Territory FM - Wayne Swan threatens WA over mining royalties
DARYL MANZIE:
Senator Nigel Scullion, welcome to the show.
NIGEL SCULLION:
Yes good morning Daryl.
DARYL MANZIE:
Listen, we’re going to talk about something pretty important, Nigel, it’s the repercussions of Wayne Swan’s threat to Western Australia. He’s going to cut back their GST funding because the West Australians legally and properly took a course of action in regards to their taxes. Under the constitution the states have the power to levy royalties on mining. That’s their role, that’s one of their incomes, and that’s been part and parcel of Federation – since we had Federation. Wayne Swan, because he’s, point in tale of what I said, because of the way he’s framed his Budget, relying on a tax which is yet to be established. He is spitting the dummy over West Australia raising their royalties on mining. That threat to withhold the GST, he’s directing the Grants Commission – what sort of future does that mean if this goes ahead? What does that mean in terms of states and their ability to raise their own monies?
NIGEL SCULLION:
Well I think it’s probably, from a Territorian’s perspective, I’m not as concerned of Western Australia as I am concerned about us. Just in terms in term of the fact – it’s not that Western Australia were just raising the royalties, they’ve just changed the system. Back in the ‘60’s the fines, in other words the very dust-like particles and the cobbly bits were separated because the
DARYL MANZIE:
This is out of the iron ore?
NIGEL SCULLION:
The iron ore, yeah, because this is only the royalty for iron ore. And so they gave them a concession, a 7.5% royalty on iron ore but they actually gave them a concession on the fines because the fines weren’t worth very much at all.
DARYL MANZIE:
They weren’t making money.
NIGEL SCULLION:
So they said that they’ll have a concession of 5.6%. What they’ve done now, because the fines are worth exactly the same as the nobbly bits in the iron ore, so they’ve brought them both up to 7.5%. Now we have the Treasurer, Wayne Swan, just suddenly spits the dummy and says: “Oh, I’ll tell you what we’ll do then. Look, I’m going to instruct the Grants Commission to pull you up on the GST for the sum of the same amount.” Now Daryl, as many Territorians should know, under the Country Liberals we ensured back in 1978 that the Grants Commission were the abator, they were the umpire to make sure that the Commonwealth didn’t dick over the Territory.
DARYL MANZIE:
That’s exactly right.
NIGEL SCULLION:
And that is exactly what we did. And if now the Grants Commission, they are supposed to be protecting places like the Northern Territory and Western Australia, to ensure that we get a good deal. The Grants Commission can recognise through it does as the GST Payments to the Territory, that we don’t have many people as an invoicing base, but we’ve got a lot of infrastructure to maintain. That’s why the Grants Commission says, “Well this is how it should be done.” So they’re there to actually protect us.
DARYL MANZIE:
So that was the Commission, started in 1933 as you said, to balance out the redistribution of money collected by the Commonwealth, their revenues. In 1942 the Commonwealth took over income tax collection, which used to be a State responsibility because of the war-time effort required. At the time they did say they’d give it back to the States. It never happened of course, but the Grants Commission was seen because it was independent and it redistributed the funds on the basis of an equal level of service for all Australians to the services that are available around the country. A fair and equitable system; independent. Now this threat to remove the independence, as we rely on over 70% of our funding from the Commonwealth nearly 80%, it really does have the potential to impact massively on us because of any future Government, the Territory could be punished in the same way if they upset the Commonwealth.
NIGEL SCULLION:
Well listen we’re talking about a sovereign government, yes we are also a sovereign government in the Northern Territory. Now last Paul Henderson put up the royalties across the board by 2%.
DARYL MANZIE:
And right he did.
NIGEL SCULLION:
Indeed. But if he’d have done so today, the response from Swan would have been the same. You can not do this, because this somehow gets in the way of an agreement we have across the board with the mining companies that imposing another tax - a mining tax. Now this is a tax that was suddenly cobbled together to sort of balance the budget that
DARYL MANZIE:
We still don’t exactly how it’s going to work.
NIGEL SCULLION:
No-one really does, like most of these taxes, no-one really knows about the impact apart from the it’s all going to come out of your wallet and it’s going to be ugly. But this a very serious matter for the Territory. If the Grants Commission suddenly loses its’ independence the 4.5% multiplier that was negotiated over the GST - that’s at threat - and we need to watch this space very carefully, Daryl, because the Northern Territory are very, very vulnerable to changes in policy by the Commonwealth. And given that we do have large estate, a very large mineral estate in the Northern Territory, we just need to ensure that this doesn’t form some sort of a precedent. As I’ve said, this is not about Western Australia, we need to be very concerned about this ourselves.
DARYL MANZIE:
In fact with our growing mineral exploitation and we’ve got iron ore deposits - I guess in the east - of the Territory. The potential for us over the next ten years to collect quite a lot from mining royalties is quite high. However, this could certainly create problems for us. I see a prior member of the Grants Commission - what’s his name? - Kenneth Wilshire, he’s a Professor Kenneth Wiltshire, he was nine years a member of the Commonwealth Grants Commission wrote a very informative article about this in The Australian, and I would recommend that people have a bit of a look at it because it does give you a very brief background of the dangerous precedent that this could set and it’s the lack of understanding by ordinary Australians that’s allowed Wayne Swan to be able to stand up and publicly make these pronouncements that most people sit there feeling very comfortable.
NIGEL SCULLION:
Well, as I said, we shouldn’t feel comfortable in the Territory. I think that royalties that are collected through, by State governments. The State government – whilst I’m a member of the Commonwealth Parliament – we should acknowledge that the State and Territory governments have to do a lot of the heavy lifting: they’re responsible for education; they’re currently responsible for our health system. And much of the revenue that comes from royalties goes back into the public to do that.
DARYL MANZIE:
Well the Commonwealth collects all the taxes, and unless that tax is reasonably shared back to the states, the Commonwealth doesn’t have any responsibility: they don’t educate a single student, they don’t have a single patient in hospital, yet they blame the states because “oh, you’re not spending enough.” They’re the ones with all the money. They collect it, so I mean it’s a pretty nasty setup.
NIGEL SCULLION:
It’s a terrible irony that they’re actually saying to Western Australia, “how dare you actually put some equality back in the system by raising it by 2% in one commodity”, when we’re actually about to subject to a massive mining tax which is going to make us completely uncompetitive across the board. The sad thing about is about that, is that under this Government, that money will go to a very bad Government, who are going to continue to mismanage and waste that money. And the only solution they seem to have about balancing the Budget is “we’ll just tax you more”, or “we’ll just borrow a bit more”. Indeed.
DARYL MANZIE:
It’s terrible isn’t it?
NIGEL SCULLION:
Well it is. I mean I haven’t had a look this morning how much, but we certainly going to borrow over probably around $108 million, today.
DARYL MANZIE:
Interest is costing us $18 million a day.
NIGEL SCULLION:
It is.
DARYL MANZIE:
And do you know how long it takes a man on a salary of $50,000 a year to earn a million bucks? 20 years.
NIGEL SCULLION:
Yeah well’s that every day.
DARYL MANZIE:
20 years to earn a million bucks, and $18million a day in interest!
NIGEL SCULLION:
I’m quite sure Territorians would find a way to spend a way to spend $18million a day on infrastructure every day in Australia. And we’ll never get that back. It’s a little bit like when you’re renting, you know? It’s that dead money , we really should be able to own the situation. But we’ve actually got to get back, we now have a massive deficit. A massive deficit. Now what we have to do – until that deficit can turn into a surplus – we’re not going to spend a cent back. So first of all we have to make a surplus, make a profit with our business, the business of Australia, and then we actually have to move towards that surplus going toward starting to pay off a growing debt and an interest rate, at the moment, of $18 million a day.
DARYL MANZIE:
Because the impact on us, the banks have already lost one point out of their - what do you call it? - their rating. And having the country, the debt that’s growing, it puts vulnerability into rates for banks and that affects us
NIGEL SCULLION:
One of the most important things that affects everybody is the cost of living is just horrendous. It doesn’t matter who you are but the cost of living pressures are horrendous. Interest rates are going north, because this Government is borrowing more and more money and putting pressure on, upward pressure on demand for money, which puts upward pressure on interest rates. Everybody’s paying.
DARYL MANZIE:
Mate, don’t’ get me started on that cost of living. Mate, why does our petrol prices keep going up when the overall cost of petrol, at the pump, well the petrol price at the refinery has dropped by about 20%. In the last month petrol prices haven’t gone down that much, have they?
NIGEL SCULLION:
No they haven’t mate, but I can tell you what we shouldn’t be looking forward to is this other tax, the carbon tax. As a Territorian, this is a tax on remoteness. And if you live in the Territory, whether you buying a cabbage or putting a litre of fuel in your car it’s going to cost you a lot more than the person doing that in Sydney. Everyone’s going to be paying more, but we’re going to be paying inordinately more in the Territory. And that’s the sort of thing that I would hope Paul Henderson is talking to the Grants Commission about to try to make some alteration because we’ll be copping it in the ear every single way. The Territory shouldn’t be copping it any more than those people in Sydney and Melbourne. And surely that’s what we’re going to do.
DARYL MANZIE:
Well they’re going to be copping it less. We use all our electricity with LNG. I mean, no-one else does. I’ve got to say good morning, mate, but thanks very much for coming in Nigel, and just having a quick chat about this, and I look forward to catching up and you’ve got Estimates coming up soon?
NIGEL SCULLION:
I have indeed, yep.
DARYL MANZIE:
Yeah, well that’ll keep you busy.
NIGEL SCULLION:
It will indeed, mate, but lovely talking to you Darryl.
DARYL MANZIE:
Good on you Nigel. Okay, talking with Nigel Scullion, Senator Nigel Scullion.
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