The superannuation industry has savaged opponents of the Government’s Resources Super Profit Tax, dismissing claims it would harm superannuation holders by showing last week’s downturn in resources stocks — along with the rest of the sharemarket — would cost $57 to the average superannuation account.
Representatives of traditionally hostile sectors of the superannuation industry, including former NSW Liberal leader John Brogden as head of the Investment and Financial Services Association, came together this morning to strongly support the Government’s proposed increase in the Superannuation Guarantee, urge the Coalition to back it and attack the “erroneous” claims of Government critics and the mining industry about the impact of the RSPT.
The group released material examining last week’s fall in resource stocks, noting the overall sharemarket had fallen 6.5% as well and that analysts were recommending resource stocks as a ‘buy’ having been sold off too hard. Global resource stocks have also been hit hard overseas, with local miners actually outperforming miners on the London stock exchange.
“Clearly the fall in mining and resource stocks cannot be solely attributed to the Government’s announcement on RSPT,” the group concluded. Nevertheless, the impact of the fall on a $50,000 superannuation account was calculated using standard weightings for investment in resources equities. The result: a drop of $57.
“Such an impact is within the normal volatility of equities. Indeed as at noon May 7, the ASX S&P 200 index had fallen to a greater extent than the ASX S&P materials index,” the group pointed out.
The group also blasted claims from the Coalition that the increase in the superannuation guarantee would amount to a tax increase for business. “Increased superannuation means a reduced burden on the aged pension in the future, and the less requirement Government has to fund the pension … equals a lower call on tax revenue by the Government in the future,” Brogden said.
The superannuation industry is the big winner from the Government’s response to the Henry Review, but it is rare to see the whole industry united, and they are significant investors in the mining industry. This is only the latest counterstrike on the mining industry’s froth-mouthed reaction to the RSPT.
The industry was deeply embarrassed late last week when the former head of the Minerals Council, David Buckingham, called its “hysterical” campaign against the RSPT “complete rot.” Buckingham expanded on his comments at Business Spectator today.
Wayne Swan also used his regular and normally trivial Sunday Economic Note to demolish the industry’s claims, explaining how the deductibility and risk-sharing elements of the tax would benefit the industry and particularly smaller miners and extensively quoting the similarly hysterical claims advanced against the Petroleum Resource Rent Tax in the 1980s.
Resources shares rose this morning, with Rio up 4%, BHP nearly 3% and Fortescue 3.6%, recovering much of the ground lost last week.
Helping the minnows at the expense of the majors is robbing Peter to pay Paul.
Obviously, Peter is going to be pissed off.
The government is intent on trying to pick winners without realising it is really getting ready to back losers.
This is like the R&D bumper tax rebates rorts band wagon that small businesses latch onto.
That’s not efficient economics.
Let the minnows burn the punters’ money, not the taxpayers’ money.
There is a good reason why long-term investors put their money in companies which are producing minerals.
The get rich quick gamblers are prepared to back Blue Skies NL instead of the greyhounds but I don’t see why our government should gamble taxpayers’ money in an exploration casino.
I do not know where “John” is coming from, but David Buckingham is a respected voice. His article this morning is especially poignant – essentially, unless your resource project is returning 15% or more, then the nett effect of the proposed changes will favour the minig company.
Once the dust has settled, we will wonder what the fuss was about… but I still won’t vote ALP next time around.
My reading of that table is that the net crossover point is more like 11%, not 15% or more.
And while you’re on Business Spectator, try Gottliebsen or Kohler for some much-needed balance to Keane.
Gottliebsen illustrates how, in a sense, the numbers do not matter. It is in the arena of perception that the real damage is being done. Kohler shows how much of this problem is down to mismanagement of the issue by both the government and the mining industry.
Mark, you are correct. My error. The point remains, that 11% is the point at which the miners are better off. Above that, a portion of their gains are taxed at a higher rate.
That point is higher, for example, than the rate of return of any of the Big Four Banks, as a percentage of their market cap.
Business Spectator, this morning, was an interesting read because it came at this issue from at least three directions. Not all writers agreed on all points.
jb
More than “complete rot” I can’t help thinking that the shrieking hysteria against the proposed RSPT reflects a cynical opportunism of profiting by unleashing a wave of short selling in mining stocks. An old trick, but apparently legal, of selling on a falling market to buy back in at a lower level thus making a profit whilst recovering ones shareholding. A great opportunity, as mining stocks represent real rather than speculative assets, and so are bound to recover. Sadly, our media is now so corrupted than reading between the lines has become a necessity.