Rinehart’s riches show why we shouldn’t slap windfall tax on gas

Gina Rinehart’s big-dollar legal win over her father’s iron ore legacy should highlight a compelling lesson for Australia’s modern prosperity.

Lang Hancock’s daughter is the nation’s richest person today because of perhaps its most consequential-ever supply-side reform.

Six decades ago, ending Australia’s ban on exporting iron ore allowed prospectors such as  Hancock to sell to the highest global bidder. And it allowed Rinehart to help develop the nation’s biggest export industry.

Anthony Albanese’s trip to South East Asia underlined it. Nations can become wealthier and more secure by profitably supplying more of what the world wants most from them.

The rest of the world is keen for Australia to be a reliable gas supply alternative to Russia and the Middle East. That demand offers energy leverage and security.

The theory of comparative advantage still echoes amid Middle East war, Donald Trump’s assault on the rules-based global trading order and questionable Future Made In Australia-style industry subsidies.

More than a decade ago, Labor resource minister Martin Ferguson reckoned that the wave of Liquid Natural Gas mega projects in Western Australia and Queensland would make us a “global energy superpower”. That should have ramped up after Russia’s invasion of Ukraine more than three years ago. It should be in overdrive now.

But it jarred with the left-progressive net zero crusade against fossil fuels. Domestic price gaps, lawfare harassment, threatened retrospective tax hikes and the like have restricted Australia’s potential supply of gas, even though replacing coal with gas in Asia is one of the lowest-hanging ways to reduce global carbon emissions. And though the subsequent promise of a “clean energy superpower” has been shelved along with Labor’s pledge to cut household electricity bills.

Inpex, the Japanese energy company behind Darwin’s $60 billion Ichthys LNG project, has even wondered whether Australia is embarking on a “quiet quitting” of our gas export industry.

Now Japan is alarmed by Jim Chalmers’ apparent push to slap a “windfall” profits tax on gas companies that have invested a mere $400 billion or so in building Australia’s LNG industry. Oh, and by Labor-affiliated union strike threats in pursuit of big pay rises for Ichthys workers already earning up to $400,000 a year.

Australia Institute-style misinformation claims that the gas companies have plundered the nation’s gas for free. Yet the Labor-designed Petroleum Resource Rent Tax sensibly starts off low before ramping up high. After paying off their massive capex, gas exporters are heading into several decades of close to a 70 per cent profits tax.

In the meantime, taxpayer-funded green activists have concocted Indigenous beliefs, such as a Crocodile Man songline, to try to derail the Santos Barossa gas field development through the courts.

It took Woodside six years to get regulatory rollover of its giant 1980s North West Shelf LNG project that left it exposed to the political risk of the 2025 election. Victoria’s Labor government constitutionally banned onshore fracking for gas, thinking that expensive offshore wind farms could power the state’s manufacturing.

In 1952, when Lang Hancock stumbled upon Pilbara iron ore, the Menzies government imposed sweeping import licensing because of shortages of exports to pay for foreign goods. Feeling abandoned by the British Empire, we signed a “Pacific pact” with America and jacked up defence spending. Australian diggers fought Communist China in the Korean War.

Exporting iron ore was banned because we didn’t think we had much of it. What we had was needed by BHP for the nation’s infant steel industry. It was an extreme domestic reservation scheme designed to help Australia “make more things” at home.

But no politician nor bureaucrat predicted in 1960 that letting foreigners buy our iron ore would unlock a dream decade for Australia in supplying Japan’s steel mills and as BHP and Esso struck oil in the Bass Strait.  No Vernon Committee-style economic planners dreamt that Australia would export close to a billion tonnes of iron ore a year.

Today, however, the effective removal of “social licence” means that Australia has virtually given up following the US in looking for new domestic sources of oil.

The Middle East oil crisis is tipped to promote a global wave of zero-emissions small modular nuclear reactors. For no reason, Australia has ruled itself out of this.

Worse still, state government-imposed political restrictions and even bans on prospecting and mining mean we are giving up the opportunity to fully develop our one-third share of the world’s uranium deposits to fuel these reactors.

For genuine security reasons, Australia may need to underwrite more domestic oil refining capacity. That could be costly when the budget is so far in the red that Labor now seeks to effectively cut 300,000 disabled people from its out-of-control NDIS. Strangling our most prospective supply-side opportunities just makes it all harder.