08/07/2010 - 00:00

Relief behind the mining battlelines

08/07/2010 - 00:00

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The Gillard government and the mining industry will be relieved the issue has been settled before this year’s federal election.

IT has now been a week since the Gillard government reached agreement with the mining industry to kill off Kevin Rudd’s resource super profits tax and replace it with the new mineral resource rent tax (MRRT).

While there are some within both industry and government who will feel they didn’t get all they wanted in the negotiated outcome, there is without doubt a sense of relief on both sides that the two months of open hostility is over and that the issue is resolved before the start of a formal election campaign.

A CPR Pulse poll of 400 voters in marginal Perth metropolitan seats in the fortnight leading up to the mining tax compromise found that both government and industry had a lot to lose if the conflict continued. The poll also found that Prime Minister Julia Gillard will need to work hard to repair the damage the tax debate has done to perceptions of her government in Western Australia.

It is now commonly understood that community concerns over the tax contributed towards a collapse in political support for the Rudd government across the country, which resulted in Labor replacing Kevin Rudd with Ms Gillard as a necessary step towards resolving the conflict. CPR Pulse found overwhelming opposition to the tax among Perth voters, with 60 per cent opposed and only 26 per cent in favour. Critically for the government, only 31 per cent of swinging voters were found to be in favour of the tax, with 53 per cent opposed.

Reasons given by voters who opposed the tax revealed the extreme threat the issue posed the government’s political survival.

The vast majority of reasons given related to concerns over the structure of the tax, how it would affect the economy and the threat this posed to jobs.

Perhaps reflecting the results of a sustained and high-quality advertising campaign by industry, opposition to the tax was built on a real concern over the impact it would have on the personal employment and corresponding financial security of voters.

In an increasingly debt-stressed and lifestyle-focused Australia, there is no surer path to electoral wipeout than making voters feel insecure about their financial future. In 2004, John Howard convinced voters that interest rates would go through the roof under Labor and its L-plate leader, Mark Latham, who led Labor to a crushing defeat.

In 2007, Mr Howard’s WorkChoices laws made workers feel less secure and, in a climate of rising interest rates, voters abandoned the prime minister who promised to keep interest rates low in favour of Kevin Rudd, who was going to great pains to present himself as a risk-free economic conservative.

With the news coverage during the RSPT debate carrying story after story of projects put on hold or under review as a result of the tax, voters were again feeling anxious about their future and were again dusting off their baseball bats.

As one respondent to the survey said, “it will do the country a lot of harm, because so many people will be out of work”. And another, “my husband works in the mines and is at risk of not getting contracts if work slows down”.

If it was a political imperative for the government to address these strong community concerns, it was also in the mining industry’s interests to reach a negotiated outcome prior to the election.

While Perth voters were strongly opposed to the RSPT, they are also strongly in favour of the mining industry paying more tax than it currently does.

Fifty nine per cent of those who responded to the survey thought the industry should pay more tax, including a majority of Liberal voters (52 per cent), Labor voters (66 per cent) and swinging voters (59 per cent). Most interestingly, a majority (51 per cent) of respondents who opposed the RSPT also thought the industry should pay more tax.

It is these figures that created a risk to the industry of not settling the issue before heading into an election campaign.

If Ms Gillard had put a compromise offer to the industry and had it rejected, it was possible she could have used her political capital as a popular new prime minister to convince the overwhelming majority of voters who believe the mining industry should pay more tax that the industry was being unreasonable.

If this had occurred and Labor won the upcoming election, Ms Gillard would have won a mandate for her compromise offer and the industry’s ability to positively influence the resulting tax in its favour could have been greatly diminished.

With the matter now largely settled between the government and major miners, opposition Leader Tony Abbott has said he will rescind the negotiated MRRT if elected to government. While being consistent with his strategy of creating clear ‘battleline’ choices between the government and opposition, Mr Abbott’s approach carries significant political risk, given the strong view of the electorate that the mining industry should pay more tax.

He will clearly be trying to capitalise on the fear the RSPT created in the electorate and positioning the negotiated MRRT as being similarly threatening to jobs and the economy.

The challenge for Mr Abbott is to sustain this mood within the electorate in the absence of the mining industry’s advertising campaign.

Results of the survey suggest a better strategy for the opposition may have been to use the past two months to develop an alternative way of the mining industry paying more tax that was more palatable to the industry.

The challenge for Ms Gillard now that a deal has been reached with the industry is to win over the large number of voters who opposed the RSPT, yet think the mining industry should pay more tax.

Stories about projects, previously put on hold, starting up again should go some way to addressing concerns about the impact of the MRRT on jobs and economy.

The industry’s endorsement of the MRRT as more closely resembling the tax reform it had been seeking should help address concerns about the structure of the tax.

While each of these will be helpful, the mining tax debate has reached deep into the community and it would be a mistake for the Gillard government to believe that the depth of feeling and anxiety the debate has caused will disappear quickly, particularly in WA.

The new prime minister will need to work hard across the country to sell the superannuation, company tax and infrastructure benefits the MRRT will fund, as well as addressing legacy concerns over the impact of the tax on jobs and the economy. However, the CPR Pulse survey suggests that Labor needs an additional message in WA.

While the majority of respondents who opposed the RSPT, yet think the mining industry should pay more tax, opposed the tax because of concerns about its impact on jobs and the economy, a significant number (21 per cent) also thought the tax was another example of WA being “ripped off” or paying more than its fair share to Canberra.

This feeling of inequity between the contribution WA makes to the national pie and the returns it receives is a long standing part of how people in this state identify as Western Australians and has been a strong part of the political mantra of premiers from Sir Charles Court through to Colin Barnett.

Ms Gillard has an opportunity to forge a new relationship with WA and she would win great respect, not to mention support for the MRRT, within the WA community if she can come up with a new way of making Western Australians feel that we are getting a fair return from the revenues WA generates for Canberra.

 Daniel Smith is the general manager of CPR Communications & Public Relations and was a senior adviser in both the Gallop & Carpenter Labor governments.

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