5 years ago
ADDRESS TO THE MINERALS COUNCIL TAX CONFERENCE
CHRIS BOWEN MP
I acknowledge the traditional owners of the land on which we gather the Whadjuk people and pay my respects to elders, past present emerging.
In that vein, working together to eradicate the scourge of indigenous disadvantage in our country is an urgent national task.
Not enough progress is being made and it will take government, business and civil society working together to make further real progress.
I’ve seen first-hand in the Pilbara some of the good work being undertaken by resources companies and I’d look forward to working with you closely should I get the opportunity as Treasurer.
Thanks for the invitation to attend your biennial tax conference, appropriately being held in Perth.
In the last five and a half years Bill, Tanya, I and the team have made a project of lifting Federal Labor’s engagement with Western Australia, and I’ve made a particular focus of lifting our engagement with Western Australian businesses.
While there are plenty of common issues between businesses here and as Western Australians say “over East”, there are also plenty of points of difference which we Eastern based policy makers should work hard to understand.
Frankly: our reasons are two-fold. We want to lift the number of seats we hold in the West, and if in government, we want to be a government in touch with the needs of the West.
And the understanding, contacts and insights we have gained from our regular engagement whilst in Opposition will be very useful if we form a government.
The Federal Shadow Cabinet and the Western Australian Cabinet had a joint meeting this morning, and that is representative of a first class working relationship. We took a great deal of heart from the election of the McGowan Government, elected with the biggest majority of any government in Western Australian history.
But we have a way to go, and we take nothing for granted.
We’re now 52 days away from the most likely date of the Federal election.
It is the business end of the term, time for us to bringing together the threads of almost six years of policy work and announcements.
With the chaos and revolving door Treasurers and Prime Ministers, Labor has been going about its work setting out a clear agenda for the next election.
What the Australian people will be deciding is if they want a government that is more focused on its own internal soul searching than it is about the nation.
Or an alternative government with almost six years of unity and stability under its belt. Six years we have used to develop an ambitious, coherent and detailed policy agenda.
We have laid out our plans well before the election, and are seeking a mandate to do big things.
Unlike the government, our team is united in its view that human induced climate change is real and needs a policy response - we’ll give Australia a proper energy and climate change policy and provide a framework for vital investment in energy generation.
We’ll deliver a massive upgrade in skills formation and human capital preparing people for the jobs of the future, from universal access to pre-school for three and four year olds, to record public schools funding, to a massive investment in TAFE and a reversal of cuts to universities.
Skills is of course an area of critical importance in the mining industry which despite high unemployment in states like WA the industry still can’t find the technical skills it needs to grow.
We’ll invest in much needed job creating and productivity enhancing infrastructure that will have spill overs for the rest of the economy, including here in WA.
We’ll help drive a step change in our economic engagement Asia, a massive focus on business and language literacy and policies to help lift Australia’s Asia relevant capabilities.
Asia relevant capabilities are the number one barrier when it comes to Australian businesses looking to expand into Asia, an important issue for a state like WA that is in the same time zone as our largest trading partners.
And our targeted bigger, better and fairer income tax cuts for the 10 million Australians earning less than $125,000 will give consumption a much needed shot in the arm.
I’ll be talking about some more of our tax plans and what they mean for the resources sector in moment, but I want to make one point upfront.
We simply cannot go on for another 3 years of policy drift, no direction, no plan and no vision.
If Labor wins the election, we’ll inherit an economy showing signs of disregard.
In that vein, working together to eradicate the scourge of indigenous disadvantage in our country is an urgent national task.
Not enough progress is being made and it will take government, business and civil society working together to make further real progress.
I’ve seen first-hand in the Pilbara some of the good work being undertaken by resources companies and I’d look forward to working with you closely should I get the opportunity as Treasurer.
Thanks for the invitation to attend your biennial tax conference, appropriately being held in Perth.
In the last five and a half years Bill, Tanya, I and the team have made a project of lifting Federal Labor’s engagement with Western Australia, and I’ve made a particular focus of lifting our engagement with Western Australian businesses.
While there are plenty of common issues between businesses here and as Western Australians say “over East”, there are also plenty of points of difference which we Eastern based policy makers should work hard to understand.
Frankly: our reasons are two-fold. We want to lift the number of seats we hold in the West, and if in government, we want to be a government in touch with the needs of the West.
And the understanding, contacts and insights we have gained from our regular engagement whilst in Opposition will be very useful if we form a government.
The Federal Shadow Cabinet and the Western Australian Cabinet had a joint meeting this morning, and that is representative of a first class working relationship. We took a great deal of heart from the election of the McGowan Government, elected with the biggest majority of any government in Western Australian history.
But we have a way to go, and we take nothing for granted.
We’re now 52 days away from the most likely date of the Federal election.
It is the business end of the term, time for us to bringing together the threads of almost six years of policy work and announcements.
With the chaos and revolving door Treasurers and Prime Ministers, Labor has been going about its work setting out a clear agenda for the next election.
What the Australian people will be deciding is if they want a government that is more focused on its own internal soul searching than it is about the nation.
Or an alternative government with almost six years of unity and stability under its belt. Six years we have used to develop an ambitious, coherent and detailed policy agenda.
We have laid out our plans well before the election, and are seeking a mandate to do big things.
Unlike the government, our team is united in its view that human induced climate change is real and needs a policy response - we’ll give Australia a proper energy and climate change policy and provide a framework for vital investment in energy generation.
We’ll deliver a massive upgrade in skills formation and human capital preparing people for the jobs of the future, from universal access to pre-school for three and four year olds, to record public schools funding, to a massive investment in TAFE and a reversal of cuts to universities.
Skills is of course an area of critical importance in the mining industry which despite high unemployment in states like WA the industry still can’t find the technical skills it needs to grow.
We’ll invest in much needed job creating and productivity enhancing infrastructure that will have spill overs for the rest of the economy, including here in WA.
We’ll help drive a step change in our economic engagement Asia, a massive focus on business and language literacy and policies to help lift Australia’s Asia relevant capabilities.
Asia relevant capabilities are the number one barrier when it comes to Australian businesses looking to expand into Asia, an important issue for a state like WA that is in the same time zone as our largest trading partners.
And our targeted bigger, better and fairer income tax cuts for the 10 million Australians earning less than $125,000 will give consumption a much needed shot in the arm.
I’ll be talking about some more of our tax plans and what they mean for the resources sector in moment, but I want to make one point upfront.
We simply cannot go on for another 3 years of policy drift, no direction, no plan and no vision.
If Labor wins the election, we’ll inherit an economy showing signs of disregard.
- Two consecutive negative quarters of GDP per capita, the first time in over 12 years.
- Wages growth barely keeping up with inflation;
- Record household debt, falling household saving and household living standards going backwards in recent years.
- Consumption coming under real pressure, with business and consumer confidence on the wane.
We’ve had six years with three treasurers and a stop-start policy agenda at best.
In one of its first acts, the Government binned the Australia in the Asian Century White Paper.
It didn’t get past the submission stage of the Tax reform white paper.
The Federation White Paper was abandoned before it was ever written.
And more recently, the Productivity Commission’s important report on lifting productivity growth “Shifting the Dial” lies unloved and unimplemented.
The Government has had twelve different energy policies, each one of them failed.
How can anyone be surprised at the lack of investment in energy generation with this lack of policy certainty?
We’ve gone from having some of the lowest energy prices in the world to having some of the highest as a result of this policy vacuum.
Labor’s approach on tax
I do want to deal now with the reason for your conference: tax and resources.
We’ve led the debate on tax.
We’ve taken on some old sacred cows that were in the too hard basket for too long.
Much of the focus has been on our decisions to address unsustainable tax concessions like unwinding dividend imputation refundability, reforming negative gearing and capital gains and family Trusts.
These are decisions that will allow us to help put the budget on a more structurally sound footing, deliver bigger budget surpluses while also giving us the ability to deliver targeted tax relief for 10 million low and middle income Australians and to business.
Labor’s Australian Investment Guarantee
It’s our plans to deliver an Australian Investment Guarantee that I want to spend most of my time talking about today.
I don’t need to tell you that investment has been under pressure.
Annual business investment in Australia as a proportion of the economy is at a quarter century low.
When firms aren’t investing, they’re not expanding and they’re not diffusing cutting edge technologies that make them produce more with less.
The recent Shifting the Dial report by the Productivity Commission made the obvious point that “Firms that fail to keep pace with technology or to provide goods and services valued by their customers will be replaced by those that do”.
The PC also worrying pointed out that “on a business as usual basis, productivity growth in Australia is more likely to fall than rise over the medium term”
We’re already starting to see the PC’s forecasts play out.
There has been no noticeable rise in labour productivity as measured by GDP per hour in recent years – in fact 8 of the last 10 quarters of labour productivity have been negative.
We need to lift investment and productivity, and we have the better plan.
Under Labor’s AIG companies small, medium and large making new investments will be able to immediately deduct 20% of their new investments, with the balance depreciated in line with normal depreciation schedules from the first year.
Our AIG will apply to all investments over $20,000 with no cap and it will apply to eligible depreciable assets, except structures and buildings and passenger motor vehicles.
Because our AIG applies to both tangible and intangible assets, it will include tangible machinery, plant and equipment, as well as depreciating intangible assets for both upgrades and new purchases (for example, new computer software).
This will have particular benefits for capital intensive sectors like manufacturing and mining, which have typically larger and longer lived assets.
The recent report commissioned by the Minerals Council “Australia Watches the Train go by” by Philip Bazel and Jack Mintz says the benefits of accelerated deprecation are “that companies cannot benefit from the incentive unless they invest” and “Accelerated depreciation can also encourage the adoption of new capital with the latest technologies and increased productive capacity”.
The report makes it clear that our AIG lowers the marginal effective tax rate on capital for new investments.
Bazel & Mintz show that our Australian Investment Guarantee would reduce Australia’s effective rate by 2.5 percentage points from 28.4 per cent to 25.9 per cent, which would leave Australia just a touch above the effective weighted average rate of 24.2% for the OECD as a whole.
Previous investment allowances in Australia have tended to be temporary in nature.
Allowances used during the global financial crisis for instance were much needed and played a helping hand in supporting investment through an acute downturn.
We’ve taken a different approach with our AIG.
It’s not a policy commitment for one year, or two years, or even five years.
It will be permanent fixture of the tax system which means it will reduce the potential for intertemporal substitution of investment decisions.
Because of its permanency it will improve the net present value of prospective investments and therefore has a much better chance at getting more marginal projects off the ground.
Management and boards around Australia have told me that the introduction of the AIG would make a material positive difference in deciding whether to undertake investment in Australia.
I know you have to convince internationally focussed boards of the merits of every potential investment in Australia. The AIG will be of assistance to you in doing so.
The message is clear: as it stands Australia will have a more competitive effective tax rate on new capital investment than the Coalition.
In one of its first acts, the Government binned the Australia in the Asian Century White Paper.
It didn’t get past the submission stage of the Tax reform white paper.
The Federation White Paper was abandoned before it was ever written.
And more recently, the Productivity Commission’s important report on lifting productivity growth “Shifting the Dial” lies unloved and unimplemented.
The Government has had twelve different energy policies, each one of them failed.
How can anyone be surprised at the lack of investment in energy generation with this lack of policy certainty?
We’ve gone from having some of the lowest energy prices in the world to having some of the highest as a result of this policy vacuum.
Labor’s approach on tax
I do want to deal now with the reason for your conference: tax and resources.
We’ve led the debate on tax.
We’ve taken on some old sacred cows that were in the too hard basket for too long.
Much of the focus has been on our decisions to address unsustainable tax concessions like unwinding dividend imputation refundability, reforming negative gearing and capital gains and family Trusts.
These are decisions that will allow us to help put the budget on a more structurally sound footing, deliver bigger budget surpluses while also giving us the ability to deliver targeted tax relief for 10 million low and middle income Australians and to business.
Labor’s Australian Investment Guarantee
It’s our plans to deliver an Australian Investment Guarantee that I want to spend most of my time talking about today.
I don’t need to tell you that investment has been under pressure.
Annual business investment in Australia as a proportion of the economy is at a quarter century low.
When firms aren’t investing, they’re not expanding and they’re not diffusing cutting edge technologies that make them produce more with less.
The recent Shifting the Dial report by the Productivity Commission made the obvious point that “Firms that fail to keep pace with technology or to provide goods and services valued by their customers will be replaced by those that do”.
The PC also worrying pointed out that “on a business as usual basis, productivity growth in Australia is more likely to fall than rise over the medium term”
We’re already starting to see the PC’s forecasts play out.
There has been no noticeable rise in labour productivity as measured by GDP per hour in recent years – in fact 8 of the last 10 quarters of labour productivity have been negative.
We need to lift investment and productivity, and we have the better plan.
Under Labor’s AIG companies small, medium and large making new investments will be able to immediately deduct 20% of their new investments, with the balance depreciated in line with normal depreciation schedules from the first year.
Our AIG will apply to all investments over $20,000 with no cap and it will apply to eligible depreciable assets, except structures and buildings and passenger motor vehicles.
Because our AIG applies to both tangible and intangible assets, it will include tangible machinery, plant and equipment, as well as depreciating intangible assets for both upgrades and new purchases (for example, new computer software).
This will have particular benefits for capital intensive sectors like manufacturing and mining, which have typically larger and longer lived assets.
The recent report commissioned by the Minerals Council “Australia Watches the Train go by” by Philip Bazel and Jack Mintz says the benefits of accelerated deprecation are “that companies cannot benefit from the incentive unless they invest” and “Accelerated depreciation can also encourage the adoption of new capital with the latest technologies and increased productive capacity”.
The report makes it clear that our AIG lowers the marginal effective tax rate on capital for new investments.
Bazel & Mintz show that our Australian Investment Guarantee would reduce Australia’s effective rate by 2.5 percentage points from 28.4 per cent to 25.9 per cent, which would leave Australia just a touch above the effective weighted average rate of 24.2% for the OECD as a whole.
Previous investment allowances in Australia have tended to be temporary in nature.
Allowances used during the global financial crisis for instance were much needed and played a helping hand in supporting investment through an acute downturn.
We’ve taken a different approach with our AIG.
It’s not a policy commitment for one year, or two years, or even five years.
It will be permanent fixture of the tax system which means it will reduce the potential for intertemporal substitution of investment decisions.
Because of its permanency it will improve the net present value of prospective investments and therefore has a much better chance at getting more marginal projects off the ground.
Management and boards around Australia have told me that the introduction of the AIG would make a material positive difference in deciding whether to undertake investment in Australia.
I know you have to convince internationally focussed boards of the merits of every potential investment in Australia. The AIG will be of assistance to you in doing so.
The message is clear: as it stands Australia will have a more competitive effective tax rate on new capital investment than the Coalition.
- Both the Government and Labor support the reduction in the company tax rate to 25% for businesses with turnover of less than $50 million.
- Both the Government and Labor support extending the instant asset write off for small businesses making investments less than $25,000.
But only Labor has the AIG, a policy that allows all companies to accelerate their depreciation expenses on all new investments.
Our Investment Guarantee as a targeted and affordable way to encourage new investment, while not rewarding back book investments which were undertaken many years ago under the current taxation arrangements.
I want to make one other point about Labor, tax and the resources industry.
Every so often, in our regular meetings, a resources company will ask me about our plans for the Diesel Fuel Rebate.
My answer is pretty straight forward: no change.
We won’t be making any changes to the diesel fuel rebate if we win office.
I’d just make this point: because Labor has done the hard policy work on reforms elsewhere in the tax system, we won’t need to contemplate changing the rebate.
Because the Government has refused to undertake these reforms, they have, from time to time, had to ambush business with sudden policy changes like their $6 billion bank tax, imposed without mandate or consultation.
Because we’ve been upfront about the plans we are seeking a mandate to introduce to fund our important initiatives, we won’t need to engage in this sort of knee-jerk ambush of business.
Australian Future Mines Centre
I’ll now turn to some other, non-tax Labor policies of interest to the sector.
With commodity prices elevated again, it’s masked the fact Australia has been going backwards in global market share in commodities like gold, copper, nickel and zinc.
It’s important we undertake the work now to ensure we can take up the opportunities and mega trends occurring across the globe.
This is why we will establish a new Australian Future Mines Centre right here in Perth that will help co-ordinate exploration work and lead the scientific research and development necessary to uncover further natural endowments.
The Centre will be funded through a $23 million Australian Research Council Special Research Initiative, with input from the Australian Academy of Sciences and the sector.
In welcoming our policy the Australian Academy of Science pointed out, “Australia needs new geoscience, technology and infrastructure to boost the rate of discoveries for base and precious metals and deliver Australia’s major new mines of the future”.
Some of these base and precious metals will be needed for the renewable energy economy, including for things like batteries in electric cars and to meet global demand for products like smart phones.
The Academy of Science again points out that “With the growth in renewable energy for example, we’ll need more copper in the next 15 years than we’ve used in all of human history”.
Mining skills
We also understand the frustration that mining company CEOs have when they can’t find the technical skills they need to grow and expand their operations.
This is why Bill Shorten announced last month that Labor would invest in 100 new scholarships for people to enrol to study mining engineering.
We are clearly not training enough engineers and this is one small initiative that will try and turn things around, which is part of our broader investment in human capital.
As Bill said we want to try and encourage more people pursue a career in your industry, which is why we’ll seek to put in place the right settings to support existing engineers to diversify, re-skill and retrain in mining engineering.
Conclusion
So thanks for inviting me to be here today.
It’s always great to be here in Western Australia.
We come here often.
We listen, and we learn.
And we feel we’ve put the right policies on the table, including our AIG and our bigger tax cuts for low and middle income earners that will help drive investment and support consumption, the largest component of the real economy.
Policies that have the Labor party ahead of the Liberal Coalition when it comes to lowering effective tax rates on capital that will support businesses across Western Australia.
I’ve enjoyed strong and productive interactions with the resources sector in my time as Shadow Treasurer.
My door will be open to continue that interaction, should I return as Federal Treasurer in 52 days time.
There are plenty of challenges and opportunities facing Australia. Each of them best met if business and government is talking regularly and sharing perspectives.
And that’s the approach that a Shorten Labor Government will be taking with the resources sector.
Thanks for your time today.
ENDS
Our Investment Guarantee as a targeted and affordable way to encourage new investment, while not rewarding back book investments which were undertaken many years ago under the current taxation arrangements.
I want to make one other point about Labor, tax and the resources industry.
Every so often, in our regular meetings, a resources company will ask me about our plans for the Diesel Fuel Rebate.
My answer is pretty straight forward: no change.
We won’t be making any changes to the diesel fuel rebate if we win office.
I’d just make this point: because Labor has done the hard policy work on reforms elsewhere in the tax system, we won’t need to contemplate changing the rebate.
Because the Government has refused to undertake these reforms, they have, from time to time, had to ambush business with sudden policy changes like their $6 billion bank tax, imposed without mandate or consultation.
Because we’ve been upfront about the plans we are seeking a mandate to introduce to fund our important initiatives, we won’t need to engage in this sort of knee-jerk ambush of business.
Australian Future Mines Centre
I’ll now turn to some other, non-tax Labor policies of interest to the sector.
With commodity prices elevated again, it’s masked the fact Australia has been going backwards in global market share in commodities like gold, copper, nickel and zinc.
It’s important we undertake the work now to ensure we can take up the opportunities and mega trends occurring across the globe.
This is why we will establish a new Australian Future Mines Centre right here in Perth that will help co-ordinate exploration work and lead the scientific research and development necessary to uncover further natural endowments.
The Centre will be funded through a $23 million Australian Research Council Special Research Initiative, with input from the Australian Academy of Sciences and the sector.
In welcoming our policy the Australian Academy of Science pointed out, “Australia needs new geoscience, technology and infrastructure to boost the rate of discoveries for base and precious metals and deliver Australia’s major new mines of the future”.
Some of these base and precious metals will be needed for the renewable energy economy, including for things like batteries in electric cars and to meet global demand for products like smart phones.
The Academy of Science again points out that “With the growth in renewable energy for example, we’ll need more copper in the next 15 years than we’ve used in all of human history”.
Mining skills
We also understand the frustration that mining company CEOs have when they can’t find the technical skills they need to grow and expand their operations.
This is why Bill Shorten announced last month that Labor would invest in 100 new scholarships for people to enrol to study mining engineering.
We are clearly not training enough engineers and this is one small initiative that will try and turn things around, which is part of our broader investment in human capital.
As Bill said we want to try and encourage more people pursue a career in your industry, which is why we’ll seek to put in place the right settings to support existing engineers to diversify, re-skill and retrain in mining engineering.
Conclusion
So thanks for inviting me to be here today.
It’s always great to be here in Western Australia.
We come here often.
We listen, and we learn.
And we feel we’ve put the right policies on the table, including our AIG and our bigger tax cuts for low and middle income earners that will help drive investment and support consumption, the largest component of the real economy.
Policies that have the Labor party ahead of the Liberal Coalition when it comes to lowering effective tax rates on capital that will support businesses across Western Australia.
I’ve enjoyed strong and productive interactions with the resources sector in my time as Shadow Treasurer.
My door will be open to continue that interaction, should I return as Federal Treasurer in 52 days time.
There are plenty of challenges and opportunities facing Australia. Each of them best met if business and government is talking regularly and sharing perspectives.
And that’s the approach that a Shorten Labor Government will be taking with the resources sector.
Thanks for your time today.
ENDS