It’s not President Trump’s corporate tax cuts, or even the retailer-busting arrival of Amazon to these shores that poses the real and present US threat to the Australian economy and could be the final straw for much of our industry and its employees. It is the collapsing cost and soaring supply of cheap energy in the US that stands in horrific contrast to Australia’s chaotic volatile energy price rises and unreliability. While Trump’s tax cuts do put pressure on Australia to reduce our current uncompetitive company tax rate in order to save private sector jobs, the Labor/ Greens rousing rhetoric of ‘No tax cuts for millionaires and multinationals’ will bring the inevitable Senate defeat for any governmental attempts to fix this problem.
It is vital that a better fate befalls any resolution of what Australia’s chief competition regulator Rod Sims describes as ‘Australia’s largest economic challenge—energy affordability’. As the CEO of the Australian Competition and Consumer Commission recently told the Australian, continually increasing high energy prices, that have already seen jobs lost and investment reduced, will result in more plant closures and job losses. Australia’s abundant low-cost energy that used to be the biggest competitive advantage of Australian businesses has now become ‘our biggest source of competitive disadvantage’. Already there is evidence of manufacturers considering off-shoring their activities, others going to the significant expense (like Telstra) of providing their own alternative energy sources and yet others changing their production schedules to operate at night to avoid peak power rates. The ACCC is to recommend by June measures to resolve the energy supply crisis (both in electricity generation and natural gas) and cut costs.
But don’t expect the Turnbull government to get any support in its fight for cheaper and more reliable energy from key local energy giants like coal-miners BHP and AGL who are too busy making a quick quid out of Australia’s self-inflicted energy shortages to interrupt their concentration on virtue-signalling about what they regard as far more significant issues (of major concern to their shareholders?) like climate change and gender. As a shareholder in BHP, I am not alone in strongly objecting to BHP’s formal embrace, in last month’s 22-page declaration, of greenie activist opposition to the need for Australia’s energy policy to prioritise reliability and affordability rather than BHP’s CO2 obsession. This, along with BHP’s opposition to any campaigning for the use in Australia of HELE coal- fired power stations that are proliferating in our region, is the basis for its bully-boy threat to withdraw its membership (and its $1.86 million a year) from the Minerals Council of Australia that it had once found so useful in defeating the Rudd government’s mining tax. Threatening to take its bat and ball and go home, BHP has demanded that MCA refrain from policy activity or advocacy on energy or climate policy where BHP has a different view. This no matter that the other MCA members, including majors like Rio and Glencore, strongly support, such as the focus on energy reliability and affordability – as do all of Australia’s main industry groups. ‘BHP will review its membership of the MCA if the organisation has not stopped such activity within the next 12 months’. Despite this threat and after BHP successfully removed MCA’s pro-coal CEO Brendan Pearson, the MCA has nevertheless asserted that it ‘will continue to be an active participant in energy and climate policy debates on behalf of all its member companies’.
As for AGL, its rejection of the Turnbull government’s request to extend the life or sell its ageing Liddell coal-fired power station, means that the government must rely on the company’s promise that, after Liddell closes in 2022, it will make up the 1,000 MW base-load despatchable shortfall by a combination of the (subsidised) renewable alternatives it proposed in a submission last month. AGL, whose power generation is currently 86 per cent coal-fired (and will remain heavily dependent on coal for at least another 30 years) profits heavily as a result of power shortages, so a failure to meet its promised target could prove quite rewarding to AGL – and expensive to consumers.