Tony Abbott came out swinging against the mining tax last night pointing out that quarry masters such as Boral would also be hit. But despite his efforts, the miners are losing the public relations war because the combination of Treasury, the Reserve Bank, Kevin Rudd, Wayne Swan and Lindsay Tanner is too good. And it would seem that when miners accept the Treasury invitation to negotiate they are not listened to.
Unless the mining company chief executives wake up to the fact that a new approach is required, they may need take the advice of Kevin Rudd and Wayne Swan and simply ‘cop it sweet’.
Yesterday, I wrote about the difficult decisions facing BHP CEO Marius Kloppers over whether to suspend the Olympic Dam expansion. Suspending the Olympic Dam expansion represents the most powerful weapon in the mining industry armoury, but the decision must be in BHP shareholders’ interests – and even if suspension meets that test, it might not be sufficient to sway the government.
The government’s massive public relations juggernaut is well orchestrated. The ministers concentrate on poplar issues such as saying miners are basically foreigners; that they are mining the people’s assets; that we only have one chance to mine them so the community must get its fair share; that the tax take is too low; that a super profits tax is the best way to tax the miners and so on.
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The Reserve Bank conducts private briefings which are leaked and show that it believes we have far too many mining projects on the slipway and the number needs to be pruned heavily or Australia will expand too rapidly, forcing up interest rates.
In my words: “Miners, we actually want you to cut back projects, so do your worst.” I must add that Wayne Swan and Lindsay Tanner deny that they want fewer mining projects and it’s true that the Reserve Bank is independent of the government.
Then it would seem that Treasury is briefing selected journalists to explain some of its reasoning. They include Michael Stutchbury of The Australian who explains that the Treasury view is that the government will be a quasi stakeholder because they will accept losses as well as profits. And Matthew Stevens also from The Australian reveals that when Xstrata went to the negotiating table, all Treasury wanted to talk about was implementation – not changes.
Rio chief Tom Albanese and Xstrata’s Mick Davis have been saying some nasty things, but they make their statement way off in London or the US. That tends to confirm the government’s stance that the whole issue is not that serious – certainly not serious enough for Albanese and Davis to come to Australia to lead the attack. Marius Kloppers gave an interview to Alan Kohler which was good as far as it went, but once again it was pretty mild given that BHP shareholders must pay out between $2 billion and $3 billion a year in extra tax.
Chief executives know how to run companies, but find these sort of games difficult to manage and they have concerns about being active in the political process. The Minerals Council launched an advertisement as well as plans to give a presentation to Treasury. The advertisements had impact, but presenting Treasury with data is wasting money and time. Treasury can’t change now unless the political heat is turned up.
And only action can turn up the heat.
Treasury is telling Rudd, Swan and Tanner that this tax will not affect mining development (which is likely to be wrong advice) and the Reserve Bank is saying it is great if a few mines shut (they probably will). The only way to test those arguments is to suspend a project every few days. Each project suspension should carry human interest stories for the local community. Once a worthwhile number projects have been suspended, and that the suspensions include the big three – Olympic Dam, Curtis Island and Rio’s WA iron ore – miners will then have the government’s attention. The companies also need to campaign on what this means to the value of ordinary people’s superannuation.
The companies also need to recognise that the government had an enormous budget hole which they are filling via the mining tax (a fact that the government denies). Moreover, the mining tax has been linked to company tax reduction and superannuation promises. Removing the tax is therefore not simple. None of the above is easy, but unless miners take action, when BHP, Rio Tinto, Xstrata and others face their shareholders their boards must accept part of the blame – it was the boards’ inaction that contributed to the enormous losses to be suffered by mining shareholders.
This article first appeared on Business Spectator.