The Commonwealth Treasurer
Transcript of 02/07/2010

Interview with Jon Faine

ABC Melbourne

2 July 2010

SUBJECTS: Minerals Resource Rent Tax

FAINE:

Wayne Swan, good morning to you

TREASURER:

Good morning Jon. Good to be with you.

FAINE:

A clear choice for the Australian public. We can vote Liberal at the next election and none of this will happen, or we can vote Labor and it will go through. So that sets the parameters, does it not, for the campaign?

TREASURER:

If you want to vote Liberal you'll also get an increase in the company rate of 1.7 [per cent] plus the rejection of this tax which gives some fair value to the Australian people for their resources that they own 100 per cent.

FAINE:

Why would you get an increase? You mean you won't get a decrease by one per cent?

TREASURER:

Tony Abbott is promising to fund his parental leave scheme by an increase in the company tax rate. That's the point I was making.

FAINE:

So you're accumulating them?

TREASURER:

Well, we're taking the company rate down to 29 [per cent] in 2013-2014 as part of this reform, as you know.

FAINE:

How could it be that you do a deal that only costs one and a bit billion dollars, when it seems to resolve so many of the problems, and yet have little impact on the revenue?

TREASURER:

Well, because we've re-designed the tax, via these discussions. There are fundamental changes. For example, what they all objected to in the previous proposal was an item called refundability. And of course, refundability was something which was going to help many of those miners – we thought anyway – who were more marginal and weren't super profitable. But many of them said they didn't value refundability, and of course, that was a big expense in the previous tax.

So the other thing that we've done is also just concentrate on the most profitable parts of the industry, of commodities, basically oil, and gas, and coal, and iron ore. So essentially, without refundability, and of course, some other arrangements in here in terms of the way in which they transition for existing projects, it has meant we've kept most of the revenue but not all of the revenue.

But the thing I'm most pleased with, Jon, is we've got recognition from the industry that in terms of the value the Australian people should receive for their commodities that they own 100 per cent, that they should pay a bit more tax. And that's a good thing, and we can do some good things with that money.

FAINE:

Well, you've got that from some people in the industry. Joe Hockey earlier this morning had this to say…

HOCKEY:

Well, we are going to rescind it. We are going to oppose this tax because this tax from the Rudd-Gillard Government is a bad tax for investment, is a bad tax for jobs and it's ultimately a bad tax for Australia.

FAINE:

It's also, as we've been told by Simon Bennison, from the Association of Mining Exploration Companies, it is divide and conquer, not all the industry has even been consulted.

TREASURER:

Well, can I say that this is a good tax in terms of jobs. It's going to be a very good arrangement in terms of future investment because they are going to be getting immediate write-off for new investments. So we're very mindful of all those things.

Joe Hockey said a couple of things this morning – it was a bit funny. First of all he said it was a coup for common sense. Then he said he was going to rescind it. And, of course we had Mr Abbott walking both sides of the fence the other day.

The fact is that I think there is broad recognition across the industry that this type of reform is overdue. It's very important Jon, as we go forward, given that we're going to have higher prices for our commodities for a long time to come because of the Asian century, because we're going to have mining boom mark II there will be stresses and strains on our economy, which is why we do need to do some other things which this tax will fund. The Liberals don't seem to have any initiatives or proposals to deal with that situation whatsoever.

FAINE:

Why didn't you do this deal? It was there to be done weeks ago when Kevin Rudd was Prime Minister. What stopped you doing it then?

TREASURER:

Well, we just couldn't make the significant progress we needed in those discussions at that stage.

FAINE:

Why not?

TREASURER:

Well, I can't explain why it didn't happen then but...

FAINE:

Why not?

TREASURER:

Well, it just wasn't happening, and we weren't getting anywhere.

FAINE:

Well, you're the ones that seem to have made the concessions not the mining industry, so…

TREASURER:

I don't accept that Jon, at all, I mean…

FAINE:

Well, you've gone from 40 per cent to 30 per cent. You've exempted a lot of the small companies – the below the 50 million cap ones. You've changed some of the write-off and write-down definitions, and also the trigger date.

TREASURER:

Well, there's still a substantial amount of revenue, because the design features - there are swings and roundabouts. The really big achievement here is the recognition of the need for this profits-based tax in an area we haven't had it before.

FAINE:

But what have they conceded in exchange? Because I don't understand what's come the other way.

TREASURER:

Well, for example, we have existing projects in this tax. Now there are generous transitional provisions for those existing projects. And we've come halfway, if you like, with them in terms of market value when we said originally book value. There have been concessions on both sides. Both sides have actually given some way in negotiations.

But at the end of the day what we have is a substantial amount of revenue, not dissimilar from what we had before, a little less. And we are now in a position to boost superannuation, to give some significant tax cuts to small business – all of these things are good. And we had that breakthrough in the past week, and I believe the intervention of Julia Gillard, the Prime Minister, was fundamental in that.

FAINE:

Well, that's how it's being stage-managed. A couple of quick things. I've got text messages that say, for instance, you create a mess and now you want us to thank you for cleaning it up.

TREASURER:

Well, big reform in this country is always hard. I said that when we announced our response to the independent review, that there would be a vigorous and tough debate about this, and that's what happened. This is what happened, Jon, back in the 1980s when the PRRT was brought in. It's what happened when we brought in national superannuation. These things are always hard fought – that has been the way in Australia. And because we've actually resolved these issues, even in difficult ways over the years, that's one of the reasons why our economy is so resilient, and that's what's important about going forward.

FAINE:

The inescapable conclusion, Wayne Swan, is that as the polls, the opinion polls, got worse and worse, you had to concede more and more.

TREASURER:

Jon, I don't accept your premise. If we are actually pulling in an amount of revenue which is not dissimilar from what we said at the beginning, this is a substantial profits based tax which is going to fund the superannuation initiatives we talked about, the small business tax breaks, the infrastructure investment. I don't think that what you've said is correct because we are still doing all of those things.

Yes, the design is different and that's a good thing, it's a better tax for that. And we have had a good negotiation, particularly in the last few days, and it has produced this outcome which I think is a great reform for Australia.

FAINE:

Do you concede that the way you and Kevin Rudd were going about it initially was clumsy and even ham-fisted?

TREASURER:

I think there are a whole range of factors involved. I don't concede that at all, and I don't seek to apportion blame or credit.

FAINE:

Do you accept responsibility for the poor process and lack of consultation when it was first announced?

TREASURER:

We offered when it was first announced, consultation, very generous transitional arrangements…

FAINE:

Shoot first, questions later.

TREASURER:

I think I might have discussed this with you at the time.

FAINE:

You did.

TREASURER:

And I talked about all of those things, and I've just explained to you that we now have generous transitional provisions and all of those things in place. I also think I would have said to you at the time that it was going to be a difficult debate. It has been difficult, and I think it was always going to be difficult. Of course, I was a major player in it, and it was a willing debate from all sides. The important thing is that we've resolved it in the interests of Australia.

FAINE:

A couple of other quick questions if I could, I don't know how much time I have with you, but…

TREASURER:

Not a lot more.

FAINE:

But I'll keep going until I'm told to stop.

TREASURER:

I think they're waving.

FAINE:

How does this deal in any way affect superannuation entitlements for people who are not in the public sector?

TREASURER:

Well, we continue with the original proposals we put forward. There's been no change to that at all.

FAINE:So how does money from a mining tax flow through to superannuants?

TREASURER:

Well, basically we're providing for people who are at below $37,000 a contribution to their superannuation accounts out of the monies that are raised, that's very important. We're also continuing with those superannuation caps at $50,000. They're all pretty important for people who are approaching retirement age. So, a lot of those things. But nothing's changed from what we announced originally in that area. But Jon, I think I have to run, I'm getting the wind up.

FAINE:

Thank you for your time this morning.

TREASURER:

Good to be with you.