Labor is attacking new modelling that shows how the Coalition's gas reservation policy would reduce power prices. The modelling shows household gas bills would fall by seven percent and electricity bills would drop by around three percent.
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00:00What's being proposed here is that the government, if the opposition was in government, they
00:07would get advice from one of the market bodies and say, look, this is a fair price for gas.
00:13The producers for the gas they provide to meet potential shortfalls on the domestic
00:18market are charging more than that.
00:20They should not be allowed to do that.
00:22So basically what the government ends up doing is setting the price, imposing a price on
00:27the producers for the gas they sell to make sure we don't run out of gas on the east coast
00:31of Australia.
00:32It is hugely interventionist.
00:34I can't think of any example where a government has intervened like that elsewhere.
00:39But of course, maybe it's justified because we are seeing these high gas prices, which
00:44are caused by the international situation and what the opposition is trying to do is
00:48separate them.
00:50Labor, despite its own attempts to do so, really hasn't been able to do that.
00:54And so this modelling from Frontier Economics, it says the policy could drive down household
00:58gas bills by 7%, industrial gas bills by 15%, could see a 3% reduction in residential electricity
01:05prices.
01:06Does the modelling add up for you?
01:08Well, there isn't any modelling published.
01:10I mean, basically the report says we ran these numbers through our model and we came up
01:14with 8% for wholesale and 3% for consumers.
01:17I mean, that's it.
01:18So I've got no, I have no idea how those calculations were done, whether they're right
01:23or not.
01:23I mean, in a general sense, the concept that if you bring down the price of wholesale
01:28gas, then you should bring down the price of retail gas and that should flow through
01:32partly to end prices for electricity.
01:35But there's no modelling being provided around that.
01:39And none of what was provided on the actual way this proposal would work is actually modelling.
01:44It's a careful analysis of a concept.
01:46And you haven't seen evidence of consultation with the gas industry in this.
01:51Can you explain to us the concerns there?
01:54Well, when governments intervene in markets, they set up markets for good reasons.
01:59But when for hopefully also good reasons, they decide the market isn't behaving they would
02:03like, then governments intervene.
02:05The difficulty is that sometimes those interventions cause unintended consequences that haven't been
02:10thought about.
02:11So I think it is really important.
02:13It doesn't seem like the opposition has really thought through with the industry how this
02:19might work and what could go wrong.
02:21I mean, principle, I think it sounds like the right way forward.
02:24But exactly how this will work, what gas it will apply to, how that fixed price will actually
02:29be calculated.
02:30And will it apply to all the gas that's supplied into the domestic market, including that that
02:36has to be secured at short notice?
02:37A lot of that detail is critically important if it's to work.
02:41I think it's a pity that the industry itself didn't come up with a solution which they could
02:46have lived with, because I'm pretty sure they won't like this one.
02:48And the coalition is also looking to encourage more gas production, but demand for gas is
02:53expected to fall.
02:54So how can investment be encouraged here?
02:57Well, the problem we have now, particularly in the southern part of the East Coast, that
03:02I live in Melbourne, is that we're running out of gas.
03:05And so we've got an interesting problem in one sense, in that we are running out of gas,
03:10but we're eating it for a bit longer.
03:11And we also want to get off gas because it's a fossil fuel.
03:13And the trick here is to align those difficulties.
03:17And so far, we haven't done a great job.
03:19And the question is, because at the moment, what's going on is we're running out of gas
03:22faster than demand is falling.
03:25Now, it's improved the situation a little bit, but it still remains a big problem.
03:29And none of what I've seen in what's been announced here is going to address that problem,
03:33the idea that we've got a sign of way of getting gas into Victoria, because having more gas
03:38in Queensland doesn't help, because the pipeline capacity to get that gas into Victoria isn't
03:43there.
03:44And secondly, other ideas like bringing it from Queensland to Victoria by ship have not
03:50yet been proven workable.
03:52So that's a completely separate problem in a way, but inevitably, they're all related
03:58to the way gas will behave or gas will be used in Australia's future.
04:03And Tony, how does this all fit into the Coalition's proposed construction of nuclear
04:06reactors by the late 2030s?
04:08Well, I think the plan is for these two to dovetail in one sense, and that is to say,
04:14look, rather than continue to develop renewables and having gas as a backup, we'll actually
04:20slow down the development of renewables, we'll keep coal running longer, and we'll encourage
04:25more gas until we have the development of the nuclear plant.
04:29That's the idea.
04:30Whether that can be lined up perfectly remains to be seen, because the real issue here, I
04:35think, Gemma, is that addressing the gas problems we have today is a five to 10 year
04:41problem.
04:42Thinking about nuclear as a 10 to 20 year problem.
04:45They have to both be thought about, but they have very different time horizons.
04:49And having them lining up, you wouldn't attempt to do economic modelling to make them line up.
04:53This is a matter of carefully thinking through what our transition plan would look like under
04:58the current labour proposal and alternatively under the current opposition proposal.
05:03And they are very different.