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Tuesday, June 22, 2010

Is the media biased on the Resource Rent Tax issue?

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Perhaps Kevin Rudd has complained to the media companies that he is not getting enough fair play for his new tax. Maybe a bad tax was never supposed to have been heralded as the start of a new age. Phillip Wen from the Sydney Morning Herald has come out in defense of Kevin Rudd. so let us examine his arguments. Is the media biased in favour of miners? Rudd? Well, I would suggest to you that its hard to be on Rudd's side when you introduce such a sudden, arbitrary, discriminatory tax as the Resource Rent Tax. It is also poorly conceived. But let's challenge the arguments made in this article.

1. Xstrata has exaggerated the impact the tax will have on its operations, with talk of job losses and cancelled projects.
The reality is that a mining company makes money by assessing the feasibility of the project. When a government moves the goal posts in the middle of a game (i.e. After a miner has spent the money, or after a shareholder has bought stock upon certain assumptions), ought they expect the government to protect their rights rather than breach them? Is there a positive side to fascism? Only a deluded moral relativist would argue yes.

2. Xstrata was unbalanced in its disclosure of employee numbers when it closed the Windimurra mine in WA. i.e. It did not disclose the numbers for Windimurra, but not it is disclosing the numbers for its new mine.
I would argue that the mining company is obliged to act in the interests of its shareholders, and to do so in accordance with the law. It was a sad fate for the Windimurra workers. It was a strategic move by Xstrata to buy the Windimurra mine and then close it to support its other mine in Africa (I think?). This is business. If anyone is opposed to that, then an argument needs to be made to change the law. Hopefully it will be a logical argument, unlike the argument made by Rudd....which is based on gross opportunism and extortion. Clearly it is in the interests of Xstrata to re-examine the economics of a project when a government changes the rules. Even if they are bluffing, they are reasonable to use all arguments to discredit the government. It is my opinion that the mining industry is using concrete, pragmatic argument rather than ethical ones because they think that will have greater traction with the voters. I disagree, and I think the strategy can backfire because its money in their pocket. They ought to remember that after Rudd gives them a "super-kiss" he is probably going to give them a "Ruddy tax kick in the balls". That's right...Rudd has ruled out another arbitrary tax on other specific industries....but what's to stop another government, or him taxing all super funds...after everyone has placed all their savings in super...this is what happens with arbitrary rules....you don't know where you stand.
I would however argue that Xstrata did not treat Windimurra shareholders badly as "minority interests", but its a cloudy area of law. I challenged this issue at the time. Having acquired Windimurra, the company placed the project on hold. In fairness, it would have pursued the project if there was a great deal of money in it. Strategists could have seen this unfold. It was a good decision for Xstrata shareholders.

3. The Minerals Council of Australia is spending a reported $100 million on an advertising blitz against the tax.
What else can a minority interest group do other than to engage in a media campaign. Rudd is offering a 'welfare-like' carrot to voters in the form of a "super-kiss". It will take a well-funded campaign to overcome the appeal of this unethical tax upon miners and shareholders. Sadly, the nature of our political system provides a poor basis for reconciling political arguments.

4. The notion that the mining industry has used these tactics before to undermine the government's proposed emissions trading scheme, saying it would severely damage the coal mining industry, leading to big projects shutting down.
Quite rightly. The tax would have destroyed the industry. It would have placed the fate in the hands of unproven technology and subjected them to very high capital cost burdens to make the technology green. The biggest problem the mining industry has is the unproven nature of the 'anthropogenic global warming'. The most recent evidence supports the idea that variations in sunspot activity is the cause. There is good correlation between these solar flares and climate change. Satellites launched in 2006 will offer greater certainty in the next few years. The problem is that the 'liberal' media needs to defend its dire media statements about global warming. Their treatment of this issue highlights their lack of objectivity and their lack of scientific and critical thinking skills.

5. Research conducted by the Australian Conservation Foundation and the Australian Climate Justice Program last year found six companies - including Xstrata, Rio Tinto and Woodside Petroleum - made public statements on emissions trading that were not reflected in formal announcements to the stock exchange.
"The regulator did not pursue the findings, saying the companies made their statements at senate hearings, and were therefore political statements made with parliamentary privilege and not made in the course of trade and commerce".
Not only that, but from my experience submitting documents to the parliament, you are not supposed to publicly disclose the info. Why was this argument made? To make it look like the reporter had a story?

6. Xstrata's biggest shareholder is the Swiss commodities supplier Glencore, one of the world's largest privately held companies, infamous for its colourful past. Its founder Marc Rich, was cited in a 2004 CIA report for paying illegal kickbacks to obtain oil from Saddam Hussein's Iraq regime, in breach of United Nations sanctions.
In the interests of fair disclosure...just look at the track record of US foreign policy over the last century and ask yourself whether that is a fair critique. The reality is that companies have a far better track record than governments, which is weird because governments make the rules. Which can be difficult to interpret because, as we know, they are so arbitrary.
It ought also be mentioned that BHP and the Australian Wool Commission were caught up in the same type of scandal....but why would you smear all mining companies for a breach of US foreign policy. Is that the best this 'liberal' journalist can do?

7. The Construction Forestry Mining Energy Union is for the tax so suggests Xstrata is exaggerating claims.
Yep. I'd go to the mining industry for a balanced perspective on mining company ethics. The union movement were of course the extortion experts of the last century, so they love miners. Anyone remember the wharfies dispute in Wollongong.

8. Final point....the journalist concedes "But the concerns in the mining industry are real. It is not in debate that successful miners will take a hit to their profits".
Ask yourself what that does to investors. And the lost profits will be higher as prices rise. All those future 'opportunity losses' will be wiped off the value of mining projects and mining companies today. Is that share to shareholders in mining companies? Shareholders do not invest to lose.

9. Xstrata would favour overseas projects if the tax was implemented. ''Someone like Xstrata.
There is no question that this will happen. There will of course be some appeal to Australia because the infrastructure is already there and its close to Asia. Though there is iron ore in Asia, e.g. Indonesia, PNG, Bangladesh. Some of these countries were believed to offer greater sovereign risk than Australia, however Kevin Rudd has changed that with his arbitrary tax. In fact, it will be interesting to see if Rudd leads a resurgence of fascism around the world. Other governments could follow suit as he has given arbitrary 'fascist' taxation his 'Western government' approval. I don't even think that Obama could get away with that.

10. "Tony Maher says that as with the lobbying against the emissions trading scheme, miners have to be kept accountable for the claims they make. ''It was corporate bullying then; it's corporate bullying now.'' "
Tony is a union man...so its interesting that a journalist would quote him on a point of ethics about bullying or extortion. Geez, hopeless unbalanced media.

Congratulations Philip Wen, you have just won yourself a citation from the Australian Broadcasting Commission....my complaint is currently being processed. Rest assured, based on previous experience, they come from your side of the political fence. Interesting arguments...pity your smear of Xstrata has nothing to do with 'ethical issues' involved. You seem to share the pragmatic concerns of miners....I wish someone would get to the ethics involved...maybe some of the regulators people studied some ethics. My guess is no.
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Author
Andrew Sheldon
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