Whew: mining corps, banks, got through okay

With mining companies (which we’ll call “miners” to make it sound like we’re talking about the workers instead of the investors who actually get the money) and banks posting frankly hilarious profits, this is a good time to take a moment to remember how close we came to destroying them with the RSPT (in the sense of slightly reducing their profiteering as they plunder our one-off resources), and how staggeringly inconvenient any similar move on the banks would be.


*giggle*

If you look at their enormous profits and then subtract 40% of the part of those profits over a particular absurd amount, then they’d only have their full profits plus 60% of the unprecedented extra. Only 60% of a huge amount of money? What would be the point of going on? What kind of investor would participate in such an industry?

Most of them Not a single one.

Anyway, we might not quite have had a total crushing defeat for Labor at the polls, but their spines were broken and they’ll never dare threaten this country’s prosperity – by which of course I mean the prosperity of the richest tiny portion of the country and overseas investors – ever again. And in the end, maybe that’s even more satisfying than the victory on the tax.

Suck it, ordinary Australians.

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16 responses to “Whew: mining corps, banks, got through okay

  1. narcoticmusing

    “but their spines were broken”

    If they got any more spineless, we’d have to reclassify the lot of them as invertebrates.

    I agree with you 100% Jeremy.

    I think the super profits tax for mining is a similar scenario that we see with public-private partnerships. So much pandering to the private, so much neglect of the public side (hence we’ll agree to a contract for $x for $y services and then the company just says, well I need $x+10 knowing that the services are essential so they can blackmail govt into it – but instead of taking a stand and suing for breach, govt just pander and take it).

    Krugman wrote a piece recently (sorry too lazy to link) but he basically talked about how foolish it is to use one off capital and not consider what it can do in the future. So, for example, selling off an asset for what its value is right now, rather than its capacity to generate revenue for you. Yes, yes, I get that the value is linked to the revenue capacity but the point was that you make a loss in the long run. It was basically criticising the fashionable public-private ‘partnerships’ (aka outsourcing risk to blame the company who has an interest in profit rather than service improvement).

  2. jordanrastrick

    I agree that the RSPT should have gone ahead, that the miners were ruthless in killing off a great piece of public policy in their own self-interest.

    I’m still yet to see anything like a coherent justification for such a tax on the banks, published here or anywhere else.

    Banks aren’t extracting an economic rent on a finite resource owned collectively by the people of the nation. They are are a service industy.

    The banking sector in Australia is arguably more competitive than supermarkets, search engines, airlines… hell I think I already constructed a list like this on a previous thread here which no one bothered to answer IIRC.

    The only justification to tax banks differentially seems to be that they’re generally profitable, which is true of many industries and so says nothing, and that its easy, because they’re unpopular. Of course if we follow that logic we should probably tax lawyers and Muslims at a higher rate.

  3. More that we should use this opportunity to more tightly regulate some of the banks’ more parasitic and odious practices – like charging account keeping fees.

  4. jordanrastrick

    …..

    No, we should take the opportunity to tightly regulate some of LAWYERS more odious fees. Screw billables. You’re all on $20 an hour for the rest of your life.

    I tell you, I’d much rather live in an Australia with government mandated cheaper access to the legal system than government mandated cheaper banking.

    I mean, for the love of god, there are several account keeping fee-free products on the market right now. So competition has already given people this option. You, however, want to make it illegal for me to get an acccount that has such a fee, if a bank happens to offer one that is attractive in other respects? Why?

    Can you make an argument about the banks that isn’t just name calling? Saying something is parasitic or odious doesn’t make it so, even if most of your audience instinctively agrees with you.

    I don’t like having to use all this ridiculous emphasis and snootiness. I really do prefer a reasoned debate, on the merits of a case, honestly. But no one ever seems to want to have one about banks. Ever.

    And the worst part is banks do need to be carefully regulated in some respects, for example with regards to financial stability. But then everyone wants to ban them from charging you a buck to withdraw money (my GOD Eftpos and ATMs are light years more convenient and secure and cost effective than every other technology civilisation has ever had for paying for things, and yet apparently they still manage to be the modern chains of our oppression or something) and the whole case for any regulation just starts looking stupid.

  5. Yep – Labor completely fucked up our opportunity to obtain a fair share of Australia’s mineral wealth with their botched and cowardly efforts over the mining tax. How could they fail to sell something that would be of such enormous benefit to Australia at the expense of only a small cost to the incredible profits of some massive corporations.

    Mind you the sycophantic interference run by Labor’s ideological enemies played a big part. Theirs was a betrayal of the future of our country and its people in return for cheap points in a meaningless personal crusade.

    What a wasted opportunity.

  6. Personally, I believe banks need regulation beyond the obvious and existing security requirements (eg minumum capital reserves) and to prevent anti-competitive behaviour (eg collusion on setting interest rates). For example, abuse of the natural power of oligarchy by price gouging (eg the spurious claims of “cost recovery” in charging inter-bank ATM fees of $2+ when the real cost is neglible). But as for special additional taxes on banks merely because they’re super-profitable, sorry, I’m with Jordan on that one: it seems like a penalty applied solely on success and the almost universal hatred of banks.

    Mining company super-profits on the other hand are different because as Jordan points out, those super profits are basically “economic rent on a finite resource owned collectively by the people of the nation”.

  7. @jordanrastrick
    Spent all my working life in two of the big four and a few years in one of the Asian based “biggies”.
    The latter years spent in M&A poking around banks in every part of the world and from what I have seen Australia has something to be very proud of. Yep they make good profits but as a return on capital it is middle-of-the-range.
    The big threat to “our” banks is that they become less profitable and the overseas banks figure they can do better and come in and aquire the best of our banks. Ask New Zealanders how they feel about their bank ownership.
    My only complaint about Australian banks is how little the executive understand of the underlying technology. Smart cards are a good example of a great opportunity lost.

  8. narcoticmusing

    Jordan: I could give you a couple arguments without using nasty name calling – the fees are completely disproportionate to the cost incurred and inconsistent (something they’re in court for a lot). Their products often fail basic tests within the Trade Practices Act but they use bully tactics to prevent prosecution. They are an oligarchy; not really competing at all, because they are so heavily protected. We see building societies etc going under simply due to being denied even a similar level of protection as one of the pillar banks (anyone remember Pyramid?). When we, the tax payers, took on all the risk of the banks, how did they respond? Was it responsible? No (eg. seeing we have all the risk, the CEO need not be paid for said risk). Instead, we see McQ go off and borrow up big because all their risk is paid up in full by the Australian tax payer.

    Hmm… lawyers… I agree that we should all have access to the legal advice, but do you really want to encourage access to the legal system? I will give you a counter argument for you to chew on. The charges are prohibitive to reduce the amount of people entering the system.

    Yes, there are sharks out there, no doubt, but even the Law Reform Commission has acknowledged accessing the legal system is something to be discouraged (both due to the onerous nature of it on the individuals involved and the cost to the state – think of all the mandated pre-court mediation now required). There is also much tighter regulatory regimes for lawyers than banks. Lawyers face a high degree of liability (ie risk) in advising clients (lawyers are the most common profession to be the subject of a law suit for example due to the automatic fiduciary responsibility that is placed upon them regardless of the advice). The fiduciary nature means they might be held responsible for the entire losses made by a company for no other reason that the lawyer was the only one left with $ still (we actually have a high court judge that faced that and it has shaped his views since).

    I’m not sure that lawyers per se are the problem – I accept that some law firms and individuals do wrong, but in the common law system, lawyers perform a critical function. I also don’t think more litigation and more people in court is the answer (with of course the caveat that all people should have a right to legal advice when needed, for example, if they are charged with an offence).

  9. The mine owners spent 23 million to oppose the resource tax . The MSM were the beneficiaries . It was never in their interest to explain that tax, their interests were served by confusion and delay. They sold lots of add space ,just more very rich people looking after themselves .

  10. narcoticmusing: “The charges are prohibitive to reduce the amount of people entering the system.” Whether a system designed explicitly to prevent access to the law “both due to the onerous nature of it on the individuals involved and the cost to the state” is at all ethical is seriousy questionable. But the idea that prohibitive cost is the method to ration justice is inherently unfair as it restricts opportunity only to the wealthy.

  11. “No, we should take the opportunity to tightly regulate some of LAWYERS more odious fees. Screw billables. You’re all on $20 an hour for the rest of your life.”

    Yeah, professionals who spent five years at university, plus a year of professional training, plus in the case of the Bar another three months or so in the readers course, should certainly be on $39k a year, significantly less than the average wage. That’s entirely fair and reasonable.

    Tell me, Jordan, what do you do for a living and what do you earn? Since you’ve decided to make this an ad hominem and attack me through my profession.

    I’m pretty disappointed in your decision to run that line, to be honest. I’d thought better of you.

    The comparison doesn’t even work because we’re talking about organisations making stupidly huge profits, and taxing those companies – not reducing individual incomes to a fraction of the average wage. If you’ve got some law firms making “super profits”, then by all means, apply a super profits tax. Otherwise, the comparison doesn’t work at all.

    What a contemptible attack.

    PS I don’t believe you can just go into your local bank and get a fee-free account. You can get one through a credit union, but then you have to pay more every time you use an ATM and you probably don’t live anywhere near an actual branch.

  12. jordanrastrick

    Yeah, professionals who spent five years at university, plus a year of professional training, plus in the case of the Bar another three months or so in the readers course, should certainly be on $39k a year, significantly less than the average wage. That’s entirely fair and reasonable.

    OK, I’m bad at this sarcasm on the Internet thing. I don’t actually think lawyers should be paid $20 an hour. That was supposed to be so obviously absurd that you wouldn’t think it was serious.

    My point is that its insane to dictate what a professional services industry charges based purely on how the public perceives them. Its as easy for you to attack banks in the abstract as it is for someone else to attack law firms. But I’ve know people who work or have worked in banks, as tellers on the ground and as risk analysts in the central office; and frankly they find it kind of upsetting that the rest of society presumes to call their industry parasitic scum without any real knowledge of their costs of doing business.

    The case for regulating legal fees more tightly is stronger than that for regulating banks, IMO, because legal representation is a fundamental democratic right, but financial services aren’t. But I wouldn’t increase the regulation on either, for the record.

    Tell me, Jordan, what do you do for a living and what do you earn? Since you’ve decided to make this an ad hominem and attack me through my profession.

    Well, since you asked, I do IT support for an insurance broking / risk management company. I earn about $45,000 p.a., with little prospect for advancement if I stay on this particular career path. But its a lot better than any job I’ve had since I dropped out of university (with mental health problems that were of course undiagnosed at the time), and its more than adequate to meet most of my needs, so I’m pretty grateful for it at the moment.

    I’m pretty disappointed in your decision to run that line, to be honest. I’d thought better of you.

    I apologise. I should have tried to be calm and reasonable in the first instance rather than outrageous-to-get-across-a-point or whatever SB style attention seeking antics can be called.

    But you’ve posted similar points about banks here before, and not really engaged with any of the measured arguments in the past that I’ve made against them. It was unreasonable for me to snap as though this were a continuation of a debate from long ago, but that was where I was coming from. And like I said, almost no one ever really ever wants to have the debate on reasonable terms (narcoticamusing is a notable exception above, and I’ll move on to what he’s said later.)

    The comparison doesn’t even work because we’re talking about organisations making stupidly huge profits, and taxing those companies – not reducing individual incomes to a fraction of the average wage. If you’ve got some law firms making “super profits”, then by all means, apply a super profits tax. Otherwise, the comparison doesn’t work at all.

    If you want to force banks to cut certain fees, than either other fees go up, their employees’ pay goes down, or their shareholder’s lose out.

    The first (which is most likely) achieves nothing, although the added administrative costs of complying with regulation means that the increases passed on to consumers are almost certainly slightly higher than the reductions. The second is analogous to my silly point about lawyers. The third probably doesn’t bother you, but bank shares are far from some sort of exceptionally well performing investment, and to be honest continuing the analogy I reckon your average law-firm partner/owner is better off than your average bank shareholder.

    What a contemptible attack.

    As I said, I’m not actually out to attack lawyers. I’m out to stop other middle class professionals (including my dad, who I often argue this same issue with) launching unjustified attacks on bankers, based mainly it seems on general anti-elitist anti-wealth populist sentiment that is suspicious of how any income earner or company that makes more than average could possibly be “really” earning it without trickery and fraud.

    PS I don’t believe you can just go into your local bank and get a fee-free account.

    Of course you can’t get an account that’s completely free of any fee. Providing a bank account to someone costs more than zero dollars; if you want it provided free that means you want to legislate banks run a loss.

    But the “parasitic” account keeping fees are avoidable.

    For instance, first hit on Google,

    http://www.nab.com.au/wps/wcm/connect/nab/nab/home/personal_finance/5/1/2

    (haven’t looked in detail so I’m not sure what the tradeoff is.)

    You can get one through a credit union, but then you have to pay more every time you use an ATM and you probably don’t live anywhere near an actual branch.

    I’m in the process of switch my day-to-day transactional spending to ING Direct and their Orange Everyday Account.

    I don’t live anywhere near an actual branch, as they don’t have them. That makes me happy, because I never need to go into a branch, and almost certainly a reason ATM fees and account keeping fees and the rest are higher than they could be is that they cross-subsidize the existence of branches for the 10% or whatever it is of people who can’t or won’t do their banking online and at ATMs. But of course when major banks try to reduce the number of branches they have, there’s an outcry.

    I will have to pay the $2 to use ATMs, but it doesn’t bother me that much, and ING refund it if I withdraw $200 or more. So not only do they charge no fees themselves, they will compensate me for the fees I incur using other banks’ facilities to access my account.

    As I’ve argued before, I think if the retail transactional banking market is undercompetitive, its because most people are too apathetic to go to the effort of switching to less expensive accounts and providers. That means the case for the government legally intervening is REALLY BAD. “Save the rich westerners from banks profiting from their lazy reluctance to get themselves a better deal.” Please. There are about 72,549,331 more important real problems that the government should be dealing with right now. The issue of bank fees is a sideshow and a distraction and a farce, and politicians would sensibly ignore it if the public and the media didn’t love to whinge so much about it.

  13. narcoticmusing

    “There are about 72,549,331 more important real problems that the government should be dealing with right now. The issue of bank fees is a sideshow and a distraction and a farce, and politicians would sensibly ignore it if the public and the media didn’t love to whinge so much about it.”

    This is possibly the BEST reason ever to not bother taking on the banks, regardless of if your reasons are well justified or just fallout from anti-elite anti-wealthy sentiment. But then, here comes the crunch, how do we fund the 72,549,331 more important real problems? Can’t use something like a mining tax because that is a finite resource, much like selling off an asset. Hmm… perhaps a perpetual super profits tax? Ok, ok… I know… now I’m just being cheeky. :)

  14. Splatterbottom

    Jordan: “The case for regulating legal fees more tightly is stronger than that for regulating banks, IMO, because legal representation is a fundamental democratic right”

    Maybe, but only for criminal matters, which are subsidised by the state. The fact that there are so many lawyers means that the state doesn’t have to pay much for their services.

    The main problem with lawyers is that to do their job properly they have to be professional pricks. They are paid to see only one side of the story, and to argue hard for it to maximise their client’s advantage. That is why so many pricks become lawyers, and so many decent people become pricks after a few years practicing law. This is probably due to the nature of the legal system.

    The type of regulation we need generally is to extend the criminalisation of anti-competitive behaviour from a few specific instances to a general offence. This should have a bigger effect on the banks as there is less competition in that sector than in the legal sector.

    If you want to shift the balance more to individuals bringing claims against big corporations then change the rules to allow for larger contingent fees, change the rules about who pays the costs and allow more scope for exemplary damages. The upside of that is better access to justice for individuals and better behaviour from corporates. The downside is sleazy vultures like John Edwards, who make tens of millions of dollars out of other peoples’ misery, and corrupt the political process into the bargain.

  15. jordanrastrick

    Can’t use something like a mining tax because that is a finite resource, much like selling off an asset. Hmm… perhaps a perpetual super profits tax? Ok, ok… I know… now I’m just being cheeky.

    The type of regulation we need generally is to extend the criminalisation of anti-competitive behaviour from a few specific instances to a general offence.

    I’ve never liked the idea of the criminal law as an instrument to create competition, and I think anti-trust in general has had some pretty bad consequences around the world (as well as a lot of good ones.) Basically its often too ad-hoc or too much of a blunt instrument.

    And I don’t like a specific tax that’s just on the banks. There’s no justification for the targeting of the sector.

    However an idea I’ve toyed with in the past is a market-share tax. As in the corporate tax rate is 26% if you have less than 25% market share, 28% if you have 25%-50%, 30% if you have 50%-75% and 32% if you have 75%-100%. Or something like that.

    Of course it becomes important to carefully define what counts as a market and a share of it, there’s potential for overreach etc. You could maybe legislate some body (maybe the ACCC?) gets to pick a maximum of 20 industries to which the tax applies, and then to maximise revenue the incentive is to target the industries in which a lack of competition is likely to be doing the most economic harm.

    If you want to shift the balance more to individuals bringing claims against big corporations then change the rules to allow for larger contingent fees, change the rules about who pays the costs and allow more scope for exemplary damages. The upside of that is better access to justice for individuals and better behaviour from corporates. The downside is sleazy vultures like John Edwards, who make tens of millions of dollars out of other peoples’ misery, and corrupt the political process into the bargain.

    There’s been a developement in the U.S. on this access to justice point that I have found interesting although its probably a bit too ultra-capitalist to be popular around here. Investors, I think typically private wealth funds, have started investing in lawsuits. I.e. a potential plaintiff with no money will go to them and they assess the merits of the case, then say “We will give you $120,000 cash now and pay all the legal fees on this case, but if you win we get to keep all the damages.”

  16. narcoticmusing

    I understand the basis for the US model, but disagree with it – it is far too similar to their idea of credit being a self-funded form of welfare. I guess my main concern is that it makes a mockery of the entire point of damages being for compensation and instead promotes a litigious society out to profit from others through exploitation. I agree that there should be access for all to the justice system, but I also think people should be discouraged from accessing it (this of course doesn’t include where you don’t have a choice – criminal law is always separate in these arguments because by its very definition it is an offence against the State so the State is obliged to cooperate in bringing about justice – but there are other times when you are forced into the legal system and in those moments should also have access).

    Market share taxation will simply be too easy to be dodged, particularly if you leave it in the hands of the ACCC (C’mon, when was the last time they didn’t embarrass themselves in litigation?)

    The idea of a super profits tax, if applied evenly (and not just to mining companies or banks for that matter) does enable only those who are generating “super profits” to be taxed. Thus it wouldn’t pick on one sector unless that sector, coincidently, was consistently making super profits.

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