On Saturday, I was interviewed by Radio 2GB’s Luke Grant, where I dissected the Albanese government’s “Future Made” subsidies for low-emission manufacturing.
This policy was announced shortly before the collapse of Australia’s last plastics and chemical manufacturer, Qenos, which blamed high gas costs for its demise.
In the interview, I explain why the Albanese government’s subsidies are wasteful and why it should simply reserve gas on the East Coast if it wants Australian manufacturing to compete and survive.
Below are highlights from the interview.
Edited Transcript:
The Albanese government wants Australia to build solar panels and all that stuff, even though we can import them from China for cheap.
It is a typical case of the government picking winners, and it will be inflationary because it will throw a whole bunch of taxpayer money at areas where Australia will never be competitive.
At the same time as Australians have been compelled to invest in renewables, the government is going to increase their costs by requiring us to either buy Australian-made panels or subsidise them. So, we will pay more.
The government should just let us buy the lowest-cost renewables from the lowest-cost supplier.
At the same time, the government really wants to boost manufacturing. There is a way to do it: deliver Australians cheap energy prices.
Despite being an energy superpower, we have some of the highest gas and electricity prices on the East Coast of Australia.
We export about 80% of our gas, most of it to China. We are the only jurisdiction in the world that exports gas without a reservation policy.
As a result, we pay really high prices, and that means that gas feeds into electricity prices because it’s the firming power for electricity.
So, if the government wants to boost manufacturing, it should bring in domestic reservation. It should copy what they do in Western Australia. Copy what they do everywhere else in the world.
If they brought down the cost of gas, we would have cheap energy and could actually be cost-competitive.
Because at the moment, we are not, and we saw Australia’s last plastics and chemicals manufacturer, Qenos, go broke last week. They cited high gas prices as the reason.
As a result, we’ve lost that capacity and will throw about 700 people on the unemployment line because of expensive energy.
I guarantee you that if Australia had lower-cost energy than the majority of the rest of the world, we would actually have some competitive manufacturing.
We are the Saudi Arabia of gas, and yet we pay European-style prices for it.
We pay some of the highest prices in the world for our gas, which we sell on the cheap to everyone else so that their manufacturing can be competitive.
It is back-to-front. And we are not a serious country.
As a case in point, the United States has now overtaken Australia as the world’s biggest gas exporter. However, the United States also has some of the world’s cheapest domestic gas prices because it has a large reservation program for its residents.
As a result, the US is both a manufacturing powerhouse and an export powerhouse.
They are competitive. We do the opposite and are not competitive.
