Global trade barriers a brake on economic growth, says BHP

BHP yesterday announced a loss of $US6.4bn ($8.3bn), one of the biggest from an Australian company.

Andrew McKenzie has slammed a proposed tax on iron ore of $5 a tonne.

The head of BHP Billiton (BHP) has warned of the dangers rising global protectionism poses to fragile economic growth after the mining giant handed down the worst loss in its 130-year history.

BHP yesterday announced a loss of $US6.4 billion ($8.3bn), one of the biggest from an Australian company, after the miner’s earnings were smashed by a combination of weak commodity prices, falling asset values and a huge clean-up bill from the Samarco disaster in Brazil.

The company also took an axe to the dividend it pays to its 600,000 Australian shareholders. This year’s 30c payout is 76 per cent lower than last year’s.

After the release of the results, BHP chief executive ­Andrew Mackenzie slammed a proposal from West Australian Nationals leader Brendon Grylls to hit the company and fellow mining heavyweight Rio Tinto with a new $5-a-tonne iron ore tax, describing the plan as “unfair and anti-job creation”.

The proposed tax, which would raise about $7.2bn over four years, was designed by Mr Grylls as a wedge to force a resolution over the system of GST distribution and relieve pressure on the state’s finances.

“We’ve already contributed massively ... to the coffers of Canberra, WA and the Pilbara through the hard work and ingenuity of our people and the far-sightedness of our investors. That spreads right across Australia, it lifts the takings in the coffee shops and taxis on the east coast,” Mr Mackenzie said.

“So we’re slightly perplexed that we, as the two companies having made this massive contribution to the country as a whole, are being the ones asked to fill the shortfall created by others.”

Asked about the federal government’s decision last week to block Chinese parties from bidding for NSW’s Ausgrid, he demurred but expressed concern about the potential for increased economic protectionism.

“I would continue to urge all nations of the world to embrace free trade at a time when I think there are rising signs of protectionism, which ultimately will depress world economic growth and be very bad for an export-driven country like Australia,” Mr Mackenzie said.

The Brexit vote in Britain and the anti-trade agreement policy positions adopted by Donald Trump and Hillary Clinton in the US have been seen as threats to global free trade.

Mr Mackenzie said trade co-operation between Australia and China was “critical” and Australia “absolutely” had to remain open to free trade with China.

While noting there were aspects of China’s foreign policy position that “not all people would agree with” — an apparent reference to its increased militarisation in the South China Sea — other Chinese initiatives such as the Asia Infrastructure Investment Bank held “tremendous potential”.

“It’s so important that Australia is part of that and it’s absolutely critical for the future of BHP,” he said. BHP is the second-largest company in Australia and one of the most widely held stocks in the country.

Beyond its 600,000 Australian investors, almost every super fund in the nation holds some exposure to the company.

While BHP expects its profitability to rebound next year as cost-cutting and restructuring efforts kick in, Mr Mackenzie warned he expected the price of iron ore — Australia’s biggest export — to weaken as more supply came into the market.