Unless you have been living under a mat, Abbott’s little confession moment on the 730 Report about how sometimes he exaggerates the truth when not scripted isn’t exactly going down well with the main stream media. A media pack that is thirsty for his blood to resurrect Rudd’s political fortunes. So my message to Abbott is: 730 Report isn’t confession time – stick to message and toughen up!
BHP is toughening up:
The mining giant plans to hold shareholder meetings across Australia “to warn investors of the impact” of the proposed tax, according to the report. BHP Billiton has been flooded with shareholder complaints and letters regarding the 40% tax, the report said.
So Abbott get on board and don’t make you the issue. This is the issue: Rudd is hanging his budget hat on the mining industry to get us back into surplus. An industry facing significant risks, and not just in Rudd’s tax regime.
The new pricing scheme replaces the annual-price benchmarking system, begun in the 1960s and used more or less universally up until March — a process, typified by long negotiations, in which miners and their steel-mill clients set a single price for an annual contract. The new system was seen as a benefit to miners in the short term, so long as commodities continued to rise.
The problem for BHP, Rio Tinto and others, is that the system has the opposite effect on their revenue during commodity downturns, and more generally, exposes them to unexpected shocks of the kind that some analysts believe are now brewing in China’s housing market.
Chinese housing prices fall – decline in net household wealth – economic slowdown – decreasing demand for commodities – decrease in mining profits – less Rudd ‘super-tax’ revenue – deficit gets bigger.