Surprise! A new Age survey found that investors were concerned about the Henry Review’s proposed Resource Rent Tax:
… a staggering 92 per cent believed that the higher taxes would hurt the share prices of resource stocks. Long-term effects were also considered, with 25 per cent believing that a resource rental tax was ‘short-sighted’ and likely to ‘damage mining’ as an industry. More frightening was that 45 per cent of investors said the implications of the tax would make them rethink their investments in the sector.
These figures suggest significant support for a mining campaign against the tax, at least among those actively in the stock market. However, the miners have a big job ahead of them balancing this campaign against an already-widespread perception among investors that the tax is damaging to earnings. Too vigorous a response could increase risk-aversion significantly.
The miners have some room to move. When asked about how the government should deal with any resistance to the tax, 42 per cent of investors reckon authorities should ‘give in’ to miner demands. If the miners threatened to move offshore, 23 per cent said ‘let them go’. The results sounded one note of caution in that 36% of investors agreed the government should counter-threaten with nationalisation of assets. This figure is likely to be higher among the general population.
It seems investors are keen to fashion Australia’s economy into a resources powerhouse – with all of the population increases that entails – but they don’t want to pay for it.
With this BRIC-led resource boom in full steam, a number of countries are charging over 70% in Resource Rents (Norway, Bolivia, Bahrain). Let’s hope the Rudd government can keep the public’s interest front and centre when the lobbyists knock on their door. Extraction should never be confused with production.
Please read our Dec – Jan edition of Progress (8MB), a special on Resource Rents.