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May 4, 2010

Digging through the mining industry’s lies

Don't believe a single word you read in the mainstream media from the mining industry about the impact of the Resource Super Profit Tax.

Bernard Keane — Politics Editor

Bernard Keane

Politics Editor

Don’t believe a single word you read in the mainstream media from the mining industry about the impact of the Resource Super Profit Tax.

The mining industry routinely and systematically lies about government policy, with a long-running Chicken Little act about even the smallest policy changes that might affect it. And most of the media uncritically recirculate their lies, either because journalists aren’t sceptical and informed enough to subject their claims to analysis, or because they complement the smear campaigns run by the right-wing media.

Over the weeks and months ahead — for the Government has foolishly left open an extended consultation period in which to develop the RSPT with the states and mining companies — you’ll be able to see the miners crank up their lies. Watch for the predictions of job losses, reduced dividends and abandoned projects. Watch for the dodgy modelling from economic consultancies designed to back up the wild claims. But also watch for what they tell investors, because they tell the public one thing about how disastrous things will be and investors and the ASX quite another.

We saw all this during the CPRS debate. The miners’ favourite trick then was to blame massive “job losses” on the CPRS by comparing industry growth under a rosy “business as usual” scenario with slightly lower growth under a dire “CPRS” scenario and claim the difference as actual job cuts — when they were simply the difference between one very high growth rate and one slightly lower growth rate. They did this three times for the coal industry, with reports by ACIL Tasman and Access Economics, and a report by the now-bust Concept Economics for the Minerals Council. All forecast “job losses” of between 3-9,000.

Unfortunately, the CFMEU was awake to the scam and commissioned its own modelling to use the same data as the coal industry and show that there would actually be an increase of 10-16,000 jobs in the coal industry out to 2020 under the CPRS.

And as I’ve shown previously, and the Grattan Institute confirmed recently in relation to coal mining and LNG, the additional costs faced by the mining sector from a carbon price were so small as to be virtually irrelevant.

Watch for the same trick this time, although it will be harder because the Government has already produced modelling showing the RSPT coupled with the resources exploration rebate will actually increase jobs from the “business as usual” scenario.

The mining industry’s preferred cliché is that any changes will “kill the golden goose”, and that’s been getting a thorough workout already. Back in 2006, the Howard Government, News Limited and the mining industry joined forces to whip up a scare campaign about Labor’s proposed reversal of WorkChoices. Steve Knott of the Australian Mines and Metal Associations said removing AWAs would cost the industry $6.6 billion a year.

John Howard called Labor’s IR policies “a dagger to the throat of the Australian mining industry” and Terry McCrann, ever the wordsmith, warned Labor would “kill the mining goose that promises to lay many more and bigger golden eggs”.

As it turned out, the only thing that came close to killing the goose was the GFC. But the big miners had no trouble slashing employee numbers during the downturn under Labor’s new IR framework. Indeed, Rio Tinto boasted of “record” iron ore production in October.

That might have been because AWAs had little to do with mining industry profitability and productivity. In fact, in 2007 the CFMEU showed that 10-year productivity growth in the coal industry, which features collective agreements and a strongly-unionised workforce, far outstripped that of the Western Australian iron ore industry, and productivity had actually fallen under AWAs in the Western Australian gold mining industry.

The miners also predicted dire consequences from the GST back in 1999. And as the splendidly sensible Peter Martin showed last week, the sky was going to fall in if a gold tax was introduced in the 1990s. I haven’t been able to check, but I’d bet real money they thought compulsory superannuation would destroy the industry as well.

Talk about an exploration and extraction. The Australian mining industry is world-class when it comes to rent-seeking.

The lesson here isn’t so much that the mining industry is a pack of liars. It’s what the media does with the lies. We’ve all been engaged in a collective  flagellation of Kevin Rudd and Wayne Swan for the last 48 hours over their cowardice and failure to embrace reform. But as we’re already seeing with the limited reforms they’ve picked up, the media flog them even if they do pursue meaningful change.

The Government will now be criticised for attacking the mining industry, which is dominated by vast multi-nationals generating billions of dollars. The absurd claims of the miners that they’ll move offshore — made even as Newcrest acquires Lihir in a $10 billion deal — will be taken seriously. Dire forecasts of job losses will be run with a straight face, despite previous claims being exposed as blatant falsehoods.

It’s more of the media’s “perpetual present” that I’ve complained about before. If it happened longer than five minutes ago, it never happened.

The media want it both ways, naturally. We’re all high-minded economic purists when it allows us to criticise governments for failing to undertake significant reform. But should a government be so foolish as to attempt something, the media doesn’t take long to get stuck into them, and gleefully provides a platform for critics of reform, no matter how often and how badly the latter have been proven wrong.

Then again, the media’s primary interest is in conflict and contest, rather than good policy outcomes.

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151 comments

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151 thoughts on “Digging through the mining industry’s lies

  1. John

    Was that the sermon on the mount?
    All you journalists: confess your sins.
    I will give you absolution.

  2. Liz45

    No JOHN, just one voice in the wilderness telling it how it really is! Thanks Bernard!
    The mining industry? It won’t be satisfied until workers give their labour for nothing or close to it, and being allowed to ‘rape and pillage’ without contributing to the communities that suffer! In a world of change, some things remain the same!

  3. Mark Duffett

    …the big miners had no trouble slashing employee numbers during the downturn…

    Actually, this downturn was notable for the lack of really big layoffs in the mining industry in comparison to previous troughs in the commodity cycle. Conventional wisdom is that the industry learned to some extent from its experience trying to attract and retain staff during the preceding boom (then still a very recent memory), new IR framework or no.

  4. David Sanderson

    If mining industry workers don’t believe that job losses will occur and their unions think that the employers are a pack of liars then that is all the evidence I need.

    Usually when an industry has a new impost placed on it the owners of that industry can usually count on the backing of their employees in attacking that impost. The fact that they are not attacking this impost should be a warning to Abbott and right-wing hacks (Stutchbury et al) that the mining industry, and the very big miners in particular, do not have a big fan base.

    The “consultation period” should be watched very carefully. There are indications that the government is hinting to the industry that it will win some concessions if they stops squealing so loudly. The government must not give concessions even if the companies shout and scream all the way up to the tax office door.

  5. david.byrnes

    Isn’t this the same industry that is complaining about skill shortages? It takes a special kind of doublethink to warn about how there will be job losses while demanding higher amounts of immigration to fill vacancies.

  6. Mark Duffett

    The absurd claims of the miners that they’ll move offshore — made even as Newcrest acquires Lihir in a $10 billion deal

    I don’t get this. Most of Lihir’s assets are outside Australia. What then is Newcrest’s acquisition if not a move offshore?

  7. Michael

    Excuse me but hasn’t anyone noticed that big fat elephant that walked into the room this morning? Yes that one…Newspoll result.

    Doesn’t really matter why or how Rudd has stuffed up everything he has touched, the simple fact is that his gig is up.

    All downhill from here and the harder he tries the more the public will hate him.

    Australians are far more discerning than the elites give them credit for.

  8. Ben Carew

    As far as I can see, the stuff is in the ground here. Moving offshore doesn’t make any sense as simplistic as that may sound.

    This really is sounding like the Minerals Council’s CPRS scare campaign all over again.

    By the way Bernard you are so right about the media’s ‘perpetual present’. We’re trapped and have to get out of it!!

  9. shepherdmarilyn

    Well they can’t take the holes offshore can they? I would like a halt to some mining though after seeing what coal mining is doing to towns all over the country and the health of the people living near them.

    [Ed: Removed a particular reference here. We can’t have personal attacks on here — as all commenters should be aware.]

  10. cosmicharade

    Um, isn’t our superannuation invested, at least in part, in mining? Won’t this effect superannuation in the long term, and therefore increase reliance on government pensions in the future, more so than without the Mining Tax?

    And what about compensation for any loss of investment value? BHP shares are down today, as is the overall ASX. Even Hugho Chavez compensated investors for his nationalisation programme, so shouldn’t the Australian government compensate investors for this part nationalisation?

    Will this have any effect on our corruption and investment ratings as a country? If so, will this drive up interest rates even more?

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