Ground control to Major Rudd ...

In the parallel universe of political spin inhabited by Kevin Rudd and his advisers, a new benchmark has been set with the Prime Minister’s announcement that his massive 40 per cent tax on mining profits would be “good” for the mining sector and would encourage its expansion.

The Rudd Budget is a shameless con.

The entire house of cards rests upon an assumption that investment in the mining sector will increase significantly.

Just how imposing a 40 per cent super tax - on top of company tax, payroll tax and licence fees - will lead to increased investment, is anyone’s guess.

Mr Rudd has maintained the line that his massive tax is good for the sector, as mining companies suspended hundreds of millions of dollars in projects and more than $14 billion was wiped from the value of mining shares.

Mining giant Xstrata announced it would cancel all exploration activity in the Mount Isa and Cloncurry regions of Queensland, which has put a cloud of uncertainty over jobs and the health of the regional economy.

Other miners including Santos are deferring projects and reviewing cost structures. The mining services industry is bracing for the fall out.

State Labor governments are panicking as they see the strongest economic performers in their states under attack from Federal Labor. Queensland Premier Anna Bligh has expressed public concern about the impact on jobs. South Australia expressed alarm at the prospect of the Olympic Dam project being mothballed.

Western Australian Liberal Premier Colin Barnett has released a detailed repudiation of Mr Rudd’s claims that the tax will be good for Western Australia.

However, the reaction internationally reveals a grain of truth in Mr Rudd’s claim that it will be good for the mining sector - just not ours.

Toronto’s Globe and Mail newspaper has reported that Rio Tinto has approved an expansion of its iron ore activities in Canada, with an initial investment of US$400 million.

This project has been hold since 2008, but Rio Tinto will now go ahead because of the “attractiveness of investing in Canada” and the need to evaluate the impact of the proposed 40 per cent mining tax on its Australian operations.