A retailing red herring

At the weekend a friend of mine went into an Adelaide fishing equipment store looking to update his gear for the Christmas-New Year break.

In the past, this fishing store has always found that when times are tough business stays strong because fishing is a relatively low cost form of recreation. But this time business is way down and it's not simply because people are using the internet to purchase goods.

The store knows its customers and believes that Australian political uncertainty is having a big effect on consumer spending in areas that are not normally vulnerable. And of course add the interest rate squeeze and online purchases and you have the reasons why that so far Christmas has been a poor retailing season.

So you can only imagine what will happen to the local economy if the government implements its new plan to take on the miners – almost certainly we will see a repeat of the disaster that contributed to the fall of Kevin Rudd as Prime Minister.

The Australian newspaper at the weekend confirmed the earlier reports in Business Spectator that the miners now fear that the government is to go back on its word and make the iron ore and coal miners vulnerable to increases in state royalties under the minerals resources rent tax. WA clearly has high royalties on the agenda. (Reading between Rio Tinto's lines December 3; and (A royal MRRT breakdown, December 8.)

The newspaper says that the miners are looking to restart their advertising campaign against the tax. While this would be a blow to the Gillard government, words are words. If the government decides to go down the path of confrontation then the only way to make them listen is to act – in other words again suspend all new projects. (Rio is poised for a capital strike, December 9.)

It was the spectre of a capital strike last year by the miners that had such a devastating effect on the Rudd government.

If the government provokes the miners into a capital strike (and I suspect the government will not be so silly) then we will see community uncertainty taken to an elevated level. Our fishing stores and all other retailers will have very hard times – and be very angry.

One reason for the lack of consumer confidence stems from the fact that WikiLeaks has shown that western politicians are masters at the use of half truths. And so when the Gillard government declared that "all” state royalties would be covered by the new MRRT they now say that "all” only referred to present royalties not future royalties.

That half-truth simply won't wash with Australians outside of Canberra, provided the miners show they are serious and the $10 billion iron ore plan of Rio Tinto is mothballed along with other expansion projects.

Australians will come to know well the words of Rio CEO Tom Albanese when he told the KGB: "I think it would be incredibly shocking for us to see the government go back on what they agreed with us back in July. We are making investments on the basis of the MRRT. We are putting our faith and confidence in the Australian government to deliver what they committed to in July” (KGB: Tom Albanese, December 3).