In one awful decision, Albanese reveals his do-nothing plan

It didn’t take long for us to discover what a triumphantly re-elected Labor government would be like. Would Anthony Albanese stick to the plan he outlined soon after the 2022 election of avoiding controversy during his first term so he could consolidate Labor’s hold on power, then get on with the big reforms in term two? Or would he decide that his policy of giving no offence to powerful interest groups had been so rapturously received by the voters, he’d stick with it in his new term?

Well, now we know. The re-elected government’s first big decision is to extend the life of Woodside Energy’s North West Shelf gas processing plant on the Burrup peninsula in Western Australia for a further 40 years from 2030.

What was it you guys said about your sacred commitment to achieve net zero emissions by 2050? You remember, the commitment that showed you were fair dinkum about combating climate change whereas the Coalition, with its plan to switch to nuclear energy, wasn’t?

So you’re happy for one of the world’s biggest liquified natural gas projects still to be pumping out greenhouse gases in 2070, 20 years after it’s all meant to be over?

Some estimate that the plant will send 4.4 billion tonnes of greenhouse gas emissions into the atmosphere, but that’s OK because nearly all the gas will be exported. We won’t be burning it, our customers will. (Though we don’t quite know how we’ll ensure their emissions worsen their climate but not ours.)

To be fair, had the government failed to extend the project’s licence, Woodside would have been ropeable and the West Australian branch of the Labor Party – which I sometimes suspect is a wholly owned subsidiary of the mining industry, or maybe the mining unions – might have seceded.

But that’s the point. If you want to govern Australia effectively – if you aim to fix our many problems – you have to be prepared to stand up to powerful interest groups. It’s now clear Albanese isn’t prepared to stand up, but still wants to enjoy the spoils of office.

The strange thing is, according to our present law, the environment minister’s power to end Woodside’s franchise stems only from the project’s effect on the environment, not on climate change. But this would have been no impediment to rejecting the continuation.

Other acidic pollution from the gas plant at Karratha has done great damage to the Murujuga rock art, and will do more. And this isn’t just any old bunch of Aboriginal carvings.

It is the most extensive collection of etched rock art in the world. More than a million carvings chart up to 50,000 years of continuous history, showing how the animals, sea level and landscape have changed over a far longer period than since the building of the pyramids.

It has images of what we called the Tasmanian tiger in the Australian mainland’s far north-west. It includes what may be the world’s oldest image of a human face. It even has an image of a tall ship.

How much natural gas would it take to persuade the French to let some company screw around with the 20,000-year-old paintings in the Lascaux Cave? What about the Poms letting miners have a go at Stonehenge?

But that’s not the way we value our ancient carvings. They may be important to First Australians, but the rest of us don’t see them as our heritage, valuable beyond price. The miners want them? Oh, fair enough.

Speaking of price, how valuable is that gas off the coast of WA? To Woodside’s foreign partners – BP, Shell and Chevron – hugely so. To us, not so much. The foreign companies pay only a fraction of their earnings in royalties to the WA government.

They pay as little as possible in company tax and next to nothing under the federal petroleum resource rent tax. In principle, it’s a beautiful tax on the companies’ super profits; in practice, they pay chicken feed. The Albanese government moved early in its first term to fix up the tax. Now the fossil fuel giants are being hit with two feathers, not one.

Ah yes, but what about all the jobs being generated? About 330 of them. Oil and gas are capital-intensive. We’re destroying our Lascaux Cave to save 330 jobs?

But apart from this decision’s effect on the climate and our pre-settler heritage, what does it say about how we’ll be governed over the next three years? Albo must think he’s laughing. His policy of doing as little as possible has received a ringing endorsement from the voters. So much so that the Liberals have been decimated, while the minors promising to act a lot faster on climate – the Greens and the teals – slipped back a bit.

But if I were Albanese, I wouldn’t be quite so certain that another three years of doing as little as possible – of never rocking the boat or frightening the horses – will see him easily re-elected in 2028.

In all the Libs’ agonising over what they must do to attract more votes, old hands are advising them not to become Labor Lite. Good advice. Albo has already bagsed that position.

I suspect that if Albanese wants to be the Labor government you have when you’re not having Labor, he’d better expect a fair bit of buyer’s remorse, starting with Labor’s true believers.

Just because Albo looked better than the scary Peter Dutton doesn’t mean voters opted for a do-nothing government.

Labor did well – and the Libs did badly – because it attracted more female and young voters. We know both groups are strong believers in climate action. Next time, they may decide the Greens and teals are the only politicians left to vote for.

If most voters expect their government to do something about their growing problems, Albo may attract a lot more critics than he bargained for. But admittedly, he will be kept busy shaking hands with the victims of droughts and 500-year floods.

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Let's stop kidding ourselves. Taxes will have to go up

Before the election, the business press was terribly concerned about the decade of budget deficits and ever-rising public debt the Albanese government had clocked up. Something must be done! After the election, however, when the government pressed on with a move to save up to $3 billion a year by making rich men pay more tax on their superannuation, it was appalled. The sky would fall.

What the two contradictory positions have in common was that both are criticisms of a government few of its business readers would have much sympathy for. But the episode also shows the way voters’ attitudes towards the budget abound in wishful thinking – something the pollies encourage. “You want more, but don’t want to pay for it? Sure, I can do that.”

In Treasury secretary Dr Steven Kennedy’s speech to the Australian Business Economists last week, he showed a graph of the budget’s “structural” deficit stretching all the way out to 2035-36. (The structural component of the budget balance is the bit that’s left after you’ve allowed for the effect on the balance of where we happen to be in the business cycle of boom and bust.)

The structural deficit for next financial year is estimated to be 1.5 per cent of gross domestic product. Kennedy noted that spending on the National Disability Insurance Scheme is expected to reach more than our spending on defence. But he reminded us that (thanks mainly to our good friend Mad King Donald) defence spending is likely to grow a lot in coming years.

And that’s just the feds. The combined state and territory budget deficits are likely to be 1.8 per cent of GDP in the financial year just ending – which is 1.5 percentage points higher than their pre-pandemic long-run average, Kennedy said.

So the states have been really going at it, with their combined debt at the end of this month expected to reach 18.9 per cent of GDP, its highest in the 30-plus years they’ve had control over their own finances.

And yet politicians, federal and state, persist in running election campaigns where they promise bigger and better spending on this, that and the other, without any mention of how it will have to be paid for.

Worse, no matter how much they’ve promised, the Liberals always claim that their taxes will be lower than Labor’s, without this having any effect on their spending on “essential services”. (Perhaps this boils down to a promise not to rely on bracket creep – the “secret tax of inflation” – quite as much as Labor does.)

What the pollies never tell us is that, if you want it, it will cost you. But one woman who is game to tell us what the politicians aren’t is Aruna Sathanapally, boss of the Grattan Institute. In a speech a year ago she told the unvarnished truth: our governments are “not raising enough revenue for what we spend”.

No one wants to pay more tax. And the richest of us protest more and fight hardest when asked to cough up a little more. I meet people who tell me we’re already overtaxed.

Nonsense. “We are a relatively low-tax country with high service expectations. Pre-COVID, Australia was eighth-lowest ranked country in the Organisation for Economic Co-operation and Development for tax collections relative to our country’s size, five percentage points lower than the OECD average,” Sathanapally says.

“Yet, Australians expect high-quality healthcare, aged care, and disability care, among many other things. Like other rich nations, government spending has grown as a share of the economy, particularly in recent decades.

“But our tax base is going in the opposite direction: narrowing as the population ages with the growing cost of tax concessions.

“This leaves a structural gap,” Sathanapally says. “You can tackle the structural problem by reducing spending, increasing revenue, and by growing the economy.

“Growing the economy is the easiest solution to sell, but it is the hardest to achieve in practice. Australia, like other advanced economies, is expecting slower economic growth over the next 40 years than we’ve had over the past 40 years. Even if productivity growth exceeds expectations, it is still unlikely to close the structural gap.

“As a relatively low-tax country, we can afford to raise more revenue, but of course there are better and worse ways to do this. Broadening the tax base and reducing tax concessions tend to be much less economically damaging than simply raising the headline rates of tax.

“Australia’s tax mix asks workers and companies to shoulder most of the burden, while offering substantial concessions for wealth. Wealth in housing and superannuation gets particularly generous treatment.”

“Take superannuation tax breaks for example. They cost the budget almost $45 billion a year and are projected to cost more than the age pension by 2036. These tax breaks predominantly benefit the top 20 per cent of income earners, so they do little to actually reduce age pension spending.

“Meanwhile the combination of capital gains tax breaks and negative gearing encourages speculation in the housing market in place of other more productive uses of funds,” she says.

We know how hard politically governments find it to fix these problems, “but frankly, we are sitting on a wretched generational bargain, and it has gone on for long enough.

“Young people today already face the prospect of weaker wage growth, higher hurdles to owning a home [or more likely, a lifetime of renting] and a future shaped increasingly by extreme weather and natural disasters.

“Yet, we ask our young people – our children and grandchildren – to contribute more towards supporting older generations than our older generations ever contributed when they were of working age,” she concluded.

Phew. It’s not often people in public life say things of so frank, so honest, so disinterested good sense that I want to quote them at such length.

Next, why doesn’t the business press write a desk-thumping editorial explaining how Sathanapally got it all so badly wrong.

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