If the Australian public would like to know what their future would have looked like if former Prime Minister Kevin Rudd succeeded in his mission to create a healthy sovereign wealth fund from the Resources Super Profits Tax proposal in 2010, look no further than the Kingdom of Saudi Arabia in 2024 – where all its citizens share in the spoils.
The Australian mining industry’s campaign against former Prime Minister Kevin Rudd’s Resource Super Profits Tax (RSPT) took place over a relatively short but intense period in 2010.
The campaign began shortly after the RSPT was announced in May 2010 and continued until Rudd was ousted as Prime Minister in June 2010.
The RSPT was introduced as part of a broader tax reform agenda based on the recommendations of the Henry Tax Review, which aimed to levy a 40% tax on the extraordinary profits of mining companies. The tax was designed to ensure that Australians received a fair share of the profits from the country’s natural resources. However, the mining industry perceived it as a threat to their profitability and launched an aggressive campaign against it.
The industry, led by major companies such as BHP Billiton, Rio Tinto, and Fortescue Metals Group argued that the tax would deter investment, reduce profits, and lead to job losses.
Was the industry’s concerns well founded?
In Aussie slang, ‘yeah…nah’. In the 2009-2010 financial year, the Australian mining industry generated approximately AUD 153.5 billion in sales and service income.
In a single day, the industry collectively generated approximately AUD 420.5 million in revenue earnings.
The Australian mining industry spent an estimated AUD 22 million on the media campaign to oppose the RSPT. This campaign was highly coordinated and involved extensive advertising and lobbying efforts to sway public opinion and political support against the tax.
In other words, it took less than two hours of revenue earnt in one day, to usurp a Prime Minister that had won the popular vote by a landslide in the 2007 election campaign.
A cheap fully integrated marketing campaign for an incredible result. Cheers and beers all round.
Legacy media, particularly The Australian, played a significant role in shaping public perception of the RSPT. The Australian’s coverage was overwhelmingly negative, portraying the tax as economically damaging and politically reckless. The newspaper’s front-page stories consistently highlighted the mining industry’s arguments and criticisms, creating a narrative that the tax was detrimental to Australia’s economic interests.
The relentless negative coverage and the mining industry’s lobbying efforts eroded public support for the tax and, by extension, Rudd’s leadership. Within the Labor Party, there was also growing concern that the controversy surrounding the RSPT would jeopardize their chances in the upcoming federal election.
Amidst declining poll numbers and internal party dissent, Julia Gillard, then Deputy Prime Minister, challenged Rudd for the leadership of the Labor Party. On June 24, 2010, Rudd was ousted in a party room vote, and Gillard was given the nod.
The morning of the day after the coup, wall-to-wall media coverage was shamelessly co-ordinated in its narrative and industry collusion; there was to be no mention of the betrayal of Gillard, but a concerted gushing around the elevation of Australia’s first female Prime Minister!
What ensued was a deranged decade of political instability in Australia, whereby the leadership revolving door of six Prime Ministers within two election cycles rendered the idea of democracy into a farce.
One of Gillard’s first items on the agenda was to immediately engage in negotiations with BHP Billiton, Rio Tinto, and Xstrata. These discussions led to significant changes to the original RSPT, resulting in a new tax framework known as the Minerals Resource Rent Tax (MRRT).
Key Changes in the MRRT included:
The headline tax rate was reduced from 40% to 30%
The MRRT was limited to iron ore and coal projects, rather than applying broadly to all mining operations
The tax would only apply to about 320 companies, focusing on the largest and most profitable mining operations; and
The existing Petroleum Resource Rent Tax (PRRT) was extended to cover all onshore and offshore oil and gas projects.
Had Rudd’s RSPT passed legislation, it would have generated approximately AUD 12 billion annually for the public purse.
Gillard’s ‘negotiated’ MRRT was introduced in July 2012 and repealed in September 2014. During its brief existence, the MRRT generated significantly less revenue than initially projected. In its first full FY2012-2013, it raised about AUD 200 million. In the subsequent period until its repeal, the revenue remained low, totalling approximately AUD 400 million over its entire duration.
That’s AUD 144 Billion dollars that the Australian Sovereign Wealth Fund would have earnt between 2012 to 2024 had Rudd’s RSPT come into force, as opposed to Gillard’s 400 million over two fiscal years fly ash. In the words of Maximus Decimus Meridius – are you not entertained?
What could Australia’s Future Fund have done with that kind of coin? For those who lack imagination, allow me to direct your attention to the Kingdom of Saudi Arabia.
Australia and KSA are two nations with significant wealth derived from their abundant natural resources. Both countries have leveraged their mineral and energy resources to build robust economies. However, despite their similar wealth, there is a stark contrast in how they allocate public spending, particularly in healthcare, education, and infrastructure.
Australia is renowned for its vast mineral wealth, including coal, iron ore, gold, and natural gas. The mining sector is a cornerstone of the Australian economy, contributing significantly to GDP and employment. In 2022, the mining industry accounted for approximately 10% of Australia’s GDP.
Australia’s primary exports include iron ore, coal, natural gas, and gold. The country is the world’s largest exporter of iron ore and coal.
Saudi Arabia’s economy is heavily dependent on its oil reserves, which are among the largest in the world. However, the country is actively diversifying its economy through its Vision 2030 initiative, which aims to reduce reliance on oil and develop other sectors, including mining.
Saudi Arabia’s primary exports are crude oil and refined petroleum products. The country is also rich in minerals such as gold, phosphate, and bauxite.
The oil sector dominates the Saudi economy, contributing to over 40% of GDP and 70% of export earnings. The government is investing heavily in mining to tap into its estimated USD 1.3 trillion worth of untapped mineral resources.
Despite their different resource bases, both Australia and Saudi Arabia have achieved similar levels of wealth. Australia’s GDP in the FY2022 was approximately USD 1.7 trillion, while Saudi Arabia’s GDP was around USD1.1 trillion.
However, Australia’s GDP per capita is significantly higher.
Here’s where the disparity in public spending is like a dirty finger poking an Aussie in the eye.
Healthcare: Saudi Arabia provides free healthcare to its citizens, with significant investments in hospitals, clinics, and medical research.
Education: The government offers free education at all levels, including higher education. There are numerous scholarships and funding opportunities for students to study abroad.
Infrastructure: Saudi Arabia has invested heavily in nation-building giga projects such as Neom, which includes The Line, a 170-kilometer-long city, and other regions like Oxagon, Trojena, and Sindalah.
Or how about the Roshn project, a national project focused on increasing home ownership in Saudi Arabia by building 400,000 homes, along with schools, mosques, and other community facilities.
There are at least a dozen more giga projects currently under construction. No exaggeration.
In contrast, Australia’s public spending on healthcare, education, and infrastructure is somewhat anaemic and frankly, uninspired. While the country has a well-developed public service system, ask any regular bloke on the street, and they will tell you that its been underfunded for years.
Healthcare: Australia has a mixed healthcare system, with both public and private providers. Medicare provides subsidized healthcare to citizens, however the gap is generally up to a 50% out of pocket expense.
Education: Primary and secondary education is publicly funded with small annual contributions from families. Tertiary education is not free. Australian students who cannot afford to pay, graduate oftentimes with heavy student debt.
Infrastructure: Australia’s infrastructure is well-developed, but again, public investment has not kept pace with population growth or market opportunities.
The biggest nation-building project in Australia over the past two decades was the National Broadband Network (NBN) project which had an estimated final cost of AUD 51 billion by late 2018. However, the NBN underwent significant changes in its delivery and rollout due to budget blowout. Initially, the NBN was planned to be a nationwide fibre-to-the-premises (FTTP) network. However, after the 2013 federal election, the government shifted the approach to a multi-technology mix model to reduce cost.
This change involved using existing copper and hybrid fibre-coaxial networks instead of building new fibre infrastructure as originally planned. However, the use of older technologies resulted in higher maintenance costs and integration issues, which contributed to the overall budget blowout and a significantly poorer outcome that did not put Australia in pole position to ride the ensuing digital revolution – which it really should have.
Hindsight is a painful, but enlightening thing.
Rudd should be applauded for his visionary leadership in seeking for a fairer re-distribution of sovereign wealth for the genuine upliftment of Australian citizens. Fluent in Mandarin, Rudd understood that a fully integrated Australia within APJ, is not just common sense from a security and opportunity perspective, it’s just plain good business to get along with one’s neighbours, rather than weigh neighbourly relations through the lens of US-led interests to the detriment of Australians.
Rudd now serves as Australia’s Ambassador to the United States. Let’s hope he stays true to his legacy, and continues to put the interests of Australians first, inshallah.
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