July 17, 2013

There is an increasing recognition that the economic gains of the last decade are behind us and that maintaining Australia’s prosperity will require some new thinking.

With a change in Prime Minister and a federal election looming, this is a good time for both the Government and Opposition to consider policy. But it will also be a period that tempts politicians to resort to cynical populism.

This temptation must be resisted. In announcing he would challenge Julia Gillard for the leadership of the parliamentary Labor Party, Kevin Rudd said, “The nation needs … national economic leadership to deal with the formidable new challenge Australia now faces, with the end of the decade-long China resources boom and its impact on Australian jobs and living standards in the future.”

Our political leaders need to show national economic leadership, not just in words but by deeds.   Both sides of politics must act to help improve the oil and gas industry’s international competitiveness and commit to policies ahead of the coming election that build – rather than hinder – the industry’s growth.

Our industry is today building almost $200 billion worth of projects in Australia – and we have the potential to build another $100 billion worth.

But Australia’s attractiveness as a place to invest is under enormous pressure. Unless the next Australian parliament can work with industry to rectify this, the next generation of Australian LNG projects may never be built.

Policy priorities

To maximise investment, jobs growth and tax revenue, government must commit to policies that pursue more export sales while also delivering more gas domestically to households and factories.

Regardless of who wins the federal election, the next Parliament must:

  1. Deliver a stable, predictable and competitive taxation regime that encourages investment. We don’t want shocks or surprises. We don’t want an ad hoc or short-term approach to tax reform. We do want to see the competitiveness of the whole tax system improved.
  2. Resist calls for energy policy interventions that force non-commercial outcomes – and show leadership to state and territory governments to do the same.
  3. Deliver regulation based on sound scientific principles and transparent assessment – and show leadership to state and territory governments to do the same.
  4. Drive resolution of the problem of duplication of green tape and red tape across jurisdictions. We have had years of talk about this from Canberra, but the issue is getting worse, not better. It is adding to the time required to develop projects, adding to the costs of developments and adding to the risks faced by investors.
  5. Address the need for providing a skilled workforce for Australian energy developments through training and continuing access to overseas labour markets.

The Australian oil and gas industry created 100,000 jobs last year and is looking to generate this many again in the decade ahead.

However, the costs associated with delivering Australian LNG into key markets is now substantially higher than for projects in East Africa or North America. Higher taxes, lower labour productivity and red/green tape faced by local projects have to be addressed.

Based on projects committed and under construction, the Australian industry will deliver more than $13 billion a year in royalties and taxes by 2020.

That’s the funding needs of more than 25,000 public hospital beds, or enough to fund the annual education costs of 1 million students in government primary schools.

Governments’ visions for health, education and social welfare programs can only be realised if they also have a vision for national wealth creation, a vision underpinned by a sound and coherent policy framework.

Australia can maintain its prosperity and enviable way of life, but only if its political leaders tackle the necessary reforms.

Politicians and voters would do well to reflect on this as the federal election approaches.