MELISSA CLARK, HOST: Gas exporters will be required to reserve 20% of their supplies for domestic use as the Federal Government looks to decouple local gas prices from the international market. But the industry says the plan lacks detail and will crowd out smaller domestic gas producers. I spoke to the Minister for Industry and Innovation a short time ago. Tim Ayres, thank you very much for speaking to AM this morning.

SENATOR TIM AYRES, MINISTER FOR INDUSTRY AND INNOVATION AND MINISTER FOR SCIENCE: It's good to be on the show, Mel.

HOST: Now, the Government is saying this policy is going to lead to a modest oversupply that will put strong downward pressure on prices. So, what sort of prices and how much gas are we talking about?

AYRES: Well, it'll be the lowest possible price. A 20% reservation is a decisive intervention indeed. And you've seen that there have been these ad hoc interventions as a complicated set of measures have been deployed to try and manage international spikes in prices following the Ukraine war, for example. That's not good, you know, to have those kind of ad hoc interventions. This sets up the market for the long term, reserving Australian gas for Australian industry and Australian households. It will deliver, as we indicated yesterday, always a modest oversupply but significant downward pressure on prices.

HOST: So, what sort of prices and how much gas?

AYRES: Well, it'll mean lower prices and 20% of gas being reserved, of course. The scheme commences in the middle of next year. It won't impact contracted gas. So, as those contracts come off, the scheme will have a larger and larger effect on prices. We'll be working through those details over the coming months with industry to make sure that there's not scope for different actors in industry to game the process.

HOST: You must have some information, though, about what sort of prices this would lead to and volumes that you expect to get from it. I mean, the Government had been weighing up whether or not to have a 15% or 25% reservation. You've landed at 20%. So, presumably there's data that has informed that decision?

AYRES: Yeah, we've been working very hard as a Cabinet across the Ministers responsible here and with our colleagues in the Cabinet on that. And our focus has been, of course, on making sure that the focus of this scheme is to deal with potential future shortages. The scheme does that. There won't be shortages in the future, and it is focused on delivering the lowest possible price.

HOST: You're not giving any figures on price or volumes on gas. Is that because you don't have them or because you don't want to offer them up?

AYRES: Well, we've done the work, but there is work –

HOST: So, you just don't want to say. You don't want to publicly say what you think it will bring prices down to –

AYRES: So, let me finish the point we've done the work to design the scheme, to make sure that the fundamental purpose of the scheme is delivering an Australian price that is the lowest possible price. There's more work to do over the coming months, of course, on those issues with industry, but it will disconnect the Australian gas market from the global gas market. That's the fundamental structural shift here.

HOST: There's not a lot of detail beyond the 20% figure and the promise not to apply to existing contracts. It's pretty similar to what the Government was talking about in December, except you've narrowed down on that 20%. Why are you announcing this before you have the rest of the details figured out?

AYRES: Well, because what it means is that it's very clear now to industry what the shape of the scheme is. What the requirements will be on industry. And that allows us to step out from the decision that we've made to now go and engage closely with industry. We've announced that publicly, it's the right thing to do to frame that final round of consultation.

HOST: Does this move forward because of the pressure to impose a tax on gas exports?

AYRES: Well, certainly not. We have as a Government been working on this now for well over six months. Chris Bowen and Madeleine King and I announced the initial parameters just before Christmas. We did that because it was important to draw a line in the sand so that industry understood that contracts that were met before that were –

HOST: But the only extra detail you've announced yesterday was the precise figure. The rest of the other, the details and the scope don't seem to be any further narrowed than where we were in December.

AYRES: Yeah, we're working through this in a careful way. It is a decisive intervention. Landing on 20% of exports being reserved for Australia for Australian industry and Australian households will lead to very significant downward pressure on prices and a new Australian price setting market. Making that very clear frames up the coming weeks and months of consultation. A short period of eight weeks of consultation to make sure we resolve the finer details of this scheme. Importantly so that gas producers don't have incentives to try and game the system and that we make sure that the benefits flow to Australian manufacturers and Australian households.

That's the purpose of the announcement in the lead-up to budget today. That's that process is really important to delivering that careful, deliberate, Cabinet style Government process around big issues like this for Australia. That's what we're doing, and the scheme will apply from the middle of next year.

HOST: Tim Ayres, thank you very much for speaking with me this morning.

AYRES: Thanks, Mel.