That's it - the RSPT is dead
Julia Gillard's victory in the Labor leadership spill ensures the resources super profits tax is dead.
The Labor leadership spill ensures the resources super profits tax is dead. While the RSPT started as an investment theme, it's now just politics. And investors often struggle to price political themes.
Rudd was a victim of his own political misjudgment and the amateur advice proffered by his 'uni grad' advisors. Many within the Labor party will struggle to comprehend Rudd's fall from grace. It has been so swift it seems surreal. But it's real enough. From "walk on water” approval ratings six months ago, Labor polling has plunged. As an example, the Penrith by-election on Saturday yielded Labor just 34 per cent of the vote. The Libs achieved 66 per cent. Labor is deluding itself if they think this was purely a state issues election.
What not to do
Rudd's list of political missteps will one day make a good "what not to do in politics” book. First we had the ill considered home insulation scheme. Not many government policies lead to unintended deaths. This one did. Four tragic deaths and up to 174 house fires later, the scheme has been shelved. And almost 120,000 houses still need safety inspections. Voters were stunned.
There has been a simmering grass roots revolt against the cost of the Building the Education Revolution (BER). Many state schools and their parents are demanding to know why their new buildings cost twice as much as similar buildings in the Catholic school system. Voters were annoyed.
In April, while still relatively popular, Rudd massively increased cigarette taxes. Smokers, many of whom are blue collar Labor voters became very angry.
The real clanger was a fortnight later – the RSPT. In one stroke Rudd had alienated one of the best funded groups in the country (miners). This would have to rate as one of the dumbest political moves since Chifley tried to nationalise the banks 60 odd years ago. Labor nick-named Mark Latham "crazy brave”. But I doubt even Latham would have tried this one on.
There was no industry consultation before the tax announcement. Even after it was announced, One Steel (OST) was twice refused a meeting because they were considered a "manufacturer”. Because of its particular circumstances, OST is faced with closing its steel works in Whyalla if the RSPT goes ahead as advertised. They are the biggest employer in a town of 22,000. Solid Labor voters as well. KABAM! POW! and thanks for coming. Only after the intervention of SA Premier Rann could OST present their case. Tony Abbott is being generous calling this "amateur hour”.
Former Labor senator Graham Richardson said earlier this week the miners are now spending a million a week advertising the stupidity of this "super tax on profits”. And he concludes "their ads are 50 times more effective than the government's ads”. What was Rudd thinking? Who was advising him?
Enter stage left: Ken Henry
Although Rudd has since rejected the idea, on Monday Rudd's Treasury Secretary helpfully suggested the RSPT should be extended to all industries, especially banks and retailers. I think there are three possibilities here. Ken Henry is either politically dumb, gone completely mad or he is a secret admirer of Tony Abbott. Surely Kevin Rudd had enough enemies without adding two of Australia's largest industries to that ever growing list. There is another possibility. Henry is just a nave greenie. Reportedly he partly drafted his tax review while caring for northern hairy-nosed wombats in central Queensland. Too bad wombats don't vote.
The spill result is great news for investors, because the mayhem Rudd unleashed over the last six or so months will cease and the RSPT in particular will be consigned to the history books with him. And I strongly suspect Secretary Henry won't be too far behind.
For investors in Australian-based miners, not to mention One Steel, this is very good news. These investments have fallen the hardest. They'll bounce the largest. I suspect Telstra shareholders will smile as well.
Mike Mangan is a portfolio manager at 2MG Asset Management. Both he and 2MG have investments in the sectors and stocks mentioned.
Rudd was a victim of his own political misjudgment and the amateur advice proffered by his 'uni grad' advisors. Many within the Labor party will struggle to comprehend Rudd's fall from grace. It has been so swift it seems surreal. But it's real enough. From "walk on water” approval ratings six months ago, Labor polling has plunged. As an example, the Penrith by-election on Saturday yielded Labor just 34 per cent of the vote. The Libs achieved 66 per cent. Labor is deluding itself if they think this was purely a state issues election.
What not to do
Rudd's list of political missteps will one day make a good "what not to do in politics” book. First we had the ill considered home insulation scheme. Not many government policies lead to unintended deaths. This one did. Four tragic deaths and up to 174 house fires later, the scheme has been shelved. And almost 120,000 houses still need safety inspections. Voters were stunned.
There has been a simmering grass roots revolt against the cost of the Building the Education Revolution (BER). Many state schools and their parents are demanding to know why their new buildings cost twice as much as similar buildings in the Catholic school system. Voters were annoyed.
In April, while still relatively popular, Rudd massively increased cigarette taxes. Smokers, many of whom are blue collar Labor voters became very angry.
The real clanger was a fortnight later – the RSPT. In one stroke Rudd had alienated one of the best funded groups in the country (miners). This would have to rate as one of the dumbest political moves since Chifley tried to nationalise the banks 60 odd years ago. Labor nick-named Mark Latham "crazy brave”. But I doubt even Latham would have tried this one on.
There was no industry consultation before the tax announcement. Even after it was announced, One Steel (OST) was twice refused a meeting because they were considered a "manufacturer”. Because of its particular circumstances, OST is faced with closing its steel works in Whyalla if the RSPT goes ahead as advertised. They are the biggest employer in a town of 22,000. Solid Labor voters as well. KABAM! POW! and thanks for coming. Only after the intervention of SA Premier Rann could OST present their case. Tony Abbott is being generous calling this "amateur hour”.
Former Labor senator Graham Richardson said earlier this week the miners are now spending a million a week advertising the stupidity of this "super tax on profits”. And he concludes "their ads are 50 times more effective than the government's ads”. What was Rudd thinking? Who was advising him?
Enter stage left: Ken Henry
Although Rudd has since rejected the idea, on Monday Rudd's Treasury Secretary helpfully suggested the RSPT should be extended to all industries, especially banks and retailers. I think there are three possibilities here. Ken Henry is either politically dumb, gone completely mad or he is a secret admirer of Tony Abbott. Surely Kevin Rudd had enough enemies without adding two of Australia's largest industries to that ever growing list. There is another possibility. Henry is just a nave greenie. Reportedly he partly drafted his tax review while caring for northern hairy-nosed wombats in central Queensland. Too bad wombats don't vote.
The spill result is great news for investors, because the mayhem Rudd unleashed over the last six or so months will cease and the RSPT in particular will be consigned to the history books with him. And I strongly suspect Secretary Henry won't be too far behind.
For investors in Australian-based miners, not to mention One Steel, this is very good news. These investments have fallen the hardest. They'll bounce the largest. I suspect Telstra shareholders will smile as well.
Mike Mangan is a portfolio manager at 2MG Asset Management. Both he and 2MG have investments in the sectors and stocks mentioned.
Share this article and show your support
Call 1300 880 160
Start a chat
Schedule a call
