"As Energy Ministers and First Ministers meet this week to discuss a response to Australia's energy affordability crisis, it must be clear to all that effective action is essential and a failure to reach agreement would be disastrous for all," Innes Willox, Chief Executive of national employer association Ai Group said today.
"The energy prices confronting Eastern Australia are beyond alarming. Wholesale electricity prices in 2023 are set to be three to four times higher than expected a year ago. Spot gas prices in the local markets at around $20 per gigajoule are double their level of recent years and the ACCC's forward metric of export price parity suggests they will average $40/GJ in 2023, doubling again.
"International factors, especially the invasion of Ukraine, have combined with our highly trade-exposed energy markets to produce these local price increases. There is every indication that international energy markets will remain tight and expensive for the next several years.
"If nothing is done these high prices will soon hit all households and most businesses. Some businesses, facing competition from suppliers with legacy energy contracts, will not be able to pass on cost increases and the more energy-intensive will face mounting challenges to their viability. That would hit jobs and disrupt supply chains that are still recovering from the pandemic and international challenges. Other businesses, whose local or international competitors are facing similar price pressures, will be able to pass on increases – ultimately adding to the cost of living pressures confronting households across Australia.
"All the Eastern States and the Federal Government will suffer if that happens. The budgetary cost of existing State energy concessions and rebates would have to sharply increase. Business activity and State economies would be hit. The cost of government operations, from heating hospitals to lighting schools, will soar. Whether or not governments have resource royalties or government-owned energy businesses, higher local energy prices are not a boost but a drag on growth and the public finances.
"There are many possible options for an energy affordability response package. We have to be honest: none of them is wholly satisfactory. Price caps, export limits, financial assistance and other interventions would come with costs to pay and unintended consequences to manage. Boosting energy efficiency or the supply of clean energy beyond what's already in the pipeline is complex to execute and may take years to make a widespread difference.
"Doing nothing is not an option. Energy Ministers and First Ministers can and should agree an effective and immediate package of measures targeted to meet clear objectives to help users of both electricity and gas. Imperfect but faster interventions can hand off over time to sensible but slower investments in the lower-cost supply and smarter demand of our energy future.
"Energy policy is complex and deserves close scrutiny. Australia's governments have the opportunity this week to run the ruler over the options, ensure their respective concerns are met – and take action.
"First Ministers and Energy Ministers can share responsibility for success, or for failure," Mr Willox said.
