Scott Morrison has threatened to cut the GST distribution for state and territory governments if they push back against unconventional gas exploration, known as “fracking”.

He has warned state governments the Productivity Commission will be considering its attitude towards the controversial gas extraction industry – particularly any moratoriums or limits on the practice – in its review of the goods and services tax distribution, according to reports.

“I think it needs a fair dinkum look,” Morrison told the Australian. “The Productivity Commission is looking at whether the way the states and territories operate is giving them a leave pass under the GST formula for not getting on and doing things. When you have states that get on and do things, should they be penalised by getting less GST?”

Morrison’s threat has enraged an anti-coal seam gas group, Lock the Gate.

“This is an outrageous move by the federal government to blackmail state and territory governments into accepting fracking, regardless of the devastating impact it will have on farmland and water resources,” Georgina Woods from Lock the Gate said on Thursday.

“We will be asking for urgent advice as to whether it is lawful for the government to subvert the proper return of tax dollars to states in order to pursue a blatantly political agenda to promote multinational fracking companies.

“This is yet another example of the fracking industry undermining our democratic institutions – even the fair distribution of GST dollars is now being hopelessly compromised by the debasement of our democracy to fossil fuel interests.”

Morrison’s warning to the states comes as the Turnbull government tries to keep a lid on rapidly rising energy prices, with electricity bills set to increase by up to 20% on 1 July.

The Grattan Institute warned two months ago that the national electricity market was already at “crisis point”, with urgent action required before summer to safeguard against the risk of blackouts.

Since then the Turnbull government has been increasingly criticising state governments for their opposition to coal seam gas, blaming them for Australia’s gas shortage, but little has been done.

The question of whether or not Australia has a gas shortage is highly disputed.

Most states and territories in Australia still have some form of restriction on fracking, or are considering one. Queensland and South Australia are the only states that don’t.



In April, Morrison announced a Productivity Commission review of the way in which the GST is collected and distributed among the states. As part of the terms of reference, he asked the commission to examine “state laws and policies restricting the development of energy resources”.

He said on Wednesday it was unfair the Northern Territory received more than four times the GST revenue it raised itself when it had a moratorium on coal seam gas extraction, while Western Australia made great use of its natural resources and was penalised for it, receiving a paltry GST share, according to the Australian.

Woods said the Turnbull government was effectively threatening to shortchange schools and hospitals “in their fervour to give gas fracking giants access to every last square inch of Australia”.