It is not often that this House, in debating the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013, can debate the removal of a tax that will actually make the Australian budget better off. Such has been the mismanagement of the Rudd and Gillard, and Rudd Labor governments that we find ourselves in exactly that position. The budget bottom line will be improved by some $15 billion over the current forward estimates with the passing of this repeal legislation.
The mining resource rent tax, introduced by Labor, actually damaged international investor confidence in Australia and, in particular, the energy and resources sector. We have seen so many projects shelved or put on hold over the last couple of years. This measure was very clearly an attack on Western Australia by the Labor government. The iron ore industry in Western Australia was clearly one of its primary targets. Iron ore remains Western Australia’s highest value commodity, accounting for $56.4 billion or 73 per cent of the state’s total mineral sales.
So, once again, like the carbon tax, the MRRT was not only an attack on WA. Even worse, it was a direct attack not only on regional Australia and regional Western Australia where the resources and wealth are generated but also on the service sector where the people who work in the mining sector live—the fly-in fly-out workers—in parts of my electorate around Busselton, the Margaret River and the south-west. At least 3,000 of these people live within about 100 kilometres of Busselton airport and they, along with the other companies which actually supply the resources sector, were all directly impacted, particularly by the government’s first announcement.
Mineral and petroleum exports, in total, comprise 89 per cent of Western Australia’s state total merchandise exports and provide the major contribution to WA’s 47 per cent share of the nation’s total merchandise imports. Have no doubt that the mining tax was a direct assault on Western Australian by the then Labor government.
The repeal of this tax will provide a desperately needed boost for the mining industry and is a strong step towards repairing the perceptions that international investors have formed about Australia since Labor came to government in 2007: the sovereign risk issue, the long-term investment risk issue.
The original mining tax, the resource super profits tax, was expected to raise $49.5 billion over five years. In July 2010, the RSPT tax proposed by Labor was replaced with the minerals resource rent tax and the extension of the PRRT to onshore projects.
While the original resource super profits tax and mining resource rent tax was at that time forecast to raise around $26.5 billion over five years, MRRT revenue estimates have since been progressively revised down: ‘It wasn’t going to do what we thought it was going to do. We got it wrong yet again—more numbers we got wrong again.’
Since its commencement, the MRRT has only raised $400 million in net terms, yet the former government has locked in more than $16.7 billion of expenditure on an underlying cash basis over the current forward estimates or $18.4 billion of expenditure on a fiscal basis over the current forward estimates.
The repeal of the MRRT and its associated expenditure will improve the budget bottom line by $13.4 billion over the forward estimates on an underlying cash basis and $15.1 billion over the forward estimates on a fiscal basis. The repeal will also save millions of dollars. This is the issue for the mining and resource sector as well as having to pay: it is the compliance expense for small, medium and large mining entities, many of whom are centred in Western Australia, with the iron ore industry in the north-west. For example, around 165 miners have been required to submit MRRT instalment notices, yet fewer than 20 of these have actually contributed to the net $400 million raised by the MRRT to date. They have spent millions of dollars doing this work to find out they do not have to pay the tax. So we have added to their cost of doing business, for no benefit. The remaining 145 have had masses more Labor red tape to deal with, while making no net payments. It just does not add up. It is just incredible, a disaster.
The mining tax, along with the carbon tax, has inhibited a range of the junior miners. There were those that said to us: ‘Our companies would never have got off the ground at all in the environment of the Labor government. We would not have been able to generate the income for the state and the nation if we were trying to start out now, under these circumstances.’ We know that Labor have no understanding of the resources sector, otherwise they would not have done this, and Labor certainly have no understanding of exploration costs and long-term financing requirements.
As you know, Mr Deputy Speaker Vasta, we said that we would do this from the time that Labor applied this tax. The electorate were in no doubt. They went to the election knowing that we had said we would repeal not only the carbon tax but the mining tax, and this is a government that keeps its promises, unlike Labor. We promised to repeal the mining tax, and that is what this legislation does. We mean what we say, and that is exactly what we are doing. This commitment goes back years, and it is a policy that has never changed. The electors knew that. The electors of Forrest knew that. We have been entirely transparent. The government of the day fought the repeal of the MRRT at both the 2010 and 2013 federal elections.
When I talk about what happens in regional areas, I look at my electorate and the first iteration of the mining tax. Three months into that, I went and talked to businesses—including small businesses and individuals—in my electorate, because a lot of them supply and service the mining sector, from the south-west into the north and more broadly. The tax affected the fly-in fly-out workers, because some of them were not sure whether they were going to have jobs and what the tax would do to them. I went and talked to small businesses in the retail sector. For so many of them their income flat-lined because their customers were the fly-in fly-out workers, who put their hands back in their pockets because they did not know if they were going to have a job. I went and spoke to a fencing contractor who worked for the magnetite sector, and he said, ‘I used to have months of work lined up well ahead, because there was confidence in the industry to do the exploration.’ As a result of the tax, he was down to two workers, and he said: ‘I’ve got two weeks of work left. I’ve put off eight people.’ So, if you think this sort of decision by government does not have an impact in a rural and regional area, it certainly does. There was a direct impact. And two of those retail outlets that I went to visit who had seen such a significant drop are no longer in business.
I want to talk about the resources in my electorate. In the south-west we manufacture 22 per cent of the global supply of alumina, which a lot of people do not understand, so the decisions are very relevant. The entire national supply of silicon is processed in the south-west, and we are a key source of lithium as well. The mineral sands miners and processors are internationally significant suppliers and they employ thousands of people throughout the electorate, along with Iluka Resources, which has the largest synthetic rutile plant in Australia in my electorate. And of course we have significant coal deposits and we generate nearly half of the state’s power supply. This bill will repeal a range of the expenditure measures for these businesses, and that will save billions.
There is no choice, because you cannot spend money you do not have, but that is what Labor were doing. They did not have the income that was supposed to be generated by the mining tax. However, they were still spending it. We know that, in time, that Labor spending will incur a bill of $10 billion a year in interest alone. And we know that we are going to punch through the debt ceiling in the not too distant future—$320 billion worth of debt. The government have to make the decisions that we said we would and we have to give confidence back to the mining and resource sector. Those projects are on hold, and some of them unfortunately have been abandoned.
I want to talk briefly about schedule 5 of this bill, the provisions that mean expenditure on geothermal energy exploration is not immediately deductible. There are very real reasons for this. In the decade from 2000 to 2010, and probably more around 2005, there were a number of companies, some in Western Australia, that thought geothermal was a real option, and vast areas of the state were open for exploration to develop geothermal assets. However, over time, given the costs involved in this work, although there are companies that are still looking into the process, there is probably less commitment to this than there was previously and, clearly, geothermal will not be the great panacea that some of the early thoughts suggested. And there are significant costs to the power generation from this resource. Certainly geothermal is a cheap and reliable resource in areas where volcanic rocks can be tapped as a heat source to impart the energy into the water, producing the steam for the power generation. Countries like the Philippines and parts of New Zealand have made good use of this.
However, pumping water thousands of metres underground to be heated by volcanic rocks is an entirely different matter, with vastly more problematic economics. That is what it gets down to. This is not to say it will not play a future role in our energy mix but simply that it will be less prospective in the short term than perhaps the early predictions suggested. So the repeal of this part of the MRRT is therefore understandable.
As I said when I started my remarks, we had no doubt in Western Australia that the mining resource rent tax was a tax that deliberately targeted Western Australia; it targeted regional Western Australia. I have explained some of the impacts of that. It was simply another way of taking funding away from the west to buy good will and, ultimately, votes in the east. It was a very cynical process. Western Australia will be relieved to see the back of this tax.
I congratulate our government for keeping this key promise. The people who voted in Western Australia were in no doubt that this is what we said we would do and that we would do it. Basically, as a very early order of business, it is exactly what we are doing. For several years, this is what we told you we would do and this is exactly what we are doing.
It is very reassuring for people out in the electorates to see sound process, good governance and good government. This reassures business, industry, families and people who live and work in regional Australia. We do know that the iron ore industry is the backbone of Western Australia today and that it is a major contributor to the national economy. It has been shifting from exploration, to development, through to production; however, its contribution will continue to be massive. But it is not seen—and it should not be seen by the Labor Party—as simply a cash cow to be milked by Labor for political gain.
I commend this bill to the House and the government that was wise enough to present it.