YESTERDAY should have been a good day for the miners – it almost was. Having unceremoniously ousted Prime Minister Kevin Rudd, the government has lost the upper hand in the battle over a supertax on miners’ profits. Julia Gillard, Rudd’s nemesis and successor, is now trying to enforce a softer version of the levy, although even this could prove difficult. Originally, Rudd wanted to slap a 40 per cent tax on miners’ profits above a six per cent return on investment. The industry is resigned to a tax of this kind, but the major sticking point is the level at which it kicks in.
In a bid to end the damaging stand off – which helped destroy Rudd in his final days as Prime Minister – Gillard has been trying to broker a compromise. She is now suggesting that the tax should kick in on profits above a 10 per cent return on investment. Miners think they can soften the blow further still.
Despite the boost, miners tanked yesterday on fears that the frenetic pace of China’s growth is starting to slow, proving that domestic tax issues are no match for fears over Chinese demand. Factory activity and lending are both off, while May’s economic leading index, from the National Bureau of Statistics, is standing at 103.4, compared to 104.4 in April and 105.5 in the final few months of 2009. Industrial production is still growing, but at a slower rate: it was up 16.5 per cent year-on-year in May, compared to 17.8 per cent in April. Markets were expecting a drop, but not one of this magnitude.
A victory down under has been sullied by problems in the far east.