lIt’s never too late to solve a problem. It doesn’t matter if it’s you who’s been postponing a trip to the doctor or your country that’s been putting off natural resources properly, it really is better late than never.
The fact that former Liberal treasurer Peter Costello failed to cash in on the riches of the early 2000s, and just because the mining industry succeeded in sinking the Rudd government’s mining tax in 2009, doesn’t mean that Australia will reap the benefits. record raw material prices are slipping through our fingers again. Not doing something sensible twice before is hardly a good reason to repeat the mistake a third time.
This year, Norway, with a population of just 5.3 million, will collect about $137 billion in taxes from their oil industry. They had expected $95 billion, but will raise nearly 50% more than planned, mainly due to higher oil and gas prices. This is what a good resource tax system looks like.
Meanwhile, here in Australia, despite being the world’s third largest exporter of fossil fuels, people struggle with high prices for petrol, gas and electricity (the vast majority of which is still produced by burning our own coal and gas). The idea that an energy exporter like Australia struggles when the prices of our energy exports are skyrocketing shows how fractured and disconnected from reality our political debate has become.
The profit share of GDP is at record highs, the wage share is at record lows, real wages are falling and the Reserve Bank of Australia is raising interest rates to curb inflation driven more by profits than consumers.
And in a valiant effort to defend the indefensible, the Business Council of Australia may have thrown the mining industry under the bus, while trying to argue that profits don’t come at the expense of wages.
BCA chief economist Stephen Walters says that “after excluding the miners and banks, which skew this data and where wages are among the highest in the country, the broader profit share has actually fallen”.
Just think about that. The corporate lobby group admits that mining profits are so huge that they skew national statistics. Could there be a stronger case for reviewing the way we tax these companies?
This latest claim by Walters appears to be an attempt to distance herself from a previous claim by BCA chief executive Jennifer Westacott, who said that “once mining profits were taken away, the profit share of income actually fell to its lowest point in 20 years.” year”.
Thanks to the liberals, we already have a super profit tax on the banks, even though it’s only $1.6 billion of the $37.6 billion profit the industry made in 2021. And in the words of the BMA, the financial sector has benefited in part thanks to the “cheap money” provided by the RBA during the pandemic. So now is definitely a good time to increase the windfall tax on the banks – and impose something similar on the miners.
There is no economic reason why the mining industry, and the gas industry in particular, should not share some of their profits to help Australians grappling with the pain of energy prices. The Norwegians, by taxing their oil and gas industry, have amassed $1.8 trillion in their sovereign wealth fund. But in Australia, which exports far more fossil fuels than Norway, we have only $200 billion in our future fund, most of which will come from the privatization of Telstra. In other words, the value of our wealth fund is only slightly greater than Norwegian oil tax revenues for a year, even though the Norwegian economy is a quarter of ours.
It’s not just the mining and banking sectors that are exploiting rising prices while pretending they can’t afford to pay workers more. Qantas, Harvey Norman and thousands of local cafes have converted higher prices for some inputs into bigger profits for themselves. But oil and gas profits have soared to astonishing levels – the highest in recorded history – as a result of high energy prices during the Russian invasion of Ukraine.
Nobel Prize-winning economist Joseph Stiglitz has argued that an excessive profit tax on energy companies is a “no brainer” and in Australia economists from Rod Simms to Chris Richardson have joined calls for such a tax on the gas industry. Whether it’s used to pay off the debt the corporate lobby is concerned about, or to make childcare and medicines cheaper, doesn’t matter. There is no need to make the perfect the enemy of the good.
In 2013, the BCA demanded a repeal of Australia’s “unreasonably high carbon tax” and in 2019 Westacott called Labour’s 5-15% emissions reduction target “economy wrecking”. But in the run-up to the 2022 elections, the BCA proposed even more ambitious emissions reductions than Labour’s 43%.
So the fact that the BCA would rather talk about productivity than a tax on its largest members—whom it has now openly acknowledged earning absurdly high profits—is staggering. The corporate lobby will change its mind when the public puts it behind them.
The real question is whether Australia will take this opportunity to improve the way we tax the resource sector, or again wait for the next one.