Labor to Support Fossil Fuel Industries in Upcoming Budget
As the Australian federal budget approaches next month, it appears poised to favor fossil fuel industries, despite growing calls for reform. This development coincides with an international conference on transitioning away from fossil fuels, attended by representatives from 57 nations, including Australia. At the conference, France announced plans to eliminate coal from its national grid by 2027, end oil dependency by 2045, and cease fossil gas usage by 2050.
Contrastingly, the Australian government’s pre-budget messaging suggests it will reject recent campaigns advocating for two key measures opposed by gas and mining sectors. These measures include a significant increase in the gas export levy and a reform of the fuel tax credit scheme, which currently exempts large miners from paying diesel excise taxes that households, tradespeople, and small businesses must bear.
Both proposals aim to address the structural deficit in the budget and reduce implicit subsidies benefiting multinational fossil fuel companies.
Broad Support for Gas Export Levy and Fuel Tax Reform
The proposal to increase the gas export levy has garnered support across the political spectrum, including from various parties, independent MPs, unions, former bureaucrats, ex-gas industry executives, and environmental groups. Gas, primarily methane, is a potent fossil fuel contributing significantly to climate change when burned.
The campaign for a 25% levy on all gas exported overseas is driven less by environmental concerns and more by the argument that fossil fuel companies have profited immensely from resources that belong to the Australian public. Advocates contend that Australia should claim a larger share of these profits. The Australia Institute think tank estimates that such a levy, if introduced when Labor took office in mid-2022, would have already generated substantial revenue. Former Treasury chief Ken Henry has proposed an even higher 100% windfall profits tax.
An Essential poll reveals strong public backing for taxing gas export profits, with 57% of voters in favor and only 12% opposed. Support is consistent across age groups and political affiliations, including voters for Labor and the Coalition.
Given this widespread support, senior government officials have expressed willingness to consider the idea. Treasury was tasked with modeling both a windfall profits tax and modifications to the existing petroleum resource rent tax.
Within Labor, some members have been vocal supporters. Former industry and science minister Ed Husic has endorsed the 25% levy and criticized the gas industry’s multi-million dollar advertising campaign opposing the tax as misleading. The Labor Environment Action Network advocates for a "very substantial tax" on windfall profits.
Prime Minister Albanese’s Position on Gas Export Contracts
However, Prime Minister Anthony Albanese has taken a different stance. During a visit to Perth for a mining and gas industry breakfast, he assured attendees that the budget would not affect existing gas export contracts.
"I can confirm that the budget will not undermine existing contracts on gas exports," Albanese stated, linking his position to the global fossil fuel crisis and emphasizing the importance of maintaining relationships with countries that purchase Australia’s fossil fuels and control the southern supply of liquid fossil fuels such as diesel, petrol, and aviation fuel.
Technically, Treasury officials have indicated that introducing a 25% tax would not impact existing contracts, as the additional costs would be absorbed by gas producers. Albanese’s assurance was more political, aimed at reassuring the gas industry and the pro-gas Western Australian Labor government that existing contracts would remain untouched.
The prime minister did not directly address whether this stance excludes future tax changes, such as a windfall profits tax or a levy on new contracts. This leaves open the possibility of future reforms, especially since many current gas export contracts expire by 2030. Albanese defended the current tax framework, dismissing criticisms as dishonest and populist, and no immediate policy shifts are anticipated.
Fuel Tax Credit Scheme and Mining Industry Subsidies
A similar situation exists regarding the fuel tax credit scheme, which provides miners, farmers, tourism operators, and heavy freight businesses with a full rebate on the 52.6 cents per litre diesel excise.
Campaigns for reform have gained support from unexpected quarters, notably mining magnate Andrew Forrest’s company Fortescue. The company launched a campaign highlighting that 18 major mining companies receive approximately $3 billion annually in diesel excise rebates, while households face rising living costs.
Fortescue, which claims its Pilbara mines are exempt from some rebates, advocates capping the scheme at $50 million per mining company annually. It suggests redirecting savings to assist the mining industry in reducing emissions or contributing to general budget revenue.
Other proponents of winding back the diesel rebate include influential figures such as the Australian Council of Trade Unions (ACTU) and Climate Change Authority chair Matt Kean, who described continuing the diesel rebate for miners as "insane."
Although there is some governmental support for these reforms, hopes of changing the scheme this year diminished following the escalation of the US and Israel conflict with Iran, which caused diesel prices to surge.
Perceptions and Challenges Ahead
The government’s positions on the gas tax and fuel credit scheme have led some observers to conclude that Labor is influenced by fossil fuel industry interests. This perception may be reinforced if the budget prioritizes securing long-term petrol and diesel supplies without equally advancing clean energy and electrification initiatives.
The situation is complex. Analysts predict that fuel and goods supply issues may worsen before improving, making supply security a priority for any government. Labor does provide meaningful support for renewable energy and battery technologies.
However, there is limited enthusiasm for addressing the need to reduce and eventually eliminate fossil fuel consumption. Resolving the climate crisis requires halting the encouragement and promotion of fossil fuel use.
If Australia and its trading partners are serious about their climate commitments, the maritime trade of coal, oil, and gas must be rapidly phased out within the next few decades and replaced with alternatives. Currently, discussion in Australia either treats this as a distant challenge or dismisses it outright, highlighting the significant progress still required.
Campaigners Remain Optimistic
Despite these challenges, campaigners find cause for optimism in the growing cross-community support for a gas tax this year. They believe the government has felt pressure on an issue that previously lacked traction, indicating that change is possible.
Regardless of the budget’s outcome, advocates intend to continue pushing for reform.
