GRYLLS' POPULIST MINE TAX PUSH WILL HURT WA

TIM HAMMOND MP
SHADOW MINISTER FOR CONSUMER AFFAIRS
SHADOW MINISTER ASSISTING FOR RESOURCES

FEDERAL MEMBER FOR PERTH

GRYLLS' POPULIST MINE TAX PUSH WILL HURT WA

The current debate in relation to Brendan Grylls’ proposed $5-a-tonne iron ore levy reflects a trend in modern day politics – find the tallest poppies in the field and shout loudly that the answer to our future prosperity lies in cutting them down.

Sound familiar? It was this approach that resulted in Brexit, and has allowed the erratic and dangerous rhetoric of Donald Trump to flourish to the point where the US Presidential Election is looming as too close to call.

Mr Grylls’ proposal is straight from the same playbook. And on first blush, one can understand why the proposal might garner some superficial attraction.

Closer inspection, however, reveals many reasons why industry, as well as political parties of all persuasions, have rightfully given this idea the short shrift.

In short, the proposed tax will cost jobs, and threaten investment. Here is why:

First, the tax bears no relation-back point to profitability. Royalties like the one Grylls is proposing is effectively a tax on production, not on profits, which essentially means it’s a tax on jobs.

Depending on the buoyancy of the price per tonne of iron ore, the new royalty being proposed by Grylls could mean new projects that could actually be developed quite profitably, may simply not proceed.

This would destroy job creation and economic activity.

For a State like ours where unemployment is running at well above the national average, this is the last thing WA needs.

Second, the arbitrary nature of the tax should provide no comfort at all to those other miners (or other industries) whose royalty rates are governed by other State Agreements. Should Grylls’ proposal gain any traction, what is there to stop him aiming his sights at other commodities? If this proposal is given any consideration, why stop at commodities? Can you imagine what damage would be caused to our economy if such an approach was applied to tonnage rates for grain? There is no distinction between ore and grain in what Grylls is suggesting insofar as he is proposing to unilaterally vary a State Agreement.

Third, if Mr Grylls is looking for ways in which to increase revenue streams into Western Australia, he is looking in the wrong direction. Given the inevitable effect of the GST redistribution as dictated by the Commonwealth Grants Commission, the proceeds would be spread all over the country, and not into the coffers of the WA treasury.

Fourth, don’t just take my word for it - at a time when the community is crying out for its political leaders to put partisanship aside and look at policy proposals on their merits; we need look no further than public responses to Brendan Grylls’ proposed $5-a-tonne iron ore tax: it has been opposed by Colin Barnett, Malcolm Turnbull, Mathias Cormann, Mark McGowan, Ben Wyatt and a host of others.

To this cohort, we can add Bill Shorten, Labor’s shadow minister for resources Jason Clare, and myself.

Indeed it probably says a lot about an idea when the only person backing you in was Barnaby Joyce, and even he has now stepped away from the proposal at a rate of knots.

In a perfect world, all taxes would be neutral in nature, so they don’t affect production and investment decisions. While not always achievable, optimal taxation at least demands that tax neutrality be a key consideration.

But pushing all that aside, let’s focus on the timing. This is the worst possible time to impose this poorly designed new tax on mining production. The WA economy led by the Liberal-National Government, is basically on life support.  Total private sector investment in the state has collapsed by more than 30 per cent over the last two years and state final demand is down by 9 per cent over the same time period.

The best thing we have going for us when it comes to attracting investment in the mining and resources sector is our stability. Cheaper labour can be found on projects overseas. Higher grade ore can also be found elsewhere. But we are currently without peer when it comes to a consistent, reliable and safe investment choice.

This proposal, if implemented, would tear up the ace of spades we currently hold up our sleeve and replace it with nothing, causing a direct threat to jobs at a time when our employment market is already under siege.

It’s time to buck the modern day trend of peddling populist policies. Our community rightly expects more of us.