Federal Labor must back resources sector, not punish it

ALP national president Wayne Swan says gas companies were profiteering from the war in Ukraine. Picture: NCA NewsWire / Dan Peled

Australia exports more liquefied natural gas than any other nation in the world. We are a vital energy security partner to nations such as Japan and South Korea. We also supply coal for power generation and steel-making.

Australia is a resources powerhouse yet we are about to engage in another round of confidence-sapping investment uncertainty and policy back-flipping. All this in a desperate attempt to manage a federal budget in disrepair and a knee-jerk reaction to the loudest voices in the room on gas prices.

The Australian Workers’ Union has rightly been raising the issue of gas prices and domestic production at state and national forums of the ALP for years. These calls have routinely been rejected by many of those now serving on Labor’s frontbench, including Treasurer Jim Chalmers.

The self-serving, largely under-invested manufacturing sector has tagged along in the hope of cheap energy to produce a profit rather than innovate and embrace renewable energy.

Meanwhile, the peak body for oil and gas, the Australian Petroleum Production and Exploration Association, has com­pletely dropped the ball in representing its members’ interests. Its government relations “strategy” in Canberra seems to have been reduced to handing out free seats to backbenchers at Canberra’s Midwinter Ball.

Gone are the private sector energy champions such as Shell’s Andrew Smith, who actively used to promote the contribution to our nation, especially in regional economies, of his company and the wider resource sector. He was prepared to stand up to the activists and take on the naysayers.

The sector’s political weakness couldn’t come at a worse time as the Albanese government is under extreme pressure to be seen to act from the teals, the Greens and rent-seekers. Labor’s actions in coming days to be seen to “do something” may well do ­irreparable harm to Australia’s reputation as a stable place to ­invest in big and economically transformative resource projects like those we’ve seen in Queensland and Western Australia.

It comes as ALP national president Wayne Swan, doing his best to channel Venezuela’s Hugo Chavez, declared on the public broadcaster that gas companies were profiteering from the war in Ukraine. It was an unedifying performance that then segued into an all too familiar Bernie Sanders-style “tax the rich” call on gas companies.

It’s ironic Swan’s Cbus superannuation members have done very well with the capital appreciation and dividends paid by their significant exposure to resources companies, including those that mine coal and produce oil and gas. Swan, a self-acknowledged mentor of Chalmers, obviously had a healthy heads-up on the Tuesday statement to the Senate committee by Treasury secretary Steven Kennedy that echoed Swan’s call – with a justification of “war-driven shocks” – for massive government intervention including new taxes in the coal and gas sector.

Kennedy’s commentary on gas and thermal coal prices sits totally at odds with the same Treasury predictions contained in this October’s budget that tip thermal coal to drop from the current $US438 to just $US60 and gas also dropping by some 33 per cent by March 2023. You really do wonder how they make all this up and keep a straight face. Their low-ball commodity prices were just a lazy revenue kicker for their Treasurer come May next year.

So, just a fortnight later, we are now supposed to believe there’s a “war pricing profit cycle”. This is the one Treasury’s own estimates says will collapse within the next five months, but is now justification for massive market intervention and targeting of specific companies that have invested billions into our economy. Companies that throughout the depths of Covid and massively depressed resource prices only two years ago kept Australians in work.

You only get to traduce your investment-grade standing and sovereign risk profile once. Rather than recognising we need more supply, not more investment-killing taxes and regulations like price caps, the federal government seems determined to declare a war on success. Such a move might well appeal to short-term populism. Focus groups are currently littered with support for a “windfall tax” and it would no doubt be a populist sugar hit for the Albanese government.

What a price cap, super profits tax or domestic quarantining of gas and coal won’t do is provide the long-term framework for ongoing investment in our resources; a sector that has driven inter­generational growth and helped Australia avoid the worst economic shocks of the GFC.

The resources sector should be supported with more expansions to provide energy security for our nation and our allies. Energy security is as important as physical security through increased defence spending and capability.

The example of Western Australia often used to support domestic gas reservation is not com­par­able to the multi-state juris­diction on the east coast. Queens­land has produced a global gas export industry while Victorians cheer on gas moratoriums as they demand cheap gas for their cold winters and cottage industries.

NSW isn’t much better. It has plenty of gas but would prefer to cry poor and ask for handouts from Queensland taxpayers to support its energy-starved manufacturers and homes.

Federal Labor must decide whether it wants to tax Queensland with a triple whammy of domestic reservations, price caps and windfall taxes on companies daring to be profitable. Such a move would be cheered on by the chattering classes and the billionaire-backed teals in parliament. Just like the carbon tax and the mining tax before it, this won’t quickly be forgotten in the must-win state of Queensland.

That not one, but potentially two Labor federal treasurers from Queensland could so happily work against their own state’s interests might well explain why the last time federal Labor in Queensland had more lower house seats in federal parliament than the conservatives was 1993. That’s despite Labor at the state level having governed for 24 years in the same period.

Federal Labor should support the resources sector wholeheartedly and recognise the vital role it plays in supporting jobs and investment, not single it out for short-term punishment in the vain attempt to be populist.