In May, The AFR published the below chart showing how Australia has enjoyed the largest boost from global commodity prices in the world over the past 20 years:
“The price received for exports has surged ahead of other countries, including big iron ore producer Brazil and oil and gas exporters Canada and the United States”, wrote The AFR’s John Kehoe.
“Compared to other countries, it has increased by almost two and a half times, or 146 per cent since the turn of the century”.
Economist Chris Richardson estimated that the terms of trade boost since 2000 had lifted tax receipts by an extra $100 billion a year by 2024, mostly via corporate taxes.
While this “dumb luck” has certainly been fortuitous for the federal budget, it could have been so much better for Australians if we had a proper resources tax mechanism in place, like in Norway.
Consider Australia’s natural gas. Until recently, Australia was the world’s largest LNG exporter (we have since fallen to number 3 in the world behind the USA and Qatar).
Almost all of Australia’s natural gas is exported, which has created an artificial domestic gas shortage and driven up gas and electricity prices on the East Coast, where no domestic reservation policy is in place.
Source: The Australia Institute
The boom in LNG exports, which mirrors the boom in Australia’s terms-of-trade, has generated enormous profits for multinational oil and gas companies. However, Australia’s tax take from this boom has actually fallen:
Now compare this situation with Norway, which taxes its oil and gas sector at nearly 80%. Therefore, Norway’s tax receipts from its oil and gas sector have risen commensurately with export revenues:
Norway has invested its oil and gas bounty in a sovereign wealth fund that is now the world’s largest and valued at around US$290,000 per Norwegian resident:
Norway’s oil and gas riches have made Norwegians the richest people on earth – a title that Australia would hold if we bothered to tax our resources properly.
Qatar residents have also made a fortune by taxing the nation’s resources properly.
Punter politics explains the idiocy of Australia’s tax treatment of resources in the video below:
The bottom line is that Australians should be the richest people on earth.
Instead, we have impoverished ourselves by engineering an artificial gas shortage, driving up domestic gas and electricity prices.
We are not a serious country.
