Never waste a fuel crisis: the Albanese government must seize the moment and start taxing gas companies | Greg Jericho
The first rule of politics is to never waste a crisis.The current fuel crisis due to the Iran war is one the Australian government needs to seize.The old political concerns about taxing gas companies are now dead.Should the Albanese government fail to act it should not be surprised if voters angry at rising petrol, gas and electricity prices begin to look elsewhere.Earlier this month, the independent senator David Pocock asked the Senate if it was true that Australians paid more in beer excise than gas companies did in the petroleum resources rent tax (PRRT).
It was true, drinkers of beer, spirits, cider or pre-mixed drinks are all paying more tax.Heck, even smokers still pay more excise than gas companies pay PRRT:If the graph does not display click hereThat Pocock made this point is not shocking but the public support for his position highlights just how far and quickly the narrative has shifted.Way back in 2014, I wrote a column explaining how the opening of the Gladstone LNG terminal would send our gas prices higher.It was based on work by the Australia Institute senior economist Matt Grudnoff’s paper Fracking the Future.Within six months of LNG production in Gladstone starting, wholesale gas prices in the east and south-east of Australia more than doubled and, because gas prices link to electricity prices, they also rose:If the graph does not display click hereAfter the start of Russia’s war on Ukraine, prices here spiked due to nothing other than the world price of gas soaring.
This might not have been a problem were it not for the fact that Australia, unlike most energy-exporting nations, does not tax our LNG exports in any serious way.This goes to the crux of Pocock’s point – our LNG exports have soared but PRRT revenue has not:If the graph does not display click hereAs a result, gas companies have spent the past few years absolutely laughing.Since the invasion of Ukraine, gas exporters in Australia have taken in an estimated $128bn more revenue than they would have, had prices remained at previous levels.If the graph does not display click hereBecause windfall profits are by their very nature unexpected, taxing them does not affect business decisions in any way – and yet the Albanese government has thus far refused to tax them.In the past, that might have been politically beneficial – after all, the gas industry has been very good at suggesting it is necessary for the economy.
And yet while the industry takes in around 8% of all operating profits, it only pays around 0.5% of all wages in the private sector:If the graph does not display click hereFor many years there have been a few of us calling for better taxing of gas companies, but it was a pretty lonely spot.Now, however, the ACTU is calling for a 25% tax on gas exports (full disclosure, I assisted with some of the research behind the report that found it would raise around $17bn a year).This is supported by Pocock.And he has plenty of company.
The Greens are on board and independent MP Allegra Spender, who has just released her own tax white paper, is also calling for a windfall tax on gas.Zali Steggall knows the gas industry is taking us for a ride and Kate Chaney has long been calling for a proper tax on gas.Even One Nation has announced it wants to massively increase the level of royalties paid by the gas industry.We now have a situation where the ACTU, the Greens, independents and One Nation are all calling for either a tax on gas or for the industry to pay much, much more.And it is not surprising.
A recent poll showed that One Nation voters were the most strongly in favour of a 25% tax on gas exports:If the graph does not display click hereThe political calculus has changed.What previously would have been seen as a risky option is now seen as sensible.And as fuel prices rise across the country, the sense that Australians are missing out will only grow, and with that will come more anger at a government that fails to act.Last week Monique Ryan asked the treasurer if the government would introduce a tax on gas “to capture windfall profits from conflicts like those in Ukraine and Iran”.Jim Chalmers replied that the government had already “made some changes to the PRRT”.
Except, when those changes were announced in the May 2023 budget, the gas industry celebrated and, unsurprisingly, the estimates of PRRT have since fallen drastically, putting a lie to the treasurer’s line that the gas industry now pays “extra billions of dollars sooner”:If the graph does not display click hereSo it would seem the government is not for turning,But last week, in a mostly unreported speech in parliament, government backbench MP Ed Husic absolutely let fly,He told parliament “we don’t have a shortage of supply, we have a glut of greed”,Pointedly he noted: “Australian politics has got to acknowledge the red-hot anger that exists about the greed of gas companies felt by voters of all political persuasions,”This is a key issue.
Voters over the past two elections have very quickly realised that no one owns their vote – there is no such thing as a safe seat any more, and they want politicians who listen.It is time for the government to stop being afraid of the gas industry.Australians have woken up to the greed and how we are being ripped off.Failure to act in the May budget could very quickly make voters who are angry at gas companies realise their real anger is at the government.Greg Jericho is a Guardian columnist and chief economist at the Australia Institute
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