Via the SMH:
Andrew “Twiggy” Forrest has pledged to reinvest every dollar saved from the Turnbull government’s full company tax cuts back into job creation and expanding his operations, in a last-ditch effort to convince the Senate crossbench to pass the $65 billion measure.
His company, Fortescue, paid $2 billion in tax last year and based on those results a 5 percentage point cut would deliver a jobs and investment boost of $40 million a year.
The commitment from Mr Forrest is understood to have helped win over One Nation senator Pauline Hanson, who singled out the mining magnate as being “absolutely fantastic,” leaving other crossbench senators wondering what had been promised to deliver such a dramatic turnaround.
Wow. Andrew has a history of hoodwikning gullible cross-benchers but this is beauty.
Fortescue is going to invest to increase its iron ore grades. We already know it. It has no choice given the persistence of huge lower grade iron ore discounts. That investment is coming no matter what.
But it’s also about to come under intensifying and extreme pressure as iron ore crashes into the Chinese slowdown. Cliffs shut its low grade WA iron ore this week. Low grade Indian ore is gone. Atlas is going into lithium. There’s a cost curve shakeout underway for low grade ore already.
FMG is swimming full tilt to keep its head above a rising tide and it will sink more and more as the year rolls on and the Chinese slowdown sends iron ore back to the lows, with low grade material much lower than 2015. It will need to shred its costs all over again.
There is no better metaphor for the extraordinary stupidity of the corporate tax cuts. We are entering what will be a renewed income shakeout, easily severe enough to destroy the Budget outlook, and we’re going to hand out $8bn per annum of corporate welfare right at the precipice.
The resulting sovereign downgrade should be sent straight to One Nation head office with a dozen red roses.
