Why Australians receive minimal returns from their own natural resources
Australia is blessed with extraordinary mineral and energy resources—iron ore, coal, natural gas, gold, bauxite, and rare earth minerals that belong, in principle, to all Australians. Yet despite our resource abundance, we have secured remarkably little public benefit from their extraction compared to other resource-rich nations.
It's essential to understand how our resource taxation system has evolved to consistently favor corporate interests over the Australian public. This isn't a partisan issue—both major parties have contributed to a system that allows multinational corporations to extract hundreds of billions in value while paying minimal royalties to the Australian people who rightfully own these non-renewable assets.
This timeline tracks key policy decisions that have shaped Australia's approach to taxing resource extraction.
Treasurer Paul Keating introduces the PRRT as a profits-based tax for offshore oil and gas projects. Initially designed with reasonable parameters that ensured tax revenue.[1]
Modifications to the PRRT under Treasurer Peter Costello expanded deductible expenses and introduced the "uplift rate" allowing companies to carry forward losses indefinitely with an additional 15% premium above bond rates.[2]
Prime Minister Kevin Rudd and Treasurer Wayne Swan propose a 40% tax on "super profits" from resource extraction. The mining industry launches a $22 million advertising campaign against it.[3]
Prime Minister Julia Gillard and Treasurer Wayne Swan implement a compromised version of the resource tax covering only coal and iron ore at 22.5%. Design flaws result in minimal revenue collection.[4]
Prime Minister Tony Abbott and Treasurer Joe Hockey repeal the MRRT, returning to a fragmented state-based royalty system despite Australia entering its biggest resource boom in history.[5]
Australia becomes world's largest LNG exporter under Energy Minister Josh Frydenberg. Government forecasts project minimal PRRT revenue from LNG projects for decades due to generous deduction rules.[6]
Resources Minister Madeleine King and Treasurer Jim Chalmers announce minor PRRT adjustments while rejecting calls for more substantive reform, despite record energy company profits during global energy crisis.[7]
Source: International Petroleum Fiscal Systems Analysis, Wood Mackenzie (2020)
Understanding the structural flaws in Australia's resource taxation system reveals why we receive so little public benefit:
The scale of lost revenue is staggering. The Australia Institute estimates Australians have missed out on approximately $90 billion in resource revenues over the past decade.[13] Norway, with a similar population but more effective resource taxation, has accumulated over A$1.5 trillion in its sovereign wealth fund from oil revenues.[14]
The Petroleum Resource Rent Tax contains structural features that allow companies to minimize or avoid payments entirely.
Key Decision-Makers: Initially designed under Treasurer Paul Keating, but significantly weakened through amendments by Treasurer Peter Costello (1996-2007)
Impact: Major LNG projects like Chevron's Gorgon and Wheatstone, and Woodside's North West Shelf may pay zero PRRT for 20-30 years despite generating billions in revenue
Alternative approach: Norway's petroleum taxation model combines a corporate tax (22%) with a special petroleum tax (56%) for an effective rate of 78%, while still maintaining a profitable industry
The watered-down Minerals Resource Rent Tax of 2012 failed to capture appropriate returns from the mining boom.
Key Decision-Makers: Initially proposed by PM Kevin Rudd and Treasurer Wayne Swan, compromised version implemented by PM Julia Gillard, then repealed by PM Tony Abbott
Impact: Australia's historic mining boom delivered minimal public benefit compared to similar resource-rich nations
Alternative approach: A properly designed tax based on resource profits above a reasonable return on investment, similar to the original Resource Super Profits Tax proposal
States compete for mining investment by keeping royalty rates low, creating a "race to the bottom" environment.
Key Decision-Makers: State premiers and treasurers across political lines, including WA Premier Mark McGowan (Labor), NSW Premier Dominic Perrottet (Liberal), and QLD Premier Annastacia Palaszczuk (Labor)
Impact: Fragmented and inefficient system that fails to maximize returns from finite resources
Alternative approach: A nationally coordinated approach to resource taxation with revenue sharing among states
Australia became the world's largest LNG exporter while receiving among the lowest government take in the world.
Key Decision-Makers: Resources Ministers including Josh Frydenberg, Matt Canavan (Coalition), and Madeleine King (Labor)
Impact: QLD LNG industry projected to generate $400+ billion in exports between 2020-2030 while contributing less than 1% of this in royalties and resource taxes
Alternative approach: Qatar's production sharing agreements ensure the government receives 65% of LNG revenues
The distribution of Australia's resource wealth varies significantly by state, with some regions bearing environmental and social impacts while seeing limited benefits.
Click a state for more information
This stark contrast highlights what's possible with proper resource management. Norway and Australia both have small populations and large resource wealth, but Norway has captured a much greater share for its citizens while still maintaining a profitable petroleum industry.[15]
Australia's failure to secure appropriate returns from its natural resources transcends the traditional partisan divide:
"Resource taxes deter investment and threaten jobs. Our competitive resource tax settings have helped build Australia's world-class mining and gas industries."— Typical Coalition resources minister stance
The Coalition has consistently prioritized industry concerns about international competitiveness over securing fair returns, despite evidence from other countries that appropriate taxation doesn't prevent industry development.
"We support a resources industry that creates jobs and prosperity while ensuring Australians receive a fair return from their resources."— Typical Labor resources minister stance
Meanwhile, Labor has talked about fair returns while being reluctant to implement meaningful reform after the political fallout from the mining tax experience. Despite rhetoric about fairness, when in government, Labor has made only minor adjustments to resource taxation.
The harsh reality is that both major parties have been heavily influenced by the resource sector's lobbying power. The resource sector is one of Australia's largest political donors, contributing millions to both major parties over the past decade. Additionally, the "revolving door" between politics and the resources sector means many former politicians and staffers find lucrative employment with the same companies they once regulated.[16]
Your independent representative, should champion reforms to ensure Australians receive fair returns from their natural resources:
Australia's non-renewable resources can only be extracted once. We have a responsibility to ensure they generate maximum benefit for all Australians, including future generations. Other resource-rich nations have demonstrated that it's possible to maintain a profitable resources sector while securing appropriate returns for citizens. Australia deserves nothing less.