The following oped was published in the Northern Territory News on 6 December 2017
Mining is one of the things the Territory does best.
And it’s an important industry for us, accounting for 12 per cent of the NT’s economy in 2016-17 – the largest of any private sector industry.
It employs thousands of people, fosters regional development and supports remote communities.
And according to the Treasury’s recent revenue discussion paper, the mining industry is going to generate $225 million in royalty revenue in 2017-18.
But did you know that under the current arrangements for distributing the GST, the Territory will have to share that royalty revenue with other states?
In fact, the Territory is losing around $52 million of GST funding in 2017-18 because Canberra considers it has a revenue capacity advantage in mining.
In other words, because the Territory — its people, businesses and government — made a greater effort to develop a productive mining industry than some other states, it now receives less federal government funding for the social welfare, government services and economic development programs that are needed here. And incredibly, the money goes to states that actually restrict their own exploration and mine development.
In the Territory we developed the world-class Ranger uranium mine, which has created jobs, supported a local community and paid millions in royalties.
But our royalties from Ranger are effectively shared with Victoria — a state that has imposed a ban on even exploring for uranium for decades. It seems that uranium mining isn’t fashionable in Victoria, but siphoning off a share of the proceeds is.
It gets worse. Royalties raised from our manganese production are shared with Tasmania, which already participates in the manganese supply chain by refining the ore mined at Groote Eylandt. But since there are no royalties on metal refining, the flow of shared revenue heads exclusively south.
A new approach to the treatment of mining royalties in sharing Australia’s GST revenues is critical for the Territory — and it’s long overdue.
The Minerals Council argued this case at the Productivity Commission’s public hearing on the GST distribution in Darwin.
The Productivity Commission is currently undertaking an inquiry into the GST distribution because it has finally been recognised by the federal government that there are clear problems with the current arrangements and methods used to determine how the GST pie is shared.
However, the draft report released by the Productivity Commission has failed the Territory on many fronts.
It not only fails to offer effective reforms to enhance the Territory’s treatment and provide incentives to develop our economy further, it proposes to take more funding away from us.
At the public hearings with the Productivity Commission many of our business and social groups rightly raised concerns about the impact this additional federal funding cut will have on the Territory.
So did the Minerals Council — but what we also brought to the table was a plan. We not only need to restore the funding for our social programs; we need a long term plan to grow the Territory’s economy — one that promotes regional development to share the prosperity among the people.
The Minerals Council has proposed discounting state raised mining revenues in the GST distribution so that the states and territories that make the effort to develop a mining industry keep a greater share of the benefits.
Rather than hiking mining royalty rates, which would only jeopardise future investment in mining, the Minerals Council’s GST reform plan would let the Territory government keep more of the proceeds from mining royalties and offers an incentive for co-development of an industry that can benefit us all.