What will Australia’s corporate giants do if they’re handed a massive windfall from Malcolm Turnbull’s company tax cut? Invest it? Hand it to workers for some years-overdue pay rises? Or blow it on share buybacks?

Let’s ask Rio Tinto, which over the last year has enjoyed a huge windfall in revenue from higher commodity prices.

Rio yesterday revealed an underlying net profit after tax of $US8.62 billion, up from $US5.1 billion in 2016 as prices for all of its major commodities rose. Iron ore was the main driver of this 70% increase in annual profits. But earnings also rose at Rio’s aluminium division, which has struggled for years to gain traction after the costly and stupid Alcan takeover. The company’s profit margins were the highest in a decade, it said. And where did much of this profit come from?

Despite Australia’s supposedly uncompetitive company tax rate and inflexible industrial relations laws, Rio’s Pilbara iron ore business had underlying profits of US$11.53 billion — a profit margin of 63.5%, up from the still impressive of 58.5% in 2016. That’s almost big bank-like in its profitability.

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What did the company do with this profit, plus revenue from the sale of its coal mines? You’ll never guess: it handed shareholders the biggest dividend in its history, cut billions off its debt and said it will top up its share buyback program by $US1 billion. It declared a final dividend of $US1.80 a share, taking its payout for 2017 to $US2.90 a share, topping the previous high of $US2.15 a share in 2015, as part of a total of $US9.2 billion of cash returns and buybacks to shareholders for the 2017 financial year. That compares with $US3.6 billion for 2016 in total. And net debt fell to $US3.84 billion from $US9.5 billion a year earlier.

In one of the more bizarre moments of the entire company tax debate yesterday, CEO Jean-Sebastien Jacques said that a company tax cut was needed to increase investment. “The tax cut rate, if there were to be one in Australia, it is more about investment. Australia needs to remain competitive in the global landscape. Our job as a mining company is to develop new resources and it is absolutely clear that taxes is a very important element and we are very encouraged by what the government is doing in the US and I really hope the government in Australia will take similar action to make sure there is further investment in the mining business in Australia.”

Serieusement, Jean-Sebastien? Serieusement? You got an extra $3.5 billion in profits, a 70% rise, and you’ve thrown it back at shareholders and cut debt, but you reckon you need a tax cut to undertake investment?

It’s like a bloke sitting on a pile of gold who tells passers-by that, if only he he had a pile of gold, he’d happily share it with them, but sadly the government won’t give him one.

As a Crikey subscriber and someone who began working as a journalist in 1957, I am passionate about the importance of independent media like Crikey. I met a lot of Australians from many walks of life during my career and did my best to share their stories honestly and fairly with their fellow citizens.

And I never forgot how important it is to hold politicians to account. Crikey does that – something that is more important now than ever before in Australia.

North Stradbroke Island, QLD

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