Interview on ABC Newcastle

PAUL CULLIVER, HOST: Well, in places like Gladstone and other locations around Australia where LNG is exported from huge industries and huge rebirths of, really the economic livelihoods of towns have sprung up because of the huge export of gas through LNG on those big tankers. But, since we have so much of it, should we be getting cheap, abundant gas for ourselves? Well, the Federal Government has been toying with the Gas Reservation Scheme for the East Coast for some time now. The news yesterday that it's not going to be pegged at 20 per cent, but it'll be up to 20 per cent. So, why the change? Tim Ayres is the Minister for Industry and Innovation and the Minister for Science and joins you on the line. Minister Tim Ayres, good morning to you.

SENATOR THE HON TIM AYRES, MINISTER FOR INDUSTRY AND INNOVATION AND MINISTER FOR SCIENCE: G'day, it's good to be on the show, Paul.

HOST: How's this going to work?

AYRES: What this scheme will deliver is an oversupply, a modest oversupply of gas into the Australian market that'll drive down prices and, as you are starting to say in your introduction, we are the only major gas exporting economy in the world that doesn't reserve gas for domestic purposes. This scheme will provide for reserving up to 20 per cent of our exports or equivalent and that will have a very significant effect on price and availability for Australian industry and for Australian households. This is a landmark reform. It should have happened 20 years ago. Should have happened 20 years ago. I worked in Australian manufacturing for most of the time before I was elected to Parliament. I saw firm after firm, when we were exposed to the global price of gas, gas prices rocketed, firm after firm closing, jobs lost, capability lost for Australia. This is a fundamental part of our Future Made in Australia plan from the Albanese Government to deliver real change for Australian manufacturing.

HOST: Alright. The original plan that was touted by Labor, and obviously we're talking about the East Coast, the West Coast already does something similar, was a full 20 per cent of the gas produced. Why have you scaled that back?

AYRES: Well, we said in December when we opened the consultation process on the scheme and because this is such a big reform and it's a complex reform, we want to make sure that there's a proper consultation process. We said that we would wrestle with this question of how you made sure that there was a modest oversupply into the Australian market and that 20 per cent was the threshold figure that we had determined, as a Government, was the right amount for Australian industry. And so, the detail that we've announced yesterday really nails that question down. 

There will be an assessment every year, forward planning about what is the demand in the Australian system. That figure will be calculated, we'll add 10 per cent to that figure. So, there is always an oversupply every day of the week and that is what will drive prices down. And we can go all the way up to 20 per cent if that's required. That is a massive reform for Australia. 

It's a tough reform. I mean there are elements of course of the gas producing sector who'd rather we just left things as they are, but that's not our approach. We are determined to make sure that for firms like, not far from where you are, like Orica at Kooragang Island, that they have the confidence to contract for low price gas for year after year after year and to get long term contracts that will deliver more secure manufacturing jobs and deliver the investments we need in things like fertiliser, plastics in the metal industry all require low-cost gas and low-cost electricity.

HOST. So, yeah, I want to talk through some of the impacts of having gas and having it at a cheap price, what it means for people on the Hunter. Obviously domestic gas use, literally the price you pay, retail price for gas is one factor. As you talk about, the manufacturing side of things where gas is used to produce other products here in the Hunter. And then of course as you've also mentioned electricity prices, we have the Kurri Kurri gas plant. It's using gas, it's a peaking power source of electricity. So, when there's not enough power in the system, you've got to see gas being burnt. It’s an expensive source of electricity but it's a backup source of electricity that we have in the NSW grid. All pretty real-life impacts on people of the Hunter when it comes to the price they're paying for electricity, gas and the viability of manufacturing. Just to talk through some of the impacts there. Ultimately, are we going to see gas prices come down because of this reservation?

AYRES: Yes, we'll see gas prices come down. The scheme, first of all, has to make its way through the Parliament, Paul, so we are going to have to make sure that the Liberals and Nationals, One Nation, the Greens Political Party, have a responsibility to the country here to support this reform. That legislation will lock in in 2027 and the obligation, heavy obligation, on our gas sector to reserve gas will begin at the beginning of 2028. There's a phase in arrangement here. Make sure that we land this reform properly. Gas prices will fall as a result of this measure. And you're right to point to the uses for gas in Australia. It is a critical part of our electricity system. It's becoming less of an influence on electricity prices as the prices of industrial scale and household batteries fall, but it is still very important for maintaining peaking capacity in the electricity system. You want it there, you just don't want to use it every day. It's important for households, but overwhelmingly this is about what heavy industry can do, securing heavy industry jobs where gas is absolutely essential to their competitive position.

HOST: Obviously, when we talk about the gas industry in Australia, there's been a lot of conversation and many calls coming from both the left and right of politics for this idea of a flat 25 per cent tax on LNG that is exported. Surely if you put a tax on the gas that we exported, that would also incentivise putting more of that gas into the Australian market. Could that be something that we could actually one day see from a Labor Government?

AYRES: Well, it wouldn't incentivise local gas production or putting more gas into the Australian market. Quite the reverse. This reform is a much bigger reform than some of the other proposals that have been floating around. What it does is mean that there's an oversupply of gas into the Australian market. That drives lower prices for industry and will be fundamental to Australia's industrial competitiveness for the future. This is a core part of our Future Made in Australia plan. Delivering a new electricity generation that supports facilities like Tomago delivering low-cost gas or a gas reservation scheme. Backing heavy industrial capability through interventions in, as indicated before, Tomago, Kooragang Island, Orica, the Boyne Aluminium smelter, the copper industry, making sure that we're backing current heavy industrial capability. There's no other government in our history that's ever had the same pro-manufacturing approach. We've got the biggest ever pro-manufacturing package for our future industry as well. This is a full court press to deliver a reindustrialised economy.

HOST: If I can just go back to the idea of the 25 per cent gas tax and it hasn't come up and it wasn't in the Budget. It's been rebuffed by the Federal Government so far. But I mean, at the end of the day, if we're digging this stuff up, any resource before it's been dug up it's owned by the Australian people until the company gets to dig it up and sell it somewhere else. Are we getting our fair share? Why shouldn't we tax it with 25 per cent like it's being called for?

AYRES: Well, this reform is about making gas cheaper. Gas tax makes it more expensive and less competitive.

HOST: Even when you're taxing exports?

AYRES: Yeah, absolutely. This is about putting the obligation on the exporters to turn the gas around and make sure that Australian gas is being reserved for Australian industry and Australian households. A gas tax is a fiscal measure. I understand why some of our political opponents are attracted to it, but it's not the right reform for Australia. This is all about delivering for blue collar jobs in the regions and the suburbs, outer suburbs in particular, where every industry relies on low prices and certainty of supply, certainty of contracting. This is a bold reform that will deliver that. It's all about lower price and availability. The gas tax is about something else completely and, this is a much bigger reform than a gas tax.

HOST: All right, Minister, I appreciate your time today. Thank you.

AYRES: Thanks, Paul.