Opinion
Anthony Albanese didn’t want a fuel crisis. But it is just the opportunity he needs.
Australia is in a funk. Breaking out of it requires tough reforms. The fuel crisis is creating the sense of emergency he can use to justify controversial changes.
He has three added advantages. One is that the crisis has struck at just the right juncture. The government is one year into its term. So it has two years to run. That’s two years for the government to enact reform, argue its case, manage the consequences and settle the electorate.
Second is that the Coalition is dazed and confused. Third is that Albanese has a big parliamentary majority, so he can afford to lose some seats yet retain power. A bonus: the federal budget is 52 days away, a potential launch pad for reform.
Of course, it requires the prime minister to seize the opportunity. Just as the old adage says, never let a crisis go to waste. Ken Henry certainly thinks this is just such a moment. “At times in the past, confronted with crisis, Australian governments have proved capable of creative, imaginative thinking that has produced economic reforms that have improved the lives of Australians,” says the former Treasury secretary who helped midwife the Hawke-Keating and Howard-Costello rejuvenations.
“Here’s another such opportunity,” he tells me. One simple example, he says, is to impose a federal tax on fossil fuel exports. It could raise $40 billion a year in revenue and push local gas prices lower. A similar effort to tax mining profits helped destroy the Rudd government but, says Henry, it “should be child’s play now”.
Why? “Because people are experiencing the pain of rising energy prices and seeing the energy companies taking billions in superprofits. When Kevin Rudd tried to tax mining superprofits in 2010, people weren’t experiencing high fuel costs, and they believed the narrative that the mining industry was underwriting Australian prosperity. They don’t believe that today.”
A new tax on Australian coal and gas exports could be set as a carbon export tax at $38 per tonne. That is the current trading price of the nation’s market in carbon credits, Australian Carbon Credit Units.
This would generate over $40 billion a year for the Treasury, he says. And, by “driving a wedge between the domestic price of gas and the export price, you’d be driving domestic gas prices lower for households”, he says.
Henry sets this as a minimum hurdle for the Albanese government’s reform agenda: “If you can’t do this, you can’t do anything.”
In itself, this is not a program of reform. It’s just a revenue grab. But “it could be framed as part of tax reform, a windfall gain tax”, says Henry. It could constitute part of a bigger, systemic reform to break Australia out of its low-growth reality and its bleak economic future.
And, if not now, when? Perhaps never. Without dramatic change, Australia will remain in its funk, the people’s discontent will fester, Pauline Hanson’s One Nation will continue to take advantage and it could well seize some seats in the House of Representatives as well as in the Senate.
Hanson, realistically, has no hope of winning the prime ministership at the next election. But it’s entirely possible that her party could occupy the balance of power. In which case, constructive reform would become impossible.
One Nation is on a tear. It scored 6 per cent of the vote at last year’s federal election. This has almost quadrupled – to 22 per cent, a record – according to last week’s Resolve Strategic poll.
One Nation is not a problem-solving party. It’s a protest party. It appeals to anger and it sells blame. Hanson originally wanted to victimise Asians, then Indigenous Australians, lately Muslims. It has no solutions, only scapegoats.
Like other right-wing populist groups abroad, it’s a party of last resort. “They are taking votes from those who feel ill-served, ignored or rejected by the major parties, and they’re voting for change, any change,” says the pollster for this masthead, Jim Reed of Resolve Strategic. A favoured Hanson catchphrase is “I’m sick of it”.
If voters think there are no constructive solutions, they will vote for the party of destruction. Because they feel they have nothing to lose.
It’s the fable of US President Donald Trump. Americans didn’t choose him because they expected him to fix their country. They expected him to wreck it for the Americans who were doing better than themselves. Remember? “I am your retribution,” he said.
Australia in recent months discovered it is stuck in a low-growth economy. If it grows faster than 1.5 per cent to 2 per cent, demand outstrips supply. Inflation heats up. The central bank raises interest rates to cool it. With this newfound speed limit, real wages, living standards and government revenues are straitjacketed. Now, on top of that, we face fuel shortages. Rising petrol prices, if persistent, will inflame yet more inflation.
Inflation erodes living standards. It kills governments. In Australia, inflation has returned just when we thought it was past.
With the people’s economy sick and Hanson rampant, it’s possible that this term of parliament is Australia’s last best chance to avoid a MAGA-esque morass, a dead end of racist recriminations rather than a pathway to progress.
Albanese will have political advice counselling against bold reform. Leaders always do. The advice usually runs along these sort of lines: “PM, the punters are anxious and frightened, they want reassurance, they don’t want more change. It’s too risky.” Inertia is easy. It’s not leadership.
Treasurer Jim Chalmers showed in a speech this week that he grasps the reform imperative.
“The war in the Middle East is the most pressing problem confronting the global economy,” Chalmers said. “But it reinforces – rather than replaces – the three core challenges shaping this budget.
“Let me be blunt. Before this war, inflation was already too high. Productivity growth had been too weak for two decades … Developments in the Middle East make addressing these three challenges even more urgent, not less.”
The fuel crisis, said Chalmers, was not the only major problem “but it exacerbates the others”.
What does the Albanese government need to do to seize the opportunity? First, it must manage the immediate fuel crisis. The entire country now is acutely aware that Australia has only about a month’s reserves of petrol, diesel and avgas.
Second, it needs to break the dismal economic speed limit. Chalmers has to raise the speed at which Australia can grow without generating self-defeating inflation. This has two main components.
The first is that the budget has to take pressure off inflation by cutting federal spending. That will be difficult and unpopular in the short run. He signalled that he’s resolved nonetheless: “We will make hard decisions in May” on budget night, he said.
The other component is lifting productivity. This doesn’t mean longer working hours, it means working smarter. To produce more for every given dollar of investment or hour of labour. This, again, is about raising the speed limit. Chalmers nominated three themes to deliver better productivity: attracting investment, making it easier to build and build faster, and cutting compliance costs.
One of the key ways to get better productivity is to use the tax system to offer incentives. Chalmers says he’s working on it. Decisions are to be announced on budget night. He knows the sort of political counsel that he’ll be given – to offer reassurance, not difficult reform, to the electorate.
And he’s anticipated it. The fuel crisis and Trumpian chaos “is a reason for more reform, not less. It’s a reason to go further, not slower”.
Trump’s apparently random war on Iran opened the Pandora’s Box of chaos in a moment. He could abandon it just as quickly. But even if he pulls the US out tomorrow, he’s lost control of events. Israel and Iran are likely to continue attacking each other for weeks. Oil, LNG and fertiliser supply will be disrupted accordingly. International air corridors, too. Shame about those holiday plans.
Albanese didn’t bomb Iran, but he will be held responsible for managing the domestic consequences.
The glaring lack of fuel supplies is the result of a national effort; the Coalition is guilty of stupidity, Labor of complacency. Labor has moved to address the Coalition’s failures, but too slowly.
As Chalmers pushes the government to act on a new and urgent reform agenda, he said in his speech this week that “it will be an ambitious budget because ours is an ambitious government, and this is an ambitious country”. But while it’s Chalmers’ budget, it’s Albanese’s government. Over to you, prime minister.
Peter Hartcher is political editor.
Peter Hartcher is political editor and international editor of The Sydney Morning Herald and The Age.Connect via email.