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- [00:01]
A
I'm Daniel James and you're listening to 7am. Australia is one of the biggest exporters of liquefied natural gas in the world. Over the past 25 years, the value of those exports has grown more than 20 fold. Yet revenue from the tax design to capture the extraordinary profits from petroleum resources has gone backwards. Now, this week at its national conference, the Labor Party has formally acknowledged that Australians deserve a fairer return from the resources beneath their own soil and seas. But the party stops short of backing a policy that forced the issue onto the agenda in the first place. A 25% tax on gas exports that supporters say could raise up to $17 billion a year. Today, Australia Institute co Chief executive Richard Dennis on the unlikely alliance pushing labor to take on the gas industry and whether the party's carefully chosen words will ever become an actual tax. It's July 25th. Richard, you were at the ALP national conference this week. What was the vibe like at the meeting?
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Oh, I think there was a. There was a lot of excitement, a lot of labor members who hadn't seen each other for a long time, been a while since there's a national conference. So there was definitely a lot of. A lot of goodwill in the room, but at the same time, variously, frustration and disappointment that the good old days were where you could have a stoush and that people could see the competing arguments and that people might even see the result shift because of the strength of public argument that those days seem to be behind. Well, not just Australia, but, but, but Labor Party and the way they want to organise their conferences. So people talk about grassroots, people talk about the base. Well, this is the grassroots and this is the base. And they wanted to talk about gas, they wanted to talk about Gaza, they wanted to. They wanted to talk about gambling. And the big kids were saying, calm down, fella, the Prime Minister doesn't want a distraction. Lots of people had different priorities, but between them, they couldn't agree on what to force on the party as a whole.
- [02:17]
A
One thing that the national conference this week agreed to was to put a commitment in the party platform to secure Australians a, quote, fairer return from natural resources through appropriate taxation arrangements. It didn't endorse the 25% gas export tax being pushed by unions and some Labor MPs. So can you strip that language down for us? What has labor actually agreed to by using that language and putting forward that commitment?
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B
Look, what they've agreed to do is to make it fairer. I think the two letters do a lot of work in that Sentence. So look, it's a statement of intent, it's a statement of direction of travel. But by definition, you know, that language has no timetable and it doesn't have a destination. So what I think it is is, you know, quite a big public nudge from the party to the parliamentary wing. Come on, do better, try harder, negotiate harder, take the pain, go get a better deal for Australians. And you'd have to force those foreign owned gas companies to pay more. So to be clear, the 25% export gas export tax is the ACTU's formal position. The ACTU executive have adopted that the affiliate unions are broadly behind it. The left and right blue collar unions are supporting it. The service sector unions, the white collar unions are very supportive because they know that the only way teachers and nurses are going to get a pay rise is if the government collects enough tax. The NDIS sector knows it's going to get huge cuts unless the government can find new sources of revenue. So it's united the left and right of the union movement. It's united the blue collar and the white collar of the union movement. It's certainly got the branches excited. But the Prime Minister knows how to manage a labor conference. He managed to avoid what he might think of as a messy debate about it. But you know, I think Messi's what democracy looks like.
- [04:21]
A
Well yeah, I mean I miss the coverage from the good old days of the old labor conferences where there were just blues on the floor everywhere and make great viewing. But that's another point.
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B
Including by elbow.
- [04:30]
A
Including by, by elbow in his various forms. Jim Chalmers on 7:30 the other night told Sarah Ferguson the reason why gas tax has not been on our agenda is because we've got other priorities.
- [04:42]
B
Whether it's reservation, the PRRT changes I've already made or making sure that we are a reliable international supplier. That's the government's focus.
- [04:51]
A
How far down the priority list do you think it is for this government and how much hope do you hold out that this will become part of their election platform in 2028?
- [05:00]
B
Look, you know, hope is not a strategy. But you know, in my experience pressure works. So everywhere the Prime Minister goes someone says hey, you say we have to tighten our belts, why don't we tax gas instead? The question when will they act on it? Well that's their political judgment. But to give you an historical example, in Labor's first term the Australia Institute and the other and a lot of other groups really pushed hard for changes to the stage three tax cuts and for two and a Half years. I got told, oh, come on, Richard. He said, he won't do that. That's never going to happen. He's ruled that out. And then he did it in the lead up to the 2025 election, which he won in a landslide. And while I spent years saying, it's obvious you should do it, the Prime Minister got the timing spot on. So what do I think is going to happen this term? Well, the pressure's not going to go away. Every week we delay this tax costs us $350 million. Every week we are foregoing $350 million. We estimate $17 billion a year in revenue. And you only get to sell the gas once. You only get to tax it once. I'm not suggesting that he'll inevitably do it, but I reckon if he does it, he'll do it before the next election. Because to be clear, there's a very real threat that if he doesn't do it, a Liberal party led by Andrew Hastie or some conservative politicians are going to see the same political opportunity to put Australians first. And this is really important. The first party in Australia to say, I will have a fight with foreign gas companies so that you can have higher quality services. The first party to do that is going to get all the lollies and everybody else is going to get sucked into their wake. So just like as soon as labor did the stage three tax cuts, the Liberals came out and backed it. If labor came out and said, we're going to tax gas and make childcare free or tax gas and, you know, drop hex or tax gas and give everyone a pay rise, if labor came out and did that, the Liberals have got nowhere to go. One nation's got nowhere to go. But if one of those other parties do it first, well, you know, that's a real risk for Labor. And Hastie's already said he supports the idea
- [07:19]
A
coming up, why the gas companies are so good at minimising their tax.
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- [07:51]
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- [08:02]
A
Richard, gas companies have been paying relatively little for years. Could you just take us a step back and explain what Australians currently receive when gas is extracted and exported?
- [08:13]
B
Yeah, look, Australia exports about the same amount of gas as Qatar and Qatar collects about five times more tax than us. Other countries know how to tax the gas industry. Well, the problem in Australia is we have this thing called the prrt, the Petroleum Resource Rent Tax, and there's a hint in the name. We invented this policy decades ago to tax oil that got turned into petrol. That's why it's called the Petroleum Resource Rent tax. And it was just never designed to tax something like liquefied natural gas exports. Now, you know, most people are sitting there now going, oh, who cares? What's the difference between petrol and gas? Well, because of the complexity and how many stages there are in sucking out gas, shipping it to the liquefication plant, liquefying it, putting it on a boat, all those steps allow for what's called transfer pricing, effectively tax minimization. So the simple reality is we collect more revenue from beer, excise and hex repayments than we get from the prrt. That's how bad it is. The way it's set up, it's a profits based tax, not a revenue based tax. And the way that profit is defined is easy to manipulate. And it's particularly easy for the gas industry to manipulate the amount of profit they claim to make because any of the upfront costs that they incur are deductible against future profits. The end result is the gas industry are not breaking the law, they're just carrying forward all these kind of historic expenses and every year they get to go, nah, I know I've shipped a lot of money back to my shareholders, but no, it's not a good year to pay prrt. Have you seen all these costs I carried forward? So that's why a simple export tax is now on the agenda. You can't hide the total sales, you can't avoid it. And the only real way to avoid the export tax, get this, is to not export it, it's to actually supply more gas to Australians. So you actually fix this so called supply shortage by giving the gas industry an incentive to sell gas to Australians.
- [10:28]
A
So this is why the Australia Institute supports a flat 25% tax on the value of gas exports rather than based on company profits. The industry says this tax would drive investment away and ultimately leave Australia with less gas. I guess they would say that, but what's the evidence that Tells us whether that threat is actually credible.
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B
Yeah, look, they get paid a lot of money to say that they're not accountable for lying or misleading. Indeed, they get a reward, they get a bonus if they talk Australians into this nonsense. But what's the easiest way to rebut it? Well, IMPEX says if we increase taxes, then they won't invest here anymore. But they're currently looking to invest in Norway, and Norway taxes a lot more than we do. But the other thing is they use the word investment in a way that confuses people. To be clear, if something's already been built here in Australia and they've spent billions of dollars building it, they can pull their money out of Australia. But the only way they can pull their money out of Australia is by selling that project to someone else. And the project stays here. So, you know, I think this scare campaign implies, oh, if they don't invest, we won't have any gas anymore. It's like, no, no, no, no. To be clear, the gas is here, the gas extraction equipment is here, the liquefication project is here. I mean, it's a scare campaign. What's embarrassing is not that people fall for it. What's embarrassing is that our elected leaders seem to fall for it. You know, this stuff is a bit complicated, but if our government doesn't know that they can't take their bat, their ball and their gas refinery and go home. If our government doesn't know that, that's embarrassing. So I don't blame the public for being a bit confused, but we actually need our Resources Minister and our Prime Minister to negotiate hard deals on our behalf. And, you know, the resource Minister speaks as if she represents the resource companies. Talk about getting the brief wrong. It's the resource Minister's job to get the highest possible price for Australians for our gas. That's her job because we only get to sell it once. And the Norwegians know that, and the Qataris know that, and the Saudis know that, and we think that the foreign gas companies are doing us some sort of favor when they invest in the export equipment that they need to take our gas to their country. I mean, it's. It's wild.
- [12:56]
A
So another ALP national conference is over now, Richard. And there is the promise, like we've mentioned, that there will be a fairer return on natural resources. Ed Husick says the campaign will survive the conference. What do you think? Do you think there are enough factions now within labor to keep this issue alive and get the treasurer and Prime Minister to embrace it eventually?
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I do. And I think it's in Labor's interest to do it. And I think the timing is important because if I can see it, they can see it. You know, Peter Dutton went to the last election saying we needed some form of gas export tax. Pauline Hanson says we we need some form of gas export tax. To be clear, neither of them has proposed something as ambitious or as effective as a 25% export tax. But both of them have made space for this conversation. Clive Palmer supports it. All those full page ads that you see, have a look, the first dot point is a 25% gas export tax. So yes, it's true that the prime minister seems determined to kick this into the longish grass yet again. But it's also true that his party wants it, the members want it, the ACTU are calling for it. But it's also true that his political opponents can see the same political opportunity. And again, the first party that shows Australians I will put Australians ahead of the interests of the foreign gas companies. They're going to pick up a lot of votes. And frankly, what better way to show Australians that our democracy isn't broken? What better way to show Australians that our parliament can actually stand up on behalf of Australians than to make some foreign gas companies really sad? Indeed. The anger of the gas industry is the communication strategy. Look how angry they are because I made them pay you a fairer price for your resources. Now I can give you better aged care. Now I can give you cheaper childcare. Now I can cut your kids university fees. Like, you know, called me old fashioned, but that sounds like good economics and good politics.
- [15:06]
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I'd never call you old fashioned, Richard, but thank you once again for coming on 7:00am thank you. You can also read Richard Dennis latest vantage points essay from Australian Strategic Press titled More Fool Me how the Gas Industry Tricked Australia. That'll be out next month. 7:00am is a Daily show from Solstice Media. It's made by Aria Richards, Atticus Bastow, Chris Dengate, Crystal Keller, Renee Auckland, Ruby Jones, Travis Evans, Zoltan Fitj Jr. And me, Daniel James. Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio. Have a great weekend and if you haven't already, you can follow 7am on Instagram or subscribe on YouTube and you can leave us a review on your podcast app. It really helps.