Given the stakes, it is not surprising that cold war continues to rage about the proposed resources super profits tax. While truth is said to be the first casualty of war, it is disappointing that Crikey’s own (usually accurate) Bernard Keane been caught up by a stray fact. That is the claim that the share prices of international mining companies have fallen substantially in the past month. Yesterday, Keane noted that “Brazil’s Vale, for instance, supposedly poised to take advantage of our fiscal foolishness, lost 10.5% of its value in its New York listing in May. Anglo-American lost 13% on the NASDAQ. Freeport-McMoran lost 10%. Our miners only lost 6%.” The only problem is, these figures aren’t correct — in fact, they’re not even close. According to Yahoo Finance, during May, the share prices of Vale, Anglo, Xstrata and Freeport were:
| Company | Share price (beginning of May) | Share price (end of May) | Change |
| Vale | $30.81 | $27.19 | Down 12% |
| Anglo American | $2770 | $2661 | Down 4 % |
| Freeport | $75.60 | $70.05 | Down 7 % |
| Xstrata | $1060 | $1016 | Down 4 % |
All this, of course, doesn’t necessarily destroy all of Keane’s arguments (although it does make his claim of “systematic lying” from the mining industry somewhat ironic) — Australian mining company share prices tended to fall by similar amounts (and have slightly outperformed the broader market here). But Clive Palmer is probably correct – investors are not factoring in the RSPT being implemented in its current proposed form.
In layman’s terms, the government’s rationale for the RSPT seems to largely be (1) the current system is inefficient (true); and (2) mining companies make a lot of money at the moment and are owned by people with funny accents. Even for Ken Henry (who has never worked for anyone other than the public service) that seems like pretty flimsy reasoning to suddenly take a 40% stake in the profits (and importantly, the losses) of an entire sector.
And it’s not as if the federal government has proved adept at spending taxpayer monies — from the disastrous first home owner’s grant (which served to inflate a housing bubble), to the fatal insulation debacle, the botched Building Education Revolution and the $900 stimulus payments (some of which found its way into poker machines and plasma television salespeople), not all that much has gone right.
Of course, Keane, or is it Keynes, sometimes it’s difficult to tell, doesn’t agree, claiming:
The BER is currently all that stands between tens of thousands of workers in construction and support industries and joblessness. There is a clear conclusion you can drawn from those campaigning against it: they evidently place no value on keeping those people in work, and have no regard for the vast damage unemployment wreaks on both people’s lives and the economy as a whole.
Perhaps Bernard also thinks the government should hire a team of thugs to smash windows throughout capital cities — not only will that create employment (too many violent young people appear to have nothing to do these days), but think of all the construction workers who would find jobs fixing the broken windows. What a fantastic policy that would be. All those lives helped.
But while the likes of treasury, the federal government and Crikey’s political correspondent target the mining sector, the bloated banking industry continues to make billions of dollars in profits, fattening margins during the global financial crisis and still charge hundreds of millions of dollars in penalty fees. Its punishment? Continued taxpayer retail deposit and wholesale funding guarantees (which were introduced by the federal government in close consultation with the banking industry) and virtual elimination of any real competition.
So while Keane alleges that the mining sector is “highly polluting and damagingly pro-cyclical — that falls in a heap whenever there’s a downturn, but goes gangbusters when economic growth is high, inflicting inflation and higher interest rates on the rest of the economy when it can least afford it” and “deeply entrenched, well-resourced rent-seekers aided and abetted by a sympathetic media”, his comments are off the mark. Sure, many mining companies may be inefficient and poorly managed, and many smaller miners companies have disclosure difficulties. However, it is not a sector that generally relies on substantial government assistance or rent seeking. Unlike the banking, construction and retail sectors, which seem to bounce from handout to guarantee to stimulus.
Wow, Adam, you’ve really jumped the shark on this one.
Are you seriously, seriously!, suggesting that there is no evidence that the stimulus has helped Australia avoid a serious downturn? And genuinely trying to compare GDP generated from a destructive activity to trying to improve insulation rates and school facilities, even with some waste?
The only actual facts in this article were the share prices at the top, indicating Bernard had some of the details wrong, although you do acknowledge that the miners have out performed the broader Aussie share market – using the specious claim that the reason is that the RSPT hasn’t been fully priced in because no one thinks it will be implemented.
@Jackol: “trying to improve insulation rates and school facilities, even with some waste?”
Good intentions are insufficient reasons to re-elect an incompetent government.
John, so you are also arguing that the stimulus failed in its primary goal of boosting the economy through a time when there was a very real risk that we would shed hundreds of thousands of jobs? I think you’ll have a hard time finding any real evidence to support this.
And thanks for regurgitating the meme that the insulation program and BER have been evidence of an incompetent government, despite the fact that both programs have led to good outcomes. The insulation industry has been improved, and the rate of fires etc is lower after the HIP than it was before – is that the sign of an incompetent government, when they implement a program that improves the industry targeted while delivering on its main goal of acting as an emergency stimulus measure? The BER, similarly, supported construction jobs and -continues to do so-, as has been amply demonstrated by the this week’s growth figures. Many schools have new buildings that they are pleased with and that will provide lasting value for schools across the country. Could better buildings have been built for lower cost? Perhaps given a lot more time, but certainly not in the timeframe that was required to be effective as stimulus, and this context is constantly lost in media reports. The fact that we have positive, lasting, benefit from these two programs flies in the face of ‘botched HIP’ or ‘wasteful BER’ slogans.
In defence of the BER and other emergency spending in the face of an unfolding GFC, please consider that the primary goals included:
* Keeping employment up, thus keeping tax income streams live.
* Keeping employment up – every job maintained is one less needing to be created.
* Keeping cash flowing throughout the economy, when cash flows from other sources (eg foreign interbank loans) were drying up.
* Maintaining work for at least some of the small to medium businesses which would otherwise have simply folded, each of which represented a huge loss to those involved.
It has been said, perhaps a bit tongue in cheek, that carpet bombing the outer suburbs of the capital cities would have achieved the same worthy goals, but what then about the additional positives in relation to schools, homes, etc?
It’s easy to be cynical and to criticise. It is far more difficult to devise and to carry through a plan to save this country from the worst of the GFC which did so much more damage across the world.
So, Jackol and other armchair generals, where is the incompetency in that?
Jackol and John B – great stuff! You are both absolutely correct. I just can’t understand why these so-called economic journalists rabbit on with all this rubbish about the “disasterous” insulation program and “money wasteful” BER. They seem to completely ignore the stimulus component of these programs. Frankly, I think in the MSM this is done on purpose – anything to have a whinge about the PM and his government.
Okay, so not everything they have done has been perfect, but the alternative is too frightening to contemplate!