With the nuclear implosion of the Coalition political parties and government likely to resonate for many years – a “dismissal” moment as it were – the incoming Shorten Labor government needs to not waste this crisis.
It has a pretty decent policy platform already. The exception is no population policy but even on that there are encouraging mumblings about cutting back temporary visas for the labour market. More will need to be forthcoming.
So, it will implement its policies when it gains power in a landslide. This will cause some pain as the reforms are structural, meaning there will be winners and losers. On the whole we can say that it is households that will benefit over business and it is tradables that will win over domestic consumption sectors.
That’s all to the good and is already expected. What I want argue today is what Labor should do with the giant lump of extra political capital being handed to it on top of the usual election victory thanks to the Coalition suicide bombing.
The temptation will be for Labor to spend this capital on interests, especially unions. This would be a huge mistake and actually out-of-step with what has made Bill Shorten so wildly successful as an opposition leader. Shorten has run the first “big target” opposition since Paul Keating destroyed John Hewson’s Fightback and he has won with it.
Whether he did this because he recognised that his own personal appeal would not carry an election is besides the point. He has already gone a long way to redeeming his own assassination of two PMs by doing it. It is a new paradigm for defeating a government: do it with better ideas not toxic politics. That’s a great national interest outcome.
He must continue with this philosophy in government, which brings me to the point of this article. What should Bill Shorten spend his big lump of serendipitous political capital on? One issue stands out above all others: energy.
This may seem counter-intuitive given it has already appeared to kill several PMs, including Malcolm Turnbull. But it’s not. There is a way to fix the east coast energy markets quickly and simply for the long term. By that I mean bringing together the holy triptych of lower prices, reliability and reduced emissions.
Fix the gas market.
Do NOT listen to the ACCC idiots. In fact, ask Rod Sims to resign. He’s been a disaster. Instead look to the very policy solution that the ACCC has been holding back: domestic gas reservation.
There are two path you could take. The first is clean and ruthless. Pull the rip cord on Malcolm Turnbull’s own reservation policy, the Australian Domestic Gas Security Mechanism (ADGSM). Lower its target price from the ACCC’s stupid export net-back to some estimate of production costs plus a small margin.
The second path is more elegant but also slower. Ask Andrew Liveras to conduct an inquiry into the east coast energy market including gas. Get him to explicitly examine other nation’s domestic gas reservation mechanisms and design one for the east coast.
I recommend the first course. It’s quick and clean and uses a Coalition policy! That’s free kick if I’ve ever seen one. Why the idiots didn’t do it themselves is a wonder of miscalculation.
Get the gas cartel in your office and give them the bad news. Santos is most reprehensible but it would be a better optic (and probably more fair) if all three Curtis Island terminals share the pain of reduced exports. You need to get them to leave an addition 200Pj of gas per annum here for the local market. Tell them you want it priced at $5Gj or you will apply quotas to guarantee it. They can afford it. they has cheap gas to leave here they’re refuse to sell it:
These are all-in costs that include infrastructure already built. The cash cost is dirt cheap.
The Abbott Opposition will scream “sovereign risk”. Just howl back “risk to the sovereign”. They’ll look like bloody clowns doing so given what they’ve just been through. Explain that the export cartel lied about having enough of their own reserves when they built their LNG plants and the subsequent shortage has caused the gas and power price spikes. The one leading directly to the other.
Pulling the rip cord on the ADGSM will instantly crash household and industrial gas bills. Within a year power prices will fall b y a third. As well, it will ensure there is enough gas for baseload and peaking generation as the march to renewables plus storage continues. Stick with your 45% emissions reduction target and use the RET.
This will solve the east coast energy crisis overnight and give Australia a smooth path to decarbonisation. As well, it will boost growth and incomes. Victoria University modeled the outcome and found that the lower the gas export price the better off is the economy.
It may appear risky but it’s not. It’s simple and will work. By doing so it will so completely humiliate Tony Abbott that he may well then lose the opposition leadership.
Don’t waste a good crisis, Bill. Australia needs this reform desperately and, just quietly, so do you. If you do not break the nexus between Australia and Asian gas prices, and the east coast is allowed to rely on LNG imports, then your government will wear the disaster of further gas and power price spikes coming from the region and a falling Australian dollar.
Do it. Make it your first act as PM.
