Fortescue pushes for cap on mining industry handout amid cost of living crisis
Mining giant Fortescue, which is rapidly switching its major Pilbara iron ore operations to run on electricity, is pushing for reform of diesel tax credits, which it says are an unnecessary “grant” worth billions of dollars to the country’s mining industry.
Fortescue, founded by billionaire Andrew Forrest, said it would target diesel tax credits with a national television and radio campaign, which would “highlight the imbalance at the heart of current policy, comparing the billions of dollars of tax credits flowing to the mining industry with the cost-of-living pressures Australians face every day.”
Australia’s largest miners receive the lion’s share of the estimated $11 billion refunded to businesses each year under the 2006 Fuel Tax Credit Act, which effectively subsidizes the use of diesel, although the bulk of the fuel is imported.
The US-Israeli war against Iran and the blockade of oil tanker traffic in the Strait of Hormuz have caused an escalating global fuel shock that has caused unleaded gasoline and diesel pump prices to rise in Australia. High fuel prices, with unleaded fuel at more than $2 a liter and diesel at more than $3, are causing hardship for households and businesses already struggling with other cost pressures and rising interest rates.
The Albanian government’s temporary halving of the fuel tax will provide some relief to drivers, but the measure will expire on June 30. Finance Minister Jim Chalmers is considering other cost-of-living measures to cushion the impact of the oil shock on consumers in the upcoming federal budget.
The Westpac-Melbourne Institute’s consumer sentiment index fell 12.5 per cent in April, its biggest monthly decline since the pandemic, as fears of job losses grow and reached the highest level in a decade excluding the pandemic.
Fortescue, a major beneficiary of diesel tax credits, is calling for a cap of $50 million per company per year, saying the reform is both fair and economically responsible. The cap would save the federal budget an estimated $2.46 billion annually, and the savings are expected to increase significantly over time.
The miner claimed $308 million in tax credits for 600 million liters of diesel in fiscal 2025.
Fortescue CEO Dino Otranto said the scale and injustice of the diesel tax announcement was not fully understood. “This diesel tax declaration is meant to support core industries, not provide huge benefits to the biggest players,” he said.
“At a time when families are being cut back and small businesses are finding it difficult, it’s reasonable to ask whether this is the best use of taxpayers’ money. Frankly, it’s not.”
Fortescue’s position is unlikely to be popular with rival miners.
The Institute for Energy Economics and Financial Analysis estimates that mining accounts for 35 per cent of Australia’s annual diesel fuel use of around 10 billion litres, and the government provides around $4.5 billion a year to sustain mining activity. Rio Tinto uses around 1.6 billion liters of diesel a year, two-thirds of which powers its massive iron ore business in the Pilbara.
Unlike heavy vehicles on the road, where rebates are tied to vehicle emissions standards, mining’s fuel tax credits are unlimited and growing, the institute said.
Earlier this month, Fortescue said it was accelerating the construction of a green energy grid powered by solar and wind in the Pilbara over the next 18 months, with the aim of eliminating fossil fuels from its operations by 2030. The company expects to generate 2 gigawatts of energy, enough to run its operation, supported by 4-5 gigawatt hours of battery storage.
Savings of US$100 million ($140 million) in fuel costs are expected by next year.
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Simon Johanson is a business journalist for The Age and The Sydney Morning Herald.Connect with: X or email.
