Productivity Commission head accuses governments of failing on energy policy

Productivity Commission head accuses governments of failing in their responsibility to offer certainty to energy investors.

Peter Harris, chair of the Productivity Commission.

Productivity Commission chairman Peter Harris has accused state and federal governments of failing to fulfil their ultimate responsibility to offer certainty for public and private sector investors to invest in the nation’s energy sector.

In a discussion with University of Melbourne vice-chancellor Glyn Davis on the university’s “Policy Shop podcast”, Mr Harris also said the Council of Australian Governments process had fundamentally failed and mused that some involved in it believed COAG “is the place where good policy goes to die”.

Treasurer Scott Morrison has today launched the first of a series of five-year blueprints conducted by the PC which propose reforms worth hundreds of ­billions of dollars to the economy over the next two decades.

Speaking to Mr Davis ahead of the Treasurer’s speech today, Mr Harris said it was alarming that such uncertainty had arisen in the energy sector, following the failure of governments to put in place a regime that encouraged investment.

“Government needs to say to itself, am I contributing as much certainty for the parties doing the investing? ... The answer to that is I’m only at best doing it partially,” Mr Harris says.

“I do have relative certainty for renewables investors, but I do not have certainty outside that. In fact, what I’ve probably done in allowing a range here, there’s not just simply a competition between the renewables and the remainder of energy, it’s actually across the different pricing elements of the provision of energy.

“I’ve allowed the rules and the standards and the ways of behaving to depart from a simply single goal, which is the sufficient provision of energy to see that uncertainty doesn’t result in, as it were, prices being bid up simply because I’m not certain about where I’m going to get energy from next year.”

Mr Harris said governments had failed to deliver on this “and they have the responsibility for doing it”.

“In the end, it has to be a sufficiently comprehensive level of certainty to cover not just renewables but the other potential contributing sources of energy,” Mr Harris said.

He revealed people working within the COAG system that were interviewed by the PC for its report were the ultimate source of its conclusion about COAG not working.

“In one celebrated comment made to us, the way that COAG works today is ultimately entirely about short-term deliverables whereas it ought to be about the medium or long term. The more crude response has been, COAG is the place where good policy goes to die,” he said.

Mr Harris also said that in putting together the PC report, the commission interacted directly with members of the public service responsible for delivering programs.

“In the case of the public service, there’s not enough outcome-based commitment to enhancing the ability of public service to design and implement public policy today,” he said.

“That is, that many of the kinds of people that we were interacting with, which are not the CEOs and secretaries and heads of these entities, but the people responsible for delivering programs, were not encouraged to be risk-based thinkers and were often not skilled to be risk-based thinkers, both in design and in delivery of these kinds of programs.

“Rather they were encouraged to remain within a quite safe paradigm which doesn’t invite necessarily very substantial change.’’