Procedural justice

There has to be a grudging admiration for Julia Gillard. Even if you don’t like her government, her policies or her style, one has to accept that she’s kicked a few goals recently. This week the mineral resource rent tax gained the support of three of the independents, meaning its passage through the lower house is assured and that it is likely to come into force next year. Add this to her hard-won victory on the carbon tax and the glow a leader gets from being in the presence of a US president and Gillard begins to look as though she may make it to the next election.

The minerals tax has been a long-time coming. The miners revolted when the previous prime minister, Kevin Rudd, proposed his resource super profits tax and deprived it of public support with a successful fear campaign. This time the big miners knew they wouldn’t be so lucky and met Gillard’s watered down proposal half-way. The tax is expected to raise $10 billion by 2014 and will be used to fund government initiatives such as cuts to corporate tax and the increase in superannuation from 9 to 12 per cent. However, it has alienated junior miners who argue that a tax on profits treats smaller and more speculative mining harshly and that it will act as a dampener on innovation.

The arguments on the validity of this range back and forth but there is an important point in how government has treated business in all of this. We have argued before in BRW that this government isn’t anti-business, it’s just inexperienced at dealing with business, and we continue to cover the debate in this week’s news analysis. In her zeal to get the miners onside, Gillard negotiated with the three biggest miners, BHP Billiton, Rio Tinto and Xstrata, and excluded smaller miners. The government was captured by the big end of town and Gillard has proven to be as much in thrall to them as she was to US President Barack Obama on his recent visit. While the end decision may have been the same, government is as much about procedural justice as it is about the final result. By sidelining small miners, the government’s process was flawed and that makes it easy for the policy to come under attack.

But put that to one side and reflect that a mining tax was inevitable. Other resource-rich nations, such as Brazil and Russia, are considering resources taxes. Debate now has to move to the real issue – what to do with it. The problem with governments is that they just can’t resist the temptation to use tax receipts to buy favour within an election cycle. This government has promised businesses and voters immediate benefits to sell the new tax. However, there are longer-term structural issues in the economy that need to be addressed. Now that a mining tax looks like a sure thing, it’s time to question how best to use the money to bolster Australia’s future.

Last week BRW celebrated its 30th anniversary but what we forgot to highlight was the exclusive reader offer to go along with this. Two lucky readers will have the opportunity to have a one-on-one lunch with influential media planner and buyer Harold Mitchell (Melbourne), or BRW’s current Entrepreneur of the Year, Matt Barrie (Sydney). To win you need to fill out the form in last week’s magazine, or look out for the promotion in the issue of December 8. For a budding entrepreneur, it will be a good chance to sit down with established entrepreneurs to ask them how they did it. Particularly over some fine food and a glass of good wine.

Kate Mills

BRW

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