Gas prices will explode due to Queensland exports, says Grattan Institute

Esther Han

Gas heating will burn a hole in your pocket.

Larger households that use gas for cooking, hot water and heating will be hit with a yearly bill increase of up to $435 in the eastern states and the government should do nothing to intervene, the Grattan Institute has said.

In the next two to three years, high gas users in Sydney will face a $255 increase while, in Melbourne, where 90 per cent of homes are connected to mains gas, users will see a $435 jump, according to the think tank’s new report [PDF, 733 KB].

The increases are linked with the launch of gas exports in Queensland early next year that will expose Australian families and businesses to high global prices. The Grattan Institute based its calculations on the forecast that wholesale gas prices will double to $9 a gigajoule.

Calls are mounting for the government to shield Australian users from rocketing prices by reserving a percentage of gas for domestic use.

But Tony Wood, energy program director at the institute and the report’s author, is opposed to all forms of government intervention that may hinder investment and therefore "economic benefits" such as jobs.

He said governments should avoid imposing a cost, or "an implicit tax", on companies in a bid to help poor and disadvantaged people already struggling with soaring energy bills.

"If the prices impact people on low incomes, then the way to fix that is through existing welfare provisions," he said.

Cassandra Goldie, chief executive of the Australian Council of Social Service, said the smallest of price rises would disproportionately hit the most vulnerable groups.

"The big problem is the existing welfare provisions are not enough for people to meet the cost of essentials, including energy prices," she said.

"We know the Newstart Allowance hasn’t increased in real terms for over 20 years and the indexation, which is linked with the CPI, is nowhere near adequate to cover the prices of the essentials increasing at a far higher rate."

Mr Wood said the government should not reserve a portion of gas, nor apply a national interest test to ensure local supply, subsidise domestic prices, nor subsidise one energy form over another.

"More than $63 billion is being invested in LNG export projects in Queensland, leading to almost 30,000 jobs during the construction phase and up to 17,000 ongoing jobs from 2020 when the projects are fully operational," he said in the report.

"This investment will increase Australian LNG exports, currently worth $14.5 billion a year to over $60 billion in 2017-18."

Scott McDine, national secretary of the Australian Workers Union and spokesman for the Reserve Our Gas campaign, said beliefs that gas reservation or a national interest test would "spook" investment was "demonstrably false".

"The same multinational gas companies extracting our gas are doing business all over the world," he said. "They’ve just somehow convinced Australia to give them a special deal."

He said Western Australia introduced a gas reservation policy in 2006 and had since attracted $88 billion in gas production investment.

A BIS Shrapnel report showed rising gas prices would lead to one in five heavy manufacturers shutting down within five years and total manufacturing production being reduced by 15.4 per cent by 2023, cutting 91,300 industry jobs.

In June, energy retailers received the green light to increase gas prices by an average 17.8 per cent over the next two years.

Outgoing Energy and Water Ombudsman Clare Petre expects gas pricing to "emerge as an issue during 2014-15" as electricity price increases ease.

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