The Australia Institute’s big fuel subsidy lie

The Australia Institute claims fossil fuel subsidies added up to $10.3bn in the 2020-21 financial year. The claim and that figure are simply completely false.

THE far left propaganda operation The Australia Institute claims fossil fuel subsidies added up to $10.3bn in the 2020-21 financial year.

The claim and that figure are simply completely false.

Indeed, they have been shredded time and again.

But the Institute — which is essentially a propaganda arm of the far left Australian Greens Party — clearly believes it can keep recycling and increasing the size of its Big Lie in tried and true propaganda fashion.

The overwhelming majority of that $10.3bn is the $7.8bn of fuel excise which is refunded to industry users under what’s called the Fuel Tax Credit.

Take it out — as it should be, as it is not a subsidy to the fossil fuel industry — and the Institute’s Big Lie figure falls to just $2.5bn.

Although that would add up to 500,000 Cartier watches under the “Morrison Waste Measure”, it is spread over all state and federal governments, and is tiny in the fiscal scheme of things; the federal budget alone is spending $470bn this financial year.

Further, most of even that $2.5bn has been spent on infrastructure that might provide some benefit to fossil fuel businesses because it provides benefit to all businesses and consumers.

Back in 2012 the entirely non-partisan — the facts ma’am, just the facts — Parliamentary Library stated simply and conclusively: “The rebate for excise paid on fuel that eligible businesses use as inputs is not a subsidy to fuel use.”

Treasury said that “fuel tax credits are not a subsidy for fuel use”.

It quoted Treasury that “fuel tax credits are not a subsidy for fuel use”.

The Library noted the Productivity Commission “does not consider the rebate to be a form of assistance”.

Every year the PC produces a Trade and Assistance Review which identifies and, where possible, quantifies government assistance to industry.

The PC did not in 2012, and still does not, list fuel tax credits as a form of assistance.

The reason is the most basic economics 101 and even a matter of simple logic: It is not appropriate to tax intermediate goods in the production process.

That distorts the allocation of factors.

Reducing taxes on intermediate goods reduces this distortion, and so increases total output and living standards.

Exactly this happens with the GST: As with the fuel tax rebate, at each stage of the production process business claims a rebate for GST paid by it, until the final stage where the consumer pays the GST.

All this was patiently explained by economist Sinclair Davidson to Richard Denniss — the Institute’s then executive director and now its economist — in a debate in 2014 on, rather surprisingly, the far left The Conversation’s website.

Before he joined the Institute, Denniss was senior strategic adviser to then Australian Greens leader senator Bob Brown,

He was succeeded as executive director of the Institute in 2015 by Ben Oquist, who spent 15 years working with and for Bob Brown. I think we can safely conclude the Institute is not a front for the Liberal Party.

Ahead of his appointment to succeed Denniss, when he was the Institute’s “strategic director” Oquist was a key player in bringing together former US vice-president and latter-day climate loon Al Gore in that bizarre meeting with Clive Palmer in 2014. That had mixed results. It didn’t save the carbon tax — or, longer term get Bill Shorten and Labor elected in the 2019 “Adani election”. Thank you, again, Queensland (and Palmer and Pauline).

But it did arguably save the Clean Energy Finance Corporation, the Climate Change Authority and the renewable energy target which Palmer voted to keep.

They have collectively cost Australians tens of billions of dollars of subsidies to useless pie-in-the-sky energy fantasies; many multiples of any claimed subsidies to fossil fuels.

Originally published as The Australia Institute’s big fuel subsidy lie