April retail sales were released by the US Census Bureau on Friday. The next four tables summarize the numbers and put them into context by comparing with pre-recession data. A realistic analysis of the numbers requires real dollar comparisons to previous years. Real dollar numbers are in January 2005 dollars. Note that since the CPI for April has not yet been released the April real dollar data has not been corrected, i.e. April inflation of zero percent was used.

There has certainly been some improvement in sales numbers in March and April. We need a couple of months more data but it is possible that retail sales might resume the trajectory they had been on for many years prior to this recession — retail sales barely missed a beat during the 2001 recession. The chart below puts the current retail sales trajectory into context. A significant source of GDP growth has been lost in this recession, and this recovery, such as it is, shows no signs of being strong enough to recapture that lost GDP in the near future.

retail sales

The Australian government today announced a new tax on miners beginning in the second half of 2012. Known as the Resource Super Profits Tax [RSPT] it will be levied at 40% and will apply to profits after extraction costs are paid and capital investment is recouped. The announcement also said that companies will not be taxed until they provide shareholders with a normal return on capital investments but I cannot find who defines what a nominal return is.

When this was touted it was suggested that if the new tax was introduced it would replace royalties currently being paid to Australian states. Royalties are paid on the quantity of ore dug up, not on whether it is profitable. A very strange part of this announcement was that from 2013 states will refund royalties, which implies that they will still collect royalties and then hand them back to miners that are profitable enough for the RSPT to kick in. So no doubt more bureaucrats will be required to implement that.

One of the positives from the tax changes is that miners will get rebates on exploration costs. Under current tax rules small exploration companies do not currently receive a tax benefit from deductible exploration expenses until they become profitable.

In response to the announcement miner BHP said that the new tax will result in an increase in the total effective tax rate on its profits earned from its Australian operations to around 57 per cent from 2013 from the current rate of 43 per cent. BHP boss Marius Kloppers said that the proposal will hurt the sector’s competitiveness.

“If implemented, these proposals seriously threaten Australia’s competitiveness, jeopardise future investments and will adversely impact the future wealth and standard of living of all Australians,”

I have to agree with BHP [see disclaimer], on the face of it this looks like a disaster, but one that won’t begin until late 2012. The Australian treasurer described the new tax as:

“We’re putting in place a tax that encourages investment.”

…which only confirms that politicians have no idea about business. The rent-a-quote from the investment community comes from UBS:

“I think it’s clearly negative for the big miners. I expect them to be down fairly materially,”

A material hit to profits beginning H2 2012 will have a hit on the current price. You don’t have to be a UBS analysts to reach that conclusion. To be fair, there probably isn’t enough fine detail about at the moment to quantify the effect on profits — notwithstanding the quote above from Marius Kloppers.

A Range of opinion from the News Ltd Australian press here:

www.theaustralian.com.au/business/in-dep…

www.theaustralian.com.au/business/in-dep…

www.theaustralian.com.au/business/in-dep…

www.theaustralian.com.au/business/in-dep…

www.theaustralian.com.au/news/opinion/mi…

BHP · coal · iron · taxes