"By passing legislation to enable temporary gas price caps the Parliament has taken badly needed action that will, for all its flaws, help energy users and soften the blow to Australia from events in Europe," Innes Willox, Chief Executive of national employer association Ai Group said today.
"The energy affordability crisis is certainly not over. Energy users are still set to face significant cost increases in 2023, particularly because so many contracts for energy supply in 2023 have already been signed. We should not overstate the immediate impact of these measures on energy costs, particularly for industrial gas users. Nearly all users will pay more for energy in 2023 than they did in 2021.
"But with wholesale electricity futures for 2023 falling by around half since the Government signalled it would act, clearly costs for energy users are set to be lower than they otherwise would have been.
"Much further work will be needed.
"The detail of the reasonable pricing provisions of the mandatory gas code of conduct will be complex and fraught. The Government’s actions are highly interventionist and we need to be wary of the impact on future investments in energy and elsewhere. Unintended consequences are quite possible and they will take effort to avoid and manage.
"Price controls are not a long-term fix for our problems, and as with previous episodes when international conflict put the Australian economy under extraordinary strains, intense regulatory controls should give way to liberalisation as the emergency passes. However, continuing on the track we were on was unsustainable and the need for major government action was both obvious and well telegraphed.
"The Federal Government and the States are taking broadly welcome steps, including the gas substitution investments committed this week, to speed our longer-term supply- and demand-side energy transitions. While these also require great scrutiny and careful design, they will progressively reduce our exposure to the gyrations of global coal and gas markets. But Australia will need very large flows of domestic and international investment to transition our economy to net zero emissions and seize the opportunities involved in global energy transition. There needs to be a clear basis for those investments.
"At the same time we should remember that the overwhelming majority of Australian businesses are energy users, not energy producers. Their interests and their ability to invest with confidence are also significant.
"It has been clear for months that dramatic action would be needed to safeguard energy users of all sorts. That action has finally begun. The bottom line is that the sooner we can move from temporary measures to permanent and workable solutions to assist our energy transition, the better," Mr Willox said.
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