Interview with Greg Jennett, ABC 24 Afternoon Briefing
GREG JENNETT: It was an ACCC report on the state of the gas market which prompted today’s response from the government using powers that could – well, at least theoretically anyway – allow the government to intervene in commercial markets and contracts by holding back gas that might otherwise be exported.
Resources Minister Madeleine King has had carriage of trying to sort out this mess, and she joins us now. Welcome, Minister. Great to see you here in the studio. I suppose we should clear up before we slip deeply into acronyms – ADGSM is the Australian Domestic Gas Security Mechanism, also known as the trigger, but you don’t necessarily like that term, I think. But before you use it, whatever it might be called, you need to formally determine whether next year, 2023, will be a shortfall year for gas here in Australia. The answer is yes pretty evidently, isn’t it?
MADELEINE KING: Thanks, Greg, and great to be here in the studio. Well, the ACCC report today is a catalyst for action in this regard. It does – the ACCC is a very highly respected institution in Australia and the work they do is well regarded. The report – and this is one of many reports they’ve done on gas supply into the domestic market. They have issued reports before also predicting a shortfall but not of the magnitude their report predicts today of 56 petajoules or 10 per cent of the east coast gas market.
So, yeah, you’re right to say that this provides a mechanism to start enacting the mechanism, which is also called the gas trigger.
GREG JENNETT: So is it a tactic of yours that even just to put down the markers about the process that you need to go through might trigger, for want of a better word, a response from these gas producers that means you never actually have to use it? How is this going to play?
MADELEINE KING: Well, you know, I want to be clear that the gas producers have been very proactive already, ever since the price and supply crunch we saw in May and early June. They’ve been very active speaking with me but also in their interactions with AEMO and Minister Bowen’s office about making sure there is proper supply. There are many issues that the ACCC have raised around price and about how that uncontracted gas is offered to domestic users, in particular manufacturers that need large volumes as well.
So there’s a lot to go through. There’s a process to go through, and we’re going to do that sensibly and thoughtfully, because there are international contracts involved here as well.
GREG JENNETT: Sure. So there’s great commercial sensitivity around those. I note that the industry lobby group, APPEA – the Petroleum Production and Exploration Association – points to recent history. It says there had never been an actual shortfall, and the ACCC has found 11 consecutive surpluses. If that’s true, can you overcome this forecast shortfall for next year simply by them entering cooperatively into this discussion with you?
MADELEINE KING: Yeah, well, I do say the prediction of a shortfall focuses the minds of the gas companies and the exporters themselves. And they do act to make sure that gas is available. But we haven’t seen the situation where the predicted shortfall is of this magnitude. So they - I have no doubt they will work productively with me and with my department to get to an industry-led response. And that’s what we want. We do – what I think is important, though, is we can’t have this situation rolling around every six months or every year where we have to rely on an ACCC report to make sure there’s enough gas in the domestic system.
GREG JENNETT: Right. So you’ve sort of had enough of appealing to people’s better nature of patriotism, is that what you had to go through a few weeks ago?
MADELEINE KING: No, not really. I think it was just – there’s a supply crunch and, you know, I know the opposition called on us to make calls, and of course we were making calls. But it’s not a sustainable position that every time we think there’s a problem that people have to get on the phone. I think we need a reliable system in place where it operates as a matter of course for the benefit of domestic users, whether it’s consumers in their homes and everyday users or manufacturers. And that’s what I want to get to. And there’s a bit of a mountain to climb here and I’m sure myself and the gas producers can climb it in reaching a more sustainable heads of agreement and relationship. But we will also maintain the domestic gas mechanism. We also seek to reform it so that it’s more fit for purpose.
GREG JENNETT: Yes, so heads of agreement, without getting too technical, is like a level down from your trigger mechanism, and it is – what – a signed agreement. It’s one thing to use that to secure the supply you want, but I think this report also highlights the second difficulty – getting it at the price that seems reasonable here in Australia. I mean, should big industrial gas users be resigned to the fact that they’re going to have to pay top dollar because the rest of the world?
MADELEINE KING: I think there’s going to be, you know, an examination of price into the long term. And the truth is around the world gas and coal and all energy is in shortage and prices will naturally go up. We’re an exporting nation. We exposed ourselves to these kind of international waves many years ago, and we’re not turning back from that because it’s brought great prosperity to this country.
But if we can increase supply – and the ACCC have acknowledged this – increase transparency and have better systems in place around the offering and supply of gas, then that should put downward pressure on those gas prices. And I want to try and do that. I want to do it constructively with the gas companies themselves. I totally appreciate the pressures on manufacturers, but I think working together and making sure there is transparency as well as, you know, an acknowledgement that there is a mechanism that will be reviewed, that will look to that mechanism to have it triggered by downward pressure on gas prices, that has to be our aim. And doing it collaboratively is much better than talking about big sticks.
GREG JENNETT: Yeah, sure. And you’ve got plenty of negotiating power in this process. I know you and other ministers – I think the Treasurer included – have ruled out a UK‑style windfall profits tax. But you already have the existing tax for this industry, called the resource rent tax. Would you in any negotiations signal any interest in reviewing that, potentially increasing that or changing the way it’s calculated?
MADELEINE KING: No. I’m not going to have a taxation debate, certainly not here today, but also I think it’s unhelpful to link those issues into this issue, which is principally today we’re talking about a predicted shortfall.
GREG JENNETT: Sure. No, understood. I just thought we’d –
MADELEINE KING: Yeah, good try.
GREG JENNETT: – better cover that ground before you start this process.
MADELEINE KING: Yeah.
GREG JENNETT: Madeleine King, Resources Minister, thanks so much for joining us here today.
MADELEINE KING: Thank you very much.