Bill relief: Anthony Albanese seals energy deal with premiers
Households will be $230 better off under a deal to impose a cap on gas and coal prices and deliver a further $1.5bn in rebates.
Households will be $230 better off under a deal agreed by Anthony Albanese and the premiers to impose an immediate cap on gas and coal prices and deliver a further $1.5bn in rebates to vulnerable Australians.
The Prime Minister’s energy price-relief agreement, struck by national cabinet on Friday, will also slash inflation in 2023-24 by 0.5 percentage points, relieving pressure on the Reserve Bank to keep hiking rates over the coming six months.
Following weeks of intense negotiations between federal and state governments, Mr Albanese announced the commonwealth would co-fund an energy bill relief fund worth up to $3bn to support millions of vulnerable families, small businesses, pensioners and welfare recipients. The policies are designed to protect Australians from a power price hike next year of more than 36 per cent.
Delivering on his promise to unveil the energy package before Christmas, Mr Albanese will recall federal parliament on Thursday to legislate a one-year gas price cap of $12-a-gigajoule.
The NSW and Queensland governments will also legislate and enforce 12-month coal price caps of $125-a-tonne to lock in lower costs across the east coast national electricity market.
“Extraordinary times call for extraordinary measures,” Mr Albanese said. “We’re taking urgent action to shield Australian families from the worst impacts of these price hikes.
“We’re working hand-in-hand with our state and territory partners to find the best outcomes for all Australians – keeping Australians in work, keeping industry going, and making sure that families and businesses can pay their bills.”
The unprecedented market intervention was triggered after the October budget forecast a 56 per cent spike in power bills over two years, fuelled by Russia’s invasion of Ukraine and structural pressures across the energy grid.
Queensland Premier Annastacia Palaszczuk and her NSW counterpart, Dominic Perrottet, who had demanded compensation from the commonwealth for imposing coal price caps, endorsed the energy plan after the national cabinet meeting.
In his deal with the black-coal states, Mr Albanese agreed to use the $20bn Rewiring the Nation fund to support Ms Palaszczuk’s $62bn central Queensland clean-energy plan and will work with NSW to compensate coal producers already locked in to long-term contracts.
Treasury modelling shows that instead of household electricity prices jumping by 36 per cent next financial year, bills will instead increase by 23 per cent as a result of the price caps alone, amounting to a difference of $230. The rebates are likely to provide millions of households with additional relief estimated to be in the “low hundreds of dollars”.
While retail gas prices should see some movement as a result of the caps, the impact on electricity bills will only be reflected from the start of next financial year as default market offers are made in May and applied from July.
The market intervention is expected to lower inflation next year by half a percentage point, as the direct impact of driving down prices far outweighs knock-on inflationary effects of additional spending by Australians with more money in their pocket as a result of lower bills.
The October budget predicted inflation would be 3.5 per cent through 2023-24, suggesting the impact of the energy intervention would be to lower that estimate to 3 per cent. Treasurer Jim Chalmers will meet state and territory counterparts over coming weeks to finalise the eligibility of households and businesses under the $3bn rebate plan.
Senior government officials flagged significant variations in the amount of rebates paid, with Queensland, NSW and South Australia consumers expected to receive higher amounts to offset larger energy bill hikes.
ANU Centre for Social Research and Methods associate professor Ben Phillips said initial details around the household energy rebate suggested the subsidies would be well targeted.
“It seems like the rebates are leaning more towards low-income households, and they are the ones who would be disproportionately impacted (by soaring energy costs),” Mr Phillips said.
He estimated there would be about 3 million households who could be eligible for energy rebates under the yet-to-be-finalised deal.
The energy package is expected to be welcomed by the central bank, after RBA governor Philip Lowe said last month lowering power prices in 2023, alongside a moderation in rent increases, would make “a substantial contribution to bringing inflation back down over the next couple of years”.
Ms Palaszczuk, who last week warned the Albanese government to keep its “hands off our (state-owned) generators”, will use the state government’s direction powers to implement Queensland’s coal cap.
“We recognise that there are cost-of-living pressures, not just in Queensland but across the nation,” the Premier said. “And we all want to do our part. It’s good that this (price cap) is only for one year.”
Mr Perrottet claimed a victory after winning support from the federal government to co-fund rebates. “The NSW government will work with industry to ensure downward pressure on prices while securing domestic coal supply,” he said. “We also welcome the federal government’s commitment to developing compensation arrangements for the sector, which will help ensure there are no disruptions to electricity generation in NSW.”
Peter Dutton lashed Mr Albanese and premiers over the plan, accusing the federal government of misleading voters on its “dead and buried" pledge to cut electricity prices by $275.
“Nowhere in the world has there been any experience of success in capping prices and what the government needs to do is to drive more supply – more gas into the marketplace – instead of reducing supply at a time when you’ve got increased demand,” the Opposition Leader said.
Amid concerns from mining companies and industry leaders that price caps could have a negative impact on investment and trade relations, Mr Albanese said the energy measures would “not interfere with any of the existing export systems that are in place”.
Industry Minister Ed Husic, who led the charge inside government to impose a cap on gas prices and pushed back against LNG exporters banking super profits, said the package would relieve pressure on manufacturers fearing massive energy costs next year.
The Minerals Council of Australia, APPEA and Business Council of Australia warned of potentially adverse effects on investment.
BCA chief executive Jennifer Westacott said “price caps for gas and coal will send the wrong signal to investors at a time when we need to be getting new supply into the market”.
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