Julia Gillard might be excused for thinking this leadership business is pretty straightforward after swapping a few ministers around and fixing the mining tax. But this was not so much political genius as common sense. From here on in however, it gets harder.
At her first press conference as Labor leader, Julia Gillard said she wanted to get three things sorted before she pulled the election trigger. First order of business was the issue du jour, resolving the Resource Super Profits Tax. Then came asylum seekers and community anxiousness over continuing boat arrivals, and finally, repairing Labor’s standing on climate change.
But first things first. Kevin Rudd’s clumsy reversal on emissions trading aside, it was his self-started fight over the RSPT more than anything else, that was killing the Government.
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In May, Kevin Rudd announced the super-profits mining tax – which, after the shelving of the ETS and back flip on climate change – seemed to put the final nail in Rudd’s political coffin. PM Julia Gillard inherited this fiasco; but with a quick side step and gestures of reconciliation and camaraderie, she’s managed to get both government and miners beating their drums to a far less war-like rhythm.
The mining tax was announced in response to the Henry Tax Review, and was intended to provide a more equitable distribution of the wealth derived from Australia’s (limited) natural resources. A 40% tax on mining super profits would also provide a surplus of $2.5 billion and could be used to invest in a more sustainable, renewable energy industry (… one can dream).
All in all, the mining tax had a rather alluring Robin Hood-esque tinge. Indeed, it had all the fairy-tale spin that one might think would woo working voters’ support. Take money from the wealthy who are leaching off the limited supply of natural resources in our soil, and give it back to the workers’ who have toiled upon that land.
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It’s being heralded as a breakthrough and a huge win for the new Prime Minister Julia Gillard - a deal with the biggest three miners on what was once called the Resource Super Profits Tax.
Aside from a less scary new name (the Mineral Resource Rent Tax) eight days into her tenure Gillard has dropped the rate from 40 per cent to 30 per cent, and increased the threshold for kick-in from about 6 per cent to about 13 per cent. The latter will ensure the number of companies effected will be slashed from the many thousand to the few hundred.
The backdown (let’s call it what it is), will cost the Government’s Budget bottom line about $1.5 billion. To compensate the Government has decided not to cut the across-the-board company tax rate from 30 per cent to 28 per cent, instead cutting it to 29 per cent from 2013-14.
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By the time most of you read this article, Julia Gillard will have pulled off an extraordinary political coup - her second in one week - and one which again puts Labor in the box seat to win a second term. At 8.30am the new Prime Minister is expected to stand up and announce that a deal has been struck on the mining tax, killing stone dead the one issue which more than any other was threatening to derail Labor’s campaign for re-election.
If Kevin Rudd was the major personality flaw in Labor’s re-election equation, the Resources Super Profits Tax was its biggest policy failing. There were three key problems with the tax - many voters could not understand why Canberra was going after the one industry sector which had helped us weather the global financial crisis, Kevin Rudd was proving inept and ineffective at negotiating with the miners over its operation, and the proposed use of $38 million in public money to fund an advertising campaign extolling its virtues had offended the taxpayers deeply.
In just one week Julia Gillard has killed each of these three problems - she appears to have struck a deal which the miners are prepared to wear, she’s done so by sitting and down and negotiating in a manner which Kevin Rudd could only dream of, and she’s already killed off the prospect of a damaging and expensive advertising war on the eve of the election campaign. It’s a massive win for her so early in her prime ministership and a very serious blow to Tony Abbott who has been campaigning on little else for the past few months.
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I keep hearing how we have dodged a bullet. How the stewardship and steely nerve of our Prime Minister and the gang of four averted a recession (the GFC, so called, if you like acronyms), and how the RSPT (another acronym) is going to fix all our ills and bring the nasty billionaire miners to heel and “make them pay their fair share”.
He’s got cred after all, he wrote an essay on the evils of unbridled markets and the greedy speculators in the monthly, and how the age of the neo-con was over and the social democrats would restore balance to public policy.
The problem is that from where I am situated as the owner of a modestly small electrical contracting firm that is responsible for the livelihoods of 5 people, things aren’t that great.
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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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The Liberal leadership was his for the taking but Peter Costello thought better of it judging he would spend two terms in opposition and maybe more.
Now however, as Kevin Rudd’s star plummets earthward, it is arguable that Costello might have been happily ensconced in The Lodge by the coming summer. He of course walked away but for those there now, such “what might have been” frustrations are small beer.
Labor’s hapless backbenchers know the real thing. With their careers on the line, they have real skin in the game yet about as much say in Government strategy and policy as the former Liberal treasurer - to wit, none. The question is: what should they do about it?
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Lindsay Tanner was just on AM and made an observation so obvious it was almost funny. He said people only complain about the consultation process when they don’t like the outcome.
That might explain why people in the ALP are now complaining that Kevin Rudd and Wayne Swan came up with the Resources Super Profits Tax all on their own, without even consulting the other half of the so-called “kitchen cabinet”, Tanner, and Julia Gillard.
Tanner denied the claims, saying as Finance Minister he’s a key part of the Budget process, but he did stop short of asserting anyone else in Rudd’s increasingly invisible cabinet was brought into the loop. If Rudd and Swan were responsible for formulating the RSPT, their back bench is now holding them responsible for stopping the bleeding it’s caused.
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Leadership destabilisation has a habit of becoming self-fulfilling. The more people in a party diss the boss the lower he drops in the polls.
The lower he drops in the polls the more people in his party diss him. Rudd seems to be in a death spiral this long weekend. Crusty old party elders such as Graham Richardson and Keith De Lacy are joining the pack of baying wolves.
Rudd’s about as popular as Tim Cahill in his camp this morning.
But as Matthew Franklin and Samantha Maiden quote a Labor source in this morning’s Australian: “Nothing will happen unless Julia acts. And there is no sign she will. She is being a very loyal deputy.”
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It was the trip up the Swan River that Kevin Rudd was always going to have to take.
He could no longer fight the urge to visit Perth and head deep into the heart of that state that fears his new tax above all others.
Yesterday was a first for this Prime Minister: he showed up somewhere and was greeted by an angry mob of protestors. He couldn’t very well tell them to “go get a job” like Paul Keating did to rowdy university students.
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With the miners launching the mother-of-all fear campaigns and the opposition leader fanning the hysteria, it’s hardly surprising that the average person understands as much about the resources super profits tax as they do about quantum physics.
Most of us are reliant on private business and media interests to present the information about this substantial reform: business and media organizations that are not elected, are not publicly accountable, and aren’t under any obligation to make sure information is balanced and accurate.
I for one am quite happy for the government to spend $3.27 of my taxes—that’s the total cost per taxpayer—to provide a public information campaign that will provide facts, without spin, about its proposed tax. Indeed, at less than the cost of a hamburger, it’s money well spent if it helps provide a clearer understanding of such an important long term reform.
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Several years ago, when senior Labor strategists were considering how to market a major new policy initiative, they commissioned market research to hone their lines.
According to someone involved in the process, a central concept they wished to convey, that of ``fairness’’ or``fair’‘, failed to impress. The words ``tested like dog shit’’ an insider revealed. Respondents apparently found the idea of making something ``fairer’’ pretty meaningless because what is considered fair depends on where you stand.
This is germane right now because, as the Government struggles to defend its new 40 per cent Resource Super Profits Tax, ``fairness’‘, its chosen justification, is again failing to cut the mustard.
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If 3,250 jobs never existed, can they still be used to batter a government over the head and frighten the bejesus out of mining communities? That’s what Swiss mining giant Xstrata is testing this week.
There’s been much hysteria about Xstrata’s announcement it will suspend and review two Queensland projects. Prime Minister Kevin Rudd fought back, boldly describing Xstrata’s announcement yesterday as ‘passing strange’. Here are some better descriptors: arrogant, cynical, bullying, fear-mongering.
Anyone involved in the mining industry for any length of time knows how to take this kind of announcement from a mining company, with a big grain of salt.
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It is increasingly apparent that Australia’s well developed cultural bias towards egalitarianism is part of the leverage that the Rudd Government will seek to exploit to ensure its re-election this year.
Since 2007 Mr Rudd and Mr Swan have regularly gone out of their way to promote that they are some sort of modern day Robin Hoods. This carefully crafted illusion has been built around the idea that by taxing the “rich” we can somehow pay for a Mount Everest of around $93 billion of debt, racked up in reckless cash splashes and handed out on sometimes completely illogical grounds.
Now the Rudd Government tells us that we need to increase tax by 40 per cent on the most productive sector of our economy. They argue this is a “Robin Hood style” redistribution of wealth that will make us all richer.
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In Rudd Government-speak “hysterical” is the new “denier”, as in the mining industry is “hysterical” over the RSPT the way people who questioned the details of the ETS were climate change “deniers”.
The Rudd team is once again relying on a simplistic argument to sell a highly complex policy, and this time they’ve gone all in.
Tony Abbott keeps saying the coming election will be won and lost on the Resources Super Profits Tax, which for political watchers’ sakes I hope is an overstatement. Certainly there’s no way Rudd can afford to dump it in the same bin as the ETS.
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