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Australia Capitulates, Backs Down On Resource Super-Profits Tax
Once again massive corporate behemoths show those bankrupt sovereigns who is in charge. Case in point China's great resource subsidiary-cum-housing bubble known as Australia. The Australian reports that a mere three weeks after the Rudd unveiled its new resource super tax, the government will back track on this proposal, and will "lift the threshold definition of a super profit from 6 per cent to 11 or 12 per cent following a ferocious campaign by the mining companies." Not to look completely toothless, the government will still keep some vestige of the tax, although now that corporations know they have the upper hand, look for this tax proposal to be soon eliminated completely. In fact, mining companies have already declared the changes do nothing to stop the risk to investment in Australia. Quite possibly one of the main reasons for this capitulation has been the huge drop in the AUD over the past several weeks, as investors have unwound long AUD trades with gusto.
More from the Australian:
THE Rudd government is moving towards a major backdown on its $12 billion tax on resources, redefining its proposed super-profits levy, but the big mining companies have declared the changes do not stop the risk to investment in Australia.
Only three weeks after unveiling the new resource super-profits tax, the government is preparing to lift the threshold definition of a super profit from 6 per cent to 11 or 12 per cent following a ferocious campaign by the mining companies.
To offset the lost revenue in raising the threshold to the same level as the existing petroleum resources rent tax, which applies to offshore gasfields, the government intends to withdraw the 40 per cent taxpayer-funded compensation originally offered for mining projects that fail.
But all the major mining companies have rejected the new proposals as "tinkering at the edges" and not addressing the main risk to mining investment in Australia. The mining companies are demanding more negotiation with the government on the issues of the retrospective application of the new tax, different rates for different minerals and the 40 per cent tax rate.
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BHP Billiton chief executive Marius Kloppers declared last night that any thought the petroleum tax would work for minerals was "naive" and demonstrated "a lack of knowledge as to how investments are made".
"Most importantly, we must understand that for each mineral we are competing against other investment destinations, and each set of minerals has a different set of competitors and those competitors set the price," Mr Kloppers told The Australian.
And Xstrata chief executive Mick Davis said from South Africa: "The government needs to do what it should have done all along and enter into full and open consultations with the industry where every aspect of the super tax is open for debate. Tinkering at the margins will not avoid the significant long-term damage this tax could do to mining investment in Australia.
"The government should stop negotiating with itself and start consulting with the industry."
Rio Tinto chairman Jan du Plessis told the company's shareholders that Australia's reputation had already been damaged by the super-profits tax proposal.
"We are concerned that the proposed resources super tax will erode Australia's competitiveness, severely curtail investment and limit jobs growth," Mr du Plessis said yesterday. He said that some of the government's arguments for the tax and some of the statistics that had been produced to support them "could only be described as scandalous, totally scandalous".
In the meantime, the slow, concerted creep by corporations to take over the world continues. Next step: the IBM Stellar Sphere, the Microsoft Galaxy, Planet Starbucks.
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Smart move to protect industry instead of hamper it.
People this is all you need to know why this happened:
Australian CDS spread movement:
Blackmail pure and simple. Notice the spread significantly going tighter as this was announced. Yeah, Free Market.
Why wouldn't the CDS move higher whenever the government exposes it's stupidity?
New Tax=More Revenue=Easier Debt Service=Lower Borrowing Costs=Lower Default Risk.
This was speculation; pure and simple. Delta [both contract and notional wise] is indicative to that and the vertical surge in the spread does not translate into normal movements. Only HY move like that, and not as often as you would think they do.
Delta [weekly contracts]
25
Delta [weekly net notional]
82,138,290
It is not about stupidity or the government but about credit risk.
Supply side say:
New Tax=Lower Revenue=Harder Debt
Service=Higher Borrowing Costs=Higher
Default Risk.
PLUS reduced output of resources,
lower valuation of resource firms,
and reduced employment by resource
firms.
It is all about stupidity.
Exactly right. How wealthy is Venezuela becoming by nationalizing all its industries?
No.
Hyperinflation fears which will trigger a credit event written in the contract. If you brake an exchange rate against another currency buyer of the contract can evoke credit event and cash in. Venezuela has no problem in begin self-sustainable and your argument is thus invalid. Derivatives market is speculation and gambling; rarely trading based on fundamentals.
You want to talk about derivatives, go ahead. I consider it off the topic, which was the tax. The tax failed because the miners wouldn't play ball; they could shut down the mines and wait the government out.
As for your condescending 'your argument is invalid' meme, spare me. There is more than one way to view this event.
Really; they could just shut down the mines and wait for the government to back down and play ball. No; since most of the miners are publicly traded corporations, and closing down the mines would hammer their stock into oblivion. Look what happened to Xtrata after this was announced. CDS down stock up. Ditto for all BHP holdings, AA, RT and other miners. Shutting down the mines, as you propose would be the same as removing X% of revenue and profits;they would just hurt themselves, not the government. I stand by what i said; manipulation. 5y CDS was ramped up on no volume, none whatsoever.
Of course earnings would take a hit but these companies are multinational and they would survive just as the oil companies survive without Venezuela. They couldn't afford for other nations to follow suit and slap on punitive taxes. That problem is now resolved.
Look; we are not in disagreement here. Im just saying that by closing down the mines would not contribute to solving the problem they encountered. It was far easier to spend 50 million dollars and play the derivatives. Also China bursting from all sides made it even more convenient. I am ambiguous as to who will benefit from all of this; and i really dont care; what I am saying is that, cost wise, it was far more easy to force the government not to introduce this tax by ramping up yields via derivatives than it would be by closing down the mines. I really dont care if Aussie government gets another billion or two or if the companies keep it. But both the companies and the government will take heavy losses when China finally bursts; which should be really soon. The corporations may be international in ownership structure etc etc; but their activities in Australia contribute greatly to their profits and revenues.
What often happens with juniors is that they do just let the share price crash. They shutter the mines, hang on to the deeds, and wait until the environment becomes favorable again.
That's the life-cycle of the mining industry in general. It's not like oil where you have to keep pumping all the time to maintain reservoir pressure. In mining, you can just leave it alone for a while.
I agree. A mega-bluff from the mining companies. The Government is a bunch of spineless fucks and will be the downfall of that wonderful country down under.
When the mining sector implodes, the whole continent goes with it, house prices and all. It's a fuckin disgrace that they have pissed away all of this money down there and have not even broadened investment in other sectors. Real estate and resources baby....until its not.
Exactly right. How wealthy is Venezuela becoming by nationalizing all its industries?
On the other hand: exactly wrong. How wealthy is Norway by having a sovereign wealth fund fed by its main industry, oil?
Ans. Very.
How the hell does New Tax=Higher Default Risk
Maybe for a private name but not for a sovereign.
Its always supply and demand and China widening in the past 2 days did not help Australia either. The surge was 50% China going wider 50% speculation. They are playing pump and dump in the derivatives market, its like boiler rooms trading penny stocks. Norway went 15% wider yesterday [intraday high] and for what; no new developments there. So by your logic no taxes and no revenues for the government = 0 CPD.
I agree with you that it's manipulation in derivatives in this case. But Australian's are one of the highest taxed people on the planet, and it's getting to the point where these Australian governments really can't tax much more, because everything else will come to a standstill.
There are 3 layers of government down here, and with all the taxation on every income source generated locally, plus GST (VAT), most people earning the average salary would be paying slightly more than 50% to the layers of govt.
Under this diminishing scenario, it's not surprising that New Tax brings in less overall. Look at Europe, they pay heaps more taxes than Americans, and look at the sovereign risk there.
You are right, on the 'pump & dump in the derivatives market', but not for new tax=lower default risk. That assumes a static relationship, and there ain't one.
"But Australian's are one of the highest taxed people on the planet"
...come again?
Highest taxed unless you are a housing speculator, negative gearing (claim housing rental loss against your income). This stupid tax only encourages people to chase capital growth not rental yield. Claim the cash flow loss against their wages then pay a lower tax on any capital gains. DUMB
Agree with other poster Steve keens debtdeflation is a good site so is bubblepedia.net/au
If anyone thinks its different here, Skippy wont save us..
My experience (which may be atypical) is the opposite. Marginal income tax rates (state + federal) aren't that much different by the time you factor in tax free thresholds, etc. Sales tax for me (NY) is 8.75%, so not far off GST.
As a business onwer in the US you're scorched on corporate taxes (state + federal) Vs flat 30% in AU. Guess how you view that depends on the size of your business.
For me the kicker is property/school taxes which dwarf AU property taxes ('rates').
I agree some of the negative gearing setups are nuts... I think it's a stretch to say that AU's are some of the highest taxed on the planet though.
perhaps i was being sensational with that statement. forgive me. but i don't think it is a stretch at all. you also forget AU payroll tax, superannuation tax and other various business taxes when you talk about us corporate taxes vs. flat 30% tax in AU. the flat 30% tax in AU is just 1 of many corporate taxes. there are also local, state & federal taxes outside of the flat 30% tax you talk of.
for myself, last year i earned more than this year. last year, in total, i paid about 48% in taxes (all taxes). this year, earning less, i paid about 42% in taxes in total. That is not far off from them taking half my hard earned.
agreed. for anyone not a housing speculator, the average weekly income for aust. govt. sector workers is around A$1300 per week gross, and for private sector is around A$1180 gross.
Most of those earning that money would be lucky to see half left over after paying all the various taxes in Australia. if you live in Australia, and your not a housing speculator, sit down & do your own sums on your own income, and work out how much overall tax you pay, including all the GST you pay on goods & services you purchase. divide that by your gross income and chances are high that you are paying somewhere between 45-52% of it in tax.
I don't know about you, but working every hour of every day to only earn half an hour for myself sucks big time.
also, steve keen's site isn't the only good one. moneymorning.com.au is another good site for reasonable information about the australian economy & markets.
If you're in a flat out solvency crisis, then the higher taxes are a good thing because the market is not looking out more than a year. But if you're considered relatively strong, such as Australia, then the higher taxes appear to make the nation's economy weaker in the long-run. Also, it just smacks of dumb to tax Australian mining, the same way it would be for the U.S. to slap a tax on Silicon Valley.
The intelligent thing for Australia to do would have been to slap an export or sales tax on the resources. It would make it obvious that the goal is to tax foreigners and would have likely had less of an impact on financial markets, while being more palatable politically.
Indeed. The fact that the market to this reacted if indeed it had *anything* to do with this (which if it did would not be significant imo) is a sign of relative market freedom not a lack of it. Correlation is not causality. Basic concept of knock on effects, politicians seem to be under the delusion that taxing the hell out of a sector would have no impact on anything but tax receipts.
Your statement is further refuted by the fact that Aus is not insolvent.
Not yet. But K Rudd & the AOFM (Australian Office of Financial Management) are trying real hard to get Australia into more debt... You watch how much they'll pile on in the next few years. There's a plan. Get all sovereigns into debt, and lots of it... Well, that's imho anyways.
Ha! A 10% downward move in home prices will render 90% of Australians insolvent. Biggest housing bubble on the planet.
not this one it won't...bring it on...
yes, it is the biggest housing bubble on the planet no doubt about it.
but i doubt that 90% of Australians would become insolvent because of a 10% downward move. More like 40-50% would become insolvent. There are many houses that are owned as 2nd or 3rd properties down here, by boomers, who already own their 1st or 2nd homes outright. it is the first home buyers sucked in by Rudd's first home buyer grant that will be punished the most for their stupidity ie. gen y's...oh...and so will their parents that went guarantor on the loan.
Also there is a large middle & old aged migrant population who also own their home outright.
90% is way too high. I agree with your sentiment, but not with your sensationalist numbers.
You got me, 90% is sensationalist for a 10% downward move. I would vouch the number would be correct however should you see the movement in prices as the USA has seen, in the 25% - 50% downward range. Mortgages are just too high relative to income.
The investment properties you mention are primarily highly geared due to the "negative gearing" scam, it gives people incentive to lever up. All of that first-home equity won't do them any good should the "4 pillars" feel the wrath of a housing bubble implosion.
Either way, I wish you luck personally. It just ain't going to end well when it comes undone, sad, as it is a magnificent country inherited by good people.
+1000 it is always about credit risk.
The market knows governments are run by imbeciles. That is why they watch the central bank's moves. Not the current vomit coming out of elected officials face orifices.
But CB, I'll bet most sovs are drooling to see spreads in the 2 digits!
Australia is still the lucky country - even if they have a dumb-ass government that can't even simultaneously walk and chew gum.
All the ZH readers who want to know what is really going on in Australia should follow Steve Keen on:
http://www.debtdeflation.com/blogs/
This is a Blackmail economy.
Mr. Durden...what's this "the slow, concerted creep by corporations to take over the world continues..."
A curious statement.
Are YOU a statist? A taxaholic? Do you support higher taxes on producers, or anyone?
Remember, GOVERNMENTS are the real evil here, not corporations or even "banksters"...
i would agree given that none of this would be possible without the "campaign contributions" made by corps and banks...however, it is they who hold the power now. pols dont have the sack to say no
Agree - I would any day rather have the "greedy" banks and corporations running things rather than the corrupt little govt weasels around the world - or heaven forbid the moronic goons of the IMF.
Oh good, aside from the recent bank bailouts, BP and Massey Energy (the recent mining disaster), are two glaring examples of how well corporations are running things. And two examples of a corrupt government not living up to it's responsibility of giving basic protections to it's population.
Kreditanstalt, you live in a democracy where the government is supposedly chosen by the people and yet you feel the government is evil. WTF, maybe something is wrong with the government?? I was happy to read Tyler's Orwellesque comment though think he missed mentioning the upcoming Haliburtan sponsored President. It can be the ultimate step for you - just privatize the whole government - it will be more efficient. INGSOC USA?
The revloving-door/circle-jerk between the government and corporations is an obvious case of corruption on both sides, and making corporations and banks out to be the good guys is bordering on delusional. The whole system is corrupt, and the blame belongs to all players - maybe apart from the mushroom majority who have each have vote, but not a clue as to what is going on.
I used to think ZH's mission statement of "more efficient markets" was about following in Friedman's footsteps. However, over time I have become more and more hopeful that ZH's mission is more about getting rid of the leaches that contribute fuck-all to society and just bleed it dry.
Yes, but free choice should reign: Wal-Mart, BP and Halliburton don't put guns to my head. Your beloved governments DO.
HA HA HA HA HA
http://news.bbc.co.uk/2/hi/africa/8090493.stm
http://www.thenation.com/article/blackwater-founder-implicated-murder
http://www.ahrp.org/infomail/0503/22.php
You want me to go on.
"Halliburton don't put guns to my head" - not yet, but...
I certainly don't love my government (in Canada) or yours, and I think pretty much world-wide they are corrupt.
Free choice is great, but it gets complicated when you don't see the effects which we are now seeing with BP, saw with Massey's mine disaster, and choose not to see with fing Walmart.
Of course people like the cheapest price, but they do not have to see the real price, partially because reality has not hit yet. Manufacturing and industries that offer real work have been gutted but it hasn't been noticed because of the whole inflationary bubble that has gone on for ages. When (if?!) things deflate back to reality most people will finally figure out that not only are they saddled with tons of debt, but they have lost most of the ability to re-pay that debt through honest work. Competing with $0.30/hr labour rates is not going to be... real tough.
"...I think I should have the freedom to do whatever the hell I want to do if I'm living in a so-called free country, as long as I'm not hurting someone else. " - Woody Harrelson (his first quote on here I bet! lol)
http://www.huffingtonpost.com/2010/05/25/foxconn-suffers-10th-deat_n_588...
What blows me away about that story is the guy finished his shift, THEN killed himself.
"Among other violations, Apple found that some of its suppliers had employed child labor in their factories." Today, we get to swing a stick so long, that we don't see who's on the other end of it. The person getting beating by it today, may very well get to hold it tomorrow.
Fixed Income prop. desks [just to name one of your "producers"] are not important for a society to function. Nor is 90% of other "industries". But OK, I wont go any further since people do not like when their dogmas are questioned. Really sad actually, but its not like a give a shit.
Really? Fixed Income Prop desks add no value to society? Consider this:
The US has run a cumulative net trade deficit over the past 10-15 years of what? Say $5 Trillion ? So the american sheeple enjoyed all the goods in wall mart and what not without sending anything abroad in excahnge right? To the tune of $5 Trillion or so. How was this possible? Do you think some third world country - say - Indonesia could have pulled this off? No way. It was only possible because of wall street - and its "shenanigans".
Consider that.
a 5t trade deficit is a good thing?
Well . About 15 years ago - as China and India introduced a couple of billion of eager new workers to the world economy - we had a problem. The american worker was screwed. Either wages would have to adjust catastrophically lower or all the work would move off shore. So - I think the Fed/Wall Street solution was to buy some time - 10-15 years during which they would try and maintain the sheeple's lifestyles by running a huge trade deficit. perhaps they hoped that given 10-15 years - the sheeple would upgrade their skills, get tough and competitive - create new industries etc. Sheeple chose to speculate on houses, stocks and get fat , dumb and happy. So sorry.
I dont really see the how.
Upgrade their skills, get tough and competitive. Ummm, does not speak much.
Is it a call for everyone in the US working the top level jobs?
What is it exactly?
Oh - I dont know maybe get their skills and intellectual understanding of the world up to say , 10th century AD. that would be a start. 18th century would be asking too much.
An intellectual understanding of the world up to say, 10th century AD?
Somebody has that?
Usually, societies do not register their dominant features as they dont plan for societal collapse. It is commonly held therefore it will endure as long as the society endures.
With this reminded, somebody has an intellectual understanding of the world up to say, 10 century AD? That is quite an expectation to have.
This didnt answer to the question.
Upping their skills, what does it mean? It should rather be easy to illustrate with a few examples.
Grow more competitive? how? Where does the difference in productivity come from?
Hollow words, it can be supposed.
Why improve skills and get more globally competitive when one can watch "American Idol" and "Dancing With the Stars" and live in fantasy land?
IIRC, more people watched the finale of "American Idol" then voted for the President (there are enough legitimate voters for that as well).
So we sold out the future of the greatest country on earth for a 15 year party? I think we got short changed...
Oh, fuck you and your glorification of brazen fraud. That's $5 trillion of debt that will somehow have to be paid off.
Where do you people come from? Harvard?
I am Chumbawamba.
Remember though, there are still people out there who dont judge the doer but the doing. An ever decreasing ultra tiny minority but...
"A curious statement," indeed.
If I had to take a side, I'd probably favor China's industry over Australia's taxes. Even if China is attempting to "export" their profits back to China, adding a tax only makes the good parts of this even worse because it increases the costs of doing business in Australia.
the hitman, the hitman's sponsor
one and the same
When corporations and governments are complicit, when coporations can place stooges into power in government, when money is all that matters, that is corporatocracy (oligarchy).
They are hand in hand now in the raping of the world; not all...but the few at the top appear to be pretty obvious.
+100, I'd call it Fascism even though my avatar preferred calling it Corporatism.
Kreditanstalt you obviously don't understand what is happening.
We're living in a fascist world, or as my avatar preferred calling the merger of corporations and the state - Corporatism.
What this country needs and the world for that matter is another Teddy Roosevelt.
I do not think he means it to be black and white, the evil as usual lies in a union between corporations and the government that produces positions containing rights with no responsibilities.
OT: President Obama records his lowest poll since his term began this morning.
http://www.rasmussenreports.com/public_content/politics/obama_administra...
So he can either trot out Volcker or keep Frank,Dodd & Schumer away from financial regulation especially the derivatives spin off language in Blanche-Lincoln.
Australia, isn't that the name of China's new coal mine?
Also Uranium, gas, iron ore, gold, silver, wheat, beef...etc..
Lest we think the current govt the only evile, the last (conservative) government pissed away $300bn of budget surpluses vote buying. Otherwise known as middle class welfare.
AUSTRALIA IS ONE OF THE ONLY REAL ECONOMIES THAT IS SOLVENT! You guys are usually right on, but to imply that Australia is a "bankrupt sovereign" is just silly.
I really wish Canada didn't sell all its gold at the low with the British (still acting like a fucking colony to the crown), then one might be able to say teh same about the great white north.
Canada has gold to mine...they will be fine.
Once the deflationary bust gives way to hyperinflation I would think Canada and Australia will be good places to be.
My Aussie friends know to expect me...if I have to row 10000 miles.
We'll see how solvent the land down under looks once its real estate bubble bursts along with the price of industrial commodities. Or is it really different this time?
You can add Canada as well Miles... still being pumped by the usual suspects, but ready to pop any day (listings are exploding as we speak). Two years of 5% down and 1.2% variable mortgages... what were they thinking?
I know. . . Looked at relocating to Vancouver, but the prices were just to astronomical for this fixed income pensioner. Just passed a new development here this week. 500 new units, cherry cabinets, granite countertops, 0 down 100% financing available... So who are we to toss stones except out of experience which our bankers, politicians and home builders refuse to acknowledge as long as they control the levers of debauchery.
real estate bubble in australia will burst. price of industrial commodities, not so sure. we'll see how much more 'money creation' occurs before rushing to judge on that one. besides, industrial commodities aren't the only commodity around here. If the A$ stays above 79 for this correction, price of industrial commodities may not crash...we will see.
With many Chinese receivables being denominated in Euro there is only so much the Chinese pig farmers will be able to do... I join you in my desire that Australia's farmers do not suffer another severe drought year. I suspect that ANZ, Macquarie and the rest will get pounded on euro debt creating a much bigger weak spot to be exploited... I suspect that the domestic real estate market will follow. Especially with all of the wrong way hedges on the EUR/YEN debacle that resulted partially from the miners and financiers desire to make a point in Australia and punk Rudd & Co. The amazing thing is that these same miners and financiers will get Rudd & Co. to bail them out at 100% making the exercise all the more tasteless. Actually, referring to Rudd and Co as getting punked is a disservice to all of the hard working punks in penitentiaries all across America & Australia.
it has actually been a reasonable year for rain down here. and the corn harvest in march & april was decent. the cotton harvest in april had issues with flood, but this was not across the board. it was not too bad a year for those 2 commodities at harvest this year.
possibly. but NAB is the one with the A$13 bln Italian sovereign debt exposure. generally, Aussie banks are only slightly better capitalised than their "global north" bethren, but not by much. But the domestic real estate market was always a bubble for quite some time now, so it's not going out on a limb to suggest a fall here. In fact, the market needs to be cleaned out.
Rudd & Co are not high on my list of likes with all that they have done. them backtracking on this stupid tax is a good thing, because it really wasn't only the big miners that were going to be slugged. it was a scope creep tax, with the headline targeted at miners, but it was really a tax on any business earning more than "6% profit". I put this in quotes because that's what Rudd called a super profits tax when interview on radio 2 weeks ago.
Your observation is correct, but the tax would remain (if they go ahead with it) because as I said, it's a not only a tax on miners. I'd rather see the back of this tax. We don't need another fucking tax in Australia.
LOL Just take a look at the banks loaded to the gills with Aussie mortgages.
Just too big to fail when our housing bubble bursts.
Don't tell me you cant see the bubble.
you are right. but they don't live in Australia. they just play with words.
The tax will be back at some later time, probably after the Australian election and mid term, if Labor win. Seems the writing is on the wall as other countries took heed, and it seems to have 'some' electoral support.
Never get between a government and a bucket of money...
very cool site
Gulf Oil Spill Tracker
http://oilspill.skytruth.org/
Nice little boost for gold stocks... which were hit hard in the last "Comex expiry take-down."
I dunno how much the Australian government could've done, here.
The miners can just close up shop with those kinds of high taxes and wait for the government to collapse.
Starbucks, etc. and most other shitty corporations only exist due the financial/legal environment in the US. They're really not long for this world, and need the government as much as the government needs them.
Exactly right. Big corps. stifle innovation more than they encourage it. Many companies spend more money on patents then they do pursuing/developing the technology they are trying to protect.
Let's see: Do I want to be a slave of teh government or a slave of the corporations? Tough choice
Another tax scheme nearly defeated. I'm not seeing a problem here.
Australia has one hell of a property bubble. This qtr housing investment loans spriked to 26% of GDP.
2 of the BIG 4 banks have more than 50% of their assets as Aussie mortgages.
MSM keeps telling us "don't worry its different here" - LOL
Which banks? I may need to move my cash.
removed - comment came up in the wrong spot
Comonwealth and Westpac
http://www.debtdeflation.com/blogs/2010/05/21/excellent-presentation-on-scribd-on-australian-housing/
page 21 to 23
ok ANZ here I come maybe.
I took out a bunch of cash yesterday to stash at home.
The miners were worried about other countries following Australia's lead:
http://www.bloomberg.com/apps/news?pid=20601081&sid=aEVmLz1wyaGw
So they had to nip it in the bud.
Corporations are trying to take over the world. A small group of men, armed with Banks, are helping see this through. Here is Paul Krugman detailing their game Plan.
"The Rise of the Firms" by Paul Krugman:
http://nobelprize.org/mediaplayer/index.php?id=1072
I buy the CDS thing by Cheeky.
Point of fact.
A few years back right when the sun was shining and when oil and NG muchhigher than they are now, the newly elected provincial government "took it" to the resource companies and instituted a new royalty regime.
The rates were so high at one point I believe we were down to three drilling rigs in all of Alberta. Then the crash came and now we are stuck with a political closing cost lesson.
These things are religiously instituted at the wrong time.
Governments always get the cause and effect wrong but always take the credit either way. Good example is vaccinations.
http://www.vaclib.org/sites/debate/web1.html
I'll take the corporations over the "governments" any time
Hey Cheeky Bastard !!!!
Was hoping get some help from you. can you tell me where you got that graph you put up of the AUD Credit default swap spread movement???
Cheers
Why should the miners object to a higher tax. Don't they know that the only purpose for a corporation to exist is to eventually have all revenues taken for the government. Any thing that seems to have a gain attached to it should belong to the government. If it is only costs involved then that is for the private sector.
You are so correct about Australia. I'll tell all of you one thing, China has it's eyes on Australia. China and much of it's food producing land is polluted and becoming desert and with their large population of over 1 billion, they will need room to grow. I see it as a soft takeover in Australia, investing more and more in the country so business can effect the govt. and in so doing more people from China will be able to go to school and/or immigrate to the country of only 22 million people. That small continent with it's resources and good land with few people is on their mind for sure.
As an Aussie I can add a bit of local perspective here perhaps. I know there is a property bubble in Sydney, although 12 months ago things leveled off a lot. Most people I know have mortages that would kill an ox, often over $300K. Someone I know has almost $1M on the line, to own the house he lives in and an investment property. The thing here is that people are now overly sensitive to rate rises. A little 0.25% rise in the rates has a sizable impact on a variable rate repayment on $1M. I think most people sat down with their calculators and assumed that 7-8% would be the absolute, all time highest it's ever likely to get to. ANZ has a 7.41% rate right now, so a lot of people are already at breaking point. If you lose your job, the home goes soon after, which adds to stress levels. These are the brakes that the RBA are pressing. Is it working? I'm not sure, but I think some markets have hidden losses where people are holding out for higher prices and simply not selling for months and months.
The higher the gold price and the higher the margins, the more ore that is in the cut off grade. Raising costs raises cutoffs which in turn will lower revenues for the company and Australia.
The reason for this tax is to consolidate a bunch of state taxes and federalize the money-so it's money grab by the Aussie Feds. Going for 40% is just flatout greed, makes the environmentalists happy.
Its a 100% true that higher taxes will shutter mines. It decreases the cutoff grade in ore that is assessible depending on the company's margin.
Canada is the beneficiary here-they have better geology,infrastructure and in some cases very nice rebates in taxes-and the mining job market is solid. Australia is just being stupid here. Quasi punitive and socialist(but taking down the means of production to pay the non-performing government class.)
Meanwhile, their real estate market is the best short opportunity EVER.