Interview on AM Agenda with Laura Jayes

LAURA JAYES, HOST: Let's get back to Canberra now. Tim has sprinted up from his media conference in the blue room talking about gas and he's in the studio. Very nimble of you Minister. Thanks so much for your time. 

SENATOR TIM AYRES, MINISTER FOR INDUSTRY AND INNOVATION AND MINISTER FOR SCIENCE: So, I move pretty fast for a big bloke Laura. I didn't want to miss this interview.

HOST: We’ll give you that. Okay, so ‘up to 20 per cent’ now I got to say Tim, this does sound like a bit of a dodgy white goods sale. You know, it sounds good in the ads, it's disappointing in reality.

AYRES: I just don't know how you could say that, Laura. This is – for the first time in Australian history, you know, we have been a major gas exporting economy – the only one in the world that doesn't have a gas reservation scheme. This is a landmark Albanese Government reform that will deliver a lasting impact that will secure Australian gas for Australian industry, Australian households and for what's required in the electricity system. It will deliver an oversupply, a modest oversupply into the gas market every day of the week. That will make gas prices as low as they possibly can be. Now lots of options were put to us by elements of industry over the course of the last few months. We have chosen to maintain that modest oversupply because we have made a decision as a government to put the interests of Australian households and Australian industry and certainty for the gas production sector at the core of our policy position.

HOST: But you said it would be 20 per cent. Now you're saying it's up to. I mean that could mean 5 per cent. So, what did you get wrong when you announced this policy? Were you too hasty?

AYRES: Well, 20 per cent is what the legislation says. And there will be requirement every year to make sure that there is more than sufficient gas. We've been –

HOST: Does the legislation say 20 per cent or up to 20 per cent?

AYRES: Well, the legislation will deliver an oversupply. 

HOST: I know, but what does the legislation say?

AYRES: A reservation scheme that secures 20 per cent of Australian gas. Now obviously there's an annual calibration to make sure there's no point in any given year kind of over supplying gas because it's got to go somewhere.

HOST: Sure, but why don't you put a floor on it though?

AYRES: It's a difficult question. Well, we're not into floors here. This is a deliberate, groundbreaking approach, which means that Australia continues to be a resources superpower for the world, but we're reserving our gas – under the ground and under our waters – for Australian industry and for Australian households. This is. It's not going to be universally popular. There's a whole lot of industry of gas industry that would prefer that –

HOST: But it sounds like a watering down of what you announced just a couple of months ago, then you've gone out to consultation and then, you know, these two very critical words up to make all the difference.

AYRES: No, no, this is a groundbreaking reform that will set the structure for the gas sector and in particular for the heavy industry that of course, in my work I'm so focused on. Making sure that we have the lowest possible prices. We've listened carefully to heavy industry here. They have had a voice at the table and a government that's prepared to take action to deliver real change for blue collar jobs and for heavy industry. And of course, this reform matters for Australian households as well.

HOST: Well, who determines what each exporter has to provide?

AYRES: Well, there's a wall of detail there, Laura and the reason there’s so much detail and complexity –

HOST: Please give it to me. 

AYRES: Well, no, I want you to keep your, your viewers. But, but the reason it's complicated is because –

HOST: Why is it such a question who decides what exporters provide?

AYRES: Let me answer the question that you've asked me and I've just asked myself, Laura. The reason it's complicated is because it would have been very simple if governments had done it in the early 2000s the way that Western Australia has.

So, we've had to retrofit a system in the Australian national interest. And you know, as I said at the press conference, I worked in Australian manufacturing as a trade union official for many years before I came into the Parliament. I watched Australian capability going offshore. An inchoate, chaotic market system that wasn't calibrated in the Australian interest. We are fixing that. We are fixing that for Australians today. And just as importantly for a Future Made in Australia we are fixing it for the future. The lowest possible energy cost is a design feature of our Future Made in Australia program for Australian industry.

HOST: Who decides?

AYRES: And while there are different – well, the, the AER. The legislation sets the framework. The AER plays a role in setting you know, assessing demand in any given year and making sure that every day of the week that there's an oversupply that puts downward pressure on prices.

HOST. So, why would any provider, if they're not forced to provide anywhere near the 20 per cent, if they don't have to?

AYRES: Well, everybody in the Australian gas market will have an obligation. Every state, every territory that's got gas production will be engaged in this process. This is a whole of Australia effort. When nobody escapes the obligation, it is a heavy obligation. Be really clear – it is a heavy obligation. 

HOST: Not if it’s up to 20 per cent.

AYRES: It's a very heavy obligation on our gas production sector. We understand that. We, of course, we've listened carefully. We've gone through a process that's been pretty public and pretty open. Like we could have done this in private, on the back of an envelope, like previous governments have done. We've done it in a way where we made an announcement before Christmas. We further refined the scheme.

HOST: Hang on.

AYRES: Early in the year –

HOST: When Labor first came in, you were given three options on gas and you took the path of least resistance. So, you know, you can't blame previous governments exactly for this. A couple of months ago, we've had many conversations about this. You know, there's been a parliamentary inquiry into gas, famously. You said this was about price. So, the bottom line here, will Australians be paying less for gas?

AYRES: Australians and Australian heavy industry will be paying less for gas as a consequence of this scheme. 

HOST: How much less?

AYRES: – reserving Australian gas oversupply of gas for the Australian market. When we came to government, gas was $60 a gigajoule.

HOST: And what are you projecting it will be because of this policy?

AYRES: Well, we've listened very carefully to heavy industry in particular at the kind of prices and the certain framework, what is the investment horizon in 2035 like? Some of these big investments take time to build –

HOST: But how much cheaper, Tim, if you will? How much cheaper will gas be?

AYRES: It'll be much cheaper. Industry's been what they say they require. Well, what I don't do is set a value because the risk is that becomes the floor. I want the maximum downward pressure on prices. That's why we are providing legislation –

HOST: But this is your policy. You're telling it will be great for Australians. You're telling me that you haven't got any idea how much cheaper gas will be for Australians?

AYRES: Oh, we have done the work. We have done the work.

HOST: Is it 2 per cent or is it 20 per cent or is it 50 per cent cheaper?

AYRES: We've done it carefully with industry on both sides of this argument. 

HOST: Do you not know?

AYRES: We’ve brought industry together –

HOST: Do you have a –

AYRES: We are very clear. We are very clear that this will put downward pressure on prices. Industry, as I said, has been really clear that they need to see prices around the $10 mark.

HOST: Okay. Around the $10 mark. Okay. All right. We're getting somewhere here. Tim, how much cheaper is that from where we are now?

AYRES: Well, Laura, there are a heap of factors that influence gas prices –

HOST: Okay. What are prices now?

AYRES: What we are doing is a structural reform. We don't pretend to be, you know, managing the international circumstances. What we are doing here is a structural framework for Australia. 

HOST: Is $10 the goal, is that what the aim is?

AYRES: Well, Laura, we want to get where industry needs the gas market to be in order to deliver the investments in the future. Now, the reason I'm being imprecise about price here is because that has a market effect itself, Laura. Like, we're a responsible government. I don't want to set a floor. We're not in the business of setting a floor or setting a ceiling. What we're doing is a structural reform that imposes a very heavy obligation on the gas sector to provide lowest possible cost gas for Australians. And that's what this does.

HOST: One quick question, final question on this, because it's all about timing, right? From this slight delay in the policy actually kicking in, to me, it seems like uncontracted gas isn't going to be available till 2030, is that right?

AYRES. So, there's a series of steps here. Legislation is enforced next year. Obligation requirements applies in the beginning of the year after that. There are some practical issues there in terms of cargoes and how they are ordered. That is a practical question. We have listened to that. Contracts come off steadily over the course of the period between now and the early 2030s, early to mid-2030s, what that means is –

HOST: Okay but no effect till 2030?

AYRES: Oh, no, Laura. This imposes the obligation from the very first moment that it can. 

HOST: So, 2028.

AYRES: It means that investment decisions being made both on the production side and transport, and also on the industrial investment side. I have seen in my work, firms change their investment decision making because what this scheme offers. Even in our early announcement – confidence in the Albanese Government delivering this reform has caused more buyers, more investment in Australian industry. These are landmark reforms that, of course, will increase in their delivery over time. But, gosh, you know, this is important work for Australia. We are getting on with it. It's the Albanese Government delivering real change in our energy market in a way that will have practical effects. Yes, for households, but in my area of activity or heavy industry. And that will deliver good blue collar jobs in the outer suburbs and the regions of Australia. And that's why I'm so squarely behind it.

HOST: Tim, thank you for your time. As always.

AYRES: Good on you, Laura.

HOST: We will see you soon.