The nation's leaders have taken the extraordinary step of temporarily capping the prices of gas and coal as the war in Ukraine continues to shock global markets, after a meeting of national cabinet.
Prime Minister Anthony Albanese said parliament would be recalled next week to pass legislation that would help impose a temporary cap on gas at $12 a gigajoule, and states would move to cap coal at $125 per tonne.
Treasury modelling suggests that Australian households will pay $230 less next year than if the government had not intervened, though it would not completely eliminate price hikes next year.
The gas industry has warned the intervention will push gas prices up by damaging investment confidence and reducing future supply.
The Commonwealth will also fund up to $1.5 billion in energy bill relief to be matched and paid out through the states to households and businesses, which Mr Albanese said would act as a deflationary measure.
The support will be available for people on Commonwealth support payments, such as pensioners and Jobseeker recipients, but will be delivered differently in each state and territory because of their different systems.
That relief is expected to begin from the second quarter of next year.
'Extraordinary times'
"Extraordinary times call for extraordinary measures," Mr Albanese said.
"And we know with the Russian invasion of Ukraine, what we've seen is a massive increase in global energy prices. And because of Australia not investing in enough of our own energy assets, what we have is a vulnerability to those international price movements."
October's federal budget warned electricity prices were on track to jump 56 per cent over two years and gas prices 44 per cent as the war in Ukraine dragged on.
"If we sat back and didn't take action, then we know that impact would occur as predicted by treasury," Mr Albanese said.
Instead, Treasury predicts the intervention will curb price hikes over the two years to 47.6 per cent — still a painful increase for Australians, but about $230 cheaper than without the intervention.
Opposition Leader Peter Dutton said the government was not honouring its promise to reduce power bill prices, a commitment first made before Ukraine was invaded and global markets were thrown into turmoil.
"This government was elected with a promise to introduce a policy plan which would reduce electricity and gas prices," Mr Dutton said.
"The fact is he made the promise on 27 occasions after the war started in Ukraine in February of this year.
"What the government needs to do is drive more supply of gas into the marketplace."
The head of the Australian Petroleum Production and Exploration Association, Samantha McCulloch, said the government's intervention posed a threat to energy security.
"This heavy-handed, radical intervention has been conducted with no prior consultation with industry," Ms McCulloch said.
"Today's decision is the opposite of what should have happened — the government should be providing confidence to the market with positive policies that promote investment in new supply."
Coal-rich states NSW and Queensland will each take separate approaches to cap coal prices, with NSW negotiating a price code of conduct and passing its own legislation, while Queensland as a part-owner of coal infrastructure will be able to use its direction powers to determine prices.
The two states had been reluctant to sign on to price caps that would reduce the money flowing into government coffers and potentially harm workers in the sector without some form of compensation or income support.
Queensland Premier Annastacia Palaszczuk said she was pleased with the outcome, despite there being no targeted support for the sector, because 90 per cent of the state's coal was mined for export.
"I am absolutely confident there will not be any impacts [for the sector]," Ms Palaszczuk said.
The competition watchdog, the Australian Competition and Consumer Commission, has been tasked with monitoring and enforcing the new price caps.
