The Rudd Government and the mining industry are locked in a ferocious battle over plans to introduce a resources super profits tax, with
the industry saying the tax has put its expansion plans in Australia at risk.
BY MATTHEW LIDDY
But property investors should take the mining industry’s rhetoric with a hefty grain of salt, according to hotspotting.com.au founder Terry Ryder, a man who spends a fair chunk of his time assessing regional Australian property markets.
Fortescue Metals Group says it’s put two of its three expansion projects on hold as it reviews the potential impact of the tax, while BHP Billiton has also indicated some planned projects could move offshore.
However, Ryder doesn’t believe investors need to fear the impact of the proposed tax flowing through to their property returns.
“I can’t see it having an impact because I don’t really believe that the major mining companies mean what they’re saying,” he says. “I think they’re conducting a scare campaign to get the Federal Government to soften what it’s trying to do.
“When they say they’re going to scrap major projects, I think it’s all bluff and they’re not serious. It’s a political tactic.”
Ryder believes that eventually the issue will all be resolved and things will return to “business as usual”.
However, he admits that if it turned out the mining companies were serious about ditching projects, it would have flow-on effects for property. For example, he cites media reports that BHP Billiton is reconsidering the Olympic Dam expansion at Roxby Downs.
“If they did, it would have a widespread impact and not only on Roxby Downs,” Ryder says, noting the impact would flow through to Adelaide as well.
“But I really don’t think it’s going to come to that,” he adds.
The concept of the super profits tax arose out of the Henry review into the tax system, but the debate about its implementation has gotten ugly.
Fortescue Metals, BHP and Rio Tinto are running a high-profile campaign against the tax. Treasurer Wayne Swan says the mining companies are acting in their own interests, while the government is acting in the national interest.
Twenty-two leading Australian economists entered the debate today, releasing a signed statement saying they supported the introduction of a resource super profits tax, and that “current public criticism of the proposed tax has been dominated by misinformation”.
Fairfax journalist Peter Martin has highlighted some of that misinformation on his blog in the form of an out-of-scale graph released by the Minerals Council.
There’s at least some anecdotal evidence that a majority of investors support the resources super profits tax, even though they expect it to have a negative impact on their investment holdings.
At the Legg Mason Investment Symposium in Sydney this morning, attendees were asked whether they agreed with the concept of the proposed super tax, and 60 per cent said yes.
When asked whether they thought the impact of the tax would be positive or negative for their clients’ investment portfolios, 81 per cent said negative.
For his part, Ryder says he doesn’t recommend investing in mining towns anyway, because quite outside of this issue their property markets are “very cyclical, high risk and volatile”.
“People are much better advised to buy in a strong regional centre that’s not wholly and solely reliant on resources,” he says, noting they might still get some benefit from the resources industry but they’re not dependent on it.
But he says investors shouldn’t use the debate over the new tax to convince them to do nothing.
“They should be just out there doing their thing rather than sitting on their hands.”
Matthew Liddy is the Deputy Editor of Australian Property Investor magazine.
Readers – what impact do you think the resources super profits tax would have on Australian property markets? Let us know.
