From the radio this morning:
JON FAINE: Innes Willox is the CEO of the Australian Industry Group, one of the most powerful and influential business lobby groups in the country. Innes Willox, good morning to you.
INNES WILLOX: Good morning Jon.
JON FAINE: What do we exist for?
INNES WILLOX: We exist we hope to make things to trade, to expand our economy, to provide good living standards for our population, to be a sharing equitable community. That’s what we’re here for.
JON FAINE: We’re now importing the motor vehicles we use to make, we’re importing the building products we use to make, we have an energy crisis where even the brick makers say it will be cheaper to import bricks, we’re shutting down power stations, we’re closing down so many other different operations, timber-mills and the like. This can’t go on can it?
INNES WILLOX: No, it can’t and can I put my hand up and say I’ve been talking about this for some time and warning of this – of the hollowing out of Australian industry and the hollowing out of what we use to stand for. Now sure there is enormous change occurring. There’s the advance of technology. There’s the development of renewable energies and the like. And there’s a bit of a lag factor that’s going on here before all of that can kick in and a community sort of wraps its head literally around what is going on. There is enormous change and enormous pressure occurring within our communities and we don’t need to exacerbate it through bad policy making.
JON FAINE: The Prime Minister made an announcement this last week about Snowy Hydro, but that’s a six, seven at least, maybe eight or nine depending on some people’s versions of it, year project. We have an energy crisis in the next 12 months so that simply doesn’t deal with it. What do we do? Hazelwood shuts down now.
INNES WILLOX: Well Jon, yesterday we called for Hazelwood to remain open. Now at the risk of you calling me a dinosaur and the like …
JON FAINE: You’re a dinosaur.
INNES WILLOX: Thank you, I’ll take that and we’ll move on.
JON FAINE: [Laughs] You asked for it.
INNES WILLOX: What we are saying is that there is a problem here with our energy future. Now you mentioned at the top of your program Andrew Liveris’ comments and that’s something we’ve been saying and hearing for a long time from Australian CEOs who operate in a global environment. Why would you invest in Australia? Why would you reinvest in Australia? Why would we attract capital to Australia? We have an energy problem that’s emerging. We’re relatively high cost and we’re at the bottom of the world. So we have to play to our competitive advantages. And some things are doing very well. Food manufacturing is doing incredibly well. Pharmaceutical manufacturing is doing very well and there is an emergence of a sort of a new high tech industry here but we’ve got a long way to go. What we said yesterday is Hazelwood needs to remain open because there isn’t proper sequencing of the bringing on of new energy sources; the solar, the wind, the battery technology. That will come and that will happen but even those who work in those fields are saying to us: we just don’t have the capacity at the moment to be sure. AEMO says there are 72 days of risk over the next two years for Victoria in terms of power. It’s a hard call but we think until we get those new energy sources flowing through, there is still an ongoing role for Hazelwood.
JON FAINE: Not that many years ago we had a water crisis in Melbourne and Victoria. We introduced restrictions on wasting water and we were, we didn’t properly value it. We were using good drinking water to hose down gutters and concrete pathways. We banned that sort of waste and we dealt with the crisis. We built the infrastructure so that we had a floor in some future proofing of water supply for this city and this state. We’ve not done anything like that with energy. We haven’t told people to stop wasting energy, we need it for more important things than some of the things we’re using it for now. We’ve not taken a holistic approach at all. Why not?
INNES WILLOX: Jon, if you want to look back you would say that the way we have developed energy policy in Australia as an energy rich nation, perhaps one of the most energy rich nations in the world, has been a complete and utter disaster the way that we’ve done this in Australia. So we talk to CEOs now and what they say is sort of one of the best short-term measures we can do until we try to fix up this mess is to look at – just what you were talking about – energy efficiency measures to help businesses and households better utilise their energy. Reward them for not using power at peak times and the like. Because of the way we’re at at the moment we need to use less power, not more. Water’s a good example.
JON FAINE: But you and others in the business community have put your faith in the market changing our behaviour. It hasn’t worked. You need to actually tell people, no you can’t waste energy doing those things, and yes we do have to require people, if you’re renovating or building a new house in the same way as water tanks and dual flush toilets were mandated, why aren’t we mandating solar in the most solar rich environment in the world and we’re not using it?
INNES WILLOX: Because at the moment solar is still relatively – and I underline relatively costly, but the prices …
JON FAINE: But when you mandate it the prices will come down.
INNES WILLOX: The prices are coming down very quickly. I mean you can’t just say we’ll turn a Hazelwood tap and turn off a solar tap or the other way around. you’ve got to let these things play out. To put solar in it’s very expensive for households. You can’t just say to a household, hang on you’ve got to go and spend $7000, you must; but you can incentivise people to do it and that’s where the policy needs to be focused.
JON FAINE: It can’t be escaped either that the business community is saying it’s the politicians fault and the politicians turn around and say well there’s a lack of leadership from the business community. Well that finger pointing exercise isn’t helping as much is it?
INNES WILLOX: Not it isn’t and it’s a pointless exercise. Business leaders have been warning for some time about the energy crisis that we’ve been facing. This is something we’ve been talking about for five years. And Jon we could have a long conversation about gas in Victoria and in Australia. We’re rich in gas but we hate seeing gas from Victoria being sucked up to Queensland to be exported. That’s a real failure of policy there. That impacts on electricity prices. We are seeing electricity prices not double but triple now according to the Futures market. That’s not sustainable and that’s why CEOs like Andrew Liveris and others say we ain’t coming here.
JON FAINE: So with the looming shutdown, complete shutdown of the automotive industry and the export of complete cars, we still have a components industry. But there’s mass unemployment, tens of thousands of jobs disappearing in this city in the next six months. Are the right steps being taken to prepare for it now and to future proof Victoria?
INNES WILLOX: It’s going to be brutal when the car industry closure actually takes effect because of the ripple effect that will flow through industry, through component parts, transport, all of the different elements of the automotive sector. It’s going to be very tough.
JON FAINE: What does brutal mean? Does that mean business bankruptcies, mortgage foreclosures, large numbers of people losing jobs and not finding new ones? I mean let’s spell it out.
INNES WILLOX: I was talking with a CEO this week who said I think I cold write down- he didn’t, but he said I think I can write down on a piece of paper the businesses within Victoria who will close over the next 12 months as a result of energy costs. Now when you’re having those sort of conversations with CEOs you know that we’re in trouble and that we’ve got hard times ahead. That’s why we have said keep Hazelwood open until we can sequence this properly and at least try to get some more supply into the system over time and basic economics tells you, you hope, that more supply will lead to downward pressure on prices. But, we are going through a period where we’re about to see the automotive industry close off and we are seeing energy prices go through the roof. It’s not a very good time to be in business in Australia and in Victoria in particular unless you’re in a couple of very niche areas.
I can understand the pitch to keep Hazelwood open. If we get a difficult summer then further blackouts and energy cost spikes would be very difficult for industry.
But I think it’s the wrong approach. It will not bring the electricity price down given it is gas that sets the marginal cost in the National Electricity Market (NEM) though it would prevent a few energy price spikes as less gas is needed during super-peaks in demand.
It’s better to focus all lobbying efforts on the key problem. If the Feds spend $500m or more on keeping Hazelwood open then that’s $500m that will not go towards fixing the gas shortage, for instance as compensation (which should not be paid but might be) when you force GLNG to stop exporting third party gas, which is the real problem causing everything.
There is only so much political capital that can be turned towards fixing this crisis and it should be spent on fixing it not kicking the can.
The AIG needs to open a full frontal and direct assault upon GLNG.
This is a war for survival for big gas users, make no mistake. Either GLNG loses it or demand destruction hands it over.
