Iain Dixon: Good morning, ladies and gentlemen. Welcome to the launch of Reuters Insider in Australia. My name is Iain Dixon, and I am the Managing Director for Thomson Reuters markets here in the Pacific. A couple of housekeeping points: first of all, can I ask you to ensure that your mobile device is turned to silent; and secondly, in the unlikely event of an emergency, please follow me through that door and down the stairs, which are located on the other side of the foyer.
So, a couple of quick words on Reuters Insider. It has been two years in the making. My belief is it is an incredibly powerful tool for financial professionals for two reasons: one is, it allows them to go beyond the headlines. It allows them to access in real time in-depth analysis and insight into the markets that they follow. It gives you exclusive programming from our proprietary resources, the best of breed in Reuters, such as Reuters Breakingviews, IFR and Lipper, our 2,800 journalists who operate in over 190 countries around the world.
But more than that, we also have over 150 customers and partners who are part of the Insider network who are contributing their content on to the platform. So that gives you a combination of both the best of what Reuters has to offer, plus all those other market participants and commentators, all in one place, all in one platform. So I think it’s a very, very powerful tool. It’s available over our desktop services, over the internet, over Blackberry, over iPhone, over iPad, and hopefully, you’ve just had a few glimpses whilst you’ve been having a cup of coffee and a bit of breakfast as to what the potential of this platform is. So, enough on Insider for now.
The main event of the morning is a keynote speech from the Minister of Finance and Deregulation, the Hon. Lindsay Tanner. So, welcome, Minister. The Minister has held the inner city seat of Melbourne since 1993. He grew up in Orbost and studied arts and law at the University of Melbourne. Before entering Parliament, he was the State Secretary of the Federated Clerks Union. He has published several books on economic and social change, and is an ardent reader. He is also a very keen sports fan, and I understand that you are the number one ticket holder for the Essendon Football Club, which you have followed for almost 50 years.
The title of his talk today is Managing the Boom: How Australia will handle the next phase of Asian-led growth. On completion of the speech, the Minister will be joined on stage for a question and answer session from the floor by our bureau chief, Mark Bendeich and his colleague Rob Taylor. So, without further ado, ladies and gentlemen, please welcome the Minister for Finance and Deregulation, Honourable Lindsay Tanner.
[applause]
Lindsay Tanner: Thank you very much, and I am delighted to be here to be able to contribute to a very important launch and to discuss in a wider and very important context, namely, the position of Australia in the medium to longer term in the Asian environment, the current budget and our proposals with respect to tax reform. There is a great deal of hysterical commentary and news coverage occurring at the moment; that is always the case when tough and difficult reform proposals are put forward. It is not easy for people to sort out substance from rhetoric and hyperventilation. I will do my best to give you a clear picture of where the Government stands, why we’re proceeding, and also in particular a wider assessment of what this all means, especially as we’re dealing here essentially with an international context that is of great importance to people who are making investment decisions every day.
The first thing is that this debate that we are currently having about the taxation of resources is not a new thing for Australia. In fact, if you look at Australia’s European history, you will see that there are regular recurrences of a core theme, and that is how to distribute the benefits of our natural wealth that typically immediately accrue to a fairly small proportion of the population across the wider population. Those of you who have studied Australian History will know that in the 1860s there was a huge social-political-economic battle between what were called selectors and squatters; between farmers who were seeking to purchase from the state small to medium-size blocks for a variety of agricultural and pastoral purposes against broad acre pastoralists, many of whom very wealthy. Underneath this, of course, was an arm wrestle over the distribution of the imbedded value in Australia’s land resources.
Similarly, around the turn of the 20th century, you had, of course, the introduction of what was termed the Australian settlement with compulsory arbitration and industrial matters, tariff protection, white Australia, all of these things which formed a total package that became the dominant frame for Australia’s economic management and regulation for literally decades. All of these things were ultimately about the means by which Australia’s raw materials wealth, our resources wealth, our pastoral wealth, was effectively distributed across the entire country. Whatever view you have about the merits of the outcomes, and of course, these things have been endlessly debated over decades and there have been all kinds of different positions expressed, and as the world has changed and Australia’s circumstances have changed, policy positions have changed. But nonetheless, this question about how the benefits of our natural wealth are both extracted and being distributed across the Australian population is not a new debate. This is something that is imbedded in our history as a fault line of political debate.
What we are dealing with here is a question for the entire Australian community, and that is: what do we sell our natural resources for? What price do we extract from private companies that implicitly contract with the Australian people to extract, to process, to on-sell their minerals? That is not an easy question to answer. It is not a simple question. The Government’s position is quite a straightforward one. That is, the existing arrangements are both economically inefficient and they also deliver an inadequate return to the Australian people for their resources.
Obviously there will be a variety of different views about this, and there are many complicated issues of detail that are emerging in the debate. But we are not going to be diverted from our core objective, and that is to get a good deal for the Australian people, for the extraction of resources that can only be extracted and used once. Once a tonne of iron ore is extracted and used and sold, it cannot be extracted again. This is something that is often lost in this debate. We are dealing with non-renewable resources that are owned by the Australian people, and it is our responsibility to ensure that the Australian people get the best deal possible for its asset. That, of course, involves maximising exploration, maximising exploitation; so clearly there are limits to any return that can accrue to the Australian people. But we believe that the existing arrangements are delivering an inadequate return because, in the longer term, relative prices for commodities have increased very substantially and most commentators expect those increases, although they will inevitably fluctuate over time, to remain, and do not expect us to return for any great length of time to price levels that prevailed in the past.
The second critical point is: where is the money going? It is a famous old saying, ‘Follow the money.’ In this case, it is good advice. The proceeds that are anticipated to accrue to the Government from this change in tax arrangements: where are those proceeds going? It is a point that has been to some extent lost in this debate. The answer is: a company tax rate of 28 cents in the dollar; it is currently 30. At the moment Australia is in the upper level of the OECD countries. Pulling it down to 28 cents will push us back into the middle ranking zone. Our opponents, because of their proposal to impose a tax on larger companies to pay for a Rolls Royce paid parental leave scheme, are proposing to put in place a company tax rate of close to 32 cents in the dollar. We are proposing a rate of 28 cents in the dollar. That is a very significant difference.
Secondly, to change the immediate write-off factor for small businesses—at the moment, there is a maximum of $1,000 for small capital expenditure automatic immediate write-off for small businesses. We are lifting that to $5,000. That is a very important thing for people at the smaller end of the small business scale.
Third, to introduce an automatic tax deduction of $1,000 for ordinary tax payers for their income tax, so therefore, if your typical deductions are expected to be below $1,000, you simply do not have to bother with all of the rubbish that is associated with claims and with documentation and with getting assistance; you just tick a box and you get your deduction, and that is it. You will probably get a bonus on the way through.
Fourth, a small incentive for bank deposits and equivalent deposits to give some degree of tax preference for small savings. It is one of the few areas now of savings which is not tax preferred in some way and therefore has been suffering. That will help a lot of smaller savers, a lot of ordinary people who can’t save very much, who don’t have the capacity to be sophisticated investors because the scale that they’re operating at is simply not sufficient.
Fifth, a very, very substantial strengthening of our occupational superannuation regimes to increase gradually the compulsory rate from 9 per cent of salary to 12 per cent of salary, but at a very slow staggered rate of introduction to minimise the impact on business; to return the level that people can invest voluntarily in their own superannuation with tax concessionality for people who are over 50 and who have got less than $500,000 in their account. So, in other words, to increase the concessionality for a particular group of people who are vulnerable because they have not been in the system long enough to accumulate a sufficient size of superannuation investment, and also to provide a specific tax rebate of up to $500 for lower income earners who get no benefit from the tax concessionality that exists within the system in regard to superannuation at the moment because their marginal tax rate is at the same level as the level of the superannuation tax.
Finally, a very substantial investment, $5½ billion over a 10-year period, in hard economic infrastructure in the broadly resource sector dominated states. So that is something that is obviously crucial to Australia’s longer term economic development.
That takes me to the final aspect of this picture which I think has also been, to some degree, neglected in public discussion. These things are not occurring in isolation. They are occurring as part of a wider picture, a wider economic strategy the Government is putting in place that is driven by a number of key things. The first is investment in infrastructure which has been neglected in Australia for too long and which is fundamentally important to our economic future. Right at the very heart of that is huge investment in infrastructure that is occurring for one reason only, and that is to benefit the resources sector.
The Oakajee Port project in Western Australia, with almost $400 million of Federal Government money to be invested in that, will exist for one reason: the resources sector. Huge upgrades in the rail sector in the Hunter Valley driven through the Australian Rail Track Corporation, and multibillion dollar equity injections into the ARTC which I half own as shareholder Minister. It is happening for one reason: the resources sector. Providing the back-up for the ARTC to partner with the coal industry in Queensland to bid for the Queensland Rail coal assets. Again, that is happening for one reason: it is all about the resources sector.
So, while people in the resources sector are running around talking doom and gloom and how terrible all these things will be for Australia and for their sector, they should not overlook the fact that this Government already is investing billions in infrastructure upgrades that are all about improving the efficiency and competitiveness of our resources sector. As part of the specific proposals we are putting forward, there are further billions of dollars along those lines.
Second, big investment in skills; again, something that is of critical importance to the resources sector, where we are seeing significant imbalances emerge in our economy. We saw them in the 2005-07 period. They are very quickly coming back to the surface again because of imbalances that are generated by upsurges in activity in the resources sector. That is something that is relevant to the whole economy. It is critical to keeping inflation in check. It is critical to productivity improvements. Australia is behind much of the developed world in skill formation and the levels of qualifications in our workforce.
Third, deregulation, and again there are significant parts of this picture that are very important to the resources sector, but it is a strategy that is occurring right across the board. That is, to harmonise our regulatory regimes which in most cases are state-based and often inconsistent, and in some cases contradictory, and generally very inefficient and sometimes quite costly. This is an arduous, slow, torturous process that I am centrally involved in, of course, with my direct ministerial responsibility, but we are gradually working our way through the process over a period of three or four years, and we are starting to get the new regimes in place. The benefits to productivity, the benefits to costs are starting to flow through.
Finally, and in many cases as significant as any other item, is, of course, broadband. There are many people still who cannot understand why vertically integrated private monopolies in essential service areas like telecommunications are not a great idea. I would suggest to them that Australia’s performance in broadband does indicate precisely why they are not a great idea because, on any measure, whether it is access, speed or price, we are at best mediocre compared with comparable countries.
Broadband is essentially the veins and arteries of the 21st century economy, and once we get near universal ultra high-speed broadband, the transformation that that will gradually bring to economic activity across the board literally cannot be imagined now. In the same way that 15 years ago nobody had any idea what the first mobile phones were going to transform into, and how they would radically alter virtually all forms of economic activity, and how in particular they would radically alter the dynamics of economics in very poor countries in Africa or South Asia, for instance. Broadband on a genuine speed and scale is going to do even more to transform our lives and our economic activities. So that is why we are committed to our national broadband network proposal, and we are going to push it through to a conclusion.
So it is very important in considering the budget, in considering the fiscal consolidation of our undertaking to get the budget back into surplus as quickly as possible, and in particular considering the resource super profits tax, to keep these contextual issues in mind. This is not an isolated thing that is occurring; it is part of a reconfiguration of the settings in the Australian economy that is all about delivering long term sustainable growth for Australia.
Balanced, long term sustainable growth—all of these things fit together into a wider picture. Inevitably there is debate; inevitably there will be differences, and inevitably, of course, there are squeals from people who feel they have a vested interest in the status quo. But any government has ultimately responsibility to its people, responsibility to the longer-term future of the country. We intend to prosecute that, and we intend to continue with negotiations with the resource sector to produce what we believe will be an outcome that is in the interests of the entire Australian people and the entire Australian economy. Thank you very much.
[applause]
Facilitator: Thanks very much, Minister. Now it’s time to move on to some Q&A, and I hope we’ve got some questions from our clients on the floor. We’ve also got with us [Anaban] over here at a laptop, and he’s actually in our dealing room chat room at the moment, so we’ve also got a virtual audience outside Sydney today, in places like Singapore, Hong Kong and Tokyo, through our dealing room chat room. So, with no further ado, I think we’ll open up to Q&A. Maybe Rob, who’s our political correspondent in Canberra, can kick things off. Rob?
Rob: Minister, I wanted to open with the mining tax. The Chinese Vice President and heir apparent to the Presidency, Xi Jinping, will be in Australia very shortly. We’re told he’s going to receive a briefing on the mining tax. I’d be curious as to what would be the message to him, and how will you counter concerns that have been raised in China about rising sovereign risk in Australia? How do you intend to mollify him?
Lindsay Tanner: I’m not sure that there’s anything that needs mollifying. Clearly as increasingly important customer, China has got a big interest in anything that happens within Australia’s resource sector. Understandably their primary concern will be long term reliability of supply. I think Australia’s track record under governments of both persuasions on that front has been extremely good. I expect that would continue. We will be, I am sure, happy to explain the Government’s position and our projection of the future for both this particular sector and the Australian economy generally to any international visitor. China, of course, does have a crucial role to play for Australia’s future, but we shouldn’t neglect the fact that there are other key customers, like Japan and Korea, that will continue to also be extremely important. I will not be delivering that briefing, so I cannot give you a direct answer about what might be said, but I think it will be fairly straightforward and it will be broadly equivalent to what is being said in the public arena.
Rob: Do you accept claims that Australia’s sovereign risk profile has gone up as a result of this?
Lindsay Tanner: No, I don’t. I think that’s the kind of thing that companies and lobby groups that are engaged in a struggle to beat the government into submission on a particular issue will claim. It’s the sort of thing that, in the heat of battle, gets said, but I don’t think it stands up to any serious scrutiny. Ultimately people will make their own decisions about investments and about how they see particular economies. I think there are some wider issues in play here as well that are not just about Australia, because to a very large extent we are dealing here with companies that are international in dimension, so their interests in minimising the extent to which the government can put this new tax arrangement in place are not just about what happens in Australia.
Rob: The Prime Minister has said repeatedly that the 40 per cent headline rate is not up for negotiation. What is, exactly? Are all other aspects of the tax up for negotiation? Is the 6 per cent rate up for negotiation?
Lindsay Tanner: I’m not in a position to give you a kind of sliced and diced assessment of here’s what we’ll negotiate on and we’ll go this far on that and so forth. There are a couple of pretty obvious issues that have already been in play publicly. One of the very difficult things which I understand why there’s debate about is how existing mines are treated, and in effect, the valuation methodology that’s used. I am not directly involved in those processes, and I am really not across the fine detail of some of what are inevitably complex issues. But there is a range of things that we see as legitimate grounds for negotiation and all kinds of possibilities need to be addressed. Clearly there are different views, both private and public, about how that process is unfolding, but I think for those people who are watching what’s going on, you need to bear in mind in the modern era that we now inhabit, if you are an interest group or a political lobby seeking to pursue a particular objective, you cannot be nuanced, you cannot be half-hearted, you cannot be conditional.
So yes, you are hearing all kinds of absolutist claims, some of them totally ludicrous, being put against the Government’s proposals, but I think a lot of those things need to be taken with a grain of salt because the nature of modern political debate is such that people, even if they wanted to, are unable to put nuance positions because those nuances will then become weaknesses that are leapt upon, not even necessarily by their antagonists, in this case the Government, but by the media, by other commentators. So whether we like it or not, that’s where it ends up. The negotiations are very important. We believe they are proceeding in a constructive and sensible manner, but they are very complex.
Rob: At the end of the day, though, at the moment polls would point to the fact that you seem to be bleeding support on both the left and the right. Is there a pressure to get these negotiations done as soon as possible? How much pressure is there for this to happen before the election?
Lindsay Tanner: Governments are always under political pressure, and in an election year, that pressure is usually going to be stronger than it is halfway through a term. There’s a whole lot of things going on. I always caution people against attributing a cause and effect relationship between any particular movement in an opinion poll and something that is happening contemporaneously that may or may not be the driver of that move in an opinion poll. Usually you would expect that, if there’s a shift in some opinion poll and that it coincides with a particular issue dominating the airwaves for a period, that there is some connection between the two, but there’s always more than one thing going on. It’s not easy to read. Obviously we’re not overjoyed by the fact that our position in the polls has deteriorated a bit over the past few months, but I don’t believe that that’s a reason for diverting from the broad policy position that I’ve just outlined which is something that’s very much an integrated whole and is about the longer term economic position of Australia. If you look at circumstances around the world, you will see that most countries would be very happy to swap places with Australia. They would be very happy to swap the hand of cards that they’ve got with the hand of cards that Australia has got.
Facilitator: Do you mind if I just take it out to the floor. It’s obviously an issue, and I’m sure most of you are very interested in the whole area of tax reform and wider trade with Asia as well. Can we just see if there are any questions from the floor?
Unidentified Participant: Just picking up the way you started your speech, it was interesting the two debate examples you used were also key political development areas: the introduction of universal suffrage and then federation. Following on your further comment about the coarsening of our political debate, do you think that fundamental reform such as the Keating-Hawke Government achieved is now possible in the current context?
Lindsay Tanner: I think that’s a very interesting question. It’s one that does sort of trouble me from time to time. Life is never easy for any government that’s seeking to push through tough reforms that inevitably produce political turmoil or argument. Whether it’s got harder is hard to say. I think in some respects the intensification of the media cycle does make it more difficult, but countries go through moods. If you look, for example, back into that period in the early 80s, I think there was a fairly widespread mood in Australia that reform was needed, and so there was a receptiveness in the general community to tough messages that at other times won’t be there. So these things are never completely within the control of a government, no matter how determined or focused the government might be. There are always going to be external circumstances that do influence these things. I still am optimistic for the prospects for tough decisions and hard reforms. Clearly this tax package, I think on any measure, fits that bill. Whether people agree with the content is another matter, but there is no question that we understood that, when we put this forward, we weren’t going to be walking into a universal consensus saying, ‘Goodness me, why didn’t we think of that idea?’ We knew that there was going to be a serious fight. Quite how big or what form it would take, of course we could not predict. So yes, things have got a bit tougher, but ultimately it’s really the kind of wider mood and circumstances of the country that matter. Often galvanising external events can completely change a national mood. The classic example of this was Sputnik in the late 1950s when suddenly the American people kind of went mad about science, because the fact that the Soviet Union was the first into space was a giant wakeup call, and so it produces a kind of popular response to do things that otherwise probably wouldn’t have been possible.
Unidentified Participant: Just on that question, what do you think will be the main themes of this election? It is often said the mining tax will be, but for voters, what do you think will be the top two or three themes?
Lindsay Tanner: I think always a combination of economic management and the government’s plan for the future is always going to be the default setting for Australian election contests that will occasionally be elbowed aside by a big national security frame, or if not elbowed aside, at least pushed into equal partnership. So if you look at the modern history of Australian elections, you will see that typically it’s that kind of wider economic outlook encompassing a whole range of specifics is the dominant terrain around which elections are fought. In occasional elections, you will see a kind of national security frame, 2001 being an obvious example, that doesn’t quite displace the economic frame but nonetheless sort of shares centre stage with it.
So, I still think that politically we are in reasonable competitive shape, notwithstanding anything that’s happening in the opinion polls, because we will be going to the Australian people and saying: the world has just been through its most testing time in living memory, and Australia has got through that better than almost any other country, which is not only a product of the Government’s economic management but that is certainly a significant factor, and we have got coherent plans for the future that do revolve around infrastructure, skills, broadband, deregulation and a coherent picture of where we want to take the country in the longer term. We are faced with an alternative that is erratic, risky and has been concentrating simply on blocking things, negative attacks and bomb throwing, and is yet to come up with a clear narrative about the longer term for the Australian economy. I think that’s ultimately what the election will be about, but inevitably within that frame, things like the resource super profits tax will be key aspects of debate. But the wider picture that I attempted to convey in my initial address I think is really where the action is.
Facilitator: If we can get one more from the floor. I should say, this time, if you could just say your name and where you’re from? Thank you.
Wayne Gordon: (Rabobank) Nice to see you, Minister Tanner. My question I guess is more about that longer term, wanting to get away a little bit from the resources tax. I know everyone would like to talk about that, but I’m wanting to get a little bit further away from that. With regard to the Henry tax review, I guess there were a number of recommendations that Dr Henry put forward, and this is only one of them that seems to have grabbed the media attention. How does this sort of situation that, I’m not suggesting it’s a negative situation you find yourself in, I’m saying how does this situation then affect how you then go forward with the rest of those perhaps recommendations which I think are very important to this longer term view?
Lindsay Tanner: I don’t think that the current debate and the outcome of that debate will particularly influence how we approach some of the remaining issues. For example, one of the key issues that the Treasurer has been very keen on for a long time and has figured prominently in our policy positioning over the years, and has been the subject of some incremental change but requires clear further change, is the problem of effective marginal tax rates through the intersection of the welfare system and the tax system. That’s an incredibly difficult problem to deal with. Realistically, it’s a problem that you’re always going to have to some degree; it’s just that we’ve got to improve the system from where it currently sits. I doubt whether our approach to tackling that problem is going to be influenced by what happens with respect to the current debate. I suspect that everything is connected to everything else in politics, so on the fringes, I suppose the flavouring of how people approach these things can potentially be influenced, but if things are worth doing, you’ve got to do them. You learn lessons in politics all the time, but things are always changing and always moving. So I don’t think, whatever the outcome of the current debate is, that will divert us. Of course, were we to lose the election, we’d be approaching the next stage of the Henry review from a slightly different perspective, slightly more theoretical perspective. But hopefully, that won’t occur.
Facilitator: I will just take one from the dealing room then another one from the floor. So, [Anaban], have you got one from the dealing room for us?
Anaban: Mr Tanner, there was one question from the dealing room, and it says that won’t significantly reducing the after-tax rate of return in the mining industry lead to a substantial decline in investment in the sector?
Lindsay Tanner: We don’t believe so. The advice we are receiving from Treasury suggests the same thing, in particular because of the structure of the tax. Of course, you are dealing here with a great variety of circumstances across different categories of mineral resource and different kinds of investment, different configurations of options around the world, but we don’t believe that it is going to change the investment profile. Of course, what you have seen over the last few weeks is a range of statements and decisions being made suggesting that things are under review or that this expansion has been cancelled or whatever, and always you need to be careful to make sure that cause is not being confused with correlation. These things are not easy to discern, but I note, for example, some of the commentary about the Arrow Energy takeover today indicating that maybe the claims about the new tax reform arrangements are having a negative impact on investment may possibly be somewhat exaggerated. Different people have different views on this thing, but we don’t believe that it will alter the longer term investment behaviour in Australia’s resources sector.
Facilitator: Just one more from the floor? I think we’ve got a gentleman here.
Chris Kenny: (Asciano) I just wanted to change tack a little bit and refer to the Queensland Rail privatisation. We’ve expressed some concerns about the vertically integrated model that the Queensland Government has put up, and we’ve been appreciative of your comments and other Federal Ministers’ comments about that model. In that context, I would just be interested in your further comments on the coal miner’s bid, particularly, because it would seem to deal with that vertical integration problem?
Lindsay Tanner: I think there’s two significant things that flow from that bid. One is—and perhaps I should have mentioned that in answer to the previous question as well, so thank you for giving me the opportunity to correct myself—that bid by the coal miners is a very strong vote of confidence in the long term prospects of the industry at the very height of this controversy about the resource super profits tax. So I think that’s a very significant point. Effectively to me it says from those companies, yes, we are going to have an arm wrestle with the Government to try to maximise the amount of profits we’re able to get, and try to make sure that the impact of the tax as we see it will be minimised. All companies, you would expect, to do that in these kinds of circumstances, individuals do it. But that doesn’t really alter the longer term outlook for the industry. That is the message I think that you can take from that particular proposal.
Of course, we are directly involved in supporting that bid through the Australian Rail Track Corporation which is, in effect, partnering with the coal sector as the prospective operator of the track infrastructure. I recently wrote in the Sydney Morning Herald an article about the Australian Rail Track Corporation and rail generally, pointing out this is one of the great achievements of the public sector in modern Australian history. I did point out, at my own expense, the irony that this was a Howard Government reform that I, as shadow Transport Minister, opposed. So I am standing up more than a decade later saying I was wrong. The ARTC has done a tremendous job of revitalising the interstate rail infrastructure, the freight dominated rail infrastructure of this nation, which is really crucial for Australia’s long term economic prospects.
Our Government is taking this one step further with big investments, whether it’s in the Hunter Valley, acquiring the Kalgoorlie to Perth section of the track, modernising the mechanisms for locating trains, all of these kinds of things—there’s a lot of equity investment going into the ARTC with longer term benefits for the Australian economy. In that context, we are entirely happy to be overtly supporting the coal company’s bid for the Queensland Rail assets because there is a very obvious risk here, and that is that a privately owned vertically integrated operator will maximise its returns and do everything it can to put any competitor at a disadvantage economically, and that the losers from that will ultimately be the users. It is obviously different in a whole lot of ways from the telecommunications sector, but underneath it all you’ve got the same issue. That is that a vertically integrated private owner has got incredibly powerful interests in squashing competition in gaining regulation and in maximising returns to the disadvantage of end users. In this case, that would be a bad thing for the Queensland coal sector, and that’s a bad thing for the Australian economy.
There’s a lot more detailed debate underneath this issue, of course, and no system is perfect, so there will always be debate coming back the other way; I concede that. No structural arrangement or regulatory framework is going to be perfect. Everything has its deficiencies. But in this case, I think it is very clear that, if you are going to have vertical integration, it should be publicly owned. If you are going to have private ownership, then it should be separated.
Facilitator: Let’s have one more from the floor. We’ve got time for one more question. Anybody?
Jo Collins: (Kreab Gavin Anderson) You were referring to the doom and gloom that is coming from the mining industry over the proposed tax. Do you think their reaction to it is posturing, or do you think it’s genuine opposition to the tax?
Lindsay Tanner: I think it’s a mixture of both. To be fair—and I would apply this generally—I’ve got no problem with people fighting in their corner. Going back to the previous question, I’ve had plenty of battles with Telstra over the years, both in my current configuration as half-owner of the NBN and also as shadow Communications Minister. At no point did I ever blame Telstra and say: you guys are doing the wrong thing. They were acting, and have been acting, rationally in the interests of their shareholders. Just that group of people is not the same as the general public or the entire Australian economy.
The real responsibility, the real focus of my criticism then, was the then Howard Government which created a framework which put in place incentives for Telstra to act in ways that might have theoretically advanced the interests of its shareholders but disadvantaged the nation through very poor broadband access and price and so forth, amongst other things, and inadequate competition and a very complex regulatory structure that encouraged gaming rather than innovation. Again in this situation, it is entirely a matter for companies to make their own assessments about where their interests lie, and to put their point of view in the public arena. Of course, the Government responds in kind. Where there are more hysterical or overblown claims being made, we will respond, and we are responding, and some of those claims are, frankly, hysterical. There are plenty of historical precedents for this.
In the mid-1980s, the fringe benefits tax was designed to get rid of rorts like dealers in financial services being on a salary of $25,000 and a credit card giving them $100,000 a year of expenses. In the mid-1980s, that was quite a lot of money, but there were literally people running around at that time in high-powered jobs, highly-paid jobs, where they would be paying tax on $25,000 of salary and not on $100,000 worth of fringe benefits. So, the fringe benefits tax was designed to get rid of those kinds of rorts. Effectively it has. At the time, the restaurant sector went completely ballistic, saying, ‘All those business lunches and so forth, we will all die, and Australia’s restaurant sector will collapse’ and whatever. Of course, nothing of the kind happened. That is just one example. There have been other examples in the resource sector with the exemption of gold from taxation. Australia’s gold sector was going to be destroyed by just bringing it into line with other resource industries, so we were told. Of course, nothing of the kind happened. So there is plenty of form of this kind, and it is not all on one side of the spectrum, either. That is just the nature of political debate. There is plenty of form of this kind. Separating out the rhetoric and the overblown claims from the actual content of the debate is always difficult, but I just urge people to be very cautious in taking some of these statements at face value. Even one of my Labor colleagues from South Australia yesterday apparently said that Whyalla is going to close down, or something along those lines. Frankly, that is nonsense.
Facilitator: Thanks very much, Minister. I think we’d better wrap it up there. If we can show our appreciation?
[applause]
Iain Dixon: Minister, just finally, thank you very much for sharing your thoughts and giving us your time. I personally found it very interesting and illuminating. I know you are an avid reader. I have a book here which is Reuter’s publication—oh well, now unfortunately it is in pictures, mainly, not words, but as they say, a picture paints a thousand words. It catalogues the year of 2009 in photographs, so over 350 photographs all taken by Reuters’ journalists, all around the world. So hopefully you can accept this as a small token of our appreciation, and enjoy it at your leisure. Thank you very much.
Lindsay Tanner: Thank you very much.
[applause]
Iain Dixon: Ladies and gentlemen, that concludes our session for today. Thank you very much for your time and attention. I hope you got value from it, both in terms of finding out a bit more about Insider and also from the Minister’s talk. So, there is coffee and more food outside if you would like to stay and network; if not, thank you very much again and have a good day. See you soon. Bye.
| Media Contact: | Website: |
|---|---|
| Nardia Dazkiw - 0418 144 690 | www.financeminister.gov.au |
