ASX mining shares could soon rediscover the meaning of having too much of a good thing as talk of a super profits tax returns.
Former prime minister Keven Rudd is rattling the cage on introducing the extra levy on our largest iron ore producers, reported Peter Ker of the Australian Financial Review.
Super profit tax on ASX miners back from the grave
Rudd is accusing the major ASX miners of ripping off Australians as the iron ore price looks poised to break new highs.
The ex-PM tried to introduce a similar tax during the last commodity boom in 2010. This contributed in no small part to his downfall.
Extra cash would be handy right now for the country
An extra tax on cashed-up miners could certainly be handy in paying down the record federal government deficit. The Morrison government will release the budget on the second Tuesday in May.
As highlighted yesterday, the BHP Group Ltd (ASX: BHP) share price and Rio Tinto Limited (ASX: RIO) share price are likely facing profit upgrades in the near-term due to the expectation-defying iron ore price.
This same tailwind also bodes well for the Fortescue Metals Group Limited (ASX: FMG) share price.
Iron ore likely to set new record soon
A growing number of experts are warming to the idea that the iron ore price will soon crack above its previous high of US$193 a tonne set in February 2011.
But if the idea of a super profits tax gains momentum, this could dampen the party for the major miners.
"As was the case during the last resources boom, and the one before that, the super-profits earned by a handful of resource majors in this country are a giant rip-off of the Australian people," the AFR quoted Rudd as saying.
"Furthermore, the greed of these three is unbelievable: they haven't even bothered to establish serious, large-scale charitable foundations to benefit the Australian people at the scale that other serious global firms do. And in Rio's case, they dynamite Indigenous heritage in the way."
The real commodity supercycle
Also worth noting that it isn't only the iron ore price that is reaching for the stars. A wide range of metals, including copper and lithium, are booming.
This commodities supercycle looks more enduring than the last too. Production output is up, costs are down and demand for commodities is coming from several countries, not just China.
Foolish takeaway
However, it's too early to be pricing in a super profits tax on ASX mining shares. The federal Liberal coalition that's in power is unlikely to back such an idea – especially one that comes from an ex-Labor prime minister.
But ASX miners will be keeping their fingers crossed that such an idea won't find widespread popular support!
