It all depends on Anthony Albanese now after the country’s top economic bureaucrat called on the government to bring down sky-high electricity prices, saying they were enriching gas companies at Australia’s expense.
The boost from Treasury Secretary Steven Kennedy, who helped Australia through the global financial crisis and then COVID-19, is expected to strengthen the government’s hand as it prepares policy ahead of Christmas.
Gas exporters on Tuesday signaled their intention to ensure that any regulations are watered down.
“Price increases are reducing the real incomes of many people, with the hardest hit being low-income working households,” Dr Kennedy said in a statement to the Senate Economics Committee.
“Price increases lead to unusually high prices and profits for some companies [… and] to a redistribution of income and wealth and the disruption of markets,” he said.
“The national interest case for this redistribution is weak.”
Doing something about profiteering gas companies is a political idea with more fans in the electorate than chocolate and slapping them with a tax was backed by Nobel laureate Joseph Stiglitz.
But Labor had until recently avoided intervening in the market, which is still fiercely opposed by national media who have warned of unintended consequences.
Santos boss Kevin Gallagher, who received a $6 million bonus in controversial circumstances last year, has told shareholders he intends to extract fossil fuels until the 2040s and said the government would be taking a risk if it tried to discourage them.
“At this time, all Australian governments should do their bit to develop more gas to put downward pressure on prices,” he said.
“Government policies that seek to disrupt the energy system to accelerate the transition to a low-carbon future have the exact opposite effect.”
Santos and peer companies such as Woodside reported record profits this quarter after war in Europe sent gas prices soaring, even when produced in Australia. These profits have just helped Australian (non-financial) businesses set a new record for the amount of cash they have on hand, up 60% since COVID.
But gas companies warned this week that dropping them now would only make the shortage worse next year.
Gas prices influence the cost of all electricity, which the budget predicts will increase by up to 50% in the coming years.
Gas lobbyist Samantha McCulloch said: “It is easy to misrepresent how the gas market works, but the facts are that average domestic prices are well below international prices.
But Andrew Richards, who heads the Energy Users Association of Australia, a group representing big industry, says prices quoted this week are even higher than current international rates and more than four times higher than pre-war levels.
Industry Minister Ed Husic has accused gas companies of greed but the companies are unlikely to be hit with a tax after Labor ousted him in the last election.
Modeling commissioned by the Greens and carried out by Parliament shows that if gas prices were kept at their pre-invasion Ukraine levels for two years, the average family could save just under $800.