Yesterday, Treasurer Wayne Swan attacked BHP for its mining tax threats, which had been made by CEO Marius Kloppers in an interview in the Australian Financial Review.
To his great credit, last night Swan went to BHP’s Don Argus farewell dinner. On his way into the dinner, I spoke with him. He was critical of my comments on the mining tax and we expressed different points of view in a very frank way. However, Swan added that I had made factual errors. These columns are open to the Treasurer to put his point of view and correct any mistakes that he believes I have made.
In my view, the tide is turning on this tax and I believe it will be substantially amended. My Canberra contacts on the ALP side tell me that we should “watch this space”. Many ministers appear to understand that taxing retrospectively is a very dangerous tool and using a base return of about 6% before applying the resources rent tax is absurd.
My ALP contacts tell me that Treasury has had no experience in mining projects put together by the states. They genuinely had no idea of the impact of what they were doing. Exactly the same thing happened with insulation, where a different department had no experience of conducting an exercise of that particular magnitude.
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Swan, in his BHP-attacking statement in the AFR, says: “It’s a bit rich when the company goes public with these sorts of dire predictions when in fact they’ve yet to go to the [Treasury design consultation] committee.”
Of course, the truth is that it was “a bit rich” for the Treasury to mount a $9 billion attack on the mining industry without any consultation.
Treasury will need the help of the big miners to get itself out of the mire. And it better bring the consultative project forward before we get hit with another wave of bear raids.
Finally, a word of sympathy for Swan. He has been a good Treasurer who, as with the mining tax, followed the advice of his department. Unfortunately, as many of his cabinet colleagues now know, that advice was wrong because it did not alert him to the inevitable consequences of such an action.
The government must deal with those consequences. If my Canberra contacts are right, that’s exactly what they will do.
But it is not easy because the government has spent some of the money already and also issued forecasts on the basis of the tax. Those forecasts will simply have to be amended.