Senator LUDLAM (Western Australia) (10:01): I rise to speak on the mining tax bills with mixed feelings, and this comes partly from being a Western Australian senator. Dealing with the mining tax bills has exposed the degree to which Canberra views my state as little more than a lucrative and ever-expanding hole in the ground. I want to set one myth to rest at the outset: the idea that the support of the Greens for fair taxation of the mining industry means that we are somehow anti mining. Of course we are no such thing. A big wind turbine, perhaps for many people the symbol of the transition that we are here to drive, is 200 tonnes of steel; solar PV cells require rare earths and silicon; electric vehicles require high-capacity lithium batteries; the high-speed rail system that we want to introduce to this country will run on steel rails-and it is very hard to do any of that without mining.
What I am opposed to is the idea that, because of its role in our economy, the mining industry should be entitled to throw its political weight around like some kind of cartel, dodge fair taxation and punch holes in environment protection and heritage laws built up painstakingly over many decades. Every time a public policy issue arises that affects mining interests, whether it be taxation, native title, carbon price legislation or industrial relations reform, sections of the industry shriek 'sovereign risk' and threaten to pack up and leave. That is not the whole industry, of course; just those with the more aggressive sense of entitlement, the Xstratas of the world. We saw that most recently with the contrived hysteria around the resource super profits tax.
Whenever I hear these threats to throw the toys out of the cot I think it would be interesting, just for once, for somebody to carry out the threat and leave, to help reduce pressure on interest rates, inflation, exchange rates, house prices and so on. But, of course, it is an empty threat. The ore bodies are here, the stable political and security environment is here, the rail and port infrastructure and permissive planning environment are here. It is just schoolyard bullying with a big budget and, on the rare occasion that someone calls it out, it always turns out to be vapour.
The main reason for my ambivalence on these bills comes from the simple fact that they would have been better had the government not caved in to the bruising campaign of intimidation and misinformation run by the Minerals Council on behalf of its membership, with the Liberal and National parties as their ever-compliant policy sock puppets. Before I deal with the mechanics of the bills it is important to remember what it is that we are talking about here. The coalition have approached this debate as though the minerals in question all belong to Clive Palmer as his birthright and that this tax is a criminal socialist misappropriation of wealth from its rightful owner. Senators from the Labor benches have of course made the point that Australia's mineral resources belong to all of us by way of being the property of the crown-that is, the crown of a much-loved hereditary monarch on the other side of the world.
In fact, these minerals are coming from country, from Aboriginal land, where in many cases the 200-year legacy of dispossession is still real and present. Here we are in Canberra, thousands of kilometres from the iron ore operations in the west Pilbara, discussing how to redistribute the largesse from a once-in-a-lifetime mining boom while those from whom we take these commodities live in conditions of degrading the poverty within sight of ever-expanding waste rock dumps.
We were told that the native title system would correct these historic injustices and position the traditional owners to benefit from extractive industries on their land. The record has been dismal. An ARC funded research project examined more than 40 native title agreements negotiated with mining companies since 1992 and discovered that in only a quarter of cases were land councils able to negotiate substantial revenues. And we know why: the act spells out that Aboriginal people who have gone through the arduous process of proving to a tribunal that they have somehow managed to maintain connection to country have the right to negotiate over projects, but they do not have the right to say no. They know that if negotiations break down the project will go ahead without any royalties being payable. In that legal context there is no equality of arms, and that is how we set the system up. I congratulate my Western Australian colleague Senator Rachel Siewert for bringing forward legislation to address this and other serious flaws with the Native Title Act.
So, thus far, the mining tax debate has been able to progress as though the mining revenues in question were discovered on some accountant's spreadsheet in Melbourne or on a hard drive deep within the Treasury department. The distance between the major mining provinces and the vast majority of Australians has created, I think, a disconnect such that our current highly unusual circumstances are seen as normal, an economic perpetual motion machine that will keep the cash registers in Canberra ringing and deliver a razor-thin budget surplus just in time for a federal election, and maybe they even will. But the fact is this is a temporary phase-this is a moment highly dependent on successive five-year plans drafted by the Chinese Communist Party, dependent on ever-increasing and unregulated combustion of cheap fossil fuels and dependent on continued confidence in a global financial system that is profoundly out of balance.
Fundamentally, all mining booms end the same way. Visit Goldsworthy in the Pilbara. It is now just a collection of empty quadrangles fading back into the spinifex a short distance from a mine void that was abandoned when the iron ore ran out. Goldsworthy was closing about the time when the much larger Mount Whaleback deposit was being opened up, literally a mountain of iron that BHP have been dismantling for four decades.
Read DRET's annual resource report and you will see that we have eight or nine decades more of iron ore mining at present rates of extraction. That little caveat-'at present rates of extraction'-heralds the Goldsworthy endgame. None of the proponents in the Pilbara or on the North-West Shelf or in the Bowen Basin or the Darling Downs or out at Olympic Dam have any intention of proceeding at present rates of extraction, and their shareholders would sack them if they did. The mining industry intends to double present rates of extraction across the board as soon as possible, halving the depletion horizon. Then the imperative from shareholders and creditors will be the next doubling-and then the next. The boom is coming to an end one way or another but we have been hypnotised by the laws of supply and demand and the powerful magic of the price signals to believe that it can last forever. Geology says otherwise, and geology will win.
That is the context in which we debate these tax bills today. What do you do with such windfall gains while they are here? In the midst of this turbocharged resources free-for-all, economic common sense is being fed into a primary crusher and bald-faced rent-seeking has been put up on a pedestal as though it were a proxy for the national interest. Asset stripping has been deliberately confused with wealth building. It is the liquidation of four billion years of geological inheritance in a few short generations rebranded as sustainable growth.
Treasury told the Economics Legislation Committee a fortnight or so ago that there are $450 billion in extractive industry investments in the pipeline in this current decade. That is a figure well in excess of the entire Commonwealth annual budget. It is a figure probably unprecedented in the history of the country. Governments at all levels are dismantling anything that might stand in the way of this headlong rush to strip the continent of its resources as rapidly as possible.
These are nonrenewable resources, sold off cheaply on long-term contracts, resources that will be immeasurably more valuable as we move into an age of depletion. In the case of fossil resources, some of it will need to stay in the ground in perpetuity. But instead, state governments have become hooked on mining royalties despite the economic collateral damage that is now impossible to ignore. Why would we remove all obstructions from an industry that has demonstrably pushed the currency up by 30 per cent, structurally damaging the tourism, education and manufacturing sectors which collectively employ 10 times as many people? Why would we push the fast-forward button down harder when the RBA was citing the risk of the mining boom overheating our economy in their statements in the wake of every interest rate rise between May 2006 and March 2008?
The commodities boom has seen labour costs bid up so rapidly that other sectors can no longer retain workers, sectors including the Australian Navy that now cannot put submarines to sea for lack of marine engineers and other skilled workers. The boom has helped put unprecedented stress on Australia's already dysfunctional housing market, particularly damaging for people not on mining wages but nonetheless caught up in a property bubble. Why would we pour more fuel on fire? We know why. The Australian Institute's estimate of the profits to be raked out the mining industry over the next decade stands at about $600 billion, that is why; well over half a trillion dollars, not in turnover-in profit. Treasury's original model of taxing this unprecedented windfall was met with a beautifully calibrated $22 million advertising campaign, an incalculable return on investment that crashed the Resource Super Profits Tax, cost a sitting
Prime Minister his job, and led to the watered-down model we are presented with today.
When we turn to the opposition, we find that they are led by a guy who just bobs up and down whenever Mitch Hooke tells him to. The sum total of their initiative is to let these profits be sucked out of the country as rapidly as possible. It is an industry policy that says: liquidate everything, as quickly as we can, no matter what the collateral cost to the environment, to communities on the frontline and the rest of the economy.
The Greens propose to return to a model more akin to the one that the former Treasury Secretary Ken Henry started with or, heaven forbid, a model closer to the Petroleum Resource Rent Tax, that was also met with high-pitched shrieking from the industry and its Liberal Party proxies when it was first introduced. If that tax has held the oil and gas industry back since it was introduced, I would be delighted to see some evidence.
The Greens propose to roll back the frankly idiotic get-out clause that gives the states a blank cheque to raise royalties, which will then be fully reimbursed by the Commonwealth. Premier Colin Barnett in Western Australia is quite right when he reminds Canberra that mining royalties are a state responsibility and accuses Canberra of bullying in threatening to withhold GST receipts by way of retaliation. I do not understand what the Australian Treasurer is doing. Maybe a government senator will jump up during the debate and let us know.
I believe that some of the benefits of this boom, properly taxed, should be banked in a sovereign wealth fund as a source of capital for the future when the well has run dry and as a hedge against rapid currency movements. The Norwegian model is frequently spoken of. The North Sea oilfields are now well down the back end of the depletion curve but smart policy-making there has left the country with one of the largest sovereign funds in the world from which to sustain prosperity.
Colleagues, when we put this bill to a vote later tonight I will be voting for it, because the alternative is to vote for nothing. Unlike the friendless CPRS, this is an example of something being better than nothing. But as Senator Brown has indicated, this is a package that will require ongoing review and improvement to see if the reality bears any resemblance to the modelling. I want to know whether or not AMEC were right when they told the committee a couple of weeks ago that accountants for the big three miners have so completely wormholed this package as to cripple it. I do not often get up here and agree with AMEC, but credit where it is due, the big three miners sold out AMEC membership, the juniors and the mid-tier miners, and did a deal to benefit themselves at their established operations.
This is a story that still has some twists and turns in it yet. I find myself in the peculiar position of agreeing both with AMEC and Colin Barnett, our Premier, in the course of this contribution, which has created strange alliances and probably cost a few friendships as well. If we can at least agree that these resources are nonrenewable, and that we here in Canberra are placed in a position of enormous trust in their stewardship and liquidation, that at least will be a start. I foreshadow the second reading amendment that we will move later this afternoon in my name and Senator Brown's name in order to correct some of the flaws that were introduced into this bill when it was renegotiated by new Prime Minister Gillard and Treasurer Swan. I thank the Senate.