The federal government’s bottom line will be at least $3 billion worse off next financial year than if Kevin Rudd was still prime minister.
This morning’s Mid-Year Economic and Fiscal Outlook has revealed that Julia Gillard and Wayne Swan’s watered-down minerals resource rent tax will bring in $4.3 billion less over the next four years than first provided for in May’s federal budget.
A footnote buried on page 352 of the MYEFO document showed revenue tumbling from $13.4 billion to $9.1 billion to 2015-16. Lower commodity prices, export earnings and 8% weaker terms of trade (against 5.75% in the budget) all contributed to the downward revenue revision.
But perhaps the most galling differential for Rudd supporters is the yawning $6.6 billion gulf between the $9 billion expected in 2013-14 from the original Rudd-designed resource super profit tax and the MYEFO MRRT estimate of just $2.4 billion.
Applying the approximately 40% cull in MRRT revenue estimates over the last 12 months, the shortfall between the Rudd RSPT and the Gillard MRRT will be about $3 billion next financial year, and potentially much more in subsequent years.
Changes in minerals resource rent tax revenue projections
|May 2010 announcement of RSPT||$3b||$9b||N/A||N/A|
|November 2011 introduction of MRRT bills||$3.7b||$4b||$3.4b||N/A|
|November 11 MYEFO||$3.7b||$3.8b||$3.1b||N/A|
|October 2012 MYEFO||$2b||$2.4b||$2.1b||$2.6b|
|Difference between introduction
of MRRT and 2012 MYEFO
The RSPT was subsumed by the MRRT after Gillard’s elevation to Prime Minister in June 2010. Negotiated with the big miners at the exclusion of mid-tier entities like Andrew “Twiggy” Forrest’s Fortescue, it has rankled with Rudd supporters like Maxine McKew ever since.
Even on the strict MRRT comparison, the gap is massive and growing. Compared to forward estimates proffered when the MRRT legislation was introduced last November, the total gulf is $4.6 billion over just three years (rather than four) to 2014-15.
A parliamentary library comparison of MRRT revenue between the RSPT in 2010, the MRRT legislation, last year’s MYEFO and this year’s budget shows declines in revenue of $1.4 billion between 2012–13 and 2014–15 compared to the original November 2011 projections.
The 22.5% MRRT (30% before the extraction allowance was factored in) represented a massive backdown from the far more bullish 40% RSPT that also had a lower up-lift rate and weaker capital deduction rules.
And the situation could worsen still, with the actual amount entering government coffers requiring further downgrades. MRRT taxes are due to be paid to the Australian Taxation Office today but it has been widely speculated that just two miners — BHP Billiton and Rio Tinto — will pay anything (or nothing) under the tax to date. Remittance advice is expected to disclosed in December.
Speaking on AM this morning, finance minister Penny Wong said it would be a mistake to read too much into today’s receipts given they are based on first quarter profits.
The MRRT is also tied to a raft of linked expenditures, including notably the increase in superannuation from 9% to 12%. As parliamentary library researcher Kai Swoboda acknowledged after May’s budget, the MRRT package’s overall impact on the budget was -$43 million in 2011–12, +$2068 million in 2012–13 and -$619 million in 2013–14.
In typical understated style, the library acknowledged that “unless MRRT revenue increases significantly in future years it will be difficult to cover expected future higher costs of some measures, such as the $3.6 billion costs in 2019–20 associated with the superannuation guarantee reaching 12 per cent”.