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Source: The Conversation (Au and NZ) – By Michelle Grattan, Professorial Fellow, University of Canberra

High and rising power prices will become a bigger part of Australia’s inflation problem over time, Treasurer Jim Chalmers has warned, as he foreshadowed more government action to combat gas prices.

Ahead of leaving for the United States on Tuesday night, Chalmers also said he would use the information from briefings he receives there to make any needed changes to the October 25 budget – now in the final stages of preparation.

And he continued to prepare the public for large, but selective, spending cuts in the budget.

Chalmers painted a dark picture of probable recession in key economies. He remained optimistic the Australian economy could avoid going backwards, but it would not be immune from the global downturn, he said.

The treasurer’s Tuesday appearances were his first after receiving a major rebuff when Anthony Albanese at the weekend quashed any prospect of rejigging the Stage 3 tax cuts in the budget.

Chalmers had pushed hard to have the controversial tax cuts reconfigured, but Albanese – who’d given him a licence to test the water – decided he couldn’t afford to risk breaking an election promise to deliver them.

On his US visit, Chalmers will talk with the US Federal Reserve, the International Monetary Fund, the World Bank, private investment banks and his counterparts from other countries who will be there at the same time for briefings.

“The world is bracing for another global downturn,” he told a news conference.

“The deteriorating global situation combined with high and rising inflation here at home and the ongoing, persistent structural spending pressures on the budget […] are the three most important factors which provide the backdrop for the budget.”

The budget would not be “fancy” or “flashy”, Chalmers said.

He made it clear its spending cuts, expected to be substantial, would focus on “wasteful” Coalition programs rather than including areas such as the NDIS (National Disability Insurance Scheme), the cost of which has been rapidly rising. “The burden won’t fall completely equally across portfolios.”

The increasing price of power is now a major problem for the government, which promised at the election a saving by 2025. Ministers are now mostly dodging questions about that undertaking, although the Deputy Prime Minister, Richard Marles, said on Tuesday “we continue to stand by the modelling” that indicated the price saving.




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Alinta Energy’s boss, Jeff Dimery, at an Australian Financial Review Energy summit this week predicted retail electricity prices, on current market prices, would rise at least 35% next year.

Andrew Richards, CEO of the Energy Users Association of Australia, said, “It appears that some people think [the energy transition] will be easy and cheap, but I think most people in this room understand it’s hard and expensive and likely to drive energy bills [up] in the near term”.

Chalmers told his news conference: “We are very concerned about what’s happening with power prices”. It was due to a combination of international factors, extreme weather and policy delay.

He said that “even as inflation eases in aggregate […] the treasury’s expectation is that a bigger and bigger part of this inflation problem over time will be what happens with power prices.

“Shipping costs have been a concern, supply chains have been a concern, the labour shortages are an ongoing concern that we’re addressing in the budget. But electricity is the one that I think most about. I think it is going to be the most problematic aspect of it, of our inflation problem over the course of the next six or nine months.”

Chalmers said there was more that government could and would do to deal with high gas prices. He was working with Industry Minister Ed Husic, Resources Minister Madeleine King and Energy Minister Chris Bowen on what can be done.

“I think all of those ministers recognise that the way that our gas industry regulation is set up has not been delivering the kinds of outcomes that we want to see and so if you recognise that, and I do, then you recognise that if more can be done, it should be done – and I’m a part of that work.”




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He did not say what was contemplated. The government has not pulled the “trigger” (the Australian Domestic Gas Supply Mechanism) under which it could order companies to put aside a certain amount of gas for the domestic market, but it has that trigger being reviewed.

Companies have recently agreed with the government to supply gas for local consumption at prices no higher than the international price. But that is little comfort domestically given the soaring overseas price.

Husic this week accused companies of “milking gas prices”.
He told Nine newspapers: “The gas companies can either be part of team Australia or they can be part of team greed. They will make the choice.”

Husic said the trigger legislation needed to be reformed, as did the code of conduct which is supposed to help local buyers of gas.

The Conversation

Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

ref. Chalmers flags gas action, with escalating power prices a cost-of-living nightmare for government – https://theconversation.com/chalmers-flags-gas-action-with-escalating-power-prices-a-cost-of-living-nightmare-for-government-192251

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