THE federal government’s proposed resource rent tax has come under fire from BHP Billiton’s recently retired chairman, Don Argus, who has argued the tax will permanently damage Australia’s economic prospects and create uncertainty among investors and miners alike.
Mr Argus said Australians at least deserved to be fully informed about the economic assumptions underpinning the proposed tax before it goes any further.
In a lengthy address to the Australian Council of Superannuation Investors in Melbourne, Mr Argus said he was concerned about the government introducing the resource rent tax when there remained significant uncertainty about the economic outlook and there was a possibility of world economies faltering yet again.
”Here we are, dealing with 18 per cent of Australia’s GDP, and we don’t understand the [economic] assumptions in the model,” Mr Argus later told The Age. ”That’s no way to put that on to the Australian people, and I don’t believe Australian people are going to wear it.”
Asked if he believed it would be permanently damaging, Mr Argus told The Age: ”Oh well, it will.
”Have a look at the flattening in the sharemarket in the last week – there’s been a derisking of Australia, there’s been an exit and the stocks are down,” he said, adding that Australia needed external capital to boost its economy.
Mr Argus, who was BHP Billiton chairman from 1999 until he retired in March, declined to comment specifically about BHP Billiton’s plans or its complaints about the tax. His successor, Jac Nasser, this week wrote to BHP shareholders, warning that ”the strong economic foundation of the country over decades could be undermined, representing a crucial turning point for Australia”.
Fellow miners have weighed in, some with considerably more vehemence. Fortescue Metals Group’s founder and chief executive, Andrew Forrest, on Tuesday claimed the company would be forced to suspend $US15 billion ($A17.7 billion) worth of infrastructure projects in the Pilbara because financiers, concerned about the impact of the tax, were fretting.
At the same time, Ross Garnaut, the Lhir Gold chairman whose academic research in the early 1980s generated the first models for resource rent taxes, said public debate about the government’s tax plan should avoid sloganeering and focus on content.
”It is critically important to our future that we are able to discuss hard policy proposals on their merits, so that an informed perception of the public interest can emerge and eventually win broadly based support,” Professor Garnaut said. ”What is important is that this time, on this subject, we demonstrate that we can still discuss policy proposals with clarity and rigour, listening to interested parties, with their words having influence according to their content, and not according to the cruder instruments of political influence that accompany them.”
He said that although the government’s manner of unveiling the new tax plan was ”not world’s best practice”, many of his mining industry associates remained opposed to it ”with a passion that has no near comparator in my memory”.
In his address to ACSI, Mr Argus noted the LIBOR rate, an official measure of how much banks charge each other for overnight lending of funds, was starting to edge up again ”and that’s a worry” because it could signal yet another liquidity crisis among banks.
”So, if we think we are out of the bubble, let me tell you we’re not,” he said. ”If banks start paying more for their cost of money, that’s going to hit you in the equity markets, it’s going to hit you hard in the interest rate markets.
”The world is not in the robust state that we would all want it to be. So then I started to question why does a government want to head down the path of a new tax and start to think about crippling the thing that has kept our [economic] environment alive for the past 30 years. That concerns me.”
Mr Argus said Australians needed to think hard about the long-term implications of the tax and its unintended consequences.
”It really bothers me [with the tax], that we are not seeing the assumptions,” he said. ”We didn’t understand the assumptions of the CPRS [carbon pollution reduction scheme], and these are the things that we, as a nation, now have to get better at – to start to understand what are the consequences, the unintended consequences, of what we are doing.
”Because if you are about to dismantle 18 per cent of GDP growth – and that is what the super tax is all about – I can assure you I am going to make a bit of noise … because I need to understand the assumptions.”
