We’re all going on a cheap overseas holiday

TimB says:

07:06am | 14/01/13

It’s good for those who purchase imported goods, surely. (Whether or not that offsets the downside of a high dollar is another question of course)

EG. Finally after paying ridiculous prices for video games for ages ($120+ in some cases), prices seem to have tumbled in the last year or so. New titles can easily be picked up for $70-$80.

Still higher than they should be, but much better than they were.

And I’m sure electronics and whatnot would be in the same boat.

Gregg says:

08:02am | 14/01/13

That’s really greatly good TimB, cheaper video games!, WTF!

What about what can be helping Australia to pay its way in the world, exporters other than mining not being so greatly disadvantaged and the same will eventually apply to miners too.
Australian companies being internationally competitive is what Australians need far more than cheap video games.

Neil says:

09:23am | 14/01/13

Our dollar is high because the US is printing like crazy (quantitive easing). Japan is now doing the same.

So how do we reduce our dollar? Reduce interest rates? Which will probably create a bubble on top of what may already be a housing bubble?

I don’t know.

However I do like the cheaper stuff from the internet.

TimB says:

11:21am | 14/01/13

I know that Gregg, you’ll notice I acknowledged that the advantages of having low import costs are offset by disadvantages that come with the high dollar (and vice versa). Video games are just a personal example I’ve noticed of those low import costs. And of course if we’re spending less money on imported goods, then we have more money to spend on local stuff…Not to mention the jobs associated with selling those same imports.

Just pointing out that it’s not uniformly bad news as Shane indicates. Otherwise we’d be happy to have our dollar be worth a fraction of the $US dollar would we not?

Balance is key.

Shane From Melbourne says:

07:06am | 14/01/13

Damn those Liberal state governments that increased their mining royalties then…..

TimB says:

07:57am | 14/01/13

@ Shane, they can do that, it’s the states that own the resources. Not the Feds.

lvd says:

08:09am | 14/01/13

PJ did you notice the recent report from the IMF saying that the Howard Govt wastefull spending government in recent decades? and the Gillard govt was spending responsibly?

John says:

08:16am | 14/01/13

The mining companies were desperate for workers and so offered sky-high wages to attract them. This is what happens in booms. Now they are complaining about costs being too high. Give me a break. Nobody forced them to pay truck drivers and electricians $200K per year.

acotrel says:

08:39am | 14/01/13

@lvd

The IMF must be just another biassed leftie government organisation, like the ABC ?
Tony Abbott and Joe Hockey are much wiser than the IMF, and more honest too.

Llana says:

08:45am | 14/01/13

As usual, facts are optional with babble-on.
The MRRT that collected no tax has rooned us, rooned us I tells ya.
1000 billion of mining investment in the pipeline and babble on tells us the mining boom isn’t happening.

hahaha - the mining boom has gone to Africa has it? Apparently it never went anywhere..
This must be your worst nightmare babble-on as all your opinions continue to be found wanting of substance just like your made up quotes.

PJ says:

09:15am | 14/01/13

Did you not read the quotes in my post from the 3 eminent Mining Corps citing the high cost of Mining created by the Gillard Government?

Did you not pick up that during 2012 when Swan was saying the Mining boom was over because of commodity prices, those same commodity prices were not an issue in Africa?

Ferguson said the boom was over. Gillard said he was wrong it was yet to peak. Swan said Commodity prices meant the boom was over and I laughed. The mining boom is over, its not, but it is, not, its over. Love Labors clarity and understanding of Australian economics.

Remember that even the week before the Gillard Government capitulated that the vow and promise of a Surplus was not possible, Julia Gillard was still saying one was going to be delivered.

That’s two examples that clearly show the Gillard Government does not understand the Australian economy and worse is not driving it with a plan and strategy.

The quest for Resources is not over, its just moving out of Australia and away from her fumbling Government.

Achmed says:

09:25am | 14/01/13

PJ reference your quotes please.  And I dont mean some right wing news sheet. 
The fact is you were putting up these same comments 6 months ago when ranting that the Govt had ended the mining boom when in fact there had been a drop in the price of iron ore forcing the miners to scale back on construction and expansion.  They were still shipping the same amount of ore.

ZSRenn says:

10:02am | 14/01/13

@Ivd and acotrel I guess you guys failed to read the first page of the said IMF report. That is OK, as initially I missed it as well. To bring you up to speed the disclaimer said

“This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.”

Also the definition of profligate is a bit of a conundrum for those using it to laud the failures of Howard.

“Although a precise definition of prudence or profligacy has not been established, policymakers, investors, and voters need to take a view all the time, in real time, on whether a country’s fiscal policies are appropriate to support economic growth and achieve other social objectives without causing a fiscal crisis.”

It’s true Howard spent the money paying off the debt left by Hawke / Keating governments and not for economic growth and to achieve other social objectives. I do not know of any fiscal crisis caused by Howard’s policies.

The ratings authorities also have a different view of Howard’s policies as they returned our AAA credit rating lost by Hawke 17 years earlier. 

I hope this helps.

Tim says:

10:03am | 14/01/13

PJ,
you were the one saying the mining boom was over 6 months ago and cut and pasting the exact same comments.

Now that the iron ore price has massively increased again, you’re still posting the same stuff.

Clearly you have no idea what you’re talking about.

Kingy says:

11:20am | 14/01/13

Same old, same old posting.
Isn’t it fabulous that our GDP rose 3.1% over 2012 – a tad bit more than those African countries you champion. You must be delighted that our economy is being handled so well!
That aside, things are changing in Namibia, Tanzania and Zambia with regulation, increased royalties and rising power prices all impacting on their bottom lines. By the bye, someone should mention to Gina that Sierra Leone was ranked 123rd in the Corruption Perception Index. Australia was seventh.
Mining in Australia can’t be in too terrible a state if both Rio and BHP shares have risen approximately 18% since the mining tax started.
Finally, Australia was ranked number one in the 2012 Behre Dolbear report on the best countries for mining investment. The highest ranked African country was Botswana at number eight with less than half the points accrued by Australia.
So where would you want to do business?

Pandabater says:

12:03pm | 14/01/13

PJ,
The MRRT is on Coal & Iron Ore.
The Olympic Dam Project mines Uranium & Copper.
Please try harder in the future.

GigaStar says:

12:07pm | 14/01/13

lvd - firstly where did you get the time frame of “recent decades” from - the Howard government wasn’t in for decades?  And where exactly in the report have the IMF said what you stated in your post. You’ll be hard-up to find it as Australia isn’t actually mentioned in the text of the report - it’s only in the tables. When you can understand how to interpret the tables then make a comment.

Rose says:

12:21pm | 14/01/13

” I do not know of any fiscal crisis caused by Howard’s policies”....how about Howard leading the nation in it’s addiction to middle class welfare? It doesn’t matter whether or not Australia could ‘afford’ the payments at the time, as only a short sighted government would bring in policies which were destined to cause difficulty for the nation as conditions change.
Conservatives complain about Rudd’s stimulus payments but they were a once off, never to be repeated measure to counteract the GFC. Howard’s extra-ordinary increase in middle class welfare is an ongoing concern, even years after he has left office we are stuck making payments and offering rebates unnecessarily as politically it is too difficult to wean the greedy off of the government teat. Meanwhile Gillard is screwing the needy as that is acceptable to the electorate even though is cruel and unnecessary.
Howard damage the fabric of Australian society, he made Australians greedy and somewhat heartless!!

PJ says:

01:58pm | 14/01/13

So BHP, Chevron and Rio Tinto tell you that the Gillard Government has made Mining in Australia too expensive.

80% of the power generated for the Mining Industry comes from Coal.

Yet still your accusing me of lies and respond with denials, no facts?

What will it take to show that the Gillard Government had the best economy in the world but produce results that look better compared to Europe than the Asia Pacific?

Rudd was assassinated for running a poor Government. You all agreed that his assassination was right. But under Gillard we have worse results but you will not invoke the same rules to judge her as you did Kevin Rudd, why?

Debt
Rudd - $42 Billion. Gillard $47 Billion
Illegal Boat arrivals (Gillard used this against Rudd’s Government)
Rudd - 6,500 Gillard 25,000
Cost of Living
Rudd Electricity - up 34% Gillard Electricity - up 41%

You criticism and removed Rudd in the most public and bloody way for these results, yet over the same period Gillard produces worse results and you do not judge her in the same way?

Clearly Gillard has performed worse than Rudd, you agreed he should go on those results, then surely she should go on hers right?

Achmed says:

02:02pm | 14/01/13

@ Gigastar - Quote from OECD Report Australia 2012
The report, published today, recognises the strong performance of the Australian economy and its resilience to the global economic crisis. It notes, however, that activity has moderated with GDP expected to grow by about 3 ¾% in 2012 and by about 3% annually over the 2013-14 period.
 
“Australia’s long period of uninterrupted economic growth makes it the Iron Man among the OECD countries,” said OECD Secretary-General Angel Gurría said. “The rise of Asia has driven Australian natural resource exports and is providing enormous new opportunities for the agriculture, education and tourism sectors, but it has also imposed significant challenges and strains. The strong Australian dollar resulting from the mining boom is imposing considerable structural changes on the economy,” Mr. Gurría said.

Achmed says:

02:25pm | 14/01/13

IMF Article IV Consultation Sept 2012 - Australia’s terms of trade peaked in 2011, pushing up the real effective exchange rate further and narrowing the current account deficit to 2¼ percent of GDP. Since then the terms of trade have fallen by 10 percent as of June 2012, driven by sharp declines in export prices for iron ore and coal. However, in recent months the Australian dollar has remained high despite lower commodity prices and the weaker global outlook, in part related to portfolio reallocations of large reserve holders toward Australian government debt. We expect the current account deficit to widen this year to 4 percent of GDP as import volumes pick up, especially for capital goods, possibly reaching 6 percent by 2014.

quasimodo says:

02:32pm | 14/01/13

Tim,
I think what PJ is trying to say is that the mining boom is receding in Australia and growing in Africa.

Achmed says:

02:47pm | 14/01/13

My angst with the fiscal policies of Howard/Costello is based around three things
1.  The introduction of middle class welfare that has created an on-going growing cost to the Aussie taxpayer which requires more and more taxpayer money through increased taxes to fund
2. The selling off of assetts.  Over $50 billion worth.
A simple analogy…I have an investment property with regular income.  Yes I have a debt but the income services that debt and provides still provides an income.  I sell the property and now have the profit.  The value of the profit is reduced by inflation . increasing costs and its value is reduced.
3. Was the failure of the Howard Govt to address bracket creep in the taxation system that gave the Govt around an extra $20 billion.

So around $70 billion of the debt left by Labor was not paid off through good fiscal management.  It was paid by selling our property/assetts and condemning us having to now “rent” and by ripping off taxpayers by not addressing bracket creep.

And lets not forget the mining boom of the 90’s that provided a further windfall to Howard.

So all the ranting about how great Howard/Costello managed the economy is just puff and bluff.

Achmed says:

02:56pm | 14/01/13

@quasimodo - I think the only thing receding is PJ’s hairline….hahhahaha gee I crack me up!!!

GigaStar says:

04:11pm | 14/01/13

Achmed says:02:02pm | 14/01/13

lvd is posting about the IMF report comparing 55 countries over the past 200 years for strong fiscal profligacy. The reports you’re posting about look at recent figures of economic indicators. None of the indicators you list apply to the methodology used by the IMF in the report - the IMF looked at sustainability relative to gross public debt, testing for structural breaks, profligacy outliers and rho coefficients. Get with the program buddy.

Achmed says:

06:38pm | 14/01/13

and yet an anouncement today that yet another iron ore mine will commence operations in the Pilbara…...15 million tons a year

irl says:

08:54am | 14/01/13

Benzo

for a more thoughtful analysis- particularly from the perspective of profligate wall to wall state labor governments at the time consider the following.
‘YOU don’t need to be a professor of economics to know John Howard was more fiscally prudent than Silvio Berlusconi. And if an econometric study suggested the opposite, you would look very carefully at its data and methods before placing much weight on its results’.

http://www.theaustralian.com.au/opinion/columnists/deceptive-attack-on-howards-record/story-fn7078da-1226553110377

Perhaps it would be better to rely upon considered argument rather than flinging accusations of spin supported by spin.

noelene says:

09:13am | 14/01/13

The Australian again..I can see why certain media hates it.They publish the truth..not spin.
MINING giant BHP Billiton’s boss Marius Kloppers has labelled Australia’s looming carbon tax “a dead weight cost”, while outlining its negative impact on coal sector investment.

Just hours after the multinational announced Australia’s highest ever corporate financial net profit of $US23.6 billion ($22.46 billion) for the 12 months to June 30, the CEO delivered a bleak assessment of the Gillard government’s plans to put a price on carbon.

“This, if you boil it down to its barest essentials, is a tax on coal exports from Australia,” Mr Kloppers told reporters in London.

“And that is a tax which competing countries like Indonesia, South Africa, and so on, do not have.

“I think that like any other cost impost, and therefore it is what economically would be called a dead weight cost, it’s an economic dead weight cost because it’s basically just an export tax, and those costs get discounted into investment decisions.

PJ says:

09:25am | 14/01/13

Benzo…. Read em an weep:

“BHP Billiton head Marius Kloppers has told European investors that Australia’s carbon and mining taxes have helped to render the nation’s coal industry unworthy of further investment at this time.

Despite reassuring Australians that the taxes were not to blame for BHP’s mothballing of the $US30 billion Olympic Dam expansion, Mr Kloppers referred to both when telling British media that new investments in Australia’s coal sector would not be profitable.”

http://m.smh.com.au/business/taxes-a-drag-on-coal-kloppers-warns-investors-20120823-24oyp.html

Coal has 30% of the Global Energy market and despite the Climate Change apocalyptics, is at a 40 year high. In their Energy Report BP say Coal will retain a 27% share up to 2030.

What a stupid time to tax your Coal Industry to unprofitability, don’t you think?

Massive loss of revenue for Australia, its children and its children’s children.

The Gillard Government is swapping massive profits from the Mining Industry and replacing it with 130 years of debt for Australian.

Anubis says:

10:21am | 14/01/13

@ Bonzo - this was posted by another Punch user (AdamC) on the Open Thread today - It is worth posting here for you (and other Labor sycophants) to take note

Henry Ergas has an interesting piece in the Aus today debunking the ‘profligate Howard’ stories that got a run on the Labor media last week. Ergas argues that the journos in question misinterpreted and/or misrepresented an IMF working paper about fiscal sustainabilty. The report is actually a long, highly technical, academic journal-style document. As such, I haven’t really been able to make head nor tail of it with my brief flick-through.

However, Ergas is certainly right that a) the paper does not reflect any sort of IMF findings or opinion and b) the paper seems to use a number of tests of fiscal sustainability, not just one. (I actually struggled to identify which part of the report the journos got their headline numbers from.)

Benzo says:

02:15pm | 14/01/13

@anubis and IRL, Henry is clearly right winged biased and has an agenda, plus his is an opinion piece…

IMF are just look at facts and statistics they have no reason to take sides…..

Anubis says:

02:34pm | 14/01/13

@ Benzo - Read the disclaimer page right at the start of the report it clearly states that the report should not be considered to be the opinion of the iMF and has been distributed to encourage feedback and comment. The reporting on this in the papers where it has been stated that the Howard Government was profligate is clearly the left wing press jumping on any hint of impropriety by the Howard Government. So saying that Ergas is right wing biased and is playing to an agenda (although true) ignores the fundamentals of the report (draft) and the purpose it was released in the first place.

acotrel says:

08:45am | 14/01/13

As Pauline used to say : ‘ploise hexplain’ ? What we need in Australia are more people who will work for nothing .  Bring back slavery ! It worked in America for a couple of hundred years, and bits of it still remain there. I would go into business as a whip maker.

Q says:

08:47am | 14/01/13

Facts would be nice Anubis.
Do you have any?

Tim says:

09:12am | 14/01/13

Yes Anubis,
a tax which raises zero dollars is definitely going to drive away possible investments.
Honestly, are you really that stupid?

Borderer says:

10:05am | 14/01/13

@Tim
Yes Anubis,
a tax which raises zero dollars is definitely going to drive away possible investments.
Honestly, are you really that stupid?

Because paying a super tax just gets them reaching for their cheque books…. are you really that stupid?

Tim says:

10:22am | 14/01/13

Borderer,
did you even read Anubis’ comment?

“Because paying a super tax just gets them reaching for their cheque books”

So your assertion is that the miners will be paying the tax? The exact opposite of Anubis’ assertion.

Anubis says:

10:55am | 14/01/13

@ Acotrel - take your meds mate your comment had nothing to do with the posted subject and just seemd to waffle off into thin air.

@Q - Front page story in the Australian today (you know, the paper Labor hate because they can’t stop them from printing facts)

@ Tim - Of course it will. Investment increases production, which increases turnover, which then shifts the company from the non-paying group to the group that need to pay the MRRT. Stop investment in Australia in order to dodge the MRRT and instead invest in places like Africa where the MRRT does not apply. Surely that’s not too hard a concept for a literate Labor supporter like yourself to grasp is it Tim?

james says:

11:14am | 14/01/13

The Australian prints facts?

Is this April fools day?

Tim says:

11:28am | 14/01/13

Anubis,
who’s a Labor supporter?

So you agree that the miners will be paying the tax when their profits are high enough exactly as the tax was designed to? That the fact that the MRRT hasn’t collected any revenue is a function of the world economy and commodity prices during those quarters?

And I don’t know about driving investment offshore seeing as most other countries are either increasing their taxes or have significant sovereign risk associated with them, like these wonderful African nations that are apparently taking all the mining investment dollars that would otherwise have been spent here.

But either way, the idea behind the mining tax is to curb the excessive boom-bust cycle that is currently causing large problems in other areas of the economy, partly due to the high Australian dollar.

As Adam C says below, even though we’ve had massive mining investment our economy is only growing at trend. This large mining boom is causing structural problems with the rest of the economy.

Without dealing with these problems what happens when mining investment drops into the bust part of the cycle?
We don’t have to dig up every mineral asset in the quickest time possible, we should be aiming to extend the boom at more reasonable and sustainable levels.

Borderer says:

11:39am | 14/01/13

@Tim
So your assertion is that the miners will be paying the tax? The exact opposite of Anubis’ assertion.

The exact opposite. The tax is a whopping incentive to offshore profits and bring forward expenses. It is also a whopping incentive to invest elsewhere as it makes our tax rate globally uncompetitive so that even Japan or the USA look cheap by comparison. It’s so poorly designed that surprise surprise is collecting nothing and halting new investments as it flat lines return on investment (ROI) when compared to other options. The only thing worse they could do is broaden the scope of the tax to include LNG and then they will have totally screwed the pooch.
It’s a tax grab designed to usurp the rights of the states, greedy, stupid and has little regard for consequences.

The Badger says:

11:53am | 14/01/13

“Stop investment in Australia in order to dodge the MRRT and instead invest in places like Africa where the MRRT does not apply.”
Perhaps you don’t know there is 1000 billion in mining investment in the pipeline?

Someone asks for facts and you refer him to the Australian?
too funny
The relationship between facts and a the Australian is like the relationship between the color green and the number seven. Occasionally you will see the number seven written in green, but you learn not to expect this.

TimB says:

12:00pm | 14/01/13

Tim, think about this logically for a second.

Imagine if the ALP decided to bring in a ‘millionaires’ tax, where they doubled the tax rate of those earning over a million a year.

All the millionaires decide they won’t stand for this nonsense and move to New Zealand.

Hey presto, you’ve got a tax that’s raised zip because the targets of said tax have all pulled out of the country.

Then when someone points out the governments folly and notes all the money that is now flowing overseas, you have someone pop up with an absurd counter-argument that ‘no money was raised from the tax anyway, so why would any millionaires move overseas?’

The issue with such an argument is that it relies on the ridiculous fallacy that reaction to the tax should be based on the actual financial result of the tax instead of the intended goal.

It also ignores the fact that the reaction to the tax is quite possibly one of the factors as to why you have a zero result in the first place.

Greg in Chengdu says:

12:12pm | 14/01/13

Are you guys forgetting already what the head of BHP said in the UK that the new taxes on mining in Australia particularly Coal has made it unprofitable to invest here. It doesn’t matter that the MRRT hasn’t generated a sindle cent in revenue it chasing away investment anyway and like Anubis said why bother with Australia and its mining taxes when you have continents like Africa that make it much easier to do business

Bert says:

12:57pm | 14/01/13

Yes, it’s really easy to do business in Africa isn’t it?
Ever hear of Sovereign risk girls?

“Rio Tinto chief Tom Albanese has also spoken out against nationalisation, encouraging governments to look towards royalty schemes instead.
His comments came on the back of increased pushes from South Africa’s ruling party, the African National Congress (ANC), to bring in legislation forcing miners to give more than half of their operations to the state; echoing the recent legislation changes in Zimbabwe.

Ah yes, the challenges of West African sovereign risk
In Zimbabwe the country has just run wholesale over foreign miners, and not only take the majority share of their operations, but is also increased licence costs by up to 5000% in some cases, while also declaring “Many governments around the world have now gone beyond taxation in seeking a great take from the sector, with a wave of requirements introduced such as mandated benefication, export levies, and limits on foreign ownerships.“that no new foreign miners will be granted licences to operate in the country.
For some critics, Africa’s iron rush has always been more hype than hope. Aside from the well-known political and infrastructure risks, the west coast of Africa has shipping distances to China three times further than the Pilbara.

Meanwhile in another part of the world,
In Brazil, the federal government is pursuing legislation to increase royalties for the industry.
Vale, Brazil’s mining giant and the number one producer of iron ore in the world, is being chased by the government for nearly R$30.7bn ($14.4bn $AUS) in back taxes.
In addition, Brazil’s National Mineral Production Department is seeking $4 billion in additional royalties, citing an understated value of Vale’s production.
Following the Brazilian government’s lead, various state governments including Minas Gerais have slapped tax notices on the company. Last month, the Brazilian state of Para – from which Vale produces a third of its total iron ore output – introduced a new mining tax.”

Yes, all the miners are rushing to Africa. There is no risk at all.
Perhaps this explains why Rio Tinto mines 3% of its iron ore in Africa and 3% from in South America.

Tim says:

12:58pm | 14/01/13

TimB,
if mining capital, investment and minerals were as easily moved as a millionaire’s funds then you’d have a point. It’s why a super tax on banks wouldn’t work.

No money was raised in the last quarter because of world economic conditions and commodities prices, not because investment was fleeing elsewhere.

Sure, there will be an dampening effect on overall mining investment over time because you are lessening the return but the idea that it’s driving investment overseas en masse is wrong.
Note that the slight lessening of investment during booms such as this can actually be a good thing for the rest of the economy. Lowering the variability of the boom-bust cycle helps rather hinders the rest of our economy. 

And the idea that Africa is some sort of investment paradise where everyone wants to do business is completely laughable.

Geoff says:

01:09pm | 14/01/13

wow labor logic has hit a new low.
Why do people champion a broken system? Another reason there was 0$ raised is because mining companies are busy writing off assets against the tax (remember it is against profits)
It will eventually make money when there is no more assets to write off but in the mean time a cork has been shoved into any new investment.
Stupid stupid labor.

Borderer says:

01:17pm | 14/01/13

@The Badger
Perhaps you don’t know there is 1000 billion in mining investment in the pipeline?

Really? So the Olympic dam expansion was in the pipeline….
One of the divisions of my employer work in the construction of such things (ore processing, gas liquifiers and such), I wouldn’t be so confident. The plans are there, just like Olympic dam’s expansion was (still is) but actually committing the cash, lets just say they’re holding off at the moment and will continue to do so.

Borderer says:

03:15pm | 14/01/13

@Bert
Yes, it’s really easy to do business in Africa isn’t it?
Ever hear of Sovereign risk girls?

The miners have, the risk at the moment is a broadening of the MRRT to cover other resources. It’s not the same as having a sovereign nationalise or blow up your investment, the tax effectively says (as far as profit is concerned) that the government has a bigger piece and that the tax may increase in the future. Investors become skiddish when they aren’t sure what a government is going to do or backflips on crucial policy decisions, something our present regime is guily of several times over. Africa was less popular because of the soveriegn risk in relation to violence and siezure, Australia returned less but with greater sureity (labour costs and safety requirements made it more expensive). That situation has changed and the movement in investment dollars is the prime indicator. If you wish to refute the assertion, the question you need to answer is why wouldn’t you invest in Australia? The miners have worked this out and their money is talking. You could bang on about Gina’s $2 a day but that’s grasping at straws and wages haven’t been making double digit jumps…

StevenK says:

06:14pm | 14/01/13

I’m not sure its a good analogy and quite happy if anyone can show me a better one.
In the PAYE tax system we have a tax free threshold of $18,200. So if you earn (profit) less then you don’t pay tax. If you earn more but can reduce your income (profit) below that $18,200 you don’t pay tax. You only pay tax when you earn above the $18,200

So if a companies profits are below the threshold of the amount that the MRRT is paid then they don’t pay the MRRT.  If their profits are above the level and they reduce their profit to below the threshold by whatever means then they don’t pay the MRRT.  Earn above the threshold and they pay the tax.
So the MRRT is a profit based tax not based on investment levels.  If the price of iron ore goes down then the companies make less profit and are more likely not to get to the threshold.  As the price goes up, and there are less opportunities to reduce the profit then they will pay the tax.

The problem is that the Treasury based its forecast on the ore price not allowing for there to be a downturn…error…..and Govt made financial predition based on that Treasury advice and now the money is not coming in as expected…..

Shane From Melbourne says:

09:56am | 14/01/13

Good- then when resource scarcity really kicks in in thirty years time Australia will be able sell its commodities at even higher prices…..

Rambo says:

09:56am | 14/01/13

The risk is a bit more than corruption a war or two and nationalizing foriegn companies is the norm in those regions. Foriegn companies that invested in Venezuela and Zimbawe have been bit hard and Nigeria is looking hairy.

expat says:

12:47pm | 14/01/13

It does not always work like that Shane, what happens as a base metal becomes more rare and expensive we find alternatives. Consider that we once relied on stone, then bronze and now steel, I would not expect steel to remain in the demand that is currently forever.

Australia could play the waiting game but it may be stuck with dirt that is worth less than it is today.

Rambo I live in Central America and frequently do business with these regions, Venezuela’s problem has little to do with corruption, rather it’s socialist government in power (want to see what Australia would like after a decade of left wing rule? Look no further). Not a single private company would do business in Venezuela unless it is absolutely necessary. The good news is that eventually the government will fall, especially now that they are seeing the wealth being generated in neighboring Colombia, lot’s of Venezuelans are seeing the benefits of capitalism.

I think you would be quite shocked at the level of investment into Africa and the number of private companies with a large presences in these locations. 
South Africa and Zimbabwe are not countries that are of issue for Australian investment being off-shored, your risk lies in West and East Africa. Nigeria is not hairy at all, Lago’s will be the financial center of the region for a very long time and you will find that doing business with countries like Nigeria will become for more common.

For a long time fear of doing business in these locations was a big issue, however the risk vs return is now well worth it. You have no idea how far Australia has priced itself out of the market, not just in costs but also in regulation until you have seen it from an outside perspective.

simonfromlakemba says:

11:32am | 14/01/13

I remember posting something to you last year sometime showing growth trends and we have been going along at the same pace give or take for Howard and How Rudd/Gillard. With Australia we have basically utilised our economy as such for all its worth. That’s why economic growth for poorer countries is a lot easier because they are coming from a lower starting point.

Gregg says:

02:01pm | 14/01/13

It’s not so complex Adam for on one hand all this investment that Swan&co; prattle on about is never really going to be evident or of any meaning to most Australians for with mines being located in remote or semi remote locations, investment needs to go into stuff like construction equipment in the first instance, mostly imported from abroad and then there’ll be mining and other plant, railway systems and port loaders etc., all rather expensive and all mostly consisting of equipment and material imports.
Where you do have Australian manufacture, it could be occurring because of drop off in other manufacturing, vehicles for instance.

So all the investment will not really affect Australian growth too much at all other than for the additional royalties and taxes for governments to attempt balancing their budgets and then they too can fall in a hole as we have seen if commodity prices drop and/or mine operations get mothballed.

As for structural problems in the economy, that’s another mythical fancy term oft used by economists and/or consultants in the hope of justifying getting a fee from someone.

Looking at any business more simply, any that rely on providing a product or service against competition have to be competitive or they will lose people a lot of money and eventually fold.

Taking that to a bigger picture, the same applies with businesses operating internationally or against international competition such as with manufacturers attempting to export and the two reasons why Australian exports will strike trouble is first off our cost of production and secondly what a landed price abroad for profitability needs to be given exchange rates and ultimately too high a price will just mean failure.

Australia is not alone in suffering the plight of lost competitiveness with manufacturing as can be seen happening in many other western developed countries and there is one underlying cause - the WTO level playing field principles which are decidedly not level and western governments seem to just be unwilling to accept their countries will all have enormous unemployment and increasing debt issues while they sit back and let more and more manufacturing go abroad to developing countries.

If there is a structural problem that is it and without fixing, all Australia can look forward to is eventually catching up to and surpassing economies like those of the US and the EU.
And why should we surpass them you may want to ask and it is because with the US and the EU at least a lot of like standards countries are much closer to oneanother to generate intertrade whereas where are we?

jg says:

10:05am | 14/01/13

Yeah, but Abbott will (insert rant here)

Meh says:

12:16pm | 14/01/13

@.pj

yawn

DJ says:

12:43pm | 14/01/13

I don’t listen to commercial radio because I don’t like high repitition

Achmed says:

01:32pm | 14/01/13

PJ - “murderous Pink batts”...then the employers who failed to adhere to OHS Legislation and failed to provide the proper training and failed to comply with Aust Building Codes should be charged and imprisoned.

Christian Real says:

02:22pm | 14/01/13

PJ
I weep for my Aboriginal ancestors country that you extreme right wing conservatives are trying to hijack with your crap.
One only has to look at the conservative State Government like Queensland, was a beautiful State before Newman and his henchmen got their hands on it,and people had jobs.

Craig says:

02:33pm | 14/01/13

Well said Acmed, No pink batt has ever been convicted of murder. It is the biggest lie of all that the government is in any way responsible for the deaths. Irresponsible employers, the bastions of the free economy were responsible and will be the ones in court, not the government.

nihonin says:

03:08pm | 14/01/13

Christian Real says:

      02:22pm | 14/01/13

      PJ
      I weep for my Aboriginal ancestors country that you extreme right wing conservatives are trying to hijack with your crap.
      One only has to look at the conservative State Government like Queensland, was a beautiful State before Newman and his henchmen got their hands on it,and people had jobs.

lol, yes CR you weep for our ancestors.  Take a look at what Labor federally has done for our ‘brothers and sisters’ who are actually living in the here and now.

nihonin says:

03:33pm | 14/01/13

’  ell said Acmed, No pink batt has ever been convicted of murder. It is the biggest lie of all that the government is in any way responsible for the deaths. Irresponsible employers, the bastions of the free economy were responsible and will be the ones in court, not the government.’

True craig, but the government enabled the madness and the deaths by giving away money without checking the credentials of all applications from the people/companies wanting a slice of the free government giveaway at the taxpayers expense..

Ando says:

03:46pm | 14/01/13

Craig. No doubt the employers are to blame but the Government should have investigated the ability of an industry sector to handle being flooded with tax payer money and listened when told this may happen.

Achmed says:

10:29am | 14/01/13

Agreed.  What we did see from the Libs and media during the Pink Batts was a massive amount of attention on the Govt with all the finger pointing that the Federal Govt was to blame.  No doubt there were mistakes made.
But…..we did not see the Libs or media pointing to the failure by employers to properly train employees or follow OHS Rules or the role of the State Govts to moniotr compliance to building codes
And since then we have seen little in the media and heard nothing from the Libs about the prosecutions that have taken place and the requirement for those businesses to repay the taxpayer money they stole and rorted.

Anubis says:

10:34am | 14/01/13

@ Kingy but those “dollar savings in energy costs” have well and truly been nullified by Labor allowing the power companies to keep increasing their fixed charges so it doesn’t matter how much you reduce your power usage you are still paying more per quarter than you previously were.

Achmed says:

11:09am | 14/01/13

Anubis - State Govts determine electricty/power prices not the Federal Govt.  In WA the LIberals have increased electricity by 60%.  How is it that Liberal supporters can claim that the CT caused the problem and yet the 60% increase by the State Liberals had no effect?
The CT added less to the cost than the GST.
The State Liberals have also increased WA debt from $4billion to over $20billion in less than 4 years…..despite increased royalties and increassed income from state taxes.

Kingy says:

11:31am | 14/01/13

@Anubis
Your point is valid but it is a second issue. I am not too sure how much influence the Federal Government has in this area. Be that as it may, Individual homes with PB insulation typically save around $300 dollars a year on their power bills because of that insulation.

Anubis says:

12:54pm | 14/01/13

@ Kingy - The Federal Government has to approve every price rise, regardless of what the states recommend. See the Australian Energy Regulator for more details,

Anubis says:

01:45pm | 14/01/13

That last commend should have been directed toward Achmed NOT Kingy

Achmed says:

01:48pm | 14/01/13

@Anubis - From 1 July 2012, the Australian Energy Regulator (AER) started to take on the function for regulating retail energy markets under the National Energy Customer Framework (‘Customer Framework’).
The Customer Framework is the final stage in the transition to national regulation of energy markets. These reforms aim to streamline the way that energy retail markets are regulated. The introduction of the Customer Framework will move consumer protections for energy customers in Queensland, New South Wales, the Australian Capital Territory, Victoria, Tasmania and South Australia into a single framework enforced by the AER.
Since July 2012…..so that would mean that prior to July 2012 the Sate Govts were responsible.  And the AER will only be overseeing the regulations not approving price rises.
In WA that means the Sate Liberal Govt was responsible for the 60% rise

ZSRenn says:

10:42am | 14/01/13

@ Achmed is this the same Tony Abbott that is often reported in these pages as talking down the Australian economy with many commentators calling him Dr No etc.

Thanks for the post, It is great for someone to provide a positive stance on Abbott for a change.

Sadly he went on to blow it by adding this later.

“The Rudd-Gillard government, by contrast, has turned a consistent $20 billion surplus into the four largest deficits in our history and a $70 billion net asset position into $107 billion of net Commonwealth debt.”

Here is a link to the story.

http://www.theaustralian.com.au/opinion/building-a-stronger-economy-in-an-uncertain-world/story-e6frg6zo-1226192925681

Achmed says:

12:25pm | 14/01/13

then there was his comparison between the economy of Greece and Australia

It appears he has one message when overseas and one for local consumption.

Hockey did the same thing in London

nihonin says:

11:26am | 14/01/13

sunny, they al (as in party acolytes)l seem to be coming across as whiny sooks, mind you though, it is fun to read their comments, as they all sound like rhetorical lamenting. 

But, but , but and if only, if only, if only and lets not forget…......... you get my drift.

John says:

12:18pm | 14/01/13

@sunny

Lately ? Always.

Reacher says:

03:17pm | 14/01/13

Based on the two blogs by Achmed it would appear that things in Africa aren’t as rosy as PJ and others would have us believe.  In fact it looks like Australia is being seen a a role model for how a country can get a proper financial return from mining instead just seeing the money go into the pockets of the billionaires.

Levi says:

02:27pm | 14/01/13

Oh wow a doco made by SBS is obviously unbiased and all-encompassing isn’t it Terry?

Typical Sheeple watch one documentary and you think you know it all.

nihonin says:

03:37pm | 14/01/13

I like SBS, can’t understand a word they’re saying, but its funny as all crap. I rate it up there with Twilight and Avatar  

Steve says:

04:47pm | 14/01/13

Aatar has hell better CGI though.

And boobs. Don’t forget boobs