Mining and Heavy Industries

Frydenberg backs GST system to encourage gas development

Frydenberg on the Bolt Report. Photo: Channel Ten

States who don’t move to develop their gas resources could face losing chunks of their GST revenue, after the Grants Commission suggested the Commonwealth take the measure to combat the gas shortage affecting major industrial consumers.

The national Grants Commission released its positions paper on the weekend, ahead of its final report on the horizontal fiscal equalisation system (i.e. the GST).

The positions paper recommended GST could be used as a measure against states who don’t contribute their fair share of new gas to Australia’s domestic supply, while demand – both domestic and international – grows rapidly.

“While Queensland and South Australia currently have no restrictions on onshore oil and gas exploration and development, New South Wales, Victoria, Western Australia, Tasmania and the Northern Territory all at present either ban coal seam gas exploration and/or development, in some or all areas, or have a moratorium on fracking,” the Grants Commission’s report says.

“In these circumstances, the Commission could take the view that all states that have CSG have the opportunity to exploit it and whether they do or not solely reflects policy choice.”

The comments are expected to be reflected in an upcoming set of recommendations from the Productivity Commission, which is itself currently reviewing the GST system.

Australian energy minister Josh Frydenberg did not shut down this line of thought this week, describing the NSW and Victorian Government actions against new gas production as “mindless and job destroying”.

“We’ll consider those findings when we see them,” he said, adding the review aimed to ensure GST distribution should “maximise productivity and economic growth”.

“It is a curious consequence for the current day arrangements that states like Western Australia that do develop their resources, do create jobs and export income for our country, get penalised when states like Victoria who don’t develop their 40 years’ worth of gas resources, are getting rewarded and that does not seem to be in the country’s long-term interests.”

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