Several long-term trends are now intersecting in a way that is going to deepen economic divisions in Australia, as well as undermine growth ahead of what may become a significant slowdown in 2023.
The global energy price boom is undoubtedly great news for Australia’s big fossil fuel energy exporters: soaring coal and gas prices mean windfall profits for coal miners and gas exporters — especially offshore gas producers.
The benefits of these good times to the rest of the economy are limited. Coal miners at least pay company tax; the big gas exporters Chevron, Shell, Woodside, Santos and Origin pay little or — more often — no tax; while many receive far more in carbon capture and storage subsidies than they will ever pay in tax. These companies employ only a small number of people, and much of their infrastructure is manufactured overseas. It’s great for our trade surplus, but you can’t take that down to the supermarket to buy anything. The only benefits flow to shareholders — in the case of Chevron and Shell, most of them foreign.
And all of that ignores the devastating climate impacts of their exports.
The list of losers is as long as the list of winners is short. High black coal and gas prices internationally mean high black coal and gas prices domestically. The long-term consequences of nine years of climate denialism and no energy policy are now apparent: a fleet of failing, unreliable coal-fired power plants nearing the end of their lives, and a renewables and storage sector that hasn’t grown anywhere near fast enough due to hostility from the prior federal government, forcing us to rely on expensive gas just as winter has arrived to boost demand.
The result: soaring energy prices for households, small businesses and large businesses alike, unless you live somewhere like the ACT where the government has had the foresight to drive a rapid transition to fully renewable energy. If you’re an investor in a big gas exporter, you can at least have the satisfaction of knowing your higher power bills are at least partly offset by a higher dividend.
That long-term trend is coinciding with another: after years of wage stagnation and for many workers real wage declines, high inflation and an anti-worker industrial relations system are likely to impose significant real wage cuts on households, despite promises that wages growth is just around the corner. If only workers could have taken promises from the Reserve Bank and the federal government about coming wage growth improvements to the bank.
High inflation inevitably is driving a rapid increase in interest rates; too bad if you took the Reserve Bank seriously when it said interest rates wouldn’t rise before 2024.
Ordinary workers will see some benefit from record coal and gas prices eventually, via their super funds when they retire, but otherwise it’s all roundabouts and no swings for households dealing with big power bill increases. Even some of the beneficiaries are losing out — Origin Energy is making a motza from its liquefied natural gas exports from Queensland, but can’t source coal for its Eraring power plant in NSW and had to slash its profit forecasts.
None of this will be fixed by forcing gas exporters to pump more gas domestically — they’re already doing that. There are no quick solutions, especially not for NSW and Queensland, where reliance on black coal has left its coal-fired power plants at the mercy of international prices and breakdown-prone generators. The decisions that could alleviate this crisis needed to be made years ago, when climate denialism reigned and renewables were demonised.
What we can do is shift national income back from profits to wages via higher wages growth, backed by greater social spending funded by a windfall profits tax on energy exporters, and accelerate the transition to renewables as quickly as possible. The goal should be an energy market where coal and gas prices can go to the moon and back and it will have zero impact on the energy bills of families and small businesses, freeing Australians from the tyranny of fossil fuel inflation. Call it decarbonising household budgets.
Regardless of what Labor promised before the election, things have deteriorated substantially since the election. Time for an increase in base rates of tax on any company making profits on the sale of atmospheric pollutants and a super-profits tax where profit exceeds a prescribed level. Labor with the cross bench and the senate will get that up. And it must be done urgently.
Amazing what a difference a fortnight makes – “…things have deteriorated substantially since the election.”
If ‘Labor’ had a backbone connected to a brain it would have spent the last week telling the country the state of the national accounts and, most importantly, WHY they are so drenched in red ink.
Still in ‘pre-emptive buckle & cringe’ mode with little prospect of that changing within a parliamentary term, barring several resignations or wayward buses.
Absolutely- time to re-assess all these options. Most Australians would have no idea of the many billions that have been sent off shore by Fossil Fuel companies who pay little or no tax in Australia- yet another scandal allowed, in fact encouraged by the previous LNP govt!! Time to tax the bastards!!!
I am just disgusted how the nation virtually gives away our non renewables for virtually no return to the nation and taxpayers. The lack of gas supply to the locals, while we export massive amounts elsewhere is inexcusable and negligent of Government.
You can thank Little Johnny Eyebrows for that masterstroke…………
…………..signed away TWENTY FIVE YEARS worth of Australian gas at a price fixed when it was at a historical low.
https://www.smh.com.au/opinion/how-australia-blew-its-future-gas-supplies-20170928-gyqg0f.html
Subsidising rooftop solar has been a big success; small scale solar is now collectively our main producer of renewable power. Something similar should be done to replace gas appliances with electric. We recently replaced our gas water heater with an electric heat pump; am amazed at the $ this has saved. Subsiding heat pumps and similar would be a good short term measure.
Think BIG Charles. The success of the most successful country economically in the World has come off infrastructure.
Build a utility corridor (multiple if you like) with highway, water, rail and electricity transmission. Potentially 1000km of solar panels say 50m wide. Could put another 50m on the other side. Now that is energy. Also wave and geothermal and wind can be connected in.
Power for industry and employment. Water pumped free by solar. Charging centers on highway supplied by solar.
I’m waitint for the night riders. Run one East/west thus reducing lack of coverage. Night is low load and the existing stations could cover the reduces load easily – they do it now. That would include wind, geothermal and wave. Thus reducing it more.
There are already substantial corridors, with inviolate easements on either side, throughout the country – they are called railways.
Heavy rail runs on 1,500v DC which could/should be supplied by PhV along the many thousands of route miles, esp in rural areas.
Suburban/commuter rail uses less than half that, around 600v DC, and could easily be fed by the excess within the dormitory suburbs during the day, obviating the ‘need’ to invert to feed into the grid – currently the main tech. hitch in the grid.
That’s a grand project but in OZ it would be impossible to bring to fruition. Too many committees.
Plus lack of imagination and utter inertia. Where’s the derring-do and optimism our great grandfathers used to have. The world is on the cusp of entirely new way of existing and instead of getting on the bandwagon our pollies and corporations grizzle and whine about how it’s all too hard and let’s stick with coal and more fracking will save us BS, instead of just getting on it.
Use all that fracking poisoned land in QLD and build massive solar power plants. Innovate and build those gravity batteries. We have lithium, overseas theyre producing 400watts/kg batteries with claims of up to 1000watts/kg. Wave power. Hydro power. For dogs sake Labor, you’re in power now, stop tinkering around the edges and bloodywell DO something!
I think you mean 400 Wh/kg, not 400 W/kg – but yes, that is a good capacity for a battery.
Fill Lake Eyre with seawater so that the fearsome evaporation, at 15 metres below sea level is 10cubmts per metre pa, to make rain in north Qld on the west of the GDR
and eventually it all drains back via the Channel Country, where SA, Qld, NSW & NT meet.
It is true when Lake Eyre fills we have greater rainfall down here in SA. Could be the same elsewhere.
I’ve had solar for quite awhile but the game changer was the battery and Musk’s Energy Locals, never had a power bill since. On another property I’m removing gas hot water to electric eliminating outrageous supply fees. I’ll need to connect a battery there in the future.
Im glad the heat pump worked for you. We’re an hour and half from Melbourne and it caused a noticeable increase in costs – it shifted the hot water system from off peak electricity, to constantly working at a low key all day and in the super cold days working harder all day. I think there’s some weather they just don’t suit.
I’d have it checked out, our bill dropped by over half with water system even larger than we had. It’s dropped even lower when we added solar to the mix
Maybe it’s time for us to look back at the history of the State Electricity Commission of Victoria (SECV); created following similar market failure. Had it not been sold for thirty pieces of silver who could doubt we would not be in the position we are today (At least in Victoria, but probably nationally since the sale of the SECV as the Trojan Horse which allowed the brigands inside the city). How about we stop thinking of energy as a private benefit and start thinking of it as a public good? AEMO is a fraud. The AEMC is a fraud. The AER is a fraud. They are ideological constructs; a series of Potemkin villages invented to deceive the public into believing a privatised energy market can deliver anything but misery for most and unspeakable riches for a few. If privatised energy so efffing good how come the public keep on refusing to buy at election after election from Tas to WA?
In WA it’s publicly owned despite a few near-miss attempts at selling it off to balance the budget. Bit of a miracle, if you believe in them. There’s no off-peak rates. 27c per kWh + GST + $1 a day supply charge. 3.5c extra for greenpower. And a rebate for dependent children. In the bush it goes off pretty often, pole fires etc – wooden poles being such a great idea, NOT. So have a generator or lose your food. No idea if the power company makes a profit for the govt or not. It used to run at a big loss because successive govts were terrified of putting up the prices, vote-wise. It used to be all brown coal, too crappy to sell overseas, but there’s now a fair bit of wind and very many house PVs, which are allowed to put no more than 5kW into the grid. We have some very long supply lines around the edge of the grid. Very good engineering it has to be said. Still a bit 3rd world, but we get by. Sorry to go on. Thought someone over East might like a comparison. Our grid has to cover a lot of ground for few users, once out of Perth.
Well worth study is West Australia’s main electricity grid, the “South West Interconnected System”. SWIS delivers 2 GW from much PV, wind, coal and much gas. People interested in the growth of renewables can track the triumphs and tribulations of progress in WA. Because SWIS is completely isolated, there are no concealed imports and exports of power, so analysis is much easier. In 2016, 13% of all power was generated by renewables, and has increased significantly in the five years since then. On the web you can track down how they are dealing with the problem of saturation.
The catch is labor is almost as compromised and the libs when it comes to fossil fuels. We need the greens (unpredictable fruit cakes tho they may be) and the teals to kick and scratch long and hard here.