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Rudd's tax plan mired in the mud

Date

Michelle Grattan

Illustration: Andrew Dyson

Illustration: Andrew Dyson

The PM is making tactical blunders in prosecuting his fight with the powerful mining sector ahead of the election.

If Kevin Rudd has a strategy in his mega-fight with the mining industry, could someone please explain it? The PM this week declined to front the miners at their annual dinner, calling into question his political courage. He also indicated the government was in no hurry to conclude its discussions with companies about the details of the controversial proposed resources tax.

Maybe I'm missing some subtlety, but both moves appear dumb.

And the messages are confusing. The government last week appeared set to deal; this week it sounded more intransigent.

If Rudd had gone to Wednesday's dinner, rather than a Labor Party fund-raiser, he'd have got some rough handling - but scored marks, too. He'd have occupied some of the space, instead of ceding the night to the tax's foes - including Sir Rod Eddington, a Rio Tinto director and usually the government's businessman of choice.

The PM has given his opponents serious ammunition to add to the deepening criticism of his character. They can suggest the no-show was a failure of ''ticker''. In Parliament, the opposition accused Rudd of lacking ''the guts'' to appear.

What's surprising is that Rudd and his advisers aren't spotting these ''character'' traps (unless the advisers are being ignored). Basic political instinct should have warned against splurging $38 million on ads pushing the mining tax when you'd fulminated against John Howard's advertising.

Rudd's line on Tuesday - that no one should expect an early outcome from talks with the miners - is even harder to fathom than the dinner boycott.

No doubt the rhetoric from the government and the miners exaggerates their differences. Resources Minister Martin Ferguson, the miners' friend, certainly always carries an olive branch. And in his hardline speech at Wednesday's dinner, Minerals Council president Ian Smith recounted how his great-grandfather was in the 18-month-long Broken Hill strike. ''That great tradition of disputation and following the Australian labour way taught me a couple of things . . . you always respect your opponent . . . and you always keep dialogue open.''

But whatever changes the government ultimately makes, the mining companies won't be happy. The only issue is how unhappy they remain.

The big companies are slashing away at the fundamentals of the tax, including the 40 per cent rate, rather than just objecting to the detail.

BHP Billiton's Marius Kloppers condemns the tax as ''deeply flawed'', declaring that the Treasury model ''neglects the fact the rest of the world exists''.

''The modelling assumes Australia is a closed system,'' he told The Age, when in fact if the tax regime is changed here, other places become more competitive.

In one sense, the government-industry talks aren't ''negotiations''. The companies are waiting on what the government will concede; they have nothing to offer in return. They are going all-out, hoping the government, facing an election, will make some retreat.

The government might think it weakens the companies' resistance by pushing the talks out towards the election. The miners know that if Labor is returned, it will be able, politically, to ignore their cries. (If Rudd lost, they would have hit the jackpot.)

But the costs for the government of delaying any changes are high. The row is drowning out other issues, such as the health reforms, and helping Tony Abbott.

If the government quickly settled the broad concessions it was willing to make (assuming it will make some), it would be on stronger ground. It could say it had heard the miners' point of view and shown reasonable flexibility.

It might then have a chance to regroup, and prosecute the debate more effectively to the general community, where Newspoll this week showed opinion 41-36 per cent against the tax. Regardless of what the government does, the resource tax will cost votes in Western Australia and other specific areas, but proper handling should be able to contain the bleeding elsewhere.

Even if polling day is not until October, time is short. The government needs to bed down difficult issues as well and as quickly as it can, rather than being surrounded by unfinished business.

The government's argument that the mining sector should pay more tax is sound, although there are conflicting views from experts about the model, and a case for changes. But the timing of this row was crazy - and that goes to the government's poor political management.

How extraordinary that Abbott, having found the ''great big new tax'' emissions trading scheme taken off the immediate agenda, has been handed another ''great big new tax'' on which to campaign.

The run-up to this election is something of a mirror image of 2007. Then, a fierce multimillion-dollar union campaign assaulted the Howard government over WorkChoices. It was only partially, and ultimately unsuccessfully, countered by business advertisements. This time business - in the form of the mining industry - is delving into its deep pockets to mobilise against the Labor government's tax, while the unions are weighing in to support it.

Kloppers says that in the Hawke, Keating and Howard years ''Australia would have been the gold standard'' for investment. ''We have done damage to that gold standard already,'' he says, and even if there was a deal, ''we shouldn't underestimate the damage''.

It's a hard punch from a company whose charter says it keeps out of politics.

Michelle Grattan is Age political editor.

167 comments

  • the most stunning thing about this new tax is the lack of leadership from Rudd. It is obviously causing the country problems as well as being divisive at a time when any sensible govt would be doing everything to keep it's country united and economy pumping along.
    krudd is meant to be the leader of this country but where is HE taking the leadership role? He seems happy to see this mayhem and that is just crazy.

    Commenter
    Cs
    Location
    Sydney
    Date and time
    June 04, 2010, 6:56AM
    • The government's "business man of choice", Sir Rod Eddington called on Rudd to scrap the tax and start again. Miss that detail, Michelle?

      The double-standard here is appalling. If Howard had made this mess and a chief business ally had publicly trashed it, the outcry would have been deafening. Rudd does it and its "Ho hum, a little tactical finesse is needed."

      Commenter
      bitrich
      Date and time
      June 04, 2010, 7:26AM
      • As a voter, I don't think any politician or PM should be wining and dining with special interest groups such as the mining industry when the government has important decisions to make relating to that industry.

        Commenter
        cb
        Date and time
        June 04, 2010, 8:03AM
        • Wake up Australia!. Kevin Rudd is a classic case of a 'dictator' in waiting. i.e Decisions without consultation, Hysterical outbursts when his decisions are questioned. Resentment of financial success by others, All based on forceful; vocalization and denial of reality and desperation. The Labour experiment has failed. They have to go back to the opposition benches.

          Commenter
          JW
          Location
          Qld
          Date and time
          June 04, 2010, 8:07AM
          • There is also the big issue about whether this Federal Tax tax is in fact constitutional. The way the Rudd government keeps justifying the taxes as a "minerals rent tax" further cements the tax as being the preserve of the States under the constitution.

            The other big one is WA secession, the vast bulk of this money/tax comes out of WA, and the size of the tax grab is big enough to give serious to get serious support from the big players.

            If Labor wins the next election, will Australia lose WA? Will a Labor gov't have to be sacked again, this time to stop WA seceding?

            Commenter
            Nihongo
            Location
            Melb
            Date and time
            June 04, 2010, 8:24AM
            • Kevin Rudd comes to office in 2007 promising he will not abuse the process of government funded advertising like the Howard government did so egregiously.

              If climate change was the "great moral challenge of our time" government advertising, according to Rudd in 2007, was "a long term cancer on our democracy."

              The famous PM BACKFLIPTER.... Will you vote for this party again? And did anyone notice, he seem to run for cover when he makes mistakes and let his staff do the explanation.

              Commenter
              Observer
              Date and time
              June 04, 2010, 8:27AM
              •  

                What this insane proposed mining tax has done is to demonstrate beyond any doubt that Rudd is a failed PM.

                He is a woeful public speaker. His language is forced and insincere. He is allergic to answering a question directly. His use of hyperbole is shockingly un-Prime Ministerial.

                He is gutless. Abandoning the ETS was the most extraordinary backdown in Australia's political history. If he believed in the policy he should be fighting for it at this election. Simple as that.

                He is out of his depth. A boy in a man's job.

                Commenter
                BBP
                Location
                Omnipresent
                Date and time
                June 04, 2010, 8:35AM
                • Nihongo,

                  If Rudd does win the next election and WA does secede, I'm moving to Perth.

                  What a nice thought to start the day with ...

                  Commenter
                  BBP
                  Location
                  Omnipresent
                  Date and time
                  June 04, 2010, 8:39AM
                  • There seems to be two lines of thought on the governments strategy, one the 'Hatcher' thesis is that Mr. Rudd has deliberately chosen to pick this fight. The other is the 'Perpetual Klutz' theory, that the prime minister simply mucks everything up. Personally I think it's a combination of both, putting money aside in the budget even before revealing the tax is evidence of the 'Hatcher' thesis. But the complete mishandling of the governments campaign against the miners is because they are incapable of organising anything more complicated than a chook raffle.

                    Commenter
                    SteveH.
                    Date and time
                    June 04, 2010, 8:47AM
                    • Thre is something disconcerting watching overfed mining billionaires professing they care for the average Aussie. There is something even more disconcerting that seemingly average Aussies advocating for the billionaires to have more money.

                      Now that the country is on the way of being shafted due to self-interest of the few, I would rather allow the Chinese ownership of these mining companies. I'm sure they are more than willing to pay taxes on their excess profits.

                      Come to think of it, if these fat billionaires think that a tax on their excess profits will kill their business, why don't they sell up to those who can run a profitable business and pay excess profit tax at the same time.

                      Commenter
                      Andy
                      Location
                      Fairfield
                      Date and time
                      June 04, 2010, 8:47AM

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