It’s there now, in black and white, half-passed into law, a clutch of Mineral Resource Rent Tax bills, passed in the House of Reps early this morning, or late last night, whichever usage takes your fancy.
It’s appropriate, really, that the policy journey that began one Sunday morning in May 2010 ends in the dead of night, for what has been after carbon pricing the most comprehensive failure of leadership in Australia for a generation.
It began with the Henry Tax Review release, when the press gallery and assorted commentators and industry types were locked up in Canberra on a Sunday to be given the long-awaited review and the government’s response. The review turned out to be a lengthy, forensic and comprehensive analysis of our tax and transfer system and the solutions to its flaws. The government’s response was none of those things. It did, however, include one decent proposal, to shift to a profits-based approach to resource royalties.
It was a good Labor reform, and sound from an economic point of view: while it was not yet apparent, everyone knew the returning resources boom was going to hammer other sectors of the economy such as manufacturing. The RSPT was an excellent response to an emerging multispeed economy.
That was about it for excellence, however. Despite having held onto the report for months, Labor didn’t bother consulting with the mining industry, or convincing the electorate of the problem that the tax was designed to solve. When the mining industry ramped up a campaign to oppose the tax, the government appeared helpless to defend itself. Those backbenchers who wanted to sell the tax in their electorates struggled to get high-quality material to counter attack with.
Things got worse once Labor rolled Kevin Rudd. The new leadership hastily negotiated a new deal with the biggest miners that amounted to a surrender to some of the world’s biggest multinationals, with BHP, Rio Tinto and Xstrata dictating how much tax they’d be prepared to pay.
Labor insisted at a time that, with much less revenue from the MRRT, it would cut its cloth accordingly and cut back the associated corporate tax cuts and infrastructure spending, while leaving the compulsory superannuation rise intact. Nearly a year and a half later, we know the MRRT won ‘t raise enough revenue to cover all the expenditure measures linked to it. And it will raise even less after the deal with Andrew Wilkie.
It’s been the worst political performance by a government in support of good policy since Peter Reith managed to make the MUA look like heroes during the waterfront dispute.
The failures of leadership didn’t stop there. Corporate Australia shares much of the blame. It stood by, virtually silent, as the foreign-controlled mining industry ramped up its massive scare campaign against the tax. When the government eventually caved in, some in the business sector had the extraordinary hide to complain about the smaller corporate tax cut that resulted from it. Only the superannuation industry spoke up strongly, supporting the tax and its associated superannuation reforms. John Brogden, in particular, showed courage to speak out as head of IFSA, when his erstwhile Liberal colleagues were roaring on opposition to the RSPT.
The mining industry, of course, conducted a campaign based entirely on deceit and misrepresentation. Rare was the mining executive who opened their mouth except to spew out lies about the apocalyptic impact of the tax, even as their share prices surged ahead of the rest of the stock market and ahead of miners in other countries — in some cases even as they themselves bought up mining stocks. One invented a mine he insisted would be closed down. “Sovereign risk” was casually bandied around. African countries such as Zambia were held up by the mining industry as exemplars for Australia, even as mining companies systematically ripped off those countries. At that stage, the only thing piling up faster than the miners’ profits was their b-llshit.
There’s plenty more responsibility to spread around. News Ltd enthusiastically joined the campaign against the tax for its own partisan purposes, another multinational joining Rio, BHP and the Swiss tax dodgers of Xstrata in an attempt to destroy Labor. It wasn’t the only one. The Fin Review and Business Spectator also campaigned heavily against the tax. Other outlets ran the garbage claims of the mining industry — invariably sourced from “independent modelling” — uncritically.
Mining royalty increases by conservative state governments in WA and NSW failed to elicit a fraction of the coverage or opprobrium directed at the federal government’s proposals, either from the media or from the federal Coalition, which gleefully rehashed and embellished the lies of the mining industry.
The government, the opposition, much of the media and corporate Australia all spectacularly failed, in different ways and for different reasons, their basic obligations to the public interest.
The result is that we’ll miss much of the opportunity presented by the resources boom, the non-minerals sector will have a heavier load to bear, and the budget is further from structural balance. And, possibly as bad, high-quality economic debate has been damaged. There’s now a template for aggrieved industries to attempt to block economic reform. Every rent seeker, shonk and spiv in the country now threatens an advertising campaign against the government if they feel their interests are threatened. Politicians everywhere will have heeded the lesson.
And business and the media then have the hide to complain about the lack of economic reform.