"Treasurer of Australia doensn't understand basic business finance. ROFL. Wacha smokin?"
yeldub I am talking relatively simple issues that someone in his position should understand, there are numerous examples of his lack of understanding if you followed the supertax debate closely, here is but one:
Swan doesn't appreciate the impact of tax Matthew Stevens From: The Australian May 14, 2010 12:00AM
IT can't really be that the federal Treasurer does not understand the fundamentals of capital management that drive large-scale commercial investment.
But that is one of the damning possibilities raised in an incendiary note from a senior Macquarie Private Wealth investment adviser.
The note, which was sent out late last week but is still finding its way around the boardrooms of global mining, claims that in a discussion with Macquarie analysts, Wayne Swan "apparently did not understand" a question that focused on the difference between the government bond rate and a company's average weighted cost of capital.
"Apparently Wayne Swan thought that the long-term bond rate was a companies (sic) cost of capital," the adviser reported.
The note reported that "a few Macquarie analysts attended a breakfast meeting with Wayne Swan" and one asked why the 40 per cent RSPT kicked in at the long-term bond rate rather than something closer the miner's average weighted cost of capital, which would historically be nearer 10 per cent.
"Anyone who has studied finance knows that a company will not invest in a new project unless that project will generate a return on investment above the companies cost of capital," the adviser wrote.
"Apparently Wayne Swan did not understand the question. Apparently Wayne Swan thought the long-term bond rate was a companies cost of capital."
The Australian sought a reponse from Swan's office, but has not received one.
And needless to say, Macquarie Group has run kilometres from the content of this note.
"Macquarie Private Wealth adviser in question made it clear in his note that he was expressing his own personal views and not those of the company," the firm said.
"This is clearly the case.
"Macquarie re-reiterates that the views expressed in the note are not those of the Group and that partisan political views have no place in company research and analysis." But what Macquarie has not done is to say publicly that its "senior investment adviser" misreported or misrepresented the content of the Treasurer's conversation with its analysts.
And anyway, the problem here for Swan, to a degree, is not whether this note accurately reflects the substance of his chat but rather that the claims are fertiliser to a belief becoming embedded in the resources sector -- that neither he nor the Prime Minister truly appreciate the damage that has already been caused by the Resources Super Profits Tax.
Let alone what the new regime may cause when, and if, it becomes law.
Meanwhile, the Minerals Council of Australia yesterday became the latest delegation to emerge bitterly frustrated from a date with the Treasurer's ill-named Resource Tax Consultation Panel.
As we noted yesterday, this panel has nothing to do with consultation.
It has everything to do with building the pipelines of project data that will allow the government to effectively implement its new tax.
The fact that the panel is currently slated to produce an interim report on its consultation on May 24 says it all really.
Why?
Because it is now not slated to meet either BHP Billiton or Rio Tinto until May 28 and 29.
I mean seriously, what is the value of any report on the successful progress of the RSPT regime if it is written without the contribution of the two biggest miners in Australia?
Yesterday's MCA delegation was led by deputy chief executive Brendan Pearson and he later echoed Xstrata's complaint that the remit of the consultation process was far too narrow.
At one point yesterday the MCA quizzed the panel on just why the new tax had been pitched at 40 per cent.
Well, because that makes it consistent with the rate at which the petroleum resources rent tax is charged, even though it is quite different to the proposed regime in its construction and enforcement (it is not retrospective, it allows for a higher rate of return and is not charged quite so high up the revenue lines).
But, the MCA continued, why was the PRRT set at 40 per cent? Well, that was a question too far, apparently.
No one on the panel knew and nor did any of the Treasury boffins sitting down the back of the room being paid to help out with detail such as this.
"The MCA has previously expressed deep concern that the panel's terms of reference are too narrow and explicitly exclude the key policy parameters of the proposed tax," Pearson said.
"Those concerns were not allayed by today's meeting.
"The meeting confirmed that fundamental aspects of the proposed tax design, including the 40 per cent rate and the inclusion of existing projects, are off the table despite the fact that there was no opportunity for consultation prior to the announcement of the new tax on May 2. It is not satisfactory to seek the minerals industry's co-operation on the world's first super tax on mining while forbidding discussion on its key elements. The MCA has this week written to the government requesting that it urgently revise the Panel's terms of reference to include its key design features.
"Failure to do so will only increase suspicion that the government is not serious about meaningful consultation on the proposed tax."
Pearson's commentary actually seriously understates the level of incredulity and anger within the sector about the government's refusal to consult over the framework of the RSPT and its continued reliance on distortion and deception to market what is a fundamental reconstruction of the investment settings for the resources sector.
It is plain that miners of every size and maturity have pretty much abandoned any hope that the consultation they were promised through Ken Henry's review and the government subsequent lengthy, private contemplation of its content, is anything but a charade.
As one very senior mining industry director told me yesterday: "In these situations you have to decide whether you can get traction, whether there is any benefit to be gained from engagement.
"You have to ask yourself, 'what do we want to achieve' and then 'can we achieve it'. And if you cannot get the right answers to those questions, if you can't see a way to engage, then you really have to go to war."
He went on to say the miners now have to "play the ball and not the man, to focus on the policy, not the politicians presenting the policy. But we're getting ready to play. And we're going to go hard."
