It’s all down to Anthony Albanese now after the nation’s top economic bureaucrat called on the government to bring down sky-high power prices, saying gas companies were making unreasonable profits at the expense of Australian families and businesses.
The thumbs-up from Steven Kennedy, Secretary to the Treasury, who helped Australia navigate the Global Financial Crisis and then COVID-19, should strengthen the government’s hand as it readies a policy before Christmas.
Gas exporters on Tuesday signalled their intent to make sure any regulation is watered down.
“Price increases are leading to a reduction in the real incomes of many people, with the most severely affected being lower income working households,” Dr Kennedy said in a statement to the Senate’s economic committee.
“Price increases are leading to unusually high prices and profits for some companies [… and] to a redistribution of income and wealth and disrupting markets,” he said.
National interest
“The national interest case for this redistribution is weak.”
Doing something about the profiteering gas companies is a policy idea with more fans in the electorate than chocolate and Nobel Prize-winner Joseph Stiglitz says exporters should be hit with a super profits tax.
But Labor had until recently shied away from intervention in the market, which is still bitterly opposed by national media outlets that have warned of unintended consequences.
Santos boss Kevin Gallagher, who took a $6 million bonus in controversial circumstances last year, told shareholders the gas company plans to extract fossil fuels until the 2040s and the government would be taking a risk if it tried to discourage them.
“Right now, all Australian governments should have their shoulders to the wheel to get more gas developed to put downward pressure on price,” he said.
“Government policies that seek to disrupt the energy system so as to hasten the transition to a low carbon future are having exactly the opposite effect.”
Record profits
Santos and company peers such as Woodside have declared record profits this quarter after war in Europe sent the price of gas soaring even for Australian consumers using locally-produced gas.
Record profits at Santos and a couple of others in the industry have caused the wider sharemarket to break a national business record: Australia’s (non-financial) companies are sitting on a record $95 billion in cash alone, or 60 per cent more than before COVID.
Gas prices influence the cost of all electricity, which, the budget said, would be up as much as 50 per cent in the coming two years.
Gas lobbyist Samantha McCulloch said: “It is easy to misrepresent how the gas market works, but the facts are that average domestic prices are well below international prices.”
But Andrew Richards, who runs the Energy Users Association of Australia, a group representing large industry, says Australian businesses seeking a short-term gas connection this week were quoted prices at more than four times pre-war levels, well above international rates.
Industry Minister Ed Husic has accused gas companies of greed, but it is unlikely the companies will be hit with a tax after Labor ruled that out during the last election.
Dr Chalmers recently acknowledged Australians’ anger that resource exporters pay only a fraction of their profits in taxes due to favourable arrangements designed to encourage investment.
That leaves either a cap on prices or the use of export controls to stop companies from exporting supplies to Europe to create a cheaper local market.
Former ACCC head Rod Sims said as long as they thought the government was serious gas companies would likely cooperate before regulation kicked in.
As one of the only cost-of-living measures around that won’t risk compounding inflation, there is a lot riding on it.
Modelling commissioned by the Greens and done by Parliament shows if gas prices were kept at their pre-Ukraine invasion levels for two years the average family might save only a little less than $800.
