Australian Governments Subsidising Fossil Fuel Use by More than $30,000 a Minute, Analysis Finds

Why It Matters

The scale and growth of these subsidies undermine Australia’s climate commitments and inflate budget deficits, while encouraging continued fossil‑fuel consumption.

Key Takeaways

• Fossil fuel subsidies hit $16.3 bn in 2025‑26.
• Subsidies rise 9.4%, outpacing NDIS growth.
• Fuel‑tax credit scheme costs $10.8 bn, biggest subsidy.
• Queensland receives $2.2 bn, most state support.
• Calls for $50 m rebate cap from industry groups.

Pulse Analysis

The Australia Institute’s latest analysis reveals that Australian governments are allocating $16.3 billion to fossil‑fuel subsidies in the 2025‑26 fiscal year, a level that translates to more than $31,000 per minute. This spending represents a 9.4 % increase over the previous year and now exceeds the growth rate of the National Disability Insurance Scheme, a benchmark often cited in budget debates. By channeling public funds into coal, gas and diesel‑heavy sectors, the subsidies lock in emissions pathways that conflict with the nation’s net‑zero pledges and international climate accords.

The bulk of the subsidy package stems from the federal fuel‑tax credit scheme, which is projected to cost $10.8 billion this year, up from $10.2 billion in 2023‑24. The program refunds excise taxes for businesses that use diesel on private roads or heavy‑vehicle fleets, effectively lowering operating costs for mining conglomerates, agriculture and tourism operators. While industry groups argue the rebate preserves competitiveness, critics point out that the majority of the excise revenue funds general budget needs rather than road infrastructure, creating a perverse incentive to burn more fossil fuel.

Growing political pressure—from unions, climate NGOs and even some mining executives—has sparked calls for a $50 million annual cap on rebates and a broader phase‑out of inefficient subsidies. State data show Queensland alone contributes $2.2 billion, highlighting regional disparities in fiscal support for high‑carbon activities. Reducing these subsidies would not only improve fiscal discipline but also accelerate Australia’s transition to renewable energy, enhancing energy security and shielding the economy from volatile oil markets. Aligning subsidy policy with the COP30 declaration could position Australia as a leader in sustainable finance.