Henry bites back hard over mining tax

TREASURY secretary Ken Henry said the new resources tax was poorly understood by the markets.

Treasury Secretary Ken Henry said the resources tax was poorly understood. Picture: Alan Pyke

KEN Henry and Warwick Grigor both studied economics at ANU. That's where the similarity ends.

At a lunch in Sydney yesterday Mr Grigor, head of the emerging miner-focused BGF Equities, slammed Dr Henry, who had just delivered his first public remarks since he recommended what we now know as the resource super profits tax.

Mr Grigor said that Dr Henry's address, which has been in part a defence of the tax, had "rapidly regressed" into a talk that reminded him of doing economics at ANU.

"To bring on a tax like this is to destroy our No. 1 comparative advantage in global economics," Mr Grigor, who serves on the boards of several listed miners, said. Money was leaving Australia, which was now seen as an "unreliable place for investment".

"International investors do no trust this Government, or Treasury for the advice it gives," he said.

In reply, Dr Henry chided Mr Grigor, saying: "You obviously didn't enjoy very much your studies of economics at ANU. You still wear the wounds today.

"I have to say that in contrast I very much enjoyed my study of economics at ANU." The retort drew laughter from those gathered in the Four Seasons ballroom -- mostly market economists.

Then Dr Henry got serious.

"It was not our view that this RSPT in any way affects the pattern of Australia's comparative advantage," he said.

Dr Henry said that taking a long-term view the reform should lead to more mining activity, not less.

Earlier, in his address, he had said that in the mid-1980s he was told the gold mining industry would not survive the removal of its exemption from income tax.

"The dire predictions of the past have not eventuated and it is unlikely that similar predictions today will fare any better."

When Mr Grigor, who was a top gold mining analyst in the 1980s, was asked about this claim after the lunch, he said: "That is crap."

The gold sector wasn't being taxed at the time, which made comparisons erroneous, he said.

Today's mining sector was already "paying its fair share of tax".

Dr Henry was "in an ivory tower in Canberra", Mr Grigor said.

In order for Australia to enjoy the benefits of its resources, miners had to take financial risks and have an opportunity to "enjoy reward", he added. "Do you think he's going to send his public service troops out to explore?"

Dr Henry argued the RSPT was poorly understood by the markets.