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Aussie Government - The Idiot Giving The Advice  
User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 36
Posted (4 years 2 months 4 days 23 hours ago) and read 2494 times:

I usually finish reading the Australian political news in a state of slightly-amused resignation; but this story left me downright angry. I thought that it would maybe be of interest to people in other countries, as it possibly explains to an extent why all governments worldwide so often consider any problem that comes up, 'take advice' on it, and then almost always do precisely the wrong thing........

The current Australian Government (having spent like drunken sailors for a couple of years) is currently desperate to raise taxes; but, with an election coming up, it dare not raise general levels of tax. So it is now proposing a 'Resource Super Profits Tax' on the mining and resources industries that are commonly accepted largely to be the foundation of Australia's relative prosperity. The tax is proposed to consist of an extra tax, additional to normal company tax, payable at a rate of 40% on all annual profits above 6% (yes, only SIX per cent!  ).

Turns out that the scheme is the brainchild of a guy named Ken Henry, who is the Head ('Secretary') of the Australian Treasury. In a hearing into the tax proposal that is currently in progress in the Australian Senate, his advice included the following statement:-

"Dr. Henry is appearing before the Senate estimates hearing in Canberra this morning where he is being quizzed on the Rudd government's resource super profits tax, which he helped design through his work on the Henry tax review.

"Asked about the Opposition leader's claim that the tax would hit the cost of living, Dr Henry said he had learned in high school that a profits-based tax should not affect prices.

“Prices should not be affected,” he said."


http://www.theaustralian.com.au/busi...mates/story-fn5eo6td-1225871907112

Dr. Henry didn't complete his education in high school - he went on to get a degree and Ph.D in economics. Then he went straight into the civil service, and has been Head of the Treasury since 2001, In retrospect, his career since then has been much concentrated on inventing new and 'promising' ideas for new taxation - including our infamous GST ('goods and services tax') - under which if, for example, you hire an electrician to overhaul your domestic electrical system (as I happen to be doing at the moment), you pay tax not merely on the fittings etc. that he buys to do the job, but ALSO on the cost of his services as well. The GST has of course generated a lot more revenue for the government, but in the process it has 'transformed' the cost of living here (in an upward direction, as you - and anyone else with brains in their head - would have expected).

http://en.wikipedia.org/wiki/Ken_Henry_(Australian_public_servant)

The newspapers here are full of reports of resources companies putting new projects on hold because of the 'uncertainties of the situation' - again as you'd expect.

As it happens, my degree was also in economics. But after that I spent a lot of time (in both public and private sectors) helping to plan, design, and fund a large number of new commercial projects. I can assure Dr. Henry of two very simple facts:-

1, No company (or funding source) would take the risk of planning and carrying out a project on the basis of a mere six per cent return, after which they'd face penal rates of tax. They could get pretty well the same rate of return just by leaving the money in the bank; indeed, in almost all circumstances, they'd be paying more than that for the capital to fund the project anyway.

2. Like it or not, business is about taking risks in the hope of securing profits. Though that situation can have its drawbacks, no-one has yet found a better way of creating wealth and employment. And the risk factor inevitably means that entrepreneurs will 'win some, lose some.' If any government announces in advance that it will tax the daylights out of any successful project that achieves a profit above financing costs, there is only one thing that can happen. Most, if not all, said projects simply won't happen.....

All in all, I think Dr. Henry's high school economics teacher, all those years ago, has a helluva lot to answer for.......  AS DO his counterparts in many other countries - who appear to have taught civil servants and politicians all over the world that 'money grows on trees.'

[Edited 2010-05-26 20:44:05]


"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
22 replies: All unread, jump to last
 
User currently onlineDerico From Argentina, joined Dec 1999, 4300 posts, RR: 12
Reply 1, posted (4 years 2 months 4 days 22 hours ago) and read 2456 times:

I thought Australia was actually one place were there hasn't been excessive government spending. In fact, I was under the impression there was no deficit budget issues.


My internet was not shut down, the internet has shut me down
User currently offlineBaroque From Australia, joined Apr 2006, 15380 posts, RR: 59
Reply 2, posted (4 years 2 months 4 days 22 hours ago) and read 2454 times:

Quoting NAV20 (Thread starter):
Dr. Henry didn't complete his education in high school - he went on to get a degree and Ph.D in economics. Then he went straight into the civil service, and has been Head of the Treasury since 2001,

Your criticism of Henry might be justified but are you really happy about taking the opposite view expressed by Tom Albanese of Rio? The man who:

1. Went on a frolic buying ALCAN which basically sent the company broke.

2. Arranged to sell a controlling interest to the Chinese government.

3. Does not want the tax to be retrospective, but conveniently forgets that Rio has NEVER lived up to its solemn commitment for secondary processing in relation to the original Hamersley lease and

4. Maintaining that Australia has the worst sovereign risk, conveniently hoping nobody will notice that:
.........4A. The Indonesian government effectively confiscated the immensely profitable KalTimPrima mine in Kalimantan Timur and
.........4B. Just lost a large part of the Simandoo lease after spending some hundreds of millions on exploration and
.........4C. Totally fails to mention the implication of Black Empowerment rules for mines in S Africa - the S African revenue service is called SARS!!!

Oh and just for the record about Albanese sitting there looking the camera with a face that would do credit to Bishop J about reinvesting all its profits in Australia, Rio TInto got its original stake money by selling up its mines in Spain and backing out of that country.

Have we all forgotten the darling book of the 1970s?
http://www.jstor.org/pss/4185408
River of tears : the rise of the Rio Tinto-Zinc Mining Corporation

Quoting NAV20 (Thread starter):
1, No company (or funding source) would take the risk of planning and carrying out a project on the basis of a mere six per cent return, after which they'd face penal rates of tax. They could get pretty well the same rate of return just by leaving the money in the bank; indeed, in almost all circumstances, they'd be paying more than that for the capital to fund the project anyway.

Good try. You and I know that the bond rate is used because the tax also includes a reverse arm where reimbursements are made for losses. As it happens I don't think this is all that bright an idea, but you might give him credit that it is there. The cost to the government is higher on losses if you use a higher threshold.

Quoting NAV20 (Thread starter):
2. Like it or not, business is about taking risks in the hope of securing profits. Though that situation can have its drawbacks, no-one has yet found a better way of creating wealth and employment. And the risk factor inevitably means that entrepreneurs will 'win some, lose some.' If any government announces in advance that it will tax the daylights out of any successful project that achieves a profit above financing costs, there is only one thing that can happen. Most, if not all, said projects simply won't happen.....

Like it or not, the government already declares that if your business is successful, it will take 30%. It is more a matter of quantity rather than one of quality.

Somehow you managed not to mention a major feature, the tax is to replace Royalties - a tax on volume - with one on profits. Said by economists (of which I am not one) to be more efficient. And you omit the argument that the companies are selling our minerals, and that once sold, they are GONE.

And that is leaving aside the discussion that the very same companies robbed us blind by overproducing for years resulting in abominably low prices and were also pretty cack handed about negotiating prices. It is said that the large Woodside gas contract with China does NOT contain an inflation clause and lasts for something over 20 years. Now with geniuses like that negotiating, we really need their advice on tax.

I am not sure what you are inferring about Henry's scholastic record, but the average guy leaving school at age 12 would figure that no escalation in a 20 year contract was not too clever.


User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 36
Reply 3, posted (4 years 2 months 4 days 22 hours ago) and read 2445 times:

That was a couple of years ago, Derico:-

"May 9 (Bloomberg) -- Australian Treasurer Wayne Swan said the deficit in the May 11 budget will be less than forecast last year, with a “stronger” outlook and 2 percent cap on government spending.

"The budget will have a “stronger” outlook, yet revenue will be lower amid the global financial crisis, Swan said. The budget was forecast to deliver a A$57.7 billion ($51.1 billion) deficit in the year ending June 30, according to the mid-year budget review published in November.

“The outlook will be better and the outlook will be stronger,” Swan told Nine Network television today. “You will see a very disciplined budget.”


http://www.businessweek.com/news/201...budget-deficit-lower-update2-.html

You're right in the sense that our deficit is not 'out of control' yet. But just give the various 'idiots' taking the key decisions a bit more time.....  



"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineTheCommodore From Australia, joined Dec 2007, 2758 posts, RR: 8
Reply 4, posted (4 years 2 months 4 days 22 hours ago) and read 2416 times:

Quoting Baroque (Reply 2):
Somehow you managed not to mention a major feature, the tax is to replace Royalties

Are you sure about that ?

I thought one of the sticking points was, in relation to the ("consultation process") (not) that it wasn't going to replace "royalties". Miners are actually saying this new "super mining tax" was on top of the existing tax's and state royalties, with the only concession being a drop in company tax rate?

Quoting Baroque (Reply 2):
And you omit the argument that the companies are selling our minerals, and that once sold, they are GONE.

Why, they never were before, why now all of a sudden?
I must take issue with you on this point Baroque, with all due respect I think the minerals you refer to belong to the mining companies in question, they are paying hefty amounts on lease payments to the owners of the land, whether they be crown leases or private owners.

What is your reasoning behind saying they belong to us, eg all Australians.?

It the Government in it's infinite wisdom, thinks that the minerals belong to "all Australians" then they should reclaim All land that contain minerals/oil/gold etc.. and start a mining company, then share all the profits with each and everyone of us on a P/A basis .

[Edited 2010-05-26 22:06:03]


Flown 905,468 kms or 2.356 times to the moon, 1296 hrs, Longest flight 10,524 kms
User currently offlineBaroque From Australia, joined Apr 2006, 15380 posts, RR: 59
Reply 5, posted (4 years 2 months 4 days 21 hours ago) and read 2376 times:

Quoting Derico (Reply 1):
I thought Australia was actually one place were there hasn't been excessive government spending. In fact, I was under the impression there was no deficit budget issues.

FYI

http://www.anz.com/resources/3/f/3f9...D=3f93b480426f8c13975e9f9bdc498da1

A summary that is up to date. ANZ Australian Federal Budget Report / 12 May 2010

If anone wants a calm summary of the tax, try

http://www.fspcanberra.com.au/index....tax-review-summary.html&Itemid=126

May 02
2010

The Henry Tax Review - Summary

Or you can try
http://resources.news.com.au/files/2...37188-economists-on-mining-tax.pdf

For an open letter by 20+ leading Australian economists on the subject.

An extract:
Royalties tax production no matter how profitable. A resource rent tax only taxes production when it is profitable and only after all costs have been deducted. If the project does not make a profit, some of its costs are potentially refundable or otherwise claimable. This means the Government shares the risk associated with exploitation of our minerals resources. So, the proposed design for the RSPT effectively only taxes those profits over and above the hurdle rate of return for a mine (that is, its risk-adjusted cost of capital), after allowance is made for the proposed 40% rebate of the cost of developing each mine.

Given the Governmentʼs commitment to bearing some of the risk by refunding losses, uplifting undeducted capital and losses by anything above a risk free rate would create potential distortions. Any increase in the uplift rate would require a corresponding modification of the risk shared with government. Any modifications in the design of the RSPT should be underpinned with evidence about the relative shares of returns for natural resources as well as returns on other factors of capital. Moving from taxing mobile capital towards less mobile tax bases in this way is consistent with economic theory and recent work of the OECD and IMF on the application of economic principles to guide taxation policy. Australia has a long history of resource taxation and resource economics. The Petroleum Resource Rent Tax that started almost 24 years ago only applies to some sites offshore and represented a significant practical and conceptual advance in our thinking and tax practice. Applying this principle more broadly to other minerals represents the next measured but difficult step.


And in other news

http://www.watoday.com.au/business/w...ew-resource-tax-20100526-wdk5.html

China plans new resource tax
May 26, 2010 - 3:24PM


China will levy a 5 per cent resource tax on crude oil and natural gas sales and a 2-5 per cent tax on coal in the Xinjiang region from June 1, raising over 2 billion yuan ($330 million) for the region this year, Chinese media reported today.


And just for the record, that will be 5% and 2.5% on total sales value, not on profits. Cannot believe those guys sat there and intoned there is nothing of this kind in the whole world. Apparently neither Norway nor Indonesia are on this planet. Sheesh!!!


User currently offlineBaroque From Australia, joined Apr 2006, 15380 posts, RR: 59
Reply 6, posted (4 years 2 months 4 days 20 hours ago) and read 2353 times:

Quoting TheCommodore (Reply 4):
What is your reasoning behind saying they belong to us, eg all Australians.?

Strictly they belong to the crown and these days the crown acts for us all. There was a small amount of "private" coal in NSW, but Nifty Nev IIRC bought it back. Cannot remember how that came to be but the private coal was the exception that proved the rule as it were.

So to cut to the chase, you can have the world's biggest oilfield under you back garden or a diamond that leaves the Kohinoor for dead, but it still belongs to the state in which your back garden is situated. You could ask nicely and try to buy a lease. But if I knew there was a bloody great big diamond in your back garden, I might outbid you. Then you would negotiate with me about a fee to enter and dig up your back garden. That is more or less what happened to BHP when they found the Wolfang coalfield in Qld. They took out the least for GOLD and found COAL - by the bucketload, but White Industries bought the coal lease from under them. Oh it is all fun in the lease business.

Quoting TheCommodore (Reply 4):
Are you sure about that ?

I thought one of the sticking points was, in relation to the ("consultation process") (not) that it wasn't going to replace "royalties". Miners are actually saying this new "super mining tax" was on top of the existing tax's and state royalties, with the only concession being a drop in company tax rate?

Absolutely positive. Even to the point where the refunds will be done variably through the states until the Feds gets a uniform agreement on what they should be - probably another GST sort of agreement at a guess.

Here is the relevant quote from the open letter of the 20+ economists.

There is no reason to expect a net contraction in mining over the longer term as a result of replacing royalties with the proposed resource rent tax. This is because a tax on economic rent of non-renewable resources is a more efficient way of raising revenue than taxing mining production (royalties).

Not a heck of a lot that is being said by the mining side is true - alas. But look, I had 20 years of them maintaining that overburden is better than soil at the top after an open pit has been mined. Saying that with a straight face when the Coal Board in the UK went to full restoration in about 1942 - that is in the middle of a bloody great big war. And the reason they went to full restoration - U-boats. So don't say that torpedoes are not good for something. But it took the mining industry another 40 years and even then it is pretty pathetic compared with mid war UK practice. The reason for restoration was to keep up food production, a tonne grown at home was calculated to save a considerable multiple when translated into imports in the face of U-boats. Don't mention ze var, you will not get away with it.

Aha, mining lease payments. They MAY have to pay to acquire mining rights, but even though the capital amounts look high, they are small on a per tonne basis. In many cases the main outlays are a promise to drill so many holes, and sometimes other lease requirements. The main payment is through Royalties. And as the bevy of economists point out, they have to pay the same Royalty when prices are sky high and when they hit rock bottom. Remember that at most time up to about 1995 it was nearly impossible to give away coal mines. And guess what, Rio Tinto did virtually give away Westcliff and Northcliff mines to BHP.

But the things of which you have heard not a word are HBI and Hismelt.

http://www.chemlink.com.au/iron.htm
To December 2000, world steel production was a record 843 million tonnes (up 7 per cent on previous year). China produced 126mtpa, Japan 106 mpta and the USA 101mtpa. About 40 per cent of steel is from scrap. US prices for scrap are $20 per tonne lower than in Asia. EAFs anticipated to produce 45 per cent of world steel production by 2010. Scrap sells in a range of about $US80 per tonne to $US140/t. It in 2000 now trading at the lower end. A new DRI plant would have to produce in the range of $US80 to $US90 a tonne for viability.

Hismelt (April 2002)

Rio Tinto Ltd has confirmed the construction of a $400 million commercial scale HIsmelt plant in Kwinana south of Perth, after securing federal government assistance of A$125million ($50 million plus a further $75 million contingent on the steel mill), WA government $30 million in land and port facilities and Japan's Mitsubishi Corp as a joint venture partner.

Mitsubishi would take a 10 per cent stake in the project, joining Rio Tinto (60 per cent), US steelmaker Nucor Corp (25 per cent) and Chinese steelmaker Shougang Corporation (five per cent).

The project will produce around 800,000 tonnes of high quality pig iron a year using lower grade and lower value iron ore (typically 25 per cent less), such as the high phosphorous ores found in the Pilbara region of WA. It would promote a cleaner steel industry not requiring coke ovens and sinter plants and producing less greenhouse gas per tonne of metal.

It followed more than that 20 years of research and development at a cost of A$600 million.

Construction will commence early 2003 with commissioning scheduled for 2004. Rio would initially source ore for the project from its own reserves and those of fellow iron ore producer Portman Ltd.

Its joint venture partner Nucor consumes about five million tonnes of pig iron annually making it an obvious customer of the HIsmelt product.

Rio Tinto would consider doubling the project's capacity to 1.5 million tonnes a year in 2005, which ultimately could lead to the construction of a steel plant in about 2006/07.
Austeel

Austeel is planning a plant at Cape Preston some 100 km south of Dampier to produce 4.62 mtpa of DRI/HBI and use 210 terajoules of gas per day. The HBI will be shipped to Austeel at Newcastle in New South Wales.

In December 2001, agreement was signed by the state, Mineralogy Pty Ltd and six co-proponent companies for the mining and processing of magnetite iron ore deposits near Cape Preston, 85 kilometres south west of Karratha. The project, which involves capital expenditure of $5.6 billion, is expected to create 20,000 jobs nationally and generate an annual output of $2.5 billion. It involves the development of a new open pit iron ore mine in WA's Pilbara region, processing of ore into a hot briquetted iron (HBI) and shipping of the HBI through a new port at Cape Preston to the planned steel mill in Newcastle. Mineralogy holds mining leases over the several ore bodies and has a established a consortium to develop the project based on the deposits. National and international players which have indicated their support for the project include Italian steel producer Danieli, engineering group Lurgi, Macsteel International Holdings BV (a joint venture between the Macsteel group and Iscor of South Africa), Chevron, Industrial Bank of Japan and mining contractor Thiess Pty Ltd, a subsidiary of Leighton Holdings.

In addition, Austeel last year signed a memorandum of understanding between with the Woodside Petroleum Ltd-operated North West Shelf project for the supply of gas to the project. Palmer told reporters he expected to finalise all regulatory hurdles by mid 2002 and achieve financial closure three to four months later, enabling development work to begin. The three year construction timeframe would see the project move into production in 2005.

HBI is gone.

Hismelt??
http://www.minister.infrastructure.g...releases/2009/March/GG011_2009.htm
[i] 26 March 2009
GG011/2009
KWINANA HISMELT DECISION

Parliamentary Secretary for Regional Development and local member of Federal Parliament Gary Gray said the decision by Rio Tinto and its joint venture partners to put its HIsmelt operation in Kwinana under caretaker mode until April 2010 was regrettable but inevitable as the price of pig iron dropped to a quarter of the price it fetched mid 2008.

"I understand that Rio Tinto has assessed its operations after the three month suspension and has regrettably made the tough decision to place the Kwinana HIsmelt operation on suspension for another 12 months," Mr Gray said.

"While around 40 people will keep their roles to maintain the plant on standby I understand around 100 workers will be encouraged to seek redeployment or take redundancy."

"While it is hopeful that the plant will restart in 12 months time, it is inevitable that many HIsmelt workers will now be out of work and this will have a significant impact on our community," Mr Gray said.

If Kwinana HIsmelt workers are made redundant they will be eligible for the additional Employment Services announced by the Minister for Employment Participation Brendan OConnor on 25 February 2009. This includes:


So we continue to sell for example Korea a tonne of iron ore at about USD150 (if lucky) and half a tonne of coking coal for about USD150 and import the result as a Hyundai Elantra for what USD15,000.

Way to go. And Port Kembla probably still produces the lowest cost pig iron in the world. Don't get me started!!!!!


User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 36
Reply 7, posted (4 years 2 months 4 days 20 hours ago) and read 2320 times:

Quoting Baroque (Reply 6):
Here is the relevant quote from the open letter of the 20+ economists.

Joke against myself, Baroque, but IMO George Bernard Shaw put the lot of us economists 'to bed' when he said, "If all the economists in the world were laid end to end they still wouldn't reach a conclusion."  

In any case I don't hold a brief for either side of politics in Australia - both of them make mistakes, they just tend to make different ones........

Anyway, I guess we can just about wind this thread up. Either the Australian Prime Minister is an A.netter, or someone else finally managed to inject some common sense into him (hopefully into a painful part  ):-

"THE Rudd government is moving towards a major backdown on its $12 billion tax on resources, redefining its proposed super-profits levy, but the big mining companies have declared the changes do not stop the risk to investment in Australia.

"Only three weeks after unveiling the new resource super-profits tax, the government is preparing to lift the threshold definition of a super profit from 6 per cent to 11 or 12 per cent following a ferocious campaign by the mining companies.

"To offset the lost revenue in raising the threshold to the same level as the existing petroleum resources rent tax, which applies to offshore gasfields, the government intends to withdraw the 40 per cent taxpayer-funded compensation originally offered for mining projects that fail."


http://www.theaustralian.com.au/busi...-rate/story-fn5eo6td-1225871786155

'The game will go on until the whistle blows,' but in my view that (to my mind, vast) about-turn pretty well defuses the matter.

And it won't take Dr. Henry long to wipe the egg off his face......

[Edited 2010-05-27 00:01:37]


"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineBaroque From Australia, joined Apr 2006, 15380 posts, RR: 59
Reply 8, posted (4 years 2 months 4 days 19 hours ago) and read 2300 times:

Quoting NAV20 (Reply 7):
"Only three weeks after unveiling the new resource super-profits tax, the government is preparing to lift the threshold definition of a super profit from 6 per cent to 11 or 12 per cent following a ferocious campaign by the mining companies.

"To offset the lost revenue in raising the threshold to the same level as the existing petroleum resources rent tax, which applies to offshore gasfields, the government intends to withdraw the 40 per cent taxpayer-funded compensation originally offered for mining projects that fail."

I agree that is preferable. Not so much to lower the incidence of the super tax, but to avoid the wrangling over losses when it went the other way. That was potentially a good idea, but in practice - which we will not see, so I can affirm this!!! - it would have been a nightmare.

There is a video on this link
http://www.watoday.com.au/business/e...back-mining-tax-20100526-wbfq.html
where Ross Gittins gives about as good an explanation of what the tax is about.

That change does not alter the thrust of the proposal, just makes it simpler and less open to abuse. And after working for one large company that ran a case against the ATO about coal being oil for tax purposes, I get the feeling that simplicity would be a good idea.

But back at the start of it all, where are the value added projects these companies agreed to with such solemn promises now close to 50 years ago. I mean a broken promise for 50 years would be a near record for a pollie, so why are BHP and Rio able to keep a straight face.


User currently offlinebill142 From Australia, joined Aug 2004, 8440 posts, RR: 8
Reply 9, posted (4 years 2 months 4 days 18 hours ago) and read 2246 times:

Quoting Baroque (Reply 8):
And after working for one large company that ran a case against the ATO about coal being oil for tax purposes, I get the feeling that simplicity would be a good idea.

Don't be stupid. Government likes to add layer upon layer of complexity and market it to you as being more simple than before. It's the kind of bureaucratic non-sense that keeps half of the public service employed in coming up with it and the other half employed by having to deal with it. I see this every day. I swear the department of finance have nothing to do so they just find ways to make everyone elses lives more difficult.


User currently offlineBaroque From Australia, joined Apr 2006, 15380 posts, RR: 59
Reply 10, posted (4 years 2 months 4 days 12 hours ago) and read 2155 times:

Quoting bill142 (Reply 9):
Quoting Baroque (Reply 8):
And after working for one large company that ran a case against the ATO about coal being oil for tax purposes, I get the feeling that simplicity would be a good idea.

Don't be stupid. Government likes to add layer upon layer of complexity and market it to you as being more simple than before. It's the kind of bureaucratic non-sense that keeps half of the public service employed in coming up with it and the other half employed by having to deal with it. I see this every day. I swear the department of finance have nothing to do so they just find ways to make everyone elses lives more difficult.

Take a blue riband in pessimism. I presume your chickens did die and now the dept of finance is preventing you from selling the wire netting.

How is the log going on the other shoulder?   

Pip pip as Chanticlleer used to say.


User currently offlineTheCommodore From Australia, joined Dec 2007, 2758 posts, RR: 8
Reply 11, posted (4 years 2 months 4 days 5 hours ago) and read 2098 times:

Quoting Baroque (Reply 6):
Absolutely positive. Even to the point where the refunds will be done variably through the states until the Feds gets a uniform agreement on what they should be - probably another GST sort of agreement at a guess.

Thanks for the detailed reply Baroque.

I suppose we will have to wait until the consultation process is done and dusted to see what comes next. If the money (raised) was not already spoken for then it may the the Gov a little room to move, but whatever happens it will be interesting.

Quoting NAV20 (Reply 7):
Anyway, I guess we can just about wind this thread up. Either the Australian Prime Minister is an A.netter, or someone else finally managed to inject some common sense into him (hopefully into a painful part  -

Beautiful ! Although not a for gone conclusion just yet.You understand how the Press "sometimes" get things about face !!!!

Quoting bill142 (Reply 9):
Don't be stupid. Government likes to add layer upon layer of complexity and market it to you as being more simple than before. It's the kind of bureaucratic non-sense that keeps half of the public service employed in coming up with it and the other half employed by having to deal with it. I see this every day. I swear the department of finance have nothing to do so they just find ways to make everyone elses lives more difficult.


Yes, I little like an episode of "Yes Prime Minister" and the head of the public service Sir Humphery

Quoting Baroque (Reply 10):
I presume your chickens did die

Only the one laying the golden egg, so to speak !!  



Flown 905,468 kms or 2.356 times to the moon, 1296 hrs, Longest flight 10,524 kms
User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 36
Reply 12, posted (4 years 2 months 4 days ago) and read 2043 times:

Quoting Baroque (Reply 8):
I agree that is preferable. Not so much to lower the incidence of the super tax, but to avoid the wrangling over losses when it went the other way. That was potentially a good idea, but in practice - which we will not see, so I can affirm this!!! - it would have been a nightmare.

I think only 'creatures' like governments could say to an industry, "OK, sorry you don't like the idea of us taking most of the profits on the successful projects; tell you what, we'll 'compensate' by giving you a tax allowance on the un-successful ones........."

It's that government/business 'disconnect' again. Governments try to do every 'project' at once, and usually have a 'failure rate' of at least 50% (this particular government's failure rate so far is just about 100%). Industry tends much more to take projects one at a time - and can't afford to entertain any suggestion that any given project might fail.......

About this 'land ownership' thing - the land does not belong to 'all Australians.' Australia - like most other ex-British colonies including the United States - adopted the British (strictly-speaking, the English) system of land tenure. Furthermore, all such colonies were separate to begin with. So, for example, I don't 'own' the land on which my house stands; I only have a 'freehold interest' in it. What's more, the true ownership of the land does not rest with the 'Johnny-come-lately' 1901 Australian Federal Government, it rests with the State of Victoria, which was established in 1851. As far as I know, exactly the same applies in say, Virginia in the USA.

What's more, my 'freehold interest' does not allow me to build anything on my land - or, least of all, dig it up and mine the resources - without the permission of the true 'owner,' the State of Victoria.

In my view, therefore, the system currently in place - The Federal Government having the general right to tax people and businesses, but the individual States having ownership and control of the land - is exactly right for a continent as large as Australia.

AND, in the context of this thread, it is to my mind exactly right and just that a system exists whereby the Feds have the right to tax businesses, but that the individual states should have the power to grant title to land as they choose (up to and including charging royalties on land on which permission has been granted for mining etc., if they so wish). And I feel instinctlvely that the federal government should not (possibly, in strict constitutional terms, CANNOT) unilaterally turn that system on its head and effectively 'assume rights of ownership' over the heads of the various states.

[Edited 2010-05-27 19:41:27]


"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineBaroque From Australia, joined Apr 2006, 15380 posts, RR: 59
Reply 13, posted (4 years 2 months 3 days 20 hours ago) and read 2001 times:

Well there you go, I was under the impression that the states had "given" the right to tax corporations and individuals incomes to the Feds. Not mineral royalties, but then the Henry proposal only envisages offsets to current royalties not replacing them unless the states agree.

I think there are some who thought the Feds should not have all the powers that the last Government wanted in relation to Labour laws, but they still got them So why are you not railing about that I have to ask?


User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 36
Reply 14, posted (4 years 2 months 3 days 18 hours ago) and read 1987 times:

Quoting Baroque (Reply 13):
the powers that the last Government wanted in relation to Labour laws, but they still got them So why are you not railing about that I have to ask?

Because it would be off-topic, Alan?   In any case, I was talking about the risks not of tinkering with labour laws, but of dismantling a land ownership system that has stood the test of time for many centuries and has applied in this country for 150 years. As I said earlier, I pay no heed to mere party politics (given that each is as bad as the other); I try to look at things a bit more dispassionately than that.

Quoting TheCommodore (Reply 11):
You understand how the Press "sometimes" get things about face !!!!

I think you scored a goal there, TheCommodore. Turns out that the latest 'strategy' is to spend millions of taxpayers' dollars on advertisements attacking the mining industry.......

But maybe I unwittingly scored one myself by 'fingering' Dr. Henry. The latest press reports say that today's 'policy' - as opposed to yesterday's - is to spend millions of taxpayers' dollars on ads attacking the mining industry:-

"The Federal Government has granted itself an exemption from its own advertising guidelines to start rolling out ads promoting its resource super profits tax.

""The TV and radio commercials are designed to counter the campaign being waged by mining companies against the changes.

"Under the advertising guidelines the Government introduced, campaigns worth more than $250,000 had to be approved by a panel of three retired public servants.

"But Treasurer Wayne Swan wrote to Special Minister of State Joe Ludwig nearly three weeks ago to seek an exemption from the vetting process.

The exemption was granted on Monday but only announced quietly today.

In his media release Senator Ludwig says he can grant an exemption [i]on the basis of a national emergency, extreme urgency or other compelling reasons."


Further down the article an Opposition guy comments as follows:-

"Labor promised prior to the 2007 election that it would cut back drastically on government advertising and that it would introduce new checks and balances.

"Senator Ronaldson says the exemption for mining tax ads shows the Government lied.

"They said they were going to get the auditor-general to oversee all advertising campaigns over $250,000," he said.

"Two months ago they ripped those powers away from the auditor-general and put them into Treasury and a committee run by the person who recommended the changes.

"So the auditor-general is out of the process. This is a complete and utter disgraceful farce."


Yes, you guessed it - the department to which powers to get round the government's own guidelines were effectively transferred from an independent committee run by the Auditor-General two months ago amounts to the Treasury. Run, of course, by Dr. Henry.......

http://www.abc.net.au/news/stories/2010/05/28/2912134.htm

For good measure, I'd recommend a look at the video on the right ('VIDEO - Henry refutes mining glory"). This is the actual clip when he recalled the time he (presumably) fell asleep in an economics lesson - but it ALSO seems to show that, for some reason, he absolutely 'has it in for' the mining industry - more or less implying that they're 'a waste of space and no use to anyone.'

Well, at least we know who runs the country now. And it doesn't appear to be Kevin Rudd.......

PS - SBS TV News says the campaign will cost $38M.  


[Edited 2010-05-28 01:43:30]


"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineBaroque From Australia, joined Apr 2006, 15380 posts, RR: 59
Reply 15, posted (4 years 2 months 3 days 12 hours ago) and read 1942 times:

Absolutely no changes are being proposed for land ownership. We never did have mineral rights and we will not have them after this sort of tax is introduced.

If the states want, they can stick with their Royalties and the Feds will deduct that much from the overall tax paid by the companies. OR the states can cede the Royalties, presumably in return for an incentive to do so. This is where it would be different to taking the powers on Labour laws, I think, in this case the states could do it voluntarily with a small reward for doing so.

State based Royalties have nothing to do with land ownership. In any event land ownership is a red herring, while you are right to point out that states seem to try to retain powers and indeed Queenie is still Queenie of the states, the concept of that state owning the land passed to the Feds on Federation. My crown is bigger than yours in effect!!

In general the comment sounds like the Aboriginals will be camping in your back yard scares when Land Right legislation was introduced. This does not affect land ownership at all, except in as much as some agreements with native title holders might (MIGHT) have to be renegotiated. And those land rights are about 20 years old at most. Unless of course you want to go back to terra nullius?????

As to ads, well since few apart from Henry, Ross Gittins and Peter Martin seem to understand the proposals, perhaps an explanation would be a good idea.


User currently offlineBaroque From Australia, joined Apr 2006, 15380 posts, RR: 59
Reply 16, posted (4 years 2 months 1 day 18 hours ago) and read 1863 times:

FWIW from the Sat SMH
http://www.smh.com.au/business/super...azen-propaganda-20100528-wlea.html
Ian Verrender
According to Albanese, Australia is

his numero uno sovereign risk problem, outstripping Mongolia, Guinea and Madagascar, where Rio Tinto has major projects.

It is a wonderful term, sovereign risk - two words that, combined, raise all sorts of connotations. Coincidentally, it was the same term being thrown about by the foreign owners of our two biggest polluting power stations in Victoria's Yallourn Valley during the emissions trading scheme debate.

But it is a very serious accusation. Generally it is defined as the risk that a government will default on its debt; the sort of situation we are seeing in Europe, and particularly Greece, right now. It can also relate to new regulations imposed by a government that will restrict the ability of a company to meet its financing obligations.

There is no way an extra tax on hugely profitable ventures will result in either of the above. The accusation, coming as it does from a man who engineered a plan to deliver control of Rio Tinto and its Australian resource projects to the Chinese government, is a piece of propaganda so brazen it boggles the mind.
...
The fact is, these non-renewable resources are owned by all of us, and if we are going to exploit them, we have a responsibility to maximise the return, not just for ourselves, but for our children and for generations to come.

Norway came to this conclusion years ago. It has a resources rent tax of 50 per cent, with company tax paid on the top of that. But the world's major oil companies are still drilling in Norwegian waters. Why? Because it is profitable.


Note the bit about sovereign risk from a man who engineered a plan to deliver control of Rio to the Chinese government, now that WAS sovereign risk.

And Ross Gittins at
http://www.smh.com.au/business/major...nerally-selfish-20100528-wle9.html
All companies have to pay tax on their taxable income at the rate of 30 per cent. If the amount of company tax they pay comes to a smaller percentage of their published accounting profit - as it almost always does - the explanation is that the taxman is giving them more concessional tax deductions than they use when preparing their published accounts. (It shouldn't surprise you that many companies aim to minimise their taxable income while maximising their accounting profit.)

The miners' ''effective'' company tax rate will usually be a lot lower than 30 per cent - and a lot lower than paid by many other industries - because mining is so capital-intensive and because the government gives them generous rates of depreciation on their equipment and structures.

So there are good reasons for miners' effective rates of company tax to be low. Is this relevant to the debate about the resource super-profits tax? Not really - unless your purpose is to bamboozle people who aren't accountants.

What is relevant is to understand that when you add company tax to royalties you're adding apples to oranges. Why? Because, although royalty payments for the use of minerals are labelled as taxes, they're not really taxes.
....

In BHP Billiton's full-page ad it claims the strength of our resources sector ''was a key factor in keeping Australia out of recession''. It offered no figures in support of this claim, so let's look at a few.

The mining industry accounts for less than 7 per cent of gross domestic product and, because it is so capital-intensive, only 1.6 per cent of our total employment. So for such a small part of the economy to have saved us its performance would need to have been miraculous.

In fact, mining contracted more than most. After peaking in the December quarter of 2008, its new capital expenditure fell in each quarter of 2009, taking the total fall over the year to almost 13 per cent.

Over the year to last September, employment in the mining industry fell by 5.6 per cent. Employment in the related heavy and civil engineering construction industry fell by 7.6 per cent. Over the same period, total employment in Australia fell by only 0.3 per cent.

In the first six months of 2009, the mining industry shed more than 27,000 workers. Had all industries behaved the same way (and assuming no fall in the rate of participation in the labour force) the unemployment rate would have increased from 4.6 per cent to 19 per cent in just six months.

This huge volatility in the mining industry - its vulnerability to swings in world commodity prices - demonstrates why, taken overall, the industry would be much better off under the more flexible royalty arrangements offered by the resource super-profits tax.


And again on Business Insiders Albanese droned on about sovereign risk but never ever mentioned how Rio got pushed out of the KalTimPrima mine in Kalimantan.

In the same SMH,

http://www.smh.com.au/business/tax-c...hps-bowen-basin-20100528-wle1.html
Tax casts doubts on BHP's Bowen Basin
RESOURCES MATHEW MURPHY
May 29, 2010

BHP BILLITON'S coal development in Queensland's Bowen Basin is under fresh doubt as Australia's biggest miner signs a deal for its Indonesian coal project and uncertainty reigns over the federal government's resource rent tax.


What a fabrication on two grounds. First the Indonesia mines are in Kalimantan and like KalTimPrima will be subject to having to be sold from under BHP, just as the old Senakim and Satui mines had to be sold in S Kalimantan by BHP.

The second ground is that AFAIK, the coking coals that BHP has in Indonesia are about the rank of the Hunter Valley coals and are about as competitive with the Bowen Basin coking coals as the Hunter coals are - NOT AT ALL.

Additionally, Indonesian coals are missing a component that tends to increase coke strength. I would need an hour to explain why - I was up in Indonesia a couple of years ago explaining exactly that!! - but suffice to say that for a critical measure of coke performance, the Bowen coals will give you a value for CSR (coke strength after reaction with carbon dioxide) of about 60 whereas the Indonesian coals are likely to give a value of less than 40, more likely about 30. For a large blast furnace, that is the difference between GO and freezing the furnace, which trust me you do not want to do. Now some of the Indonesian coals are excellent as minor blend components WITH Aus coals from the Bowen basin or from the South Coast of NSW. But you can use the Aus coals by themselves. For a modern large blast furnace, the Indonesia coals at best can be a small blend component. They do not have the required cold OR hot strength. Blends yes, substitute NEVER.

Most spin and bluster. I don't suppose they expect the newspaper journos to know much about making cokes!!!


User currently offlinepilotdude09 From Australia, joined May 2005, 1777 posts, RR: 4
Reply 17, posted (4 years 2 months 1 day 18 hours ago) and read 1849 times:

Quoting Baroque (Reply 2):

Somehow you managed not to mention a major feature, the tax is to replace Royalties - a tax on volume - with one on profits. Said by economists (of which I am not one) to be more efficient. And you omit the argument that the companies are selling our minerals, and that once sold, they are GONE.

You are very wrong. This tax does not replace state royalties at all. This tax is on top of royalties and this is why Rio Tinto, FMG and BHP (to name the big miners) are so angry about it. They get charged millions in royalties and they are set to go up this year and then a tax on top of that.

Don't know where you heard it was replacing royalties but it's incorrect. I work for Rio Tinto and can 100% assure you state based royalties are still in place along with the tax. The company is still in negotiations with the WA government in regards to the royalty payments.



Qantas, Still calling Australia Home.........
User currently offlineBaroque From Australia, joined Apr 2006, 15380 posts, RR: 59
Reply 18, posted (4 years 2 months 1 day 14 hours ago) and read 1809 times:

Quoting pilotdude09 (Reply 17):
Quoting Baroque (Reply 2):

Somehow you managed not to mention a major feature, the tax is to replace Royalties - a tax on volume - with one on profits. Said by economists (of which I am not one) to be more efficient. And you omit the argument that the companies are selling our minerals, and that once sold, they are GONE.

You are very wrong. This tax does not replace state royalties at all. This tax is on top of royalties and this is why Rio Tinto, FMG and BHP (to name the big miners) are so angry about it. They get charged millions in royalties and they are set to go up this year and then a tax on top of that.

Don't know where you heard it was replacing royalties but it's incorrect. I work for Rio Tinto and can 100% assure you state based royalties are still in place along with the tax. The company is still in negotiations with the WA government in regards to the royalty payments.

NO NO NO. You have been reading too much from your boss by the sound of it. Here is a scheme of how it would work:



1. Tax under proposed tax system comes to a tax liability of X dollars.

2. If states do not agree to including Royalties (quite likely), then Royalties paid in the various states comes to Y

3. TAX PAYABLE comes to X-Y

4. If not liable for new tax, then presumably in the absence of an agreement about Royalties, the obligation to pay Royalties will remain. So if I were Rio, I would hurry to sign up to the tax so I could try to be Royalty free in the case that prices decline and my profitability declines to the point where I do not pay the new tax.


The new tax does not replace Royalties unless the states agree, but it is not proposed that the new tax is ON TOP OF Royalties. If you pay Royalties, they are subtracted. This is equivalent to replacing Royalties.

I note you do not comment on your boss trying to sell Rio Tinto to the Chinese government. Now that WAS a sovereign risk.

Mind you after the arm twisting and bargaining who knows what will result, but in Reply 2 I stated what was proposed.

The mining industry is in serious danger of growing extremely long noses.


User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 36
Reply 19, posted (4 years 2 months 1 day 12 hours ago) and read 1784 times:

Quoting Baroque (Reply 18):
1. Tax under proposed tax system comes to a tax liability of X dollars.

2. If states do not agree to including Royalties (quite likely), then Royalties paid in the various states comes to Y

3. TAX PAYABLE comes to X-Y

Sorry, Baroque, utterly wrong. The proposed higher rate of tax is on profits above 6%. By definition, royalties are an expense and therefore do not figure in 'profits.'

The decision as to whether to embark on any new project - and indeed the decision to keep any existing one going - is assessed on the basis of expected NET profit. If the extra Commonwealth tax is introduced, it will inevitably reduce those expectations.



"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineBaroque From Australia, joined Apr 2006, 15380 posts, RR: 59
Reply 20, posted (4 years 2 months 1 day 12 hours ago) and read 1764 times:

Quoting NAV20 (Reply 19):
Quoting Baroque (Reply 18):
1. Tax under proposed tax system comes to a tax liability of X dollars.

2. If states do not agree to including Royalties (quite likely), then Royalties paid in the various states comes to Y

3. TAX PAYABLE comes to X-Y

Sorry, Baroque, utterly wrong. The proposed higher rate of tax is on profits above 6%. By definition, royalties are an expense and therefore do not figure in 'profits.'

The decision as to whether to embark on any new project - and indeed the decision to keep any existing one going - is assessed on the basis of expected NET profit. If the extra Commonwealth tax is introduced, it will inevitably reduce those expectations.

All true except the utterly wrong happens to be utterly right. IF Royalties remain, they get paid, then the new tax is worked out on profits above the magic margin and THEN the Royalties are deducted from the amount otherwises due. So I am utterly utterly right. Why not read the instructions before use??

http://www.perthnow.com.au/business/...looms/story-e6frg2qu-1225861437269

Royalty refund brawl looms

* Sarah-Jane Tasker and Matt Chambers
* From: The Australian
* May 02, 2010 10:00PM

WAYNE Swan has laid the foundation for a brawl with the states by flagging state mining royalty refund measures.

The measures, labelled "ludicrous" by West Australian Premier Colin Barnett, are expected to spark hostile negotiations between the Treasurer and the states.

The Rudd government says it wants to avoid double-taxing miners with its 40 per cent resources rent tax by giving those that pay state royalties a refundable credit.

Rather than simplifying the system, the measures will create extra red tape for miners and will force the Rudd government to argue with the states over which royalties are refundable.

"There will be tension between the federal and state and territory governments over how this will come together," said Teresa Dyson, a partner specialising in tax at law firm Blake Dawson.

"This proposal doesn't immediately require removal of state royalties, but it seems that will be something they want to move towards -- having a single tax across the whole country."

"In the meantime, while they are doing the refund, I think there will be some argy-bargy."

Ernst & Young global mining head Mike Elliott agreed it appeared Mr Swan's longer-term goal was to change the way the states charge mining royalties.

"It will still be a double tax because they will pay the royalties, then the incremental amount," Mr Elliott said. "The design of this is not efficient for the miners, as it increases the amount of red tape.


http://www.abc.net.au/news/stories/2010/05/03/2888463.htm
The federal government proposes to impose a new super profit tax on resource companies but will refund royalties paid to state goverments and introduce an exploration rebate.

I am not saying I think the tax is particularly smart but if you want to criticise it, you do need to get its provisions correct. And none of the miners are making statements that are better than about 50% correct and therefore are about 50% wrong.

Of course profits above an arbitrary margin and Royalties are different beast, but the aim of the Henry proposal is to get rid of Royalties. With that proposal, I agree, but I am not too keen on much of the rest. But I am even less keen on folk not understanding the simpler parts of the system proposed.


User currently offlineBaroque From Australia, joined Apr 2006, 15380 posts, RR: 59
Reply 21, posted (4 years 2 months 1 day 11 hours ago) and read 1761 times:

Also if all else fails read Peter Martin

http://petermartin.blogspot.com/2010...s-idea-of-super-tax-on-mining.html

The submission from the Minerals Council of Australia, dated November 2008, explicitly argued for a shift away from the existing complex system of more than 40 different state-based royalty charges to a national "profits-based" tax.

Quoting its own submission to a Ministerial Council on Mining as long ago as 2005 it said the new regime should be seen as "a return to a joint venture where the State brings the resources to the joint venture and the minerals company the expertise to convert it to a salable product".

It argued for a "sharing of the profits that arise from a saleable product," saying the government should "try to extract a share of the joint venture rents"...

By contrast at present no state had the same rate for the 42 minerals mined, with "the method of levying royalties for the same mineral differing across states, rates differing for the same mineral across states and in some cases rates differing for different mines extracting the same mineral in the same state."

It suggested the government use the proceeds of tax reform to cut the 30 per cent headline company tax rate and assist with the tax treatment of capital expenditures, also measures ticked off by the Henry Review and adopted by the government.

So sensible did the government find the Mineral's Council's suggestions that at a conference in 2009 the head of the Treasury's revenue group David Parker thanked it for "quite properly" pointing out that the best way to look at resource tax was as a "partnership or joint venture between private capital and community owned resources".

He showed the conference a graph showing that if 40 per cent excess profits tax had been in place instead of state royalties during the past decade the industry would have paid less between 2001 and 2004 and more between 2005 and 2008.

He even referred to it as a tax on "super profits."

So what went wrong? Why is the Minerals Council now opposing a change it sought?

One view is that the market changed. It became apparent that there would be many more good years than bad years in the decade ahead, making the switch to a an excess profits tax less than it seemed in 2008.

Another is that what the government now proposes is different to what the Minerals Council thought it would propose. The rate is the same, but it will apply to existing projects rather than "prospectively" to new ones only as the Council wanted.

Its submission spoke of the danger of "sovereign risk" if that happened, a contention David Parker derided at its conference observing that governments often made decisions that changed the tax treatment of existing businesses.

"I cannot recall anybody arguing that then existing investments should not have been able to access the reductions in the company tax rate in the early 2000s," he said.


The Minerals Council used to know what they meant, time to catch up with the past perhaps.


User currently offlineBaroque From Australia, joined Apr 2006, 15380 posts, RR: 59
Reply 22, posted (4 years 2 months 23 hours ago) and read 1716 times:

Ross Gittins apparently just does not "get it" to use one of his favourite terms.

http://www.smh.com.au/business/tax-b...-still-possible-20100530-wnfy.html

You see it now in the mining industry's bitter resistance to Rudd's latest attempt at major micro-economic reform, the replacement of inefficient mineral royalties with the far more efficient super profits tax.

Dearie dear oh me. Poor old Ross he is as mistaken as I am apparently!! "Replacement" - that is what I showed in the equation I wrote of X-Y. Of course if the states are as bloody minded as is commonly the case, they will hang on to the current system and instead of being "replace" the Royalties will simply be refunded out of the liability calculated in the absence of Royalties - no double entries please!!

On sovereign risk, Roscoe also has a few word to write:

To this end they're using a host of high-sounding, but actually unconvincing, arguments, the first of which is that the planned change in the royalty arrangements has greatly increased Australia's ''sovereign risk'' in the eyes of miners.

This is over the top. The sovereign risks faced by foreign investors in many countries - mainly developing countries - constitute things like having your company expropriated by the government, a breakdown in the rule of law, or the government defaulting on its debt.

Are BHP and Rio seriously putting us in that company? Turns out their definition of sovereign risk is merely ''do you trust the government not to change the rules?'' And what rule would that be? The price at which we're prepared to sell them our non-renewable resources.

The contract price of iron ore has increased by a factor of more than six since 2004. The contract price of hard coking coal has more than quadrupled. Do you reckon we're going to be the only country putting up the price it charges?

Far more likely that a lot of countries follow our example - which may well be what's adding extra vehemence to the big miners' fightback.

And name one country that's prepared to give foreign investors a guarantee it won't at some stage decide to change a tax or other law affecting those investors' businesses. If that's your definition of sovereign risk then it's a risk you face in every country - and many of them would be a lot rougher about it than us.


Now if only I can teach the SHM Financial writers a bit of coal technology, they can also work out how empty most of the threats to move the coal industry elsewhere are.

Indonesia, low rank, almost no inertinite, low ash but poor coke strength. And after a few years the Indonesians will take the mine anyway or make you have a forced sale to Indonesian interests.

S Africa, you can either pick the southern coalfields and have low rank and high ash and very low vitrinite coals, or you can go N and get high vitrinite coals with humungous amounts of ash, most mines have a washery yield of about 20% (Aus coals are a yield of 80% ).

Russia, high ash, and how about dealing with Mr Putin.

China, well ask Occy how well their coal mines went. Mongolia does have large coal deposits some of fair quality, but care to bet that China will not say "thank you very much"?

None is competitive with Australian coals from the Bowen and Sydney basins. Now Mr Palmer's Gallilee Basin coals are a different kettle of fish, very low quality, which leaves him room to scream he is not getting the same profits as the Bowen basin miners - hardly surprising, lower quality and a VERY long new railway to construct.

Come on guys, do at least assume we might know something about the realities of mining. It might be an arcane art, but the knowledge is not entirely locked away in the multinationals filing cabinets.

[Edited 2010-05-30 20:18:20]

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