There’s only one circumstance in which a corporate profit of over $15 billion looks disappointing. That’s when you made $23 billion last year.
The multinational mining giant formerly known as the Big Australian announced a massive US $15.4 billion net profit yesterday afternoon (simultaneously on stock exchanges around the world, reflecting the global behemoth it has become).
It was reported in some places as ‘BHP profit down 35 per cent’. That’s true. But then last year’s $23 billion mega profit was up 80 per cent on the previous year, knocking all previous corporate profit records out of the park.
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Dear Coal Seam Gas,
I had high hopes, I really did. My friends told me you were the clean and safe energy source of the future. You promised heaps of new jobs. Best of all, you promised to co-exist peacefully and profitably with farmland. I couldn’t wait to meet you.
But things started to go wrong as soon as you arrived. I had imagined maybe some dinner and some conversation, a chance to get to know you. But instead you just marched into Queensland and started drilling, without answering even half my questions. In fact, there are still questions you haven’t answered.
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The 1.3 per cent GDP growth figure in the first quarter of this year is indeed a great result for Australia and all credit goes to the mining and resources sector for driving it.
But Wayne Swan shouldn’t be crowing because any analysis shows it is a tremendous result despite him, not because of him.
The result has come largely off the back of the key resource states in Western Australia and Queensland. And tell me anything Wayne Swan has done to promote the investment and development of these resources?
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Australia’s biggest proposed industrial development is looking on increasingly shaky and unsecured ground, with Woodside this week announcing it was asking the Federal Government for a year-long extension on making a final investment decision on its contentious Kimberley gas plant.
That comes less than two weeks after Western Australian Supreme Court Chief Justice Wayne Martin handed the James Price Point gas project its biggest setback by ruling that the WA Government had acquired the land illegally.
The Chief Justice found that the government had botched its rushed attempt to compulsorily acquire the land 60 kilometres north of tourist gateway Broome after negotiations between the government, Woodside and the Kimberley Land Council stalled last year.
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Update 6:45am: The Minerals Resource Rent Tax Bill 2011 passed the lower house in the early hours of this morning after a marathon sitting day. Voting on the bill and 10 associated pieces of legislation didn’t begin until almost 12.30am AEDT.The vote on the bills finished at 2.42am. Treasurer Wayne Swan said the historic reform meant all Australians would share in the benefits from the country’s non-renewable resources.
It’s no secret, many Australians are doing it tough. With the constant demands of the mortgage, bills and school fees, it’s difficult for many to provide for their families.
Meanwhile, at the other end of town, big mining has not only remained immune to the financial squeeze, they’re doing better than ever.
Australian mining darling Fortescue Metals last week announced a $1 billion profit for the last financial year, a profit made without one cent of corporate tax. This comes on the back of a record $22.5 billion profit announced by BHP Billiton earlier this year and Rio Tinto’s 30 per cent increase in first half profits.
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The Australian economy is in danger of being torn apart by the resources boom.
The high prices being paid for our minerals, the unprecedented foreign investment to dig up those minerals and the rising value of the dollar are already reshaping our economy. This is only the beginning.
It will end, all booms do, but this one will take some time and it will bring great change.
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Last year BHP helped prove that crying wolf works, provided you crank the volume up to 11. Along with the other mining giants, they managed to convince Australians that paying anywhere near a fair amount of tax would somehow cripple their companies – and the nation.
We know now how the scare campaign played out: a Prime Minister was rolled, a new one installed and the Resources Super Profit Tax became the Mineral Resources Rent Tax.
Within 24 hours this week, in what can only be attributed to a divine act of timing, Australians have discovered how much mining wealth the nation lost and how quickly it’s made by those who squealed so loudly. Yesterday, BHP Billiton announced half-year net profits had surged 72 per cent – to $10.6 billion dollars.
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Ban the bomb, no new mines, the three mines policy, additional mines, street marches, fear of nuclear terrorism and the existence of rogue states with nuclear power or weaponry have all been elements in the debate about uranium mining, processing or nuclear power for a long time.
Perhaps its time to get past emotion fear and inconsistency and concentrate on rational debate in a coherent manner.
We are a blessed continent with more than adequate supplies of coal, gas and oil. We are major exporters to the rest of the world in each of these commodities. As I write new sources of energy like coal seam gas, costing tens of billions of dollars have become mainstream in Australia.
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So what is the Resource Super Profits Tax all about? And what is a resource rent tax anyway?
As it happens, I did a PhD in economics on these very questions, under the supervision of Professor Ross Garnaut. And as an economic adviser to Resources and Energy Minister, Senator Peter Walsh in the Hawke Government, I had the opportunity to implement my PhD findings by helping design the Petroleum Resource Rent Tax in 1984.
Let’s start with resource rent. Minerals like iron ore, coal, oil and gas possess two special features – they are non-renewable and deposits of them vary in quality and closeness to markets. These features give rise to resource rent.
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As someone who has worked as an accountant or financial analyst for most of the last couple of decades, including in the mining sector, I have been watching the debate about the mining resources super profit tax with some bemusement. People like me understand tax and why businesses make – or don’t make – investment decisions. It is becoming disturbingly apparent that ordinary punters are not getting the information they need to make a reasonable assessment about the merits of this proposal.
Frankly, there is a lot of nonsense being talked at present.
Firstly, you can discount almost everything that has been written by journalists, since virtually none of them seem to know anything about business or economics. Most appear to be simply regurgitating other people’s words. I put most business and economics writers into this category, by the way.
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At first blush today’s employment figures are an early Christmas present for the federal government. Some 30,000 jobs were created in November and the unemployment rate, against expectations, crept downwards by the tiniest of notches.
But there won’t be any champagne popping in the Cabinet room. There’s a worrying trend beneath the figures: the mining states, which you’d assume are leading Australia’s unexpected economic performance, are actually shedding jobs. It’s the states in the southeast - previously the laggards - where the jobs are being created.
So [the run-up] to Christmas
Eve will be a nervous one for Kevin Rudd. Santa could be preparing a big sack of trouble to chuck down his chimney in the form of the national accounts which come out on December 24 16 and should give a clearer indication of any weak spots in the economy.
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CHINA is a huge country. Its landmass is 25 per cent bigger than Australia, its economy is 10 times larger, it has 60 times as many people and, I am led to be believe, significantly more BBQ duck restaurants.
Thankfully, Australia is still ahead in a few areas. We have more stars on our flag, we have won more cricket World Cups and, as developments in the past few weeks prove, we trounce the Chinese in corporate haggling.
Increasingly, Australian business is going to rub up against China. The People’s Republic is our No2 trading partner but is likely to regain the No1 slot from Japan this year or next. And Beijing’s “go global’’ directive, or zou chu qu, means China’s state-owned firms will continue to eye opportunities to join with, or buy outright, Australian companies.
A funny thing happened on the weekend: the world’s second largest greenhouse gas emitter - the US - took the first step towards establishing a carbon reduction scheme and almost nobody wanted to talk about it.
The Obama-endorsed scheme passed the US House of Representatives and only has to clear their Senate to become law.
In Australia, a few people welcomed the vote and applauded the move, but almost no-one dared to lift the carpet and comment on the design of the US scheme.