Today's economic note comes to you after a busy week of Parliament and consultations on the Resource Super Profits Tax we need to boost superannuation, build new and better infrastructure, and cut taxes for small business. After a tax review process spanning 18 months, which gave everyone the chance to have their say, we put our tax reform proposals into the public domain and made it clear that we would consult extensively on the design details. Since that day mining companies have been meeting privately with the Prime Minister, the Minister for Resources and myself, as well as the Resource Tax Consultation Panel, to discuss the design of the RSPT. Unfortunately, at the same time some mining companies and lobbyists have been waging a very public scare campaign to try to prevent these historic reforms. It's not surprising that certain mining identities have poured millions of dollars into ad campaigns making a series of claims which have turned out to be false, rather than simply admitting to Australians that they don't want to pay them a fairer price for their non-renewable resources. But as more and more facts have come to light, I think most Australians are seeing these false claims for what they are. For my part, I'm getting on with the job of nailing down the final details of this important part of our tax reform agenda.
Since my announcement of the Australia's Future Tax System Review on 13 May 2008, the AFTS Review and the Government have released over 1,800 pages of detailed material spanning discussion papers, consultation papers, reports and explanatory documents. After calling for submissions in August 2008, the AFTS Review received 1,745 submissions in total – 1,184 from individuals and 561 from organisations. In addition to submissions from the two main resource industry bodies – the Minerals Council of Australia (MCA) and the Australian Petroleum Production and Exploration Association (APPEA) – the review also received submissions from BP, Woodside, Shell and one other company that requested their submission remain confidential.
Members of the AFTS Panel and its Secretariat delivered around 30 speeches and presentations to various audiences, two of which specifically dealt with resource taxation – a keynote speech at the APPEA Tax Conference in Perth in August 2009, and a keynote speech to the MCA's Biennial Tax Conference in Melbourne in September 2009. The AFTS Secretariat met with the MCA's Tax Committee on four occasions during the course of 2008 and 2009, members of the AFTS Panel met with MCA representatives in November 2009, and the AFTS Secretariat met with the MCA's consultants in November 2009. The Secretary to the Treasury and other members of Treasury's Executive Board attended the MCA's full council meeting in May 2009, and a member of the MCA Secretariat attended the AFTS Tax and Transfer Policy Conference as part of a select invitation list. All requests for meetings with the AFTS Secretariat from members of the resource industry and individual resource companies were agreed to, with meetings taking place with APPEA, the Association of Mining and Exploration Companies (AMEC), the Queensland Resources Council, ExxonMobil, Chevron and Shell.
Since we announced our tax reform package on 2 May 2010, I've personally spoken to representatives from mining companies. Treasury estimates that departmental staff have participated in 265 hours of direct consultation. In addition to the Resource Tax Consultation Panel's discussions with 26 companies, briefing sessions have also been held in capital cities around Australia. These included 65 companies and 22 individual sessions in Sydney, 52 companies and 16 individual sessions in Brisbane, 72 companies and 27 individual sessions in Melbourne, seven companies and one individual session in Burnie, 109 companies and 47 individual sessions in Perth, and 36 companies and 11 individual sessions in Adelaide, with a session still to be held in Darwin. So far over 600 representatives from around 356 companies, industry and tax associations, financiers and states have participated in the consultation process. I think that by any measure this consultation process has been extensive and comprehensive.
Unfortunately the misinformation campaign over the consultation process isn't the only inaccuracy being peddled in this debate – another is that superannuation balances are being threatened. That's why I was interested on Friday to see the Australian Institute of Superannuation Trustees (AIST) call on ASIC to examine claims by the Minerals Council that super investments are under threat as a result of the RSPT. CEO Fiona Reynolds described this as "scaremongering and irresponsible". AIST's analysis of recent stock movements shows "mining stocks have outperformed the rest of the Australian share market since the Government's resource tax announcement". This follows comments from the Association of Superannuation Funds of Australia (ASFA) that "the sky is not about to fall in and, even better, super account balances are set to grow as a result of the Government's planned increase in the superannuation guarantee to 12 per cent".
Earlier in the week the Australian Council of Social Service (ACOSS), the Consumers' Federation of Australia (CFA), the Australian Conservation Foundation (ACF) and the Australian Council of Trade Unions (ACTU) called for the voices of ordinary Australians to be heard in the tax debate, saying "fair and efficient taxation of Australia's natural resources is critical if all Australians are to obtain lasting benefits from the nation's mineral wealth". ACTU Secretary Jeff Lawrence is right to say "the RSPT misinformation being spruiked by the big miners is a disgrace. The big miners and their CEOs have been pocketing the fruits of the minerals boom for years – it's time ordinary Australians got a fairer share."
While attention is currently focused on domestic reforms, the Government also continues to press for important global reforms from our seat at the G20 table. I've been working closely with my fellow G20 Finance Ministers in the lead-up to next week's Leaders' Summit in Toronto, Canada, which I'll be attending with Prime Minister Kevin Rudd. It's fair to say that the mood amongst developed countries at our meeting in South Korea earlier this month was quite sober, with some G20 countries facing the huge task of reducing debt at the same time they are grappling with double-digit unemployment rates and weak growth.
Fortunately, the situation for Australia couldn't be more different. We came through the global recession in far better shape than other economies because we acted quickly and decisively. Stimulus meant we avoided recession and largely avoided the business failures and large-scale job losses that have occurred elsewhere. Our unemployment rate of 5.2 per cent is around half that in the US and Europe, and we're getting the budget back to surplus in three years – three years early and ahead of every major advanced economy. The minutes of the latest RBA Board meeting confirm our growth prospects remain sound, stating "while the international environment facing the Australian economy had become more uncertain, members noted that the medium-term outlook remained positive."
While our recovery is on track, we're seeing a patchy and uneven recovery globally, with strong growth in Asia and more sluggish growth in many of the world's major developed economies. The shift in economic activity towards our region was underscored by a report put out by the IMF last week. The IMF expects that within five years, Asia's economy will be about 50 per cent larger than it is today and will account for more than one-third of global output – rivalling the US and European economies in size. In the first three months of this year, Asian economies grew at an annualised rate of 10 per cent. This contributed to big increases in global commodity prices, with iron ore prices doubling since last year and big increases in coal prices as well.
Australia is in a strong position to benefit from these trends, but we need to manage the challenges that come with them. That's why RBA Deputy Governor Ric Battellino said last week that "the broad fact here is Australia is having an unprecedented mining boom at the moment … [W]hen we look at how the economy has performed in the past through those periods, it's pretty clear that those sort of booms have very significant impacts on the economy and do cause a lot of stresses and strains … [T]he challenge for the Australian economy for the next few years is going to be how to accommodate this mining boom." We're determined to manage this boom better than our predecessors managed the last by using the proceeds of the Resource Super Profits Tax to strengthen our economic foundations.
Throughout these debates I'm driven by the fact we can't afford to repeat the mistakes of the past and squander the opportunities of another mining boom. As I said in my speech to the Canberra International CEO Forum on Wednesday, we only have one shot at getting a fair price for our non-renewable resources which can only be mined once. I know it would have been easier to just let the old, broken system of royalties continue, but getting a fairer price for our mineral wealth and investing those proceeds back into building a stronger economy is the right thing to do by our nation.
We are about to enter our 20th year of economic expansion not because of good luck or good fortune, but because governments – of both political persuasions – had the foresight and political courage to do what was right in the national interest. Had previous governments put sectoral interests ahead of the national interest, we would have never floated the dollar, pulled down the tariff walls, or introduced compulsory superannuation. None of these reforms were easy, but they have made a huge contribution to the strength of our economy and to our living standards today. They've also taught us an important lesson – that it's the biggest and hardest reforms that make the greatest difference.
Treasurer of Australia
Sunday 20 June 2010