13-July-2010
Portfolio Media Releases, Foreign Affairs, The Economy, Immigration and Multicultural Affairs
Topics: Doubts about Labor’s mining tax raising $10.5 billion in revenue, Julia Gillard’s half-baked asylum seekers’ thought bubble, Federal election odds and polls.
E&OE
ROSS GREENWOOD:
The Shadow Finance Minister, Andrew Robb, who joins us now. Hello Andrew.
ANDREW ROBB:
Good evening Ross.
ROSS GREENWOOD:
A question for you, I noticed, I was actually a bit gob-smacked by this, page eight in the Financial Review which is supposed to be the journal of business, the document that you gained from Bank of America and Merrill Lynch’s analyst, after a briefing with the BHP Billiton Chief Financial Officer, Alex Vanselow, today indicating that, one, BHP Billiton is not likely to pay any tax after the minerals resource rent tax for 25 years, number two, that, according to the analyst, Jason Fairclough, the case for an emergency mini-budget is compelling, the revised budget estimates of revenues have just been made up and the multi billion dollar hole exposed in the budget will mean no budget surplus and pressure even higher interest rates and higher costs of living, which of course was your commentary on the whole thing. So the point about this is, that quite clearly, something needs to be done, urgently.
ANDREW ROBB:
Well, you know, we’ve been concerned all along that the budget is basically a house of cards. I mean if you look at the assumptions, they’re just you know ridiculous, especially in year three and four where they claim that they’re going to get a surplus.
I mean this year is the biggest budget deficit in the history of the country, $57 billion. Next year will be the second biggest in the country’s history, $40 billion in deficit. And then they claim a surplus the next year. It just doesn’t hold up to any sort of scrutiny.
The problem with this one is the third and fourth year they claim a lot of the surplus is dependent on this mining tax. Well now it appears from this report of the BHP Chief Financial Officer, that he’s saying really they won’t pay on their existing assets any sort of revenue of any consequence for the next twenty five years.
Well that means that BHP and Rio, which were 80 per cent of the revenue anyway, will be paying very little. Where’s the $10.5 billion that the Government claims that will be received in the years ahead when you know at the moment the whole budget deficit, the whole budget surplus proposition is a complete fallacy.
ROSS GREENWOOD:
The second thing of course is that Goldman Sachs/JB Were estimated that by 2020, the foregone revenue could sort of be $35 billion…
ANDREW ROBB:
That’s right.
ROSS GREENWOOD:
…but the issue of this also is that Treasury has not been asked to forecast any more than two years ahead. So the Australian public right now has got no idea as to how much this could potentially cost.
ANDREW ROBB:
Well, the Government has refused, as has the Treasury, to provide any estimates or any detail of how they arrived at these estimates. The companies, the mining companies have been sworn to silence. You know we can’t even get calls returned in many cases. There is a cone of silence that has gone down over really what makes up this mining tax, how much tax will the miners really pay or not pay, how it was arrived at.
It does appear from the briefing from BHP in London that the company will really pay very little if any tax in the years ahead. The coal seam gas companies are saying the same thing.
So it would appear that the Government’s claiming $10.5 billion, a lot of money $10.5 billion a year. The companies are giving the impression, certainly in overseas briefings, that they won’t be paying anything, and they have said that retrospectivity no longer applies which means they won’t be paying anything.
So there is a big hole in this budget. The confidence that people can have that this Government has got a grasp on the economics of this country must be severely challenged.
The election will be about the economy, it will be about costs of living for people, it will be about interest rates and how quickly they will go up. Therefore, the Government has a great responsibility to demonstrate that its budget is not built on a house of cards.
ROSS GREENWOOD:
One issue here of course also is that a lot of those who may have been affected, those who look for coal seam gas, of course have now been put under the petroleum resource rent tax. But of course one thing that the Government seems to have been at pains to make certain occurs, is a lot of the big projects such as the Gladstone LNG projects as well as that also quite clearly, with the exemptions of anything other than coal and iron ore, Olympic Dam and others to go ahead. Are you concerned right now that maybe the public has not worked out there may have been individual agreements signed or individual coal seam gas projects
ANDREW ROBB:
Well the coal seam gas companies are saying that they expect to pay no extra tax over what they would have paid.
ROSS GREENWOOD:
No extra tax?
ANDREW ROBB:
No extra tax. So in other words they’ll pay the royalties which would’ve gone to the states and they are saying they’ll pay no extra tax. So if they’re not paying any extra tax and if BHP is saying that most of its existing mines or all of its existing mines now won’t be taxed, well, what will be taxed?
ROSS GREENWOOD:
Well that’s the issue I guess. We’re about to go to the polls and this was a key area that the Prime Minister personally intervened in to try and sort out. The miners walked away all very happy but it would appear as though the Government in terms of its budget forecasts is completely out of whack right now.
ANDREW ROBB:
Well the Prime Minister, Julia Gillard, was feted after this for having achieved some extraordinary negotiation, but every day it’s starting to look as though what she did do is simply cave into the miners, which is not difficult to do and in the process has blown a hole in the budget. Therefore no one can have any confidence about the prospect of surpluses in a few years time. What that means is there will be greater pressure on interest rates and costs of living.
And the general confidence in the ability of this Government, having lost Lindsay Tanner, having lost Kevin Rudd, there is no economic talent left. In many respects Wayne Swan is seen as a total light weight and Julia Gillard really has never had anything much to do with economic policy.
So we’ve really got a bunch of amateurs in my view and at the very least, they should tomorrow, when Ken Henry appears before the Senate Fuel and Energy Committee, he should be allowed to answer how they got to these sorts of assessments, that there’ll be a $10.5-11 billion from the mining industry tax in the budget in three years time.
ROSS GREENWOOD:
Can I ask you another question, is this afternoon of course another key plank of the Prime Minister’s policy to clear the decks before calling a federal election was the idea of having an asylum seekers’ refuge or basically I suppose centre in East Timor.
Now the whole idea of a processing centre in East Timor has this afternoon been rejected outright by East Timor’s Government and we heard from Arsenio Bano, Vice President of the Fretilin Party and East Timor MP saying that was unanimously voted down by all sides of each political party in East Timor. What does that do in terms of the Government’s plans?
ANDREW ROBB:
Well again it just means that they had no plans basically. The plan was for a centre in East Timor. That was a ludicrous plan in the first place because what it would mean, it would mean that there would be literally in the end prospectively hundreds of thousands of people trying to get to East Timor as a sort of certain route to being assessed and placed somewhere, hopefully Australia.
It was never going to happen. Plus that country, you couldn’t have people in a refugee or a detention centre, probably living a lot better than many of the people who are living in East Timor. I mean it was never going to happen, which just means again, that it’s policy on the run.
Nothing seems to have changed from Kevin Rudd’s period. He started a hundred things and finished none of them. And now because he galloped into everything and then galloped onto the next thing before any of it was completed, creates all these expectations, we’ve seen Julia Gillard I think doing the same with the mining tax, now we’re starting to see that the numbers that it was all based on and the expected tax revenue is illusory, is not there. Now we’re seeing the next big policy, the boat people, it’s not an answer, they’ve got no plan and as a consequence it will encourage further, the people smugglers to encourage people to get on boats and get on over here.
ROSS GREENWOOD:
But Andrew Robb, you’d be also conscience of the fact that despite all of that right now, not just with bookmakers but with opinion polls, that Julia Gillard appears to be a red hot favourite for the forth coming federal election.
ANDREW ROBB:
Well, I agree with the bookmakers, they’ve still got a strong lead. On the polls itself, ever since they had a change of the leadership and dumped Kevin Rudd unceremoniously, our primary vote, in other words those people who would vote with their fist vote, has stuck on 42. We haven’t moved. In other words, our base hasn’t moved. We only need another two or three primary points and we would win the election. So we’re not far away.
Julia Gillard and the Government dropped in both polls today, they dropped seven primary points from last week, so it went back to the Greens. I think you know 52/48 is still a very contestable position.
This election, because there’s a whole new team in the Labor Government and we’re in our first term in opposition, this election I think will be the first one in a long, long time where the campaign will count because we really are starting off not far apart to be honest. And how we perform and how we explain how we would run the country. How we would get the debt down, how we would get the deficits removed, how we will take pressure off interest rates, they’re the sorts of things that will determine whether we would get up or not.
ROSS GREENWOOD:
Andrew Robb, who is the Shadow Minister for Finance, we appreciate your time here on Money News.
ANDREW ROBB:
Many thanks, thank you Ross.
Further information: Cameron Hill on 0408 239 521