ABC Radio National Breakfast with Fran Kelly 

E & OE

KELLY: Minister, welcome to Breakfast.

FERGUSON: Good morning and thanks very much Fran.

KELLY: According to this deal the Federal Government will repay all state royalties for ever more now. That was never the original plan. This is now a blank cheque to the states to jack up their royalties isn’t it?

FERGUSON: No, if you have a look at what the Treasurer said yesterday we’ve ticked off existing royalties and said we’ll talk about any proposal to increase royalties in the future. But let’s have a look at the balance that’s been achieved.  And as I said yesterday enough is enough. We’ve got a large section of the mining industry on board for a profits based tax which means we get a share of the huge profits being earned by Australian companies at the moment. It also enables us to cut company taxation, do something about infrastructure, to help small business.

And I think we’re at this point. We’ve got a system of taxation in Australia which means we are attractive for investment. If the Commonwealth or State and Territory governments start to go beyond the balance announced yesterday then they want to think about what that does to our long-term investment opportunities. I actually think we got a ringing endorsement of the package last night with announcements by BHP of another $12 billion in investment, new investment, over $7 billion in iron ore in North West Western Australia, $5.2 billion in metallurgical coal in Queensland and over $400 million in thermal coal in New South Wales.

Now that was announced last night after we announced the outcome of the tax discussions. That says the balance is right at a state and federal level. Get on with the job of putting in place the legislative framework for the tax, continue the pipeline of investment. Because that pipeline of investment over time will give us more benefits to the community than one-off proposals by Bob Brown to substantially increase the tax take that we’ve announced.

KELLY: I’m more interested, and we’ll talk about Bob Brown in a minute, but what about the State Premiers? A lot of them have never really been convinced by your sales pitch on this tax. And already, WA Premier Colin Barnett, says this is just bullying from the Feds and in WA he is already thinking about increasing royalties in the May Budget before you get a mining tax in place. So really the Commonwealth is going to be out of pocket.

FERGUSON: Well I think Colin Barnett, who I have a good working relationship with, has also got to think about the challenges to the tourism industry that’s doing it pretty tough in Western Australia because of the pressures of the resources boom. Take tourism and the importance of the airports. Think about the investment out of this tax of $480 million to fix the operation of the roads around that airport. Think about the need to actually give some company taxation assistance to the tourism sector in WA that’s doing it very tough at the moment because they can’t compete with the resources sector in terms of wages to actually attract and keep labour.

This is also about evening out our two speed economy and I think under it all Colin Barnett understands there is an absolute limit to how much he can take in terms of royalties. Yes he can beat the drum and play to the gallery but there is a balance. He’s done well in terms of the recent Grants Commission process,  there is additional money to Western Australia, no discounting of the $600 million in royalties he got out of BHP and Rio Tinto.

So look, of course we are going to have people jumping up and down and soap box Bob Brown in terms of its never enough in terms of taxation. But we’ve got a balance. The state is going to do well out of this in terms of Western Australia. As importantly are small businesses in Australia and companies generally.

KELLY: Okay, that’s okay for you to say but how are you going to make this happen if the states do insist on putting up their royalties? What levers do you have? Is it about deducting that amount from their GST payments?

FERGUSON: They are matters for the Treasurer to consider. He indicated at the media conference yesterday he’s got a variety of options. He is the lead Minister on this. I’ve helped settle the design parameters, we now finalise the legislation in consultation with experts from industry. There’ll be an exposure draft, further consultation with industry.

But you know Australia’s got a chance. Huge profits. Let’s just take Twiggy Forrest and FMG – 630 per cent increase. Xstrata, 75 per cent increase. Rio..

KELLY: ...BHP’s first half year profits…

FERGUSON:…88 per cent…

KELLY:…$10.7 billion.

FERGUSON: Yes.

KELLY: I mean do we really need to give these big miners more concessions? They are already laughing all the way to the bank.

FERGUSON: Well as a result of this tax announcement they’ll be paying increased taxation but in terms of those profits think about the announcements overnight of another $12 billion investment in Australia. That creates apprenticeships, jobs, export opportunities, increases in taxes as a result of this new system, company taxation, payroll tax, etc. What you’ve got to consider is you put in place a taxation system which means for a short-term period you get a huge jump in taxation but you stifle investment because capital is footloose. Plenty of opportunities in places such as Africa. They’re the choices companies make.

BHP has basically said last night, yes we’ve got great profits, we are prepared to pay more, but perhaps more importantly we’re going to give more to Australia in the medium to long-term by investing another $12 billion in Australia. Think about the balance. It’s the pipeline not the short-term one-off opportunity to jack up tax and stifle any long-term investment in Australia.

KELLY: Alright, the original tax has already been watered down to this tax and now you’ve got – confronted with how you’re going to get into law. It’s all very well for you to talk about Bob Brown on his soap box but the Greens – the Opposition is not going to support your mining tax. The Greens, you’ll need them to pass this legislation and they say simply, it’s too generous at a time when the miners are making so much money. How are you going to get this through?  Will you be prepared to accept any changes?

FERGUSON: They’ve also said on a number of occasions that yes, they’ll play to the gallery, they’ll move their amendments, but then they’ll let the Government have its way. Because frankly this is a formal agreement signed with the mining companies on the second of July. It went through the election period and we are determined to put it in place. We’ve said on successive occasions that we’ve got no intentions of changing it, adding additional commodities, or whatever. Because as far as we’re concerned this is about putting in place an agreement. You know, a lot of heavy lifting to actually get this agreement. We are getting substantial improvements in terms of our capacity to do things for the Australian community. 

And if we don’t get this tax in place then Bob Brown better start explaining to the Australian community, as should Tony Abbott, how you are going to actually get the revenue  to cut company taxation, how you are going to get the revenue to assist small business, how you are going to get the revenue to actually do something about all the infrastructure difficulties, how you going to actually have the capacity to increase superannuation and savings in Australia. That’s what’s at stake. Not the theatre of a political battle in Parliament. Hard, fought after opportunities to something substantial for Australia in the short to medium term.

KELLY: Alright well the other hard fought after negotiation at the moment is over the carbon tax. By sort of caving to business here, to the tune of something like $60 billion over a period of ten years, have you given the signal to business that the Government is a soft touch and on the carbon tax business will just keep pushing you until you give them more concessions too on a carbon price?

FERGUSON: Well firstly I don’t accept your proposition in terms of us caving in to the mining community. This is a fair outcome which also maintains a pipeline of investment to build a bigger tax base over time in terms of payroll tax and company tax.

Now in terms of the issue of carbon tax, a complex debate no different to the mining tax. Again it is about getting the balance. How do we put a price on carbon but also not put in place carbon leakage from Australia by which we see jobs going offshore? Now it’s easy again to play to the gallery and say we should have $60, $70, $80 per tonne, pull something out of the air and suggest it without actually modelling the potential implications on the Australian community and the standard of living that we expect.

You know we can all sit under the tree and weave baskets with no jobs if that’s what some people in the NGOs and the Greens want. This is a hard economic debate about also achieving environmental outcomes. 

KELLY: Martin Ferguson thanks for joining us on Breakfast.

FERGUSON: Thank you.