The Politics    Wednesday, December 7, 2022

Cap in hand

By Rachel Withers

Image of Queensland Premier Annastacia Palaszczuk, New South Wales Premier Dominic Perrottet and Prime Minister Anthony Albanese, September 30, 2022. Image © Mick Tsikas / AAP Images

Queensland Premier Annastacia Palaszczuk, New South Wales Premier Dominic Perrottet and Prime Minister Anthony Albanese, September 30, 2022. Image © Mick Tsikas / AAP Images

In negotiating coal price compensation, NSW and Queensland have sounded like the energy companies

The negotiations ahead of Friday’s national cabinet meeting are coming to a head, with the prime minister issuing a demand for the states to impose their own coal price caps, and the treasurer indicating that the Commonwealth will offer them a “responsible” level of compensation for doing so. The support will not be a “blank cheque”, Jim Chalmers said, noting the tightness of the federal budget. But it nevertheless seems that the tantrums from the coal-producing states have succeeded, with the federal government to compensate them for forgoing some of their massive royalties – royalties being boosted by the cripplingly high prices driven by the war in Ukraine. The outcome is patently ludicrous. Why should states be remunerated for giving up windfall fossil-fuel gains, for a policy that will benefit their constituents by lowering their energy prices? And how can leaders rail against energy companies profiteering from the war in Ukraine while their states look to do the exact same thing?

It would be a shame if the federal government really has decided to cave on this. It has spent the week imploring the premiers – in particular, Queensland’s Annastacia Palaszczuk and NSW’s Dominic Perrottet – to put the national interest ahead of their windfall gains. Speaking on 2GB last week, Assistant Treasurer Stephen Jones urged the states to focus on the shared goal of bringing down energy prices. “This has got to be a team Australia moment,” he said. “We’re asking New South Wales, Queensland, Victoria, all the states to put squabbling aside and have the interests of the Australian people in mind.” Unfortunately, certain premiers have been unwilling to do that, continuing to demand that they be compensated for any reduction in their royalties. (South Australian Premier Peter Malinauskas, for his part, appears to have been yanked into line, walking back comments on nuclear power last night, after being criticised by the PM.)

Energy companies have not earned the massive windfall profits they are currently reaping. As the NSW treasurer himself keeps pointing out, the war in Ukraine is the main reason for the high prices squeezing consumers, and therefore the main reason for the profits. By the same token, state governments have not earned these massive windfall royalties, and, what’s worse, these royalties are coming off the back of prices that are hurting their constituents. Admittedly, the states aren’t trying to hang onto these royalties as “profits”. Queensland argues it wants to put them towards rebates for consumers (though as the AFR points out, only a small portion of that dividend is actually going towards the rebates). But it’s an argument that is “weak” and “almost immoral”, says Grattan Institute energy program director Tony Wood. “This is a windfall gain caused by the terrible pain that has been imposed in Ukraine,” he told the Nine papers. “For them to suggest ‘you’re taking away my fair return’ is absolute rubbish.” Only a small amount of coal exposed to the spot market would be affected by the price cap, not their entire industries, Wood told The New Daily, making the tenor of this debate seem rather ridiculous.

This entire exercise has been a dispiriting reminder of just how hard it is to take away any kind of fossil-fuel windfall – whether profit or royalty, from a multinational or a government. NSW and Queensland have sounded similar to the energy companies, something cartoonist Cathy Wilcox nails in today’s cartoon. (“WAAAAH! BUT OUR MASSIVE ROYALTIES,” the cartoon premiers cry, next to a sobbing industry figure lamenting his lost super-profits). The premiers are only being parochial, trying to get the best deal for their states, no matter how irrational their arguments may be. But federal Labor’s backdown is deeply disappointing. The Albanese government has been unwilling to implement a windfall tax, which is an obvious solution backed by experts and the public, for fear of upsetting the coal companies. Now it seems it can’t even stand up to the coal states, as they demand taxpayer reimbursement for a policy from which all Australians stand to benefit.

Rachel Withers

Rachel Withers is the contributing editor of The Politics.


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