ROBBIE BUCK:
Scott Morrison is the Federal Treasurer and joins us this morning. Good morning.
TREASURER:
Good morning, good to be with you.
BUCK:
Ok, the Government yesterday was spruiking these savings of about $115 annually on average for consumers starting in 2020 but we’re seeing there’s not a great deal of detail on the modelling. How are you claiming that?
TREASURER:
That’s the express advice from the National Energy Security Board which was set up as a result of the Finkel report by COAG and that Board was set up to advise governments – not just the Federal Government – but all state and territory governments. And they have advised in their letter to us that that is their assessment based on their analysis of other systems, and John Pierce who is the key author of that is the person who’s made that assessment, and John would have to be arguably one of the most credible economists on this topic anywhere in the country.
BUCK:
There are questions about whether the modelling can be seen at this stage though aren’t there?
TREASURER:
What we have is his advice and that was all made available yesterday, but equally, John made it very clear that he’s been tasked to take further analysis and further modelling as they take that proposal forward to COAG. But I make this point too, Robbie, this is just one of many things the Government is doing on energy. That’s the assessment of that particular item but on retail discounts, for example, we know of cases where people are ringing up and getting a 20 per cent discount on their bills now.
BUCK:
Yeah, but that’s recommended by Rod Sims from the ACCC and that’s to do with the retailers. Let’s talk about…
TREASURER:
It’s all part of the same package.
BUCK:
Yeah, ok, let’s talk about the National Energy Guarantee and about how this is going to work. You’re essentially putting the onus onto the retailers who will then have to provide the energy mix that you’re mandating. Take us through how it’s going to work.
TREASURER:
We’ll start with the environmental safeguard first. The emissions reduction target for the Government is 26 per cent and basically, the retail company will purchase a portfolio of energy which back solves to meet that emissions output for meeting that target. Now, our target’s 26 per cent, the Labor party’s target is 45 per cent. Whatever your target is, that is what is going to set what that emissions guarantee is going to be at. On the reliability – what I call a back solve – is that the energy market operators and the other regulators will determine what the level of reliability is required in the system, and then they will make that assessment and will advise the retailers and then the retailers go and contract to meet that as well. So, what you end up having in the system is greater certainty and less volatility because there are clear things the retailers are vying towards and they’re finding the lowest cost way of doing it and there are no subsidies in the system pushing up the prices.
BUCK:
Ok, it does mean though, doesn’t it, that there will be less renewable energy in the mix than what was to be expected with Alan Finkel’s clean energy target? I think he was estimating around about 42 per cent under his target and you’re suggesting it’s going to be under or around 30 per cent?
TREASURER:
It means we meet our obligations, we meet our Paris target. That’s what we’ve committed to do. We haven’t said we’re going to achieve 45 per cent which is what the Labor party’s saying. That’s why there’s to be a $66 billion bill, electricity bill, for going down that higher emissions reduction target. If you want to have a higher emissions reduction target like Labor does then you’re going to push up prices considerably and that’s what this model actually exposes.
BUCK:
You still have a long way to go convincing some of the states. The Labor states aren’t particularly enthusiastic about it, we’ve heard from the Premier Jay Weatherill from South Australia:
[EXCERPT] JAY WEATHERILL:
We have a Prime Minister who now believes in nothing. We have a Prime Minister who is paralysed by vested interests within his Party room. We have a Prime Minister that cannot deliver a clean energy target and has now delivered a coal energy target.
BUCK:
You’re going to need to get those states on side. It doesn’t sound like it’s going to be an easy job for you.
TREASURER:
The Energy Security Board which was set up by – including Jay Weatherill who adopted the recommendation fully to set up the Energy Security Board – the Labor party across the country welcomed the appointment of these very distinguished individuals. But it seems when they come out with something that challenges some of the ideas that some of these Labor Premiers, and indeed the Labor party in Canberra have, they go rogue on them. They start bullying them, they start accusing them of being partisan and giving the Government advice it wants. They were pretty ugly on people like Kerry Schott who is the Chair of that Board. Kerry Schott and John Pierce, they’ve worked for governments on both sides of the fence. In fact, most of the occasion – John Pierce was a Treasury Secretary to the Labor government in New South Wales in our home state, and he’s held in high regard. But what I don’t understand – whether it’s from Jay or whether it’s from other Premiers – is why would they want their industry, their householders to pay more for their electricity by imposing subsidies that are not needed to meet our emissions reduction targets? Why would you want people to do that?
BUCK:
I’m sure that debate can be taken off in a few different areas. Let’s stick to what you’re proposing from yesterday, and at the heart of it, is the Government removing itself from energy policy? The PM also said yesterday that it means no more industry policy, no more picking winners, but simply ensuring a reliable energy system to keep the lights on. Is that an admission that the Government has vacated the policy field in this area?
TREASURER:
No it’s a confirmation that the Government has a clear energy policy which provides certainty for investors to invest in new supply of energy into the market to ensure that people, businesses, families can get lower prices, and that we no longer have subsidies that are no longer needed. The reason you don’t need the subsidies anymore is because, as the renewable sector have said, the prices of renewables are coming down, and when the prices come down, that means they can compete on a level playing field, and they don’t need to be propped up. This is a bit like clearing away the cholesterol from arteries to make the blood flow more freely through the system.
BUCK:
Ok, I haven’t seen that analogy before…
TREASURER:
But that’s how it works. The subsidies are cholesterol on the system and they’re not needed.
BUCK:
Alright, we’ll take that analogy. We have heard from a lot of politicians, a lot of federal politicians standing up in the last ten years and saying, “this is the energy mix that we’re going to have in the future, and this is going to be the solution that we’re going to see.” Do you really feel like that the National Energy Guarantee is going to be the fix that we’ve been looking for in the last five years?
TREASURER:
I believe it is and it’s not just me who’s saying it. We have had the Australian Industry Group’s Innes Willox say it delivers the certainty. The same from Jennifer Westacott from the Business Council who said this is the certainty we need. The Australian Chamber of Commerce and Industry has made similar conclusions. You need the investment certainty for people to invest in new supplies. Now, the best supplies that are going to be most favoured under this system, which is a level playing field system, are those that are both renewable and reliable. Those types of outcomes are obviously going to be more prized and what the Energy Security Board has belled the cat on is that for years and years there’s been an industry policy about the renewables industry which has been subsidised by customers, by households, by businesses and that’s not about lower energy prices, that’s just about creating a scaled industry. That is being achieved and what they’ve come up with is to say, “well, those types of subsidies are no longer needed” so they can compete in the market, they can compete on their own two feet as they should and the energy security mix we’ll have in the future will be purely dependent on meeting our emissions reductions targets and on guaranteeing the reliability of supply, which is what Australians want: lower price, more reliability, meeting our environmental commitments.
BUCK:
Ok, we’ll see if it is the fix we’ve been looking for. Federal Treasurer Scott Morrison, thanks very much for your time this morning.
TREASURER:
Thanks a lot, Robbie. It’s good to be with you.