Coalition fine-tunes pledge on gas price cut

The Coalition has released new details of its plan to cut gas prices on the east coast. Full modelling has yet to be released, however.

Frontier Economics’ Danny Price who has conducted modelling for the Coalition on gas prices.

The Coalition has released further details of a plan to cut east coast gas prices by promising a 15 per cent reduction for manufacturers, only half the headline number originally pledged by Peter Dutton, due to the cost of delivering supplies to industrial users.

The Opposition Leader had vowed to decrease wholesale gas prices to less than $10 a gigajoule from $14GJ currently, representing a 29 per cent fall, by tapping gas that would have been exported, in a boost for local supplies.

However, the Coalition on Friday updated that calculation and said the overall chop for big manufacturers would be 15 per cent, based on its new policy, after taking into account processing and delivery costs.

Frontier Economics, which has conducted as yet unreleased modelling for the Coalition on the gas forecasts, offered its first public comments on the blueprint as pressure grows on Mr Dutton to release the full set of assumptions.

“The decoupling arrangement that Peter Dutton announced as part of his budget in reply ensures that gas buyers pay no more than the price that would prevail in a competitive market – known as the long run marginal cost of gas – which includes a commercial rate of return for gas producers,” Frontier Economics managing director Danny Price said in a statement.

“Based on current estimates this will incentivise supply to the domestic market of between $9-$10/GJ for new sales of gas, which is about 30 per cent lower than current wholesale prices prevailing in the market.”

Under Mr Dutton’s “Australian gas for Australians” plan, the Coalition government would immediately introduce an east coast gas reservation to secure an additional 10-20 per cent of demand by tapping gas that would have been exported.

“This scheme will mean that all new sales that occur under the decoupling scheme will be at the new domestically focused price. Under current market conditions, if an average industrial gas buyer struck a deal under the decoupling scheme with $10 prices at the gate, their overall gas price – that is, including all costs – would be around 15 per cent lower than without the decoupling scheme,” Mr Price said.

By boosting local supplies, it expects prices will fall, although experts have raised a string of concerns over its assumptions including sovereign risk and pipeline constraints.

The Australian Competition and Consumer Commission warned in March that Australia’s eastern seaboard may experience a narrowing of the gas surplus for the third quarter of 2025, underlining the ongoing tight supply situation as major companies and policymakers ramp up a push for LNG imports to ease shortfall concerns.

An urgent need for an energy policy change was required, Mr Price added.

“If Australia wants a vibrant economy that can better manage international shocks, and jobs that can provide Australians with long-term financial independence, it is crucial to urgently change direction on energy policy, including ensuring that Australian businesses and households have ready access to affordable gas at all times,” he said.

The Opposition Leader has been notably quiet on the Coalition’s $331bn nuclear plan set to come online in the mid 2030s, instead making the case for short to medium-term energy certainty and the promise of lower gas and electricity prices.

Anthony Albanese has refused to say if he will model how his second term agenda will affect power prices over the next three years after Labor bungled its calculations at the last election and failed to meet its pledge of a $275 price cut this year.

Several big gas players have panned the Coalition’s move, describing the decision to impose an east coast gas reservation regime as a damaging market intervention.

MST Marquee head of energy research Saul Kavonic said the Coalition’s gas plan will result in Queensland LNG exporters slashing investment and potentially inflaming gas shortages on the east coast.

Originally published as Coalition fine-tunes pledge on gas price cut