Federal treasurer Joe Hockey this week lambasted the former Labor government for holding up roughly $15 billion in Coalition savings, with $13 billion of that emanating from the mining tax. In his debut mid-year economic and fiscal outlook, Mr Hockey said Australia’s budget suffered up to $20 billion in damage when measures proposed by Labor while in government and were being opposed by Labor in opposition were taken into account.
Fortescue Metals Limited
(ASX:FMG) boss Nev Power chipped in to say that the MYEFO was a clear indication Australia would enjoy a more fruitful next four years if it eliminated the controversial minerals resource rent tax and related tax concessions. According to Mr Power:
"Fortescue's rapid growth means its income tax and royalty payments will rise from more than $1bn in FY13 to more than $2bn in FY15, proving that benefits from the growth in mining are flowing to all Australians... the government can't create jobs or grow the economy by taxing it, and it's great to see the government is prepared to establish the right environment to let business generate jobs and opportunity for Australians."
The treasurer said in his MYEFO that the coalition has introduced legislation to repeal the mining tax and to repeal or revise the spending measures that were to be paid for from the proceeds of that tax. Mr Hockey is confident that:
"Overall, this will generate net savings of $13.4bn over the forward estimates. The failure of the Labor Party to support our election policy will cost an additional $728 million to the budget this year as a new round of School Kids Bonuses goes out the door in January."
The MRRT had been expected to pour $450 million into government coffers in fiscal 2015, with the figure tipped to grow to $1.16 billion in fiscal 2016 and $1.8 billion in fiscal 2017. Some of the tax concessions in the crosshairs alongside the mining tax include the increase in the small business instant asset write-off threshold, discontinuing the loss carry-back for business, abolishing the low-income superannuation contribution expense measure and rephrasing the superannuation guarantee increase from 9 per cent to 12 per cent.
Labor, however, remain unconvinced. Chris Bowen, the Opposition Treasury spokesman, believes the MYEFO confirmed the Prime Minister Abottt has fallen in breach of his contract with Australian people. According to Mr Bowen:
"Today's (MYEFO) the day Joe Hockey's magic pudding economics came crashing down around his ears."
Economic news
An index providing a preliminary read of business activity in China’s manufacturing sector has fallen to a three-month low, according to a private sector survey. HSBC and Markit’s Flash Purchasing Managers’ Index unexpectedly fell to 50.5 from a final read of 50.9 in November. A read above 50 indicates activity is in expansion territory.
The Bureau of Resources and Energy Economics has upped its iron ore export forecasts, predicting a 23.3 per cent rise in exports in the fiscal 2014 following significant investment in mines and infrastructure. BREE predicted iron ore exports of 650 million tonnes in 2013-14 versus 527 million the previous fiscal year. BREE in early October forecast exports would reach 615 million tonnes. BREE said expansions by some of the world's largest producers, including Rio Tinto, BHP Billiton and Fortescue, was behind the increase.
Resource company headlines
Rio Tinto Limited
(ASX:RIO) expects its Oyu Tolgoi mine's production to double in 2014, compared with this year. Rio subsidiary, Turquoise Hill Resources, which owns 66 per cent of the Mongolian mine, says it expects to produce between 150,000 and 175,000 tonnes of copper in concentrates at the mine in 2014. This compares with a forecast of 75,000 to 85,000 tonnes of copper in concentrates for 2013, which the miner reaffirmed in October. The miner says it expects to produce between 700,000 and 750,000 ounces of gold in concentrates in 2014. Operating cash costs are expected to be approximately $US1 billion and capital expenditure is set to be $US160 million.
BHP Billiton Limited
(ASX:BHP) will cut as many as 200 jobs after suspending mining at its Nickel West Leinster Perseverance Underground mine in Western Australia due to safety concerns. The miner says it will try to redeploy employees before announcing a total number of redundancies, and will continue to operate its processing facilities at Leinster and maintain the underground infrastructure in Perseverance mine.
Leighton Holdings Limited
(ASX:LEI) subsidiary Thiess has won a four-year contract with Wesfarmers Limited
(ASX:WES) for work in the Curragh North Coal Mine in Central Queensland’s Bowen Basin. Thiess says the contract is worth $570 million and extended the current 10-year agreement signed in 2010. Wesfarmers Resources managing director Stewart Butel says Thiess has been awarded the work in a very challenging environment for the industry. Mr Butel says the companies are working together to review areas of efficiency and agree on a strategy that will ensure Curragh maintains its position as a cost-competitive operation.
