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Australia risks rapid erosion of its world-leading mining knowledge and skills base, the foundation of a $A40 billion technology and services (MTS) sector, by selectively targeting the mining industry with new tax measures.
“Resources have been the foundation of Australia’s wealth and high standard of living and taxing this area at a higher rate to fund growth of other business sectors is poor policy,” said Alan Broome, Chairman of Austmine.
Austmine represents more than 100 MTS companies, including many of the county’s leading MTS exporters.
“Australia has the pre-eminent research, innovation and technological base world-wide in this sector,” Broome said. “These industries and all related sectors, including their employees, are at risk if the government chooses to increase the cost and decrease the attraction of mining in this country.
“The Australian-based MTS sector is already disadvantaged globally against competitors due to a lack of cohesive action by government to develop activity in this important industry. The ‘discouragement’ takes a range of forms, from the tangle of state-based OH&S regulations, to inconsistent tax treatment of research and development and even the poor performance of the Federal Government’s Export Finance and Insurance Commission in providing export finance to international miners seeking to buy Australian technology and services.
“By comparison, as a recent example, the Canadian mining sector has provided significant export funding to Chile for the financing of Canadian suppliers and engineering services and technologies in the form of a CAD$200 million loan to Codelco. Germany also provides significant funding for both its knowledge base and manufacturing sector in mining.
Broome said members of the organisation were expressing strong concern about the proposed Australian Government Mineral Resource Rent Tax.
He pointed to a recent survey by the mining e-magazine, HighGrade.net, which showed Australian-based MTS companies generated revenues totalling more than AU$27 billion in 2009.
“The Australian resources industry is comprised not only of the mining companies, but also a very large and diverse, regionally based, high tech value-added manufacturing and services sector,” Broome said.
“The numbers used by HighGrade only reflected the mining revenues of Australian-based and controlled MTS businesses and excluded MTS companies operating in Australia such as Atlas Copco Australia, and was listed with annual turnover of $A683 million in the recent BRW Top 1000 companies’ analysis.
“We estimate, perhaps conservatively, that the total value of technologies, services and equipment supplied by the MTS companies with operations in Australia is worth AU$40 billion a year.”
Broome said past research had highlighted the tremendous importance of resource-based wealth to economic development and prosperity in countries like Australia.
A paper produced by Gavin Wright and Jesse Czelusta of Stanford University in 2002, for example, highlighted the close co-relation between a strong resources sector, technological research and development, and standards of living.
“It is not a mistake that the countries with the highest standards of living world-wide also feature a strong resources base including USA, Canada, Finland, Sweden, Norway, as well as Australia,” Broome said.
“The Federal Government should not implement the Resources Rent Tax until they fully understand the significant and complex web of industries that operate at world leading positions in sectors dependent on a strong domestic resources sector.
“A lot of our members and businesses in this sector are still affected by slow project development and lack of orders due to the GFC credit crunch. An additional tax on the mining industry will result in further project delays.”
Robert Trzebski
Executive Officer
Austmine Ltd
Telephone: 02 9458 7393
Mobile: 0414 182686
