GRATTAN INSTITUTE: Australians Are Just Going To Have To Deal With Higher Gas Prices

Image: AGL.

The growth of Australia’s export gas market will push up the average household bill in the country’s eastern states by more than $100 a year and Australians are just going to have to cop it sweet, the Grattan Institute says.

Releasing its Gas At The Crossroads: Australia’s Hard Choice report overnight, the institute said households in Melbourne could be looking at forking out more than $300 extra a year due to the changing gas market.

Electricity and gas prices in Australia have already increased 61% and 36% respectively in the past five years and further price jumps will put pressure on the country’s manufacturing industries.

Grattan Institute’s energy program director Tony Wood said: “The increases are also likely to price gas-fired power out of the electricity market, except to meet short-term peaks in demand. Last year, gas produced 20 per cent of Australia’s electricity.”

With Australia’s gas export industry ramping up, estimated to be worth $60 billion a year by 2018, domestic users will soon have to pay the global market rate. That has a number of industry groups, including the Australian Workers’ Union backed Reserve Our Gas coalition, calling for a portion of Australian gas be reserved for domestic use.

Reserve Our Gas spokesperson Scott McDine said the Grattan Institute isn’t giving Australian consumers and local industry a fair go by acknowledging price increases but not recommending policies which see some Australian gas set aside for local consumption.

“Here’s a tip for the Grattan Institute: free market rules are only worth playing by if others are playing by them too,” McDine said.

“But there is no such thing as a free global market when it comes to gas. Because every gas-exporting nation, aside from Australia, has some form of gas reservation or national interest test, the global gas price is distorted and pushed extremely high.

“Why should Australia be voluntarily subjecting itself to this distorted global price?”

Pointing to WA’s gas reservation policy, McDine said the idea that gas reservation or a national interest test would spook investment “is demonstrably false”.

McDine warned without a national gas reservation scheme, Australia will be allowing its own gas to be extracted and sold back at the higher global price.

“I don’t think Australian consumers will be too happy to sit back and let their gas bills triple for the sake of deluded ideological purity,” he said.

But Wood said despite price increase forecasts, the government shouldn’t implement protectionist policies around the sector.

“The emerging export industry will deliver overwhelmingly positive economic benefits for Australia,” he said. “Governments are already coming under pressure to protect Australian industry and consumers from the price rises. They should resist it.”

“Reserving or subsidising gas for domestic use will add more costs than benefits and do nothing to increase supply. And in the long run, protection harms everyone,” Wood said, adding government would be better off removing market barriers to ensure Australia reaps the benefits of a strong gas exporting industry.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.