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Gina Rinehart tells big fat porkie-pies about struggling miners


Michael Roddan

By

May 27th, 2013


Gina Rinehart last week accused the Government of treating the mining sector like an ATM, and discouraging mining investment in Australia. Michael Roddan challenges the credibility of this claim.


Gina Rinehart, Australia’s richest and most mendacious mining magnate, spoke to the Australian Miners and Metals Conference last week.

In her speech, she accused the greedy government of treating the mining sector like an ATM. When she wasn’t throwing stones in glass houses, Gina was arguing that Australians had gotten too big for their boots and should “not be too proud to admit that we’re really just a large island with a small population with record debt.”

If Gina were speaking at a conference in 1946, she would be undeniably correct. Australia’s gross government debt exploded to a record peak of 104% of GDP right after the conclusion of World War II. At the end of 2012 public debt was 16% of GDP. Her economic figures are as old as the minerals she unearths.

In this year’s federal budget a deficit of about $19 billion was announced. While Ms Rinehart seems very concerned about government largess on the one hand, she fails to mention that her wealth alone could help bridge the budget shortfall, even when accounting for her $7 billion personal losses last year.

So what’s all the noise about? Rumours have been circulating of the mining industry’s imminent demise for quite some time and it’s getting tiresome.

Former Resource Minister Martin Ferguson said, “You’ve got to understand that the resources boom is over.”

Our soon-to-be Glorious Leader Tony Abbott said, “The whole point of the Carbon Tax is to eliminate the use of coal and that spells death for the coal industry.”

Senator Eggleston said, “Many mining companies said they will no longer do business in Australia once this tax and the subsequent emissions trading scheme are introduced.”

Research from the think-tank the Australia Institute seems to suggest the opposite. Since the carbon tax was first proposed in 2010, investment into mines and equipment has grown more than $15 billion dollars. Indeed, over the last 9 years mining investment in Australia has grown 12 fold. Since the Mining Resource Rent Tax was proposed investment has more than doubled.

“Claims that the carbon price and mining tax will destroy the mining industry in Australia are at odds with the level of investment that the industry is making. To invest billions of dollars every year you must be confident that your industry has a positive future,” writes the Australia Institute.

This level of infrastructure spending not only contradicts the mining industry’s cries of oppressive and exorbitant government taxation, it is also their own worst enemy. Although demand for minerals has dropped globally since recent record highs, with the slowdown in the global economy, Australia’s export volume has increased.

That is to say that so much money has been confidently invested into improving mining efficiency that the industry produces much more than is wanted. Export volume, of what is mainly iron ore and coal, grew 3.3% in the last quarter –  far outstripping growth in demand. The mining magnates’ eagerness to squeeze the egg from the golden goose has led to their own undoing.

And it is this drop in prices that has in turn led to the measly returns on the Mining Tax. The government has seen about $200 million dollars of the $2 billion that the MRRT was designed to recoup. If the government is treating the mining industry as an ATM, as Gina would like us to believe, we’re not withdrawing very much money.

Ms Rinehart said that we should learn from Singapore too, using low taxes to encourage investment and development because we had the natural resources that Singapore lacks. What Gina failed to mention was that Australia has something much more valuable than resources, and that Singapore also lacks: Democracy. It was a democratically elected government that legislated the MRRT.

The Coalition is arguing to have the Mining Tax repealed to ease the burden on the mining industry, while the Greens are arguing that it should be enhanced to raise more revenue. The minerals are owned by the Crown, which means that everything under the ground is owned ultimately by the citizenry. We should enhance the tax to raise revenue for the sale of resources that we own. However, we need to think about how to better spend this revenue.

Rather than the business as usual, vote buying, cash splashing and middle class welfare that is indicative of how the Howard Government squandered the revenue from the first wave of the resources boom, we should use the money to address real inequality.

Andrew ‘Twiggy’ Forrest of Fortescue Metals, being the lesser of three magnate evils (the others being Rinehart and Clive Palmer of Rio Tinto), leads the field in trying to offset the damage of the two-speed economy that the mining boom has produced, especially in indigenous communities.

As prominent indigenous academic Marcia Langton wrote in the Resource Curse, state governments have continually shirked their responsibilities of putting revenue back into the northern towns where minerals are sourced. Instead, rent-seeking state governments spend big in southern cities while ignoring the electorally insignificant aboriginal communities in the north.

“Anyone who lives in a mining province but does not work for a mining company is disadvantaged in important ways: their income is much lower, yet they must pay the same exorbitant housing, food and services costs, thanks to the localised inflation brought about by the boom,” writes Langton.

Andrew Forrest is aiming to get 50,000 indigenous people in mining jobs with his Australian Employment Covenant. It’s a start. Australia needs to ignore the lies of the self-interested in the mining community and put our resources to good use.

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The views expressed within this article are those of the author and do not represent the views of the ESSA Committee or the Society's sponsors. Use of any content from this article should clearly attribute the work to the author and not to ESSA or its sponsors.

  • Dave Sharpe

    Great article Michael. I couldnt agree more. I wonder what Gina R would be doing but for her fathers success. Maybe living large on $2 a day? In my mind she is the poster child for bloated entitlement and privilege. Re the tax, first priority should be to improve the mining tax so that it at least generates more than it costs to administer (always a challenge for government). Rather than implementing Gonski and gutting our universities use the revenue from the enhanced mining tax to support education of all australians, especially to improve opportunities for education for indigenous communities. Build a sustainable innovation economy. By doing so we sell one natural resource to enhance another.

  • Monika Sarder

    Hi Michael,

    I enjoyed the article – but one thing I thought might be worth pointing out is that given the long lead times between exploration and production (around 15-20 years) in an environment of relatively high sustained minerals demand, the MRRT and carbon tax will not have an immediate effect on capital expenditure that is already on foot.

    What they do effect is exploration investment by both juniors and majors. Australia’s share of exploration has more than halved in the last ten years.

    Certainly taxation arrangements play a large part in where companies plan to invest in the future. Australia is deemed ‘mature’ exploration terrain which means that once projects on foot are completed, unless exploration is very attractive here, companies will divert resources to more attractive terrain – leaving us just a declining quarry for the rest of the world.

    So in summary, tough taxation arrangements are something that we will feel 15-20 years down the line, as regions like South America and Africa are positioning themselves to attract investment away from places like Australia.

    We remain the complacent ‘lucky country’.

    Another phenomenon that occurs when the taxation levels are increased is “high grading” of ore bodies. That is, in order to maximise profits, when taxation burden increases this leads mine managers to quarantine lower grade orebodies that previously would have been mined, but that are no longer worth it as costs of operating a mine increase. In that case everyone loses.

    Gina Rinehart is an easy target. Because she is an idiot. I don’t know why she is rambling that we are going to be like struggling Eurozone countries.

    However,the case for an attractive taxation environment for mining so that global investment dollars fort he pipeline of future projects do not flow elsewhere is sound.

    Also most companies do not behave like mining companies in the 80s. Significant resources are spent on capacity building to ensure that indigenous groups can negotiate, paying indigenously managed companies to ensure that local indigenous people who want to work on mines are work-ready, as well as training local indigenous people themselves.

    Marcia Langton does not work in this space at all (pragmatic real effort to engage indigenous stakeholders). I have had the pleasure of being chewed out by her in a bar and the bartender asking me if he should tell her to leave because she is such a rage-a-holic(this wasn’t a racist thing I am unambiguously brown). Not only does she work off pure ideology, she has a 1970s mindset in which everyone is either indigenous or white. Migrants seem to complicate issues for her :P

  • Vanessa Cheung

    Hi Michael,
    I think your piece reflects what many Australians feel about Gina Rinehart but are afraid to say. Rather than being an idiot she is a dangerous force in Australian business & media solely because she is wealthy. Apart from a sea of litigation I am not sure what her lasting legacy will be. Contrast that with Bill & Melinda Gates!
    Vanessa

  • Dave Sharpe

    I couldnt agree more Vanessa. AS well one of the ugliest family soap operas and making lawyers rich her legacy will be to cement her place as yet another self serving pugnacious mining bully who has squandered an opportunity to serve her nation well and repay the opportunity and wealth she inherited (not earned) through philanthropy. Dave

  • Michael Roddan

    Thanks for commenting!

    Monika,
    Yes, Gina is an easy target because she is the loudest, but I would have given equal space to the other magnates if I had more room to write. Perhaps a future article.
    I think you raise some really good points, but from what I have read exploration hasn’t slowed as dramatically as you argue, especially when you take into account exploration in energy mining and not just minerals.
    I think you’ve misread Langton though. From what I understand, her squabble isn’t with the miners – and it shouldn’t be, as long as the mining industry isn’t just guarding their superprofits.
    Langton is critical of the state and federal governments extracting great revenue from mining but not putting it back into the communities that it is extracted from. So in the southern cities we benefit greatly from mining revenue, but in the north the government is apathetic with investing money into the communities. Rather than create TAFEs or the like to train indigenous communities to be able to actually contribute to the mining industry and gain social mobility (this is what Langton argues), governments would rather bankroll electorally powerful southern cities. That way they stay in power at the cost of a pretty destructive industry (not necessarily environmentally destructive but socially, as indigenous communities are excluded from the mainstream economy).
    And I’m not sure if race has anything to do with it, Langton is quicker to attack the 70s era progressives and modern leftists than the mining industry. I think a large part of her work focusses on criticising the “feel good” left who say things like the Intervention is paternalistic and racist, when it is anything but.

    Vanessa and Dave,
    While it is horrible to hear these things that Gina spurts as legitimate public debate, I think her influence on political parties is more abhorrent. Her cosiness with politically powerful people should raise more than just eyebrows. If what she says is so easily dismissible by the lay-person, why hasn’t it been by the Coalition

  • Monika Sarder

    Thanks Michael. I still feel that mining revenue should not necessarily be funnelled specifically back into indigenous communities. I think that support for these communities – the kind you describe, is critical but this should not just be for indigenous people who have a windfall on their land, but all indigenous people. There are other ways to increase general revenue to create a fairer society than hamper a big earner…get rid of things like negative gearing, excessive support for private schools, first home buyers grants, expensive offshore detention centres to name a few.

    Similarly with communities that benefit – agree that they often face high costs of living and disruption, and that States need to address these and be proactive, but this is not necessarily a task for Federal taxation targeting a specific industry.

    I heart mining! (until a sustainable substitute for mineral commodities is found)

  • Elijah

    An interesting article, Michael.

    But does it really make much economic sense to say on the one hand that the mining industry is cooling down yet then go on to say that the tax on the mining industry should be “enhanced”? If an industry isn’t doing so well, the last thing we should do is smack a tax on them.

    Also, the mining industry is a lot more than just Gina Rinehart, Clive Palmer and Andrew Forrest. It is also many jobs, many industries and many livelihoods.
    It amazes me how much the political debate around mining in Australia is focused on these three people. We make a big deal of their wealth, their family feuds, personal affairs. We put way too much emphasis on the “dollar”. I think it demonstrates how mercilessly and unthinkingly we, as a nation, bad-mouth industrialists and producers – the people who, across all industries, innovate and produce to the benefit of BOTH producers and consumers. It is not a zero sum game.

    I don’t think “rich” miners owe a thing to anybody else. To imply that “everybody” ultimately owns the minerals, and that “everybody” is therefore entitled to a share of the wealth produced by the miners, is morally unjustifiable. It is advocating that people ought to receive the benefits from something they have not earned or produced themselves. Just because you happen to be born in a certain place that is rich with natural resources doesn’t mean you have an automatic, god given right to the wealth, productive capacities and achievements of others. The minerals in the ground don’t have any practical value when left in the ground. It is only by mining them, by digging them up, that they become valuable. It is the miners themselves who manage to turn this dirt into gold. It is wrong to suggest that people simply don’t have a right to what they themselves produce and earn – Am I entitled to a slice of everybody else’s pie? Is what’s yours, also mine?

    I also don’t see how one can call for addressing “real inequality” and assert it as a morally consistent ideal when it is to be achieved by morally inconsistent means. Moreover, the issue of how to spend revenue is distinct from the issue of where it should come from. It is arguably the latter which is the field of the economists.

    This all obviously has adverse impacts on the basic economic incentives to produce – why should I work and produce when I can’t keep what I make?
    The aim of any legislation or policy agenda should be to enhance the incentive to produce and to protect peoples’ rights over what they earn and produce – these are crucial principles to maintaining the integrity of the market and of voluntary exchange. The MRRT, regardless of its lucrativeness, is therefore a step in the wrong direction and is not a good idea. And just because it was democratically endorsed, it doesn’t make it right or fair. Throughout history there have been many democratically endorsed policies that were outright abhorrent.

    Despite how wacky or outrageous the things Gina might say, they should not detract from the fundamental principles to be considered on this issue.

    • Dave Sharpe

      Elijah

      i can only assume you are bit dizzy on Gina cool-aid and didn’t really mean to imply that taxation, or “a share of the wealth produced by the miners” is “morally unjustifiable”. We live in a society that aims to reward industry, productivity and innovation while ensuring, through taxation, that we have a robust, fair and socially responsible democracy; one where we care for those who are less able to care for themselves. So Elijah, yes “rich” miners DO have a responsibility to others, in the same way that we all do. Ms Rinehart uses her mostly inherited wealth (note she didnt ‘earn” it) as a hammer to bludgeon and bully and as such she is a justifiable target. To paraphrase Bill Gates, with great wealth comes great responsibility. Time to step up Gina!

  • Michael Roddan

    Hey Elijah,

    Not sure you read my article.
    – The industry is doing fine and the tax isn’t going to stop them digging up minerals.
    – Having a dig at what the faces of our largest mining companies say isn’t about tall poppy syndrome, it’s about democracy. Once we stop criticising power our society will become nothing more than dictatorship. And, I only took argument with what Gina said and what Andrew Forrest has committed to doing. What Gina said was blatantly wrong. It begs response.
    – Everyone who is an Australian citizen does actually own the minerals under the ground. Even the land you own, you only own entirely yourself about a metre underfoot. Minerals belong to the crown, therefore we’re entitled to the proceeds of the sale. Morals don’t come into it (not even ethics!) – though if they did, I’m not sure how you’d justify it.
    – As part of our social contract: yes, we do have an entitlement to a slice of what you earn or produce or whatever. It pays for things like the police to prevent militias, fire departments to keep you safe, and laws to keep order. these things aren’t free and we decided to things this way a long time ago. What you’ve written in this part reads exactly like one of Gina Rinehart’s poems at an Ayn Rand convention.
    – Real inequality is that two thirds of indigenous people die before the age of 65. Not addressing that isn’t moral. Once again, try.
    – Economists shouldn’t say where tax should be spent? Economists just don’t stop at the supply side last time I checked.
    -By now writing this I realise that you’re writing through the prism of libertarian ideology and that nothing I write will not be refuted bluntly with abstruse and irrelevant argument. My arguments only exist in the real world with our tangible society

    Thanks for commenting

  • Monika Sarder

    Whether or not minerals belong to ‘everyone’ and so the mining industry should pay a rent over and above other industries is questionable.

    Also reading Professor Stephen King’s article, published yesterday, also highlighted the fact that mining only reaps ‘indecent profits’ for a short time. For some commodities such as nickel the boom years (before the bear) may be the only thing incentivising investment.

    Back to exploration, heavy risk and substantial processes are invested to find and prove that a deposit is worth mining.

    Are you entitled to a share of the production of something you were oblivious to merely as a citizen? That is, over and above the company taxation rate that we deem reasonable for all industries.

    The agriculture industry uses (sometimes unsustainably) soil nutrients and water (which arguable also belong to all Australians). In terms of destructiveness the health care industry produces (directly) biohazards including by-products of the nuclear reactor at Lucas Heights and indirectly water pollution through medications that we consume that end up in our sewage every day but no one argues punishing that industry.

    I am all for reasonable regulation and taxation.

    And yes, we all think Gina is a b#$%&. I can understand calling her on her cr&$ because some people listen to her. She is famous for being rich, famous for law suits against her step-parents and children and famous for being famous.

    But I don’t think people at the helm of say BHP Billiton or Rio Tinto would make the same crazy comments.

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