Speech to the Australian Chamber of Commerce and Industry Business Leaders Summit 2018
ANGUS TAYLOR: It's wonderful to be here today, thank you Jeremy and James for having me here today.
Can I pay tribute to ACCI and the audience here, everyone who works in small business. I'm one who worked in and for small businesses and has done all my career, and I believe and continue to believe that small business is the engine room of so much of our economy. In my electorate of Hume, we now have one of the lower levels of unemployment in Australia - nearly all of those jobs are being created by small businesses.
This is a story that doesn't get out there enough, and I speak to my local newspapers regularly saying: "You're willing to talk about all sorts of wonderful political battles in local councils, and at federal and state level, but can't we start talking about all the extraordinary things that small businesses are doing in this region and for this region”. I think we need to see a lot more of this celebration of the role of small businesses in the economy and certainly I'll fight for that every day of the week.
Thank you again for having me here today this morning.
The themes of this summit around energy costs and the implications for digital technologies I think are extraordinarily important ones. I'll spend a little bit of time on both of those things, starting of course with the very hot topic of energy.
As the new Minister for Energy, it's probably not lost on any of you, that I have one very clear goal - that is to get prices down while we keep the lights on.
I am a firm believer that if you want to get something done, you need clarity. Well, we have clarity in this goal - there is no doubt about it whatsoever.
My formal title is the Minister for Energy, but my informal title, as ScoMo has been using all the time, is the 'Minister for getting electricity prices down' - so I am reminded of my KPI every time he says that.
My focus will be on getting prices down for households and for small-to-medium sized businesses, as well as our bigger corporates because they play an important role, when you look at aluminium smelting businesses, cement businesses, fertilizer businesses, lots of small businesses rely on the success of those big businesses in order to prosper.
I am absolutely convinced that if we don't get electricity prices down, not only will we have the most vulnerable in society struggling to make ends meet, having to make decisions between eating and heating, which are not decisions a modern nation like Australia should have to be made at all, but worse than that, we will be losing jobs en masse. For the industrial parts of our economy which are so crucial to job creation in, particularly, regional centres and outer suburban centres - in electorates like mine - if we don't deal with this energy price issue we will have large job losses, make no mistake about it.
I won't stand for that happening on my watch, on this Government's watch. Those are jobs that we need to continue to protect - to protect in a sensible commercial way, but by making sure that we have energy prices that are sustainable.
Lots of research is showing how dire this situation is for so many businesses, and I won't go through that, but it's pretty clear and most of you would see that impact on the ground by all sorts of businesses, including businesses that you might not expect, including butchers, cafes and farmers. If you're an irrigator, one of your biggest costs is energy. If you're a dairy farmer, your energy costs are one of your biggest costs. Right now, aside from hay, or feed, it's an extraordinary cost for those players and I see bills regularly from my dairy farmers showing just what's happening in the marketplace, and it's unacceptable.
To address this, we are not interested in grand gestures. We are not interested in gesture politics. We are interested in practical action, and for me, that's what policy is. Some define policy as grand gestures. I don't. I define policy as outcomes. I have spent my career with a focus on impact and with a view that if you're not having impact, don't bother.
Well I'm here to have impact and that is what we will be doing in every step we take now in our focus on energy policy.
Now there's three parts to our plan to get electricity prices down while we keep the lights on, and there are aspects of this that will evolve over the coming months.
Let me describe the key elements of this.
We will, based on the excellent work of the ACCC - and it is great to see Rod Sims here - a really terrific piece of work, if you haven't had a chance to look at this yet and are interested in energy then look at it because this is one of the best pieces of work coming out of government for a long, long time - but one of the recommendations was to establish a price safety net to empower customers to get better prices.
This is a default market offer, a default market price, which is a reasonable and fair price.
We've seen standing offers in the market place which are the offers you get if you roll over your contract or don't have time to negotiate, those standing offers have escalated extraordinarily over time. It is remarkable how retail margins in the energy sectors have increased over time. They are very high by international standards, as are margins more generally in that sector.
By establishing this price safety net, we're looking to ensure that customers not only have a default market offer when they don't have the time to negotiate a better deal, and let's face it, a lot of small businesses don't have that time, but a benchmark against at which they can test whether or not the offer they are getting is a reasonable one. That is extremely important when you don't have time - the simplicity of knowing that you are getting a discount worth 'x' per cent, and being able to measure that against any other offer that you might get, when you're comparing apples with apples, not apples with oranges. Now that's a very important initiative for small business people in particular.
Secondly, we will be taking a big stick to bad behaviour by big energy companies - and we have seen that. We saw an escalation in New South Wales, of the distribution transmission asset base, from 25 billion up to 47 billion between 2007 and 2014. That was unacceptable behaviour and we won't accept that sort of behaviour again.
We've made significant changes to the way those sorts of investments are being measured, and through the abolition of the Limited Merits Review, and we'll continue to work hard to make sure that distribution and transmission costs aren't continually escalated.
This has been an area where many politicians and others have felt that they can just throw money into the system and consumers have to pay for it, and they can get away with it, because ultimately it doesn't come out of their revenues. In fact in some cases - the worst cases - they have been government owned entities where the government has got the dividends back. This is behaviour that we consider to be unacceptable, and we won't be putting up with it.
We'll also be taking a number of measures to make sure there aren't rip-offs happening to customers, including late payment penalties, ensuring energy companies pass on all their savings from wholesale price reductions. We are seeing wholesale price reductions right now. We expect those to be passed through. And strengthening the regulators' power to crack down on dodgy practices, because we have seen some of that.
The third part of our plan is backing investment in new supply, new generation, reliable generation - particularly generation that is creating competitive pressure. There hasn't been enough competitive pressure in the market. The ACCC's work on this was very, very clear. It was quite striking to me as someone who has observed and worked in this sector many years, just how the market structure has changed over time. This is a sector that hasn't had the competition it should have, and I think that's part of the reason why customers have not been treated the way they should have been. Competition is the best way to ensure that customers get a fair deal. Governments stepping in is the second best way, but not one I prefer. I prefer competition to get a better deal for customers and businesses, businesses that many of you come from. So reduction and downward pressure on prices through more competition and supply, which I will have much more to say about that in the coming weeks and months, it was an excellent recommendation in the ACCC report along these lines that we're working with right now.
We will also be looking to make sure that our abundant natural resources are properly utilised. We know that the shortage of access to gas, and less talked about coal, has had an impact. Making sure we have access to those natural resources, as well as of course to sun, and we've seen a large escalation in the use of solar across particularly in Queensland, where it obviously has higher utilisation levels.
Making sure we are properly utilising our natural resources, our abundant natural resources, like no other country in the world, is crucial. It is extraordinary to me that we have amongst the highest electricity prices in the world, in a state like South Australia which has abundant natural resources. It should never ever have gotten to this.
We're also very focused on reliability. Those three initiatives have been focused on price, and the reliability guarantee within the NEG will be maintained. We are going down that path and we will make sure those reliability measures go into place. We need the cooperation of the states on this one, and will be working with COAG to make sure that happens.
That combination of initiatives will increase competition, reduce bad behaviour in the markets and, most critically, deliver more affordable, more reliable energy than we have seen in the past.
The challenge is not trivial, because to focus on price has not been fashionable. Let's face it - to focus on lower electricity prices has not been fashionable. But as I say, the work of the ACCC and others has shown us how important our work is and how much it matters to everyday Australians. It might not matter in some corridors around the place, but it sure matters on the ground, and all of you I'm sure hear that all the time, I'm sure of that.
It's also worth saying what we are not going to focus on.
We won't be introducing grandiose emissions reduction schemes at the expense of small businesses and households.
We have a 26 per cent emissions reduction target. We think that's a reasonable target, that's our commitment from Paris. I am very confident that we'll reach that target ahead of time. On very conservative assumptions, the Energy Security Board is telling us that we'll be very close, we'll be within 'cooee' in the early 2020s, and they are very conservative assumptions.
The good news is, this doesn't need to be an area of focus, because we're going to get to 26 per cent. Our challenge is to focus on price and reliability - the two things that haven't had the focus they deserved in recent years with a debate that I think has gone in the wrong direction.
We also will be making sure throughout all of this that reliability, and making sure there's a balance of supply and demand, is part of the mix. Not only the reliability guarantee that I talked about a moment ago, but the way we think about new supply coming into the market. There does need to be enough new supply to make sure there is reliable and affordable electricity to all users in the market.
Another theme of this summit is digital innovation. I'm a huge believer that technology, including digital technologies, will have a big impact in the coming years, and a positive impact.
One of the reasons why we're going to reach the 26 per cent emissions reductions target is the work of technology.
Policy makers have run around in circles in some cases in the past and in other countries, on all of this, and meanwhile technology does extraordinary work. I believe firmly that the combination of clever use of technology and competition can drive extremely good outcomes for customers, for users, and the energy sector is no exception to this.
As the former Minister for Digital Transformation, I think data and the better use of data can be a major driver for how we improve the innovation of our energy markets.
Data-driven innovation has been estimated by the Productivity Commission to add up to about $64 billion per annum to the Australian economy.
I am very excited about the potential of the better use of that data to drive further innovation in a range of markets.
In the energy markets, energy use data is held across many data holders, and is not accessible in many cases, and it creates real challenges to understanding the way the energy market works.
The Energy Use Data Model, or sometimes called the EUDM - it's not on the lips of the cafes in my electorate, but it's a very important initiative nonetheless - is a 'big data' project that will improve forecasting and answer many of the questions that people have about our energy market. It puts more facts on the table, and we need to have more facts-based debates in this market.
The Government has committed just under $20 million to the CSIRO to develop the EUDM, and I think that will help to ensure that we have these facts-based debates.
Alongside that, the implementation of the Consumer Data Right, is a very important initiative in my view for small businesses - more generally but also in the energy market. This is all about giving customers more control over their data. It will lead to better value for households and customers.
We know that one of the reasons why it's hard for people to haggle for a better deal for energy, is that they have a usage pattern that is not always easy to extract, and not always easy to compare to alternative plans. If you're working with one energy provider and you have a usage pattern, it is quite difficult to work out what price you would pay with that usage pattern with a different provider.
Making that easier, will increase competition in the marketplace, and most importantly it will empower customers, particularly small business customers, to get better deals.
So not only are we seeking to make the deals more transparent and easier to compare against a benchmark, we want to make it easier to get access to the data you want in order to make those comparisons based on your own usage patterns.
In many cases we believe this will be done through third parties, and we'd like to see more third parties coming into the market who will help small business and households to compare. That means giving those third parties access to the data with appropriate permission from users.
That's the heart of what we're doing with consumer data right now, which I announced alongside Scott Morrison as Treasurer, back last year. The work is being done. We've said the first three sectors we're focusing on - banking, energy and telecommunications - energy is a priority for us. We'd like to see these consumer data rights put in place as quickly as possible. I think it will support - in fact it was one of the ACCC recommendations - but it will support the other package of initiatives we will put in place to ensure that we do get competition. The ease of switching, which ultimately will lead to what I really want, which is not governments regulating energy companies, but businesses and users more generally regulating the energy companies. The best regulator of any market is the customer.
I firmly believe that small businesses in particular can play a very strong role in that. I am looking forward to working with you, and ACCI, in the coming months to make sure we have an affordable, reliable electricity market for all our small businesses as well as households, and I am confident that we have a suite of initiatives here, which we will work to have a real impact.