$40bn bonanza strengthens case for new windfall tax on gas giants: Australia Institute

A broad coalition spanning economists, union leaders and progressive politicians have been urging the Albanese government to reverse their opposition to the idea, which involves imposing a higher rate of tax on profits which result from a sudden surge in demand.

Committing to a new resources tax would be politically treacherous for Labor after it ruled out such a move.

But it would help the new government manage the federal budget, which is under strain from almost a trillion dollars in debt and rising spending pressures in areas including health, defence and the NDIS.

Treasurer Jim Chalmers' first budget next Tuesday will also be framed by a bleak global economic outlook and rising domestic cost-of-living pressures, which are set to worsen as a result of the latest flood crisis.

One sector which has weathered the economic storm is the gas industry, which has enjoyed surging export prices as a result of an international energy crisis caused by Russia's invasion of Ukraine in late February.

The value of liquified natural gas exports from Australia has risen from $30.5 billion in 2020-21 to $70.2 billion in 2021-22, according to the Australia Institute research.

The export bonanza has come without the companies facing a significant increase to their production costs, the thinktank claims, meaning their windfall profits were anywhere between $26 billion and $40 billion.

If windfall profits were taxed at a rate of 100 per cent, as former Treasury secretary Ken Henry has suggested, it would have delivered that sum in revenue to the federal government.

The argument in favour of a windfall profits tax is three-fold.

It would prevent foreign-owned companies profiteering from an Australian resource without returning the benefits to local taxpayers, help prop up the depleted federal budget, and shore up domestic supplies by removing an incentive to ship gas overseas.

The gas industry lobby has repeatedly rejected the need for a new tax, and earlier this month released figures forecasting exporters would hand over almost $14 billion in various payments to federal and state governments this financial year - up for less than $5 billion in the previous 12 month-period.

Australian Petroleum Production and Exploration Association chief executive Samantha McCulloch said at the time that the near $14 billion would help governments fund schools, hospitals and roads.

But the Australia Institute argue taxpayers deserved a greater return.

"While households and businesses are facing soaring bills, these [gas] companies are essentially profiteering from the war in Ukraine," the thinktank's executive director, Richard Denniss, said.

"A wide and growing range of experts back a windfall profits tax as an economically responsible way for Australians to receive a fair return for the once off exploitation of our gas resources."

The revenue from a windfall profits tax would have been enough to fund Labor's $20 billion plan to upgrade the nation's electricity grid and support households suffering from energy bill shocks, Dr Denniss said.

The thinktank conducted polling in June which suggested there was strong public support for a new resources tax.

Two-thirds of the 1001 people who were surveyed supported a windfall profits tax on oil and gas companies to support households. Just 12 per cent were against the idea.

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