Two things are happening today that show just how broken Australia is.
First, the economic recovery has been underway since the RBA rate easing cycle was dealt a nasty blow by the gas cartel as electricity prices skyrocketed.
This helped spike inflation far higher than the market expected. Although the broader monthly index was more benign, this is clearly a risk to the easing cycle.
Even worse, it is a stagflation risk as it kills consumption while lifting inflation.
The energy price spikes are easy to explain. They are the delayed result of the Ukraine War, when gas prices jumped and took power prices up with them, pushed out by various government subsidies that are now rolling off.
Which brings us to the second fact: policy failure:
The Coalition is developing plans for a domestic gas reserve, and to include the fuel in the capacity investment scheme, as it seeks to dampen internal disquiet over net zero emissions and tackle the government on energy policy.
With Labor to announce within the next few weeks its emissions reduction target for 2035, moves are afoot in the Coalition to release the gas policy with the aim of being able to argue for cheaper energy while still sorting out its position on net zero.
In the lead-up to the May 3 election, then-opposition leader Peter Dutton promised to establish a domestic gas reserve on the east coast but, controversially, it would be fuelled with gas from existing wells.
Dutton pledged to force the extra gas into the domestic system by threatening exporters with penalties. There would have been no interference with long-term export contracts, but less excess gas to offer on international spot markets. The plan was to flood the domestic market with cheap gas to drive down energy and manufacturing costs.
Sources familiar with the new policy said the new reserve would drop the retrospective element of applying to existing wells and be fuelled by gas from new or expanded gas projects.
Which means the LNP policy cannot lower gas and power prices because future developments—i.e., Beetaloo—are very expensive.
This is just madness. The LNP is gutting its one great energy policy to placate a gas cartel that is gutting the economic recovery as we speak.
Australia is lost.
