“The new Heads of Agreement between the Federal Government and the East Coast Liquefied Natural Gas exporters is a step forward but is not one that will drive a gas-led industrial recovery,” said Innes Willox, Chief Executive of national employer organisation Ai Group today.
“While the Heads of Agreement provides a helpful buffer against gas shortages, there had been high hopes that the agreement and the wider gas policy package announced by the Government would lead to lower everyday gas prices and support recovery and reinvestment across the economy. Businesses in key industries had been looking for the certainty that would allow them not just to shore up the critical jobs and activity of today but to invest to help deliver the gas-led recovery. There is now considerable disappointment that the Agreement at best will make only a relatively negligible contribution to that aspiration.
“No gas supply shortfall is forecast during the life of the Agreement, but if the worst happens the supply commitments announced today should help prevent the sorts of extreme prices we saw in the tight gas market of early 2017. Containing crisis risk is important insurance.
“However the Government has sought not just to contain spikes, but to sustain lower prices for gas to industry, power and households. The agreement does not do that, but reflects the existing expectation that Eastern Australian gas prices will simply reflect East Asian ones. Both have already significantly recovered from the pandemic-induced lows of 2020.
“The rest of the Government’s gas agenda remains in progress, including supply studies, market tweaks, a voluntary code of conduct, consideration of reservation, and other elements. It should be hoped that these measures will do more to drive the gas led recovery.
“Transparency about the basis for prices and their movements is essential. As much as possible of the information gathered by the ACCC should be published. Other measures to provide clear reference points to inform all market participants can also help.
“It is also becoming more urgent to increase support for gas efficiency and fuel switching. Demand measures can bolster security alongside supply measures – while also cutting user costs.
“Re-packaging the status quo will not produce the gas-fired recovery promised by the Federal Government. The stakes in finalising the rest of this policy package are high – existing and prospective jobs across industries like chemicals, metals, building materials and food,” Mr Willox said.