Chalmers told manufacturing and business leaders on Monday he was preparing to announce “temporary,meaningful,sensible” regulations to ease the crisis.
Federal Treasurer Jim Chalmers.Alex Ellinghausen
“We don’t want to get 12 or 24 months down the road and have industry hollowed out by a war in Ukraine,” he told the 75 executives at a lunch in Parliament House.
An international energy crunch is driving international demand,following Russia’s invasion of Ukraine,and the federal Treasury forecast that gas prices would rise a further 20 per cent next year,and electricity prices 30 per cent.
The Albanese government is under pressure to relieve the pressure of energy costs on households and industry,following its election promise to revitalise manufacturing and cut power bills by $275 by 2025.
Energy Users Association of Australia chief executive Andrew Richards,who represents manufacturing businesses,said many of his members are “horrified” at the price of gas being offered to them,as they looked to replace expiring long-term supply contracts with new deals priced for the current market.
“It’s getting to the point where those companies that can pass the costs through to products on the supermarket shelves can’t compete against imported products.
“That’s when they say ‘what’s the point of staying in business?’
“We concur with the Treasurer,there is a question over manufacturing survival.”
Long-term gas contracts are currently being offered to manufacturers for as much as $45 a gigajoule. Prior to 2015,when exports began,gas contract prices traded as low as $4 a gigajoule.
The Australian Energy Regulator last week said over the next two years because the eastern seaboard’s wholesale power prices have already hit record levels this year,and forecast they would be pushed even higher by rising fossil fuel costs.
Treasury Secretary Steven Kennedy earlier this month said runaway to limit the price of gas and coal. Gas is a key input for manufacturing processes and also for electricity generation in gas and coal plants.
Chalmers all but ruled out imposing new taxes on industry,which could be used to generate revenue to pay for household and business energy subsidies. Chalmers has warned such subsidies could drive inflation and on Monday said he hoped to bring in new regulations as “urgently as we can”.
He said he would consult widely before it announces “something as meaningful and potentially consequential as what we’re contemplating”.
Despite Chalmers’ claims he does not want new taxes,the mining industry has warned it would mount a campaign against such a measure.
“A tax on mining will put Australia’s economic recovery at risk,and hurt the very people the government is trying to help:Households and small business owners,” Minerals Council of Australia chief executive Tania Constable said.
The mining industry has also argued that. However,energy experts said the government would need to lower the cost of both gas and coal to deliver meaningful cuts to electricity prices.
The Australian Petroleum Production and Exploration Association said capping gas prices would deter companies from investing in new exploration and risked future shortfalls in supply.
Last week the Albanese government at the energy sector,declaring it will “not sit back and watch Australians suffer” due to soaring power and gas prices.
The Albanese government has formed a working group to nut out a solution,comprising Chalmers,Finance Minister Katy Gallagher,Climate Change and Energy Minister Chris Bowen and Industry Minister Ed Husic.
Gallagher told Radio National on Monday the government was aiming to announce its decision by the end of the year.
“Ministers are continuing to work hard on it. Departments are working hard on analysis and advice to government and we will work through it in a responsible and measured way,” she said.
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