In a federal budget that sought to restore intergenerational equity, particularly through reforms to tax concessions that have long favoured Australia’s wealthiest few, the Albanese government is facing criticism for ignoring a golden opportunity to balance the scales on energy and climate.
Jim Chalmers on Tuesday night described the 2026-27 budget as “the most important and ambitious … in decades.” And while “climate” did not rate a single mention in the federal treasurer’s speech, “getting through the global oil shock and building resilience” topped his five-part economic strategy.
But Chalmers’ strategy is notably lacking in ambition on new funding for climate and renewables – and has failed to act on what is broadly considered to be the clearest political mandate, yet, to reform fossil fuel tax loopholes and subsidies.
Climate Energy Finance director Tim Buckley – while noting the $60 billion of decarbonisation and Future Made in Australia funding initiatives put in place over the last four Chalmers budgets – says this is a “glaring omission” in the context of the global fossil fuel shock and cost-of-living crisis.
“The government declined to introduce a proposed 25 per cent gas exports levy at a moment when prices are hyperinflated by Trump’s war in the Middle East, a reform which could have delivered $17 billion annually to the Budget and funded cost of living relief,” Buckley said on Wednesday.
“Instead, it buckled to appease the war-profiteering gas industry. Likewise, the failed PRRT [petroleum resource rent tax], which will deliver just $1.6 billion per annum over the next four years, was untouched.”
Also left untouched by the government was the controversial diesel Fuel Tax Credit scheme, an $11 billion a year fuel tax break that is expected to grow to $13 billion a year in 2026-27.
Iron ore billionaire Andrew Forrest, whose company Fortescue Metals is itself one of the largest recipients of the FTC, has been pushing hard for the introduction of a $50 million annual cap on diesel fuel rebates per company, including through a major pre-budget ad campaign.
Fortescue points to research that shows Australia’s 18 largest miners received about one-third of the $11 billion in FTC rebates returned to businesses in the 2025-26 financial year.
It wants reforms to restore fairness to the system, and to stop subsidising fossil fuel dependence for major companies that should be decarbonising their operations.
In a rousing speech at last week’s Smart Energy Conference in Sydney, Forrest slammed the FTC as “absurd politics” and said Australian industry was “being held hostage by diesel, and the rebate scheme.”
But for all of Twiggy’s passion, the call for tax reform on this count has not been heeded.
“[The FTC] remains untouched, leaving taxpayers out of pocket and disincentivising mining majors – its key beneficiaries – from investing in decarbonisation… as it keeps them addicted to imported diesel,” Buckley says.
“The government’s temporary cuts to petrol and diesel excises sustain this national dependency.”
In its own statement, on Wednesday, Fortescue said the lack of action on the FTC was “disappointing” and pledged to continue to advocate for reform.
“Now is the time for Australia to show real leadership and stand up for a fairer approach to fuel tax settings,” said Fortescue Metals and operations CEO Dino Otranto in a statement.
“Billions of dollars continue flowing through a tax credit that overwhelmingly benefits some of the country’s largest and most profitable companies. That’s becoming harder to justify when Australians are doing it tough.
“We recognise the government is managing a range of economic pressures and priorities. But this issue shouldn’t keep getting pushed to the side.”
The response from the Climate Council, however, was a little less diplomatic, describing the lack of action on subsidies like the FTC as a “$19 billion budget free kick” for the fossil fuel industry.
“This Budget maintains the $19 billion gravy train for big fossil fuel corporations,” said Climate Council CEO Amanda McKenzie on Wednesday.
“That is $19 billion in the wrong direction, keeping us tied to foreign oil, rather than supporting the expansion of renewable energy solutions that Australians want to deliver a safer, cleaner, more secure energy future.
“If the government is serious about intergenerational fairness, the Budget must address not just housing but climate harm landing on young people. We can’t secure young Australians’ futures while expanding coal, oil and gas,” McKenzie said.
And Buckley, too, is scathing: “Inaction on fossil fuel tax reform fails to deliver a fair return to Australians from multinational gas giants’ exploitation of our sovereign assets,” he said on Wednesday.
“And it does not strategically decouple our economy at speed and scale from expensive, volatile imported oil so as to permanently ensure our energy security and insulate us from future threats.”
Taking a broader lens, economist and Climate Councillor Nicki Hutley points to the budget’s lack of ambition on climate and its failure to back in some of most basic policy measures for cutting both emissions and bills.
“This federal budget includes serious tax reform to deal with the housing crisis, but a patchwork of fossil fuel subsidies and short-term handouts that keep us dependent on fossil fuels from volatile regions,” Hutley said on Wednesday.
“The government could have done much more to expand clean energy and electrification, which can deliver lasting cost of living relief and energy security, while reducing climate pollution.”
Matt McKee, the chief researcher at Beyond Zero Emissions, says the budget “feels like a band-aid” rather than a recipe for energy and economic resilience.
“This budget was partly a test of whether Australia is serious about building long-term energy security at home, rather than just managing short-term risks from overseas,” McKee said.
“On that account, we have to acknowledge it leaves a lot to be desired – funding for short-term fuel storage far outpaces long term decisions that sustainably reduce fuel demand.
“Energy security isn’t just about fuel reserves, it’s about building a domestic, renewable energy system that doesn’t rely on global supply chains in the first place,” says McKee.
“While we applaud some of the R&D support we saw today, this budget feels like a band-aid for the challenges facing Australia’s industrial regions.
“We’re keen to work with the government on how we can best utilise the existing budget mechanisms to deliver the necessary economic resilience that the Treasurer regularly mentioned in his speech.”
Francis Vierboom, CEO of Rewiring Australia, applauded the CGT and negative gearing changes, but also vented his frustration on energy decision.
“It’s pretty dumb we’re ploughing $10 billion into a government petrol stockpile and letting offshore gas just keep shipping away for free when a gas tax that pretty much everyone wants (except Inpex shareholders) could fund electrifying all the houses and cars and trucks in the country and prevent us from having to care at all about oil prices and oil-driven inflation ever again,” he wrote on LinkedIn.
Republished from Renew Economy
Sophie Vorrath
Sophie is editor of One Step Off The Grid and deputy editor of its sister site, Renew Economy. She is the co-host of the Solar Insiders Podcast. Sophie has been writing about clean energy for more than a decade.