The federal government looks set to finally intervene in energy markets this week, so it’s no surprise to see a chorus of industry groups warning of economic fallout if they do.
But let’s be clear: industry associations such as the Australian Petroleum Production & Exploration Association have one primary mission and that is to represent the interests of their members, such as Santos and Woodside.
As everyone recognizes, the surge in profits from the sale of fossil fuels is the direct result of Vladimir Putin’s brutal invasion of Ukraine. It has nothing to do with improving the productivity of industry or any other entrepreneurial initiative. It’s luck, pure and simple, and what Australian manufacturers, small businesses and households pay for.
Australians can see that the government needs to step in, and not just because many of these companies, such as Chevron, Santos and Woodside, make billions from Australian gas and pay little or no income tax in return. In 2021, Chevron paid $30 in income tax. Santos and Woodside got the last laugh though, paying out $0.
But that’s not how these industries see it, which is why their industry associations are in effect right now. As a scholar who has studied the political activities of corporate actors, there are several things to keep in mind when assessing the claims made by these groups.
First, industry associations are created by companies to promote the business interests of their members, and that usually means their most important members. The reason companies such as BHP, Chevron, Rio Tinto, Santos and Woodside dip into their pockets to keep these groups afloat is that they may engage in a range of political activities to protect their profits – think lobbyists who walk the halls of parliament, or advertising campaigns on television or on social networks denouncing any attempt to regulate the industry.
And too often these campaigns are effective. In 2010, when Kevin Rudd proposed a super resource profits tax to ensure taxpayers a fairer share of the billions made by miners, the Minerals Council of Australia alone spent $17.2 million campaigning against the government, mainly in television advertisements. Shortly after Rudd’s fall, the Gillard government backed out of the proposal and the industry kept its super profits. No wonder they’re starting over.
The second point to keep in mind is that in addition to protecting their profits, the related objective of any industry association is to protect the reputation of its members. That’s why these groups and their members often spend millions on public relations campaigns, or donate to a local community group or sports team. This is to ensure that their members maintain a social license to operate. However, concerns over fossil fuel production and their contribution to climate change mean many groups are now pushing back, with Tennis Australia ending its partnership with Santos. Cricket Australia’s sponsorship deal with Alinta will end next year but the decision came from the energy company, according to CA.
Industry groups also serve to protect their member companies by waging negative campaigns so that the reputation of the companies that fund them is not tarnished. Basically, industry lobby groups often do the dirty work of the company. It is better for the head of MCA to be in public threatening the government with a negative publicity campaign as happened last month, than the head of BHP, because they have no brand to protect.
One last thing to bear in mind is that no serious economist thinks the Labor government should let the market do its thing.
Yes, there is an ongoing debate about what policy leverage to pull and whether price caps, taxes or reservation policies are the way to go when it comes to coal and gas markets, but it is difficult to find experts suggesting that the current settings are correct. The Federal Treasury and most academic economists agree that government must intervene in energy markets and act to support energy consumers.
So the next time you see an industry group such as APPEA or MCA complaining about government regulation, remember that it’s not you it represents, it’s the interests of its members.
Industry associations have a legitimate role to advocate on behalf of business, but this should never be confused with what is in the public interest.
Christian Downie is an Associate Professor in the School of Regulation and Global Governance at the Australian National University
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