Andrew Broad says untapped reserves are not creating gas shortages and government should fix exports, which are to blame

This article is more than 2 years old

This article is more than 2 years old

The GST should not be used to force states to lift bans on gas exploration and development because exports, not bans, are to blame for shortages, the Nationals MP Andrew Broad has said.

On Monday the energy and environment minister, Josh Frydenberg, doubled down on the government’s threat to use goods and services tax distribution as a lever to force states to end bans on gas exploration and development.

Victoria’s treasurer and the Northern Territory chief minister have emphatically rejected the idea, although the Commonwealth Grants Commission has suggested it would do little to affect GST revenues in the short term.

The high price of Australian gas: is low supply really to blame? Read more

Broad, the chair of the House of Representatives environment and energy committee, said the government should not pursue the GST as a lever, although he conceded increased royalties may be affecting Western Australia’s GST share while other states banned gas development.

“So there is an argument that if you lock up resources, then you are limiting the earning capacity of the state and then you expect the federal government to give you a portion of GST,” he said. “However, I think what has been lost in the gas market is Victorians do not have an appetite to develop more gas when it is just an export industry.

“On the east coast, two-thirds of the gas is exported and one-third is used domestically.

“So it becomes a pretty hard argument to say to Victoria and New South Wales – we are short of gas, you must open up your gas resources, when we are not short of gas, we are actually exporting two-thirds from what we need on the east coast.”



Broad said the government should instead argue that if states opened up their gas resources it would support domestic industry, because if prices stayed at current levels “we are going to lose lots of Australian jobs”.

“What [Malcolm] Turnbull has done with his negotiations, the other week is not going to bring prices down enough … and I think you would get Victoria and NSW and communities more over the line if they thought that gas was for Australians, rather than exporting.”

Last week three major gas companies agreed to fill the shortfall in the domestic gas market next year, with a final agreement expected to be hammered out at a meeting between Turnbull and the companies on Tuesday.

On Sunday the finance minister, Mathias Cormann, said: “GST-sharing arrangements are a potential lever to encourage and incentivise the states and territories to develop their economies to their full potential.”

The Commonwealth Grants Commission has indicated it will consider coal seam gas development as part of its 2018 update and 2020 review of the formula to split the tax take between jurisdictions.

A position paper released late last week, suggested the commission could factor in whether or not states had chosen to exploit their gas reserves in its distribution of GST.

The proposal under consideration is for the commission to use a per capita assessment of states’ capacities to raise revenue from CSG, as it does for gambling revenue, assuming each state has equal CSG capacity.

This would mean “that royalties raised on CSG gas would not lead to a redistribution of GST revenue”, in effect rewarding states that developed gas and punishing states with gas bans.

But the discussion paper found that in 2015-16 states and territories raised just $22.5m in CSG revenues, which was “insufficient to be material” in affecting GST distribution.

“At some stage the royalties raised could become large enough for mineral bans to materially affect states’ GST shares. They are not at that level yet.

“The commission will continue to monitor the level of royalties and to test the materiality of these bans in the lead up to the 2020 review.”

On Monday Frydenberg told Sky News that under the current GST sharing arrangements “states that do develop their resources, like Western Australia, are penalised and those that don’t, like Victoria, end up getting rewarded and that’s not in Australia’s long-term economic interests”.



The energy and environment minister accused the states of being “mindlessly recalcitrant” in locking up gas resources that could be developed in an environmentally sustainable way.

He said the government would consider the Productivity Commission review of GST allocation, with a draft report due out in October and a final report in January.

Malcolm Turnbull's request for end to gas 'moratoriums' rejected by states Read more

The Northern Territory chief minister, Michael Gunner, said his government was conducting an independent inquiry into hydraulic fracking.



“Territorians won’t be bullied by southern politicians,” he said. “We will continue to fight to make sure the Northern Territory gets its fair share of the GST.”

On Saturday the Victorian treasurer, Tim Pallas, said the state government was “standing up for Victoria’s regions and our farmers”. “We’ve got a $12bn export food industry to protect in this state and we’re not going to be in any way intimidated by the federal government around what they choose to do.”

Pallas said the Commonwealth Grants Commission “went to great lengths to say that policy neutrality was an important principle and should be preserved”.

“Put simply, that means recognising and respecting the rights of states to make their own decisions.”