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Sales v Abbott, II

I might as well write down what I thought substantively about the Abbott interview. I've read Andrew Bolt doing a bit of digging this morning regarding the refugees/illegal entry point, and he actually convinced me. He convinced me in such a way that it's basically irrelevant: some UN documents he found described refugees as illegal arrivals. They then proceeded to say that receiving nations should basically ignore that 'illegal' status, so it's ultimately meaningless, but I guess you could say Abbott is technically correct when he describes refugees as illegal.

The bigger disaster was about BHP. Abbott says today that of course he had read BHP's documents and he thought Leigh Sales was referring to something else. You can look at the transcript and decide for yourself how plausible that is; the clincher for me is sentences like "you're not seriously telling me", which suggest that he basically thinks the carbon/mining tax is to blame because he thinks it to blame and he finds it impossible to believe otherwise.

Let's track what he actually says about BHP though. He insists that the mining and carbon taxes are to blame, even though the company's documentation explicitly rejects that idea and blames capital costs. His first rationale is that they basically lied, because they "didn't want to make a very bad situation worse by directly blaming the Federal Government". I'm not sure how this would make the situation worse, but okay.

Then Sales moves on to talking about the broader economy. Tony makes some pretty bizarre comments about how the carbon price will increase - $350 a tonne in 2050? Who projects to 2050, putting aside the fact that it's generally expected the price will fall when the tax changes to an ETS? After that Sales offers him a chance to talk about how the economy is suffering, and in a hilariously silly misstep, instead of talking in general terms or about some small businesses, he brings the interview back to BHP where he's already made a fool of himself.

That brings us to his second explanation of how the taxes are to blame for BHP's change of plans. Now he says that "capital costs are obviously more difficult in a situation where the company is massively impacted by the mining tax and the carbon tax". Now I'm no expert, but when I read this it struck me that Abbott doesn't really seem to know what a capital cost is. Source, emphasis mine...
Capital costs are fixed, one-time expenses incurred on the purchase of landbuildingsconstruction, and equipment ...... For example, a fossil fuel power plant's capital costs include the following:
  • Purchase of the land upon which the plant is built
  • Permits and legal costs
  • Equipment needed to run the plant
  • Costs involving the construction of the plant
  • Financing and commissioning the plant (prior to commercial operation)
They do not include the cost of the natural gas, fuel oil or coal used once the plant enters commercial operation or any taxes on the electricity that is produced
The carbon tax increases operating costs; the mining tax doesn't actually increase any costs, just reduces profits at the end.

The most worrying impression I get from Tony Abbott, when he does things like this or his "techhead" interview before the 2010 election, and from his frontbench when Joe Hockey says "but imagine how well we could be doing", is that they are making it all up as they go along.

(As an afterthought, Abbott leans heavily on statements by Jacques Nasser about tax. I'm pretty confused by that - the statements are about massive uncertainty in the tax environment. If there is any uncertainty around the mining and carbon taxes, it's only because nobody's sure whether they'll be around in a year, since Abbott's promising to repeal them. There's nothing uncertain about the taxes in themselves.)