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Legislative Council - Fifty-First Parliament, Third Session (51-3)
2008-12-02 Daily Xml
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MINING ROYALTIES

The Hon. M. PARNELL (15:17): I seek leave to make a brief explanation before asking the Minister for Mineral Resources Development a question about mining royalties.

Leave granted.

The Hon. M. PARNELL: This week, SA Unions released its agenda for South Australia. As part of that agenda, SA Unions states that it 'wants the state government to put an end to the excessive corporate welfare that has existed in this state at the expense of the wider community in the race to develop South Australia's potential wealth'.

Janet Giles of SA Unions points out that companies such as BHP Billiton have 'a huge capacity to put back into the community some things that will really make this place fantastic or they could just choose to dig up ore and ship the ore out and not contribute'.

The mining royalties interstate are much higher than in South Australia. In Western Australia, they are set at 7½ per cent for iron ore and bauxite. In Queensland, their coal miners pay between 7 per cent and 9 per cent in royalties, and the dividend from petroleum there is 10 per cent. In South Australia, mining royalties are just 3.5 per cent. My questions are:

1. How does the minister respond to the calls by SA Unions?

2. Will the minister consider increasing mining royalties in South Australia to bring them into line with mining royalties in other states and, if not, why not?

The Hon. P. HOLLOWAY (Minister for Mineral Resources Development, Minister for Urban Development and Planning, Minister for Small Business) (15:19): In relation to base metals, the royalties that are paid in South Australia are comparable with other states. In relation to coal and bauxite, I understand that the case has been given that the higher royalties in other states reflect the huge gain that has been made in the price of coal and bauxite. Unfortunately, royalties for the base metals this state produces have been declining, particularly for copper.

I would suggest that, at this stage of our development, when we have just gone from four mines to 11, to increase royalties would not be a particularly sensible policy. It is one thing for those states to have increased royalties, such as Queensland increasing royalties for coal, for example, when that state has been producing coal for 30 years and there are, no doubt, some windfall elements in relation to those operations. The honourable member mentioned BHP Billiton, but I think he ought to be reminded that, for that expansion to go ahead, the company has to spend four years moving one million tonnes of overburden a day before it will get the first kilogram of ore out of the ground on which it can pay a royalty.

At some stage in the future, one would expect that this state will get significant increases in royalties although, of course, these royalty payments are equalised—in some manner at least—through the Grants Commission across all states. So, not every dollar of each royalty necessarily goes to state coffers: it is much more complicated than that. Nevertheless, we need to bear in mind that, in relation to places like Olympic Dam, it will be many years before the increased royalty will come out of that operation. In the meantime, that company will have to invest literally many billions of dollars before it will get to that point, so the royalties that we strike have to take all that into account.

Certainly, with the negotiations currently under way with BHP Billiton, this government will be mindful, in reaching the arrangement with the company, that we get an adequate return to our community. That adequate return will include not only royalties but also employment, in particular for indigenous people, as well as other economic benefits for the state. So, all of that will be taken into account.

The final point is that one has to be careful in comparing royalty rates between states, because not only are the commodities different but also the basis on which they are assessed can vary from state to state, because it depends on what deductions are allowable under the individual state schemes and what is taken into consideration. So, it is not necessarily easy to make that comparison.

In summary, whereas I can understand the case that SA Unions is putting—that miners, like those in other industries, should pay their way—there are a number of ways in which the government can expect that to happen, and the matter of royalties is just one of them. We are certainly mindful of the fact that we do get an adequate return to our community from mining companies; however, I think that at this early stage of the mining boom it will be a bit premature to kill the goose that has not yet even laid its first egg.

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