BEAUMONT: Mr Rudd, thank you for your time this morning.
PM: Thanks Simon, thanks for having me on your program.
BEAUMONT: Mr Rudd, in Western Australia today, this is a chance for you, isn't it - either on this program or while you're here in the next couple of days - to back off on the mining tax. If you do it today, if you do it now on this program, it could save you your job. Will you do that? The floor is yours.
PM: Nice try Simon. I'm here to explain to the people of Western Australia why tax reform's important, and if it wasn't important and positive for the WA economy and for families in Western Australia, we wouldn't be doing it. If you go to the core of what we're on about, this tax reform is all about strengthening the WA economy long term, by cutting company tax for all West Australian companies, including 50,000 small companies trading across this state, making a tax break available to all of West Australia's 160,000 small businesses, as well as providing a source of revenue to boost our investment in WA infrastructure. That's in terms of strengthening the economy long term.
But in the meantime, it's also about providing extra superannuation for 700,000 workers in WA who will get higher super savings, and that helps take a bit of pressure off the weekly budget in the long term. So if you're 30 years old, you'd be around $108,000 better off by retirement as a result of these changes. So this is what we're doing.
BEAUMONT: But the superannuation contribution is also made up by employers, so that's not totally true, that's not all coming from a taxation base. Whatever way you look at it -
PM: That comes from - in relation to that question Simon - it comes from two sources. One of course is the cost to tax revenue through the Australian Government providing better tax treatment for people making savings through super, that's one thing. But the second obviously involves businesses. And for businesses, we're also making it easier for them to make those payments through extra super over time by bringing down their tax rates. So that's why -
BEAUMONT: So who are you trying - while you're here - who are you trying to explain this to? Are you trying to explain it to the people who will put you back into office, or are you trying to explain it to the miners? Because it seems to me, looking at the opinion polls, this, you're not explaining this very well to anybody.
PM: Well Simon, you're, I'm on your program, I'm talking to your listeners this morning about what we're seeking to do for tax reform for the economy for Western Australia, and for families in Western Australia. And what we're on about as a Government is building a stronger Australian economy long term, but also making it easier for families. And that's why these super reforms are so important.
In terms of the mining industry, I entirely respect the mining industry's point of view. We are engaged in a continuing consultation with them. And that will continue into the days and weeks ahead. We think these consultations have been productive. We're learning various things from various companies about their individual circumstances. But this will be a very difficult negotiation, I fully accept it.
BEAUMONT: But you, you're saying to me today and to our listeners, you're not going to back off, you're going to forge ahead? You're not going to drop the thresholds or change this taxation. You're going to go ahead. You and Mr Swan are going to forge ahead?
PM: Well Simon, as we said last time, I think, on this program, we believe that we've got the rate of this tax right. And we also said, I think I said this on your program too last time I was in Perth only a few days after announcing the Government's tax plan, or tax reform plans, that we would consult with the industry on detail, on implementation, and on generous transitional arrangements. And all those consultations with big mining companies are happening as we speak, and have been happening over the course of the last month.
BEAUMONT: Whichever way you look at it, whichever way you look at the thresholds, or what you're saying, or what the miners are saying, you're going to take $9 to $10 billion out of the mining industry. You must concede that does make it a less attractive investment option?
PM: I think it's very important to look at what this does for long term economic reform and the strength of the economy. I look recently, for example, at considered analyses published in the Financial Times in London, these are the folk who actually examine carefully the details behind or beyond all the rhetoric and underneath all the rhetoric that's mounted by one side of the debate against the other. And what do we actually find underneath it all? That this sort of reform is seen by analysts such as that, reflected in the editorial of the Financial Times, as good for the mining industry long term.
Remember what this is about, in part. It's about also encouraging smaller, less profitable mining operators in their early years in particular to get going, to get established. That's because the Government is of course allowing them to establish a tax credit of some 40 per cent of their upfront investment when they get into the field. It's about deepening and broadening the industry.
And remember what the analysis also points to in terms of the overall impact on growth in the mining industry. The independent analysis of the Treasury says that with all these reforms taken together, bringing down the company tax rate, also bringing down the tax rate faced by small business, and the other changes which are brought in, including the advantage for small miners here, mining investment according to the independent modelling of the Australian Treasury over time goes up by some four or five per cent. And employment in the mining industry also goes up by something like seven per cent over time.
So, I know that people in the mining industry will have a different point of view, Simon, and they will say that loud and clear, and that's their right. We live in a democracy. Good on 'em. But I've got to look carefully and calmly at the figures that we're presented independently of all the noise and clamour.
BEAUMONT: Independent analysis from Treasury and independent analysis from experts in London doesn't hold much sway here in WA, when you've got sober, upright citizens who are well respected over here, like Sam Wash, like Albanese, and to an extent Twiggy Forrest, when they rail against this tax and say it'll mean less investment, we in WA are more inclined to listen to them, than some pointy head in Treasury or in London. You must concede that -
PM: Well Simon -
BEAUMONT: - You've been trying to demonise the miners in all of this from day one. When you and I first spoke, you talked about this super profit, it's put you offside with the miners, and it's put you offside with a lot of people in WA.
PM: Simon, when was the last time that somebody actually proposed a tax reform which involved a sector of the economy paying more tax, when those who are being asked to pay more tax are going to pop the champagne corks and say it's a great thing? What we're on about for West Australian families is a fairer share for all those families. So many small businesses out there not linked to the mining industry or only indirectly linked to the mining industry I think would be pretty happy about the prospect of a $5,000 ability to write off assets they've purchased as a result of the tax changes which in part we fund through the resource super profits tax.
And also, all those working families listening to the program this morning who are thinking about their retirement in 10, 20, even 30 years' time, wondering about whether they've got enough superannuation. Now, those families want to know whether they're going to have enough to have a decent and dignified retirement. That's why increasing the superannuation guarantee from nine per cent to 12 per cent is so important for them. As I said, if you're a younger person, you end up with an extra $108,000 in your nest egg later on. These are important reforms for all families. That's why we talk about this being a fairer share for families, here in the West as well, but also strong in terms of its addition to the WA economy in the long term by bringing down the tax rate for all WA companies.
BEAUMONT: But you will, you will also - you talked about this being a national imperative. This is a national tax, this is a federal tax. Do you think people in these working families in suburban Victoria and New South Wales, do they have a right to some sort of ownership of the iron ore in Western Australia? Because constitutionally they don't.
PM: Well let's go to the core of that. That's one thing we haven't discussed so far. I'll be talking a little more about this at the Perth Press Club today as well. And that is, one of the additional things that we're seeking to fund through the proceeds from the resource super profits tax is a specific investment fund for WA's infrastructure. This state's road, its rail, and its ports. Every time I've been to the West, Simon, over the last two and a half years as Prime Minister - and that has been on average every two months, I come here quite a lot - I haven't been here on one occasion where someone from either state government or from a local authority has come to me and said we desperately need the following piece of infrastructure - road, rail, port and for that matter, even high-speed broadband - in order to equip ourselves for the future.
Now, you talk about the proceeds therefore of a resource super profits tax, part of those proceeds - the lion's share of those proceeds - will come back to WA and to the other big resource state, Queensland, in order to fund infrastructure projects in these states. That's what we believe is necessary to help the resource generating centres of the west and of Queensland and elsewhere.
Those people deserve better investment in their communities, better infrastructure for their communities. And also here in Perth, so many people also support the activities of the mining parts of the state as well. So infrastructure funds - the lion's share - comes back to the states which generate these, this resource wealth in the first place.
BEAUMONT: But again, this goes back to consultation and this goes back to the way you've sold this. At no time in the last two and a half years have you said to the West Australian Government we'll fund Northbridge Link, and Oakajee and Ord River, but the money's going to come out of a mining tax. At no stage have you said that. You only started saying that from May 2nd. Those negotiations on those infrastructure projects may well have been very different if that was brought up at the time, surely?
PM: But Simon, what you've just said is actually just untrue. All those projects you've just mentioned, frankly, are funded through the pre-existing Building Australia Fund which we put together as soon as the Government was elected. And those projects proceed in any case. That's why I did announce the co-investment, the first time by an Australian Government in a long, long time with a WA Government, to expand the Ord. A huge investment in Oakajee, to make sure that the port will have sufficient capacity for the future for a new minerals province. And here in the city of Perth, the fact that one part of town is not properly linked to the other because of Northbridge and the way it's currently laid out, the Premier made a strong case to me for that to be fixed, and we came up to the plate and made that investment. Together with I think, two, three, four five hundred million dollars worth of investments in various hospital and health facilities here in Perth as well, Fiona Stanley, the Midland Hospital and others like that.
What I'm talking about Simon is something quite different, it's how we actually create a pool of funds for the long-term future for the West, WA infrastructure -
BEAUMONT: But for NSW and Victoria as well?
PM: But what I'm saying is the funds that we are talking about through our national investment fund would be entirely reflective of how much each of those States contributes to the resources wealth of the nation. In the case of the West, that's probably something in the vicinity of 35, 40 per cent, similarly to the State that I come from, Queensland. When I travel round regional Queensland, people ask the same question. In Mackay recently they said we've got huge mining developments in the Bowen Basin, but we desperately need a new road to the Port of Mackay because people can't get through the centre of Mackay these days without being mown down by trucks. The cost of that road is $240 million, and the question I'd raise then is do the rate payers of Mackay pay for that? Do the State taxpayers of Queensland pay for that? Or should we be using some of the enormous wealth of some of those super profits earned by the biggest mining companies to funnel back directly into infrastructure investments within the States that they've come from? And WA and Queensland would get the lion's share of this proposed new infrastructure fund.
BEAUMONT: So in the past when Federal Governments have been funding national infrastructure projects, or projects of this type that you say are in the national interest, this tax on the miners hasn't been there. How have we been able to fund them in the past? Lots of West Australians listening today will say, Mr Rudd we pay plenty of taxes, we pay plenty of income tax, companies we work for pay plenty of company tax and payroll tax and State taxes as well, why can't you fund these infrastructure projects with the existing pool of money?
PM: Well here is the bottom line. Anyone who's analysed the infrastructure needs of WA, and Queensland for that matter, will tell you that there is not enough infrastructure now; the roads, rail and ports already under serious stress. What we as an Australian Government have done is made record investments, as an Australian Government, in the infrastructure needs here in the West. From memory, something like three, three and a half billion dollars worth of investments in one form or another over the last several years that the Government has been in, vastly in excess of what our predecessors invested here.
But for the future Simon, this is a really critical point, the infrastructure needs of this State are vast and on the existing tax base cannot be funded. So what's the alternative?
Either the infrastructure is not built for the future, or secondly, you ask the State Government here to fund it and to run significant and sustained budget deficits and ring up a whole lot of State debt, or you ask the Federal Government to run up a whole lot of federal debt, or finally, you ask mums and dads out there to increase their taxes, either income tax or the taxes on small business.
We say that the sector of the economy most able to share a greater part of the burden for funding our infrastructure needs for the future is in fact our most profitable mining companies. Asking them to put a bit back in to the community in terms of the road, rail, ports and other infrastructure the community needs.
BEAUMONT: Well they would probably argue they do that already to a large extent through the taxes they do pay and the royalties they pay.
PM: Well you talk to them though in the communities up in the north west of this State, Simon, the story I get on the ground from a lot of folk is that once upon a time mining companies, well, tended to take on total responsibility for funding the infrastructure of towns, cities, regional developments. But the criticism I hear in various parts of the country over the last decade or so is that they've withdrawn that level of support, putting more pressure back onto local governments and onto State Governments.
And therefore what I'm doing is putting that out there in very stark and sharp relief. That is, we need to get on with the business of building our infrastructure for the future and to make sure that we are in fact getting those road, rail and ports built, prepared to boost the productivity of the mining sector and the overall wealth of our WA economy in the long term, that's what this is in large part about as well.
BEAUMONT: You say mining - point taken about fly in fly out, I agree with you there - you say that mining is the profitable sector, and many callers to this station say what about banks, what about pharmaceutical companies, what about the growth industry of internet sales companies, why not tax them as well to this level?
PM: Well I think when I was coming onto your program this morning I heard some bloke replayed from, was it Atlas Resources?
BEAUMONT: Yes, David Flanagan.
PM: Is that the bloke who said that iron ore is a infinite resource?
BEAUMONT: Yep.
PM: Well go to back to Geology 101, it's not, and the whole point of having a separate tax regime on minerals and resources, going back for more than a hundred years or more, is that these are non-renewable resources. They exist for a period of time.
The key challenge is how do you use them when they exist to build up wealth for tomorrow, build up wealth for the long-term future. That's why we're proposing to take some of those funds and put it into a WA infrastructure fund to build the State's infrastructure for the long-term. But also, boost the whole level of savings by making it possible for WA families to save more through the super changes I mentioned before; good for them, but also good for the pool of national savings, but also strengthening the whole broad base of this economy.
Many of the companies I've spoken to in the West have been punished pretty badly over the last 12 months or so because of the high Australian dollar losing competitiveness; the international student service providers for example, international tourism industry here in the West, what they are looking for is a bit of help elsewhere. How can you help them when the dollar is punishing them, a dollar pushed higher also by among other factors, the strength of our mining sector, how you can help those other companies is by bringing down their company tax, causing them to pay less tax and therefore helping them remain more competitive over time. That's why we're seeking to do this, it's a non-renewable resource and that's where the guy from Atlas, whatever his name is, Mr Flanagan, frankly is just not telling the truth.
BEAUMONT: Alright, so Prime Minister just to go briefly to where we started, and I did want to get a comment on our involvement in Afghanistan before you leave us this morning, to go back to where we started, you're over here to explain, not to reconcile or to back down?
PM: Simon, I very much respect the mining industry. Coming from Queensland the big mining State, I've known some of the leaders of our mining industry for not just the last two years I've been in office, I've known them for 10, 20 years, including the people that you mentioned just before, I've met them many, many times before. I have great respect for them and their achievements.
However, we're in the business of a tough consultation and negotiation with them. Obviously, as I've said, if you ask the big mining companies to pay more in tax, in order to fund better super and better infrastructure for the whole community, those mining companies will object. But I'm here to consult, to listen, listen respectfully to the views that are put, but we believe tax reform is really important for the country.
We're also here for a Community Cabinet meeting, to listen to what people in the local area have to say about their other needs which the Australian Government can support and that goes to basic things, like health, like education and all the sorts of things that mums and dads talk about round the dining room or the kitchen table.
BEAUMONT: Alright, yesterday we woke up to the terribly sad news that Darren Smith and Jacob Moerland, two young Aussie boys were killed in Afghanistan by an IED. In simple terms PM, what needs to happen for you to pull our troops out of Afghanistan?
PM: Well firstly Simon, given that we're having this discussion on radio with your listeners here in the West, again I would reiterate what I said yesterday - our condolences and our sympathies to the families of these two brave Australian soldiers, who are from are from the Brisbane based 2nd Combat Engineer Regiment. Your question goes to the future of our mission in Afghanistan. What we have said very clearly, is that our mission is very specific, and that is to raise the 4th Afghan Army Brigade so that it can take on security responsibilities for the province of Oruzgan, and having done that, our mission would then be complete, having secured that province for the future controlled by the local people.
We're in the process of doing that now, we're training up battalions which belong to that Brigade, but it's a very difficult and dangerous part of Afghanistan and all of your listeners I'm sure, would just spare a thought today for our brave women and men in uniform over there given the daily dangerous environment in which they operate.
BEAUMONT: So it's about this push, this surge into the southern provinces and if that is deemed successful by what, the Coalition forces, we may see a date of withdrawal announced?
PM: Well I go back to our mission, which is you can't just walk out of the place without locals being equipped to take care of the responsibility for the part of Afghanistan which we've been a responsibility for, and that means getting it right, it means training them the right way, that takes time. We've made really good progress on that so far and our troops are doing a fantastic job. It's also important to bear in mind though, Simon, that we can't allow under any circumstances Afghanistan just to become this sort of free-range training ground for organisations like Al-Qaeda and other global terrorist organisations in the future.
Remember already, these organisations have been responsible for the murder, through terrorist attacks, of about a hundred Australians already. Therefore we've got a national interest involved in making sure Afghanistan doesn't return to being their operating base for the future.
BEAUMONT: Prime Minister thank you for talking to us this morning, we appreciate your time.
PM: Thanks Simon for having me on the program.