Every year, the mining sector braces itself for what the federal budget is going to deliver in terms of industry investment, tax concessions, new taxes, mining royalties or any other revenue-related developments. This year was no different. And just like in every other year, the budget papers contained mixed news for the future of Australian mining.
WHAT THE BUDGET PAPERS SAY
“In 2015-16, company tax is estimated to be $3.5 billion (5.1 per cent) lower than expected in the 2015-16 Budget. This is primarily driven by the fall in commodity prices in recent years, lowering profitability in the mining sector,” the latest federal budget papers stated.
WHAT DOES THIS MEAN?
In a nutshell, what it means is the less money mining companies make – the less tax they pay. The fall in commodity prices means mining companies are less profitable and contribute less tax.
The multiplier effect also plays a part because companies in sectors such as mining services benefit from the boom and feel the impact of the bust as their profitability and subsequent tax burden changes with the boom/bust cycle.
SOME GOOD NEWS FOR EXPLORERS
The budget wasn’t all bad news when it comes to the mining industry. An announcement that was somewhat overlooked in the mainstream media was the $100 million ‘Exploring for the Future’ programme, which is aimed squarely at the mining and mining services sectors in regional and remote Australia.
$100 million will be provided to Geoscience Australia, the Federal Government’s geology and geography agency, tasked with producing geoscience data – that will be released each year for the next four years. Geoscience data is thought to be the key to unlocking Australia’s mineral exploration, with mining industry experts estimating that as much as 80% of Australia’s landmass is under-explored, particularly in the Northern Territory, Queensland, Western Australia and South Australia.