Deep in the weeds of the 24-hour dust-up over whether the mining boom is over—on the very day that BHP reported a $15 billion profit— lurks a more obvious strategy on the part of the mining companies: a determination to build up the specter of a threat to the boom if “costs” are not controlled—“costs” being workers’ wages—and to take absolutely no responsibility for the blow-back from the boom.
Some of this is subtle, some not so subtle. The boom is far from bust, as Paul Cleary pointed out in The Australian:
The projects that mining companies have put on hold are completely overshadowed by the $260 billion in investment already approved by company boards and government authorities that is being poured into mammoth mining and energy projects across the country.
Even if commodity prices fall by 50 per cent, these increased volumes will generate increased flows of income into Australia, keeping the dollar strong while driving far-reaching structural change in our economy. This means the mining boom can be expected to deliver benefits and challenges for all Australians for some time to come. [emphasis added]
The mining barons, themselves, swore up and down yesterday that, no, the boom wasn’t over. But, the Fin gives a little insight into where they are going:
At The Australian Financial Review and Macquarie Future Forum in Perth, resources chiefs were confident that Chinese demand for commodities will grow in the longer term, despite a slowdown that has seen iron ore and coking coal prices fall to four-year lows.
However, they warned Australia had become a high-cost place to develop projects, and needed to improve its international competitiveness through reforms to taxation, industrial relations and environmental approvals. [emphasis added]
Aha. “Reforms” in taxation and industrial relations are code words for the Coalition’s agenda: repeal the resources tax and attack the system of bargaining that protects wages and benefits that makes Australia a decent society. In a decent society, leaders would embrace a once-in-a-lifetime mining boom to invest some of the profits in infrastructure, schools and other in life-changing, society-altering projects. Nope, the mining barons make clear, we’re just not in to that.
Note that “high cost” never refers to the compensation of the CEOs of the mining companies, or the staggering wealth of the owners of the companies like Gina Reinhart, the richest woman in the world. “High cost” translates into “take it out of the hide of society and the working person”.
The mining barons view can be summed up thus:
We don’t care how many people are hurt by the rising Australian dollar. That’s the “free market”.
We will fight tooth and nail against resources taxes because, well, the “free market” cannot be messed with.
We truly don’t care what Australia looks like in 20, 30 or 40 years.
When is a $15 billion profit not enough? I suppose when you are at the helm of BHP and do not want to pay a fair share in taxes in return for digging up the minerals that are making you rich.
It’s not, as the Sydney Morning Herald tells us, a day to cry at BHP:
The group is still highly profitable. Underlying earnings before interest and tax fell 14.8 per cent to $US27.2 billion, but that was still a very [sic] 39 per cent share of revenue, and BHP’s underlying return on capital invested was 23 per cent.
I’m assuming the missing words in the sentence above were “big haul” or “monster profit” or something. It is not something to wring ones hands over, as CFMEU National President Tony Maher points out. That profit is still the second-biggest corporate profit ever recorded in Australia and more than double the highest profit made in our next most profitable sector – banking. Maher continues:
Don’t be fooled. This is a massive profit, greater than the GDP of over 60 countries. BHP shouldn’t have to be dragged kicking and screaming to do the right thing by its workforce, by mining communities and by downstream Australian businesses trying to benefit from the mining boom.
The worry should be that BHP will use a lower, but massive profit, to try to squeeze workers and continue to fight a reasonable resources tax. Maher also points out, though, that any higher costs are not about workers’ wages:
Where mining companies are looking to cut costs, the protracted record-high level of the dollar is to blame. Australia’s mining boom is going to continue for many years into the future. For the sake of jobs across the whole Australian economy – it’s time for some serious action to take the heat out of the dollar.
As Gina continues on her “I, Gina” self-absorbed stomp, it’s always useful to keep in mind that a society always has the ultimate option: if rich people, or mining barons, don’t care about the national interest, they can just move somewhere else. And what is pretty clear is that most don’t, and won’t, because they have it good where they are–which brings us to the whinging about resources taxes.
Gina and her ilk–Clive Palmer and Twiggy Forrest come most quickly to mind–bring up the usual fiction heard around the world whenever higher taxes on the wealthy are pushed as a way of making sure a society sustains itself: it’s anti-business and hurts “us” from being competitive.
Well, to focus on just mining, that’s pure rubbish, as we learn from a pithy summary from Peter Colley, National Research Director at the Construction, Forestry, Mining and Energy Union (we don’t have a link to a place it might be posted–we’re just privileged to get such gripping, novelistic American Idol-like fare sent our way…). As Peter writes:
One would think the mining companies were losing money when the overall picture for the mining industry globally is one of rude good health.
PriceWaterhouseCoopers, one of the global Big 4 accounting firms, in their annual survey of the mining industry summarised the good news for big mining companies:
“In 2011, the financial results for the Top 40 hit new heights”, it said, listing the following facts:
• Revenues increased 26% to over $700 billion
• Net profit was up 21% to $133 billion
• Operating cash flows grew 34% to $174 billion
• Investing cash flows grew 92%
• The Top 40 returned 156% more to shareholders than in 2010
• Total assets remained above $1 trillion and grew a further 13%.
Imagine that. They are rolling in dough. And it isn’t the case that the local barons, Gina and The Gang, would have it so much better in another place on the planet. Back to Peter:
At least 25 countries increased taxes and royalties on their mining industries, or announced intentions to do so. These include all the major mining nations – Canada, the USA, South Africa, Indonesia, Chile, Brazil, Colombia and even China and India.
These taxes and royalties are often far higher than in Australia – in Colombia they can reach 81% of coal mining profit, while in the oil and gas sector it is well known that Norway taxes almost all the profit of the North Sea oil industry – but what remains is still enough to keep the investors coming.
So, the proper response to “we’ll take our business elsewhere” should be, “what flight can we book you on?” The truth is that what Gina and The Gang are really up to is a extortion–but they aren’t holding much of a weapon. The resources are in the ground. You can’t take it with you. But, by all means, if life is so cruel for Gina and The Gang, the country should organize a collective farewell party, wave goodbye and invite others to do their business here.
And we neglected to mention that Fortescue is out there whinging about the mining tax and, per the SMH, taking the government to court:
While large miners Rio Tinto and BHP were able to strike a deal with the federal government over the final scope of the tax, smaller miners including Fortescue and Gina Rinehart’s Hancock Prospecting have waged a fierce battle against the tax.
Fortescue has been threatening to challenge the MRRT in the High Court for months, arguing it is unfair and was been stitched up by the government in conjunction with the big miners.
A spokesman for the acting prime minister and Treasurer Wayne Swan said the challenge had not come as a surprise.
”Mr Forrest has made it clear that he is staunchly opposed to the government spreading the benefits of the mining boom to millions of households and small businesses who aren’t in the fast lane,” he said.
“The Gillard government believes Australia’s non-renewable natural resources belong to all Australians, not just to a handful of mining billionaires, and is determined to deliver the MRRT to ensure the Australian community shares in the benefits and opportunities of the mining boom.” [emphasis added]
To which we say: good on the government, and the Swanster for saying what needed to be said.
Read Essential's ongoing research on the public response to Covid-19.Download this week's Report