Via The Saturday Paper:
The federal government is considering further measures to ease the financial burden on pensioners and new moves to force domestic gas prices down, in a deal to secure enough senate support to legislate its proposed tax cuts in their entirety.
South Australian senator Rex Patrick and his Centre Alliance colleague Stirling Griff are demanding both steps in return for their votes, along with further assurances from Treasury that the economy can really afford the tax cuts into the future.
On Friday, the government fuelled suggestions that it was ruling out a deal with the crossbench in a bid to wedge Labor and try to force it to capitulate. But The Saturday Paper understands that talks with the Centre Alliance senators are ongoing.
Patrick and Griff argue further relief from household cost pressures should not be restricted to those Australians who pay tax, and that pensioners, in particular, need help beyond the one-off energy payment contained in the April budget.
“Centre Alliance is looking at other measures that make sure it isn’t just people who are still working who are benefiting from the purported strength of the economy,” Patrick told The Saturday Paper this week. “If the government is satisfied that there is sufficient buffer in the surplus, then there should be room to ease costs for pensioners as well.”
Patrick is emerging as a central figure in the new parliament, with the government in need of four extra senate votes to pass legislation.
Alongside him and Griff, the key senate crossbenchers are the Australian Conservatives’ Cory Bernardi, One Nation’s Pauline Hanson and her returning colleague Malcolm Roberts, and Jacqui Lambie.
Bernardi has already said he will back the full tax package. Lambie has been holding talks with Patrick and Griff in what could become a powerful new senate voting bloc.
The Centre Alliance senators are in discussions with Finance Minister Mathias Cormann that began last week in Adelaide. They have put a clear policy price on their support for the tax cuts.
The senators have asked the government to adjust the existing domestic gas security mechanism, which is designed to block producers from exporting gas when domestic supplies get low, so it not only guarantees availability but actually drives prices down.
Centre Alliance negotiated the creation of that mechanism in 2017 when former senator Nick Xenophon was its leader, Malcolm Turnbull was prime minister and domestic gas supplies were falling. It has had some effect, with gas producers maintaining just enough supply to the domestic market to avoid an export ban.
That means the mechanism has never been formally triggered and has also not put any significant downward pressure on prices. Its use is considered annually around November, but supplies are expected to be sufficient again this year to also avoid the trigger. Patrick is concerned the mechanism isn’t doing what it was ultimately meant to do – ease the hip-pocket burden on consumers.
“There were companies in South Australia that could not get a gas contract,” he told The Saturday Paper. “The threat of the use of that mechanism has resolved the problem of supply. But it hasn’t addressed price.”
Senator Patrick wants the mechanism adjusted so it’s triggered when the Australian gas price exceeds that of competitor countries in South-East Asia.
“The aim for me is to get a surplus into the market, such that prices fall to a level that is equivalent to or preferably less than the prices being paid by our international competitors for gas,” he said.
In eastern Australia, the current price of gas is between about $8 and $12 a gigajoule, compared with prices of about $7 in Asian markets. As a result, there are active proposals to open up to five new import terminals in Australia and buy in cheaper gas from overseas.
The two Centre Alliance senators don’t support this as a solution, arguing that the domestic supply exists to service Australian consumers but is dominated by a small group of big players.
“It’s my view that the gas market is not operating as a market should,” Patrick said. “[I believe] the gas companies have been maximising their returns from the Australian market. While the supply issue of two years ago has disappeared, price has not been addressed.”
Patrick and Griff argue the current situation is a real and present threat to the economy.
They are warning of increasing evidence that high gas prices in eastern Australia are putting the manufacturing sector under dangerous pressure and seeing small manufacturers close.
It’s an issue that the sector itself has been warning successive governments about for years. Some industry specialists warn that tying the domestic gas security mechanism to the export spot price to help out gas consumers is potentially risky because the price in other markets is volatile and, while it may be low now, it could rocket in future, taking the Australian price with it.
Why Karen Middleton didn’t note that this is also about households because the gas price sets the marginal cost of electricity is beyond me. She missed a golden opportunity to drive the point home to her Fake Left readers.
Still, bravo CA for keeping the issue alive. Obviously we need to do better than just meeting foreign prices for our own gas. The ADGSM needs first to be enforced. Local prices should today be at export net-back around $4.50Gj under the existing terms of the ADGSM. Instead they were at $9.20Gj they were on Friday.
But the mechanism should also be strengthened with have a fixed price cap. I suggest $6Gj which is plenty high enough for the cartel to distribute its cheap gas locally at a profit. It can export the more expensive stuff or not at all.
Only that way will the LNG export cartel be forced to take the pain for is malinvestment instead of everybody else wearing it.
