Anthony Albanese muted on budget tax windfall from resources and energy exports

LNG, coal and iron ore will turbocharge the value of the nation’s resources and energy exports to a record $464bn in this financial year.

Earnings on liquefied natural gas exports are set to jump by $20bn to $91bn in 2022-23

LNG, coal and iron ore will turbocharge the value of the nation’s resources and energy exports to a record $464bn in this financial year, promising a tax windfall for the federal budget that extends late into this decade despite retreating prices.

With earnings on liquefied natural gas exports set to jump by $20bn to $91bn in 2022-23, Anthony Albanese on Sunday would not be drawn on whether the government in the May 9 budget would look to claw back more of exporters’ booming gas profits via a higher petroleum resource rent tax.

“We’re working constructively with business,” the Prime Minister said in Perth.

Treasury has been examining the adequacy of the PRRT since before the last election, and there is a broad consensus that the tax is poorly structured and has failed to capture the super profits associated with the recent booming energy prices.

“We know that the budget faces pressures,” Mr Albanese said. “We inherited a trillion dollars of debt and no plan whatsoever to deal with that debt.”

The Department of Industry, Science and Resources’ latest Resource and Energy quarterly report predicted that 2022-23 would be the high watermark for our natural resources exports, but painted a picture of ongoing resilience, with resources export earnings projected to still be at $289bn by 2027-28, after adjusting for inflation. “The long-term structural picture for Australian commodities remains promising,” the report says.

Monthly Department of Finance figures released on Friday revealed the tax revenue boost from elevated gas and coal prices had helped deliver a $20.5bn improvement in the budget bottom line for the 2022-23 year-to-date versus October’s official estimates.

Ahead of a May 9 budget that Jim Chalmers says will once again focus on spending restraint despite what he has said would be a “substantial” lift in the tax take, the Treasurer has said his department was looking at whether to include more “credible” commodity price forecasts, in a move that would add billions to the bottom line over forward estimates.

The report from the department’s Office of the Chief Economist says supply disruptions from flooding and the chaos in energy markets unleashed by Russia’s invasion of Ukraine would be responsible for this year’s record export earnings, which would “easily” surpass last year’s equally historic $422bn.

Exports earnings would retreat sharply in 2023-24, however, to $378bn, in real terms, “as commodity prices settle back at levels seen before the recent spikes”. “The spike in energy commodity prices in 2022 has now largely unwound,” the report says. “However, a strong recovery in Chinese economic activity could re-tighten world commodity markets over the next year or two.”

Iron ore exports would drop to $121bn in this financial year, in real terms, from $142bn in the last, before falling to $100bn in 2023-24 and $74bn by 2027-28.

High prices would drive LNG earnings to $91bn in 2022–23, or three times the level recorded in 2020-21, while thermal coal exports would hit $65bn in this financial year, from just $16bn two years earlier.

The steepest projected fall was in coal exports, driven by the rapid retreat from record high prices, the report says. Thermal coal earnings would retreat from $65bn in 2022–23 to $19bn five years later, while steelmaking coal exports would halve from $63bn to $30bn in that time.

“The outlook remains subject to significant uncertainties, linked to geopolitics, war, the global energy transition and weather events,” the report says. “But Australia has resources that are central to the global energy trans-ition. Exports of critical minerals, such as lithium, are expected to increase strongly as revenue from coal exports declines.”

Lithium exports have tripled since last year and will reach $19bn this financial year, the report saysid, before dropping to $11.8bn in 2023-24 and then retracing back to $19bn by 2027-28.

With lithium and base metal exports set to equal the value of coal exports by 2027-28, Resources Minister Madeleine King said the report “underlines the importance of our critical minerals sector and Australia’s ambition to become a clean-energy superpower”.