HOWARD SATTLER: One of the architects of what has been decided and announced is Lindsay Tanner the Minister for Finance, hello Lindsay.
LINDSAY TANNER: G’day Howard, how are you going?
HOWARD SATTLER: I think you might have just lost the West Australian vote on this, what do you think?
LINDSAY TANNER: Look I don’t necessarily think so Howard, I think there’s obviously going to be a fair bit of controversy but I’d make a couple of points. One is that the level of super profits coming as a result of the massive increase in prices, you know, obviously costs remain pretty much the same when iron ore prices double and as you say a big slab of that profit’s going overseas, raised the big question because we use to get about 30 to 40 per cent of the overall profits going in various taxes, now it’s got as low 14 per cent. But there’s some big good things coming back the other way for WA. Obviously WA benefits like the rest of the country from a lower company tax rate and small business being able to write-off across…
HOWARD SATTLER: [Interrupts] But small business doesn’t employ the sort of numbers that the BHP and the Rio Tintos does, does it?
LINDSAY TANNER: Well actually it does. Actually although they’re small by definition there’s an awful lot of them, and ultimately we don’t believe that this will be negative for the mining sector because there’s a couple of key things that are also changing. One is that the current tax system is a bit of a discouragement for exploration and the development of new projects look a bit risky, so we are going to change that, we could rebate for exploration which will mean that it’s a lot more attractive particularly for smaller miners to go out and explore and develop new projects, and secondly built into this super profits tax system will be in effect a rebate going back to companies that have got their projects up and running that have ultimately failed, where they haven’t made profits. So it’s essentially a restructuring of business taxes that we believe will benefit Western Australia as well as the rest of Australia…
HOWARD SATTLER: But you haven’t convinced the mining sector, just heard the bloke, he’s filthy, he’s talking about projects not happening, projects going overseas where there are much lower tax regimes, I mean is he just, he’s just bleating for no reason at all is he, you reckon it’s all, you know, wind?
LINDSAY TANNER: No, no look I think there’ll be different views within the mining sector on this Howard. I think some of the smaller miners will be much more positive than the big players and it’s understandable there’s going to be controversy, there’s no question about that. But ultimately underneath this is a big question for the whole community and that is that when it’s our resource that’s ultimately being dug out of the ground and shipped overseas and when the prices being one for that resource have just gone through the roof and look like staying way above where we’re used to them being into the future, then there’s a pretty obvious question about why the Australian community shouldn’t get a better dividend from that. Now we’re very conscious of the fact that people in WA understandably see that this is very closely connected with their interest, that’s why for example that infrastructure fund that Reg Howard-Smith referred to, that’s going to be deliberately designed so the money is going to the state…
HOWARD SATTLER: [Interrupts] Can we trust you with that? Will you definitely send it back to us in infrastructure?
LINDSAY TANNER: Yeah, no, no in fact it’s going to be designed so that the money is to go to [indistinct] according to the level of their resource activity. So in other words my own state of Victoria, we’re a quarter of the federation in population, we don’t expect we’ll get much money at all out of that fund. I would expect that WA will get a very big slab of that funding deliberately intended to go back to build infrastructure that’s relevant to the growth of the resource…
HOWARD SATTLER: [Interrupts] You make a very good point about it being our resource, it’s the peoples’ resource, I mean the Government has some sort of role to play in protecting the public’s interest but I’ll just bring up one issue and it’s a big issue over here, what we pay for gas. Our utilities are paying the resource companies that are pulling the gas out of the ground in Western Australia, $8 a gigajoule right?
LINDSAY TANNER: Right.
HOWARD SATTLER: But the Chinese are buying it for $2 gigajoule. Now you’re letting that happen, your government through the Competition and Consumer Commission has approved of that, approved of a cartel operating up there so why haven’t you done something about that?
LINDSAY TANNER: Look I’m aware of the debate about whether or not there should be reservation of a particular proportion of the gas…
HOWARD SATTLER: [Interrupts] We are fair to come filthy about this I’m telling you.
LINDSAY TANNER: Well the difficulty is that there are some complicated additional issues for example…
HOWARD SATTLER: [Interrupts] No, no, no why for instance are Victorians paying $3.50 and New South Welshman paying $3.50 a gigajoule for their utilities and we’re paying $8, why is it?
LINDSAY TANNER: Look I don’t know the answer to that to be honest…
HOWARD SATTLER: Can you find out?
LINDSAY TANNER: Yeah I can do my best, it’s way outside my portfolio…
HOWARD SATTLER: I know that but you’re the one on the line, I’ve got you lined up.
LINDSAY TANNER: [Laughs] Fair enough. I think there’s some really difficult choices involved in that issue because we have got a world market we’re seeking to be players in here and export dollars from, of course we have major issues with the gas supplying WA not to long ago…
HOWARD SATTLER: Yeah well that’s over now.
LINDSAY TANNER: We’d still be learning very large in the way people see things but I’m not an expert in the - some of the detailed issues in…
HOWARD SATTLER: [Interrupts] And then why are Australians paying about $1.30 a litre for unleaded petrol at the pump and I found out the other day in Qatar where they’ve got oil just like we’ve got oil is 27 cents a litre. Why, because you are taking so much of it in tax, that’s why.
LINDSAY TANNER: Look I think the key reason there is that they don’t have a very large population and of course they’re not able to drive very far so their actual expenditure on petrol’s nothing like ours and of course what they do is they get huge government revenues. They only provide these benefits to people who are citizens so countries like that tend to have large migrant work forces that don’t get citizenship and don’t get the same benefits so you can’t compare us with countries like that on virtually any basis and I certainly wouldn’t seek to do…
HOWARD SATTLER: [Interrupts] We feel as a population, this is the people out there in the real world that we’ve got all these resources and yet we’re paying top dollar for our own resources at the end of day, and yet other people overseas, if you like, customers seem to get these things much cheaper than we do.
LINDSAY TANNER: Look you may well have a point on the gas front, as I said I’m not particularly aware of the detail of that issue but on the petrol front compared with other developed countries we are still relatively low. We are not as low as the United States but most other developed countries pay more for their petrol. Of course we don’t produce as much oil as we did say 20 years ago, Bass Strait oil fields for example have diminished output so the majority of our oil is now imported like many other countries and obviously we are very susceptible to the world oil price going up and down.
HOWARD SATTLER: All right no back to Ken Henry’s report, 138 recommendations, you picked up only about three or four of them I think. Is that because of the election later this year, c’mon?
LINDSAY TANNER: No, look, it’s…
HOWARD SATTLER: C’mon Lindsay.
LINDSAY TANNER: [Laughs] That’s a leading question. No look I think the key thing here, how it is that this is not the end of the story. We’ve identified a number of things that we’ve just said look, no way, we’re not going to do that and there’s some of those recommendations I’m sure if you looked at you would agree whole heartedly with our conclusion. But there’s a number of propositions that we put out there which we said look, not immediately but in due course we’ll give consideration…
HOWARD SATTLER: [Interrupts] If we get re-elected then we can do it?
LINDSAY TANNER: Well it’s - look one of the things that you tend to underestimate here is that you’ve got to be able digest(*) these things through the system and the stuff we’re doing is all focused on wealth creation, business taxation and maximising our growth potential for the future. The more things we all try and do at once, the more risk you create, the more uncertainty, the more instability, so…
HOWARD SATTLER: People to get off side.
LINDSAY TANNER: …we’ll be criticised for not doing more immediately, that’s fair enough and people will draw their own conclusions but I don’t think you should underestimate the scale and the significance of this package and yeah it’s controversial and we’re expecting that we’re going to get a belting from sectors of the mining industry about it.
HOWARD SATTLER: All right now what about a super profit? The Prime Minister had a lot of trouble on this radio station today trying to explain what a super profit is, what is it in your mind? The bloke I just talked to said it’s plus six per cent, anything above six per cent of what we invest that we make, that’s when they’re going to hit us, is that right?
LINDSAY TANNER: That’s approximately right. We’re still yet to refine absolute details of this with the mining industry but that’s a reasonable portrayal. It’s profits above and beyond what you might call a normal return and the whole idea of course is that these international price fluctuations can just almost overnight produce profit out of thin air and therefore the key thing is to have a tax system that basically makes sure that when this happens, the Australian community gets a slice of the action and of course that hasn’t been happening in recent times.
HOWARD SATTLER: We’d like to get a slice of the action but the Government seems to take the bigger slice all the time and we don’t seem to see it.
LINDSAY TANNER: Well Howard that’s why we have been really focused on making sure that the proceeds of this are going into things like cutting the company tax rate and producing the exploration rebate for mining companies. You might recall there was a debate about a thing called flow-through shares with respect to smaller mining companies which both sides of politics have danced around for some time and not delivered on and it’s a crucial issue for particularly the smaller mining companies. Well this resource rebate is basically an equivalent of that, it’s actually better, it’s just a straight payment to the companies that will make the tax arrangements for mining exploration much more favourable. So we’ve been really focused on say okay, we’re getting this extra money, let’s make sure that it’s going to wealth creation, to things like lower tax rates on companies and small business rather than just endless extra spending on things that might be worthy but people will be right to be cynical about so I think you should look at that total picture.
HOWARD SATTLER: The other thing you need to look at is when you talk infrastructure, in fact housing in the north-west, there are people, you know, living in tents because they can’t afford the accommodation up there at the moment.
LINDSAY TANNER: Look that is a particular problem is not an easy one to solve because of course the huge fluctuations that can occur in the numbers of people, the role of the companies in providing company housing, it’s not an easy thing for governments to address. I can’t say this specifically but the question of that infrastructure fund, it might be one of the things that that can ultimately assist with. I’m saying that not knowing whether or not that will be an intention…
HOWARD SATTLER: Pretty basic…
LINDSAY TANNER: …I think a lot of it will depend on what state government has to say about how those funds should be expended, but that’s a very tricky issue to solve.
HOWARD SATTLER: Right, that’s why you’re there, you’re in government to handle tricky issues. Thank you Lindsay.
LINDSAY TANNER: Fair enough, good to talk to you Howard.
-ends-
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