Meet the Press 

HUGH RIMINTON:

Resources Minister MARTIN FERGUSON is our guest... Now welcome to the program MARTIN FERGUSON. Good morning.

MINISTER FERGUSON:

Good morning.

HUGH RIMINTON:

Let's go straight to the mining super tax. What is now negotiable?

MINISTER FERGUSON:

Let's be clear - the Government said from day one there is a process of consultation. I have urged the companies to go and open their books, both big and small, because there are technical issues to resolve. But when it comes to the headline rate of taxation, the same as the petroleum resources tax is 40%, we think that is a fair level of taxation for the Australian mining industry.

HUGH RIMINTON:

So 40% _ no movement.

MINISTER FERGUSON:

No movement at all. But let's be realistic. The mining companies also have very much acknowledged to me that they have had a good decade. They are not out there arguing that they shouldn't be paying more tax. The only people arguing that the mining industry should not pay more tax at the moment are Tony Abbott and the Opposition. The world has moved on. The Australian community expects this sector, that has done exceptionally well out of the development of our national resources and we only get one chance to develop our national resources, to actually pull their weight and pay more tax

HUGH RIMINTON:

OK, well, let's accept then, the argument that the mining industry accepts that it has to pay more tax. At what point should it kick in? Is there any movement on the roughly 6% at which it becomes a super profit?

MINISTER FERGUSON:

The Government is clearly awaiting a report from the high-level consultation committee.

HUGH RIMINTON:

So there could be movement?

MINISTER FERGUSON:

I am not prepared to suggest that there is any movement but we will wait the outcome of those discussions. I say there are different issues from different companies' point of view, different industries' point of view. We will sit down and assess the outcome of that process of consultation.

HUGH RIMINTON:

So is that the point at which there might be a little wriggle room - is on the 6% before it kicks in?

MINISTER FERGUSON:

The Government is not in a position to make ad hoc decisions on the run. We will consider the outcome of consultations. They are genuine consultations. That is one of a variety of issues that the companies have raised with me and the Treasurer but in terms of getting this right, let's go through proper process because this is exceptionally important to Australia's future. It is not just about the level of taxation the mining industry should pay. It is also about all of the support we want to give small and medium-sized businesses in Australia, including the capacity of Australians to improve their right to retire with decent superannuation payments.

HUGH RIMINTON:

One of the suggestions being made is that the threshold level, for it to be seen as a super profits tax, goes from 6% up to 10-11% and there is a trade-off somewhere else in the structure, might that be the way out of this?

MINISTER FERGUSON:

There are a variety of suggestions. Can I also say, the suggestions vary from company to company. Take the coal seam methane industry. We've gotta be very careful. We've got one set of companies suggesting one outcome because that is about them trying to get the jump on another company. We have to be very careful as we go through these negotiations and considerations of what is right for Australia to make sure we don't get caught in the intercompany games about how one gets a jump over another.

HUGH RIMINTON:

OK. One of the other issues is retrospectivity. Is there any movement on that?

MINISTER FERGUSON:

Retrospectivity is the nature of [our system]. Changes in royalties have occurred in the past. The last couple of years we've seen an increase on existing royalties out of Queensland and New South Wales with respect to the coal industry. We're also just about to see in Western Australia a decision by the Western Australian Premier and Treasurer Colin Barnett to increase iron-ore royalties across existing operations on BHP and Rio by about $700 to $800 million a year with effect from the 1st of July this year. So retrospectivity is not something that is ruled out because it has been the nature of changing royalties in the past and I also remind you, the Mining Council itself which represents companies such as BHP, Rio, Fortescue etc, they actually argued for this tax system - a profit-based tax system - because they actually believe it is better for them in the long run.

HUGH RIMINTON:

That's not what they're arguing to you right now, though. The mining industry sees you as one of the few potential friends in this government because you do get out and talk to them. Mitch Hooke was quoted as saying, "Martin Ferguson is a pivotal figure in the resolution of this issue." Because of that, how would you resolve this?

MINISTER FERGUSON:

Clearly I am the minister but I am also a member of Cabinet. The mining industry has basically been doing what I've asked them to do since the 2nd of May - treat the negotiations as genuine, open the books and assist Treasury in modelling it. But also remember this - that consultation committee has no capacity to negotiate or make changes. Any changes will be made by the Government because that is our responsibility, and we must get it right. But at the end of the day, unlike the Opposition, we actually believe the Australian community is entitled to a fair return on the development of its resources. We get one chance to develop those resources. It is only the Opposition led by Tony Abbott who basically says economics is boring and is arguing that the mining industry should not pay more taxation in Australia.

HUGH RIMINTON:

You can't be seen as a government, though, to back-flip on this. You're committed. The back-flip on the ETS was too damaging to allow another back-flip. Is that a fair read of the politics of this?

MINISTER FERGUSON:

Tax debate is always very tough. We've said from day one there is a capacity to refine the announcements of the 2nd of May. We appropriately established a consultation committee to talk to industry, but the Treasurer and the Prime Minister and I have also been engaged in detailed consultations with individual companies and we will consider the outcomes of those discussions. There will be a profit-based tax in Australia, the headline rate is going to be 40%, but there are refinements that can be made to make the tax appropriate and balanced from a mining industry point of view whilst getting an appropriate outcome from the Australian community point of view.

HUGH RIMINTON:

We're gonna take a break. When we return with the panel we'll talk about the class warfare issues among others. Also, when do Prime Ministers ever learn sport is best left, at least when the cameras are rolling, to the folks who know what they're doing?

HUGH RIMINTON:

Welcome back. You're with 'Meet the Press' with Resources Minister Martin Ferguson. Welcome now to our panel, Matthew Franklin, chief political correspondent with 'The Australian' and Alison Carabine from ABC Radio National 'Breakfast'. Good morning both of you. Now, the debate over the mining tax is certainly intense, as the Minister says, the mining industry and the Opposition complaining of class warfare against wealthy miners. Accusations have also been made against Tony Abbott.

MINISTER FERGUSON:

(Wednesday) The Opposition leader should hang his head in shame. He is more concerned about corporate donations than the proper return on the development of Australia's resources.

RADIO NATIONAL'S
ALISON CARABINE:

Minister, whatever the Coalition's motives in opposing this tax, it is forming a formidable alliance with the mining sector. Some are predicting the biggest corporate involvement in an election campaign since the late 1940s. The mining sector is cashed up. It would appear that the debate is still finely balanced in the community. How will you withstand that pressure?

MINISTER FERGUSON:

It is about a proper policy determination in Australia. Good policy is good politics. The mining industry has had a great decade. Look at the jumps in prices for iron ore and metallurgical coal, for example. The companies themselves acknowledged privately to me that they should be getting more taxation. They argued for a profit-based tax. We will put one in place. We always said there's a process of consultation and discussion. We will take our electoral chances because life is about leading and tough decisions, unlike the Opposition. Look at the chaos they are in this week with respect to their performance on a range of budget issues. They are not fit to govern. We will take our chances electorally and lead by example and make sure we put in place a proper taxation system.

ALISON CARABINE:

Do you personally support this 40% tax? Do you agree with the analysis that it will grow the industry?

MINISTER FERGUSON:

I'm the Minister for Petroleum as well. We last year achieved, with a 40% tax, the biggest ever single investment in Australia, the Gorgon project, worth $43 billion.

ALISON CARABINE:

But what about the 40% mining tax?

MINISTER FERGUSON:

The question is the technical details of the application of the announced tax proposal. That is where the refinements can occur. That is where I have urged the sector I represent with and have worked closely with to sit down, open the books and show Treasury their modelling. For example, take iron ore for BHP and Rio. The logistics chain is taxed because it is part of an integrated mining operation. For FMG, Twiggy Forrest's company, it is a separate rail company. They are the technical details we need to go through. What are the taxing points? What's in, what's out? Then we will get a measured outcome which means we achieve a profits-based tax for the mining in Australia whilst also having an attractive investment.

THE AUSTRALIAN'S
MATTHEW FRANKLIN:

Mr Ferguson, just on the issue of consultation, were you, in fact, as Minister, consulted about this decision when it was made, or, like the ETS, was it done inside the kitchen cabinet and isn't the fact that Kevin Rudd centralises many of these decisions evidence of the fact or reason for the fact that people get upset about them and then you have political problems that you have to hose down?

MINISTER FERGUSON:

I am at the Cabinet table, clearly. I, with others, was consulted about the nature of the mining industry tax proposal.

ALISON CARABINE:

What about the detail?

MINISTER FERGUSON:

Let's go to the detail, because what we put out there is a proposal which involves us working with industry to get the detailed application right. We appreciate that the applications can vary with respect to its implications from company to company, from particular resource to resource. It is a proper process of consultation, contrary to what some people would have you believe and the media believe.

MATTHEW FRANKLIN:

Why don't you consult out front? Why did you slap it out there and say, "No compromise", leaving yourself little room for wiggling?

MINISTER FERGUSON:

What we are saying is that the headline tax rate is correct. But there is room for compromise, and I've said on a number of occasions, with respect to how you apply the proposed tax regime. This is no different to what happened on the GST. That was a tough debate as well. It is no different to what happened with the introduction of the fringe benefits tax. Everyone said the Australian tourism industry would fall apart, of which I'm also the Minister, we've still got a strong tourist industry and we've still got a strong economy because of the action we took over the last 18 months.

MATTHEW FRANKLIN:

Is this the debate that you need - a class war-type debate - against the big miners to get people to forget about your broken election promises?

MINISTER FERGUSON:

The government is not interested in the class war. We are interested in getting the tax system right. The Henry Tax Review said this was one of the toughest issues to handle. We are gonna take it on and resolve it, because it needs to be resolved now. These companies have had a great go for 10 years. We are gonna make sure that we set up a tax regime which is still attractive and also means we cut company taxation for the Australian community. As a Minister for Tourism, that is exceptionally important because 90% of the tourism industry is small and medium-sized business. We are increasing the capacity of people to retire with some dignity. Take small business. Immediate write-off of any equipment worth less than $5,000. They're the big beneficiaries. That's the choice Tony Abbott has to come down to. If you're going to oppose a fair outcome, 'cause you're the only one opposing increases in mining taxation in the Australian community at the moment and are you going to deny the small business sector of the Australian community and the whole of the Australian community benefits on company taxation and improvements in superannuation and infrastructure and skilling?

HUGH RIMINTON:

Let's get back to the tax itself. Is there any possibility of a differentiated tax across the different sectors of resources and mining?

MARTIN FERGUSON:

I think it is a question of how you apply the tax in the technical details going to taxing points etc. It determines the nature of the outcome from sector to sector.

HUGH RIMINTON:

So we can talk about differentiation?

MARTIN FERGUSON:

We can only resolve that through proper discussion and consultation. The last thing we're going to do is to make ad hoc decisions on the way through this process of consultation. These issues will be determined and if there are to be changes, the Government will announce them in due course.

ALISON CARABINE:

Minister, whatever the merits of the tax, some projects are being put on hold - BHP Billiton, Fortescue, some coal and gas projects in Queensland. These industries already suffer a skills shortage. There is a concern that workers could desert these industries while these projects are in limbo. As the Resources Minister, what will you do to stop that happening?

MARTIN FERGUSON:

As I have said from day one, investment decisions do go on whilst we resolve these taxation issues because they're part of investment decision. I don't think we're going to lose workers from these industries. We have got skills shortages at the moment. If you have any doubts about that, go and look at Western Australia. Go and have a look at the Gorgon project where we've already got skills shortages. The completion of the Pluto project, we have shortages. All around Australia, one of the biggest issues we've got in managing the pipeline of investment is skills shortages. Hence out of the Budget, you see a bigger investment by the Australian Government in upgrading the skills of the Australian community. I was in Cairns this week, largely a tourism centre. We've got a problem in unemployment because the Japanese market has dropped. In discussions with the local community, the problem is these people do not have the skills. My objective is to assist Cairns to also become a mining services centre, to invest in the skilling of these workers to have them employed in the mining industry to overcome the unemployment problems in that region.

MATTHEW FRANKLIN:

As you mentioned, you are also the Minister for Tourism. There has been a reduction in the value of the dollar in the last while and Joe Hockey says that's because of your mining tax. Isn't that, as Tourism Minister, a good thing?

MARTIN FERGUSON:

In the tourism sector, a weaker dollar is good because it means it's less attractive to people to go overseas and also, over the last 12 months, our figures for 2009 in a very, very tough environment are in line with 2008. I say to Joe Hockey, you are big on rhetoric, not much chop on hard work and substance and your performance this week clearly proved that you and the Opposition are not fit for government. He ought to go for a trip to Greece and see what's having an impact on the Australian dollar.

HUGH RIMINTON:

We're out of time. We must let you go back and butt heads with the mining industry. Thanks very much for being with us, Martin Ferguson, our guest.