Latest / The Front / Why Albo won’t be doing a gas tax

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Why Albo won’t be doing a gas tax · The Front

• 0:05
  Speaker 1: From the Australian. Here's what's on the front. I'm Claire Harvey.
• 0:08
  Speaker 1: It's Friday, April twenty four, twenty twenty six. Victoria Cross
• 0:15
  Speaker 1: recipient and Vietnam and Korea veteran Keith Paine says he'd
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  Speaker 1: two year old Pain is Australia's most decorated living soldier
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  Speaker 1: with the VC three Gallantry medals and twenty seven other decorations.
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  Speaker 1: He says, what happens in war stops in war. A
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  Speaker 1: new literary drama is blowing up, this time as the
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  Speaker 1: University of Queensland Press helps a book that includes illustrations
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  Speaker 1: by an anti Israel activist who compared the Bondai Beach
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  Speaker 1: massacre victims to fascists. That's prompted other authors to quit insolidarity.
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  Speaker 1: Those stories alive right now at the Australian dot com
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  Speaker 1: dot au. Should we have a new gas tax? Will
• 1:01
  Speaker 1: fossil fuel companies pull out of Australia if we do?
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  Speaker 1: And would any politician take the risk? After what happened
• 1:08
  Speaker 1: to Kevin Rutt? Today we dig into the big idea
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  Speaker 1: getting Canberra all fired up.
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  Speaker 2: A twenty tax on gas export revenue is what's needed.
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  Speaker 1: That's on revenue, not profits. Sounds like the gas companies
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  Speaker 1: have never met attacks that they haven't found a way
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  Speaker 1: of avoiding.
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  Speaker 3: Just do it and stop the crap.
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  Speaker 2: We still pay our tax and we don't get our
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  Speaker 2: gas for free.
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  Speaker 1: It's the refrain of the moment. The economy is in trouble.
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  Speaker 1: Let's introduce a gas tax so the evil fossil fuel
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  Speaker 1: industry can help pay for our public hospitals and seven
• 1:49
  Speaker 1: dollar armand lattes. There's an organized campaign to pressure the
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  Speaker 1: government to whack attax on the gas exports Australia's presently
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  Speaker 1: using in our negotiations with Oversee, these oil refiners. They
• 2:01
  Speaker 1: want our gas, we want their diesel. The Green say
• 2:05
  Speaker 1: a simple gas export tax is what we should be
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  Speaker 1: doing instead of kicking one hundred and sixty thousand people
• 2:10
  Speaker 1: off the National Disability Insurance scheme. And you saw this coming.
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  Speaker 1: There's an equally passionate pushback from the resource sector saying
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  Speaker 1: this would send investors fleeing in panic. Australia already has
• 2:24
  Speaker 1: a kind of gas tax, the Petroleum Resource Rent tax,
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  Speaker 1: introduced by the Hawk government it's a forty percent tax
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  Speaker 1: on offshore extraction, originally designed for oil, now mainly about gas.
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  Speaker 1: It only applies to offshore rigs because that's what the
• 2:40
  Speaker 1: Commonwealth controls, and critics say the big gas producers are
• 2:44
  Speaker 1: dodging and minimizing it.
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  Speaker 2: The Australian government collects more revenue from HEX than it
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  Speaker 2: does from the petroleum resource rent tax.
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  Speaker 1: That's economist Richard Dennis, the director of a think tank
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  Speaker 1: called the Australia Institute, which has more more than fifty
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  Speaker 1: thousand signatures on a petition to impose a gas tax.
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  Speaker 2: We give the gas away for free and again, which
• 3:09
  Speaker 2: arge kids of fortune to go to university? In Norway?
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  Speaker 2: They tax their fossil fuel industry and give their kids
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  Speaker 2: free higher education.
• 3:24
  Speaker 1: Eric Johnston is an associate editor with The Australian. Eric
• 3:27
  Speaker 1: Scandinavia just does everything better than us. Apparently. Why are
• 3:30
  Speaker 1: they so good at all these things that they're happy
• 3:31
  Speaker 1: to pay a lot of tax I guess I guess.
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  Speaker 4: The first thing to think about too is there's a
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  Speaker 4: lot less Norwegians than there are Australians, so when they
• 3:41
  Speaker 4: do have a national fund, it can go around a
• 3:43
  Speaker 4: lot more and they're a very high tax country. I
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  Speaker 4: think they do pay a higher proportion of tax than
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  Speaker 4: we do. We collect more in beer excise than what
• 3:53
  Speaker 4: we do in selling gas overseas. Budget full casts are
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  Speaker 4: currently saying over the next four years almost seven billion dollars,
• 4:01
  Speaker 4: So that's over four years. We're expected to collect something
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  Speaker 4: like twelve billion dollars in beer excise over the same period.
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  Speaker 4: So you can see the difference. So what's happening at
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  Speaker 4: the moment is that in order to extract that gas
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  Speaker 4: off sure, companies, private companies had to spend an extraordinary
• 4:19
  Speaker 4: amount of money. So in total, there was about four
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  Speaker 4: hundred billion dollars on the boom in mining or extracting
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  Speaker 4: gas off shore. So, as any capital project, when you
• 4:29
  Speaker 4: spend money on a project, you can deduct that from
• 4:32
  Speaker 4: your profitability. So these projects aren't actually making money at
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  Speaker 4: the moment. That's the key thing. That's why they're deducting it.
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  Speaker 4: The big thing is we all see it and we're saying, well,
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  Speaker 4: they're not paying tax. They're not paying tax while they
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  Speaker 4: are deducting their losses for what it's worth. The industry argues, well,
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  Speaker 4: the reason why we spent so much money because we
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  Speaker 4: have this deduction scheme available. If this scheme was not available,
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  Speaker 4: that gas would still be there, trapped under the ground
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  Speaker 4: or under the surface of the sea.
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  Speaker 1: I mean, it reminds me a little bit of negative gearing,
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  Speaker 1: where you organize your affairs so that you make a
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  Speaker 1: loss on your second or third property so that you
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  Speaker 1: don't have to pay too much tax. Is that what
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  Speaker 1: they're doing?
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  Speaker 4: So these gas projects are very very long data. When
• 5:15
  Speaker 4: they signed up and they said, right, we're going to
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  Speaker 4: spend fifty billion dollars building an allergy plant and extract
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  Speaker 4: that from under the ocean, they said, right, we can
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  Speaker 4: do that because upfront, we can deduct the losses. We're
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  Speaker 4: not paying for everything at once upfront. Now we're about
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  Speaker 4: to hit a really interesting time because some of the
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  Speaker 4: tax losses are now running out for these projects. Not now,
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  Speaker 4: not next year, but by the end of the decade,
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  Speaker 4: they're going to flip from making losses to earning quite
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  Speaker 4: a lot of money, quite a lot. And this is
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  Speaker 4: where we're going to start to see the power of
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  Speaker 4: this PRT tax regime. Suddenly, it's going to move from
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  Speaker 4: an st I made it seven billion dollars over four
• 6:02
  Speaker 4: years and there's going to be multiples of that, all
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  Speaker 4: things being equal. So it's kind of like we've waited
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  Speaker 4: all this time and if the government was to change
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  Speaker 4: the goalpost at the moment, we won't get the windfall.
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  Speaker 4: It's coming. It is coming probably from the start of
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  Speaker 4: the next decade. That's the tax system working. That being said,
• 6:21
  Speaker 4: the system is a little bit inelegant. Potentially Australia should
• 6:24
  Speaker 4: have capped the amount of deductions is in place, but
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  Speaker 4: it is. Hey, this is a system. We've got a
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  Speaker 4: lot of companies invested with good intentions and their tax
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  Speaker 4: losses are about to start running out.
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  Speaker 1: A gas tax, if it was to apply to land,
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  Speaker 1: would have to cover land that's controlled by the states.
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  Speaker 1: Can the Commonwealth actually create this kind of legislation. We're
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  Speaker 1: having a Senate inquiry about this now, but how would
• 6:50
  Speaker 1: they do it?
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  Speaker 4: Yeah, so that's when you start getting a bit tricky.
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  Speaker 4: So stuff in the water five kilometers beyond the shoreline
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  Speaker 4: belongs to the Commonwealth. Stuff in the ground is the
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  Speaker 4: purview of the States and they have a lot more
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  Speaker 4: power and a lot more influence over that. In Western Australia,
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  Speaker 4: some of these projects because the alerg plants were built
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  Speaker 4: on the land, they were able to create a reservation system,
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  Speaker 4: so some of that gas must be directed to the
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  Speaker 4: local market. You will increasingly find that any large domestic
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  Speaker 4: projects on land will be aimed for the domestic market,
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  Speaker 4: and I think that will trump the idea of putting
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  Speaker 4: a tax. I think we won't supply more than the
• 7:30
  Speaker 4: revenue from the project.
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  Speaker 1: So domestic supply obviously wouldn't be captured by an export tax.
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  Speaker 4: In parts, yes, and swings and rounds about, but not
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  Speaker 4: by this tax.
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  Speaker 1: There's never a simple answer to these questions. I ask you,
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  Speaker 1: I'm sorry about that.
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  Speaker 4: Well, what is remarkable is that when these projects were
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  Speaker 4: first started, particularly the ones in Queensland, we tend to
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  Speaker 4: forget bass straight down there in Victoria, which is running
• 7:54
  Speaker 4: out of gas. That bastraight gas was being pumped in
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  Speaker 4: the pipe going straight up through New South Wales, not
• 8:01
  Speaker 4: stopping going to Queensland and going offshore to export markets.
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  Speaker 4: So we're diverting a lot of our gas in there,
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  Speaker 4: and quite legitimately so because the owner's theology plans were
• 8:12
  Speaker 4: just buying it on the market.
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  Speaker 1: Anyone who's old enough to remember Kevin rud and Julia
• 8:16
  Speaker 1: Gillard will know that a mining resource rent tax is
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  Speaker 1: what brought Kevin Rudd down in the first place. He
• 8:21
  Speaker 1: tried to introduce a super profits tax. The mining industry
• 8:24
  Speaker 1: hit him with some very emotive and powerful ads.
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  Speaker 3: Again back tens of thousands of jobs, and not just
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  Speaker 3: in the mining industry, it may even be your job.
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  Speaker 1: The backbenches freaked out and installed Julia Gillard as Prime Minister.
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  Speaker 1: She was then defeated by Tony Abbott in twenty thirteen.
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  Speaker 1: The first thing he did was get rid of the tax.
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  Speaker 1: One of the arguments that the mining companies were using
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  Speaker 1: at the time was that this was a form of
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  Speaker 1: sovereign risk that they wouldn't invest in Australia because you
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  Speaker 1: can't go changing the rules like that. This is not
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  Speaker 1: fair and you make it too risky for us to invest.
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  Speaker 1: At the time, that made me think about, well, you know,
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  Speaker 1: what is our sovereign risk really compared to Africa somewhere
• 9:07
  Speaker 1: where the government might just seize your mind. What is
• 9:11
  Speaker 1: the situation in regard to this? Is that a legitimate concern?
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  Speaker 1: That's certainly an argument that the gas companies are making now.
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  Speaker 4: Yes, it is in the way that the big investors
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  Speaker 4: in these are Japanese companies, South Korean companies, Malaysia to
• 9:26
  Speaker 4: a smaller extent, and also the United States. If we
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  Speaker 4: changed the rules a fair way into the game, even
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  Speaker 4: from the outset, that does introduce an element of sovereign risk.
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  Speaker 4: These projects don't just happen overnight. They take years to build.
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  Speaker 4: That's why there's so many tax losses. Some of them
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  Speaker 4: only started only in twenty eighteen and so on, started
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  Speaker 4: ramping up after almost ten years of construction, years of construction,
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  Speaker 4: long life projects. So to start with, you really need
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  Speaker 4: to know what the landscape and you need certainty in
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  Speaker 4: confidence before you start writing the checks for a couple
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  Speaker 4: of hundred billion dollars. You want some confidence that the
• 10:07
  Speaker 4: landscape is not going to change. If halfway through or
• 10:10
  Speaker 4: just suddenly the environment does change, just because you can't
• 10:14
  Speaker 4: control your federal budget, suddenly you've borrowed way too much,
• 10:19
  Speaker 4: or you've got a spending problem, then that does introduce
• 10:22
  Speaker 4: some sort of element of risk and sovereign risk and
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  Speaker 4: winding companies, they do reach for this phrase a lot.
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  Speaker 4: And in the right days, it was a little bit different.
• 10:32
  Speaker 4: Capital wasn't as liquid and as free flowing. Capital now
• 10:37
  Speaker 4: does flow and right now you're seeing, for example, in
• 10:41
  Speaker 4: the world of copper, you're seeing Argentina become a force.
• 10:44
  Speaker 4: Surely is becoming a force. Canada is also becoming a
• 10:48
  Speaker 4: force in terms of other projects, iron or gold, other commodities.
• 10:53
  Speaker 4: United States is also really drumming for investment in copper.
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  Speaker 4: So if I'm a company, I've got wonder of capital,
• 11:00
  Speaker 4: should I spend that here in Australia or should I
• 11:03
  Speaker 4: spend it in an emerging province of Chili which is
• 11:06
  Speaker 4: offered me this deal. It does come down to that.
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  Speaker 1: Now coming up. So will the PM and Treasurer actually
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  Speaker 1: do this? One of the things that the gas companies
• 11:34
  Speaker 1: have probably wondered about until now is how much of
• 11:37
  Speaker 1: a future did gas have in Australia. Was it going
• 11:39
  Speaker 1: to suddenly be made uneconomic by government subsidies for solar
• 11:43
  Speaker 1: and wind for example? It would be my impression, as
• 11:45
  Speaker 1: a complete non expert, that gas does actually have much
• 11:48
  Speaker 1: more of a future than any of the other fossil fuels.
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  Speaker 1: We seem to need it for peaking plants and for
• 11:52
  Speaker 1: domestic supply in a way that we might not be
• 11:55
  Speaker 1: needing coal in forty years. What do you think about that?
• 11:58
  Speaker 2: Is that right.
• 11:59
  Speaker 4: Yeah, what what we're seeing now in terms of the
• 12:01
  Speaker 4: fuel crisis, we're seeing another use for gas as well,
• 12:04
  Speaker 4: and that's leverage. So we're using gas, so you see
• 12:09
  Speaker 4: an elbow go overseas to Malaysia. Is also gone to
• 12:13
  Speaker 4: Singapore as well. Another big investor, and he's saying, we
• 12:17
  Speaker 4: will continue to be a reliable supplier of gas as
• 12:20
  Speaker 4: long as you continue to be a reliable supplier of
• 12:22
  Speaker 4: fuel and petrol to us. Our gas is being used
• 12:26
  Speaker 4: as leverage on the global market, which is really important
• 12:29
  Speaker 4: for us in terms of locally, the amount needed to
• 12:34
  Speaker 4: be invested, the size of Australia and the industry would
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  Speaker 4: never make that a profitable exercise. That's why the gas
• 12:42
  Speaker 4: is geared for export markets. The only reason that gas
• 12:45
  Speaker 4: is coming out of the ground is because it's profitable
• 12:48
  Speaker 4: because of export markets. That's the only reason they buy
• 12:52
  Speaker 4: it in the sums and the quantity which can ultimately
• 12:54
  Speaker 4: repay that four hundred billion dollars worth of investment. Then
• 12:58
  Speaker 4: we'll start seeing profits and we'll start seeing some taxes
• 13:01
  Speaker 4: down the track coming in on that. That's the only
• 13:03
  Speaker 4: reason that works. We won't see any more big allergy
• 13:06
  Speaker 4: plants being built in Australia. That boom is now over.
• 13:09
  Speaker 4: The sums needed not only to dig it out of
• 13:12
  Speaker 4: the ground but to get it to market.
• 13:13
  Speaker 1: Quite extraordinary given the history of labor, prime ministers and
• 13:18
  Speaker 1: taxes on fossil fuels. Do you think the government is
• 13:20
  Speaker 1: going to have a crack at a gas tax?
• 13:22
  Speaker 4: Look, anything could happen in the budget. I think the
• 13:26
  Speaker 4: message that the Prime Minister sent overseas was that your
• 13:31
  Speaker 4: investments are safe here, and that's a really important thing,
• 13:35
  Speaker 4: particularly it's such in a world that is in such
• 13:37
  Speaker 4: flux at the moment. Australia needs capital. It needs external
• 13:42
  Speaker 4: capital to be able to build things and to be
• 13:45
  Speaker 4: able to create its own well. So we need other
• 13:47
  Speaker 4: countries to invest in Australia, whether that's in these big
• 13:51
  Speaker 4: allergy projects or whether it's in a factory or a
• 13:55
  Speaker 4: warehouse or buildings. We do need capital from overseas to
• 13:59
  Speaker 4: help us try grow. And the message if Australia's suddenly
• 14:04
  Speaker 4: slapped attacks on budget night on gas projects, I think
• 14:09
  Speaker 4: you would start seeing some very very nervous investors around Australia.
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  Speaker 1: Eric Johnston, thank you very much, Thank you, Claire. Eric
• 14:22
  Speaker 1: Johnston is an associate editor with The Australian. You can
• 14:26
  Speaker 1: check out all Eric's analysis and of course all our
• 14:29
  Speaker 1: coverage of the forthcoming federal budget right now at the
• 14:32
  Speaker 1: Australian dot com dot au