Australia’s recent prosperity has largely resulted from Australia’s ability to attract investment.
The Australian oil and gas industry is today building almost $200 billion worth of projects – and it has the potential to build another $100 billion worth. But without substantial policy reform, further investment in this sector may not proceed.
A Deloitte Access Economics report, Advancing Australia, shows that:
- More than a third of current business investment in Australia is in the liquefied natural gas (LNG) sector.
- Over the investment phase, it is estimated that the industry created about 103,000 (full-time equivalent) jobs across the Australian economy.
- Companies all over Australia supply goods and services to the oil and gas industry, and the use of fly-in, fly-out staffing is spreading the benefits of the industry across Australia.
- The oil and gas industry’s production profile directly and indirectly represents around 2% of current GDP, with value added of about $28.3 billion in 2010-11.
- The sector’s economic contribution to the national economy will more than double to $65 billion in 2020.
In 2011-12, the industry paid $8.8 billion in taxes ($4.8 billion in corporate taxes and $4 billion in production taxes). This is forecast to reach almost $13 billion in 2020.
These benefits cannot be taken for granted.
Australia’s attractiveness as a place to invest is under enormous pressure and its reputation as a place where investors can safely make long-term decisions is being eroded.
Unless industry and government can work together to rectify these problems, the next generation of Australian LNG projects may never be built. This would undermine national prosperity.
To maximise investment, jobs growth and tax revenue, government must commit to policies that pursue more gas export sales while also delivering more gas domestically to both households and factories.
The Australian Government must:
- Deliver a stable, predictable and competitive taxation regime that encourages investment. Industry and investors don’t want shocks or surprises. Nor do they want an ad hoc and short-term approach to tax reform. The competitiveness of the whole tax system must improved if Australia is to attract further oil and gas investment.
- Resist calls for energy policy interventions that impose non-commercial outcomes on companies – and show leadership to state and territory governments to do the same.
- Deliver regulation based on sound scientific principles and transparent assessment – and show leadership to state and territory governments to do the same.
- Drive resolution of the problem of duplication of green tape and red tape across jurisdictions. We have had years of talk about this from various governments, 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.
- Address the need for providing a skilled workforce for Australian energy developments through training and continuing access to overseas labor markets.