SPEAKING ON A BILL | GOLD ROYALTY
Mr Melhem: I rise to speak on the motion put by Mr Davis to disallow the gold royalty. Mr Davis in particular is very good at putting before this house disallowance motion after disallowance motion, forgetting that he is in opposition. The Parliament will allow him to move motions like this on anything Mr Davis does not like—like the West Gate one, and this one is another one. I cannot believe that people who would like to be the alternative government would put in a disallowance motion in relation to gold when we are the only state in the commonwealth who do not have a royalty tax on gold. We are talking about a time when the price of gold is at its highest ever and the profitability of these mines is actually going through the roof, which is a great thing.
I did represent, in my previous job, goldminers. I have been to a number of these mines—Fosterville in particular. I think it is a great industry. It is a dangerous industry, no question. Some really good people work there, and some mines do well and some do not. But I think it is time for Victoria to actually take advantage of being able to get some revenue like other states do. Why should we as Victorians miss out on that tax? Western Australia joined not long ago. Queensland, New South Wales, South Australia—they all have a royalty tax for mining gold. If we want to continue our infrastructure program to deliver for Victorians—to build more roads, provide more public transport, invest more in schools and hospitals—the money has got come from somewhere. The mining industry and the gold industry are doing pretty well, thank you very much.
I have just got a couple of quotes here in relation to, for example, the Fosterville goldmine, which is owned by Kirkland Lake mining and is one of the most profitable goldmines in the world. I quote from Australian Mining magazine, which reports:
Kirkland Lake president and chief executive officer Tony Makuch said Fosterville had transformed into one of the world’s highest-grade, most profitable gold mines since November 2016.
That is a quote from Australian Mining, 22 February 2019. Bloomberg further states:
A thirty minute drive east of Bendigo, a city of elegant Victorian-era civic buildings built with the proceeds of the first gold rush, Kirkland has transformed its underground mine into one of the world’s most profitable gold operations.
The reason I am quoting this is Mr Rich-Phillips said that the 2.7 per cent royalty tax does not take into account profitability and that is going to affect the profitability of the mines we are talking about. It was clearly spelt out earlier that the tax only applies to processors or producers who produce more than 2500 ounces of gold per year, so it does not apply to amateur gold-diggers, people who go out as a hobby or small producers. We are talking about significant operations which produce more than 2500 ounces a year, and I am using the Fosterville mine as an example. I am not picking on them, but that is just such a classic example.
Whatever design we put in place, probably we are not going to get the mining industry to jump up and say, ‘Great. We are going to pay you some more tax because we are making so much money’. You are not going to have that. I remember the Kevin Rudd super-profits tax. That was a super-profits tax after you had made your 10 per cent plus. They even opposed that, so I get it. Some will say it is fair enough; some will say, ‘We don’t want to pay any tax’. I am sure my friends from the Liberal Democrats will have their say, and that is fair enough. That is their position, ‘We don’t want anyone to pay any tax, or maybe not much tax’. You have got to pay some tax. I am looking forward to that contribution.
But the fact is that we have reduced, to the tune of $900 million, payroll tax and stamp duty in the regions. We are not trying to recoup that money back, but I think the goldmining industry is taking off in Victoria again. We can all go back to the 1800s with the gold rush. It was a very successful industry, and looking at a building like this, it was built on the back of the gold rush. Hopefully we will have another gold rush in Victoria, because there are still a lot of unexplored mines and areas where gold mining can flourish, and then we can build another magnificent building like this. You would not build this building today. I think people who made a decision to build a building like this now would probably be hanged. But they were good times back then on the back of the gold rush.
We do not want to just impose tax because we like to do that. There is a reason for it, and the reason is very simple: we want to be able to deliver to Victorians what we said we were going to deliver. Are we going to run a deficit or borrow money? I think the gold industry in Victoria has had it good for so long. They have enjoyed a significant period with no additional tax, unlike in the other states. Therefore I think it is just and fair to basically fall into line with what the other states are doing.
As I said earlier, the gold price has jumped over 25 per cent from $1847 on 27 May 2019 to currently $2363 per ounce. That is a huge jump. As a superannuation investor I would like 25 per cent return on my super; that would be magnificent. If I could get 5 per cent or 10 per cent, I would be happy, and I think most people would be grateful to get that much return on investment. But 25 per cent in the last 12 months is a huge profit, and they should pay 2.75 per cent to the people of Victoria when the gold has been dug out. Pay some of that money back. I do not think it is a bad thing; I think it is a good thing.
As I said earlier, I have not found an employer in my time that volunteers or is happy to pay tax or any wage increases or anything because they want to. Most of the time they are forced to do it. Having said that, if Victoria were putting these companies at a disadvantage by introducing a new tax that does not exist in other jurisdictions, I could see the argument—that you are putting these companies at a disadvantage and we need to think long and hard about it, think twice about it. But we are simply closing the gap between our jurisdiction and what is happening in the other states.
I mentioned earlier that the same thing occurred back in 2010 when the Liberal Premier Colin Barnett in Western Australia introduced a similar tax, as did a Liberal Premier in New South Wales, Barry O’Farrell, in 2011 and Campbell Newman in Queensland in 2012. So 2010, 2011 and 2012—three Liberal governments—
Mr Finn: Any of them still there?
Mr Melhem: They have retired, Mr Finn. They have moved on to better things. They saw the benefit of introducing that tax, and what we are simply doing in Victoria is lining up—
Mr Finn: Some think Dan will go the same way.
Mr Melhem: Don’t worry, mate, he will be there for many, many years to come. You are going to be very disappointed, Mr Finn, and you are going to be sitting on that side of the chamber for many, many years to come. You may even retire there.
As I said earlier in relation to Kirkland Lake Gold, which own the largest mine in Victoria, the Fosterville mine, they increased by 50 per cent in the last three months after the budget, so basically their profit is going up as well. So what is wrong with sharing 2.75 per cent? Production looks like it is going to ramp up, and all the indications so far are that the gold that has been produced and is to be produced in the next three years is estimated to be of the highest grade. They are not digging cheap gold; they are digging top-shelf gold. It is like the Penfold Grange of the gold industry, so what is wrong with paying 2.75 per cent? I would understand it if the industry was really struggling; I would be able to see their arguments. But I cannot see the argument against this proposal.
Half of Victoria’s six largest goldmines have been purchased, with the new owners announcing plans to invest significantly in exploration and expansion. They knew this tax was coming, so it is not like it was a surprise. The government consulted widely with the Minerals Council of Australia and various other players and a lot of submissions were received, so it is not a secret—the Treasurer did not wake up on 2 January 2020 and decide he was going to impose the tax. We have still got some strong interest from the industry to invest in Victoria.
It is pleasing to note that the Australian Bureau of Statistics reported that Victorian mining employment rose 41 per cent in 2018–19, so that is another positive indication, and it is really pleasing that that is already occurring. There has been some talk about, ‘Should we phase that in? When do we implement it?’. I think we should be getting that implemented forthwith, as per the regulation, to get some of that income in while the time is good for the industry so we are not really impacting on their bottom line, on their profitability.
Also I make no apology that this government is bringing the money in—and I am repeating now what I said earlier—because we can invest that in better schools and hospitals, the airport link and various projects like the railway crossing removal program. We have got a lot of things to do, a lot of things to implement, so I think asking the goldmining industry to actually chip in is a good thing. As I said, the consultation process occurred through September and October last year, and there has also been engagement on the Engage Victoria website. You always have various opinions about people liking tax—not many people probably do—but I think if you ask Victorians whether that tax should be implemented, I think you will find most Victorians would say yes, because it is going to go to a good cause.
I have got a quote here from Hugh Morgan, who is a significant mining investor and a Liberal Party stalwart. He is very well known in the Liberal Party. He said of the royalty announcement that in the current boom:
It is almost impossible for a government not to do something.
That is a very well respected mining investor and Liberal man supporting what we are trying to do here, and I think we should pay some attention and listen to Hugh Morgan. He knows what he is talking about. He is in the money-making business. He is a good investor. He is actually investing his money in the industry and does not mind paying the 2.75 per cent, so I do not know why the opposition here are hell-bent on trying to pass a disallowance motion—probably so some of their mates can keep that money in their pocket instead of that money transferring to the Victorian taxpayers and Victorians generally to benefit from that tax. Also there is prominent gold exporter Geoff McDermott of Navarre Minerals, who was quoted as saying of the royalty that it is ‘not a big deal’. So we have a mining magnate saying, ‘That’s not a big deal. I don’t know what the fuss is about’, but obviously it is a big deal for the Liberal Party, for the opposition.
As I said earlier, this is about taxation and royalty revenue per capita in Victoria. It is still below New South Wales, still below Western Australia and still below Queensland. So going back to the point I made earlier, if we were going to put these companies at a disadvantage if they would otherwise have had the same goldmine in other jurisdictions—in Western Australia, Queensland or New South Wales—I could see the merit of the argument. But that is not the case, because we are still going to fall below these states. The other mining state is Tasmania in relation to goldmining, but obviously Western Australia, Queensland and New South Wales have significant goldmining operations and their royalty tax is much higher than in Victoria.
It is not like we are going to make squillions out of this; it would be nice if we did, but we will not. Victoria raises very little revenue from royalties. It is less than $20 per person per year, and we raise less royalty revenue per person than any other state. That is another thing I want to get into, because a lot of taxes are federally based taxes and we always have this argument—we have been having it since 2014—about what our fair share of tax or income or distribution of wealth collected by the commonwealth and put back into Victoria is. We always have that argument about what our fair share is, and we always struggle to convince. We had a problem with the Abbott government and the Turnbull government, and now we have a problem with the Morrison government, even though the current Prime Minister is making slightly different noises than his predecessors in relation to giving Victoria a fair share, a fair slice, of the federal thing. For Queensland, WA and New South Wales, in relation to the mining industry, the only tax they can raise to increase their revenue so they can deliver on their commitments to their people is the royalty tax. Victoria has been missing out on that for decades. So I think now that is another way to fill the gap that exists between us and the commonwealth. That is why I think it is a wise move by the Treasurer, and I support the levy being struck and implemented forthwith.
Now, there is an argument about how that is going to be adjusted. Over the four-year period to 2021–22, Victoria’s ratio of tax and royalty revenue to gross state product will average 5.1 per cent. As I said, that is lower than New South Wales, which is 5.2 per cent, and it is lineball with WA and Queensland at 5.1 per cent. So I urge members to reconsider their view, to think long and hard about why this royalty tax is being implemented—what is the reason for it; what is the logic behind it?—and to vote against the disallowance motion moved by Mr Davis or by the opposition. That simply puts us at the same level as the other states, delivering a scarce income. We can then start delivering on these much-needed projects and services in Victoria, because without that every time we are not able to generate income. ‘How are you going to deliver on all these projects?’. Well, I have not heard from Mr Rich-Phillips about the alternative, how we can fund these projects or services, just simply ‘Disallow it’ because someone in the industry said, ‘Oh, well, we don’t want to pay the 2.75 per cent tax, so therefore bad luck’. I have not heard any serious arguments why, apart from I think the comments that it is not based on profitability.
If it was based on a super-profits tax, would that change your view of it? I should take you back to the infamous Kevin Rudd supertax on the mining industry. Maybe he should have done it a bit differently; maybe he should have talked to the industry a bit beforehand, before he made the announcement, and maybe we would have had a super-profits tax. I wish we did, because let tell you: if that super-profits tax had gone ahead in 2007–08 and had been put in a sovereign fund, like what the Scandinavian countries implemented in the 1970s, we would all be in much better shape than we are today. But we missed the opportunity because the mining boom moved on. But I think at the time it would have been a great idea. With those words, I will be opposing the motion, and I hope the rest of the members will do the same.