TWO GREAT WEALTH DESTROYERS: ROBERT GOTTLIEBSEN
http://www.businessspectator.com.au/bs.nsf/Article/Rudds-three-way-battle-pd20100203-2ARWT?OpenDocument&src=kgb
Commentary
Robert Gottliebsen
Two great wealth destroyers
Prime Minister Kevin Rudd needs to read up on history. The last Labor Prime Minister to undertake a vigorous attack on a major industry in the lead up to an election was Ben Chifley who, prior to the 1949 election, tried to nationalise the banks.
That might not have been the main issue that caused Robert Menzies to win the 1949 election, but Menzies received unprecedented support from the private banks. Six decades later and Rudd is not trying to nationalise the resources sector – however, he is mobilising an unprecedented attack on this export power house that has alarmed Australian resource companies large and small.
In the past few weeks, as I talked with mining and power chiefs, I discovered a deep sense of anger and frustration. But at this stage, few leaders want to go public, preferring to attack the issues via industry bodies or to do special deals with the government.
As the election approaches, their anger and frustration will spill into the public arena. This week the global investment capital giant Morgan Stanley declared that: “Pan Aust assets are located in Laos that is fiscally stable, and this is becoming a clear differentiator to assets located in Australiaâ€.
To have Australia declared less fiscally stable than Laos by Morgan Stanley puts into the public arena what resource executives from the mining and power sectors are saying in private as they reel from Rudd’s threats on three fronts.
First, the Rudd emissions trading proposal will rip big sums from many mineral exporters, particularly coal. Already, Indonesia is planning to substantially lift coal exports at the expense of Australia. Under Rudd’s plan, Australia effectively ‘taxes’ carbon exports, but will not tax carbon imports.
While the resource industry as a whole will swing production to other countries, coal exporters who do not have Indonesian mines will be hit hard. When Queensland discovers what will happen to its coal industry there will be a backlash in Rudd’s home state. Many gas exporters have been able to negotiate deals to protect themselves but most of the deals are for a limited life.
Under the Rudd emissions trading scheme, those owning brown coal power
The companies who are being attacked by Rudd in emissions trading may not be going public but they are starting to help Abbott achieve carbon reductions at a far lower cost than Rudd.
Major sectors of the overall business community are horrified by the way the ETS legislation
But Rudd’s threatened attack on our resource giants goes much further than carbon. The Henry review
The likes of Morgan Stanley will be telling resources investors and their bankers around the world to invest in ‘fiscally stable’ countries, which excludes Australia.
And finally, the resources industry spent decades freeing itself from union bulling. The rise in productivity that followed was staggering. Now, thanks to the new industrial relations legislation, the extreme unions are back and we are already seeing big settlements in some areas. The great fear in the mining area is that as the unions return, productivity will slump as it did a decade or so ago.
Most resource giants have global assets and will simply switch their new capital investments to other countries. But they still have enormous investments here and their returns are endangered – particularly if prices run into a rough patch.
And while on the one hand the Australian government talks about
There are many differences between the Bathurst born engine driver Ben Chifley in 1949 and Kevin Rudd in 2010. In addition, Tony Abbott is not a Robert Menzies. But historians will see similarities.
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