JOHN MENADUE. Making miners pay their fair share.

The victorious Labor Party in Western Australia has got off on the wrong foot in its timidity towards the mining sector. Its leader, Mark McGowan, has said that a Labor Government will not support a mining royalty proposed by the WA Nationals because it would drive investment away from WA. This is a very hackneyed line about frightening foreign investment and sovereign risk.  

The WA National Party was the only political party at the last election with the bravery to campaign on a policy of increasing royalties on miners. Its leader, Brendon Grylls, proposed a royalty that targeted BHP and Rio Tinto and involved increasing a 25 cents per tonne lease rental – a price set in the 1960s – to $5 per tonne. The National Party vote held up while the Liberal Party vote crashed.

It would raise $7.2 billion over four years and compensate for the lower share of national GST that WA has received, compared with other states, in recent years.

As Ross Gittins in the SMH on 4 February 2017 put it:   http://www.smh.com.au/business/comment-and-analysis/minings-economic-contribution-not-as-big-as-you-might-think-20170203-gu4r5l.html we overstate the contribution of the mining sector.

  • Miners in Australia produce about 7% of our total production but only employ 2% of our workforce.
  • Our mining sector is almost 80% foreign owned, so a lot of our mining income is leached out of the country.
  • Most of the equipment the miners acquire is bought from overseas.
  • These foreign owned mines are heavily into tax minimisation by moving profits offshore, claiming to do their ‘marketing’ in Singapore.
  • Miners receive billions of dollars in subsidy by not having to pay the diesel fuel excise.
  • Governments build railways, ports and other infrastructure to support the foreign owned mines.

I should add that the environmental and carbon pollution costs which mining companies impose, the ‘externalities’ as economists call them, are not charged against the miners. They pollute without penalty.

Over all we grossly exaggerate the contribution of the miners. Their powerful lobby group however ensures that that exaggeration continues. We have a long way to go before our national interest is properly asserted.

At the recent WA election, the mining industry ran a huge $2 million campaign against the proposal, warning of job losses, and Brendon Grylls is now in danger of losing his seat of the Pilbara.

While I do not enjoy proposing that political parties break election commitments, there are sound moral and political reasons in this case why the Labor Party should move swiftly to impose a heavy mining royalty.

Political parties in this country have run scared of the foreign owned mining industry since the industry used its muscle to launch a $18 million successful campaign against the Rudd Government. Brendon Grylls was their latest political target. However, multinational corporations are foreign owned and therefore effectively guests in this country. They should not be allowed to run such political campaigns. Political promises made to appease them are wrong and meaningless. Mark McGowan should not be reluctant to break a promise of that kind.

But, in any event, there are sound political reasons why Mark McGowan should quickly move to increase royalties on the mining companies. In four years time nobody will remember his “broken promise”. However, in four years time they will care whether the state is getting extra billions in revenue for essential services like education, health and housing.

In six months time, the Labor Government will own everything broken including the ballooning debt. At that point, McGowan will be either working for the miners or working for the public. If he wants to ensure he’s doing the later, he must move fast.

Supporting the Grylls royalty proposal makes good policy sense. It could also make for good political sense where the new Labor government will be in a minority in the Legislative Council where the National Party vote could be critical. That could provide the political opportunity for the new government to reconsider its opposition to the sensible Grylls proposal

Western Australia, Queensland and Australia have wasted the last mining boom. Will we waste the next one?

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3 Responses to JOHN MENADUE. Making miners pay their fair share.

  1. Jeff Ash says:

    Hi John,
    Can I suggest you take some time to examine how the Commonwealth Grants Commission works? Especially in the way they class mining royalties as revenue. Any increase in earnings from royalties will be immediately taken from WA’s GST allocation.

  2. David Higginbottom says:

    One “forgotten” fact is that GST paid by exporters is refunded in full. Most people do not realise that the GST paid by suppliers (or suppliers to suppliers) is refunded in full to the mining companies.

    A quick calculation suggests that the GST refunded to the mining industry is in the order of $10b.

    This also suggests that the contribution to the economy is smaller than inferred by the mining industry as is WA’s real contribution to the GST.

    Whilst this is the way the tax was designed perhaps this benefit/subsidy should be phased out for the mining industry?

    I would also suggest that, to the extent that this policy maintains strengthens the dollar, it has a negative impact on our local industry.

  3. RosemaryWearing says:

    I urge those engaging in the debate on energy and related revenue issues to refer to the stark and challenging Report “Collection of North-Western Shelf Royalty Revenue” November 2016. It is a powerful and significant catalogue of negligence, greed,mismanagement and a disastrous absence of control of this enormous source of energy with its revenue over decades.

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