The chairmen of the three biggest mining companies operating in Australia – BHP’s Jacques Nasser, Rio Tinto’s Jan du Plessis and Xstrata’s Willy Strothotte – know they are playing the most dangerous game in international business – taking on an elected government as an election approaches. The miners will be asking the people of Australia to decide whether to back the government or the miners.
Kevin Rudd and Wayne Swan are trapped because unless they make enormous concessions on the retrospective nature of the tax, BHP, Rio Tinto and Xstrata will keep up the fight. If Rudd and Swan make big retrospectivity concessions their credibility and their forward revenue estimates will be in tatters. Rudd and Swan must try to divide the miners and try to break the BHP-Rio Tinto-Xstrata alliance.
Nasser, du Plessis and Strothotte know that in a no-holds-barred election fight there are no rules, which is why companies usually try to stay clear. BHP, Rio Tinto and Xstrata will be vilified as the gang of three. The personal attacks on the three chairmen will reach unprecedented proportions. Jan du Plessis can expect his former role with British American Tobacco to be highlighted and Willy Strothotte and Xstrata’s main shareholder Glencore and their alleged roles in embargoed minerals trading will be vilified.
But the chairman who will be hardest to attack personally will be the Lebanese migrant who rose to become global head of Ford and now BHP. Nasser is one of the greatest Australian success stories and he believes with a deep passion that he is fighting for the long-term interests of the country that gave him the opportunity, as much as he is fighting for BHP. But Nasser will be tested in ways he cannot yet imagine because Rudd and Swan know that it is his strength that holds the mining coalition together.
And make no mistake on a broader front Rudd and Swan will split the miners. Santos and the other companies with interests in Queensland’s massive coal seam gas fields will most likely be given petroleum resource rent tax status which means they can earn about 15 per cent on capital before the resources tax cuts in. If they think Abbott is a certainty to win the coal gas groups might consider holding back hoping for the present arrangement to continue but that is too big a risk. They will agree.
Rudd and Swan will almost certainly takes quarries out of the tax; that will enable OneSteel’s Whyalla operation to survive and will help get AngloGold’s Tropicana mine off the ground.
And what applies to projects such as Tropicana and Whyalla will presumably apply to Olympic Dam. But after a bruising brawl with Rudd and Swan, if the people reject the miners at an election, BHP, Rio Tinto and Xstrata will want to take what’s left of their Australian cash and invest it offshore.
If Rudd and Swan win the election, Olympic Dam will probably be a project that will be rescheduled for the next decade. By then Australians will have experienced the damage that will have been done to the country by the mining tax and the decision not be globally competitive in taxation.
If we are to have a Rudd-Swan-miners election brawl, South Australian Labor Premier Mike Rann will have to chose between backing his state’s interests and urging a vote for Abbott, or sacrificing Olympic Dam for his support of Rudd. Rann has been a good premier and I don’t envy him.
Australians need to remember that if we end up with a ‘gang of three’ public brawl where international business executives are vilified Australia will be damaged forever. Every Australian who owns a house should read The RSPT house-price risk because that’s the danger.
If we get into that sort of brawl and the Business Council does not give full support to the miners – and I mean full support and not the current lip service – then the Business Council will become a divided and defunct body. It has sat by while the industrial relations rules were changed and Telstra was attacked. Now the miners are copping it. Occasional statements of support will not be enough in a nation-changing dispute of this sort.
This article first appeared on Business Spectator.
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