For many years, Australia’s gas market has intrigued me. My interest began with a simple question: how can Australian governments claim to represent the interests and needs of Australians while allowing our natural resources to be increasingly controlled and sold by overseas interests?
Governments should be focused on what is best for Australia and Australians—not acting like business experts while overlooking the broader economic consequences of their decisions.
What concerns me most is not simply the involvement of overseas companies. It is the apparent mismanagement of our natural resources. When it comes to what was once our gas, Australians have been left paying more for a resource that we have in abundance. And the problem goes well beyond the gas itself.
The more I have researched this subject, the more convinced I have become that the way Australia accounts for, taxes and manages its gas resources is far more complicated than most Australians realise. Clever accounting, complex tax arrangements and political rhetoric can make a poor outcome appear far more attractive than it really is.
The Basic Facts
Fact: Australia is one of the world's largest exporters of liquefied natural gas (LNG).
The bigger issue: Australia has significant gas resources, yet much of that gas is exported. This can leave Australian households and businesses paying high prices for their own natural resource.
Put simply:
Australia produces and exports enormous quantities of natural gas, yet Australians can face high gas prices and supply pressures because the domestic market competes with lucrative international markets. At the same time, the tax and royalty revenue returned to Australians is not necessarily as large as many would expect from such a valuable national resource.
These facts provide the foundation for what follows.
My concern goes well beyond selling gas to overseas companies. In my view, it represents economic mismanagement of the highest order. The more I have read, the more strongly I feel that gas has been treated with contempt as a strategic national resource.
Gas is not simply something we use for heating and cooking. It is an important input into Australian manufacturing and industry, and it can also play an important role in electricity generation and firming as Australia transitions towards more renewable energy.
Selling Out – The Export Paradox and Domestic Pain
There is no easy way to sugar-coat the situation.
Australia has allowed large international energy companies to extract and export enormous quantities of our gas while the benefits returned to Australians appear, to many, disproportionately small compared with the value of the resource being exported.
The original promise was that these projects would generate jobs, investment, economic growth and government revenue. Some of those benefits have undoubtedly occurred.
But the bigger question is whether Australians are receiving a fair return for the gas being extracted and whether the broader economic consequences have been properly considered.
That question was not adequately put to Australians when many of these decisions were made. Governments appeared confident they had the situation under control.
But whose control?
If the policy fails, who is accountable? Governments change, politicians leave office and companies continue operating. Yet the consequences of decisions made decades earlier can remain with Australians for generations.
That is why I believe this issue deserves much closer examination.
For those who think I am overstating the problem, consider the following.
Massive Exports, Limited Tax Benefits
More than 80% of Australia's extracted natural gas is exported overseas, primarily to Asian markets.
Yet the amount of tax and other revenue Australia receives from these exports has been the subject of significant criticism. The Grattan Institute has highlighted the particularly low tax contribution of Australia's LNG industry, including major projects that have generated substantial export revenues while paying little or no corporate income tax in some years.
This raises a very simple question:
If Australians own the resource, are we receiving a fair return when it is extracted and sold overseas?
Tied Pricing
Australian wholesale gas prices increased dramatically after the development of large-scale LNG export infrastructure linked the domestic market more closely to international prices from around 2014–15.
Before this shift, Australia's abundant gas resources helped keep domestic gas prices among the lowest in the world.
The paradox is obvious: we have an abundance of gas, yet Australians can face prices determined by what the gas is worth overseas.
Local Shortfalls and the Manufacturing Cost
Despite Australia's substantial gas reserves, southern states have faced increasingly tight supply outlooks and high energy costs.
This matters because gas is not only something households consume. It is an essential input for many Australian industries, including fertiliser, chemicals, glass, bricks and food production.
When gas becomes too expensive, businesses may reduce production, close facilities or move operations overseas.
The economic consequences then multiply.
Jobs and investment are lost. Australian production falls. Products that were once made here may instead be manufactured overseas and imported back into Australia.
In effect, we can end up exporting the gas and importing the products that the gas could have helped us produce.
And, ironically, some of those products can come from the very countries buying our gas.
The Missing Royalties and Tax Revenue
There are several important issues surrounding the return Australians receive from gas extraction.
- Much of Australia's offshore gas does not attract traditional state royalties. A significant amount of gas is extracted from Commonwealth waters, meaning the royalty arrangements are different from those applying to onshore resources.
- The Petroleum Resource Rent Tax (PRRT) has historically generated less revenue than many Australians might expect. The tax was designed to ensure Australians receive a fair return from highly profitable petroleum projects. However, companies can claim substantial deductions before PRRT becomes payable.
- Some major LNG exporters have paid little or no company income tax in particular years. This has fuelled considerable debate about whether Australia is receiving an appropriate share of the wealth generated from its natural resources.
The comparison with countries such as Norway is particularly interesting. Norway has used its oil and gas wealth to build a substantial sovereign wealth fund for the benefit of current and future generations.
Australia has no equivalent fund of comparable scale.
So the question remains:
What lasting financial asset are Australians receiving in return for exporting a finite national resource?
How Australians Indirectly Pay the Price
Australians do not need to buy the exported gas themselves to feel its consequences.
Higher Electricity and Gas Bills
When gas prices rise, electricity prices can also rise because gas-fired generators are often called upon when electricity demand is high or renewable generation is unavailable.
Higher gas prices can therefore flow through to both household and business energy costs.
Pressure on Australian Manufacturing
Gas is both an energy source and a raw material for many industries.
When it becomes too expensive, businesses can cut production, reduce investment, close facilities or relocate overseas.
Australians Miss Out on the Benefits
Gas extraction can create jobs, investment and export revenue, but it also creates environmental and social impacts.
If the government receives less revenue than expected while Australians bear higher energy costs and local impacts, the overall national benefit becomes much harder to justify.
More revenue from our natural resources could instead support infrastructure, public services, investment or cost-of-living relief.
The Economic Cost of Selling Out
Now we come to what I believe is the most important part of this discussion.
I initially described the argument simply as:
Australian gas exports reduce Australia's GDP.
That statement is too broad.
LNG exports clearly contribute to Australian GDP through investment, production and export activity. So it would be inaccurate to claim that exporting gas automatically reduces GDP.
The more important question is:
Could Australia generate greater overall economic activity by using more of its gas domestically rather than exporting it as LNG?
To answer that properly, we need to separate two different concepts.
1. GDP asks:
How much economic activity and production occurs in Australia?
2. Broader national welfare asks:
Are Australians actually better off once we consider income distribution, government revenue, energy prices, jobs, environmental impacts and the loss of a finite natural resource?
This distinction is critical.
GDP, National Welfare and the Environmental Cost
Australia's LNG industry generates export revenue and contributes to GDP. That is a fact.
The question is whether an export-heavy gas strategy produces the maximum possible economic benefit for Australia.
If high domestic gas prices force Australian manufacturers to close or relocate, some of the economic activity created by LNG exports may come at the expense of other economic activity.
A tonne of gas exported as LNG generates economic activity.
But that same gas might also have supported Australian manufacturing, agriculture, chemicals, fertiliser production, electricity generation or other higher-value activities.
That is the opportunity cost.
The real economic question is therefore not:
"Do LNG exports contribute to GDP?"
They do.
It is:
"Does exporting large quantities of gas generate more economic value for Australia than using a greater share of that resource domestically?"
That is a much harder—and much more important—question.
The Effect on Australia's Broader Welfare
GDP is not the same as national wellbeing.
GDP can rise while the benefits are concentrated among a relatively small number of companies and shareholders, while the costs are distributed across the broader population.
Australians may still be worse off overall if:
- households pay higher gas and electricity bills;
- Australian businesses face internationally uncompetitive energy costs;
- governments receive less revenue than expected from publicly owned resources;
- communities bear the environmental and social impacts of extraction;
- future generations inherit fewer remaining resources without receiving a corresponding financial benefit;
- Australia has insufficient gas available for future electricity generation and firming; and
- energy policy decisions made today create problems for the long-term transition to a renewable energy system.
This last point is particularly important.
Australia is investing heavily in renewable generation and transmission infrastructure. At the same time, emerging industries such as data centres are creating new electricity demand.
Gas may continue to have a role in firming the electricity system during this transition.
If we export too much of our gas today without properly considering future domestic requirements, we risk creating a situation where Australia has to compete internationally for a resource that was once abundant and inexpensive domestically.
That is not necessarily good long-term planning.
The Environmental Cost
There is another cost that is often overlooked: the energy and emissions required to turn Australian gas into LNG and transport it overseas.
Natural gas cannot simply be loaded onto a ship.
It must first be processed and cooled to approximately -162°C to convert it into a liquid. This liquefaction process requires significant energy.
Additional energy and emissions are associated with extraction, processing, compression, storage and transportation.
So the environmental cost of LNG exports is not simply the gas itself. It also includes the energy consumed and emissions created throughout the export process.
This creates an uncomfortable contradiction.
Australia is pursuing a pathway towards net zero emissions while simultaneously investing enormous amounts of energy and infrastructure into extracting, processing and exporting fossil fuels.
Those emissions then have to be offset or reduced elsewhere in the economy.
That can mean building more renewable generation, transmission and storage to compensate for emissions created by the gas export industry.
The cycle becomes increasingly complex.
The Central Argument
The strongest argument is not that LNG exports automatically reduce Australia's GDP.
It is that Australia should be asking whether its gas policy delivers the maximum long-term national benefit.
The question should be:
Does Australia receive greater long-term value by exporting large quantities of gas as LNG, or would Australians benefit more from using a greater share of the resource domestically to support industry, energy security, government revenue and higher-value economic activity?
GDP is only one part of the answer.
National welfare also requires us to consider who receives the benefits, who bears the costs and what is lost when a finite national resource is exported.
A more accurate version of my original statement that "gas exports reduce GDP" would therefore be:
An export-heavy gas policy may not maximise Australia's GDP or Australians' broader welfare, particularly if high domestic prices crowd out Australian industry and the benefits returned to the public do not adequately reflect the value of the resource being extracted.
That is the argument I believe deserves serious consideration.
So, Are We Being Robbed?
Having looked at the economics, taxation, domestic pricing, manufacturing impacts, energy security and environmental costs, the issue becomes much harder to dismiss.
Perhaps Australians are not literally being "robbed" of their gas.
But we may be giving away far more of its potential value than we realise.
We risk losing current economic opportunities, future energy security, manufacturing capability and the benefits that could otherwise flow from a finite national resource.
Once the gas is extracted and exported, it is gone.
The money generated from it may continue to circulate through the economy, but the physical resource itself cannot simply be replaced.
That makes the decisions we make today important not only for us, but for generations of Australians who will never have the opportunity to use the resource we consume now.
Conclusion – The Great Australian Gas Robbery
Australia has been blessed with abundant natural gas resources. Yet Australians can face high gas and electricity prices, manufacturers struggle with internationally uncompetitive energy costs, governments receive less revenue than many believe they should, and future energy security is increasingly uncertain.
The issue is not whether Australia should export gas.
The issue is whether the current export-heavy model is delivering the best long-term outcome for Australia and Australians.
We need to look beyond export revenues and headline GDP figures and ask what we are actually receiving in return for a finite national resource.
The uncomfortable reality is this:
We are exporting a finite Australian resource, using enormous amounts of energy to process and transport it overseas, creating additional emissions along the way, while Australians can end up paying more for the gas and energy produced from that very resource.
If we cannot clearly demonstrate that this model makes Australia better off—not just today, but for generations to come—then perhaps it is time to ask a much more confronting question:
Are we managing Australia's gas resources for the benefit of Australians—or simply giving away the family silver?