The dambusters: tax review’s threat to mining
South Australia stands at the edge of a potential golden era, a golden era of opportunity like the state has never seen before.
It turns out that South Australia sits on a giant bed of yellow cake that, if managed properly, will drive the state for generations. As China and India continue to grow at nearly 10% per year with no sign of stopping soon, their insatiable appetite for energy resources grows along with it.
For instance between now and 2050 China will require an additional terawatt of power just to sustain their current levels of growth. Given the desire to build emission free power plants, uranium is in high demand as a fuel of choice around the world particularly amongst developing countries.
This puts South Australia in the box seat. Australia has approximately 23% of known world resources with a large portion of those located in South Australia.
The BHP Olympic Dam uranium mine in South Australia’s north is Australia’s largest underground mine employing 3,000 people. It already contributes enormously to the State’s gross domestic product delivering revenue to the state that ultimately means more teachers, nurses and police.
But it is what lies beneath, or in this case, what lies in the ore body next to the current underground site that is so exciting.
BHP is planning and currently undertaking an environment impact statement on a massive expansion that will make the Olympic Dam ore body one of the most bountiful in human history.
It is estimated to have one trillion dollars worth of resources.
The revenue and job potential of this massive investment by BHP is hard to comprehend.
In the start up faze alone there will be 13,000 jobs created and when the mine gets up and running it will increase net exports from South Australia over the next 30 years by over $16 billion compared to business as usual.
These numbers highlight the great economic and social benefits this expansion will offer South Australia. It will deliver services that will be the envy of the nation.
But like all major mining projects, BHP is faced by major challenges in accessing the ore body. It needs an enormous amount of new power and new water requiring significant investments in infrastructure. BHP is required to get approval under the relevant complex environmental legislation and it will need to contemplate how it will find and house the massive new workforce required.
But a bigger challenge looms on the horizon.
Matthew Stevens reported in the Weekend Australian that mining executives are increasingly worried about the prospect of a federal resource tax being implemented by the Rudd Government. Increasingly informed sources are indicating that the Henry Tax Review will recommend a new federal resource rent tax as a way to increase revenue for a cash strapped federal government.
What the Stevens article makes perfectly clear is that if the federal resource tax is implemented the Olympic Dam project will be shelved. That will be an economic disaster for South Australia.
So as we close in on the South Australian State election on March 20 it is time for the South Australian Premier Mike Rann and his Treasury sidekick Kevin Foley to declare that they are opposed to this new tax.
They must call on their federal Labor comrades and ensure that this new tax is dead on arrival.
Premier Rann stakes his economic credibility on the development of the South Australian mining industry.
If Mike Rann wants South Australians to trust him on the economy he must kill this tax before it ruins the chance at a much brighter future.
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