Tag Archives: resources super-profits tax

Joyce: The Labor Government Is Dodgy

15 Jul

Media Release – Senator Barnaby Joyce, 15 July 2010:

In trying to think of a metaphor to describe the Labor government in one word, it is this – dodgy! Their figures are dodgy when they talk about a $7.5 billion reduction in revenue but apparently only causing a $1.5 billion reduction in income. Their approach is dodgy when they talk about net debt as if the people who lent us the money don’t want the money back in gross terms and just for the record, we currently owe $150 billion and are currently borrowing an extra $150 million a day.

They are completely dodgy with how they change Prime Ministers in the middle of the night without telling the Australian people. They are even dodgy amongst themselves with the deals they make, such as the one between Kevin Rudd and Julia Gillard on the process of leadership transition which Julia obviously didn’t honour because the backroom boys told her not to. They are dodgy in how they talk about future surpluses, yet their past prescriptions about current surpluses have been so totally wrong and actually end up as deficits.

They are dodgy in how they describe solutions for the processing of boat people in East Timor when they haven’t actually done the homework to get the deal through East Timor. They are dodgy in how they employ mates such as Mr Kaiser for $450,000 a year without even putting an advertisement in the paper so that other Australian’s can apply for the job. They are dodgy in how they go forward with a $43 billion capital infrastructure program such as the NBN without doing a cost benefit analysis as to whether it will actually work.

They were dodgy in the way that they allowed the importation of beef from countries with Mad Cow Disease until we found out about the deal and then they changed the decision around again. They were dodgy in how they told people that the ETS was the greatest moral challenge of our time, but the person who was crucial in changing that moral paradigm is now enjoying the benefits of the Prime Minsters office. They were dodgy when they inferred that an ETS would change the climate when quite obviously it was never going to.

They were dodgy with how they told the Australian people that they would fix the hospital system by July 2009 or they would take it over and in the end, they did neither. They were dodgy when they decided to build school halls across our nation for $16.2 billion whether you wanted them or not and at three times the price. They were dodgy when they decided to put ceiling insulation into roofs and burnt down over 180 houses causing tragically the deaths of 4 people that we know of.

However, where they are really dodgy is this – they told people that they would assist with the cost of living. They had the dodgy fuel watch scheme and the dodgy grocery watch scheme which were announced with fan fare but achieved zip.

The cost of living in Australia is going through the roof because this crowd in government is dodgy and has absolutely no idea how to get the basics right. You cannot keep borrowing money at the rate they are, putting upward pressure on interest rates, and squeezing the last drop of blood out of working families and then claim to know something about the cost of living.

You cannot talk about reducing coal fired power replacing it with renewables at many times the cost and not expect that this is going to make working families poorer. You can’t fail to develop the inland and not expect the result to be far greater pressure on the social and economic infrastructure of urban Australia. If you don’t develop water infrastructure then you have to expect the price of a limited resource, water, to go through the roof. If you keep on making it difficult for farmers to farm, with continual new laws on vegetation, and everything they do from sunrise to sundown and in between, while at the same time failing to oversee that farmers are getting a fair price at the farm gate, then the farmers will disappear and the price of food will go through the roof. You can’t borrow hundreds of billions of dollars from overseas and not expect that it has to be repaid by people who have to pay taxes, working families, who could have otherwise put that money in their pockets.

In summary, many people at the supermarkets and at the pubs and clubs and at the church on the weekend and at the sport with their kids understand one thing – that they seem to be poorer under this crowd then they were before, they have less money than they did before. They seem to be watching a political soap opera that has more episodes than Blue Hills standing in proxy for decent government.

My statement to the Australian people on behalf of the National Party in the Senate will be this – Do you honestly believe that you can carry on with this crowd for another three years? What do you think will be left of the show if you do?

More Information – Jenny Swan 0746 251500

46 US States In Debt Crisis

29 Jun

46 out of 50 US state governments are now technically bankrupt.  To understand how bad that is for the global economy – including Australia – consider the fact that California alone has an economy that is larger than that of Russia.

From Bloomberg:

California, tied with Illinois for the lowest credit rating of any state, is diverting a rising portion of tax revenue to service debt, Bloomberg Markets magazine reports in its August issue.

Far from rebounding, the Golden State, with a $1.8 trillion economy that’s larger than Russia’s, is sinking deeper into its financial funk. And it’s not alone.

Even as the U.S. appears to be on the mend — gross domestic product has climbed three straight quarters — finances in Arizona, Illinois, New Jersey, New York and other states show few signs of improvement. Forty-six states face budget shortfalls that add up to $112 billion for the fiscal year ending next June, according to the Center on Budget and Policy Priorities, a Washington research institution.

State budget woes are a worsening drag on growth as the federal government tries to wean the economy from two years of extraordinary support. By Jan. 1, funds from the $787 billion federal stimulus bill will dry up. That money from Washington has helped cushion state budgets as tax revenue has plunged.

State leaders won’t be able to ride out this cycle the way they have in the past. The budget holes are too large.

What will the US do when nearly every state government is facing Greek-style deficits?

According to an RBS note to its clients, prepare for unprecedented money printing.

From the UK’s Telegraph:

As recovery starts to stall in the US and Europe with echoes of mid-1931, bond experts are once again dusting off a speech by Ben Bernanke given eight years ago as a freshman governor at the Federal Reserve.

Andrew Roberts, credit chief at RBS, is advising clients to read the Bernanke text very closely because the Fed is soon going to have to the pull the lever on “monster” quantitative easing (QE)”.

We cannot stress enough how strongly we believe that a cliff-edge may be around the corner, for the global banking system (particularly in Europe) and for the global economy. Think the unthinkable,” he said in a note to investors.

Societe Generale’s uber-bear Albert Edwards said the Fed and other central banks will be forced to print more money whatever they now say, given the “stinking fiscal mess” across the developed world. “The response to the coming deflationary maelstrom will be additional money printing that will make the recent QE seem insignificant,” he said.

Barnaby Joyce began warning about a bigger GFC in October last year. No one wanted to listen.

He was roundly ridiculed by the “experts” – such as the genius academic who designed the controversial RSPT, Treasury secretary Ken Henry – for suggesting the possibility that the USA could default on its massive debts.

The simple fact is this.  The USA is defaulting on its debts.

Printing money (euphemistically called “Quantitative Easing”) is technically a form of sovereign default.  When you cannot pay your debts, printing money devalues your currency, and makes it easier to pay back your debts.

It also means high inflation.  Possibly hyperinflation.  Think Weimar Germany in the 1920’s.  Or Zimbabwe today.

Barnaby is right.

Henry “Dumb”, “Completely Mad”, “Naïve Greenie”

24 Jun

In the wake – literally – of former PM Kevin Rudd, Mike Mangan at Business Spectator predicts the death knell for the RSPT:

The Labor leadership spill ensures the resources super profits tax is dead. While the RSPT started as an investment theme, it’s now just politics…

This (the RSPT) would have to rate as one of the dumbest political moves since Chifley tried to nationalise the banks 60 odd years ago. Labor nick-named Mark Latham “crazy brave”. But I doubt even Latham would have tried this one on…

Happily, Mangan goes on to join the rumblings (that were started right here on this blog back in February) calling for the sacking of Treasury secretary Ken Henry:

Former Labor senator Graham Richardson said earlier this week the miners are now spending a million a week advertising the stupidity of this “super tax on profits”. And he concludes “their ads are 50 times more effective than the government’s ads”. What was Rudd thinking? Who was advising him?

Enter stage left: Ken Henry.

Although Rudd has since rejected the idea, on Monday Rudd’s Treasury Secretary helpfully suggested the RSPT should be extended to all industries, especially banks and retailers. I think there are three possibilities here. Ken Henry is either politically dumb, gone completely mad or he is a secret admirer of Tony Abbott. Surely Kevin Rudd had enough enemies without adding two of Australia’s largest industries to that ever growing list. There is another possibility. Henry is just a naïve greenie. Reportedly he partly drafted his tax review while caring for northern hairy-nosed wombats in central Queensland. Too bad wombats don’t vote.

The spill result is great news for investors, because the mayhem Rudd unleashed over the last six or so months will cease and the RSPT in particular will be consigned to the history books with him. And I strongly suspect Secretary Henry won’t be too far behind.

McKibbin For PM 2010

23 Jun

Long something of an outsider – the lone outspoken voice of reason and commonsense on the otherwise “reserved” board of the Reserve Bank – Warwick McKibbin has again spoken out.  He has accused Rudd of panicking, and wasting huge sums of taxpayer money.

Who’d have thought!

From the Sydney Morning Herald:

A prominent university economist and member of the Reserve Bank board has delivered a scathing critique of Kevin Rudd’s response to the global financial crisis, saying his government ”panicked” and ”rammed through” decisions fraught with risk.

Warwick McKibbin, of the Australian National University, accused the government of overspending on its stimulus package, and then coming up with ”a really badly designed resource tax” to try to compensate.

And he described the government’s planned $43 billion national broadband network as ”a gigantic white elephant waiting to happen”.

It gets better.

McKibbin also attacks Treasury secretary Ken Henry.

Readers of this blog will know our scathing views of Henry’s “performance” before, during, and after the GFC.  We have been calling for him to be sacked… a call that is only now just beginning to resonate in the Opposition ranks.  And in the economic commentariat too. Highly esteemed business leader and commentator Robert Gottliebsen recently said this:

The position of Ken Henry as the head of Treasury is not sustainable.

Here’s what Professor McKibbin had to say about Henry:

Professor McKibbin also took aim at fellow Reserve Bank board member and Treasury secretary Ken Henry, accusing him of not only failing to consult experts on economic issues, but of trying to silence them…

(Professor McKibbin)… has told The Age he was stunned by Dr Henry’s call this week for academics to ”put down their weapons” and stop nitpicking over government proposals such at the emissions trading scheme.

”The ETS was a flawed scheme. Had the government got it through it would be dead by now because of the financial crisis,” Professor McKibbin said. ”I have enormous respect for Ken Henry, but he can’t believe that you should have consensus because it is better to have bad policy that everyone agrees with than eventually get good policy that will work.”

Enough of Henry. Really … enough!

Back to Rudd / Henry’s rushed and bungled “economic stimulus”:

And in a damning assessment of the government’s stimulus package, he (McKibbin) said: ”It wasn’t evidence-based policy, they panicked. They put the money into school buildings, they put it in insulation, they put it in stuff they could never reverse.

”The government rammed those decisions through the economy even though they were fraught with risk,” Professor McKibbin said. ”No one was consulted about an alternative view, and if you did say anything you were attacked by the Treasurer and the Prime Minister in public.”

He also accused the government of overspending on the stimulus package and then deciding that ”because of politics they had to get their spending back so they could claim they had fiscal surplus – for which there is no economic basis, by the way.

”So they come up with a really badly designed resource tax to try and get the position to look good three years from now and, in the middle of a sovereign risk crisis, exposed the economy to a reassessment of sovereign risk.”

Warwick, we need you in politics.  You have my vote.

McKibbin For PM 2010!

Barnaby: The Economic Illuminati

9 Jun

Opinion piece for The Punch – Senator Barnaby Joyce, 7 June 2010:

The Mining Tax:  Treasury’s Own Love Formula

Every now and then, a select group from the economic illuminati retire to their monastic study and devise a splendid idea to try and pay off their previous splendid idea.

Splendid idea number one was to borrow so much money that we put ourselves in more strife than the early settlers in our desire to adorn the nation with an eclectic mix of rubbish that apparently was going to save us from Asia ceasing to purchase our minerals. The relationship between our stimulus and mineral exports was as clear as mud, but there was an emphatic defence of this fantastic proposition by Labor.

The Treasury corruption of the graphs depicting the relationship between our and other nations’ fiscal stimulus packages and the effect on their respective economies shows that when the graphs were corrected the relationship was hardly apparent. We really were sold a lemon on Labor’s “go hard, go early, go household strategy” in response to the North American and European financial crisis and are currently lumbered with in excess of $144 billion gross federal debt while on our merry way to in excess of $220 billion gross federal debt.

The next chapter in the Labor Party Magnus Opus was called “massive debt” and the next problem for Treasury was “how do we pay it off?” The Labor Party thought to increase their revenue stream in the most politically parochial way. They explained to Australia that the big miners are morally lacking, are exploiting the workers, and they as a government, Robin Hood – like, would restore the balance of fiscal morality. It would mean the partial nationalisation of our whole mining sector, however. They had it on good advice from the Secretary of the Treasury, that he had studied a theorem at high school that no matter how you flog this mining sector, it’s going to hang around and continue to support you.

The sobering reality is this, despite the Secretary of the Treasury stating that you can put taxes up in the mining sector and not affect the investment profile, he is wrong on this occasion. If taxes go up at an exponential rate to where they formerly were, people will make the logical decision to go where the taxes are less. If the Secretary of the Treasury tells you that a new tax will assist in cooling the planet, you really have to ask yourself if this is necessarily so. If you surround yourself with hedges of economic theorems and carpets of policy papers and spend your nights fanatically trying to turn human emotion into predictable mathematical models, and don’t recognise what is yelled to you as common sense by the peak industry groups, you will come unstuck when you find that your models don’t match their experience.

During Estimates one can get quite frustrated with well meaning pontificating by well paid bureaucrats about a perfect world they have created and what happens in it. This world has created a Newtonian expectation of preciseness to economics as required to match government policy desires. It supposes that gravity and economics are the same and that people’s actions are as predictable as other items of physics- like a mathematical model for love. Commonsense expectations on actions and reactions are put aside for superb anodyne reflections on economic issues. The basic premise that must be first applied when analysing the RSPT is this – if a miner can make more money in another venue, then to that other venue they will go. Unfortunately it appears that this statement of the bleeding obvious, that one cannot predict the economic speed of sound, has meant that a realistic gut instinct of what happens when you put a 40% tax on mining has not been followed.

The reality of the RSPT, which was blatantly obvious to virtually everyone, has now of course come to be in the actions of such companies as Xstrata in the reduction of their investment decisions in Australia. How can we believe the Labor Party’s lauding of their so-called management of the GFC and take for granted their endorsement that it was their school halls program that saved us from a recession, when it is the same Labor Government inspired brains trust that is creating this stuff up?

Dr Henry, in answer to my question at the Economics References Committee Inquiry earlier this week, stated that it didn’t matter whether the RSPT tax was at 40, 60 or 70 percent, as to how it would affect investment in Australia. I was left no choice but to believe that he was correct in his description of a theory but had completely departed from reality as to what was actually going to happen.

This new tax will not only be a bombshell to such mining areas as Gladstone, Townsville, Wollongong Newcastle and Mackay and the whole of WA, but ultimately it will affect those other big coastal towns such as Brisbane, Melbourne and Sydney as they come to the startling reality that these Labor Party splendid ideas are going to have dire consequences to the investment and export structure of our nation.

In the town of Wandoan, there are some farmers who are happy today due to the fact that a major mine is not going ahead and yes we should not be mining prime agricultural land because this is the ultimate non renewable resource. This Labor Party package was not to protect prime agricultural land but to prop up Treasury with a new tax. In fact the Labor Party hoped the mining would go ahead in Wandoan. However, there are some other families who were hoping that the income from the mine will increase their standard of living, and they are very unhappy, because Labor Party hopes are not their reality.

There were people who were going to build a $1 billion railway line from Wandoan to Banana and they are unhappy today as they are not going to build it anymore. There was supposed to be the development of a massive income stream to support lots of shops, chemists, school teachers, nurses, contractors, metal fabricators, diesel fitters and they are all going to miss out. They are all very unhappy. They are all unhappy because some group of individuals in Canberra decided that they were beyond questioning and resolute in a desire to inflict on the Australian economy what would have to be the most incongruous economic policy since the 1949 desire by the Labor government to nationalise the banking industry.

Joyce: ‘More Modelling Than Naomi Campbell’

3 Jun

Barnaby Joyce accuses Labor of using dodgy statistics in its propaganda for its Orwellian-named “Resource Super-Profits Tax” (RSPT).

From The Australian:

The Federal Government has more modelling “than Naomi Campbell” on its proposed mining tax, but none of it makes any sense, Nationals Senate leader Barnaby Joyce says.

He has accused the Government of hiding behind questionable statistics in its push to implement a 40 per cent tax on the super profits of mining companies.

They’ve got more modelling than Naomi Campbell, but it’s all wrong,” Senator Joyce said today.

Indeed, the modelling is all wrong.

Professor Steve Keen, winner of the Revere Award for being the international economist who first and most cogently forewarned of the coming GFC, has demonstrated that Treasury’s modelling is based on economic fallacies and “a gaping hole in logic“, in a series of articles for Business Spectator.  They can also be found on Professor Keen’s DebtWatch blog.

Returning to Barnaby:

He took special aim at Treasury over pie charts Treasurer Wayne Swan used to back the Government’s argument miners have been paying half the tax they were paying a decade ago.

Respected business commentator and ABC TV’s Finance presenter, Alan Kohler, today checked the numbers for himself in a column for Business Spectator titled, “The Government’s RSPT Spin Is A Disgrace”:

Another big accounting firm, Deloittes, has gone through ATO data and demonstrated that the effective tax rate for Australian mining companies (company tax plus royalties) is 41.3 per cent, compared with the average across all sectors of 27.18 per cent. I went into the ATO website and did the same calculation: it’s true.

In one of its taxpayer-funded advertisements, the government says: “Before the last boom Australia got 1 in every 3 dollars of mining profits in royalties and resource charges, we now receive just 1 in every 7 dollars.”

This statement is a disgrace, even leaving aside the fact that we are paying for it.

Back to Barnaby:

Senator Joyce wants to see the figures Treasury used to formulate the charts, but Departmental officials have opted to stall at a series of Senate estimates hearings this week.

“The pie charts don’t make any sense,” he said.

“They’ve had four days to explain two pie charts and they can’t do it.”

Indeed, according to mining magnate Andrew ‘Twiggy’ Forrest today, the head of the Treasury department Ken Henry – the architect of the now infamous Henry Tax Review – can’t even explain it himself:

Mr Forrest said Dr Henry had effectively conceded at a lunch with leading economists late last month that he was uncertain how financiers would view the rebate.

“When asked … he (Dr Henry) said, `I’m sure some clever banker is going to find out how to make it work’,” Mr Forrest said.

What he’s saying to the Australian people is that he doesn’t know.

“Ken Henry doesn’t have the answers and what I know with absolute certainty is that he didn’t consult with the banking industry, like he didn’t consult with the mining industry.

As this blog has highlighted many times, Treasury secretary Ken Henry is not fit to hold his position, and should be sacked.  The huge controversy over the RSPT only serves to confirm this view.

Yesterday Andrew Forrest revealed details of his own private conversations with Ken Henry over the RSPT, during which Henry admitted that the “logic” of his RSPT all rests on one critical assumption.  The fact that this assumption is dead wrong, further proves Henry’s ivory-towered, disconnected-from-economic-reality incompetence:

“Ken has described to me how the tax works and it relies on a critical assumption, that the so-called guarantee of 40 per cent of losses in bankruptcy actually has a value to financiers,” Mr Forrest told ABC Radio.

“If it doesn’t, then in Ken Henry’s own words, the logic of the entire tax collapses and this is just a 40 per cent take, which of course will then damage the industry.”

Mr Forrest said he had told Mr Henry that the 40 per cent tax credit guarantee on losses would be worthless to the mining industry as it would not be worth anything to financiers when they decided on loans.

“It theoretically works for economists in textbooks, it doesn’t work in the real world.”

Which is exactly what contrarian economist Steve Keen says is true about almost all mainstream economic thought, in his brilliant book Debunking Economics.

UPDATE:

From The Australian:

One of Australia’s most respected economic forecasters, Chris Richardson, has demolished the intellectual and economic modelling behind the government’s resource super-profits tax, effectively telling Treasury it got it badly wrong..

The assault on the fundamental logic of the tax will seriously embarrass the government and the architect of the tax, Treasury secretary Ken Henry, given their repeated claims that their model will not deter investment and the mining industry is merely running a fear campaign.

Mining Tax Puts Australia On Frontline of Market Fury

21 May

Highly respected Australian economics commentator, Robert Gottliebsen, puts forward the same basic point as investment giant Goldman Sachs/JB Were in their recent note to clients – that the Rudd’s government’s mining tax is a prime cause of the dramatic collapse in the Aussie sharemarket and Aussie Dollar.

From Business Spectator:

Global stock markets are losing faith in governments to manage the escalating problems stemming from the sovereign debt situation. But it is worse than that. Bankers are also losing confidence in governments. The sharp falls in stock markets will affect business activities and will have repercussions on economies around the world.

Solvent governments such as Germany are effectively borrowing vast sums to prop up bankrupt countries like Greece and most of the other PIIGS . The bankers say it will not work. Traders are liquidating their portfolios and the shorters are selling European shares.

And whereas we should have been one of the pillars of stability in this global crisis, our crazy mining tax has caused Australia to be in the front line of the market fury.

We have already been hit by a massive bear raid and now we will hit again by the falls on Wall Street.

We need good government at this crucial point in history. Instead we have bad government, so our economic recovery will be stalled if markets keep plunging. Treasury’s optimistic budget forecasts now look as silly as its mining tax.

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