Labor extends power bill rebates in pre-election splurge

Jim Chalmers will extend energy bill rebates for another six months in Tuesday’s budget, with an aim of setting up a cost-of-living fight with Peter Dutton.

Federal Treasurer Jim Chalmers will hand down the budget on Tuesday. Picture: Martin Ollman

Jim Chalmers will extend energy bill rebates for another six months in Tuesday’s budget, adding an extra $1.8bn to the pre-election spending splurge with an aim of setting up a cost-of-living fight with Peter Dutton.

Despite energy bills being set to increase by up to 9 per cent next financial year, the Albanese government has fallen short of expectations it would extend the $300 rebate for another year when it expires on June 30.

Instead, households and small businesses will receive $150 off their bill from July to December with a 2.5 year run of electricity subsidies to end in January.

This will allow the government to go to the election promising relief for energy costs while absorbing the politically damaging rise in bills early in the next parliamentary term.

With Labor failing on its pre-election pledge to lower electricity bills by $275 this year, Anthony Albanese and the Treasurer this week declined to promise energy prices would decline in the next parliamentary term if Labor is re-elected.

The Opposition Leader is yet to confirm whether the Coalition would support an extension of the rebate, leaving open the option of opposing the measure if he believes it will put upward pressure on inflation.

Despite the Coalition waving through electricity rebates in the last budget, the Prime Minister declared Mr Dutton “opposed the $300 energy bill relief to households”.

“His only plan for energy is a $600bn nuclear scheme that he will cut Medicare to pay for,” Mr Albanese said, despite the Coalition matching Labor’s vow to spend $8.5bn to massively expand Medicare bulk billing incentives.

“We are going to take a further $150 right off your power bill because helping your family budget is our No.1 priority.

“This is another cost-of-living relief measure that my government is delivering for Australians while putting downward pressure on inflation.”

The Coalition technically opposed the first round of rebates that began in 2023 because they were tied into legislation that put a cap on coal and gas prices, with Mr Dutton urging the government to split the financial support for households from its broader package so it could receive bipartisan support.

Treasury estimates the latest round of electricity bill relief will reduce headline inflation by about 0.5 per cent this calendar year and lower household energy bills by 7.5 per cent.

While the government will claim the measure is putting downward pressure on inflation, the Reserve Bank is ignoring the impact of temporary subsidies when considering interest rates.

Some economists argue the electricity rebates are putting upward pressure on underlying inflation, which is the barometer the RBA is using to inform its decisions.

While electricity prices have increased under the Albanese government, Labor says bills would have been more than 25 per cent higher last year if the rebates were not in place.

Peter Dutton is yet to confirm whether the Coalition would support an extension of the rebate. Picture: Nikki Short

The extension of the rebates presents a political challenge to Mr Dutton, who has come under internal criticism for backing Labor’s key pre-election spending measures and failing to take a stand on fiscal discipline.

When asked last week if the Coalition would back an extension of the $300 rebate, Mr Dutton said he was focused on “delivering cheaper electricity, reliable electricity, and making sure that we can meet our emissions target reductions as well”.

“You can keep giving out $300 payments, but it doesn’t matter if people are paying another $1000 for their electricity bill. That’s the problem. The problem is that the system is broken, and Labor has broken it,” Mr Dutton said last week.

After the Australian Energy Regulator this month approved electricity bill increases of up to 8.9 per cent for default market offers, Energy Minister Chris Bowen said the key to bringing prices down was sticking with the government’s target of generating 82 per cent of electricity from renewables by 2030.

The Coalition argues the short-term answer to lower prices is to bring on more gas and extend the life of coal generators until it can bring nuclear power online from between 2035 and 2037.

In a joint statement, Mr Albanese, Dr Chalmers and Mr Bowen said the short-term relief through subsidies was part of a broader plan to “progress the overdue reform needed to deliver the modern, affordable and reliable energy grid Australians deserve”.

The Albanese government will also extend the ACCC’s inquiry into the electricity sector for another year to “ensure households and small businesses are getting a fair deal from their energy retailer”.

“The Albanese Labor government’s energy reforms will help consumers to switch between energy plans to secure the best value for their money, remove excessive fees and charges, and ensure people get the concessions they are entitled to, potentially saving them hundreds of dollars per year,” they said in a statement.

“Our economic plan is all about finishing the fight against inflation, providing responsible cost-of-living relief and building a stronger and more productive economy.

“Helping with the cost of living is the No.1 priority of the Albanese government and the budget, and that’s what our energy rebates will do.”