Albanese, Dutton must urgently tackle our currency crisis
I put on the table three essential policies to help us prepare for tough times and curb the inflation boosts of a currency fall. One was inspired by the wisdom of a truckie in the first leaders’ debate audience.
Within hours of the leaders debate closing, the US share slump resumed and, most frighteningly, the Australian dollar was again trashed. It fell below US60c.
Alarmingly, the debate showed that neither Anthony Albanese nor Peter Dutton understand the warnings being sent to Australia via the lower dollar. With one vital policy exception, both need to stop their “spendathons”.
It’s now urgent that we make Australia a better place for investment to insulate us from currency raids. Both parties mentioned gas. Neither understood how it can transform the Australian economy to lower energy costs, starting in August 2027.
Neither raised the emerging contract risks to overseas customers which endanger both our exports and investment, nor was the ALP’s disastrous planned tax on unrealised capital gains mentioned. Unbelievable.
Each of the above will be vital policy components if China runs into trouble, which was an important component of the latest a raid on our currency – The Chinese currency also fell. If the raid continues it will boost inflation and put upward pressure on interest rates.
I put on the table three essential policies to help us prepare for tough times and curb the boost to inflation from a currency fall. One was inspired by the wisdom of a truckie in the audience.
In the three policies, August 2027 becomes a key long-term energy cost reduction date. Accordingly, Dutton’s fuel excise reduction should be extended to July 31, 2027. The truckie was right.
First policy: mineral export rules.
The expected decline in Chinese and global activity in the wake of the Trump measures will reduce demand for our iron ore and other mineral exports. Australia’s hard-won reputation for being a reliable supplier is in danger at this crucial time. In iron ore, a battle is taking place between BHP/Rio Tinto and the unions to decide who should control the mines.
That battle looks set to destroy our reliable supply reputation in iron ore at a time of increased competition from Africa and other areas. The government must intervene in the national interest.
In gas, government interference in contracts and environmental issues are also rapidly eroding our reliability reputation. The next prime minister needs to make gas export contracts sacrosanct and make sure Australia adheres to contracts.
Second: energy policy. Given the immediate emergency, we should put nuclear on the long-term burner. We are incredibly lucky and can change the Australian energy outlook by the August 2027 target, when the petrol excise cut can end.
Eastern Australia is desperately short of gas, which it needs to maintain production of steel, cement, bricks and a vast number of industrial and domestic products. And, perhaps most importantly, gas power generation make our renewables investment economic because gas power can be switched on and off when renewables don’t generate. Gas power can replace coal.
Victoria is gas-rich but unbelievably effectively bans its development. Thankfully, the Victorian election is some nine months before August 2027.
Australia cannot afford to damage our reputation by restricting gas exports from Queensland. And we will need the export revenue. There are better solutions, but they will require “defence”-type action which the Coalition needs to quickly embrace in its policy (after checking my facts) and hopefully Albanese will follow.
The Beetaloo gas reserves in the Northern Territory are immense – many times those of the Gorgon deposit in WA. They can be piped economically into the east coast gas pipe network as well as to Darwin. The gas is 3.5km deep and requires horizontal pipes. The existence of the gas is not in doubt.
It’s about extracting it economically. America’s incredible drilling skills are being applied to the deposit. Recent results indicate the gas availability matches the biggest fields in the US.
If the federal government responds to the gas emergency we can have Beetaloo gas from the Northern Territory at an economical price in Sydney, Melbourne, Brisbane and regional areas by August 2027. The current schedule of 2028-29 for east coast delivery would be disastrous.
The desperate east coast gas situation requires unusual action, inducing fast tracking legislation. The Prime Minister after May 3 should step in and notify the Beetaloo partners, led by ASX-listed Tamboran Resources, that accelerated drilling is required, and if the recent drilling results continue in the next three months between May and August, the government will guarantee gas supplies to justify an immediate start to the pipeline. They will also guarantee the distributors that the gas will be available.
I realise this is a radical action with risk, but nations take such actions in a crisis. Failure to secure gas supplies will almost certainly continue the raid on the currency, and our dollar could fall to US50c. I invite both the Prime Minister and the Opposition Leader to check my August 2027 date.
Policy three: an end to the proposed “savings tax” – a tax on unrealised capital gains in superannuation.
Dutton should agree that revenue on superannuation assets above an indexed $3m should be taxed at 30 per cent rather than the present 15 per cent. But the tax collection system on the revenue from assets above $3m should be the same as that applied to assets below $3m. Surely this is fair.
What Albanese did was to use the superannuation change as a smokescreen to introduce his disastrous savings tax, which would apply from July 1. The Senate thankfully blocked the legislation, and paradoxically if the current share price falls continue it will actually raise little revenue in the first year. But longer term, the base will be lowered, and it will devastate future capital raising in the nation.
Treasury sees a widened savings tax as the way to fund the “spendathons” that Albanese and Dutton are engaged in.
Finally, as soon as the election is completed, the incoming trade minister supported by the prime minister needs to foster discussions to set up an Asian Pacific free trade network. There are already moves in this direction, and we need to join those moves and create our own form of initiative.
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