In a notable bookending, the mining tax that helped destroy Kevin Rudd’s leadership late last term is causing Julia Gillard serious budgetary and political problems as she heads towards the election.
For Treasurer Wayne Swan, the tax has brought one disaster after another. Rudd bitterly blamed Swan for the vicious reaction to the original tax from the mining sector, because there was not enough consultation beforehand.
The opposition has targeted Swan after figures last week revealed the tax had raised only $126 million in its first two quarters when it should have brought in $1billion. Low commodity prices and the high dollar account for much or most of the shortfall – government and opposition dispute the proportion – but the design of the tax is also seen as a cause.
The Coalition argues the tax should be scrapped altogether, while other critics say that it should be revised to make it effective.
It’s going to be a rough sitting week for the Treasurer; Tony Abbott opened question time yesterday by demanding to know whether the Prime Minister still had confidence in him.
The mining tax flop is putting extra strain on the already tough task – with the general revenue outlook bleak – of seeking savings to pay for the National Disability Insurance Scheme and the Gonski education reforms. This tax was supposed to finance various other measures, including the enhanced superannuation guarantee, which will have to be paid for by other means. Workplace Relations Minister Bill Shorten was vague and dismissive when pressed on the ABC yesterday about the money challenge.
There has been previous speculation that in its search for savings the government might again trim some so-called ‘'middle class welfare’‘, and also put a squeeze on the superannuation breaks which benefit higher income earners. In response to the talk about super, it has ruled out changing the tax exemption that over 60s get on payouts, but the favourable tax treatment when people invest in super has not been quarantined.
The government is in a bind. It is looking to the NDIS and Gonski to be vote magnets. But if it has to hit middle class welfare or super breaks to help pay for them, it risks losing votes.
It’s true that the Labor heartland would not be directly hurt by such measures. But Labor also has to think of its aspirational supporters in those many marginal seats. These people don’t necessarily need to be personally left worse off by changes – they may simply know people who are, or worry that they might find themselves affected in the future.
Fears about such a backlash came though in comments last week by government whip Joel Fitzgibbon (who, incidentally, is in a heartland Labor seat). ‘'On super, we do need to be very careful’‘, he told Fairfax Media. ’‘Aspirational Australia is sick and tired of … constant changes to superannuation and the uncertainty that brings. We need to be rewarding people for their efforts of the past. At the same time, there are some inequities and inconsistencies in the system that need to be sorted out. It’s a very difficult balance for the government.’'
Fitzgibbon, a Rudd supporter, went on: ‘'If there is a story saying Fitzgibbon said that those who worked hard in the past to get to where they want to be in life should be protected, then I’ll be happy with that story. We’ve got to make sure that there is an incentive to work. Hard work brings reward at the end. That is what aspirational Australia is about and that’s what we should be promoting.’‘ Seeing a potential advantage, Tony Abbott recently promised that a Coalition government would not bring in any unannounced adverse changes during its first term.
The Labor government has already eaten away at middle class welfare and breaks over several years – through changes to eligibility for family benefits, the baby bonus and the private health insurance rebate, as well as some winding back on super. In terms of policy these can be strongly defended. And there is a case for more action. But taking it in a budget four months from an election would be bold – and there will be quite a few Labor troops hoping that political discretion will be put ahead of valour, or even the budget bottom line, by the government’s cost cutters.
David Clerke
Teacher
It appears the Obeid family got more out of mining than the mining tax. Perhaps they should have been contracted to design the tax.
Marilyn Shepherd
pensioner
To date all we have about the Obeid's great wealth on mining is hearsay.
If there is really corruption and criminal behaviour it is a police matter not the shonky ICAC crap that is nothing more than a fishing expedition.
INstead they should have asked AWB and James Hardies criminals to devise the best way to get money.
susan walton
logged in via email @live.com.au
What on earth does the AWB and James Hardie have to do with this particular subject!
Peter Evans
Retired
As you noted in another article this campaign could be a battle of the costed policies. Just as these revenue changes are making it hard for the Govt to fund their reforms, so they make it hard for the Opposition to fund its promises. Will be interesting to see where both get their money form. We know that taxes are going up under the Coalition with the abolition of the carbon tax but the increase in the superannuation guarantee in part funded by the mining tax is meant to be preserved. So how will this be paid for. And what is the Govt going to cut without pain?
All those demanding austerity around the world have really not addressed the question that revenues are declining. So you end up chasing your tail as you try to balance the budget if you don't also help the revenue side. Much like some businesses have that endlessly cut costs only to find there is no business left.
Marilyn Shepherd
pensioner
We are currently spending $138,000 per refugee to keep them on Nauru or Manus where staff sit around on massive pay and do nothing at all.
Gerard Dean
Managing Director
Welcome to The Conversation Ms Grattan,
I may not read all you say. I may not agree with all you write. I won't go so far as to echo that US Marine's words when he said of a Vietnam war protester, 'I don't agree with what he is saying, but I will defend to the death his right to say it.' but it is good to see you anyway.
Gerard Dean
PS. Ms Grattan, you will note that commentators will now come out of the woodwork and bag me for attributing the famous, "I do not.." line to a US Marine rather than Voltaire ((or his biographer, the his American biographer Evelyn Beatrice Hall) . Well, let them, however it should be noted that Voltaire was a man of words and would never have put his life at risk for anyone, whereas when a US Marine says something, he means it.
Dan Smith
Network Engineer
That's funny, I thought a Marine would be obliged to follow the orders of his superior officers, irrespective of how he felt about it.
I've learnt two things today: Voltaire was obvs a pussy, and soldiers have autonomy to act in accordance with their personal ethical viewpoints.
Ron Chinchen
Retired (ex Probation and Parole Officer)
This situation resulted from one of the biggest cons perpetrated by the mining industry and supported by the Liberal Party in their successful propaganda campaign that deceived the public and resulted in what is at best a lukewarm taxing of that industry
The clever campaign, which focussed on being a harbinger of economic chaos, lost jobs, lost mining to other countries etc etc, was nothing but a con on the public that unfortunately the majority of Australians seemingly fell for, and denied us…
Read moreHelen Errington
logged in via email @iinet.net.au
This is the truth of the matter and yet the old media does nothing to educate the public on the con simply because they are part of deception.
Ron Chinchen
Retired (ex Probation and Parole Officer)
Oh yes I forgot about the media's involvement in this tawdry affair. In particular the Murdock press (as usual) looking after their elite business buddies...who cares about the average Joe and Jenny Blo in Australia, who help them attain their wealth only to then exploit our country.
susan walton
logged in via email @live.com.au
All the mines did was scale back for the interim, explore new shafts so it was easy..with a few clever accountants, to run at a loss or at least break even..in the meantime, 200 men laid off at my husbands pit..including every single contractor, and over 600 laid off in various other pits around here. Over 2,000 laid off in Queensland. My husband's pit simply stopped production and went into maintenance and exploration mode...there is nothing the government can do about that.
The government was stupid not to see that the Mining companies were laughing at them all the way! they can, and will, close the gates as long as they see fit..they've done it before.
Your miner's tax is useless. The opportunity wasn't missed..it was never there.
Pamela H.
logged in via email @hotmail.com
This is the result of Labor making too many concessions to the Right Wing Fat Cat Mining Moguls.
Michael Shand
Michael Shand is a Friend of The Conversation.
Software Tester
Agreed, why we let multinational companies come in and take our finite resources and then sell them overseas at profit without taking a fair share of that profit is rediculous. Imagine your neighbour wants to take some of your gardnes top soil and sell it down the street....would you let them just take it? would you want some money from the deal? at least enough to replace the top soil once its all gone?
Helen Errington
logged in via email @iinet.net.au
My sentiments exactly.
Comment removed by moderator.
Comment removed by moderator.
Ron Chinchen
Retired (ex Probation and Parole Officer)
But against whom. All sides are to blame, including ourselves. I'd make war, but the enemy is within as well as without.
David Doe
Videogame Producer
p1 speculation - Rudd reference
p2 hyperbole - Rudd reference
p3 What were the opposition's predictions?
p4 single sentence, no explanation for either position
p5 speculation based on posturing
p6 negative tone and almost hilarious use of 'vague and dismissive'
p7 speculation on speculation
p8 speculation
p9 speculation
p10 negative framing of succeeding quote
p11 Rudd reference, free kick for opposition "policy"
p12 citation needed, speculation
Very disappointing. You can do better.
You're 0 for 2 with one strike left.
Tony Grant
Student
Conservative media (1984) launch into all possible outlets of the truth...facts!
Couldn't agree more Dave.
Paul Savage
Theme Leader, Biotechnology at CSIRO
David, Michael, Stephen, oh what witty criticism... and your 'contributions' to the Conversation are sooo much more valuable than Michelle's piece.
The comments section here (particularly on political pieces) is increasingly nasty, shallow and personal. I wonder if this a true reflection of what's happening in Australian politics or have the mindless YouTube trolls just found a new outlet for their flame wars?
And yes, I'm aware of the irony that I'm being drawn into the mud rather than discussing the issues raised. *sigh*
Michael Shand
Michael Shand is a Friend of The Conversation.
Software Tester
Thats silly mate, our contributions are no more valuable than anyone elses, remember that internet comments are only a reflection of what people actually think in reality
I notice that you only have this criticism about the comments that dont have a favourable view of Michelle's article - why is that?
I mean what are you suggesting, that feedback from the Australian public - right or wrong - is not valuable
I stand by my comments, the continuing refferences to Rudd are largely irrelevant and a distraction, the article didnt at all address why the mining tax was short it only said
"These guys said this...these other guys said this...some say remove the mining tax all together....others say we should just revise the tax..."
This is not journalism and the idea that highlighting this is rude and therefor should not be done is anti-democratic to say the least
Whats wrong with asking why all the refferences to Rudd? constantly? its a fair and valid question mate
David Doe
Videogame Producer
That's partially my problem, Paul, there weren't any issues raised. It was mainly all speculation, with the occasional piece of hyperbole and negative framing.
I've been reading The Conversation since day one and have quite enjoyed having my horizons expanded on a number of topics.
That said, the comments section on political reporting is always bound to be more robust than other pieces, because people have a) a vested interest, b) particularly strong views one way or the other, and/or c) the…
Read moreStephen Paul
Community Worker
Obviously as Theme Leader in the Biotechnology world at CSIRO, only one view point is allowed
David Arthur
n/a
I've been reading and listening to Ms Grattan's commentary for some years now; my impression is that she has always been careful to limit the scope of her observations and comment to what is factually defendible.
Marilyn Shepherd
pensioner
Agreed, it's not possible to take the pg out of the girl. MIchelle's rambling nonsense never changes.
Pat McConnell
Honorary Fellow, Macquarie University Applied Finance Centre at Macquarie University
David
Well said, we can get opinion elsewhere, insight is what the Conversation is about
Sally Boteler
customer service officer at health & leisure
Yep....
"destroy" , "disaster", "vicious reaction", and the new buzz-cliche
"mining tax flop" .
Taxing profits is inherently volatile.
Prices went down, now they are going up.
WA & Queensland raised royalties.
Mining tax can still be tweaked.
No shock and awe.
Intelligent, informed writing was what i came to The Conversation for, not anti-government attacks using every old propagandist writing device available.
Inspired by your generosity David, one more strike for me too.
John Phillip
John Phillip is a Friend of The Conversation.
Grumpy Old Man
From you, Ms Shpeherd, THAT comment is priceless...."rambling nonsense"...lolololol
John Phillip
John Phillip is a Friend of The Conversation.
Grumpy Old Man
David, what gets tiresome is the defence used by the pro-Gillard brigade. Namely that the problems Labor's experiencing with its policies are the 'fault' of the LNP and or "The Australian" without acknowledging their own role. I think the bagging Ms Grattan has copped on these pages is a) pretty poor form and b) a defence mechanism by those who support the ALP/Greens and are concerned that any content balance be accorded to the Conversation.
Michael Shand
Michael Shand is a Friend of The Conversation.
Software Tester
There is that situation with Obama as well, who has carried fourth and extended most bush policies including warrantless wire tapping and changing the definition of "Due process" so it is no longer judicial process, its jst any process, rock paper siccors will do.
I can only speak for myself, but there is valid cricitism of Gillard to be made on many topics including gay marrige, school chaplins, the mining tax not bringing in revenue, lowering the carbon price, etc
All very important and valid…
Read morePaul Savage
Theme Leader, Biotechnology at CSIRO
No, everyone is entitled to their view point. I'm just disappointed to see the nastiness and bile directed to Michelle Grattan in these and other comments to her articles. Agree or disagree to the article with your own well-reasoned arguments, fine. But the personal attacks and name-calling are more suited to other forums on the internet.
Oh, and the references to Rudd? I don't care about him one way or the other but there's no denying that the behaviour of an ex-Prime Minister, with obvious ongoing leadership ambitions, is newsworthy. That may be an inconvenient truth for that side of politics, just like Tony Abbott's aggressive behaviour is for Liberals, but let's not pretend that Rudd is irrelevant.
Peter Ormonde
Peter Ormonde is a Friend of The Conversation.
Farmer
'No, everyone is entitled to their view point."
Oh no they're not! I read that on the Conversation so I know it's true.
That Kevin 07 still believes he was Australia's first popularly elected Prime Minister - and who could blame anyone for thinking that after that disgraceful campaign slogan - is not news. That he says ill-advised petulant things is not news. That he believes he has been usurped is not news. That he'd like to be back in the Lodge is not news.
What would be news would…
Read morewilma western
logged in via email @bigpond.com
Wouldn't it be nice to have included some of the arguments in favour of trimming welfare for the very well off - "middle class welfare" is a slippery term. This reads pretty much like Grattan's milder Fairfax contributions. Are there going to be one of these every edition of the Conversatiopn ? It'll annoy quite a few readers if so.
Tony Grant
Student
We didn't get the "Super Tax on Mining" you lot did its "thing" with the mining lobby to make sure it didn't go through!
The "watered down version" which included "Rudd must go" is still $126 million in the plus side of the column. If your masters "political wing-conservative government" would have brought in this "compensation" for all Australians in the 11.5 years they were in office...there would be no conversation? Ever tried to do the figures on what should have been...how many Billion (s…
Read morePeter Ormonde
Peter Ormonde is a Friend of The Conversation.
Farmer
Better - but well chewed.
I reckon Gillard should cop one on the chin with the Mining Tax ... this is what was deemed acceptable to those at the negotiating table. Narrow limited and ineffective. The immense loophole permitting the states to ramp rather than reduce royalties shows the workings of the tax need a serious overhaul.
I reckon the Government would be well advised to be going back to the original Henry Model and its purpose and scope and re-designing the thing.
Hey Michelle - Let's have a look at the profitability of affected mining companies in Australia over the last year. How ineffectual is this tax? Where did all those profits go? So quickly. Do they grant you a minion in this new sinecure?
Tony Grant
Student
In reality if the "Super Tax on Mining/original" had gone through there is no problems then with "middle -class welfare" why?
The truly wealthy and those domestic and international companies would be paying a "real price" for our assets...therefore, bringing more people into that so-called middle-class grouping...everybody should be "middle-class" in this very wealthy nation based on our natural resources? 83% of profits leave this nation from mining...aren't there others that feel insulted…
Read moreDavid Arthur
n/a
Thanks for this Ms Grattan.
I think you approach the crux of the issues in: "The mining tax flop is putting extra strain on the already tough task – with the general revenue outlook bleak – of seeking savings to pay for the National Disability Insurance Scheme and the Gonski education reforms. This tax was supposed to finance various other measures, including the enhanced superannuation guarantee, which will have to be paid for by other means."
What this points to is the failure over many…
Read moreHelen Errington
logged in via email @iinet.net.au
Michelle I wonder if you would do a story on the power of the mining corporations in this country and investigate how they and their Liberal affiliates mounted one of the most disgusting campaigns, assisted by the Murdoch press, agains the original MRRT. I agree the PM should have stood her ground and not watered it down but at what cost would that have been. Lets get underneath just who runs this country because it is not governments that run Australia, it is monstrous vested interests who make billions on the back of the less wealthy. Its time this was on the front page of newspapers. I want an NDIS, I know what it is to not have services that afford me a decent quality of life that others take for granted. It is imperative that the wealth of this nation is distributed more evenly. Lets get to the truth of why it isn't!
Rick Fleckner
Student
The link below may answer some of your questions.
I really cannot fathom why the political left does not high light this and the plethora of like cases.
http://theconversation.edu.au/limiting-australias-ballooning-coal-exports-is-good-for-the-economy-11828
Dianna Arthur
Dianna Arthur is a Friend of The Conversation.
Environmentalist
Agree completely Helen.
Most Australians are tired of the distortions and misinformation handed out by MSM, both major political parties and those notorious vested interests; the mining lobby.
At the time of Gillard's negotiations with big mining, comment was made that the proposal was too watered down from Rudd's initial proposal as to be ineffective. Seems the predictions were correct.
Would love to see Gillard tighten up the mining tax to something that respects the Australians whose work actually made the wealth for the mining moguls. Give something for Australians to vote for instead of against.
John Robert Brooker
Retired
The primary cause is the hung parliament situation delivered by the Australian voter. A reforming Government of either stripe in this situation cannot afford to upset powerful vested interests such as the mining industry or the licensed clubs, backed by an opposition with the sole objective of upsetting the apple cart.
Had Julia Gillard possessed a good working majority in the the lower house, she would have been in a better position to risk her Government to the inevitable barrage of negative publicity generated by her well-heeled opponents.
The best defence available to a reforming government that wishes to take on powerful vested interests is clear and unambiguous publication of the facts supporting their reforms and the proper and competent analysis of all of the issues by a free and unbiased media.
Good luck Australia
David Collins
Analyst
There is a lot of discussion on the mining tax and the profitability of mining. Very little valid analysis. I couldn't actually find any, so I completed the analysis here: http://costcurve.com.au/mining-profitability-mining-is-no-goldmine-part-2/.
If you look at median return on invested capital since 1993, both Woolies and Telstra are significantly more profitable than BHP. Their median ROIC was ...
WOW: 30%pa
TLS: 20%pa
BHP: 12%pa
In 2011, at the height of the mining boom, BHP was profitable as Woolies - 30%pa ROIC.