News
02/05/25
Australia's Coalition eyes power, resource funding cuts
Sydney, 2 May (Argus) — Australia's federal Coalition opposition has announced
it will cut key energy rebates and resource sector subsidies, if elected on 3
May, to reduce forecast future budget deficits. The Peter Dutton-led opposition
will cut programs, including the Labor government's A$20bn ($12.8bn) Rewiring
the Nation transmission plan, and the A$15bn National Reconstruction Fund aimed
at underwriting green manufacturing using domestic minerals. It will also unwind
electric vehicle tax concessions to save A$3.2bn, and cancel planned production
tax credits for critical minerals processing and green hydrogen estimated to
cost A$14.7bn. Combined savings measures will improve the budget's position by
A$13.9bn over the four years to 2028-29, the Coalition said on 1 May, cutting
debt by A$40bn during the same timeframe. The announcement comes as opinion
polls show Australia's next federal government is likely to force one of the two
major parties into minority, after a campaign where cost-of-living relief
promises have trumped economic reform policy. The centre-left Labor party is
more likely than the conservative Coalition to form government at the 3 May
poll. It holds a thin majority of just three seats in parliament's main chamber,
the House of Representatives, meaning a swing against it would force it to deal
with minor parties such as the Greens and independent groupings. Promising a
stable government, as Australia emerged from Covid-19, Labor had benefited from
a resources boom as Russia's invasion of Ukraine led LNG and coal receipts to
skyrocket and China's emergence from lockdowns revitalised its demand for iron
ore, which jointly form the nation's main commodity exports. But as markets
adjust to a period of protectionist trade policy and predictions of a slowdown
in global growth abound, economists have criticised the major parties'
reluctance to embrace major reform on areas such as taxation, while continuing
to spend at elevated levels post-pandemic. Australia's resource and energy
commodity exports are forecast to fall to A$387bn in the fiscal year to 30 June
2025 from A$415bn in 2023–24. The Office of the Chief Economist is predicting
further falls over the next five years, reaching A$343bn in 2029-30, lowering
expected government revenue from company tax and royalties. Gas The Coalition
has pledged a domestic reservation scheme for the east coast, forcing 50-100PJ
(1.34bn-2.68bn m³/yr) into the grid by penalising spot LNG cargoes. Australia's
upstream lobby has opposed this, but rapidly declining reserves offshore
Victoria state mean gas may need to be imported to the nation's south, depending
on the success of electrification efforts and an uncertain timeline for
coal-fired power retirements. Labor has resisted such further gas interventions
, but it is unclear how it will reverse a trend of rising gas prices and
diminishing domestic supply, despite releasing a future gas plan last year. The
party is promising 82pc renewables nationally by 2030, meaning it will have to
nearly double the 2025 year-to-date figure of 42pc. This could require 15GW of
gas-fired capacity by 2050 to firm the grid. On environmental policy, narrowing
polls mean Labor's likely partners in government could be the anti-fossil fuel
Greens and climate-focused independents — just some of the present crossbench of
16 out of a parliament of 151. The crossbench may drive a climate trigger
requirement in any changes to environmental assessments, which could rule out
new or brownfield coal and gas projects. Coal has been conspicuously absent from
policy debates, but Labor has criticised the Coalition's nuclear energy policy
as expensive and unproven, while the Coalition has said Labor's renewables-led
grid would be unstable and costly because of new transmission requirements. The
impact of the US tariff shock that dominated opening days of the month-long
election campaign remains unclear. Unlike Canada, Australia is yet to be
directly targeted by US president Trump's rhetoric on trade balances and
barriers. But the global unease that has set in could assist Labor's prime
minister Anthony Albanese, as he presents an image of continuity in an uncertain
world economy. Australia's main exposure to Trump tariffs is via China, its
largest trading partner and destination for about 35pc of exports, including
metal concentrates, ores, coal and LNG. A downturn in the world's largest
manufacturer would spell difficult times ahead for Australia, as it grapples
with balancing its budget in a normalising commodity market. By Tom Major Send
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