Opposition parties have slammed the payment as “corporate welfare at its worst” in light of the profit announced today.
However, Prime Minister John Key said the payment had been necessary to save hundreds of jobs.
The Government announced in August last year it would pay $30m to the New Zealand subsidiary of corporate giant Rio Tinto to persuade it not to close the Tiwai Pt Aluminium smelter. In return, the company gave the Government a commitment to keep the smelter until January 2017.
Rio Tinto yesterday surprised investors with a better-than-expected profit and dividend in its full-year results presentation.
The diversified miner announced a dividend of US$1.92 (NZ$2.30) after reporting underlying earnings of US$10.2b for 2013.
First of all let me say I opposed the subsidy to Rio Tinto to keep Tiwai Point open. I don’t think the Government should have paid it. I think Rio Tinto bluffed them. So I am not in any way defending the Government’s decision.
But the suggestion that because Rio Tinto globally made a huge profit, means that the subsidy was not needed is erroneous and a red herring. What matters is whether Tiwai Point is profitable, not the rest of the company. If you own ten stores and nine of them are highly profitable and one makes a big loss, then you will close the loss making store unless you can make it profitable.
Now as I said I disagreed with the decision to pay the subsidy, but I understand the reason the Government did it. They did not want to risk that Tiwai point would close, and 800 jobs or so would be lost. Ironically Labour keeps insisting that National is a hands off Government that doesn’t intervene to protect jobs. Yet when they do, they complain.