Revenue from the Minerals Resource Rent Tax
The total revenue expected to be raised from the Minerals Resource Rent
Tax (MRRT) received significant attention in submissions and at the hearings.
This chapter discusses the revenue projections and associated issues as well
the impact of the MRRT on future investment.
The Revised Explanatory Memorandum states that the government expects to
raise the following amounts of revenue over the three years from its
Table 4.1: Projected revenue implications of the MRRT
Minerals Resource Rent Tax Bill 2011 and related bills, Revised Explanatory Memorandum,
The Mid-Year Economic and Fiscal Outlook 2011–12 (MYEFO), states
that amendments to the MRRT to raise the low profit threshold to $75 million
and extend the phasing out of the offset from $100 million to $125 million,
'will have a cost to revenue estimated to be $60.0 million over the forward
At the same time, the government noted in MYEFO that, in its view, 'the
outlook for prices and investment remains favourable, notwithstanding the
unsettled global environment'.
However, resource rent taxes are 'a highly variable source of revenue as they
are heavily influenced by commodity prices and exchange rate levels'.
Any changes in global demand for resources, particularly from China, will also
affect revenue from the MRRT. Moreover, revenue could be reduced if the states
increase the royalties they demand from mining companies, as has been
The Deputy Prime Minister and Treasurer, the Hon. Wayne Swan MP,
expanded on this in February 2012:
There are swings and roundabouts when you have a variable
revenue stream [but] I don't accept that in an environment where revenue is
adjusted depending upon variable factors beyond the forward estimates it is
unsustainable to make the commitments we have made. They are entirely
sustainable within the budget framework.
By and large, comments on Treasury's modelling have concentrated on
whether the MRRT will meet its revenue projections. The modelling itself has
been subject to less attack. To some degree this is because Treasury has not
been able to release all the assumptions underlying its modelling.
Factors affecting the revenue projection
2011–12 Mid-Year Economic and
As indicated, the actual revenue from the MRRT will be affected, upwards
or downwards, by changes to commodity prices and the Australian dollar's
exchange rate. These in turn are affected by the uncertainty in the global
The government addressed these issues in MYEFO:
International growth prospects have weakened markedly since
Budget and the risks to global stability from the European sovereign debt
crisis have intensified ... Notwithstanding the deterioration in global
conditions since Budget, the Australian economy continues to outperform the
developed world with solid growth prospects, low unemployment, a record
pipeline of resources investment, and strong public finances.
However, in relation to the resources sector, it stated:
Australia’s economic growth prospects are driven by record investment
intentions in the resources sector and strong forecast growth in commodity
exports. Commodity prices have fallen in recent months, but the outlook for
prices and investment remains favourable, notwithstanding the unsettled global
environment ... Looking beyond these near-term movements, the
medium-term outlook is for Australia’s terms of trade to decline as the global
supply of iron ore and coal increases. Still, the rapid pace of economic
development in emerging Asia, and the prospect that strong resources-intensive
investment in China and India will continue for many years to come, underpin
expectations that the decline in the terms of trade will be gradual.
The government, in MYEFO, estimated that a one per cent decrease in
nominal GDP caused by a drop in Australia's terms of trade would result in a
combined drop to revenues from the MRRT and the Petroleum Resource Rent Tax (PRRT)
of $600 million.
Under questioning from the committee, Treasury officials stated that the
expected revenue from the MRRT would represent around one per cent of the
government's total revenue from taxation for a financial year.
When this was put to Professor John Quiggin he indicated that he did not
believe that volatility to the revenue of such a small percentage of the Budget
would have any significant effect on the Australian economy.
CHAIR: We heard evidence from Treasury that this tax is
likely to raise about one per cent of revenue to budget—something in the order
of $3.5 billion, $3.7 billion or $3.8 billion per year out of a total
spend of $350 billion-odd. Do you regard a bit of volatility in the
revenue flow to government from this tax as being significant in terms of the
aggregates that the government has to receive and spend?
Prof. Quiggin: Treasury is totally right here. Volatility in one
per cent of the tax base has an essentially negligible effect. The only point I
would make is that anybody leading that kind of evidence is discrediting their
own credibility as an economist ... All sources of government
revenue fluctuate to some extent or another over the course of the business
cycle. The amount of tax raised from different sectors of the economy fluctuates.
The idea that in some way the value of the revenue is greatly reduced by the
fact that it might fluctuate is just silly.
Submissions questioning the
A number of submissions have challenged Treasury's modelling and its
revenue forecasts. One from the Perth office of accountancy firm BDO Corporate
Tax (BDO) acknowledged that it was not privy to the revenue and productivity
forecasts used by Treasury as the basis of its modelling. It made its own
estimates based on publicly available information and assumed:
... a starting base calculation using an average iron ore
price of say, USD$148 dmt [dry metric tonnes] whereas mining revenue may be
calculated by reference to a price say USD$120 dmt to USD$125 dmt.
BDO went on to say that it recognised 'the calculations in reality are
more detailed than this, but the general point is still compelling'. Based on
its assumptions, BDO concluded:
It is not until the actual price realised exceeds USD$148 dmt
that a profit is made (all other things being equal and ignoring the impact of
royalty credits and the uplift factor). We are not suggesting that iron ore
prices will perform in the manner outlined and the model assumes no new
resources come on stream; it is merely to emphasise that it is unlikely there
will be MRRT revenue generated in relation to the resource which has been
included in the determination of the starting base amount.
BDO's submission was lodged on 21 December 2011. It released the first
version of its critique of Treasury's modelling on 1 November 2011, followed by
a further version on 6 November 2011.
On 8 November 2011, the Deputy Prime Minster and Treasurer wrote to BDO about
its 1 November 2011 analysis.
While this letter obviously predates the submission to the committee, the same
criticisms of BDO's modelling apply to its submission. In that letter, Mr Swan
pointed out that the practice of using a high starting base value for the
assets owned by the miner, thus increasing the deductions allowed under the
MRRT, in conjunction with budgeting a low return on that ore, is specifically
disallowed by the package.
In its submission, the Institute of Public Affairs (IPA) also referred
to the amount of revenue Treasury had estimated would be raised by the MRRT:
Concerns have been raised in the past that the estimated
revenue stream from the MRRT, off a much smaller taxing base of iron ore and
coal producers, was not substantially lower than a RSPT to be imposed on a
comprehensive basis. Such concerns have not been allayed by the publication of
the latest MRRT revenue estimate in the 2011-12 MYEFO. As the June 2011 Senate
Select Committee on the Scrutiny of New Taxes report noted, previous MRRT
revenue estimates presented by the commonwealth have varied significantly,
partly in accordance with changes in coal and iron ore prices.
The Association of Mining and Exploration Companies (AMEC) referred to
modelling conducted for it by the University of Western Australia in its
submission, which showed:
Before the introduction of the MRRT the average total tax
(income tax and royalties) for mining companies would have been around 38%, and
post MRRT the total effective tax rate increases to over 40% and over 44% for
existing and new projects respectively.
Treasury was asked about this modelling when it gave evidence to the
Mr Sedgley: The modelling shows the impact of the starting
base in one case versus a new miner that does not have a starting base on the
Senator EGGLESTON: Does that mean to say that it is, in
effect, biased towards the existing miner?
Mr Sedgley: No. It is just demonstrating in one case that the
pre-existing miner has the benefit of a starting base, because they have
undertaken investment prior to the announcement of the MRRT.
Full release of modelling by
A full analysis of Treasury's modelling has been hampered to some degree
by its inability to release the revenue and productivity assumptions upon which
it has based its modelling of the MRRT and the PRRT.
Treasury addressed this issue in its evidence to the committee:
Senator CORMANN: You know that state governments in Western
Australia and Queensland get the same information from the same mining
companies and publish their assumptions in their budget papers, so they can be
part of the scrutiny of the budget estimates?
Mr Heferen: To the extent we can publish material and are not
in any difficulty of compromising the relationship we have with firms that
provide us with information to refine a range of things that we do—not just
revenue forecasting, but economic forecasting. We obviously have to be very
reluctant to do that, because part and parcel of being able to provide that
information to governments is relying on information that we provide
in-confidence. We have to respect that confidence.
The committee considers this situation to be regrettable but
unavoidable. The information in question was provided in confidence by industry
participants, who did not agree to it being released. Their consent is required
under Freedom of Information laws. Treasury, therefore, cannot be criticised in
Increases in state and territory
The revenue raised by the MRRT may also be affected by state and
territory governments changing their mining royalty schemes. This results from
Division 60 of the MRRT Bill, which provides for mining profit to be reduced by
the amount of the royalties paid by the miner for that mining project.
In its 2011–12 Budget, the New South Wales government stated:
To address the negative financial impacts on NSW of the
carbon tax, coal royalties in NSW will be increased. The increase will only
apply to firms that are subject to the Australian Government's proposed
Minerals Resource Rent Tax (MRRT). As the Australian Government has committed
to compensate mining companies for any royalties that are paid to state
governments, the increase in royalties will not be an additional tax burden on
NSW legislation to implement the royalty supplement will be
prepared after the Australian Government finalises its carbon tax and MRRT
Treasury has indicated that its most recent estimate of revenue does not
take into account proposed changes by the New South Wales government as they have
been announced but not put into place.
In June 2010, the Western Australian government increased the royalty on
"iron ore fines" from 3.75 per cent to 5.625 per cent from 1 July
2010, with further increases to 6.5 per cent from 1 July 2012 and 7.5 per cent
from 1 July 2013 announced in its 2011–12 Budget. It expects these increases to
generate additional revenue of $1.9 billion over the budget period.
To address these developments, on 17 November 2011, the Australian government
amended the Terms of Reference of the GST Distribution Review
Review should examine and make recommendations on possible changes to the form
of equalisation to achieve the following objectives:
that HFE [horizontal fiscal equalisation] does not provide a disincentive to
State tax reform,
HFE to provide incentives and disincentives to promote future State policy
decisions which improve the efficiency of State taxes and mineral royalties,
the incentives for States to reduce Minerals Resource Rent Tax or Petroleum
Resource Rent Tax revenue through increasing State mineral royalties.
6B. In considering this issue, the Review will be guided
by the following:
findings of the Australia’s Future Tax System Review relating to existing State
taxes and mineral royalties,
Minerals Resource Rent Tax and Petroleum Resource Rent Tax provide a more
efficient approach to charging for Australia’s non-renewable resources than
mineral royalties, and
tax reform will not be financed by the Australian Government.
Moves by some states to increase royalties have the potential to
undermine the superannuation and taxation reforms the MRRT is intended to
support. The committee sees the announced increases as opportunistic, made in
the knowledge that, long-term, the miners will be compensated for the increased
royalties under the design of the MRRT.
In the committee's view, it is appropriate that increases by state
governments to their royalties from the mining and petroleum industries, should
be taken into consideration by the GST Distribution Review panel.
Outlook for the mining sector
There is constant speculation about where commodity prices and demand
for Australia's mineral resources are heading in both the short-term and the
long-term. Indeed, support can be found for almost any view of the sector's outlook.
For example, on 5 and 6 January 2012 The Australian newspaper
ran three separate articles that expressed contrasting views on the outlook for
the mining sector:
With much of the rest of the world facing severe financial
difficulties, construction work on new resources projects in Australia rose by
31 per cent, an unprecedented growth rate, and investment in machinery and
equipment rose 20 per cent over the year.
Economists believe Australia’s trade performance may have
peaked, with the November trade surplus falling 2.9 per cent to $1.38 billion
as imports outstripped export growth. While exports grew 0.2 per cent in the
month, mineral shipments of iron ore and coal were down, reflecting a slowdown
in demand from Australia’s Asian trading partners ... "Australia
has likely seen the peak in the trade balance," ANZ economist Andrew
McManus said ... Commonwealth Bank economist John Peters said he
expected the surplus to narrow in the coming months, but there would still be
strong trade surpluses, which would ensure the current account deficit would
What to expect in 2012:
prices will be volatile but remain strong by historical standards.
of dollars of "baked in" resources investment will continue being
3. Local resources
stocks to remain undervalued unless global economic conditions improve.
commodity exports to hit $200 billion for the first time.
to take giant strides towards becoming the world's biggest LNG exporter as new
projects are built and approved.
and acquisition] activity to intensify, particularly in the gold and uranium
to lose some of its lustre, with explorers returning to Australia or launching
into South America.
MRRT and carbon tax will make life harder for some companies but won't put
anyone out of business.
This variation can be found in submissions to the committee also. The
IPA, for example, stated:
There are a number of risks to the outlook for Australian
mining, including a continuation of recent falls in productivity, declines in
our global share of exploration and production, and in the shorter term
weaknesses in the global economy, which could have an effect on the
availability of credit, which could lead to some miners reassessing expansion
However, elsewhere it stated:
'it remains likely that once existing and new projects reach
their full production capacity much of the decline in productivity will be
'most economic analysts agree that the outlook for activity
within the Australian mining sector remains robust'.
Investment in the mining industry
One aspect regarding the future of the Australian mining sector which
was raised in evidence to the committee is the concern that the introduction of
the MRRT will lead to a decline in investment in the Australian mining sector
and the flight of investment to competitor countries, particularly in Africa
and South America.
The final report of the Review of Australia's Future Tax System considered
the possible effect of a resource rent tax on investment. The report stated
that a well‑designed resource rent tax would be less distorting than the
current output based royalty scheme because:
... rent-based taxes do not apply to the normal rate of
return to investment in projects. The government achieves this by effectively
contributing to costs at the same rate as it shares in receipts from resource
The Deputy Prime Minister and Treasurer, and the Minister for Resources
and Energy, pointed to increased investment in a media release:
The fact is that Australia last year achieved record levels
of capital investment in resources and energy projects – a record we are on
track to break this year. Companies are investing more in minerals and energy projects
in Australia than they ever have before, in full knowledge of the MRRT ... Since
the Government announced the MRRT and PRRT on 2 July last year, we have
seen investment not only continue but accelerate, particularly in the three
commodities – coal, iron ore and petroleum – covered by our resource taxation
The question of investment in the mining sector was raised with Treasury
at Senate Estimates on 17 February 2012:
Senator LUDLAM: Dr Parkinson, you used a figure about
half an hour ago of $450 billion in investment over the next half decade. You
said something along the lines that there is nothing that you can see likely to
stand in the way of that wave of investment going through. You were using rough
numbers, but how much of that investment is in extractive industries, or is it
effectively all of it? The rule of thumb number, the $400 billion to $450
billion in investment, is that primarily in extractive industries—mining, oil
and gas projects?
That is mining. I said in the next half decade or so. It was a bit of hand
waving. A lot of these projects will take a long time to bring on stream.
Senator LUDLAM: That is what I thought. I just wanted
to check on that. Relative to the size of the Australian economy, that strikes
me as probably the single largest wave of investment in the country’s history.
Is that reasonable? It seems like an extraordinary amount of money.
Dr Gruen: It is the case that we are projecting
investment, broadly speaking, all investment as a share of GDP, to be at
multiple decade highs. If you add this stock of investment to the investment in
the rest of the economy, investment as a share of the economy is expected to be
at an all-time high for at least as long as the quarterly national accounts have
Dr Parkinson: I can add to that. You can see that
historically mining investment as a share of GDP has bounced around one per
cent. We are anticipating in 2012-13 it will be about six per cent of GDP. It
is a huge wave of investment that is hitting.
Other witnesses argued the opposite; that mining investment was
threatened by the MRRT. The committee heard claims from some witnesses that the
MRRT will deter investment in Australia and drive it overseas to other resource
rich countries in Africa and elsewhere. For example, the Chamber of Minerals
and Energy of Western Australia argued that:
The vast scale of projects in the resources sector requires
extensive infrastructure and long term investment capital. In a global economy,
the capital essential to fund these projects is highly mobile. Even in the
resources sector where Australia is well placed to drive economic growth, there
are many competing jurisdictions for investment.
Australia's existing and recently-announced investments in mining
and oil and gas are the culmination of significant project development
processes. These investments cannot be taken as an indicator of future
investments. The global resources sector is assessing other locations in other
continents, which have significant potential, and Australia's tax system must
remain internationally competitive in order to attract investment, economic
development and employment growth into the future.
In this global context, Australia needs tax policies that do
not provide a disincentive to investment in an industry and so restrict the
ability of Australian operations from competing internationally.
Fortescue Metals Group (Fortescue), in its submission, also felt the
MRRT would deter investment:
... in effect the tax falls mainly upon new producers that
were not in a position to obtain huge concessions based upon May 2010 market
valuations. This effectively means that the perceived sovereign risk associated
with investing in Australia (and the attractiveness more generally of Australia
as an investment destination) will be undermined by a tax that won't raise
anything like the projected revenues (due to the generous but misunderstood
concessions that have been granted) but will increase the complexity of
taxation, will increase the administrative burden and will act more generally
as a deterrent to investment and as an inefficient tax.
Similarly, the IPA raised the issue of Australia's international
competitiveness in the mining sector and drew a link, in its submission,
between the international economic situation and investment in Australian
Despite episodic reductions in its corporate tax rate over
the last two decades or so, Australia's statutory corporate tax rate of 30 per
cent exceeds the rates that exist in some of our major mining export
competitors as well as other countries within the Asia-Pacific region that
compete for foreign capital inflows.
The flight of investment to other countries was raised by Professor
Henry Ergas in his evidence to the Senate Select Committee:
To the extent that there are some options or potential
projects in Australia that are extremely attractive, even this tax will not
prevent those going ahead, but at the margins it will shift riskier projects to
Atlas Iron told the committee that it believed investment would be
driven to other countries, particularly in West Africa, if the MRRT becomes
law. It, for example, was investing in manganese mining in Namibia and Ghana,
as well as iron ore mining in Brazil. Mr David Flanagan from Atlas Iron told
Senator CORMANN: Has there been a strategic shift by Atlas
post the proposal to introduce an MRRT, as it is on the table, in terms of
where you direct your investment?
Mr Flanagan: It has definitely been a factor on the table.
Senator Eggleston raised the issue of investment going overseas with
Senator EGGLESTON: Of course, the introduction of the MRRT is
a factor that must be taken into consideration in new investment and perhaps—
Mr Bennison: Absolutely.
Senator EGGLESTON: driving this capital abroad.
Mr Bennison: It is.
In contrast, there were a number of witnesses who argued there was
little evidence that the MRRT would drive investment overseas because other
jurisdictions were less stable and had higher and less predictable barriers to
investment. The Australian Council of Trade Unions noted:
There is no evidence to suggest that the announcement of a
resource rent tax has materially affected investment and activity in the
Australian mining industry. The mining industry spent $16.9 billion on capital
investment in the September 2011 quarter, more than double the $8.1 billion it
spent in the final quarter before the announcement of the original RSPT, the
March 2010 quarter. Mining investment in September accounted for 48.5 per cent
of all capital expenditure in the economy.
Importantly, the Minerals Council of Australia went further and outlined
a number of features of the MRRT that it believed would not be a deterrent to
it 'establishes a more internationally competitive tax rate';
the market value starting base allowance 'lessened dramatically
the retrospective element' of the MRRT compared to the RSPT and removed the
sovereign risk concerns;
it differentiated between commodities based on their international
it was designed to tax the value of the primary resource only;
it allowed for the 'immediate deductibility of capital
expenditure to encourage investment into coal and iron ore projects';
the higher uplift rate allowed for 'a more appropriate return to
capital invested'; and
it would not apply to projects that turned a low profit.
Mr David Richardson from the Australia Institute commented on the
potential for the movement of investment to foreign countries in his evidence
to the committee. Referring to a recent article in The Economist, he
Of the 10 major projects throughout the world announced in
the last year, seven were from Africa. We hear scare stories about Australia
increasing taxation through the resource rent tax, whereas in Botswana we have
De Beers quite happily paying 80 per cent of their profits to the
government. We have the hot heads in the ANC threatening nationalisation of
mineral companies. We have royalties going up everywhere, and more profit
sharing. Zimbabwe will not let you mine some minerals unless you refine them
there as well. There are all of these sorts of things. The way the Economist
describes it is that the whole world is looking for governments to have a
greater share in mining profits at the moment. I think it is important that we
take into account that we are not sitting in a flat environment and that things
are moving in the rest of the world as well.
That article referred to an Ernst & Young survey that showed that 25 countries
around the world had announced plans to increase their take from the profits
made by mining companies. It went on to state:
... the immense ore deposits so far discovered and soaring
commodity prices on the back of rip-roaring Chinese demand have convinced the
world's miners that the continent is the next big frontier. Bumper profits have
also spurred mineral-rich countries to seek a bigger share of the spoils. The list
of African governments that have miners in their sights is a long
one ... Right across the continent governments are seeking new ways to
squeeze more out of foreign-owned firms growing rich off what lies beneath
Africa’s soil ... Even as governments move to grab bigger slices of the
cake, high prices mean the miners remain profitable.
The Construction, Forestry, Mining and Energy Union (CFMEU) in its
evidence to the committee indicated that it considered investment in mining in
Africa was uncertain and that for this and other reasons, the MRRT posed no
threat to continued investment in Australian mining. Mr Peter Colley strongly made
the following points in his evidence to the committee:
I should address one more point, which was this capital
flight argument. I heard Mr Flanagan from Atlas Iron. I am also aware of
other players in this debate alleging that there will be capital flight from
Australia. There are two answers to this. The first is clearly empirical. It is
the list of proposed projects that are published on a six monthly basis by
ABARES, the Australian Bureau of Agricultural and Resource Economics. That
pipeline of projects has increased every six months continuously throughout the
period that the taxes, both the Minerals Resource Rent Tax and the RSPT, have
been under discussion. Clearly it has almost no impact on the investment
decisions of those who are investing in mining oil and gas in Australia.
The other argument is a theoretical one. This is the argument
put by some of the big players that they can only bring on a small number of
projects at any one time, that they have a certain number of projects that they
can manage, that each of those projects takes up considerable management time
and is capital intensive. If they get a better tax rate in some other country,
they will choose to prioritise those projects. My response to that is to say
that there are any number of willing investors in the Australian mining
industry that are willing to invest on the basis of making good profits rather
than super profits.
Chinese and Indian investors in particular are falling over
themselves to invest in Australia. Even various American mining companies are
keen to invest in Australia, despite their difficulties back home. There is no
shortage of mining investment in Australia, and arguably there is too much.
There is a great deal of speculative heat in the Australian mining industry.
There are billionaires who have not mined a tonne of mineral in Australia, they
have simply ridden the crest of speculation in the mining industry. On that
basis, our argument would be that the resource rent tax is designed to only tax
excess profits, high profit rates. It will not affect rational investment
decision making. If some companies want to invest in other projects elsewhere
that will continue to attract super profits, that is well and good. They will
still need plenty of investors in Australian mining.
I suppose a further point to make there is with regard to
sovereign risk. We were told that Australia has more sovereign risk because of
the resource rent tax. There is plenty of sovereign risk in Africa. Most
companies that have ever invested in Africa have lost their shirt. That may
change but most countries in Africa are still an incredibly difficult place to
Rio Tinto, with its Simandou major iron ore prospect, had
half the lease summarily taken off it by the government and assigned to someone
else. The government has even been contemplating taking more of that lease off
them. This was a multibillion dollar project that Rio Tinto had been
trumpeting. In contrast, Australia is a safe haven, which is why it continues
to attract such a large share of international resource investment. I will
leave my comments there.
It is clear to the committee that most commentary on this subject agrees
that the Australian mining industry will continue to prosper for some time to
come, though possibly not at the recent extraordinary levels. Any anticipated
downturn in the industry is generally attributed to external factors, such as:
general global financial conditions, which have made money more
expensive everywhere in the world and lessened capacity to invest in the
increased competition from developing mining industries, in
Africa and South America in particular, and
some contraction in the expansion of the Chinese and other North
But the positive factors outweigh the negative and include:
the current economic environment and the dynamism of the Australian
economy, (as discussed in chapter 2 of this report);
the continued record profits being announced by Australian mining
the possibility of the exit from the market of Indian iron ore
It is noted that the design of the MRRT includes pre-mining allowances
that recognise the costs associated with the mining industry, further lessening
the potential that the MRRT will act as a disincentive to investment in the
The committee is not aware of any strong evidence of investment moving
to foreign countries as a result of the MRRT.
The committee also notes that Australia has many, many advantages over
its African and South American competitors for mining investment dollars
a high level of existing infrastructure now in place;
stable, democratic governments;
a robust, globally-integrated, highly-developed economy;
skilled workers; and
proximity to the largest markets for iron ore and coal.
The committee is confident that the mining industry will continue to
grow and that investment in it will continue to be strong regardless of the
introduction of the MRRT.
The committee accepts that the revenue that will be generated by the
MRRT will be affected by proposals from state governments to increase their
royalty rates and fluctuations in commodity prices and the exchange rate. Nonetheless,
it believes that Treasury's modelling of the revenue generated by the MRRT
should be accepted for the following reasons:
it included information provided by the major industry players,
putting it in a good position to allow for expected changes to commodity prices
and mining production rates, making it the best source of industry information;
Treasury is the best placed body to assess future movements in the
exchange rate for the Australian dollar and developments in the economy
attacks on the accuracy of modelling have not undermined its
findings in any significant way; and
until the GST Distribution Review panel has completed its work,
any assessment of the effect of increases to state and territory royalties is
In the committee's view, the argument concerning investment flight
largely covers similar territory as that concerning the economic outlook for
the mining sector, the allowances made in the MRRT for innovation and
exploration and comparisons between the effects of a resource rent tax and the
royalty scheme. As noted elsewhere, the MRRT provides for the immediate
deduction of capital expenditure, which should act as an incentive for
The committee has seen no evidence that the MRRT has led or will lead to
a reduction in investment in Australia's mining sector. In fact, it believes
any change in investment is more likely to be attributable to external economic
factors than to concerns about Australia's economic environment, the future of the
mining industry or the MRRT.
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