Power prices a brake on business: Infrastructure Australia

Rising energy costs are hurting Australia’s international competitiveness, an audit of the nation’s infrastructure has found.

“This energy transformation is occurring against a backdrop of climate change and ongoing policy uncertainty” a new report says.

Rising energy costs are hurting Australia’s international competitiveness and could entrench inequality across households, the latest audit of the nation’s infrastructure has found.

The report by Infrastructure Australia, the federal government’s independent infrastructure adviser, said a lack of policy leadership had contributed to a 50 per cent-plus rise in electricity costs over the past decade and warned that thousands of jobs could be lost if prices continued to climb.

Policy indecision, the rise of ­renewable energy and changing consumer preferences had all added to the complexity of Australia’s energy markets and was ­eroding Australia’s historical comparative energy advantage, the group warned.

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“This energy transformation is occurring against a backdrop of climate change and ongoing policy uncertainty, with inadequate co-ordination across Australia’s governments on how best to manage changes,” the report says.

“The result has meant a poor deal for many users, with bills rising rapidly over recent years and most users expressing dissatisfaction with the affordability of their energy services.”

A survey carried out as part of the audit found that consumers rated electricity as the worst of all infrastructure sectors for affordability, and the group blamed ­energy retailers for adding to poor outcomes through “confusing pricing structures, opaque discounting and effective penalties for loyal customers”.

“Transparent and affordable electricity prices are essential to reducing pressure on household budgets, particularly for lower income households,” the report says.

The rise in energy costs was offsetting the improvements made in energy productivity over the past decade, it said, and warned that further increases in energy costs could lead to big job losses.

“A permanent 10 per cent rise in the wholesale cost of both electricity and gas could cost Australia over 13,000 jobs and reduce GDP by over $8 billion,” the report says.

“Some businesses have seen a 56 per cent real increase in electricity costs over the decade and significant gas price rises, so there is potential for this trend, if sustained, to be a disruptive influence on business output.”

Several big manufacturers on the east coast have warned about potential closures if energy prices don’t start to ease.

Rio Tinto chief executive Jean-Sebastien Jacques this month warned that the mining giant’s aluminium smelters in Gladstone and Newcastle were “on thin ice” due to rising energy prices.

“Regaining energy price competitiveness is important for lower business costs and improving productivity of Australian firms,” the report says. “Australia risks ­becoming uncompetitive in some energy-intensive industries due to rising energy costs.”

Despite the pressures, the ­report said Australia had “tremendous” energy potential and could become “a new energy superpower” due to its wealth of both conventional and renewable ­energy resources. The group said a continued increased uptake of ­renewables could help bring down energy costs and open up new ­export markets. “Australia could play an increasingly important role as a provider of renewable ­energy to our neighbours through direct electricity exports.”