MRRT fail

One has to be a skeptical of polling, and I’d like to see more results, but given the state of the economy I am unsurprised by the findings of a poll today on the MRRT via the SMH:

THE Labor Party will introduce legislation for its mining tax today buoyed by internal polling that shows the vast majority of voters believe average Australians are not benefiting from the minerals boom.

Internal research conducted for the ALP by UMR Research, a full copy of which has been obtained by the Herald, shows 68 per cent believe average Australians are not benefiting from the boom while only 21 per cent think they are.

Despite the mining tax being opposed by the Coalition, there was little difference among types of voters. The poll found 64 per cent of Labor voters, 67 per cent of Coalition voters and 72 per cent of Greens voters agreed that average Australians were not benefiting. So too did 73 per cent of voters in Queensland and 67 per cent in Western Australia, the two largest mining states.

I think you’d be hard pressed to find any economic issue that would unite that many Australians across political and geographic divides. What an indictment of the government’s handling of the tax process. How did it turn this latent support into a debacle that toppled a prime minister and cost the nation $100 billion over ten years, not to mention the opportunity to manage the mining boom to the benefit of all.

Comments

  1. leaving the political situation aside, the MRRT if handled well is a logical method of accumulating future national wealth that as ore always belonged to the people.

    I have little faith in their ability to handle it well, but it can be done.

    • The people never own ore. They can’t in the absence of a national geological organisation that turns rock into ore.

      Ore = Rock + Work

      It’s private investors, private companies that create ore, it therefore cannot be owned by the public.

      • What a strange idea Craig. An ore is a naturally occuring material that contains a mineral or metal in quantities sufficient to enable extraction.

      • Not according to JORC, the ASX, ASIC or AusIMM.

        You can’t define ore without doing work.

        If you disagree, have i got some moose pasture i’d like you to invest in. It’s going to be lucrative, well, y’know, it will be lucrative for me.

      • I’m curious what you are getting at Craig. JORC etc talk about ‘ore reserves’ which are defined as the economically recoverable portion of mineral resources. This is entirely consistent with the definition I gave earlier, although JORC etc are more precise in their definitions.

        JORC etc do not actually define ‘ore’ but do state that it is bad practice to refer to ore, because it can be confused with the more precise term ‘ore reserves’.

        Going back to the initial comment by Peter Fraser, the way that he uses ore is completely clear, is consistent with JORC etc (even if not best practice for reporting purposes) and is consistent with normal English usage.

  2. It is such a pity the “vast majority of voters” were believed the mining companies who were crying poor whilst making hay on our lands for record profits.

  3. The RSPT was never about “economic reform.” The Govt blew $80bn of taxpayers’ money to ‘prevent a recession’ and woke up one morning to discover a huge deficit. The RSPT was about trying to plug the hole they created.

    • It’s nice to see a political party commission a poll and get the results sought.

      I’m sure another political party could commission a poll on the carbon tax and achieve a reasonable level of opposition to it. Never ask a question if you don’t know the answer…ask questions framed in such a way to engineer the desired result…not saying this outfit did – would reserve judgement until having read in its entirety.

      Will be most interested to see exactly how ‘people’ think they should benefit – aside from the myriad of ways suggested by the Government upon implementation of the MRRT (reduced taxes, infrastructure and other vague assurances).

  4. How did it turn this latent support into a debacle that toppled a prime minister and cost the nation $100 billion over ten years

    Because if you’d run the same poll in early 2010 — at the peak of the mining sector’s advertising campaign — the results would have been very different. Memories of the GFC were still fresh. Australia had escaped the worst of it, and it was widely believed that the mining sector had “saved” Australia.

    One could also ask how the mining industry has lost so much support over the past 18 months? My answer would be pure, naked greed.

    The CSG issue, and expansion of coal mines into agricultural areas, has also played a part in the loss of public support for mining.

    • Yes, fair assessment. But my point was about the process. A proper process would have been extended to take account of vested resistance as well as the need to persuade the public to fortify them against that attack. The PRRT went through such a process.

      Our politicians today seem unable to grasp anything beyond the next week.

      • “Our politicians today seem unable to grasp anything beyond the next week.”

        Ain’t that the truth.

    • “One could also ask how the mining industry has lost so much support over the past 18 months? My answer would be pure, naked greed.”

      I’d also suggest that many people are now just starting to wake up to what a “two-speed economy” (I hate that term!) may mean for them and they don’t like it.

      • Unfortunately the people ‘waking up’ to what a two speed economy actually means fail to recognise the the ‘slow lane’ is a result of the end of the debt-finance-housing ponzi. In addition there is widespread failure to recognise that Australia minus the boom and we would be in a more dire position.

        For some everything is reduced to “what do I get from it” and “gimme gimme”. Handout culture reigns supreme.

      • Lorax – you appear to have all the time in the world but I notice from your comments you do watch a lot of TV…

        In any case, today it’s me that does not have the time, apart from a couple of quick check-ins.

        Cheers.

      • The opposite view. Really?

        ‘The end of the debt-finance-housing ponzi has and will have no effect on the slowing of the economy.’

        We both know you don’t agree with that!

      • “Mav
        November 2, 2011 at 12:13 pm

        – 1”

        Again great analytical response. People who inhabit this forum have been discussing this for years and many of us have taken note of Steve Keen’s research for 6 or 7 years or more at this stage.
        Yet now because it doesn’t suit your fixed side of any debatte it is wrong here?

      • +1 … it just seems like mobocracy at work, 2% of the workforce doing well, lets tax them through the nose cos we the majority can force anything as long as we get 51%..

        where were simialr voiced when housing was going so strong, why not tax property industry when they were getting super profits, or is that voter base too large to be a worthwhile moral crusade?

        In my circle of friends I can say 50% vote purely on ‘whats in it for me’, 40% vote based on what their family has always voted (despite not really knowing policy/ideology), 10% make ‘informed’ decisions..

  5. NB In what follows my capitals on the word chose are not shouting! It is an emphasis on the fact we ourselves made the choices!

    A long time ago I saved some money in difficult circumstances. Wtih that saving, a long time ago, I bought shares in an iron ore company. A long time ago I bought shares in Gold miners. I have since paid various calls on my money for issued shares to develop the mines.
    Why did I do that as they were fundamentally unprofitable at the time? I did it because I looked forward to a time when the b…..t that is the Aus economy must come to an end…if not in my lifetime then certainly in my kids lifetime.
    Do I wish I had more of these shares?…Sure! However I made other choices and had other obligations. Nevertheless my home was characterised by not having all the modern ‘conveniences’

    Everyone had the choice to save or spend. Spending was bigger houses, new kitchens, air conditioning,new TV’s, new appliances, overseas holidays, computer games and whatever was was the next thing Gerry Harvey was trying to flog off.

    As a nation

    We CHOSE to spend rather than save and have done so continuously for 50 years.

    We always CHOSE the easy way. We elected politicians who would shower us with money. We only elected those who promised us money! It was all our own decision…mining didn’t look like a good investment compared to a new computer game! Maybe at the time that was smart. Mining over the last 40 years has been generally notoriously unprofitable giving almost no return.

    We CHOSE inflation so that our debts would be eroded away. We still do and to argue in here that debt generated inflation is a bad thing is to be regarded as a ‘moron’

    We CHOSE not to invest in our own land, in our own nation and in our own people.

    Our Governments made contracts with the miners. The conditions under which the mines would be established and run were all laid down. We needed the ‘Foreign Investment’ to be able to maintain our level of consumption and living standards. Those contracts are lawful contracts.

    Now we are proposing a tax. It’s not a general tax applied to all businesses and all people. It is a tax aimed at a specific group. It is a confiscation of the rightful lawful property belonging to some people. We are now willing to transgress the very basic fundamental principle that underlies how our society functions. Why? Because we are now envious of those who did invest in mines back when they were seemingly unprofitable, who went for decades without a return on their invested money.
    We have indeed arrived at the point i saw a long time ago where our excess consumption cannot now be funded. Do we choose to say ‘Well, we screwed that up we had better knuckle down and save a bit!’
    Nope that’s not our way. We are going to continue our spendthrift5 ways and simply confiscate whatever private property we need to maintain the lifestyle we want.

    Unfortunately the confiscation of private property for our own political or financial ends is becoming all too common. We confiscate the money of savers every day through inflation. Then we parade that as a good thing!
    We confiscated the farmers’ trees because we wanted to introduce a Carbon tax but it would have impinged too much on our own lifestyles if farmers had to be compensated for the Carbon fixing activities of their land and vegetation.
    Now, to suit our own indulgence we are confiscating miners returns.

    It’s a slippery slope. There are no consequences for our over-selfindulgence. The limits to which we will go become further and further out, more and more outrageous.
    Eventually we will demand some go to the tumbrils just so we don’t have to do anything about ourselves.
    I fear the future.

    • That’s a steaming grogan, Flawse. By that rationale every mistake by every politician everywhere, every time is the fault of the people.

      I will add that Labour won the subsequent election against an opposition proposing to abolish the tax.

      • Only just. And if some of the independents hadn’t betrayed their constituents, the Coalition would have been in govt.

      • Betrayed?

        I don’t know. If the Windsor and Oakeshott run hard on the CSG issue, they might just surprise everyone and win their seats at the next election.

        CSG is a red hot issue in Nationals country. Red hot.

      • they are pretty much relying on the lack of memory of the public… so they will probs get back in ha!

      • Labor won???? You could have fooled me. Labour got themselves over the line because of the Gillard ‘promise’ and a heap of shady deals. The independents quite consciously and deliberately went against the wishes of those who elected them. So let’s not start with that Labor had some sort of mandate for this thing.

        The point is here that we have all lived at a level that has obviously been way beyond our means. We all knew it. We just thought there was no end to it. That’s our mistake and what we are now wanting to do is to foist the costs of that mistake on to a few people.

        In defence of the Australian people, and in the hope that we have not completely lost our sense of morality as a nation, I’d hope that that if the facts of this situation were explained carefully and properly, they would elect to go the hard yards. It’s a pity the Libs are so bankrupt of principles that they don’t defend the right to private property as a principle rather than the ‘big new tax’ mantra.

        However listening to radio before the last election I am no longer convinced. All callers I heard on the ABC plainly stated they were voting solely on the basis of ‘what’s in it for me’. I did not hear one caller say ‘what’s good for the country’
        Further the cries leading up to the latest rate cut were ‘this is all too hard! We want money for nothing’ Well we got our ‘money for nothing’ except once again we made the morally bankrupt decision to once again screw the prudent to reward the profligate.
        Yep! That seems to be our way!
        In that situation we have got the politicians we deserve and out parlous position is our own fault.

      • Flawse, as always good comment.

        You mention the “what’s in it for me” demand from some ABC callers – we must be in the same zone as I just mentioned that above, without having yet read your comment. You are spot on and at times I wonder if this is the long run destination of a generous welfare state.

      • On what basis do you tick -1.5 for my reference to Socrates. Debate Socrates if you like. Socrates just saw it as an inherent problem of democracies.

      • Labor won???? You could have fooled me. Labour got themselves over the line because of the Gillard ‘promise’ and a heap of shady deals.
        .
        That IS YOUR opinion. You are entitled to have your own opinion…. but not the FACTS concerning how our parliamentary democracy functions.
        .
        The Gillard minority government has a legal and moral mandate despite your assertion about “broken promises” and “shady deals”.

      • you can keep your moral mandates to yourself
        .
        Ok then, Don’t play morality card on a government that has the legal mandate of the people of Australia.

      • Mav who are you that you post only left wing slogans and the appropriate name calling to go with it?

      • legal and moral mandate for what exactly?

        As I said elsewhere and for some reason got bad mouhted by you…IMO the LIbs face the same problem at the next election. They will win (it now seems) however it will be won pretty much on negativity and opposition to the Carbon Tax.
        The only thing they will have a mandate for will be to rescind the Carbon Tax.
        If they proposed other positive policies then they would have the backing of the people.
        The problem seems to me that the Aus people don’t want to hear about the negative effects of anything…not sure whose fault that is…shallow journalism, whatever I don’t know.

      • Gillard ‘promise’ and a heap of shady deals.
        .
        It’s a pity the Libs are so bankrupt of principles that they don’t defend the right to private property as a principle rather than the ‘big new tax’ mantra.
        .
        …and it is a pity that you resort to the same sort of sloganeering that you accuse the Libs of !! “Broken promise” and “shady deals” indeed!!

      • What the hell are you talking about?
        What sloganeering?

        I simply suggest that the Libs, in getting elected, will not have a mandate for economic reform, except for repeal of the Carbon tax.
        Therefore they will not have the support of the people to follow an agenda and it will fail.

      • “However listening to radio before the last election I am no longer convinced. All callers I heard on the ABC plainly stated they were voting solely on the basis of ‘what’s in it for me’. I did not hear one caller say ‘what’s good for the country’”

        Seems rather hypocritical for you to be critical of people asking “what’s in it for me”, given your previous commentary in this discussion (and, I’m guessing, Libertarian politics).

      • Why are you questioning me on this. I don’t get your point?

        My arguments as to ‘what’s in it for me’ Let’s be clear…I’m an importer, selling into the retail and consumption industry.
        So pretty much every blessed thing I propose in here would be negative to my income.
        I am trying to discuss ‘principles’
        Hells bells where did all these personal attacks come from? Is this coordinated?

      • WTH?

        Libertarian…what the hell is that?

        Do I believe in individual responsibility…hell yes!
        Do I believe in individual liberety…hell yes!

        Other than that you know nothing the hell about me

        So my question was one that no one has bothered to answer just shout personal abuse.

        AGAIN for the record….all the things in here I argue would affect me negatively wealth wise in the short term. I’m an importer seeling into the reatil/service sector.

        With a bit of savings I managed to put aside a few years ago I bought shares some shares in Gold Iron ore and coal. Up till then as a small businessman I had never been able to put aside any Super.
        So now i want to know because I put that money aside, didn’t invest for an immediate return, didn’t buy a new TV, didn’t buy computer games, a German car, a new SUV…I should now pay some sort of super-profits tax on my investments.

        As to my politics I’ve been at war with every political party/government that has chosen to sell the country down the drain rather than face the short term problems of fixing what was wrong. That includes ALL governments Labor or Liberal.
        I had great hopes for Fraser after the Whitlam era but he went to water within a week. Keating was great for a while then he tried to seriously fix things and gave his ‘banana republic’ warnings. Whoever really runs this country really fixed him after that.
        Howard..yep! He announced the GST and took it to an election. Then he just kept selling the country down the drain at an ever faster rate.

        If I could have a government with a few people like Lindsay Tanner, Chris Bowen, Stephen Smith, Stephen Conroy possibly Bill Shorten, maybe Julia Gillard in the education role, and perhaps some others from the Labor party, with a few people from the Lib and national Parties that’s who i’d vote for!!!

        So before you run off at the mouth bad-mouthing me you ought just check!!!!

      • Unfortunately I’d have to suggest that this is another case of “flawsed” logic…

        To suggest that not one single ABC caller stopped to questions what was in the best interests of the country, and simply ruminated over what was in their own best interests is rather ironic considering that you yourself are advocating that position.

        We live in a free market in which personal reward and individual advancement over the greater good has been fostered and encouraged, all the time ignoring the fact that this sort of behaviour creates the very inequality which inevitably leads the voting public to feel sufficiently disadvantaged enough to take contrary positions on issues such as these.

        The challenge is that we’re no longer talking about individual advancement anymore are we? In the case of many of the miners, we are now looking at a consolidation of enormous amounts of mainly foreign capital exploiting the value of Australian resource wealth which were scarcely understood during the time during which most of the existing mining arrangements were established. I feel no particular concern for the financial well-being of these nameless entities, and feel no particular desire to see them reduce a once in a lifetime national factor endowment in to a few empty holes in the ground once the party is over. As most people of an even disposition within society agree, reward is one thing, exploitation is another.

        If our government is hell bent on digging up every bit of mineral wealth across our lands in the shortest time possible, then I’m all for placing a healthy impost of the cost of doing so if it strengthens the future economic prospects of our nation.

        You assert that there are only two ways – the path of prudence or the path of extravagance. Well I’m happy to tell you that the world is not quite that black and white…many of us would be quite happy to forego present benefits to ensure that the future within which our children find themselves could be just that little bit less bleak. Considering the marginal benefit flowing from mining to the general economy at present, it wouldn’t seem that much of a sacrifice at any rate.

      • Taken time out from Occupy Something have we. Joking 🙂

        Some really nice stuff there Aaron. We live in an fairly egalitarian country and participate in the global economic community. This is our lot. We are blessed to have our natural resources, some finite some not. How do you propose the MRRT will ensure lasting benefit to future generations and thus ensure a future for our children that is a “little but less bleak” as you clearly believe it will be.

        Surely this must be the raison d’etre for this tax?

      • “…enormous amounts of mainly foreign capital…”

        Funny thing is, what is capital? Money is just made up by central banks anyway.

      • Aaron…next time you directly call me a liar do the right thing and post your real name and address with it!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

      • littleguy
        November 2, 2011 at 4:45 pm

        “…enormous amounts of mainly foreign capital…”

        Funny thing is, what is capital? Money is just made up by central banks anyway.

        That’s a fact littleguy and why we have to stop this stupid selling off of everything for the bits of paper they create.

        However as long as we over-consume we NEED their bits of damned paper.

        We really do need an end to this free sell-off, floating exchange rate, banks create all the credit, garbage.

      • Aaron
        Where are your limits exactly as to whose private property you would confiscate?
        Where will you stop?

        So as per my qusetion how about the lawyers, banks et al who hold the society to ransom for greater returns for themselves? How far will you go?
        Confiscation, gaol terms, the tumbrils?????
        Where are your limits in having what you think you deserve?

    • This has nothing to do with envy or punishing those who benefited from the mining industry – for mining to lament the lack of justice and play the victim in this debate and is completely disingenuous. The psychology behind consumption and an economic model with consumption at its core are not particular to this country or its citizens – that much should be obvious. Do you really not see that the two things are inherently interlinked – growth in global consumption funded by debt AND the mining boom?

      What you do validly raise is the issue of how we extract ourselves from such a situation. It is perfectly reasonable principle that a super-profitable mining sector (and arguably banking sector) contribute proportionally more to efforts to reshape our economy via what you would see as discriminatory taxation. Whether the MRRT and the application of its proceeds actually achieves this is a different issue. Governments are entitled to determine appropriate tax stuctures, and that is a risk borne by any foreign investor in any country. If the legislation is indeed unlawful then the mining industry can make its case through legal processes.

  6. Any rational economist should be able to tell you that with a floating exchange rate, a country does not proper from the growth of trade.

    Gone are the days when an export boom would stimulate the whole economy. Such events caused economic cycles which the floating exchange rate system was designed to remove.

    Any growth in exports drives up the exchange rate to reduce the income of exporters and make imports cheaper so that we shift our demand from domestic products to imports.

    If you had listened to the Treasurer’s budget speech, he said that we would not prosper from the boom in mineral exports but from the increase in investment. Provided that investment was financed by bank borrowing in Australia, the additional money would stimulate the economy, a bit.

    If we were discover huge oil reserves or a gold deposit the size of Ayers Rock, the country would be no better off.

    So, the public are right, they do not and should not, receive any benefit from the resources boom, other than cheaper imports.

    • Interesting point, Leigh. How do other resource rich states deal with this? I am thinking particularly of those that have built up formal or informal sovereign wealth funds.

      • Norway does have its sovereign wealth fund. That has the effect of preventing the exchange rate rising as much as it would otherwise.

        In other parts of Europe, they formed a single currency so that the countries with booming exports (our of the EU) could prosper and other countries would suffer the losses.

        In the USA, they just look for scape goats. Once they blamed the Japanese. Now its the Chinese.

      • “…they just look for scape goats. Once they once blamed ….”. The USA is not alone in that, we in Australia manage a pretty tidy job in the blame, scapegoat, someone else’s fault, someone else should pay game. Evidenced by much of what is said on these anti-resources threads!

    • Leigh, can you explain why “the country would be no better off” if we discovered massive oil reserves? Technically if we discovered “a gold deposit the size of Ayers Rock” then supply side would be up for gold, so prices would correct big time, and that would make a lot of small mines nonviable.

      However, for oil wouldn’t that be a good thing for the BOT. I could see the Greens opposing it, but what is the down side…I’m missing something?

      • The point I was trying to make was that we as a country do not earn any more money from increased exports.

        The floating exchange rate system is suppose to provide monetary independence. That is, international transactions are not allowed to affect the domestic money supply.

        If we earn additional export income from minerals, then the only way those mineral exporters can earn more money is if we transfer money from other sectors of the economy to the minerals exporters.

        The way the exchange rate system does that is to inflate the value currency. That makes more imported products cheaper so that we reduce our purchases of domestic products and buy imports instead.

        The additional foreign money that was earned from the additional exports is used to pay for the additional imports and the additional domestic money that was spent on imports is used to pay the the mineral exporters for their additional exports.

        Overall, the country is no better off. The additional income that the exporters earned is offset by the reduction in income among those industries that have lost sales to imports.

      • Thanks a lot Leigh. I read your paper on floating exchange rate system and that has helped me.

        I have to sort this out, but I see a large part of what we import not being invented/made here in the first place. Maybe it got that way because of the floating exchange rate system. I remember Philips used to make TV’s in Clayton, and they exported them to China circa 1982 I think. Likewise mobile phones at NEC here in 1995/6. The list goes on I guess. Soon we won’t even make the roofing iron here.

        Thanks again Leigh for explaining.

    • Any growth in exports drives up the exchange rate to reduce the income of exporters and make imports cheaper so that we shift our demand from domestic products to imports.

      …in theory

      yet the data doesn’t show much if any correlation between the CAD and the currency does it?

      As DFM has written about here there appear to be many drivers behind currency moves. Fundamentals are just one aspect.

      If we were discover huge oil reserves or a gold deposit the size of Ayers Rock, the country would be no better off.

      It depends what you define as “huge”. Our resources sector makes up 8-9% of GDP and we run a CAD. Norway’s oil makes up ~27% of GDP and they run a CAS. Are you seriously saying that if we had oil reserves that produced income equal to 27% of GDP we’d be no better off?

      • ‘yet the data doesn’t show much if any correlation between the CAD and the currency does it?’

        That does not mean that a CAD is not a major factor in a declining currency and that other things being equal the CAD is not the major driver of currency value.
        As you suggest there are many other factors. in our case our willingness to sell off our nation to fund our CAD’s has been the major component of the currency value. We have been fortunate to live in a nation with such massive natural resources to sell off.
        Yet we are now at a stage where most of our industries have been sold, the food chain, between the farmer and the retailer, has been completely sold, an estimated 80 odd % of our mining industry has been sold off, and the Chinese are now here with big money trying to buy rural land and industry.
        How much longer can it go on?

        If there is no correlation between the value of a currency and its CAD, why has the A$ gone from A$1 = 240 yen to A$1 = 70 yen ?

      • If only those with exposure to international trade traded currencies then the textbook theory would probably be valid and current account balances would even out.

        If there is no correlation between the value of a currency and its CAD, why has the A$ gone from A$1 = 240 yen to A$1 = 70 yen ?

        What I meant to say above was “the data doesn’t show much if any correlation between the current account balance and the currency does it?

        Given there has been a CAD for all of the years since the float there should have been perpetual downward pressure on the dollar according to the theories.

        If A$ has gone from A$1 = 240 yen to A$1 = 70 yen then that proves my point doesn’t it?

      • Nope Bob that particular one is pretty close as far as correlation goes. They’ve run surpluses, we;ve run deficits so now our currency in terms of theirs, even after they have bought large sections of our mines, is only 1/3 what it used to be.
        I don’t think I’m arguing with you particularly other than to say that we need to get some of these other influences under control so that our currency is responsive to the CAD.
        Otherwise we are just going to continue to borrow and sell off our assets into oblivion.

      • Nope Bob that particular one is pretty close as far as correlation goes.

        mate the correlation is in the wrong direction!

      • Sideshow Bob

        I hope you return here. I do enjoy, and profit from, your posts.

        In this case you have your head on back the front 🙂 Japan has run CAS for 50 years and we have run a CAD. Their currency has strengthened by a factor of over 3.
        A$1 in 1980 (something) = 240 yen
        NOW 1A$ = 80 yen (been down to 70)
        The exact numbers don’t matter much as the scale of it is so large anyway.

      • I agree that there is no correlation between the exchange rate and the current account deficit. See: http://www.buoyanteconomies.com/AustCADMoney.htm . It shows that for Australia, the CAD is caused by the growth of bank credit.

        If oil exports were to rise to 27% of GDP, our imports would rise to compensate. See the graph in the Chart Pack today showing the relationship between the growth of exports and the growth of imports as a share of GDP.

        http://www.macrobusiness.com.au/2011/11/rba-chart-pack/

        Norway has established intervened in their exchange rate system by establishing a sovereign wealth fund. That has allowed them to generate a current account surplus.

        If we were to interfere in our exchange rate system in the same way, we could expect similar outcomes.

        I do not think this is the best solution but it does provide some short term relief.

      • Norway has established intervened in their exchange rate system by establishing a sovereign wealth fund. That has allowed them to generate a current account surplus.

        I think you have that back the front, i.e. getting cause and effect muddled. The massive oil revenues generated the current account surplus not the sovereign wealth fund or some currency intervention (it has floated freely since 1992).

        You could make the case about China’s surpluses being due to currency interventions (peg).

        Because currencies don’t move the way you imagine the Norwegian surplus has been maintained for many years while revenues from oil have boomed.

        The empirical reality is that floating exchange rates don’t move to make international payments and receipts equal, and the market certainly doesn’t set rates to ensure that payments and receipts are equal (#15 in the article Prince linked).

        In the real world currencies don’t always strengthen when there are current account surpluses and weaken when there are current account deficits.

        If currencies don’t adjust to remove current account imbalances then shouldn’t the rational economist abandon, or at least modify, textbook theories that say this will occur and instead seek theories that explain empirical data?

      • If the Krone was allowed to float without the wealth fund or other form of intervention, it is likely that Norway would have a current account deficit.

        There is a formula for the current account deficit available at http://www.buoyanteconomies.com/CAD_Formula.htm.

        I agree that currencies do not adjust to remove current account imbalances.

      • The Krona has been a free float for at least 18-19 years. Claiming Norway would have a CAD in some parallel universe is loopy. It has a free float AND a surplus. So do you stick with economic fantasy or adjust your theories based on empirical data? Economic training seems to make people lean toward dismissing the data.

        A couple of nice charts on your link, that fit your model. How about similar charts from Switzerland, Norway, Germany and so on and so forth. Don’t cherry pick the ones that fit the theory and ignore the ones that don’t.

        If your formula for a current account deficit was valid it would apply universally. Does it?

        As for endless references to equilibrium (the favourite economic fantasy??):

        (quantitative)
        http://arxiv.org/abs/cond-mat/9911291

        and

        (qualitative)
        http://www.amazon.com/Debunking-Economics-Revised-Expanded-Dethroned/dp/1848139926/ref=pd_sim_b_4

      • Bob

        I am quite happy to test the model on other countries if I have the data. You can find graphs for Australia, USA, NZ, India and the Philippines on the Buoyant Economies site.

        If you have a better formula for explaining the current account deficits in real economies, I am willing to learn.

      • It’s a circular argument. AKA feedback loops if we want to sound technical. It’s likely after all these years, had Norway just allowed its oil companies to be sold to any foreign entity it would have run a CAD and have an impossibly high currency. In that way Leigh is correct.
        I’d say Bob is also correct over a specific time period because the oil has generated profits for Norway and as Leigh points out the Krone is kept at a lower level by the SWF.

        Depends on where you start and what you assume might have happened.
        Aus has the natural resources that we are willing to sell off to maintain our consumption so we have a high CAD, external debt, foreign owned asset base, and a high A$.

  7. Diogenes the CynicMEMBER

    Like Flawse I am a shareholder in various mining ventures. WHilst I agree with many of Flawse’s sentiments and deplore the wasting of $80bn by Rudd and company I do support a mining tax, not the present MRRT which is hideously complicated but a simple surcharge on company tax say 5-10% ie BHP’s corporate tax rate increases from 30 to 35-40%.

    • Diogenes…but why only miners? Are we taking account of all the years shareholders went without returns? Why not the Banks? Why not my own small business every time it earns a return above the long term bond rate (which of course RAT rate is negative!!)

      Why not charge those who seem to be earning excess income because they are members of powerful unions? Why not lawyers who patently earn more than they are worth? Why not executives? Why not Ken Henry who was paid way more than he was worth? ( 🙂 my opinion of course)

      In my last jest there is an element of fundamental truth. In the end who is to judge who is to knit and who is for the tumbrils?

      • Sorry!!! One other point. As soon as this argument starts everyone starts quoting BHP and RIO as the only embodiment of this evil empire.

        I am fairly heavily invested in an iron ore mining company who will not produce (if they ever do) a ton of ore for about 5 years from now.. minimum. Their shares can be bought by everybody very (VERY) cheaply. For a period of 7 years I will have no return. Then hopefully the company starts to make a profit but it is likely to be another 7 years or so before i get a cent in dividends. So we are talking 15 years out! However as soon as it makes a profit, which should be good, we are going to hit it (and me) with a super tax in order to subsidise the extravagant lifestyle of those who simply choose to spend.
        Someone explain to me why that is deemed right?

      • I think you miss the point. It doesn’t matter what you think is right or wrong, it just is…philosophy 101

        “We do, because we can”

        It’s actually an argument which can be used from either perspective in this debate.

        One party will get on and do what they want and the other will eventually have to suck it up and live with it…my suggestion is that the mining fraternity will be the one with less influence than the government on this one from this point forward.

        The burden shouldn’t be great, it should be as broadly spread as possible and it should not seek to overly disadvantage any specific group, but it should definitely be there.

        Oh crud, I’m starting to sound like a bleeding heart socialist…I’m going to go and slam my head in a car door for a while.

      • erm.. Do bankers, small businessmen, lawyers, union members and Ken Henry make windfall profits out of non-renewable resources that belong to the people?

      • In their way yes! Lawyers occupy a special space in society in that they make up the rules. With the nation’s strongest trade union by far they are able to ‘mine’ the rest of our labours very easily and profitably. You lot call it ‘rent seeking’ The same applies to all the rest of them. Ken Henry got all his salary perks and privileges and has never been called to account for his totally wrong calls and advice on just about everything. Why? Because he operates in a special Govt space where everyone else pays for his mistakes. Waterside workers get paid about 10 times what my storemen get for doing jobs no more skilled and a lot less hard work than my storemen do. Why? Because they are in a position of power to exploit the society and impose their costs on it. The list goes on endlessly.
        Surely you are not suggesting that the Banks are not doing exactly the same thing.

        As Littleguy correctly points out elsewhere in this thread the problem here is the the way in which the original contracts for the mining of the resources were set up in the first place.
        In part this is because prices were low and relatively unprofitable at the time so Govts chose the path of extracting more in terms of a price per tonne than a % of the sell price or whatever. Some miners pay more royalty than others because of this.The future just didn’t go the way our governments thought it would.

        Again this was a CHOICE of our governments at the time.

        It is not a reason to essentially overthrow the rights to private property.

      • Diogenes the CynicMEMBER

        I agree with a lot of your sentiment, but mining is using up a non renewable resource. Think of resources as a balance sheet item not income, as we dig it up our balance sheet is reduced.

        I am in favour of massive banking reform. LVR caps at 50%, banks forced to retain balance sheet exposure to their loans, severe penalties for bank failures on CEOs and Board, much higher capital ratios let’s triple it and make it highly transparent, forced bank reduction in size, a bank should not be big enough to threaten the system etc.

    • Yes one of the main problems with this tax is the lack of simplicity and the duplicity of the current corporate tax compared to the “progressive” income tax.

      Why can’t we have a tiered corporate tax?

      Say 25% for family trusts and SME (i.e about the same if they were PAYG earners)

      30% for majority Aussie owned big business

      33% for majority foreign owned big business

      40% for any resource extraction business

      You could write that into the tax code in about 10 minutes and win an election on it easy.

      • Perhaps an additional category for monopoly/oligopoly big businesses and those that enjoy implicit government backing.

        I think these should be taxed above the 33% rate you nominated for foreign owned businesses.

      • Yes, good suggestions from all above. As always the perceived deep pocket is the first raided – and it remains the tax is not fair across all corporates.

      • Bob – I agree – I’ve said for a long time that if the banking oligopoly wants to retain its government guarantee backstop than they need to take the downside with that.

        40% on bank profits seems more than fair – considering a doctor or other non-finance professional who adds value to society has to pay even more in his income….

      • +1

        Prince …run for PM and like AB you’ll get my vote. Trouble is that in reality as we’ve discussed so many times there is no vision, and pretty much all of Ken Henry’s ideas were ditched so why would our elite listen to ideas that would go a long way to fixing the imbalances.

        I think we need a MB manifesto to present to the government for ways to improve the economy now and in the future.

      • I’d vote for you SSB as you’d be more up front than the Muppet’s we have now, or likely to get soon 🙂

    • Why can’t corporate tax rates be progressive like income tax rates? That way all companies that make “rent” level profits get hit equally.

      • but doesn’t every man and his dog assume that the supply/demand dynamics of the iron ore market will alter by about 2015 due to large scale volumes coming online (by then)?

        on that basis doesn’t every man and his dog assume that no super (duper) profits will be made post 2015.

        finally can we therefore assume that RSPT tax modellers are not a subset of every man and his dog?

      • In addition to the supply dynamics there are the demand dynamics.

        Expectations that China has, or will have, problems would appear to be mutually exclusive with expectations that 100 bill can be raised via a mining tax.

        can we therefore assume that RSPT tax modellers are not a subset of China bears?

      • can we therefore assume that RSPT tax modellers are not a subset of China bears?

        Not really. The RSPT was designed to tax windfall profits, so if the mining boom continues the tax take would increase dramatically and could be used to soften the impact on the non-mining sectors.

        If China crashes and burns, the pressure on the non-mining sectors would ease (via a lower currency) and the miners would pay a lot less tax on profits instead of paying fixed royalties to state govts.

        The RSPT works for the benefit of the nation regardless of the outcome of the China boom.

        No doubt if commodity prices do collapse the miners will be campaigning for lower royalties or even a profits-based tax.

      • It is a super profits tax right? i.e. tax on windfall profits due to historically high commodities (primary iron ore and coal) prices for prolonged periods.

        So how do you get 100 bill over 10 years if modellers are a subset of China bears?

        In other words high prices are predicated on China boom and demand matching or outstripping supply.

        The RSPT works for the benefit of the nation regardless of the outcome of the China boom.

        How would miners be making super profits without a China boom? In the absence of windfall profits the RSPT delivers squat.

        No doubt if commodity prices do collapse the miners will be campaigning for lower royalties or even a profits-based tax.

        But if it is a tax on super (read windfall) profits and profits collapse then miners would have no need to campaign for anything. The RSPT would be redundant, i.e. commodity prices/profits below whatever threshold is set, so it would be business as usual under the same tax regime that exists now.

        Modellers coming up with gargantuan numbers of how much revenue can be raised but be assuming windfall prices over the period in which this windfall tax will be raised otherwise how else can you get those sort of numbers?

        (i.e. they are not a subset of every man and his dog nor a subset of China bears)

      • “If China crashes and burns, the pressure on the non-mining sectors would ease (via a lower currency) and the miners would pay a lot less tax on profits instead of paying fixed royalties to state govts.”

        The royalties should not be fixed. If they were set up properly we wouldn’t be having this “rent” tax problem.

  8. The poll found 64 per cent of Labor voters, 67 per cent of Coalition voters and 72 per cent of Greens voters agreed that average Australians were not benefiting.

    Interesting that the mining boom is less popular amongst COALition voters than Labor voters. What would be interesting is the results for Nationals voters. I wouldn’t be surprised to see the anti number closer to 80%, especially in Queensland.

    CSG is the sleeper issue of the next election. Its huge!

    • Not big here in WA!

      CSG is the perfect Green NIMBY vehicle though – footage of rolling hills, salt of the earth farming types and doe eyed bovines tug the heartstrings.

      • Not big here in WA!

        Is that because you have bugger all CSG in WA?

        Fortunately WA is but a tiny minority of the total Australian population, and when the east coast turns feral on the mining sector, there will be little West Australians can do about it.

        Thank Christ for democracy.

      • Lorax, WA’s really never had much say in who controls Fed Parliament, in most elections the result is already known before the booths even close. So we pretty much take whatever Fed Govt NSW and Qld throw at us. Not that there’s much choice…

      • Dream on Lorax. No one is going to go feral on mining, apart few sensitive types opposing CSG but the rest will be reassured of the need for a vibrant mining sector when reminded of the impact mining has on every aspect of modern living.

        Thank god for democracy…and mining!

      • You may not have to eat but I do. We still do not know what the impact on the water and land is. And if it is bad, there is no second chance.

      • footage of rolling hills, salt of the earth farming types and doe eyed bovines tug the heartstrings.
        .
        +1 You have described to a T, the mining/CSG ads currently running on our idiot boxes.
        .
        PS: I didn’t know the MCA and Santos were Green NIMBY types 🙂

      • Yeah with happy farmers and graziers who like nothing better than for the likes of Santos to come in and poison their groundwater and turn their land into pin-cushions.

        People are smarter than that Fanboy. They might have been fooled by mining PR campaign 1.0, but they’re awake to you now.

        You reap what you sow.

      • Farmers are usually fairly quiet about groundwater contamination, as they have been among the chief culprits in the past.

      • It is left to be seen how many of the great unwashed will be confused and consoled by the mining ad campaigns.
        .
        You can throw money as you want at it – but that won’t make people watching the ads dumber by the same proportion.

      • Mav – I’ve called no-one unwashed nor questioned anyone’s intelligence. Suspect those comments reveal your underlying perceptions…very telling indeed.

  9. Hmm, wasn’t the royal family ancestors who came first to this land with their sovereign rights on it and its underground treasures? Or maybe before them the land and its resources were aboriginal “property”? The rent from the underground resources can’t be private property, because it is not a product of any private human activity. Only the extraction of these resources is a human activity and deserves a decent reward in profit. The rest above this absolutely merited profit is a common property or should be in a disposition of the sovereign, who in the first place has established and protected the property rights on this land. If there is no sovereign, then we have to return the rights on land to the aboriginal people, because they were the first here for more than 40000 years.

    Fortunately, we can’t privatize the breathable air, but maybe I am wrong!!!???

    • The resources now belong to the crown…although there again there has been considerable confiscation of private property rights without compensation.
      The Crown negotiated with companies to pay for those minerals and to mine them. This is done, not entirely before exploration companies have spent large amounts of capital but, before much of the capital is spent establishing mines and infrastructure.

      Now the RIGHTS to mine, granted by the crown, belong to the company.

  10. All it takes is a few clever ads on prime-time. There’s your 20% swing on the ‘are miners bad?’ question (coal-seam-gas issues aside).

    Seriously, people on this blog may laugh, but the ad with the handsome guy giving a lecture on mining’s importance was genius. nb. I mean that in that in the same way that McDonalds ads are genius, or that Tony Abbott is a skilful politician.

      • Mav, If there’s an Orwellian campaign going on it is the Government/Green Pro-Carbon Tax campaign.

        Think about the selective wording, the derogatory finger pointing and harassing as “Big Polluters” ordinary Australian businesses operating in the manner they always have, adhering the environmental restrictions and regulations NOT ‘BIG POLLUTERS’, high energy users. Corruption of the lexicon the resources sector has no need to stoop to.

        Governmental Orwellian speak for sure.

      • Just the name, Carbon Tax, is Orwellian. Nasty, dirty carbon! Not clean, invisible carbon dioxide, aka plant food.

      • LOL..! Mining PR Bot, you seem to be part of this Orwellian Corporate project, monitoring and spreading propaganda via social media and blogs.
        .
        Your “broken record” PR technique may work with the MSM.
        Give it up already – It is self-evident this technique is quite useless on the internets 🙂

      • WTF??? I am long-term resources. In the past have worked in a variety of countries, good times and bad, good regimes and bad. Fully cognizant that resources retain a boom/bust nature BUT are always required.

        Totally over this anti-resources obsession. We need, the requirements of the modern world demand, natural resources – of all kinds. It remains a great blessing that this nation has, at this difficult global time, something that someone wants.

        Mav, we are not Ireland! Or any number of other countries that have declining revenues and nor prospect of anything in the future. It is a good thing. It may not have the ‘feelgood’ factor. OK. Extend it beyond. Iron ore, coal, gas and a myriad of others are essential, ESSENTIAL, in some way or other to the way we live in 2011 and beyond.

        You tell me how it is different. We thus far remain The Lucky Country. What we do with this Luck is are far more problematic question. Perhaps you have ideas…

      • Mav …this sort of stuff is no good. The dismissal of solid argument with name-calling is a bit too common in here.
        JMO

    • “All it takes is a few clever ads on prime-time.”

      And bad adverts will do the opposite. The green wash Chevron adverts that come with the PBS news hour make my skin crawl.