Mining small but big, Dr Dennis smart but du....?

Dr Richard Denniss was at it again today, if he is not embarrassing himself by being academically crippled by Lord Monkton at the National Press Club Climate debate, he is busy releasing reports designed to wage a business class war against the mining industry.

See link below

Australian Mining not so big?

The gist

The report is a basic factual account of some figures regarding the size of the Australian mining industry and where the profits go. The interpretation and moral argument that Dr Denniss spins from the facts are truly remarkable and need to be examined.

Dr Denniss argues that 82% percent of  Australian mining profits head overseas and considering that  foreign ownership of Australian mining is 82% that makes a lot of sense. When I invest in a company regardless of geographic location I expect the return from that investment to flow back to me, otherwise I would sell those shares immediately.

Dr Denniss advocates that this large percentage of profits flowing back the the people who put up the capital in the first place is immoral and as a country we should seek to claim a greater share with the mining tax. It seems to me leftists cannot avoid the temptation to lift even more money from the hands of private individuals.

Dr Denniss likes to deliberately frame his  call for state sponsored theft in the coat of nationalism, suggesting that mineral wealth belongs to all Australians. People ignorant of mining and investment in general would easily miss the faux logic of his argument.

The catch cries of returning the profits of Australia's mineral wealth to all Australians is a great way to stir up xenophobia and class envy in the mob against the high paid and profitable mining industry, but the policy consequences morally and economically are conveniently evaded by Dennis and his ilk.


Got Values?

Perhaps I am too brazenly right wing economically, but there are two moral principles I hold that make Dr Denniss' arguments invalid.

The first value is that profits belong to the investor and the company undertaking the mammoth task of bring minerals to market.

If I or anybody else invests money in a venture, the profits of their speculation should return back to them; no government has the right on foreign ownership grounds to raise taxes.

Economically it sends a sovereign risk message to the foreign investors whose money provides so much economic activity to the regions of Australia. Dennis of course claims mining is only a small part of the economy, but clearly he has not heard of Western Australia and North Queensland. The mining tax would be a tax on regional Australia and unlike Denniss, miners do not have a back up job with a left wing think tank cooking numbers for governmental propaganda.

Profits belong not to Australia, but to investors, they risked their money they are entitled to the rewards, unless the government intends to give them a bailout when and if their investment turns a loss? The mining tax removes investment incentive from a source that cannot be replaced domestically; we loose jobs and potential economic activity as a result of a punitive policy such as the mining tax.

Those who express the view that it is Australia's mineral wealth are not understanding the role of roylaties, which is a state tax levied on the ore regardless of profit. Company tax then sits on top to take a sizeable cut of the profts; what is left gets distributed in dividends to the shareholders. When the left make the call to share Australia's mineral wealth they seem to forget how much investment, intelligence and sheer hard work is involved in bringing minerals and ore from the earth and processing them into a profitable form.

Perhaps iron ore is some parts of the country is an exception with buckets of red dust being loaded onto trains and tankers, but a sizeable fleet and billions of infrastructure still need to be built and maintained even to scoop up Pilbera red dirt onto trains. Dr Denniss likes to decouple minerals in the ground from minerals processed on the back of huge investments largely from foreign sources. If you want a bigger share of the mineral wealth you need to go work in a remote town and start pulling 12 hour shifts!

The second value is flat company tax. We might still perform the barbaric practise of tiered taxation for incomes, but it has been a long and stable principle of both sides of government that company tax should be flat. The reason being productivity, we want Australian companies who work hard and innovate to be rewarded with the only thing that can reward a company, profit. More profitable companies equates to better employment opportunities for our workforce, and general economic well being. Once you start punitively attacking companies for their profits or what industry they are in you start to send a moral message.

This moral message is that if you do well, you will be punished; this is a meritocracy in reverse. The left try to alienate the mining companies by branding them foreign and their Australian contribution as minor, but its smoke and mirrors for a partial takeover of mining.

Do we really want the government to have more money to waste; it would no doubt be better left in the mining companies coffers to fuel the next stage of investment in Australian jobs.

The Government thinks they know best how to spend money, the reality of consequences of their spending programs suggests otherwise.


The mining tax has toppled the first term leader Kevin Rudd and it is set to do the same to Prime Minister Gillard. The ALP and press gallery will cry about the salesmanship and the leadership turmoil, but it is pure and simply an immoral policy of the most shameful order.



A precedent set, next victim please!



Why does the government dare not attack the super profits of banking? Perhaps the answer lies in the truth of Dr Denniss' recent study. The mining industry account for around 2-3% of the economy directly, therefore it is easy for the government to try and wedge a small workforce of 200,000 away from the general  population.

Operation: Wedge Politics

The tactic is clear alienate 200,000 high paid miners and their foreign paymasters and simultaneously claim they are wrecking the rest of the economy by driving up the Australian dollar whilst not being that large a contributor to the economy.

So we are told by Dr Denniss Mining is having a large negative affect whilst having a small benefit! I wish he would model the affects of high tax and labour regulatory burdens on the economy, but apparently profits earned by industry should be shared by all Australians regardless of who put up the investment dollars and who did the work. Sounds like Marx 'from each according to his ability, to each according to his need.' I guess Dr Denniss missed those few decades where equalising profit starved a half a continent to death.

Economics is about incentives, if you take away carrots and apply the tax stick your going to change investment habits. Flight of capital is a real risk but the left do not appreciate or understand history.

Australians  in the resource states and regions are rejecting the wedge knowing how the mining boom has flowed through all parts of the economy. Flat corporate tax and royalties are a perfectly fair and adequate system to price finite resources. Lowering corporate tax would be far more affective to help the lagging parts of the economy. The government does want to share that fact with the electorate; instead seeking to pit industries off against each other in an attempt to secure the funds to pay down their debt.

Q N A sans Tony Jones!

We are told minerals are finite, but that is what royalties are for!

We are told miners need to pay their fair share, but is that not how a percentage based corporate tax works?

The more profit you earn the more tax you pay!

Some may argue it is like a progressive income tax for business. Then why is the long held, stable notion of flat corporate tax readily abandoned for one industry only? Why does the highly profitable banking sector get a free pass?

The answer is that banks affect everybody, mining only a few (a respectable few), therefore the industry specific class war between the well paid miner and struggling manufacturing worker is established by the left in the eyes of the electorate.


 The high dollar is great for consumers and we are all consumers?

Naturally the low cost of flat screen televisions and a whole manner of easily affordable imported goods that has underpinned high living standards in Australia is ignored by Dr Denniss and the ALP with only the convenient envy peddling message of mining as a wrecking ball being allowed to permeate the unquestioning press gallery.

If we pass on the costs of the mining tax to commodities, then the goods we buy from China must rise also, so essentially it will hit every Australian indirectly with the 'Made in China' label littering the  electronic goods of every Australian household.

Econ 101: Attention: The Left!

Capitalism works at improving living standards because the most efficient companies are allowed to excel and take profit to reinvest in further improvements to the productive capacity of the economy. When governments start to pick and choose who to help and hinder the great machine driving innovation gets a flat tyre. It can only keep driving so long before it has to pull up and change a tyre (extended metaphor, it just happened, you love it).

Profit belongs to investors, when governments change the rules mid stream they send a warning to the sources of capital on which our mining industries so depends. The message is risk, not of company performance, but of government hostility to high performance. It is an immoral message, economically risky and the fact xenophobia and simplistic economic data is being used to justify the government shakedown makes the heist that much worse.

Australians may at times be jealous of the mining industry, they might have a high dollar affecting their business, but to support a policy which punishes success is surely a far worse transgression. Mining will boom and bust, but China will continue to out compete us in manufacturing regardless of the dollar. Productivity gains, innovation and lower taxes is the fix to that issue, not trying to lift profits away from the people who invested it.

How would you feel if you owned owned shares in BHP whose profits got walloped due to a new regime nationalizing a mine in South America? You might think that is the stuff of third world dictatorships, but this government is trying to do it, in part, very soon. Nationalizing mines is bad news, doing it partially is simply expecting foreign money to make cake but letting our government take a lion's share. There are other mineral resources opening up in the world with far lower labour and tax burdens than Australia, let us not send the wrong message.

I will leave the readers with these issue to process, I must now wash my hands which are filthy with stench of excessive cliched metaphor use and disdain for leftist voodoo economics.

P.S Dr Denniss is now shamed twice, his intelligence seems to lack in both climate science and for his pet area of expertise, economics. What are they teaching in universities now? Certainly not how to integrate facts or cause and affect! A is A!

If you wish to watch academic drowning see below:

A lord or not, he was certainly victorious! Despite the press gallery being oh so quiet on that front!