Interview with Kieran Gilbert, Afternoon Agenda, Sky News

Government plan to reduce energy prices, Gas

KIERAN GILBERT: Let’s get some reaction now from a senior member of the government. The Industry Minister, Ed Husic joins me live from Sydney. Ed Husic, ExxonMobil says it’s reckless free market intervention, ill-considered, it’s going to divert investment away from Australia. Similar sentiment from Woodside and the other big players. What’s your take on this reaction from the industry? 

ED HUSIC, MINISTER FOR INDUSTRY AND SCIENCE: Sorry, is this the same ExxonMobil that told Alan Carpenter that his idea of gas reservations was extraordinary intervention and that they would walk away from Gorgon, and then they didn’t and accepted reservation? 

I mean, a lot of these big companies tend to make these type of threats and act largely in their commercial interest and attempt to do so in a way without any other regard to the communities in which they’re operating. What the Australian government is doing is in the national economic interest – bringing down or working to bring down energy prices. 

Anyone that is arguing against that is arguing from narrow commercial or political interests. And the way that the Australian government has acted in extraordinary times is to respect the common sense view of the Australian public that we should be able to get access to an Australian resource for households and businesses at a reasonable price and not by prices, I might add, that are guided by war-time profiteering. 

We are doing the right thing by the economy and the community. Others are arguing from a very narrow interest that’s designed to enrich themselves as opposed to looking at the community they operate in. 

KIERAN GILBERT: Is it scaremongering from them? 

ED HUSIC: I think if you look at some of the commentary that’s being used, I think there were analysts out there saying this was a declaration of war. You’ve had the industry group there say that people won’t invest. You quoted Exxon. All these threats that they continually use which can be summed up. We’ve been at this – Kieran, you and I have spoken about this for six months, been urging the companies to recognise the environment in which they're operating in, urging them to apply some restraint around the exorbitant pricing that we have seen, and they’ve done nothing. And what this can be best summed in terms of their approach to this entire debate, the gas companies, is propose nothing and oppose everything. 

And we as an Australian government cannot sit by when we’ve got gas companies more interested in war-time profiteering, and we as an Australian government have to act in the national interest, particularly for manufacturers that have been under huge pressure for months and have been concerned about where prices will take off. We saw the kind of projections that were put out around the time of the budget by Treasury and notably around gas being over 40 per cent in the coming year. No responsible government could sit by with this rash of war-time profiteering putting pressure on the economy, putting pressure on households. We cannot just sit and watch this occur and do nothing. 

KIERAN GILBERT: Do you think this threat of a $20 million advertising campaign, that they will go ahead with that? And just going back to that other point you made about them proposing nothing and opposing everything, that essentially, they thought you'd blink? Did they think the government would blink on this? 

ED HUSIC: I would make a number of points in response to everything that you've just said. In terms of an advertising campaign, instead of trying to spend a lot of money from extraordinary profits that they’ve earned, some of which have been over 200 per cent and some billions above what was expected in just their quarterly results, instead of using money on advertising, why don’t they actually take the right cue from the public expectation and reduce prices. That’s the thing people want to see. No-one’s denying companies do need to make a profit, and it’s understandable. A lot of these companies, gas companies, were making profits when prices per gigajoule were way, way lower. And from our point of view we have sent the signal for months they have to get their act together. I’ve accused them of being tone deaf. I’ve accused them of not following community sentiment. They could have proved me wrong and they didn’t. Now the government has a responsibility to act in the national economic interest, which is exactly what we are doing. And if the gas companies want to fly in the face of Australian common sense around the treatment of an Australian resource, they can explain that to their shareholders. 

KIERAN GILBERT: And the argument that the reasonable price test, that provision in the mandatory code, that’s been jumped on, Ed Husic, and it’s being suggested that this is a permanent attempt to manage or have government fixing price. What’s your reaction to that interpretation from the industry? 

ED HUSIC: In its last report the ACCC flagged what was really a market that was dysfunctional back in July. And they showed how there are three companies that dominate the market. They don’t engage in good faith bargaining. They offer take or leave contracts. They’ve engaged in some behaviour, for instance, offering gas prices at rates that they know they couldn’t even get away with in export markets simply to push away local buyers so they can flog that product internationally. 

Now, when we’ve had those levels of market dysfunction where you can’t bargain properly and you need to step in, we’ve had governments do that. I mean, we’ve had the whole discussion around the news bargaining – news media bargaining framework that was designed to inject balance into the bargaining system in the interests of not seeing the hollowing out – that we see large firms behave in a way that puts pressure on the existence of other ones – and governments have had to act. And I’d argue that we have very similar circumstances here where the gas company behaviour, some of which detailed by the pricing watchdog, has been extraordinary, needs to be responded to. And we cannot have this type of pressure put on the nearly 900,000 manufacturing workers of this country that cannot believe that gas companies think it should be their way or the high way no matter what. 

KIERAN GILBERT: APPEA says there needs to be – it’s actually the argument that Peter Dutton’s been saying that it’s got to be about more supply. APPEA, the industry group, says there needs to be more gas extracted closer to where it’s being used. Does that – doesn’t that make sense in terms of putting downward pressure on price, Ed Husic? 

ED HUSIC: We export, one, an extraordinary amount of gas. Two, what we have been arguing for some time is to get our hands on the uncontracted gas and make it available for households, for businesses and for energy generation where required. This is a small amount. The heads of agreement that was negotiated secured 157 petajoules which had to be offered, not securely as in it would be guaranteed to be delivered to the market, but had to be offered to the market. And the issue is you can get supply, Kieran. The question is at what price. And a lot of these companies want to be able, driven by war-time profiteering, to charge at extraordinary prices. And the Australian public has been saying we do not believe an Australian resource should be made available to Australian households and businesses at export prices. 

So more supply is not the only solution. Price is the other part that needs to be dealt with. And the argument that has been said – and I noticed you played the industry group’s argument before – and it’s worthwhile noting, none of the individual firms actually extend to the public the decency to answer questions like what you put to me, to answer questions about how they price and why they’re pricing the way that they do in an economic environment where their costs have not increased extraordinarily. But I notice that the industry group speaking on behalf of these firms because these firms don't do the right thing of explaining themselves publicly have said this will chill investment. No one – that does not pass the pub test. No-one believes at this point in time that gas, no-one will invest in production. This is just another threat to scare us away from acting in the national economic interest. 

KIERAN GILBERT: And it doesn’t – just to clarify, you said it’s a small amount. How much are we talking about in terms of the amount uncontracted for domestic use versus the exports? Because the vast bulk is still going to be exported, isn’t it? 

ED HUSIC: Correct. 

KIERAN GILBERT: And charged at whatever price these companies can extract? 

ED HUSIC: Yeah, it’s a – like, in terms of the petajoule figures, it’s off the top of my head I thought it was around 300 – just over 300 petajoules for power generation, 360, I think for manufacturing, 160 170 petajoules for households – off the top of my head; happy to be corrected – but the vast bulk of the gas that we extract goes to export markets overseas. And when I say that, it’s about roughly – and, again, I’m happy to be corrected if I’m wrong, but off the top of my head – that amount is, you know, less than a quarter of what we – of the overall take that’s then exported off to other countries. 

And the important thing is, too, international contracts on gas will be honoured. We’re talking about the uncontracted amounts and we’re talking in terms of the reasonable price issue, the whole mandatory code of conduct needs to be negotiated out. Everyone will get a chance to have their say. But you don't bring in a mandatory code of conduct because of customers; you bring it in because the behaviour of the large players and the type of concerns the ACCC has raised has forced our hand to improve the bargaining framework. 

KIERAN GILBERT: And the reasonable price test, do you see that as an ongoing mechanism to put a lid on prices? Is that how the government sees it? 

ED HUSIC: The best way to manage this is to ensure that the bargaining framework between the suppliers and the users is one that is common sensical, reasonable and that you see genuine good faith negotiations. I actually believe it’s in the interests of those parties to sort it out rather than having governments intervene. But if you have a breakdown in negotiations and if there’s arbitration there you need to have something to fall back on to work out, well, what are the way in which the prices will be determined if there’s been bad behaviour. It's up to both the producers and the buyers to act responsibly, and that’s what ultimately the code of conduct is designed to ensure. 

KIERAN GILBERT: Okay. And just finally, Peter Dutton is warning of rushing a plan of intervention in the market and says down the track we’ll look back and this would have catastrophic consequences, unintended consequences. What do you say in response to that critique from the opposition? 

ED HUSIC: I make two points: I’d emphasise again the Australian government is acting in the national economic interest. We need to bring prices down, so we are acting on that. We’ve been raising this as a new government since June. We've been asking the companies, the gas companies, to see common sense. They’ve refused. The Australian people expect to see a response, and that’s what we’re providing in extraordinary times – a reasonable response. We’re also responding, Kieran, to the fact that a former government was unable to land energy policy, unable to deal with these issues. Their neglect has meant that they’ve hidden price increases and they haven’t put a market that’s fit for purpose. They’re in no position to talk about catastrophe given they’ve been the authors of that catastrophe in the first place. 

KIERAN GILBERT: Industry Minister Ed Husic, I appreciate your time. Thanks. 

ED HUSIC: Thank you.