Several long-term trends are now intersecting in a way that is going to deepen economic divisions in Australia, as well as undermine growth ahead of what may become a significant slowdown in 2023.
The global energy price boom is undoubtedly great news for Australia’s big fossil fuel energy exporters: soaring coal and gas prices mean windfall profits for coal miners and gas exporters — especially offshore gas producers.
The benefits of these good times to the rest of the economy are limited. Coal miners at least pay company tax; the big gas exporters Chevron, Shell, Woodside, Santos and Origin pay little or — more often — no tax; while many receive far more in carbon capture and storage subsidies than they will ever pay in tax. These companies employ only a small number of people, and much of their infrastructure is manufactured overseas. It’s great for our trade surplus, but you can’t take that down to the supermarket to buy anything. The only benefits flow to shareholders — in the case of Chevron and Shell, most of them foreign.
And all of that ignores the devastating climate impacts of their exports.
The list of losers is as long as the list of winners is short. High black coal and gas prices internationally mean high black coal and gas prices domestically. The long-term consequences of nine years of climate denialism and no energy policy are now apparent: a fleet of failing, unreliable coal-fired power plants nearing the end of their lives, and a renewables and storage sector that hasn’t grown anywhere near fast enough due to hostility from the prior federal government, forcing us to rely on expensive gas just as winter has arrived to boost demand.
The result: soaring energy prices for households, small businesses and large businesses alike, unless you live somewhere like the ACT where the government has had the foresight to drive a rapid transition to fully renewable energy. If you’re an investor in a big gas exporter, you can at least have the satisfaction of knowing your higher power bills are at least partly offset by a higher dividend.
That long-term trend is coinciding with another: after years of wage stagnation and for many workers real wage declines, high inflation and an anti-worker industrial relations system are likely to impose significant real wage cuts on households, despite promises that wages growth is just around the corner. If only workers could have taken promises from the Reserve Bank and the federal government about coming wage growth improvements to the bank.
High inflation inevitably is driving a rapid increase in interest rates; too bad if you took the Reserve Bank seriously when it said interest rates wouldn’t rise before 2024.
Ordinary workers will see some benefit from record coal and gas prices eventually, via their super funds when they retire, but otherwise it’s all roundabouts and no swings for households dealing with big power bill increases. Even some of the beneficiaries are losing out — Origin Energy is making a motza from its liquefied natural gas exports from Queensland, but can’t source coal for its Eraring power plant in NSW and had to slash its profit forecasts.
None of this will be fixed by forcing gas exporters to pump more gas domestically — they’re already doing that. There are no quick solutions, especially not for NSW and Queensland, where reliance on black coal has left its coal-fired power plants at the mercy of international prices and breakdown-prone generators. The decisions that could alleviate this crisis needed to be made years ago, when climate denialism reigned and renewables were demonised.
What we can do is shift national income back from profits to wages via higher wages growth, backed by greater social spending funded by a windfall profits tax on energy exporters, and accelerate the transition to renewables as quickly as possible. The goal should be an energy market where coal and gas prices can go to the moon and back and it will have zero impact on the energy bills of families and small businesses, freeing Australians from the tyranny of fossil fuel inflation. Call it decarbonising household budgets.
This article was first published by Crikey.
Bernard Keane is Crikey’s political editor. Before that he was Crikey’s Canberra press gallery correspondent, covering politics, national security and economics.
