16 October 2017
Transcript - #2017195, 2017

Interview with Chris Smith, 2GB

SUBJECTS: ACCC releases draft report on electricity market; Turnbull Government’s plan for affordable and reliable energy; energy policy; Newspoll

CHRIS SMITH:

Treasurer, thank you for your time.

TREASURER:

Good to be with you.

SMITH:

Is the clean energy target dead or will it be dead sometime today?

TREASURER:

Well, Cabinet is meeting and these have been issues we have been working on throughout the whole year, Chris. So, I am not about to go and make any announcements at this point but what I can assure your listeners and everyone is that this is an issue that has had the full focus of the Government and what we want is more reliable power, we want more affordable power, and obviously to meet the sustainability of our whole system. That has been the wicked problem which the former Prime Minister would have described it as and that is what we are seeking to solve for and I think we have made an enormous amount of progress on this and in the time ahead we will be able to set out very clearly where the government will be going.

SMITH:

So, whose side of the argument are you on? Alan Finkel says the CET would bring prices down, Rod Simms is not convinced.

TREASURER:

I am on the public’s side who wants to have more affordable, more reliable power.

SMITH:

So, who is right?

TREASURER:

They have both made big contributions. What Rod Simms has shown today and I asked him to do this report. I commissioned this report earlier this year and I think what Rod has got a really good handle on is what has been driving the increase in the prices. We have had a very significant increase more recently on wholesale prices and we know why that is and it is because gas has been setting the wholesale price and there has been a shortage of gas and that is why he is right to commend the government for having addressed that with the big gas producers recently where we were able to get the contract agreement for supplying our domestic gas needs for at least the next two years. Now that is what the outcome that was needed and we have delivered on that. We have also delivered on working with the retail companies to address the other issue Rod also identified and has supported the Government on and that is to ensure people get on the best possible deal and have the information to help them to do that.

SMITH:

Because up until now, retail costs have cost you and I who pay our power bills, 26 per cent of the overall 63 per cent increase. That is a big chunk. So, you can force that down. What about network costs though, Treasurer? 40 per cent.

TREASURER:

Now, network costs are the big impact on this and as Rod has said in his report a lot of that got locked in because they were decisions that were taken over the last ten years and that under the previous regulatory system the transmission companies after being knocked back by the regulator got to have a second bite of the cherry on appeal and were able to claim victory and were able to build that all into your prices. Now, we have abolished that second right of appeal and Rod has commended us for doing that. It was the right call. We were the first ones to have attempted it and done it. So, there are three very clear actions that we have been taking now on top of that. We also need to ensure there is a lot of certainty about how people invest into energy into the future. One of the things I noticed though when I hear business people talk about the need for certainty they are asking for certainty about the level of subsidies they are going to be paid. Now, as Treasurer, you can imagine my interest in that topic and…

SMITH:

Enough is enough. The Newspoll survey today shows 58 per cent of voters don’t want to pay anything more to encourage subsidies but in particular subsidies for renewables and no more climate change subsidies either. Enough is enough.

TREASURER:

That result doesn’t surprise me. What we have also got to notice though is that the argument made by the renewable sector is that these things are becoming more affordable all the time and the prices are coming down. On that basis they are making the case as to why they are not needed.

SMITH:

They are defeating the fact that they have got their hand out.

TREASURER:

We have got to acknowledge that over the last 10 years where there has been a Renewable Energy Target, and to be fair that renewable target was brought in by the Labor Party, it was confirmed by the Coalition but we tried to get it down lower than it was, but nevertheless that is what was signed up to.

SMITH:

Under Tony Abbott?

TREASURER:

Under Tony Abbott, I sat in the Cabinet as well, I remember that discussion but all of that, that isn’t about cheaper power prices that is about subsidies for a renewable energy industry. So, that is an industry policy. That is not about cheaper power. I think sometimes those issues get a bit confused. What I am noticing, I have just returned from Washington for those meetings with the IMF and the whole show that goes on there every year and what I am noticing is if you look around the world Australia has natural advantages in a lot of these renewable energy sources that Northern Hemisphere countries don’t have. That is why they subsidise them more highly in those Northern Hemisphere countries.

SMITH:

They can’t rely on their raw materials but we should be able to.

TREASURER:

Well, we have as the Turnbull Government, an absolute view that we should use every bit of energy we have, every source that we have and we should use it to the full and we should price it properly. If you are a provider of wind energy and that is part of the system but if the wind energy provider says to you tomorrow I am going to deliver you this much power at 2 o’clock tomorrow afternoon – fair enough – but if the wind is not blowing you can’t. So, how are you going to produce and fulfil your contract for me? So, what we are keen to do and it was actually Finkel that first raised this idea, is that we should be pricing these intermittent sources of renewable energy properly. You price coal that way and it should be a level playing field for how you price these things and then the market will work far better than it has. We have been poking our fingers in this dam thing for long enough and now it would be good if we could just get back to a more settled, more simple policy, and that is what we are working towards.

SMITH:

Ok, 21 bad polls in a row for the boss, Malcolm Turnbull, last month we saw the Coalition counter-punching against Bill Shorten and I think trying to bust a gut to come up with ways to lower power prices etcetera. I thought he was on the front foot and he looked to be scoring some decent points. They are not showing up in the Newspoll. Is that debilitating for the team?

TREASURER:

No, that just means we have got to focus on fixing the problems Chris. That is what it means. Those numbers are exactly as you say they are and the government needs to – and will – deliver the solution that we think is the best way to deal with energy prices across the whole range of things. To grow the economy, to see people’s wages increase, all of these things are important things the Australian people expect us to deliver on.

SMITH:

And no whispers in the corridors about drafting Tony Abbott back into the position?

TREASURER:

No, rubbish. I don’t know who is suggesting it but I have never heard it and it is absolute rubbish. Nor is he seeking it by the way. He said that himself.

SMITH:

Well, he says the only way to do it is to be drafted and the only way for people to be drafted is for people like Scott Morrison and others to draft him.

TREASURER:

Not happening. What we are doing is focussed on the problems that the public expect us to solve Chris. That is how we started this discussion a few minutes ago. That has got our absolute focus. I am also concerned about the impact of this on commercial industrial users, the companies, the people listening to your program work for and their access to gas. I have been up in Cloncurry, I have been out in Mt Isa, I have been all around the country looking at the impact of what that gas shortage is having for commercial industrial users. Down on the South Coast of NSW, down there with the ethanol producers and so on, these gas issues are significant for them and there is only one side of politics, there is only one team that is trying to solve for those problems and we are doing it night and day and I think over the next little while the people will see the evidence of that and the good work that has been done.

SMITH:

Let’s hope that is the case because it is a big ticket issue at the moment. Thank you so much for your time.

TREASURER:

Thanks Chris.