Economics waits on political change-and by no means in India alone. While the Indian elections next year are widely expected to change the momentum in economic activity, experts in Australia-the largest investor in mining in the world in absolute terms-anticipate a change in government after the federal election this year, and hope some tax and environment policy reversals will bring back investors to the mining sector. Craig Bowie writes.
Australia's mining sector is in the doldrums, but a revival may be just around the corner. The federal election due in September holds the key to whether there will be renewed confidence in investing in the mining sector there. If the Coalition (currently the opposition) wins the upcoming federal elections, as many pundits predict, it could reverse many of the changes-recently introduced or announced by the current Australian government-that have negatively impacted on mining investment in Australia.
Carbon tax and MRRT
The Minerals Resource Rent Tax (MRRT) and the carbon tax are near the end of their first year in operation. To date, the MRRT has raised less than the Government expected, although final figures for the financial year are not yet in.
The first instalment of the carbon tax was paid on 14 June this year. Figures for the amount raised have not yet been released.
The Opposition has promised to repeal both taxes. If it can do that, there will be considerable savings, particularly for the iron ore, coal and natural gas extraction industries.
Income tax changes
In its 2013-14 Budget, delivered on 14 May, the Australian government announced tax changes designed to raise additional income tax from mining companies. The key changes announced (but not yet legislated) are:
Environmental legislation affecting mining
Environmental legislation in Australia is the purview of both Commonwealth and state governments, and there is considerable overlap between the two. This means that an approval may require both Commonwealth and state signoff, and that either the Commonwealth or the state can prevent a project from going ahead.
The state of Queensland, one of Australia's most significant mining jurisdictions, is trying to reduce 'red tape' and 'green tape' so that mining approvals can occur more quickly and efficiently. This does not mean a less rigorous approval process, but merely that decisions will be made more quickly, with less duplication of processes.
By contrast, the Commonwealth has recently passed legislation which industry commentators suggest will make the approvals process more difficult.
The introduction of a 'water trigger', a recent change, gives the Commonwealth power to refuse approvals for coal mines and coal seam gas developments if they impact on water resources. Not only does this duplicate a power already given to the states, but it also means the Commonwealth can reject a mining appl¡cation due to impacts on water resources even if the state has approved it.
A future Coalition government, if it wins power in both the House of Representatives and the Senate in September, could undo all of these changes. The Coalition has already announced it will repeal the carbon tax and MRRT. It seems likely a coalition government would also attempt to reverse the environmental changes. Whether or not it proceeds with the income tax changes will probably depend on the state of the budget following the election.
If it wins a majority in the House of Representa-tives only, any changes the new government wants to make will have to be negotiated with minority parties in the Senate.
Finally, because incoming Senators will not take their seats until 1 July 2014, regardless of which party wins power, a new government is unlikely to be able to make significant changes until 1 July 2014, even if it wins a majority in both Houses of Parliament.