27 September 2017
Transcript - #2017189, 2017

Interview with Luke Grant, 2GB

Subjects: Turnbull Government’s plan for affordable and reliable energy; Final Budget Outcome; NRL grand final

LUKE GRANT:

Treasurer, good afternoon. Thank you for your time.

TREASURER:

Happy to be here, Luke.

GRANT:

Good on you. I don’t know what to make of this but it would appear the gas companies from what they are saying, and I understand the Prime Minister will speak shortly as well, they have agreed to supply enough gas to keep us all warm and well lit up, apparently.

TREASURER:

That is the outcome of today but I will leave it to the Prime minister to go through the details of that. It wouldn’t be appropriate for me to make much more comment than that. It has been a very constructive meeting. We have got to remember what the goal here is. The goal here is to make sure that industrial users, commercial users of gas, and they make up more than half of what gas is used for in this country on the East Coast. So, it is not just gas powered generation for electricity or what we use in our homes. Industrial users are incredibly important and the people who work in those businesses depend on the supply of this gas. So, what is necessary is that those users can get access to that gas at a fair price, consistent with the international prices and on reasonable terms for the period they need it to just keep the doors open and run their businesses and I think we made a lot of progress on that today.

GRANT:

In relation to this other idea or ‘an’ other idea – I know there were plenty of them, of a gas reservation policy. We have heard members of the federal opposition almost goading you into pulling the so-called trigger. Can you just explain first off what this trigger is and what is your view about reserving enough supply of gas and whatever else we need so that people are able to conduct their lives?

TREASURER:

Well, the gas security mechanism, that is what it is called, it’s an export control, so it restricts what can go overseas and when the Labor Party were in power they basically allowed gas to just go offshore and they didn’t put anything in place to ensure that it could stay here in Australia. So, that is the problem we are working to fix and to solve. So, we put in place what is called the gas security mechanism. If we need to use it, i.e. if we are unable to ensure that we get a guarantee of supply of gas then we have that available to us. It is a bit like old Teddy Roosevelt used to say, you speak softly and you carry a big stick. Well, that security mechanism is a big stick but the better outcome is exactly what I just said before. If our businesses and our industries can get it at a reasonable price which is consistent with what others pay around the world – that is the outcome. So, that is what we are focussed on. Bill Shorten is running around like some trigger-happy hillbilly just wanting to shoot off into every which direction. Now, that is not going to solve any problems. It may fill him like a big machismo and all the rest of it. Pull the trigger, pull the trigger – but frankly the guy is just posing.

GRANT:

Let’s hope he is not saying that in South Korea and Japan, where he is right now.

TREASURER:

Absolutely.

GRANT:

Is a reserve policy very definite? It sounds like it mightn’t be that different to this gas security mechanism.

TREASURER:

No it’s not. In practical terms it is designed to achieve the same thing and they have one of those in Western Australia and they don’t have those issues in Western Australia like we have on the East Coast. The other big issue is obviously making, I mean that deals with problems in the short term, but the real longer term problem, Luke, is that we have gas supplies here in New South Wales, in Victoria, out of the Northern Territory. I mean Queensland didn’t go down the path of New South Wales and Victoria. The then Liberal National Government played a pretty big price for that actually. They got run out of office because they were holding strong on ensuring gas supplies for Queensland. In the other states they didn’t go down that path sadly. If you go out in the Pilliga and Narrabri there is a very big gas field out there that can overwhelmingly supply the needs here in New South Wales. We have to bring gas down from Queensland, and Victoria has got to take it even further and that is why you are paying more for it in New South Wales and Victoria.

GRANT:

What about that gas that is produced above the contract amount. So, I was speaking before to a gentleman from Reserve Our Gas, I think he is the head of the AWU, and I should remember his name, and he said, ‘you know what, if we use the gas that was produced above what the contracts suggest we have to send overseas,’ Daniel Walton it was, ‘we don’t have to drill anywhere’.

TREASURER:

Well, that is not true actually. That is actually not true. What you want is more gas. The more supply of gas you have got the better price you are going to get. So, that is an argument just for keeping the gas market fairly tight. Yes, the gas that was going to go offshore, over and above what their contracts were to sell to offshore, that is what we have been able to make the progress on today. There is a story in the Tele today…

GRANT:

Turning back the gas boats.

TREASURER:

Yes, well 54 petajoules, which is a quadrillion joules – it’s a lot of gas. That was what the market operators told us would be absolutely required for next year. And a maximum of about 107 with a hotter summer and a whole range of other events that occur. That was a sort of reserve requirement on top of that. So, 107 with all the rainy days, or I should say all the days the sun doesn’t shine and wind doesn’t blow and all that sort of stuff, an absolute requirement for 54. Now, there was gas going offshore to 63.4 petajoules over and above those contracts. So, we have been able to make a lot of progress on that and that is about 15 boats that are needed to stay here – the equivalent thereof – and I think we have made a lot of progress on that today.

GRANT:

I want to get back to the economy in a sec but a point that a lot of people have made today. And you see this in the Middle East in terms of petrol and oil. They have got abundant supply, they ensure that the people get to have access to that supply and they pay very cheap prices because in the end the whole community own the resource. Shouldn’t we expect, to some extent Treasurer, an appreciation that it is Australian gas, it is owned by all of us, we should get it really cheaply because let’s face it, it’s here.

TREASURER:

The short answer is yes, and one of the reasons why in the US gas is so cheap is because they didn’t go down the path that we have here, where we have locked up our gas reserves. Over there what they do is they have a reasonable compensation for landholders there and I think those issues are not insoluble here. I understand up on the north coast of New South Wales and the southern highlands and parts of some rich agricultural areas, why people would have concerns about those areas but in other areas where there aren’t those concerns why are we locking it up? We are just costing pensioners more on their electricity bills by doing that and those who have been in the big cheer squad for the moratorium. Well, the cost of that is now starting to be seen for householders and for businesses. When you do these things it doesn’t come without a cost.

GRANT:

Of course. Did we get more money in or did we spend less money to have that improvement in the budget position?

TREASURER:

We certainly spent less. The 2016-17 Budget when I got on my feet I said at that time we would be spending $445 billion and we ended up spending $439.4. Just in the last few months, since May, I said we still thought we would be spending $440 billion and we came in at $439.4. So, we have spent less over the course of the year and there has been a $5 billion less on social services over that year and in the last few months there has been an improvement in revenues up from what we thought in May. If I go back to what I first announced in 2016 revenues are actually still down a bit. So, keeping expenditure under control and cutting your cloth to meet what you have got has been the key to bringing in this result.

GRANT:

Beauty. You are doing a good job. Thanks for your time.

TREASURER:

Thanks Luke. And it is only three more days that we get to be premiers down there in the Sharks. I am backing the Cowboys this weekend.

GRANT:

I’m with you. I’m with you.

TREASURER:

I think it will be huge for the Cowboys. What a story. But the Sharks couldn’t get there so good luck to those Cowboys.

GRANT:

Enjoy these last three days.

TREASURER:

We will!

GRANT:

Good on you. Cheers mate.

TREASURER:

See you later.