Critical minerals, gas offer wedge

Budgets are very strange things indeed. Just when you think the public is fixated on a screaming match over the rights of Palestinians and Israelis, or any of several other socially disruptive causes, the annual focus on who gets what and how much changes the narrative.

Perhaps we could look back to this past month as a turning point. Finally, some sharp focus on what drives the economy, at state and national levels.

Here, I am talking about the federal government’s significant backing for what are widely termed critical minerals, and its belated acknowledgement that we need gas development.

While in Perth this month, Prime Minister Anthony Albanese was guarded with his announcements, including at a sold-out Business News event with close to 1,200 people.

In hindsight, however, it was clear there was momentum growing.

His news at that event was that his government would spend almost $570 million via Geoscience Australia over 10 years for a massive mapping program to help find new deposits of minerals and sources of energy.

The prime minister made clear this mapping would be offshore as well as onshore, underscoring that gas was obviously on the agenda, as well as sites for the much-maligned carbon capture and storage.

“The landmark long-term investment, led by Geoscience Australia, underscores the government’s plan to put the resources industry at the heart of its Future Made in Australia policy,” Mr Albanese said, in what was welcome news for Western Australia.

Later that week, the federal government finally got to the heart of the matter by releasing Australia’s Future Gas Strategy, which acknowledged future gas supplies will be needed for reliable and affordable consumption locally and overseas.

And then, in the federal budget, Treasurer Jim Chalmers unveiled critical minerals production tax credits with a price tag of $7 billion over a decade, plus a $1.2 billion investment in strategic projects. There was also $6.7 billion for hydrogen production.

Giving a leg up to companies in rare earths, lithium, nickel and other battery minerals is just another way the Albanese government is backing its Australia-made agenda.

Both policies look like the biggest political wedge we’ve seen for quite some time.

Having sailed into government on the back of aggressive net-zero promises, it has dawned on Labor that its feelgood plan to transition to renewables was likely to come at a huge cost to the economy, imminently.

Clearly, Resources and Northern Australia Minister Madeleine King, a Western Australian, has helped Labor turn the ship around from hitting the net-zero iceberg by offering a rescue package that doesn’t obviously look like one.

Firstly, we keep the gas switched on by allowing development of projects that require decades of operation to justify financial commitment.

The government has chosen jobs above climate alarmism, apparently without abandoning its green goals. And remember, it can tax most gas directly and has already tweaked the Petroleum Resources Rent Tax in its favour.

Secondly, to sweeten the deal with industry – notably the traditional resources and renewables sectors – the government has moved to help critical minerals players develop local processing capacity and, in some cases, survive the nasty oversupply in areas such as nickel.

This is more than choosing jobs above climate because there’s no point aiming for a renewables future if the necessary technology is in hostile hands.

Climate alarmists with a less-than-fulsome understanding of economics will be angered by the backing of gas, but what can they do?

Anyone who can afford to ignore the economy already votes Green, or possibly Teal. Labor backing gas makes the Liberals’ go-nuclear policy a tougher sell.

No matter how regressively protectionist you think Mr Albanese’s Future Made in Australia policy is, the critical minerals centrepiece on its own takes the wind out of all but the most ideological free-trade arguments.

It is seeking to lower sovereign risk in a sector that is just as vital for defence, productivity and broader technology adoption as it is for renewables. It is smart politics, especially here in the west.

When could Gina Rinehart and Mike Cannon-Brookes ever potentially agree on something? This could be it.