Lucky, yes, but wealthy too

by | Nov 5, 2011 | Business


The social critic Donald Horne could not have known how telling his three words would become when he wrote The Lucky Country in 1964.

We are even luckier now, a good deal luckier, thanks to the rise of China and the resources boom.

This week the Credit Suisse Global Wealth Report 2011 ranked Australians as the wealthiest people in the world.

Median wealth was $US222,000, the highest on the planet, while average wealth was $US397,000, second only to the tax haven of Switzerland with $US540,000.

A few points about the numbers. First, they are measured in US dollars so the currency effect inflates our ranking.

Second, the median measure tells us how the middle class is going. Wealth is distributed more equitably here. Median wealth in the US, by comparison, was a lousy $US53,000.

Third, our wealth resides largely in the property market which, although coming off the boil now, has so far managed to avoid the 30 per cent price falls of the US and elsewhere.

Hard on the heels of the Credit Suisse report came the UN human development index, where we ranked second only to Norway as the place to be. That is based on gross income, education and life expectancy.

Not only is Australia fair dinkum lucky, as evinced by the first study, but quite well-managed over the years too, as evinced by the second.

It puts all this hand-wringing over politics and business into perspective, of course, lest we become a nation of rich whingers.

It is no wonder the Occupy protests aren’t getting much traction here. In a world of 7 billion people, Australia makes up just 0.3 per cent. In global terms, we are the ”1 per cent”, not the 99.

And not that they lack just cause, but one suspects that many of the protesters on Wall Street are probably members of the global 1 per cent too. They are certainly the top decile.

And the ”1 per cent” is illusory anyway. One per cent of the US population is three million people. The number of people who control the status quo is probably more like 30,000. Perhaps it is even 3000, which is 0.001 per cent. In other words, it’s a basis point plus their bankers and lawyers.

But the protests aren’t about absolutes. It’s the relatives that count. A knight in the Middle Ages would have been quite happy with his lot in life. Yes, there were a few earls and barons above him, but plenty more serfs below.

He would have counted himself lucky to have had a small, damp, smoky, unsanitary castle with a spot for his horse under the same roof. Few Australians would trade their TV, heating, shower, fridge and car for a medieval deal like that, serfs or no serfs.

Still, the nouveaux sans culottes ought be preoccupied with fiscal management, as there will come a time when these spectacular terms of trade will turn against us.

This week the mineral resource rent tax bill was introduced into the federal Parliament. It is slated to pass next year.

This is the resources rent tax lite solution which Julia Gillard struck with the big three miners to get them off the government’s back heading into the 2010 election.

It is a climb-down of monumental proportions, so much so that it is suspected in some quarters that it might not raise anything much at all. Certainly that was the point Andrew Forrest was making this week.

The Fortescue founder was doing the rounds in Canberra with a few calculations on how much the tax would raise from the foreign-owned miners BHP Billiton and Rio Tinto.

”Based on the above assumptions, our calculations show that, over a five-year period to June 2016, the MRRT liability is like to be nil for both BHP and for Rio. In the same time frame, the small miner will be liable for MRRT,” his memo said.

There are a lot of complex assumptions involved but Forrest and co manage to get from $10 billion in iron ore revenues annually to zero royalties annually for the two miners, after accounting for the generous depreciation and assorted credits.

Forrest has tweaked his campaign. He used to denounce the very notion of more tax but now is calling it unfair on smaller miners. He’s right. And why isn’t the tax on other metals such as copper, uranium and other metals whose prices have risen?

This was the political deal which was required to get BHP, Rio and the Zug-based Xstrata to call off a rabid Minerals Council and its anti-tax advertising campaign.

Fortifying itself against any eleventh-hour assault by miners and the opposition to jettison the MRRT altogether, the government was putting about some numbers of its own this week.

Tax Office figures on R&D tax breaks going to miners doubled between 2002 from 15 per cent to 30 per cent, while the 45 per cent of the previous R&D concession which went to manufacturing fell to 30 per cent over the same period.

Most of this probably went to the big miners, companies whose shareholders are mostly foreigners these days and who pay a tax rate of roughly 19 per cent. The statutory rate is 30 per cent.

For the September quarter, gross operating profit was a record $25 billion, on top of last year’s $93 billion for the year to June.

Australia might be downright lucky to be sitting on top of a humungous pile of valuable metals but it would be poor governance indeed to fetch a low royalty for it at this exceptional time in history.


Michael West

Michael West

Michael West established to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences. You can follow Michael on Twitter @MichaelWestBiz.

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