From Allan Kohler......
There are three parts to this disaster:
1. The fact that it would raise the effective tax rate to the world’s highest for mining projects and therefore curtail new development;
2. The way it was introduced with no consultation or warning, which has separately damaged Australia’s reputation among all global financiers as a stable, sensible place to do business;
3. And the way the government now seems to think it’s in a political battle with global mining leaders – a battle it can win through advertising spin and lies, as it usually does against political opponents. But these are people who make decisions based on arithmetic and risk, not emotion or public opinion.
As the managing director of Xstrata, Mick Davis, wrote in a letter to London’s Financial Times this morning (and it’s worth quoting at length):
“Australia's reputation as a stable regime for foreign investment has already been damaged and investments in Australian resources are at risk of being delayed or cancelled. The consequences will be borne by mining communities, prospective employees, superannuation funds, customers, service providers and suppliers, impacting on Australia's prosperity, particularly in resource-rich remote or rural locations.
“Resources are immovable but diversified mining companies have a choice of countries in which to invest. The government has shown itself willing to breach investors' trust and damage the economic case on which multi-billion dollar investments were made. In developing countries, we manage this risk by availing ourselves of fiscal stability agreements. Sovereign risk concerns about Australia may once have seemed absurd. Sadly, today they are foremost on every mining company board's agenda.
“The mooted risk of other countries following suit is largely overdone. No other country is considering imposing such a punitive tax on its mining industry. Australia's resource taxation will be isolated as the highest in the world at 57 per cent. Indeed, many resource-rich nations regard this tax as an opportunity to gain a larger share of global mining investment – unfortunately for Australia, it is.”
It is a huge miscalculation to think this letter and other similar statements by mining leaders are part of a “scare campaign” as Wayne Swan claimed this week.