Linc Energy’s $20 trillion shale oil and gas find could re-shape Australia’s economic and energy based future.
The lives of the average Australian could be helped by this bounty we have all been gifted. Even if this unproven find is worth 1/4 of the headline value, the finding must raise questions for Australians about who should profit from this resource windfall.
The 2011-12 year saw the Federal government of Australia receive just $1.5 billion from its resources. Just two of our highly profitable mining companies in Woodside and Santos earnt some $5 billion (EBITDAX) in that year. As many will know, BHP and Rio Tinto earnt closer to $20 billion each over that period.
According to Goldman digs up some resource tax reality:
.. the average global royalty rate is 3.9 per cent. The average rate in Australia is 5.6 per cent.
This is held up as a disincentive for Australian investment by the mining lobby. However, these are minimal returns to the public. Citizen’s of the world must become more aware how much money is being made and what we can do to receive a fair return.
Last year’s BHP’s 2012 annual report boasted about its willingness to pay $54 billion to its shareholders over the last ten years. A yearly dividend average of $5.4 billion is considerable. Investors deserve a return on capital. The money lent is used to invest in machinery that depreciates. Taking this principle at face value, the Australian people deserve a greater return than shareholders because these are finite natural resources. This is magnified in the knowledge that iron ore appreciated by 900% over the last decade. This uplift was through no effort of the mining company.
Alex Martell, a commenter on the Goldman Business Spectator article above sums it:
When it comes to extraction of national mineral/petro resources, any profits above a fair rate of return for the miner belong to the country in question (Goldman digs up some resource tax reality, January 24).
Hi rates of capture of these profits indicate government efficiency in standing up for its citizens and collecting these profits (e.g. as Norway does as noted by Maurice Munsie above).
The Australian government I’m afraid has been inefficient in this respect and super profits continue to go to a handful of players with significant influence and ability to protect their economic rents at the expense of current and future generations of Australians.
24 Jan 2013 4:43 PM
The environmental impact of digging up costly shale oil and gas could well spell then end of life as we know it on planet earth. With the climate shift well and truly underway, we cannot give these resources away for a song as the wealth gap increases and uncertainty abounds.
The public further loses out with locals in the Coober Pedy community set to face an enormous property bubble as property ‘investors’ snoop in to play the ponzi game, passing the parcel from one to the other for quick, easy, barely taxed profits. As the Australian Property Investor reported yesterday on a local real estate agent:
“I’ve had so many calls, you wouldn’t believe it,” she says. “My brain is about to explode.”
Who benefits? Locals will suffer from rising rents that are then passed on in higher retail prices. The average miner will have to sacrifice much of their earnings in high rents to guarantee a place to live in the sweltering heat. In some communities the only alternative they face is to live in a shipping container in 45 degree heat. No wonder rents are already going up $10 per week in Coober Pedy! Will houses like this still be $85,000 in a year to come?
The Alaska Permanent Fund is one way the entire public could benefit from what was once understood as the common-wealth. A yearly Citizen’s Dividend is paid of some $1000 – $2,000. How would that help your family? Another alternative to handing miners the trillions is to follow resource blessed Saudi Arabia, where locals pay zero income tax.
One thing is certain, there’s a sure profit for those who already have money to enter the land game at any level. Read more on resource rents.