Both fiscal and monetary authorities are in a building panic about Aussie growth. They should be. We’ve been in per capita recession for nine months and it’s getting worse not better.
So, as the mad scramble for tax, monetary and prudential stimulus intensifies, why is the Government overlooking energy prices? Treasurer Frydenberg told business where to go Friday:
…”We’ve set out a pretty comprehensive set of policies in energy that will lead to lower prices and greater stability in the system,” he said.
These included building the Snowy 2.0 expansion in NSW, possibly underwriting more hydro power in Tasmania, and holding a feasibility study into a new coal-fired power station in north Queensland.
The government is also pursuing a range of interventionist measures as recommended by the Australia Competition and Consumer Commission to lower power prices. As well, it will try to legislate for forced divestment.
None of these policies are going to do anything for energy prices now, nor in the future. Divestment attacks the wrong problem. And more investment will come regardless.
But there is one VERY simple thing that the Government can do. Last week, Asian gas prices collapsed to $6.70Gj. According to the agreement struck by Malcolm Turnbull with the east coast gas cartel – to benchmark local prices to export net back from mid-2017, called the Australian Domestic Gas Security Mechanism (ADSGM) – the local price should now be trading below $5Gj.
Yet today it is still riding high at $9Gj. It has been roughly this far out of step with the agreement all year.
In short, the gas cartel is openly breaking the law. The keystone cops assigned to police it, the ACCC and AEMO, are saying nothing. The Government appears to have forgotten the law even exists. Resources Minister Matt Canavan manages the ADGSM yet he’s done nothing.
Yet, if the agreed price was delivered and sustained, it would deliver a $15-20bn utility price cut for business and consumers via both tumbling gas and power prices (given gas sets the marginal cost of power).
This is double to triple the size of the stimulus currently being debated in the first round of tax cuts supposed to save the consumer.
Moreover, election research showed cost-of-living pressures (basically utility prices) were the number one issue in the country:
Baby Boomers, Millennials, mums and dads and every state and territory are united on one thing this election — cost of living is their number one issue.
…After five years in power, the Coalition is likely to take a hit over cost of living issues given wage growth remains sluggish and households haven’t seen a major reduction in power bills.
…Power prices will be a key election issue with the exclusive Australia Speaks survey revealing they’re the most concerning household expense for the majority of voters.
Millennials were the only demographic that didn’t view rising electricity and gas prices as their key concern, according to a special election edition YouGov Galaxy poll.
…Every other demographic — Baby Boomers, Gen X, mums and dads, Australians without children and voters in every state and territory — named electricity bills as their chief concern among household expenses.
The political dividend is obvious.
Why am I the only person writing about this? I’m not making it up. Where is the Government? Where is the Opposition? The state governments? The regulators? The press? The ABC?
To repeat, there doesn’t need to be anything new. The energy cartel is openly breaking existing law to rip $15-20bn out of the east coast economy every year as everybody else scratches around looking for stimulus.
