18 October 2017
Transcript - #2017204, 2017

Interview with Neil Mitchell, 3AW

SUBJECTS: National Energy Guarantee to deliver affordable, reliable electricity

NEIL MITCHELL:

Federal Treasurer Scott Morrison.

TREASURER:

G’day Neil.

MITCHELL:

Ok, it’s a national energy guarantee, what’s the guarantee?

TREASURER:

The guarantee is that it’s more reliable, more affordable energy. And energy that meets our environmental obligations.

MITCHELL:

Do you guarantee 115 off power bills? $115?

TREASURER:

That’s the assessment of John Pierce has made, from the Energy Security Board. He’s being tasked to do further work on that as he indicated yesterday. But that’s his initial indication of what this specific measure will deliver, but as you know, the Government is doing many other things in this area. The gas delivery for domestic use, the retail initiatives we have pursued with the energy retailers, where people are already ringing up and getting better deals out of their retailers, that’s happening now. Of course, changing the regulations which gave poles and wires companies a free kick to jack up prices by gold plating their infrastructure.

MITCHELL:

So that $115 a year is a prediction rather than a guarantee?

TREASURER:

That’s what they described it as, and no one has said anything different.

MITCHELL:

As a prediction?

TREASURER:

It’s their assessment based on the best evidence they have, they’ve been tasked to do further work on that.

MITCHELL:

But they haven’t done the analysis yet?

TREASURER:

They’ve already done quite a lot of analysis but they’ll be doing more.

MITCHELL:

State Governments which are opposing it are saying the analysis is very weak and the consultation is non-existent.

TREASURER:

I think that’s a bit of an excuse to be frank. What we’d encourage the states to do, they set up the Energy Security Board. That was the recommendation of the Finkel Report that such a board be established to do this actual job. Now, they’ve gone away, the Energy Security Board, Kerry Schott has been around a long time, she’s got a lot of experience, she’s worked for governments on both sides of the political fence. She’s run large utilities so she knows what she’s talking about. They’ve come forward with the recommendation, not just for the Commonwealth Government, but for all the states and territories and I’d encourage them to look at it, engage the Energy Security Board and work through the issues and make a decision which is in the interests of the people in their state.

MITCHELL:

Some analysts are saying it could in fact force prices up, can you guarantee that won’t happen?

TREASURER:

I can’t see how that would happen and I’m not aware of any credible analyst who said that.

MITCHELL:

David Uren in the Australian.

TREASURER:

He’s a commentator. He’s a journalist. I’m talking about, John Pierce has run the New South Wales Treasury, Kerry Schott who has run large utilities, we’ve got the head of the AEMO, the head of the Energy Markets Organisation. These are the people who have come up with this. This is not the Government that’s come up with these numbers, they’ve come up with them. When you take out a subsidy Neil, this is what it comes down to, we’re taking the subsidies out of the system, so if I sell you something for $100, and let’s say there’s $5 of subsidy in it previously which you were paying for, if I take the $5 out, it’s got to be cheaper.

MITCHELL:

If it does cost retailers more, can you prevent them from adding it to the bill?

TREASURER:

I don’t accept that. I can’t see the situation where that occurs Neil, because the system is rigged to go the other way. That’s why they’ve done it this way.

MITCHELL:

The states have their own targets, their own renewable energy targets. Can they go it alone? You do need their approval don’t you?

TREASURER:

Yeah, but if a state goes it alone, and they want to hit an even higher target, well obviously they’ll be forcing the people in their state to pay more. We wouldn’t be making them do that, but if they did that, not only would they be making the people of their state pay more, the National Emissions Guarantee is worked out over the whole country, so they’d be giving Queensland and New South Wales a free kick and I don’t know why they’d want to do that.

MITCHELL:

You’ve got South Australia, Victoria and Queensland all criticising it, so they could go their own way, what does that mean, the whole thing collapses?

TREASURER:

That would mean people pay more for their electricity so why would they want to do that?

MITCHELL:

And the strategy collapses?

TREASURER:

If the states want to sabotage a process and make people pay more, then I don’t think at the next Victorian election that voters would thank the Victorian Government, not only for shutting down power stations and driving the coal industry into the ground, particularly brown coal, I mean this is the best hope that people who work in jobs that are attached to those sort of resources and industries have. Basically, the Premier in Victoria would be saying, you’re out of a job to those people in Victoria. I don’t think they’d thank him for it.

MITCHELL:

Do you have the power to coerce the states or not?

TREASURER:

This is how COAG works and this is how the Energy Security Board is recommending that this be adopted through the COAG process and we agree with that because that is what provides the additional certainty so, look, I think this scheme requires some time for people to get over the initial political kneejerk reaction, and to consider it carefully. I think the bullying and the sledging of the Energy Security Board members has been very unfortunate. But look…

MITCHELL:

Who’s done that?

TREASURER:

I heard the Labor Party in Canberra doing it yesterday. Jason Clare was basically impugning the motive of every single member of the Energy Security Board as somehow being on the drip of the Government. That’s just rubbish.

MITCHELL:

Bulling them?

TREASURER:

Yes. That’s what the Labor Party does. Victorians know that, they’ve been dealing with the CFMEU for years.

MITCHELL:

Can you at least guarantee that we’ll have secure power supplies this summer?

TREASURER:

Part of what was recommended to us is putting the energy reserve in place, and that’s what AEMO and others in the system are working to deliver right now. That’s the initial challenge that we have and we’re working with the State Government to achieve that now as we are in South Australia and other parts of the country. That is going to be a big challenge because we’re still dealing with the sclerotic system which is the problem and in the future what this does is, more of the energy, a much greater proportion of the energy that’s being used in the system will be contracted. What that means is, it’s been thought through, planned for, it will be ensured it can be delivered because it will be reliable, it won’t be a wind farm saying, next Wednesday the wind is going to blow and the power is going to turn up. There will be a contract which will say, well if the wind isn’t blowing, then I’ll provide you that power from another source which is reliable and we’ve already agreed the price. Because what happens now, is when that wind doesn’t blow, everyone pays more, because they have to pay the spot price. 

MITCHELL:

People listening are worried about two things, prices and reliability of supply. 

TREASURER:

Me too.

MITCHELL:

If the prices come down as you say, when?

TREASURER:

The assessment we’ve been given, by John Pierce, this scheme effectively comes in in 2020, but the reliability guarantee actually comes in earlier.

MITCHELL:

So the prices don’t come down for another three years?

TREASURER:

Specifically in relation to this initiative. As I said before, the initiatives we’ve done on gas, the initiatives we’ve done on retail, the initiatives we’ve done on stripping out regulation, all of that is having an impact now.

MITCHELL:

OK, and reliability, when will that improve?

TREASURER:

Reliability should improve as we get more contracted energy into the market. The plan is to get the reliability guarantee well ahead of the emissions guarantee. Look we would love to see that in place, certainly trialled and the recommendations to do that in South Australia first because that’s the place which is truly gone to seed when it comes to energy reliability. And we’ve seen that. And as you know that impacts Victorians because they’ve got to drag power across, on occasions, the boarder. That’s where they’ve recommended we’ve really got to move most quickly on reliability.

MITCHELL:

When are we likely to see that?

TREASURER:

We’d likely see that in place, at least in a trial range in South Australia by late next year.

MITCHELL:

So we’re stuck with this summer.

TREASURER:

That’s why we’ve got a different set of plans to deal with this summer, and to be fair, we’re working closely with the Victorian Government, the South Australian Government and others, practically, just to sort that mess out.

MITCHELL:

There have been doubts over the Lorne power stations, will this save them?

TREASURER:

I think, whether it’s Lorne, Loy Yang or in New South Wales, Liddell, or any of these other stations, that are closer to the end of their lives, this is the best opportunity there will be to ensure that there is an investment incentive effectively through the certainty to keep those stations running.

MITCHELL:

Do you reckon this can save the Government?

TREASURER:

It’s about saving people’s power prices. And if we’re able to deliver for people, I think we have a stronger position at the next election to demonstrate yet again, a difficult problem, applying ourselves to the solution, and deliver it. Now we’ve done that on everything from boats, to I’d say on this, we’re delivering a real, genuine solution on power.

MITCHELL:

Some of those commentators you’re talking about saying it’s your last chance to actually turn things around.

TREASURER:

Yeah they say that pretty much every week Neil, I mean the number of times I’ve driven to Canberra on a Sunday night and someone said, ‘Oh the Turnbull Government is over this week’. Well we’re still here, and we’re still solving problems and we’re still getting stuff done and we’re in the middle of the term and we’ll just keep doing that and I think by the time we get around to the next election, on this issue for example, people can pay higher prices under Bill Shorten who wants $66 billion in higher subsidies, in more subsidies, under his emissions reduction target – compared to zero under us.

MITCHELL:

This needs to work for you doesn’t it?

TREASURER:

Everything needs to work. Of course this needs to work. This is why we will take this through the COAG process and we will continue to advocate for this because it’s the right answer. Alan Finkel came out and backed this yesterday. Tony Wood from the Grattan Institute, these are organisations which I wouldn’t call a conservative think tank. They’re backing these initiatives in, and the only reason I can think that the Labor Party will not come to us on this is, A) political pride because they like having a fight over anything, to ride their own political advantage. Or B) they’re just at the altar of ideology on renewables and want to just keep delivering subsidies that you have to pay for, and your listeners.

MITCHELL:

This is important, is Tony Abbott happy?

TREASURER:

He expressed some reservations yesterday. But he can speak for himself.

MITCHELL:

Is this his policy?

TREASURER:

No. It’s the Energy Security Board’s policy and last time I looked, he wasn’t on it.

MITCHELL:

Has he influenced it?

TREASURER:

No I don’t think he would have. The Energy Security Board, the people I’m talking about here Neil, they have given frank and fearless advice for governments all of their careers on both sides of the political divide, and it seems the Labor Party’s pride is making that advice pretty hard to digest at the moment because they have a big political cough in their throat.

MITCHELL:

Treasurer, just finally and this is related because this is about cost of living as much as reliability of power, wages aren’t growing, spending is coming back. When will there be wage justice in this country?

TREASURER:

I don’t know about wage justice, I want to see higher wages. That’s what I want to see?

MITCHELL:

When can people look to that? Because wages are running behind inflation, that’s why I used the emotive work justice, people are really struggling, when can they look for something better?

TREASURER:

This is the biggest challenge I think we’ve got in the economy. We’re forecasting that over the next two to three years that we will see wages pick up as the hangover from the mining investment boom, which has had a very big impact on wages, and when we see the last remnants of that work its way out of the system we do believe we’ll see an increase in wages. But the other thing that is necessary, to drive wages up in this country, is firstly, you need more investment from business. The clear evidence from the work that we’ve done, means the more investment there is in the business, the higher the wages are. And that’s why we’ve cut taxes for businesses up to $50 million in turnover, and that’s why we wants to get those taxes down for the rest of business, because that supports wages. The second thing Neil, is productivity must lift, and the Productivity Commission I’ve tasked to do a five-yearly review of productivity, they’ve handed me that report. They’ve suggested a direction we need to follow and I’ll have more to say about that in the near future.

MITCHELL:

So what do people do in the meantime, tighten the belts?

TREASURER:

In the meantime, they do what Australians have always done, they work hard, they do the best for their families, they go out there, they try and make their businesses work better, and as a government we are doing everything to make that load lighter.

MITCHELL:

Belt tightening is inevitable though isn’t it?

TREASURER:

I actually think there are better days ahead for our economy. I said that in the Budget. We’ll see growth lift in this financial year, up from 1.9 per cent forecast, to two-and-three-quarters. We will see further improvement in the job market. We’ve already seen last year, 325,000 get a job. That’s the strongest growth jobs have had for some time, and in fact for the six months to the end of July, we had the highest growth in full time jobs in 40 years. So we’ve seen a real improvement in the jobs market, so that’s tightening. We’ve seen an improvement in investment, particularly in the non-mining sector. That’s encouraging.

MITCHELL:

When does the average person get a dollar extra in their pocket?

TREASURER:

We’re already seeing higher productivity in particular sectors where the labour market has tightened, like people working in IT Security, or parts of the construction sector. They actually already have seen some higher wages. And also in the medical sector, but as the economy continues to improve we will see, I think, those wage improvements for workers and that’s what everything we’re doing is designed to achieve.

MITCHELL:

Thank you so much for your time.

TREASURER:

Thanks a lot Neil, good to be with you again.