At the AFR this morning, Jennifer Hewitt has a scoop around details of a “secret” deal between Kevin Rudd and Andrew Forest in the dying days of the RSPT:
The night before Kevin Rudd was rolled as prime minister, he and miner Andrew Forrest had just agreed to transform the resource super profits tax into a radical proposal to revolutionise the delivery of infrastructure in Australia.
Under the in-principle agreement hammered out over a few frantic days in June 2010, mining companies could have avoided liability for the proposed 40 per cent tax by instead writing off their capital expenditure on infrastructure.
The deal was hurriedly developed by a prime minister under great political pressure to settle the damaging fight with the mining industry and a chief executive of Fortescue Metals Group who believed the planned tax would have triggered the threat of potential default for his company under United States laws.
The agreement would have split the mining industry’s fervent opposition to the resource super profits tax and immediately given the then prime minister a politically valuable and visible ally in selling a grand “national interest’’ alternative to the public.
But the Gillard leadership challenge on Wednesday, June 23 – a day after Mr Rudd had briefed senior ministers on the progress of talks– meant the whole concept was effectively dead on arrival. As was the chance to revive the Rudd prime ministership.
The agreement undermines the arguments put by Julia Gillard at the time that her “priority’’ as Prime Minister would be to sort out the mining tax and that the inability to come up with a solution was fundamental to the demise of her predecessor.
Instead, the new, detailed revelations of the negotiations between Mr Forrest and Mr Rudd in the lead-up to his forced exit indicate how close the former prime minister came to being able to announce a “solution’’ to the brawl over the tax.
This is an important piece of journalism that nicely exposes one insider’s perspective of the politics in the dying days of the Rudd Prime Ministership. However, it’s framing of the issue is itself overly political, as I’ve noted recently about other AFR journalism. The issue about these revelations is not whether or not the current Prime Minister, Julia Gillard, is lying. All politicians put the best spin of things. They’re politicians. The major issue revealed by the story is of the total failure of Labor policy process under all ministers in the Rudd government.
Yet the article goes on to use a string of quotes from Twiggy Forest to paint Kevin Rudd as a tragic hero, stabbed in the back by a preemptive and duplicitous Gillard:
“When Rudd was rolled, he had the principles of a new and different tax sorted out,’’ Mr Forrest said.
…Mr Forrest said that on Fortescue’s estimates, the plan would have led to at least $200 billion a year going into national infrastructure every five years, which would have been a great deal for the country.
…“By Monday night, we felt we had an agreement,’’ Mr Forrest said. “I believe Rudd briefed his senior ministers on Tuesday morning on his plan to switch the RSPT into the biggest infrastructure boom imaginable. It would have been a huge legacy for a Labor government. The prime minister wanted to go public with the new deal on Friday.’’
But just as the Fortescue board convened a special meeting on the Wednesday evening before taking the proposal to the industry, news of the leadership challenge broke.
“We were thunderstruck,’’ Mr Forrest, now Fortescue’s chairman, said. “We believed this was an incredibly good deal to do for the country. We didn’t realise then that BHP and Rio had gone behind our backs to do another deal.
“When we were negotiating our solution with Rudd, I was calling BHP and Rio but they didn’t call back. They were working on their own deal. As soon as Rudd was gone, BHP and Rio didn’t need us, an Aussie battler, any more. They were doing their own deal with Gillard.’’
And on it goes. This is colourful, of course, but not the nub of the issue. Consider, what was Prime Minister Rudd doing negotiating a secret deal with Andrew Forrest that completely and radically transformed his own policy? Is it any wonder that in such a policy process, it is possible for vested interests to split the ruling Party?
That is the primary lesson for the nation. As I’ve argued before, national interest policy needs to be made with far greater transparency than the process that was consistently deployed by the Rudd administration:
- during the 2008 GFC, the entire banking bailout was negotiated with business interests behind closed doors
- throughout 2009, the Rudd Government negotiated its original Carbon Pollution Reduction Scheme (CPRS) behind closed doors. The policy was announced up front, and an endless procession of special exemptions were struck with business interests as they traipsed to Canberra. The same happened again with the carbon tax
- the same approach was adopted with the Resource Super Profits Tax (RSPT).
All of these episodes have the consequence of encouraging rent-seeking in business. In an economy dominated by concentrated monopolies, duopolies and oligopolies this is a red rag to a bull. Why compete when you can simply lobby or pressure the government to prevent competition. Even as both you and the government trumpet your “free market credentials”.
Then there is the small consequence of our fraying democracy.
In my view this is the triumph of state political practice over federal. After all, state politics is basically the business of negotiating with interests and Labor had been doing it in the major jurisdictions without much interruption for a long time. Kevin Rudd and Wayne Swan both came from state politics, as did the new wave of their number crunchers.
This is the issue that is raised by the AFR story, not who is in bed with who, but why they’re in bed at all.
