CANBERRA OBSERVED: by national correspondentNews Weekly
Labor govt sinking amid confusion and acrimony
, March 2, 2013
It is theoretically possible that Eddie Obeid Inc. — that is, the former NSW state Labor minister, his sons and mining “associates” — stood to extract more money through potential inside information about Hunter Valley coal-mining licences, than Wayne Swan will manage to extract from the first year of his mining tax.
Now of course Mr Obeid continues to strenuously deny any wrongdoing, and his alleged actions as a minister are the subject of on-going hearings before the NSW Independent Commission Against Corruption (ICAC).
However, it seems, on face value, that there was easy money to be made from elected representatives giving mining companies the heads-up on the wealth contained in prospective coal-mining developments — wealth that properly belonged to the people of New South Wales.
It appeared to be not so easy to impose a super-profits tax on the three biggest mining companies which were already out there in the open, raking in tens of billions of dollars in revenue by extracting iron ore and coal from the ground.
The irony of two Labor men’s separate attempts to exploit mineral wealth during the greatest mining boom in Australia’s history should not be ignored entirely.
However, it is only one of the great ironies as the Gillard Labor government slowly sinks amidst confusion and acrimony.
Treasurer Wayne Swan revealed that his mineral resources rent tax (MRRT), during the first six months of its operation, raised only $126 million. Originally, the new tax had been forecast to raise $3.7 billion in its first year, although this was subsequently revised down to $2 billion.
In fact, the actual net revenue is much lower, perhaps half of the $126 million, with tens of millions spent by Treasury setting up and administering the ill-fated tax.
For Mr Swan the worst aspect of the tax is not its botched execution.
Nor is it the naïvety (stupidity?) of inviting the mining companies to draw up their own tax laws behind closed doors without public servants to vet and advise the process.
Nor is it the enormous damage the episode has done to the reputation of the Treasury, which originally conceived an albeit different mining tax, but whose forecasts of perpetual boom and other Budget projections have been shown to be hopeless.
Nor is the worst aspect the fact that the $2 billion that was expected to have been raised by the tax has already been frittered away.
No, the worst aspect of the mining tax debacle is that Labor blew such enormous political capital for something of minimal benefit to the Labor government and the country.
The “fight” cost one prime minister his job, and will probably cost another hers.
Labor spent months prosecuting the argument that all Australians should be able to share in the benefits of the mining boom and that the mineral wealth was there for all generations of Australians, not just the current one.
It was a valid though contestable argument.
Mr Swan himself unleashed a personal campaign of class warfare at the beginning of last year, accusing mining magnates such as Gina Rinehart and Andrew “Twiggy” Forrest of unbridled greed and pledging to lay the groundwork for a “fair” allocation of resources to all Australians.
In the end, the Opposition argued that the outcome was that “the people” received a paltry $5.50 each from the first six months of the great redistribution of wealth from the boom.
To add to the pain inside Labor’s ranks, the carbon tax is heading the same way.
Carbon tax revenues are being maintained at an artificially high level with a $23 per tonne of carbon reserve, rising to $25.40 after three years, after which it is will be tied to the European market.
However, the bottom has fallen out of the European carbon market, where currently man-made carbon dioxide emissions are being sold for around AUD$5.00 a tonne.
The latest reports from Europe warn of the carbon price going into freefall and becoming irrelevant unless parties agree to a rescue plan.
The whole theory behind the carbon tax and the carbon market is to place a cost on electricity producers to turn to more profitable “environmentally-friendly” alternatives.
As far as Australia is concerned, revenues from the carbon tax beyond 2015, like those of the ill-fated mineral resources rent tax, look dubious at best.
Julia Gillard took power on three policy platforms: stopping the illegal boats, introducing carbon pricing (but not a carbon tax), and fixing Kevin Rudd’s mining tax.
These are her “KPIs”, her own self-imposed key performance indicators. On all three, she has failed.
The rumblings in the corridors are getting louder and the knives are being sharpened.