Australian Greens' dissenting report

1.1The government’s Future Made in Australia (FMIA) policy is notable, because it is the first time in over three decades that there potentially is an active policy decision to depart from the neoliberal consensus that has led to recent record levels of wealth and income inequality[1] and corporate profits reaching the highest share of the economy ever recorded.[2]

1.2This policy on its own will not reverse those trends, but having government directing the flow of capital into desired areas of the economy could - if done right - be the first step at dismantling the dominant economic thinking that has shrunk Australia’s economic diversity, starved the capability of the public service to improve people’s lives and contracted out the public interest to private motivations.

1.3Embedding a ‘mission-oriented’ economy into our statute books is also an implicit recognition that it is the shape of the economy, more than its size, that is the true measure of social well-being.

1.4Despite this, the intended shape of the economy under a Future Made in Australia remains unclear and in dispute. This needs to be resolved before the legislation passes the Senate.

1.5The Albanese Government has made clear its intention to pursue its Future Gas Strategy which envisages a role for gas in our domestic and export economies beyond 2050.[3] New coal projects have been approved by the Environment Minister beyond 2070[4] and the Resources Minister has opened up 46,758 square kilometres of ocean to new gas fields.[5]

1.6In total 23 coal and gas projects have been approved since the Labor government came to office in mid-2022.[6]

1.7The government’s dangerous Future Gas Strategy can be delivered through this Future Made in Australia and hasten the expansion of fossil fuels which in turn will accelerate the collapse of our climate system.

1.8For the Australian Greens, it is non-negotiable: a Future Made in Australia cannot be a future for coal, oil and gas.

1.9However, under the Bills, there are no limitations on what will be funded by the Treasury or Export Finance Australia as necessary to advance our ‘economic security and resilience’.

1.10This could mean manufacturing weapons to send into occupied territories and war zones. It could finance the building of import LNG regasification terminals in developing countries so they become hooked on Australian gas. It could mean kickstarting a petrochemical industry that locks in dependency on new gas fields for decades to come.

1.11These possibilities were aired in the hearing, with the conclusion that ‘As to petrochemicals, there's nothing in that legislation that would preclude the minister from tasking Treasury to do that work’:

Senator HODGINS-MAY: For Treasury, the concept of economic resilience and what could be funded under this stream could mean a lot of things. I'm hoping we can work through another example. We don't currently make any petrochemical products here, so would making items such as plastics, soaps, detergents, solvents and those sorts of things qualify as supporting our economic resilience?

Ms Zaheed: The short answer is that, without undertaking the sector assessment, it's hard for me to say yes or no. But it could be something that Treasury is asked or tasked to undertake a sector assessment in, and we would then follow through the standard process. We would look at things such as concentration of the supply chains, impact on Australian economic resilience and security, what those products feed into and what the broader market looks like. Concentrated supply chains aren't a problem in and of themselves. It depends on where the supply chains are concentrated and what risks those concentrations pose for the domestic economy. As well, it's not necessarily the case that the solution to everything is the need for domestic manufacturing. There are a range of strategies. Regulations, encouraging domestic industries that are reliant on those supply chains to diversify supply chains—those are all the factors we would consider if we were tasked to look at something. As to petrochemicals, there's nothing in that legislation that would preclude the minister from tasking Treasury to do that work.[7]

1.12The Albanese Government has already committed $1.5 billion to develop common-use infrastructure at Middle Arm.[8] US Gas company Tamboran - who previously received public funding through the Coalition and Labor parties voting together to protect the Beetaloo Co-operative drilling program[9] - have exclusive rights to build a 6.6 million tonne gas export terminal at the site.[10]

1.13The Northern Territory Government has also promoted the site as a petrochemicals hub,[11] in keeping with the gas-fired-recovery report to the Federal Government that intends to turn the region into a ‘gas-based manufacturing industry for Northern Australia.’[12]

1.14Since then, the Northern Territory Government has submitted its stage 2 business case to Infrastructure Australia seeking total federal funding of $3.6 billion.[13]

1.15All of these developments taken together make the gas processing and petrochemical hub at Middle Arm a prime candidate for Future Made in Australia support. Public funding to expand the gas industry cannot be supported in the middle of a climate crisis.

1.16The $1.5 - $3.6 billion federal subsidy for the proposed Middle Arm gas and petrochemical precinct be redirected to support clean industries under a Future Made in Australia

1.17Funding streams under Future Made in Australia must be restricted to prevent public financial support for coal, oil and gas, associated infrastructure and other sectors that would lock in a long-term dependency on fossil fuels.

1.18To avoid diverting much needed investment and labour away from key growth areas envisaged in the Future Made in Australia package, the Government must stop approving new coal and gas projects.

1.19Treasury forecasts that under the critical minerals tax incentive, 2.7 million tonnes of refined critical mineral output will be created.[14] This increase in remote mining and processing will lift our emissions unless pre-emptive actions are taken.

1.20As current lithium miner, Pilbera Minerals state: ‘The majority of the [company’s] emissions can be attributed to the use of diesel, which is the main energy source used to power the two facilities, associated mine fleet and supporting mine and camp infrastructure.’[15]

1.21The $41.4 billion to be spent by the government on Fuel Tax Credits[16] will grow substantially above this forecast under a Future Made in Australia. This is because mining companies operating in a remote area will be paid 50.6 cents for every litre of diesel burned in a generator. This fossil fuel subsidy massively discourages capital investment in off-grid solar, wind or hybrid energy sources to power a mine.

1.22End the Fuel Tax Credits scheme for mining projects. This will remove the financial incentive to burn subsidised diesel instead of making capital investments in off-grid renewable energy systems.

1.23Adding value and jobs by processing minerals in Australia will also create additional emissions and gas demand unless plans are put in place before the passage of this legislation to prevent the need to open new gas fields.

1.24Most lithium mining done globally is processed using brine which is far less emissions intensive than hardrock lithium mining which is the type of lithium predominant in Australia. Hardrock mining is particularly emissions intensive with whole life cycle emissions at 16.4 t CO2e/t LiOH.H2O.[17] However this level of emissions intensity can be reduced significantly by deploying renewable energy and alternative processing technologies.[18]

1.25However as AEMO’s WA Gas Statement of Opportunities quantifies for projects being established now, gas use appears to be the default energy source being deployed for mining and processing:

Eleven resources projects are expected to add a net 23 TJ/day to gas demand by 2026. Three of these are demand reduction projects. – Six are mining projects, including gold and lithium, and account for a net 12 TJ/day of increased demand. – Four projects are minerals processing – two lithium and two rare earths, totalling 10 TJ/day of additional demand.[19]

1.26If gas demand is expected to increase under FMIA, then to prevent opening new gas fields, large scale electrification needs to be implemented across homes, businesses, industry and most importantly within our LNG terminals. Australia’s 11 terminals currently use 450 petajoules of gas a year. This is more than in the entire energy network and more than all Australian manufacturers use.[20]

1.27The Government’s Future Gas Strategy did not examine ways to reduce gas demand at all, it only explored opening up new gas fields. Under this do-nothing approach, government forecasts that gas demand on the east coast will only go from 512PJ to 471PJ by 2050[21] - a paltry 8% reduction over 25 years.

1.28On the west coast it is even worse with gas demand increasing by 25% from 386PJ to 484PJ by 2050.[22] Neither of these destinations are in any way compatible with legislated climate ambitions.

1.29Electrification of Australian households, businesses and industry (including LNG terminals) needs to be prioritised to prevent any new gas fields being required for a Future Made in Australia.

1.30Our current policy settings provide the best examples of how Australians have been dudded by the laissez-faire consensus of letting foreign capital do what it wants with no regard for Australia’s own public interest.

1.31Australia’s gas export industry has massively driven up domestic prices, made Australian manufacturing uncompetitive, increased emissions by a whopping 27.4 million tonnes since 2005,[23] forced looming domestic gas shortages through over-contracting on the east coast and not complying with gas reservation on the west coast.[24] Most painfully, this gas boom has also failed to provide Australia with meaningful public revenue..

1.32Ironically, it was other countries deploying industrial policy to develop vertically integrated gas exploration, extraction, processing, shipping and final consumption that has led to this situation.[25] The governments of Japan, South Korea, China, Malaysia and Kuwait all have ownership stakes in Australia’s LNG terminals.

1.33While those countries pursued FMIA-esque policies to achieve their social and economic objectives, the Australian public have been short-changed and left with no lasting public benefit in this deal.

1.34Traditional economic analyses of government-led industrial policy have historically focused narrowly on tariffs and protectionist policies to conclude that industrial policy leads to poor economic outcomes. However more recent research has incorporated a more detailed account of the institutional context and utilises modern statistical techniques and more robust empirical methods.[26]

1.35The results of this research have been much more favourable to industrial policy, tending to find that such policies have often led to large, seemingly beneficial long term effects in the structure of economic activity, particularly when focused on upstream economic activity.[27]

1.36Indeed the economic success of South East Asian and Scandinavian countries should be justification in and of itself that government-directed deployment of capital is not the persuasive neoliberal boogeyman that it was in the 1970s and 80s.

1.37The use of industrial policy to guide capital should also be complemented with enforceable domestic reserve and processing requirements where appropriate so that we can create manufacturing and processing jobs in Australia and not keep on exporting our wealth overseas like we have done for decades past.

1.38In much the same way that East Asian nations have retained the returns on their investments as they invested to create the jobs and industries they identified as necessary to their prosperity, in Sweden the government owns iron ore mining[28] and steel -making companies.[29]

1.39This has allowed these companies to be best placed to now lead the pack in the race to develop green steel.[30] Rather than adopting this approach, Australia instead produced a handful of obscenely wealthy iron-ore billionaires and created mining companies so powerful they brought down a Prime Minister when they didn’t like the idea of their excessive profits being taxed.

1.40Rather than continuing to hand over all wealth and political influence to corporations, this FMIA framework should depart from this tried-and-failed precedent and ensure that the Australian public gets to share in the returns on public investments.

1.41When Qantas and Virgin were bailed out during the covid pandemic, the financial support should have been in the form of equity and therefore, ownership like occurred in Singapore.[31] Instead aviation companies were given $5.6 billion[32] in the form of cash grants and fee and tax waivers with no strings attached.

1.42Once these airlines became profitable again, the shares could have been liquidated and the public receive a return on their financial support. Instead these companies tucked our money into their bottom line and promptly proceeded to fleece their customers.[33]

1.43Future Made in Australia cannot continue the tradition of public money being used to socialise the losses of corporations while their profits are exclusively privatised.

1.44The legislation should include a directed preference by the Parliament that FMIA investments should generate a return on investment for the Commonwealth, particularly through public equity or grants with contractual terms that deliver a lasting public benefit.

1.45Public ownership can bring competitive pressure to Australia’s many concentrated markets. They can pursue social and climate benefits alongside economic objectives. Importantly, public ownership carries a huge amount of public support.

1.46Australia already has publicly-owned companies in our markets, it is just that none of them are Australian. For example Optus is majority owned by the Singapore government, electricity distribution company Jemena and the Port of Darwin are owned by the Chinese government and energy retailer Powershop was, until recently, owned by the New Zealand government.

1.47In combination with LNG terminal ownership outlined above, if there are no objections with state-owned companies operating in competitive markets in Australia, then Australian state-owned companies should also be part of a Future Made in Australia.

1.48Where there is a competitive advantage in doing so, and in compliance with the five criteria laid down in the Future Made in Australia framework, Australia should adopt the approach of our trading partners and create publicly owned companies to advance the public interest.

1.49Finally, The Australian Greens share First Nation stakeholders concerns that the Community Benefit Principles are not tightly defined enough to guarantee benefits for First Nations communities under a Future Made in Australia.

1.50First Nations communities should hold a financial stake in projects on their land, and the Australian Government must ensure that this occurs by providing support to bodies corporate and other community-based organisations during negotiations.

1.51Similarly, the Government must support communities to negotiate on an even playing field with companies who are looking to mine for critical minerals on First Nations land. Support for negotiators should include provision for legal representation and should be independent of the positions taken by the negotiators. At all times the principle of free, prior, and informed consent must be upheld. Real outcomes should be measured through First Peoples’ equity in projects and through the wellbeing, financial and otherwise, of communities and Country, and the preservation of culturally important sites.

1.52Better defined and more expansive Community Benefit Principles are required to ensure that First Nations people benefit from the projects delivered under Future Made in Australia.

Senator Nick McKim

Member

Greens Senator for Tasmania

Footnotes

[1]UNSW and ACOSS Poverty and Inequality Partnership, ‘Sharp jump in wealth inequality over last 20 years: Report’, Media Release, 27 September 2023, available at https://www.unsw.edu.au/newsroom/news/2023/09/sharp-jump-in-wealth-inequality-over-last-20-years--report- (accessed 6 September 2024).

[2]Australian Bureau of Statistics, Australian System of National Accounts: Total Factor Income, 27October2023, https://www.abs.gov.au/statistics/economy/national-accounts/australian-system-national-accounts/2022-23 (accessed 6 September 2024).

[3]Department of Industry, Science and Resources (DISR), Future Gas Strategy Analytical Report, 9May2024, pp. 3, 42, 44 and 60.

[4]Department of Climate Change, Energy, the Environment and Water (DCCEEW), EPBC Act Public Portal: Gregory Crinum Coal Mine M-Block Extension Project, available at https://epbcpublicportal.awe.gov.au/all-notices/project-decision/?id=edd2abd3-4ded-ed11-8849-00224818a80f (accessed 6 September 2024).

[5]The Hon Madeline King MP, Minister for Resources and Minister for Northern Australia, Speech to NT Resources Week conference, 24 August 2024.

[6]See for example: Lake Vermont coal mine, Isaac River coal mine, Star coal mine, Ensham coal mine, Gregory Crinam coal mine, Varanus Island Spartan Gas Project, Wheatstone and Lago gas field, Beach Energy’s Otway gas, Towrie Arcadia CSG project, Dorado gas project, Scarborough, Crux, Barossa and Atlas gas projects. Esso (ExxonMobil) were granted exploration permits for 4 gas basins (3 in the Otway Basin in Victoria and 1 in Sorell Basin in Tasmania) and Beach Energy - Otway Basin (Vic), Chevron - Northern Canarvon Basin (WA), Melbana - Northern Canarvon Basin (WA), Woodside - Northern Canarvon Basin (WA), Inpex - Bonaparte Basin (NT)

[7]Ms Zaheed, Treasury, Committee Hansard, 29 August 2024, pp. 26–27.

[8]David Crowe, ‘Labor backs 1.5 billion plan for Darwin port in contest over NT seats’, The Sydney Morning Herald, 12 April 2022, available at https://www.smh.com.au/politics/federal/labor-backs-1-5-billion-plan-for-darwin-port-in-contest-over-nt-seats-20220412-p5ad0l.html (accessed 6 September 2024).

[9]The Hon Keith Pitt MP, Minister for Resources and Water, ‘$7.5m grant to support gas exploration in Beetaloo Sub-Basin’, Media Release, 7 March 2022.

[10]Tamboran Resources, ‘Tamboran secures land at Middle Arm Sustainable Development Precinct for proposed Northern Territory LNG (NTLNG) Development’, ASX Announcement/Media Release, 9June 2023, available at https://www.investi.com.au/api/announcements/tbn/c2224152-5fb.pdf (accessed 6 September 2024)

[11]Jano Gibson, ‘NT Government deletes references to ‘petrochemicals’ from Middle Arm website, rejects ‘greenwashing’ claims, ABC News, 26 November 2022, available at https://www.abc.net.au/news/2022-11-26/nt-petrochemicals-deleted-middle-arm-website-greenwashing/101700374 (accessed 6 September 2024).

[12]Anne Davies and Lisa Cox, ‘Revealed: documents detail key players behind vast Australian fossil fuel expansion, The Guardian, 19 June 2023, available at https://www.theguardian.com/australia-news/2023/jun/19/revealed-documents-detail-key-players-behind-vast-australian-fossil-fuel-expansion (accessed 6 September 2024)

[13]Michael Slezak, Darwin Harbour Middle Arm expansion plan slammed by critics as ‘extraordinary fossil fuel subsidy’’, ABC News, 15 December 2023, available at https://www.abc.net.au/news/2023-12-15/darwin-harbour-extension-plan-slammed-as-fossil-fuel-subsidy/103215782 (accessed 6September 2024).

[14]DISR, answer to written question on notice asked by Senator McKim, 29 August 2024 (received 5September 2024).

[15]Pilbara Minerals, 2022 Annual Report, 22 August 2022, p. 46, available at: https://1pls.irmau.com/site/pdf/84195c02-1519-47cb-8e0b-8ef4322bfa5b/2022-Annual-Report.pdf (accessed 6 September 2024).

[16]Commonwealth of Australia, Budget Paper No. 1: Budget Strategy and Outlook 2025-25, p. 198.

[17]Pilbara Minerals, 2022 Annual Report, 22 August 2022, p. 99, available at: https://1pls.irmau.com/site/pdf/84195c02-1519-47cb-8e0b-8ef4322bfa5b/2022-Annual-Report.pdf (accessed 6 September 2024).

[18]Pilbara Minerals, 2022 Annual Report, 22 August 2022, p. 99, available at: https://1pls.irmau.com/site/pdf/84195c02-1519-47cb-8e0b-8ef4322bfa5b/2022-Annual-Report.pdf (accessed 6 September 2024).

[19]Australian Energy Market Operator, 2023 Western Australia Gas Statement of Opportunities: Market outlook to 2033, December 2023, p. 9, available at https://aemo.com.au/-/media/files/gas/national_planning_and_forecasting/wa_gsoo/2023/2023-wa-gas-statement-of-opportunities-wa-gsoo.pdf?la=en (accessed 6 September 2024).

[20]DEECCW, Australian Energy Update 2023, September 2023, p. 9, available at https://www.energy.gov.au/sites/default/files/Australian%20Energy%20Update%202023_0.pdf (accessed 6 September 2024),

[21]DISR, Future Gas Strategy Analytical Report, 9 May 2024, p. 39.

[22]DISR, Future Gas Strategy Analytical Report, 9 May 2024, p. 40.

[23]DCCEEW, Australia’s National Greenhouse Accounts: Paris Agreement inventory, available at https://greenhouseaccounts.climatechange.gov.au/ (accessed 6 September 2024).

[24]DISR, Future Gas Strategy Analytical Report, 9 May 2024, pp. 97–98.

[25]See for example: Stephen Stapczynski, Spe Chen and Jin Wu, ‘How Japan ignored climate critics and built a global natural gas empire’, Bloomberg Green, 30 August 2024, available at: https://www.bloomberg.com/graphics/2024-japan-natural-gas-lng-global-trade/?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTcyNDk3NzMwNywiZXhwIjoxNzI1NTgyMTA3LCJhcnRpY2xlSWQiOiJTSVpaTzNUMVVNMFcwMCIsImJjb25uZWN0SWQiOiJFOTY4RDMzNDhBQTQ0NUFFQUM1QUFGMEQ0NUI4NjlEQiJ9.p7O-WL3DHJEK_zL9Uj2dr2nzPV1JUaTAXxMA3KULzXI (accessed 6 September 2024).

[26]R Juhasz, N Lane and D Rodrick, ‘The New Economics of Industrial Policy’, John F Kennedy School of Government, Harvard University, August 2023, available at https://drodrik.scholar.harvard.edu/publications/new-economics-industrial-policy (accessed 6September 2024).

[27]Dani Rodrik, Reka Juhasz and Nathan Lane, ‘Economists Reconsider Industrial Policy’, Policy Syndicate, 4 August 2023, available at https://www.project-syndicate.org/commentary/new-economic-research-more-favorable-to-industrial-policy-by-dani-rodrik-et-al-2023-08 (accessed 6September 2024).

[28]See for example: Luossavaara-Kiirunavaara Aktiebolag (LKAB), Homepage, available at https://lkab.com/en/ (accessed 6 September 2024).

[29]See for example: Svenskt Stal AB (SSAB), Homepage, available at https://www.ssab.com/en (accessed 6 September 2024).

[30]Hild-Gunn Bye and Birgitte Annie Molid Martinussen, ‘SSAB with new billion euro investment in fossil-free steel in Northern Sweden’, High North News, 2 April 2024, available at https://www.highnorthnews.com/en/ssab-new-billion-euro-investment-fossil-free-steel-northern-sweden (accessed 6 September 2024).

[31]The McKell Institute Victoria, Australia Aviation after COVID-19: The urgent need for an Australian Aviation Plan, June 2020, p. 37, available at https://mckellinstitute.org.au/wp-content/uploads/2022/02/McKell_VIC_Australian-Aviation_V6.pdf (accessed 6 September 2024).

[32]Australian National Audit Office, COVID-19 Support to the Aviation Sector, Audit Report No. 40, 2021-2022.

[33]Australian Competition and Consumer Commission, ‘ACCC takes court action alleging Qantas advertised flights it had already cancelled,’ Media Release, 31 August 2023.