Tax model is failing

THE Tasmanian Government’s budgetary problems are simple – it is essentially a service deliverer spending more than it is receiving.

Borrowings would be imprudent as there’s not enough to pay interest.

The past four years’ excess spending has been funded with amounts intended for other purposes, mainly funds in advance from the Federal Government such as the $290 million received to redevelop the Royal Hobart Hospital.

The GST, lauded as a growth tax until 2008, raised funds at a faster rate than overall economic growth and seduced state governments to expand their programs.

Shree staggers

Winter is a wild and woolly time down the West Coast of Tasmania.

Even bleaker for those not getting paid as expected.

Shree Minerals announcement to ASX was a carefully worded attempt not to scare the horses too much.

Shree stated : “While the company believes recent iron ore price declines are not reflective of medium term fundamentals and expects demand to continue to grow in the Asian markets, it is taking steps to optimise costs in the prevailing market conditions.”

Essentially what they’re saying is they’ll be able to pay their way if prices pick up.

Other than announcing they’d struck gold with another source of funds that’s all they could have said.

Apart from shareholders, working capital has been provided by Frost Global who have agreed to advance working capital to be repaid at the rate of US$500,000 each time Frost Global receives a shipload of ore

The last thing Shree, or Frost Global would want right now is an insolvency administration taken over by the creditors.

Shree: Another mining accident waiting to happen?

 

  

The almost daily reports about falling iron ore prices and the chatter about the effects on junior miners has shone the spotlight on Shree Minerals’ Nelson Bay River iron ore mine on Tasmania’s West Coast, as it battles to stay afloat.

Trying to understand what’s happening is best with knowledge of Shree’s recent history.

Ta Ann's last handout

 

Is this the last handout?

Last July one of the countless pre election promises made by Kevin Rudd was $7.5 million to help Ta Ann Tasmania (TAT) build a new plywood mill.

Relying on endemic amnesia amongst voters, the shameless local member elected at the same time as Kevin Rudd’s brief reappearance thankfully ended, last week was able to proudly announce that he had secured the $7.5 million handout for TAT.

TAT, it was claimed will contribute $8.3 million towards the construction of the $15.8 million facility in Smithton.

That’s a bit of an overstatement as $5.7 million is due soon, also from the Australian Government, as final settlement of the $26 million for surrendering 108,000 m³ of its annual wood supply as per the Tasmanian Forests Agreement.

So TAT will only have to find $2.6 million.

The Smithton plant go-ahead came hard on the heels of the release of TAT’s 2013 financial statements (its financial year ended on 31^st December) as well as that of the ultimate holding company, Ta Ann Holdings Berhad, listed in Malaysia.

The reports offer an intriguing look at how the group operates.

MIS last rites

Reports suggest New Forests has bought Gunns’ assets (not including the pulp mill site and permits) for $330 million.

In all likelihood this means Gunns’ land plus the trees growing on the land. Some of the trees however belong to MIS investors and joint venture partners.

Court proceedings have been underway for some time to get court approval for the amount to be split to the tree growers.

It won’t all end up with the hedge funds or whoever now owns Gunns’ bank debt.

Joint venture partners will get some and some will go to the MIS growers. Korda Mentha also will undoubtedly clip the ticket.

Privatisation: Broader issues

Privatising public assets is back on the agenda with Treasurer Hockey reigniting the discussion with his offer to State governments of a bonus if they sell remaining public assets and spend proceeds on new much needed infrastructure.

The Mercury ran an opinion piece on April 7^th from one of its resident op ed writers Hodgman has to sell off assets  urging Will Hodgman to sell assets and  ditch the leftist, big government view of the world as a necessary precondition to reviving Tasmania.

The privatisation debate has been around for a while but nothing new was presented on this occasion.

The economic blogosphere is full of bloggers trying to come to grips with the causes of the GFC. At the heart of this discussion are the matters of money, debt, and the role of government and hence is of particular relevance to the issue of privatisation.

Reality bites: Part 2

Two days ago Minister Harriss announced the way forward for the Tasmanian forest industry by creating a new class of reserve for 400,000 hectares of native forest destined for World Heritage protection designed to allow selective logging of special species whilst continuing to receive funds to compensate for the extra costs of reserve management.

Support for the Minister’s proposal has, so far, been a little underwhelming even from the main industry body FIAT.

The Mercury found a pocket of support: