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|
|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.
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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.