Government Taxing China via Mining Levy: Western Australia Premier

Australia is alienating its biggest export customer, China, Colin Barnett, the Premier of the state of Western Australia (WA) told CNBC on Wednesday.

Colin Barnett, premier of Western Australia, speaks during a conference.
Bloomberg|Getty Images
Colin Barnett, premier of Western Australia, speaks during a conference.

Barnett said China feels the Federal Government’s controversial Minerals and Resources Rent Tax (MRRT) which will apply to iron ore and coal miners is effectively a tax on China itself. That’s because China is the largest importer of Australian iron ore and coal, which is vital to the country’s fast-paced growth.

The comments come as Chinese delegates attended the Commonwealth Business Forum being held in Perth, Australia. The Forum is a prelude to the Commonwealth Heads of Government meeting, also being held in the city. The two meetings have been touted as the perfect opportunity to showcase Western Australia’s mining prowess.

The WA Liberal Party Premier, has been a vocal critic of the Federal Labor Government’s plans to place a 30 percent "super profits" tax on iron ore and coal. The MRRT is expected to be introduced in the parliament this year and if passed, will come into effect from July 1st, 2012.

Critics of the tax say it's a risky move since iron ore and coal made up the bulk of Australia's export income last financial year.

The state currently accounts for around 80 percent of China’s investment in Australia due to its wealth of natural resources and Premier Barnett told CNBC the MRRT is a huge barrier to further investment in the state.

“The proposed MRRT is causing severe problems in terms of sovereign risk and is affecting the financing of some of the mid cap projects."

Attracting foreign investors for the state’s assets is key for Barnett. Earlier this year, he voiced concerns when China's Yanzhou Coal made a $306 million acquisition of Wesfarmers’ Premier Coal mine. Mr Barnett told CNBC the emphasis on where money is invested in the state should change.

“I am encouraging foreign investment in new assets and infrastructure, rather than encouraging a shift in asset ownership from one company to another."

The Premier insists there are plenty of opportunities for foreign countries such as China to invest in Western Australia. Despite an expected doubling of the state’s iron ore production this decade and a trebling of liquefied natural gas production by 2020, there is still much of the resources-rich state to be explored and foreign cash will be a key component of the state’s long term long term economic growth.

“The relationship of Australia and Asia is very much the relationship of Western Australia to Asia and I expect the Western Australian economy to grow strongly for decades to come,” he said.

  • Click hereto watch Colin Barnett's interview.