Australian 101: Rising Energy Costs

The Issue:

  • Business and household electricity and gas prices have increased sharply in recent years, with indications that this increase will continue.
  • According to Commonwealth Bank of Australia, power prices as measured by the CPI basket, are likely to lift by 15% on average across the country in the September quarter.

Community Response:

  • Economists note that the big rise in power prices is akin to a tax on households, and when paired with weak income growth and cost of living, will divert discretionary spending money.
  • The Turnbull government has delayed the decision on the clean energy target set by Chief Scientist Alan Finkel. Finkel’s target was part of a broader electricity market review in response to the business community’s demands for a policy path that will ensure reliability in the electricity system.
  • Energy and Environment Minister Josh Frydenberg has announced a scheme to reward households and businesses who cut their power use in demand times with benefits like bill rebates, free electricity days and other small incentives.

Future Outlook:

  • Electricity prices are expected to moderate in the next few years.
  • Gas prices will increase significantly in eastern Australia as the development of new gas export terminals tightens supply.
  • Proposals are in place to keep further prices increases in check, including further privatisation of networks, adjustments to environmental policies affecting wholesale energy, retail price deregulation and the setting of reliability standards.