increase substantially and unsustainably. Left unchecked, this is the budget emergency of tomorrow.

One final brick in the wall up against which is Australia, is the decline of the manufacturing industry. Whether it’s cars or fruit or sneakers, the past decade has seen a constant flow of manufacturing businesses, large and small, leaving Australia for sunnier climes. This is not driven by a lack of capability or resources, which Australia has in plentiful supply, but rather through things that Australians value, such as a decent working wage and appropriate employment conditions including leave and penalty rates. There is only so much that Australian governments can do to reduce administration costs and provide tax breaks to encourage businesses to set up here or remain, and so long as we live in a globalising world with logistics chains that can get goods to the shelves regardless of being produced in Geelong or Kuala Lumpur, all other things being equal companies have little incentive to stay. This contributes to a loss of manufacturing potential and an over-reliance on the mining and minerals sector, and puts Australia at even greater risk. The next two decades will be critical. Employment ministers like to talk up Australia’s other growth area of employment, the services sector, but there’s a limit to how many service jobs an economy can support if there’s nothing being actually manufactured.

To its credit, Labor is aware of the challenges ahead and had productive policies in place over their past two terms of government, and in their election policies in 2013, despite a growing populism and desperation in the face of Tony Abbott’s attacks. Unfortunately Labor has proven to be absolutely inept at message management and communication to the electorate, resulting in the Coalition defining the terms of discussion for every area of policy debate. This resulted, too often, in Labor watering down its message or arguing on the Coalition’s ground, rather than making the case for their own vision.

There are no simple or foolproof solutions to these problems; after all, Australia exists in competition with a myriad of other nation-states who would love nothing better than to see us fail if only to bolster their own chances of success. There are, however, strategies and approaches that can be taken to address the issues, and it is my belief that Labor, at least until the last year of its term of government, had decent and well-considered approaches to these oncoming difficulties. It was just a pity that they were not able to clearly explain their policies in terms of the problems and their intended solutions.

Take for example healthcare. Labor recognised the burgeoning costs of healthcare for an ageing population early on its first term. Kevin Rudd’s grand plan for a revised health compact with the States combined an increase in the role of the Federal government in return for more funding, a new method of costing hospital procedures to standardise and optimise costs and processes, and a range of measures intended to increase pre-clinical healthcare. Throughout its two terms, Labor instituted GP Super Clinics to relieve the pressure from hospital emergency departments and to improve chronic and preventative healthcare. These same super clinics are now under threat from Tony Abbott’s oncoming budget of scalpels.

Improving overall health via preventative care, relieving hospital pressures by increasing the availability and ubiquity of medical care and standardising and optimising costs would not, in and of themselves, solve the healthcare problems Australia faces into the future, but they are a determined approach and a good start. By contrast, the Coalition does not believe in centralisation or group operation, feeling that competition and the holy dollar give the best results. The Coalition does not believe in federal involvement in healthcare beyond what is necessary. The Coalition does not believe in providing government assistance to those in need of healthcare, preferring instead to encourage further involvement of private health in Australia’s healthcare system. This does not address the nation’s healthcare funding problem; it simply shifts the burden onto ordinary people.

Or you can look at manufacturing. Labor’s approach to Australia’s two-speed economy was best encapsulated by the MRRT (Minerals Resource Rent Tax) and its preceding RSPT (Resources Super Profit Tax). Labor intended to marginally increase the amount of tax revenue gained from those resources companies with unfeasibly large profits and pour the resulting funds into support and resources for businesses in other sectors of Australia’s economy. A true case of “all boats will rise”, Labor intended to lower the company tax rate across the board, a move that would have been particularly of benefit to small businesses and retailers across the country. The mining tax would not apply to resource businesses in their normal course of operations; no extra tax would be taken during investment and building of a mine, nor even during moderate production. But when a company got into windfall territory, rapidly depleting a source of minerals and making huge short-term profits, the government felt that the Australian economy should get an extra cut. The philosophical merits of placing an extra tax burden on companies that already paid taxes may be debated; the politics of imposing this ‘levy’, as we now know, turned exceptionally poisonous. (Incidentally, the RSPT and MRRT were intended to replace royalties, so all claims that ‘they already pay royalties to the States’ are furphies.) But it was an attempt, successful or not, to take the benefits of a short term economic boom on the back of mining and use them to strengthen Australia’s performance in other areas of the economy.

Except that the Coalition and the resource oligarchs together conspired to corrupt the public discussion. The average Australian, by the time of the 2013 election, probably thought that the MRRT was going to push prospective mining projects out of Australia and cost thousands of jobs. The truth, of course, is that mining employs a mere fraction of the workforce (and far less than manufacturing and retail), that no companies have realistically been driven from our shores by a tax specifically intended only to be levied when a company was doing excellently, and that the mining companies had won a range of concessions about the methodology of valuing assets that depressed the overall take of the tax in any case. In a world environment where resource prices are declining and the Australian mining boom is largely over, the MRRT has been a disappointment in terms of revenue raised, and whilst it might have been more successful in the latter half of the 2010s as mining companies moved from building phases into full operation, the Coalition is very likely to be able to dismantle the MRRT before it reaches any kind of real success.

Taking even a decent amount of super profits tax from the big miners and using it to reduce operating costs for all businesses across the country would not, in and of itself, solve the problems facing Australia’s manufacturing sector. But it was a good start and a valid approach. The Coalition’s alternative approach of continuing to subsidise and promote Australia’s resource industries will have marginal short term benefits to revenue at the expense of Australia’s ability to transition away from resources into more sustainable and modern forms of production.

On the front of climate disruption, an emissions trading scheme is widely regarded by environmentalists and economists alike to be the best approach to the problem. Labor’s ETS has its detractors, but in this as in so many other areas of Labor policy, the message has been lost in the noise. It is certainly fair to say that even were an ETS to reduce the nation’s carbon footprint to zero it would make minimal impact on the world’s climate. It is definitely true that trading schemes have been gamed in some jurisdictions, that corruption can ensue, and that some people are liable to make a lot of money. It is even fair to say that during the short life of Australia’s ETS, there has been little to no measurable impact on the country’s climate. These objections ignore the bigger picture: that participating in an effective carbon trading scheme would assist Australia to meet its climate commitments and would position Australia to participate in global carbon trading markets without fear of sanctions and tariffs; that the revenues raised from the carbon trading scheme would be ploughed back into successful research and development programs in renewable energy and other carbon-abatement technologies, thus increasing the country’s export markets, renewable energy business and employment, and technological expertise; and that by leading the way for the world, we improved Australia’s standing and encouraged other nations to improve their carbon footprints as well.

By contrast, the Coalition does not appear to believe in climate change/disruption. They are seeking to dismantle a market mechanism to address this global problem, in the process removing Australia’s ability to participate in growing international carbon markets and making us a pariah amongst other nations. They have already dissolved bodies whose remit was to provide impartial and scientific advice on this issue, and are seeking to remove the revenue-generating successful Clean Energy Finance Corporation. In place of these approaches the Coalition is promoting its fig-leaf policy of Direct Action, which has been definitively shown to be incapable of meeting Australia’s stated environment goals, let alone the significantly increased goals that would be required to keep Australia on an even footing with other nations.

Labor’s ETS would not, in and of itself, save the planet from anthropogenic global warming, but it’s the ideal and almost universally respected approach, with many benefits for Australia’s economy and environment, at minimal cost. The best that can be said for the Coalition’s approach is that Direct Action might possibly be of some benefit, but it’s certainly neither the most effective nor efficient method.

On all three of these confronting issues, Labor had successful or worthy policy approaches. Whatever can be said about Labor’s ability to deliver on its policies (either through poor planning or the incapability of the public service), and putting aside the well-publicised leadership contentions, Labor’s main weakness was its inability to get across the message of its approach to these problems. On all three of these issues, judging by policies taken to the election and recent media speculation, our current Coalition government would appear to be taking Australia in exactly the wrong direction. With the Coalition’s first budget mere days away, we will soon see if the government has any valid approaches to these issues beyond the slash-and-burn approach already adopted, but the signs are not looking promising when Tony Abbott and his team will not even be honest about the problems we face. This insistence on a “budget emergency” is a farce and the Coalition’s determined intent to preserve the status quo is not the way to head off the economic emergency that is really oncoming. But of course politics is cyclical, and it’s likely that Labor will be in power by the time these problems become too big to ignore.

The truth about the mining tax

Photo by smh.com.au

Photo by smh.com.au

It has become increasingly apparent that the onus is on citizen bloggers to inform the Australian public of the truth. We certainly can’t rely on our politicians who are too busy misrepresenting the facts to make the other guy look bad.   And we can’t rely on our mainstream media who, in many cases, are under editorial instruction to present a certain view.

Today I would like to discuss that “anti-Western Australia” mining tax and put paid to some of the lies being repeated over and over from the Coalition script du jour. I wonder if they realise how annoying it is to listen to them repeat the same trite phrases regardless of who is being interviewed. This, to me, indicates that they either do not have a handle on the subject matter (I’m looking at you Tony) or that they are deliberately obfuscating the issue with whatever spin the advertising gurus tell them will resonate. Either way, it is treating us with contempt.

Most of our mining companies are majority foreign-owned and are receiving a huge windfall at the Australian taxpayer’s expense. Remember that these minerals are a finite resource – when they run out the money stops coming in. In 2001, mining companies paid approximately 40% of their profits as royalties to the state governments. Today they pay less than 20%. Clearly, there is a strong argument that the Australian people deserve to receive a greater share of today’s profits.

While parts of the Australian economy have benefited from the resource boom, other parts have suffered. Strong demand for our resources has pushed the Australian dollar higher, hurting farmers and manufacturers who export Australian-made products as their products have become more expensive to foreign buyers. The higher dollar has also impacted tourism and our foreign-student education industries. As a result, we have what has been described as a two-speed economy. The miners and associated service industries are doing very well, while our exporters are suffering.

The tax, levied on 30% of the “super profits” from the mining of iron ore and coal in Australia, was to be paid when a company’s annual profits reach $75 million, a measure designed so as not to burden small business. This affected approximately 320 companies. The money raised was to be spent on pensions, tax cuts for small businesses and infrastructure projects, particularly in Queensland and Western Australia.

Professor Ross Garnaut said, when the tax was proposed, that it would be a test of whether difficult economic reform remained possible in Australia, or whether powerful interest groups now had too much sway over the political process. I guess we have our answer.

When Australia’s richest person, Gina Rinehart, led a $22 million advertising campaign against the mining tax, the Labor Party succumbed to the bullying and allowed BHP Billiton, Xstrata and Rio Tinto to make up the rules. This was a huge mistake brought about by blackmail – give us what we want or we will make sure you lose the election. The concessions made meant that a proposed reduction of company tax could not go ahead so the miners not only screwed the Australian public, they also cost other businesses this concession.

Mathias Corman has been popping up everywhere saying that scrapping the mining tax will save the budget $13.8 billion. This is a ridiculous thing to say. How can cutting revenue save money? In fact, Hockey’s own dubious figures show that axing the tax will cost the budget $3.4 billion over the forward estimates. The mining companies were given generous accelerated depreciation concessions which, while they were in investment phase, they could write off against their record profits cutting the amount of tax due. Now, as they are moving into production phase, revenue is set to increase significantly into the future.

There have been two main arguments put forward against the mining tax. The first was that it would be a deterrent to investment, an assertion not borne out by the facts. A report by PriceWaterhouseCoopers says the possible repeal of the mining tax in Australia is unlikely to have much impact on Australia’s appeal to investors and that fluctuating commodity prices are much more of a determinant for future investment.

Another report recently released by the Chamber of Minerals and Energy of Western Australia found a number of factors are constraining private investment levels including a shortage of long-term, integrated planning for infrastructure, project structuring complexity, and a general investor aversion towards greenfield infrastructure projects. Still no mention of the mining tax.

In a glaring example of how Tony Abbott is willing to mislead the Australian public, he blamed the delayed expansion of the Olympic Dam project on the mining tax, even after it was pointed out to him that the mining tax only applies to iron ore and coal, not to the copper, uranium or gold extracted from the Olympic Dam mine. Stupidity is one thing, cupidity is another.

The other emotional string pulled in the mining tax debate is that of jobs. Whilst the mining sector contributes about 10% to GDP, it is not a big employer (currently 2.4% of the workforce) and this is set to fall as they move into the less labour-intensive production phase. Since the announcement of the repeal of the mining tax we have continued to see many job losses in the mining industry.

From a peak of 85,819 positions last year, the construction element of the resources boom is expected to dive to just 7700 in 2018, with 78,000 jobs lost, according to the 2013 resources skills study released in December by the Australian Workforce and Productivity Agency. Job losses are expected to be gradual in 2014 – down to 83,324 – and then rapidly accelerate to 2018.

The dive in construction jobs will be only partially offset by a rise of nearly 40,000 resources operations jobs, led by the oil and gas sector where employment should rise from 38,943 this year to 61,212 in 2018. Mining operations jobs should increase by 17,560 from 236,690 this year to 254,260.

In fact, repealing the mining tax will cost jobs as mining profits are stripped from our economy and sent to overseas investors. Instead of those billions circulating through our economy, they will be lining the pockets of foreigners.

The arguments about investment and jobs being dependent on the mining tax have been refuted from every corner, including the industry itself, and by every study that has been done. It is quite simply a lie and the government knows it, or at least they should if they have read any of the countless reports done on the matter. But there will be a cost and it will be us that pays. Tony’s pander to Gina will see

1. The abolition of the low income superannuation contribution

2. Unwinding the instant asset write-off for small business

3. Delaying the superannuation guarantee increase so it remains fixed at 9.25 per cent until 2016–17

4. Discontinuing the company loss carry-back, a benefit for small businesses

5. Dismantling the accelerated depreciation for motor vehicles

6. Ending geothermal exploration treatment

7. Scrapping the Income Support Bonus, which includes payments to the children of veterans and is a lump-sum supplementary payment made twice a year to people on certain income support payment

8. Abolishing the Schoolkids Bonus, a lump-sum payment to parents of school-aged children twice a year, even though this payment was not attached to the mining tax and was introduced to replace an existing education tax refund.

Mining shareholders will be smiling, a smile paid for by our children, our workers and our small business owners. Thanks Tony.

Are you being served?

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Democratic governments provide two fundamental functions in the service of a single overriding responsibility. When a government, through the performance of its two functions, betrays the single responsibility it holds, it has lost its mandate to govern. There is a case to be made that our current Coalition government is in exactly this position.

The raison d’etre for democracy, without which the very concept of democratic government would not exist; is to provide a means for the community as a whole to configure the kind of society in which they wish to live. Inevitably this involves winners and losers: government exists primarily to put checks on the powerful and support the weak. Governance is thus about promoting equality. The cut and thrust of politics is about thresholds – how much is too much? How much is too little?

Governments fulfil this basic purpose through the actions of their two primary functions: legislation and national defence. Legislation allows a government to protect its citizenry from internal threats; national defence protects us against external threats. Since coming to power, Tony Abbott’s Coalition government has continued a long history in Australian politics of continuing and sustaining Australia’s military, and in this way the government is carrying out its remit for national defence. Good for them.

In the field of legislation against internal threats to society, their record is not so good.

The Big Bad: the Food Industry

There is a growing recognition amongst public health bodies that food manufacturing and marketing in Australia, and the west in general, is promoting unhealthy eating habits and contributing materially to public health issues such as obesity and diabetes. History has shown us that industries acting counter to the best interests of the people eventually face opposition and attempts at control and harm minimisation by societal groups, and that eventually governments come to the party and assist in such opposition. The tobacco industry is the cause celebre but alcohol and junk food are both likely to follow. It is in this light that on 14 June 2013, COAG – the Council of Australian Governments – announced the implementation of a packaging labelling scheme in Australia. This was the culmination of a long discussion and negotiation process beginning in December 2011.

The Front of Pack food star rating scheme is a compromise solution painstakingly agreed and laboriously (and expensively) developed over two years. COAG is the federal council that brings together Australian state and federal governments in a single body. The scheme, initially intended to be voluntary, will provide consumers an easily understood guide to the nutritional value of their foods. The scheme was brokered between COAG and the Public Health Association with ongoing consultation with the food industry. The food industry, represented by such bodies as “Australian Public Affairs” and the Food and Grocery Council, has cooperated in its development despite being trenchantly opposed to the scheme and seeking any means possible to delay its introduction.

The Abbott government has been accused of deliberately delaying the introduction of the scheme until after State elections in South Australia and Tasmania on 15 March, for exactly this purpose, hoping that the composition of COAG would change sufficiently to allow the cancellation of the agreement. Cancellation or amendment of a COAG agreement requires the majority of State and Federal governments and the current makeup of the council is narrowly in favour of the food labelling scheme.

Included in the star rating scheme is a food ratings website that is intended to provide consumer advice on the nutrition of packaged foods. The website also includes a calculator for food manufacturers to use to calculate the star rating for their packaged foods for voluntary inclusion in labelling. The website was completed and went live on schedule, on February 5 2014. Many public health groups and industry groups were expecting its arrival and awaiting its commencement and it seems a minor miracle that such a website, developed over two years by the public service in conjunction with the Public Health Association, should have been completed on time.

Assistant Health Minister Fiona Nash personally intervened to have the site taken offline by 8pm the same night.

Nash’s publicly stated reasons for pulling down the website is that “the website will be confusing for consumers as it uses a star rating that is not yet ‘up and running’.” She has also claimed that it was a draft put online by accident. But it was her chief of staff, married to the owner of the business lobby group Australian Public Affairs, who personally intervened to have the site unilaterally taken offline.

Protecting the interests

This is not the first example of Ms Nash protecting the interests of corporations and business lobbies at the expense of public health or public interest initiatives. It’s tempting to make personal judgements that Ms Nash is not an appropriate candidate for the position of Assistant Health Minister, but she operates within a government with a strong track record of supporting business interests rather than public good regulations that limit them.

Democratic government is designed to serve the interests of the People – not individual people, but the community as a whole. Conservative governments are wont to argue that making life easier for businesses allows them to create more jobs and thus serves the interest of the people, and there is some justification for that; however, there are cases where public interest and corporate interest clearly come into conflict. These include areas of workplace health and safety; of environmental protection; and of protection of public health against goods which, in excess, can be harmful.

In a capitalist society, companies are fighting two major opponents. The first major opponent a business faces is its competitors. Companies need to compete against other companies to turn a profit. The role of government in this is simply to be even-handed; to not preference one company at the expense of others. The litmus test should be whether any proposed change operates across the board. If competition is seen as a public good, then sympathetic treatment may be justifiable towards the underdog. The second major opponent a company faces is the community.

Companies are beholden to the public that buys their goods, but are not above manipulating and mistreating those customers. Marketing might sometimes be righteous – if people have an identified need, promoting a product which can meet that need is perfectly legitimate. But in our materialistic society with many competitors for the purchaser’s dollar, much of marketing is about creating the need prior to seeking to fulfil it.

In the context of coercive or manipulative commerce, government’s role should always fall squarely on the side of the People’s interest. Regulations and laws exist to put limits on what companies can get away with, because it will never be the companies themselves that impose limitations.

An emerging pattern

The cancellation of the food star ratings website is a clear case of corporate interests being favoured at the expense of the People, and a clear abrogation of the politician’s responsibilities. However, it is merely the latest in a long line of government actions from the Abbott government that favour the interests of corporations rather than the People. Prominent examples include:

The Trans Pacific Partnership (TPP). This is the grand-daddy of corporate interests into which both recent governments, Labor and Coalition, have been driving us headlong. Whole articles can be written about the TPP – and indeed they have been.

The National Broadband Network. It has been convincingly argued that the main reasons for the Coalition’s opposition to Labor’s model for the NBN is that it will do harm to entrenched corporate interests.

The mining tax. To attempt to redistribute some of the wealth of the largely overseas-based megacorporations involved in strip-mining this country and put it to use across the community and small businesses makes logical sense, but it goes against Coalition ideology of protecting the corporate interests of those who make profits.

An internet filter. The idea of an internet filter is not new; Steven Conroy was rightly excoriated by the left for this idea that is tantamount to censorship. George Brandis’s vision of the filter, however, is not so concerned with protection of children and our moral virtue; it is aimed directly at protecting the existing media corporations, in the guise of protecting copyright. Whilst this is an issue with some justification, you might think we would have learned by now that protecting the rights of intellectual property holders by draconian regulation always hurts both the eventual consumers of media products as well as innocent bystanders who want to use file sharing for legitimate purposes.

Attacks on unions. The Abbott government’s ideological crusade against trade unions is not really about corruption and they are not really friends to the honest worker. The primary and overt aim of the coming Royal Commission is to damage Labor – both its reputation and its source of funding. But the chief outcome in any conflict between corporations and the unions which exist to protect workers and the community from the corporations’ excesses will always be to the detriment of the community. For evidence of the government’s allegiances in this field, look no further than the recent case of SPC, where the government attempted to push SPC to reduce staff conditions to the minimum allowed by the award before any assistance would be possible. In some strange way, this equates in the government’s mind to being “best friend to the honest worker”.

Credit where credit is due

It must be said that the Abbott coalition government seems to genuinely believe that promoting the interests of corporations will be for the good of Australia; they are not being deliberately harmful to the people they govern. But there does not appear to be any kind of “public good” test being applied to decisions. Corporations have the ear of the government through lobby groups and donations, and it certainly seems that the government’s ear has been turned. But when both government and public opinion can be swayed by the corporations that government ought to be protecting the public against, the very purpose of democracy is being subverted. Whether or not the coalition government (and its predecessor in Labor) are being malicious or merely unduly influenced, whether there is corruption or nobly-held ideals, it is the community that suffers. The only question remaining is how far the imbalance will go before the people wake up to the fact that the People and the Corporations are not on the same side?

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