BHP was once famously called “the Big Australian”; its CEO Marius Kloppers evidently prefers “nominal Australian” for himself, at least when talking to US diplomats. As this nominal Australian smirked his way through the announcement this week of a record profit — putting BHP-Billiton on track, according to one British newspaper, to record “the biggest profit ever made by a British company” — he had the additional satisfaction of knowing his profit announcement would enrage those who had supported the Rudd government’s RSPT.
The vast half-year profit unveiled by BHP — the first of many to be revealed by miners this reporting season — vindicates those who repeatedly pointed out that the mining industry — far from facing the Armageddon predicted by the miners — was in such rude health it could afford to pay the RSPT and more. Needless to say, that hasn’t stopped their ardent propagandists — for example, Business Spectator’s Steve Bartholomeusz in Crikey yesterday — from insisting, with not a skerrick of evidence, that agreement on the MRRT had unleashed a “wave of investment” by miners.
Still, no use complaining now. The British companies BHP-Billiton and Rio Tinto joined up with the Swiss Xstrata and the American-Saudi News Ltd (tax dodgers both) and engineered a best-practice example of regime change. The three miners then negotiated a hasty backroom deal with a desperate replacement Prime Minister that reduced the new tax to a pittance. They were in such a hurry that various undotted i’s and uncrossed t’s continue to require resolution months later.
The steady drip of record mining profit announcements will continue, each one serving as a reminder of the culpable ineptitude of this government — the Rudd model, which wrote the How-Not-To book on tax reform, and the Gillard variety, which so cravenly surrendered to the miners.
No wonder every industry now routinely threatens a “mining tax style campaign” if it doesn’t get what it wants from Labor.
The media played its role in that debacle — not just News Ltd, which acted as a propaganda arm of its fellow transnationals, but others as well, especially at the Financial Review, which unusually let its editorial line infect its non-press gallery reporting. But the disaster was almost entirely made in the office of the Labor Prime Minister, regardless of who the occupant was.
We know that because, for once, we have a counter-factual. It’s not just miners announcing record profits. The Commonwealth Bank announced a record half-year profit last week and the other members of the banking cartel all have first-quarter profits that put them on track for record or near-record profits. The banks constitute one of the single most hated sectors of the community. And NAB head Cameron Clyne explicitly welcomed a debate on a banking profits super tax. But when faced with a fiscal difficulty engendered by the floods and cyclones, where did the government look for a slug to top up revenue? Straight at PAYE taxpayers.
In fact this government won’t even consider taking on the banks over competition and regulation. On this issue, Labor actually found itself to the right of the Coalition, after Joe Hockey took up the cause of addressing banking competition and establishing an inquiry into banking regulation following the GFC. The package of competition reforms Wayne Swan produced in the face of Hockey’s success in running with the issue was modest and sensible but failed to get to grips with the issue the cartel simply doesn’t want touched — their too-big-to-fail status within the Australian economy.
In short, even when Labor had the Opposition and a range of leading economists urging it to embrace serious reform of banking regulation, it wouldn’t do it. Instead, Swan’s minimalist package unfortunately now marks the high-water mark of banking regulation reform for this term of government.
Labor is now, deservedly, left with the consequences of its retreat to a half-baked mining tax. It is getting hammered by the Greens for not taxing the miners enough, and it is getting hammered by the Opposition for having any tax at all. And it’s getting hammered by the media because of the fiscal impact of the switch from the RSPT to the MRRT, without a sufficiently savage pull-back on the expenditure associated with it. It’s out in the open, hopelessly exposed and under fire and the Prime Minister is insisting that’s right where Labor will stay.
At least Labour has a mining tax on the table. The Opposition wouldn’t even come close to tackling this one.
We were all taken for such a ride by the mining companies… their propaganda had many swinging voters say they would not vote Labor because of Rudd’s super tax plans… somehow superannuation payments would be hurt because of slightly lower share market prices….
yeah… sure…
considering what is happening now…. doesn’t it make us all look rather stupid and manipulated!
From an Australian shareholder’s perspective, mining company profits are about paying us dividends and investing in growth for the future. However, despite this year’s bigger profits, the high Australian dollar has delivered shareholders lower dividends in Australian dollars than last year.
The after-tax profits which were not paid out in dividends and the proposed share buy-backs, will be mostly re-invested in Australia as $80bn of capex over the next five years in BHP’s case.
If the RSPT confiscated those US dollar denominated profits from the company’s shareholders, there would not be $80bn available to spend in capex over the next five years. Is a Labor government better placed to invest and spend this $80bn than BHP itself? After, pink batts and the BER, you would have to conclude in the negative. BHP’s capex will power the Australian economy for the next five years. Workers will benefit directly, governments will receive increased personal and company income tax, and state governments will get more royalties from bigger volumes. The increased wealth and income will flow through to the other parts of the economy as workers, shareholders, contracting businesses and governments spend these increasing dollars. Kevin Rudd’s RSPT would have strangled the growth from our economy.
The $80bn capex intention is predicated on the MRRT. It would not have seen the light of day under the RSPT. Why would BHP invest capex for growth in Australia under an RSPT when it could do better in Canada and Africa?
Let’s continue trying to grow the pie rather than arguing about who gets what portion of a smaller pie.
BK – you write critically of BHP for its level of profit and you further write that this profit “vindicates those who repeatedly pointed out that the mining industry — far from facing the Armageddon predicted by the miners –is in such rude health… .” You completely overlooked – because it suits your argument – the fact that those taxes, at whatever level they might be applied, HAVE NOT YET BEEN IMPOSED.
The Armageddon – I never saw that word applied anyway – that you say was predicted by the miners – I never saw that said either – would in any case have taken place AFTER the tax was applied, or maybe in the form of the cancellation or deferral of development plans in the industry.
This sort of emotive writing in your reporting is quite out of place, in my view.
$22 million on an advertising campaign for $60 billion in additional revenue.
Probably the greatest investment decision so far in the 21st century.
Pity us taxpayers are made to feel like we are holding border’s gift vouchers…