An MYEFO mystery: what’s with the resource tax?

by

It’s the time of the mid-year Economic Fiscal Outlook (MYEFO) and we’re told that we’re about 11 billion deeper in the red this financial year than we thought, with the treasurer blaming the dropping iron price and the reduced wage growth. I have gone over the MYEFO documents (which are an exercise in obfuscation if ever I saw one), found that wage growth and the dropped iron ore price would ‘only’ cost us 2.3 billion each in this financial year (2014-2015), noted that this was far short of the 11 billion headline, and thus went looking for the ‘real story’.

This threw up the mystery of the resource tax. Here is what it says on table 3.2:

Table 3.2: Impact of Senate on the Budget (underlying cash balance)
Estimates Projections
2014‑15 2015‑16 2016‑17 2017‑18 Total
$m $m $m $m $m
Impact of decision taken as part of Senate negotiations(a)
Repeal of the Minerals Resource Rent Tax and related measures -1,684 -2,334 -1,670 -947 -6,634

which seems to means that the repeal of the minerals resource rent tax (and related measures) is costing us around 2 billion per year. Yet, in the ‘Overview Part’, the MYEFO says “The repeal of the Minerals Resource Rent Tax and other related measures will save the budget over $10 billion over the forward estimates and around $50 billion over the next decade.”.

What is going on?

Update (thanks Chris Lloyd): it seems to be a language issue. Part of the story seems to be that the MYEFO is counting the repeal of the mining tax, which was an election promise, as something the Senate inflicted on the budget, so the 2 billion a year is ‘revenue foregone’. So the MYEFO is blaming the Senate for the outcome of an election promise, using an odd formulation to say that the repeal will save us 50 billion when it seems to imply it would cost us 50 billion. Weird.

7 Responses to "An MYEFO mystery: what’s with the resource tax?"
  1. Or, is the $6.6 billion the cost of ‘related measures’ that the Senate didn’t agree to abolish?

    As it says above Table 3.2: ‘As part of negotiations in the Senate to pass legislation to abolish the Minerals Resource Rent Tax, the Government took decisions to temporarily maintain the Low Income Superannuation Contribution, Income Support Bonus and Schoolkids Bonus at a total cost of $6.6 billion over the forward estimates.’

    • Frankly, the text is written so weirdly that I just don’t know. If the text meant to confuse the readers so that the minister could run with the suggested headline and no hard questions would be asked, then it’s worked beautifully so far.

      • I presume the repeal of the MRRT and the full range of related measures was estimated to save a net $10 billion over the forward estimates, which gives you the headline statement.

        However, the senate has blocked the repeal of some related measures, which means that only ($10 – $6.6) billion of the net savings has been legislated at this stage.

        The Government still wants to claim that they will repeal the remaining $6.6 billion of related measures, so they are still claiming the policy proposal will save $10 billion.

%d bloggers like this:
PageLines