MRRT - The triumph of expediency over substance…

First published 3 July 2010 – Apart from the unseemly swipes at Kevin Rudd throughout this morning’s press conference, the mineral resources rent tax (MRRT) negotiations offer plenty to be disappointed about in terms of negotiation process:

PROCESS:  Julia Gillard was at pains to point out how Wayne Swan had been at the G20 and then immediately "rolled up his sleeves" and worked long hours to negotiate the deal with the miners. I was not impressed. Nobody is very clever when they are tired and jet-lagged. It certainly isn’t a good move to send a tired and jet-lagged lead negotiator into a multi-billion dollar negotiation - unless of course the outcome is less important than a quick finish to the negotiation.

AUTHORITY:  Did the mining representatives have authority to deal on behalf of the industry?  It seems not! The deal reached with Xtrata, BHP and Rio, not surprisingly, favours international mining giants over their smaller Australian counterparts and a number, led by Fortescue Metals, have already flagged that they will continue their opposition to the tax and step up their public lobbying again. To keep all of the mining community quiet at election time, expect to see further demands for concessions. 

AGREEMENT:  The hailed ‘breakthrough’ is not actually a deal – just the headline terms of a preliminary negotiation conducted with three interested parties.  The devil, as always, will be in the detailed provisions and those remain to be worked out by the implementation committee.  Sounds like trouble to me.

CONTROL:  Who will chair the implementation group?  A former mining executive!  I confidently expect that the outcome of effectively handing control of the details of the deal to the mining lobby will lead to a further erosion of the substantial concessions already made by the Government, perhaps to the point that the tax will cost more to administer than it will raise.

CONCESSIONS:  What did the government receive in return for the substantial concessions it has made?  Unless I missed something, I can spot only one: an announcement today.  That would probably make the $4-5 billion dollars sliced off Kevin Rudd's Resource Super Profit Tax (RSPT) one of the largest closing concessions we are ever likely to see.  As such, it fails all of the tests of a good closing concession: it’s neither conditional on the final deal (which is still not agreed by all), nor clearly defined (details still to be worked out) and certainly not small.

One positive development, of sorts, is that the announcement has now moved the deal from the public arena to the private conference room, which should remove some of the political pressure on the negotiators.  Hopefully, the Government can use that more private, less competitive, setting to recover some value for the Australian public.  On past performance, I’m not confident.

Matt Lohmeyer
Rose & Barton