E & OE
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SUBJECTS: |
Minerals Resource Rent Tax |
KELLY: Resources Minister, Martin Ferguson, played a key role drawing up the Minerals Resource Rent Tax. He joins us in our Parliament House studio.
Minister, Good morning.
FERGUSON: Good morning Fran.
KELLY: Now Twiggy Forrest says that foreign multinationals including Rio, Xstrata and BHP Billiton will pay less tax per dollar than Australian companies like his. Is he right?
FERGUSON: The tax hasn't been designed to suit the personal circumstances of any company. Let's be very frank, that's what Twiggy Forrest wants. He wants the Australian mining tax system to be designed to suit the personal circumstances of his company. We’ve actually designed the tax to suit the needs of industry. And I must say, I reject to the racial overtones of Twiggy Forrest’s comments in terms of the way the Government approached this tax. It was not designed to suit the needs of foreign interests, it was designed to suit the needs of the Australian community.
KELLY:
: Well that's not how he sees it. He says it doesn't suit the needs of the Australian mining industry because the small and medium size miners, like his, will end up paying more tax per dollar. Will they? No matter whether it was designed for anyone, is that the upshot of the design of this tax?
FERGUSON: This tax is about a fair return for the opportunity for the Australian community to actually develop its resources. You only get one chance. It's interesting, only a matter of a couple of weeks ago, I didn't see Twiggy Forrest or the small miners outraged at the decision of the WA Government to actually increase royalties in Western Australia in terms of iron ore fines. This is a profits-based tax. Companies will only pay this tax when they actually make super profits. The WA change to royalties means that in both good times and bad times iron ore companies, such as Twiggy Forrest’s, will pay higher royalties year in and year out.
KELLY: And under your tax?
FERGUSON: Under our tax, you'll only pay tax when you're earning super profits during the very good times.
KELLY: Why is he threatening to take you to the High Court then?
FERGUSON: Well that's not new. There’s been a threat to go to the High Court to make a constitutional challenge from day one.
KELLY: Yes but he's seen the legislation now and he's saying "well I will do it, unless it's changed, I'm going to do it".
FERGUSON: No, no, no, look we've always known that people like Andrew Forrest are threatening to take on a constitutional challenge unless we design a tax to suit his personal needs. That's what this is all about, not about us designing a taxation system based on the record profits being made in the mining industry, to suit the best needs of all Australians, but designing a tax system to suit the needs of Andrew Forrest.
Let's think about this, if the tax is so bad that Mr Forrest recently announced an $8.4 billion expansion in FMG's activities in Australia. I'm also pleased to see that with net profits of over $650 million in the twelve months to June 30 last year, which are up on the $574 million previously earned by Mr Forrest that he is doing well.
Let's go to December this year, FMG made $310 million, around seven times more that the $43 million recorded in the same period earlier last year. Things are pretty good for Mr Forrest and the truth is we’ve designed a tax system in the mining industry that suits the needs of Australia at large, not the needs of one particular company.
KELLY: Why have we designed a profits tax that relates to coal and iron ore but not to other non-renewables like gold, uranium, copper? I mean gold, record prices for gold and this tax won’t apply to them.
FERGUSON: Well over 90 per cent of the revenue is actually going to come from these three commodities; iron ore, coal and petroleum. That's why we actually designed the system to actually reap the benefits of the huge profits that are being made in a couple of big commodities at the moment. And I must say it's in those three commodities that they expect the revenue on gold to actually continue into the future. Look at the iron ore prices at the moment, look at the thermal coal and the coking coal, look at the growth we’re actually going to have with FLNG out of Australia because LNG is seen as a clean energy in terms of the climate change debate.
KELLY: Well talking about the growth in coal, the Coal Association has commissioned modelling issued today that warns a carbon tax would force the early closure of 18 coal mines over the next decade, forgoing $22 billion in sales. How does that compare to modelling the Government’s done?
FERGUSON: Well it's not a question of modelling. We accept that there are some gaseous mines that are actually going to be challenged under a carbon tax. That’s why…
KELLY: Closed?
FERGUSON: That's why we are engaged in discussions. No one can rule out a mine or two closing, but can I also say, there's a huge expansion actually going on in the coal mining industry at the moment, be it in Queensland or New South Wales, a huge expansion that’s going to create record commodity export opportunities and record profits for Australia.
KELLY: So what does the Government estimate in terms of how many of these gaseous coal mines might close?
FERGUSON: Well we're engaged in discussions, trying to actually work with industry about how we handle these gaseous coal mines, but we also are doing those in the context of record investment in terms of the expansion of the coal mining industry in Australia. It’s not as if we are going to have huge job losses in the coal mining industry, be it this year, next year or in ten years time.
KELLY: Well the Coal Association says their modelling shows there will be four thousand job losses.
FERGUSON: This industry, as the investment shows, is going to continue to expand. Just look at the demand out of places such as China for metallurgical coal, have a look at the commodity prices, and the industry knows as well as I - yes there are going to be a few gaseous mines challenged but there is also going to be a huge expansion in this industry that’s actually going to create jobs over time.
KELLY: It's twelve minutes to eight on breakfast. Our guest this morning is Resources Minister, Martin Ferguson. Martin Ferguson left faction Senator, Doug Cameron, says an increase to the rate of the mining tax will be proposed at Labor's National Conference later this year. You’re a member of the left faction. Do you support that proposal and what are the chances of success?
FERGUSON: They've got no hope. We've settled this issue with the mining industry, we took it to the last election and we will deliver on the agreement with the mining industry. Doug Cameron and members of the Left are entitled to their view, but I must say they've got short memories. I couldn't find many of them out there defending the proposal by the Government to actually introduce the new mining tax twelve months ago. They were running for cover especially if they were in left wing marginal seats.
KELLY: So you don't think the pressure from the left faction of the ALP and the Greens, because remember the Greens balance the power players after July, will be wanting this mining tax to be increased too?
FERGUSON: Be it the Left or the Greens I simply say: we went to the election with an agreement with the mining industry, we will honour our word because if we don't we've got little opportunity in the future to actually work with these people to gain further investment in Australia, because people have to remember capital is footloose. We’ve got terrific investment in Australia at the moment. But there are a lot of other countries that could be attractive for investment in the mining industry, such as Africa.
KELLY: And just finally Minister, the Greens want a price on carbon, and they want measures to support the development of renewable energy. Last Friday a meeting of state energy ministers rejected that demand. Does that mean existing incentives for renewables will be wound back as the carbon price is introduced?
FERGUSON: Let's be pretty honest about this, we’ve had a policy position for some time. The way to encourage the renewable sector in Australia as part of reducing CO2 emissions is to put a price on carbon side by side with the Renewable Energy Target of 20 per cent by 2020. The real challenge to Australia, and I might say the international community, is how we actually make the breakthrough on clean energy. That’s about R & D and innovation. That's why we've got a $5 billion Clean Energy fund actually absolutely focused on R & D. It’s about how we for example commercialise solar thermal. Can we commercialise geothermal?
That's what we are focused on. Solar PV is now very, very cheap compared to what is was two, three, four years ago because the cost of manufacture of components out of China has decreased significantly. Hence Solar PV is not a challenge in terms of its commercial deployment. Other clean energy options are highly challenged and that's why a price on carbon with the Renewable Energy Target supported by Government investment in R & D is the appropriate package for the development of clean energy in Australia.
KELLY: Minister thank you very much for joining us on Breakfast.