Industry is shocked that the Federal Government axed the Exploration Development Incentive in the recent Budget.
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Australian mineral exploration has fallen by over ten percent for five straight years, and now the Federal Government has chosen to cut the EDI.
Senator Matt Canavan, Minister for Resources and Northern Australia, met with leaders of industry recently for an open and frank conversation at AMEC.
Industry shared with the Minister its disappointment in this uninformed and breathtaking policy reversal by Government and the Department of Industry. Industry is dismayed at the level of ignorance in Government, particularly Treasury and the Department of Industry, relating to this initiative.
The Federal Government is turning its back on future mineral discoveries and mining development.
This decision will cost jobs and growth, particularly in regional Queensland.
Twenty years ago, Australia was number one in the world for share of mineral exploration expenditure.
Then Canada introduced a similar, but better designed, tax incentive scheme which worked brilliantly.
The “flow through shares scheme” lifted Canada from fifth to number one jurisdiction in the world.
This brought more discovery, more mines, more jobs, royalties and benefits. Canada waited nine years before reviewing the scheme, as they understood that these things take time to gather momentum.
Australia axed the EDI after less than three years, even though it has a minimal direct impact on the budget.
The decision was based on a non-transparent internal Government EDI review.
It used limited measurable data over a short timeline and was conducted during a severe exploration downturn. Industry is yet to see the report.
The EDI originally passed through Parliament with bipartisan support because both sides understood that we desperately need more mineral exploration.
That was three years ago, what has changed? It is not too late for the Government to recognise the need to lift investment to discover new mines.
To do this you need mineral exploration companies with access to risk capital to drill holes. To date not a single local or federal politicians has spoken out against this decision publicly.
So, industry must assume that they support it.
This is an opportunity for the Federal Government to show proactive leadership by agreeing to rollover the EDI at least for two more years until an alternative model can be delivered.