RBA backs energy policy to fight inflation but not power bills

The Reserve Bank says the energy market intervention, providing electricity discounts and imposing coal and gas price caps, will lower inflation later this year but fail to halt soaring power bills.

The Reserve Bank is backing the energy market intervention to lower inflation but says it will fail to halt soaring power bills. Picture: Luca Sola/AFP

The Reserve Bank says the energy market intervention, providing electricity discounts for vulnerable households and imposing 12-month coal and gas price caps, will lower inflation later this year but fail to halt soaring power bills.

Jim Chalmers said new forecasts in the RBA’s statement of monetary policy showed the government’s energy policies would help lower inflation from its 33-year high of 7.8 per cent.

The Treasurer met state and territory counterparts on Friday to negotiate a $3bn energy relief plan, of which the federal government will fund $1.5bn in energy bill discounts for select households.

After Anthony Albanese initially promised that energy bill discounts would begin flowing from April, Dr Chalmers said implementation issues had forced the government to delay the relief measures until after the May 9 budget.

Treasurer Jim Chalmers. Picture: NCA NewsWire/Tertius Pickard

Dr Chalmers also hit back at calls from Matt Kean to fund ­energy discounts sooner, accusing the NSW Treasurer of “confected outrage” given the state government’s energy bill saver scheme doesn’t start until July 1.

“We’ve been saying for some time in response to issues raised by the states themselves that this ­relief is expected to flow closer to the middle of the year. I’ve been saying for some time that this will be a centrepiece of the budget that I hand down in May,” Dr Chalmers said.

“We’ve responded to issues raised by the states and territories about needing to take the time to sort out the implementation ­issues to make sure that we get all of that sorted so that we can get relief into people’s hands as soon as possible.

“We’re doing a series of deals bilaterally, not one big national deal. And so inevitably there are issues that come from that – different states are putting in different amounts of existing effort. We’re asking for some additional effort.”

The RBA said inflation had been “revised up a little in the short term in light of recent stronger outcomes, but further out … is expected to be a touch lower than previously forecast”.

The central bank, which has delivered nine consecutive rate hikes and lifted the cash rate to 3.35 per cent, said its forecasts ­reflect “recent policy changes that have reduced the size of the ­expected increases in domestic electricity prices over 2023”.

“Wholesale electricity and gas prices declined in response to the announcement of the temporary price caps on domestic gas and thermal coal,” the RBA said.

“Futures markets now suggest that wholesale electricity and gas prices will be lower in 2023 and 2024 than previously expected, though they remain ­elevated compared to this time last year.

“Electricity and gas prices are expected to increase further in 2023, largely due to higher wholesale costs recorded over the past year; however, over this year and next, increases in wholesale costs are expected to be dampened by the … energy price relief plan.”

Opposition Treasury spokesman Angus Taylor said the government was breaking its election promise to lower electricity ­prices.

“Electricity and energy prices are going up, not down. The government creates the context within which the RBA makes its decisions and we know that the RBA has said many times that monetary policy is made within the context of broader government policy,” Mr Taylor said.

“If you want to take pressure off inflation and interest rates, you need to focus on balancing the government’s budget otherwise households are going to struggle to manage their budgets.”