Australia Mining Tax Will Not Impact Investment: Expert
Australia's parliament passed laws for a new 30 percent tax on iron ore and coal mine profits on Tuesday, amid a swathe of opposition that claims the tax is unfair, will not deliver the profits the government is seeking and worst of all, deter investment in Australia's mining industry. However, one expert told CNBC these fears were overblown.
"The reality is investment in the resources sector has increased from A$47 billion last year to A$95 billion this year. And it is projected to increase to A$120 billion next year," Andrew Su, CEO of Sydney-based brokerage Compass Global Markets, said Monday.
The Mineral Resources Rent Tax (MRRT) was first floated two years ago under Kevin Rudd's Labor government, and was aimed at bringing about a fairer distribution of profits from the nation's mining boom.
But it ran into opposition, especially from the mining industry, and this eventually contributed to Rudd's exit. The proposed tax has also been largely blamed for current Prime Minister Julia Gillard's poor ratings in political polls.
The tax had to be eventually watered down. It will now be charged on 30 percent of profits, down from 40 percent, and is also restricted to iron ore and coal mining.
Su says that at the ground level, there has been no let-up in interest in Australia's resources sector. "In terms of number of telephone calls that we are getting and number of deals we are working on, (there is an) increased demand for Australian mining companies and Australian resources," he said. "So I think the impact has been overplayed."
He adds that as long as commodity prices stay high there will be limited impact from the tax. "Overall the general driver for the investment in the commodities sector is commodity prices. So long as they are relatively high and production costs are relatively low, we'll see continued investment in the commodity sector in Australia," he said.