Surging energy prices have yet to make any dent on the government’s level of support; voters seem prepared to accept that the invasion of Ukraine is beyond the control of any government, and that we’re stuck with the consequences of the Coalition’s failure to have an energy policy for nine years.
Even so, journalists, particularly at commercial networks, were fixated on the issue after the budget — possibly because the government had leaked pretty much everything of interest ahead of time.
But what exactly will the government do about already high and soon to be much higher energy prices, given it has made a virtue of not pushing inflation higher by handing out cost of living relief?
“We’ve also got some important regulatory steps, boosting funding for our regulators and boosting our efforts there as well,” Treasurer Jim Chalmers said this morning.
Prime Minister Anthony Albanese said this this morning as well: “The ACCC has an important role to play here, the Australian Competition and Consumer Commission, to ensure that we don’t see any price gouging that we’re not seeing any companies taking advantage of the international circumstances which are there.”
Finance Minister Katy Gallagher was slightly vaguer, saying this morning: “The government’s looking at a whole range of options … We need more time and more work needs to be done … to see what options are available … We’ve got a role for the ACCC, we’ve got a role for AEMO, and there’s certainly a role for the energy regulator to look at and provide advice to government about what the options are.”
And, yes, the budget did increase funding for the ACCC, which is getting about $65 million over the next eight years to significantly lift its scrutiny of the gas industry. But what regulatory measures are going to lower prices, when local gas suppliers can charge global gas prices, and the price of thermal coal is also being pushed upward by international factors?
Price caps require compensation. Improving competition in gas supply and distribution is a decades-long undertaking and means developing new fields when we need to halt new gas projects altogether. Scrutinising the industry for price gouging is only going to affect prices at the margin while international prices are so high.
Putting the onus on regulators will get the government through the budget sales process, but won’t change the trajectory of power prices over the next years, especially going into next winter, if the war in Ukraine is still going.
The only policy response that stands a chance of being politically effective, even if it won’t lower prices, is a windfall profits tax on energy companies.
That at least would signal to consumers that, while they might be paying sky-high prices for power as a result of international factors, energy companies aren’t having it all their own way, but are contributing part of their good fortune to taxpayers. Anything else is just talking points.
Is it time for the Labor government to just bite the bullet and bring in a windfall profits tax? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
‘The only policy response that stands a chance of being politically effective, even if it won’t lower prices, is a windfall profits tax on energy companies.’
So why arent’ Labor keen to impose this windfall profit? Are they worried that they’d lose funding from these companies, or is there something in the contracts with these companies that prevents them for taking any action?
Living in Perth, I get a little tired of lazy journalism, by way of grabs from the east, fortunately many of which do not apply to Western Australia.
Two years of Covid news and statistics from the east, now we get a drip by drip reporting on the floods. If it was edited for local consumption, fair enough, but the TV stations in particular just grab wholesale packages and repeat them, all sandwiched between 30 minutes of station promos and betting adverts. No wonder News viewing audiences have declined.
There’s a rhetorical question containing the seeds of its own answer Bernard. Local gas suppliers aren’t charging global gas prices in Western Australia, are they? And you could have added “export quality” before “thermal coal” – a lot of the coal burnt for power generation isn’t export quality and can’t physically get to export markets.
This article is just manufacturing consent.
A domestic gas reservation would be both politically effective (“Australian gas for Australians first”) and keep prices down (like it does in WA).
Some windfall taxation (“war profits tax”) would be similarly politically effective and a great basis for developing a real sovereign wealth fund.
Not that Federal Labor are likely to encourage either of those things as they are hopelessly lost to neoliberalism and supply-side ideology.
Lost to neoliberalism alright.
The hands off treatment of big fossil fuel has them channeling their inner Angus Taylors.
And that ain’t a compliment.
First, we need to get rid of the faux NEM. Electric power is an essential social good. The NEM pretends that it is an optional good like bananas. Providers are allowed to withhold supply according to NEM’s normal operating rules. That is absurd. Try he price of electricity is set by a text book theory by the marginal price. There is no reason why it should be set by what in the faux NEM is designated as the “marginal price”. In any case, it allows the providers to capture a rent, because most costs are less than the marginal cost , which is the cost required for the last provider to meet demand. The private providers-in most cases-pocket obscenely high profits when the international price of gas rises. There is no reason why any of that should happen. The private providers-except in Queensland, where the government tells them to act as though they are private providers, provide no benefit, since their generators are fixed, embodying the technology when they were built. The answer is clear: end the grip of the secular faith that markets should regulate economic interactions.
The 1957 theorem in economic theory that shows that Adam Smith’s idea that competition in markets can guide private interest to the public good is just a mathematical model. It does not tell us what really happens. The federal government needs to dismantle the farce that is the NEM, which threatens living standards and the viability of businesses in the Eastern states and South Australia. Then we can get on with supplying electricity with government owned power sources that must supply electric power, because it is an essential good. It can be supplied at average cost, with surpluses from less costly sources supplying funds for further technological improvements.
The cost of energy in Australia is strongly linked to the international price of gas and coal.
Coal and gas are suffering a lot of price volatility.
Long term, to insulate from the impacts of wars overseas and what they do to commodity markets, then have as little coal and gas in your system as possible.
Or set aside an allocation to be used for local consumption at a stable (and low) price.
Just like basically every other country (and WA) with energy resources does.