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Federal election 2013: how will your industry be affected?

20 August, 2013

As election day approaches, IBISWorld weighs in on key Labor and coalition policies — and the industries they will affect.

Read about Workplace Reform and Energy

Resources

The future of the Minerals Resource Rent Tax (MRRT) and gas policy are the largest issues at stake for the mining sector at the election.

The oil and gas extraction industry is forecast to grow strongly in the next five years, in part by using controversial new technologies such as fracking to access existing resources. Growing investment is expected to directly benefit the petroleum exploration industry, oil and gas extraction industry, and a number of construction and mining support service industries.

The issue of gas reservation — that is, reserving a portion of gas output for domestic consumption — has been raised by large gas users on the eastern seaboard. Currently gas reservation polices are only in place in Western Australia, where they were one of the conditions of approval for the North West Shelf Project. As domestic gas prices are lower than world gas prices, expansion of gas reservation policies could deter future investment in the industry. Conversely, sudden increases in energy costs could affect a range of energy-intensive manufacturing industries.

Labor supports the MRRT and the Petroleum Resource Rent Tax (PRRT). The MRRT is a 22.5 per cent tax on profit that applies to iron ore and coal projects once the minimum profit threshold of $75 million is reached. The MRRT includes a 40 per cent PRRT, which applies to all onshore and offshore oil and gas projects. The PRRT came into effect in 1988 and was extended in 2010 to cover all onshore projects, including the North West Shelf, oil shale and coal seam gas projects. Coal seam gas developments are supported by the party, subject to approvals, as are oil shale developments. Labor does not support gas reservation polices.

The coalition intends to get rid of the MRRT but keep the expanded PRRT in place. Reflecting the position of the National Party, the coalition supports coal seam gas developments, subject to approvals. It has an additional caveat: that landholders agree to developments when they are on prime agricultural land.

The coalition supports oil shale developments. It does not support retrospectively applying gas reservation polices, but may introduce them for future developments.

There is bipartisan support from the major parties for the following: the use of Enterprise Migration Agreements in the mining sector, uranium mining, the creation of a nuclear waste dump in Muckaty Station in the Northern Territory and mining in Tasmania's Tarkine region.

Both parties support the development of gas reserves in the Bowen Basin in the Kimberley, subject to approvals. The removal of the MRRT would improve industry profitability, in the absence of changes to state-based royalty schemes.

Broadband network

One of the backdrops to the 2013 election is each party's stance on the controversial National Broadband Network. While download speeds, costs, technology and design are key differences between the Labor and coalition plans, the parties agree that broadband speed and availability can be greatly improved across Australia.

The Labor government has already begun to build the NBN, with rollouts commencing in key metropolitan and rural areas. Full completion is expected in 2021. Labor prices building the NBN, which will involve overhauling the existing copper network system through a series of fibre-to-the-premises upgrades, at $44.1 billion.

The scheme is anticipated to allow potential download speeds of up to one gigabit per second, with full utilisation of fibre to connect homes, businesses and rural properties to network cabinets. Under Labor, the NBN is planned to be distributed through universal pricing under a government-owned monopoly wholesale network.

Conversely, the coalition has vehemently promoted its own version of the NBN following a spate of rollout difficulties and connection issues suffered under Labor. Under the coalition's proposal, the NBN is expected to be priced at just $29.5 billion and take two years less to build. Maximum speeds of 100 megabits per second are anticipated through utilising a fibre-to-the-node approach, connecting fibre to neighbourhood cabinets and using copper to connect homes and businesses.

Under the coalition's plan, competition will be encouraged, with wholesale prices determined by the ACCC.

A number of unknown factors remain, including the commercial feasibility and potential usefulness of achieving such high download speeds under Labor's NBN, the ageing of the copper network system and how to continue on from current operations if the coalition comes into power.

Coming up next: Transport and Manufacturing

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Andrew | Friday, August 23, 2013, 10:10 AM
Why shouldn't the consumer pay for the connection from the street. Why should everyone be given a rolls royce system. Open up the market, and the providers can come up with marketing that incorperates a deal to install the fibre to the house or business in their deal.