Rudd's tax plan mired in the mud
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.
Poll: Who is winning the public stoush over the proposed mining tax?
- Rudd government
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Poll closed 7 Jun, 2010
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