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No end to soaring electricity prices

By Brendan Pearson - posted Thursday, 20 February 2014

There is a tombstone in an English churchyard with the following six word epitaph. "I told you I was sick."

As the number of closures in the manufacturing and minerals-processing sector grows, it is worth reflecting on how and why the repeated warnings from these sectors about the debilitating impact of steadily higher energy costs were ignored.

Less than a decade ago, Australia enjoyed the lowest energy costs in the developed world. It was an intrinsic part of our comparative advantage as a trading nation. But today, that advantage has largely gone.


As a result of the carbon tax, the Renewable Energy Target (RET) and a range of other energy policy interventions at the federal and state government level, Australia now has some of the highest electricity costs in the developed world

Household electricity prices have increased by more than 110 per cent in the last five years, and are projected to increase another 7 per cent in 2014-15.

Australian businesses – which account for some 70 per cent of total electricity use in Australia – have experienced an almost 80 per cent increase in prices since 2009 and there are more rises on the way.

The causes are not hard to find.

The carbon tax accounted for 16 per cent of the electricity bill for a typical large industrial user in New South Wales in 2012-13. In 2013-14, the carbon tax added an estimated $6.4 billion to the nation's tax bill. That's equivalent to a 10 per cent increase in company tax revenue in a single year.

Defenders of the carbon tax often point to schemes like the Californian emissions trading scheme as examples of comparable effort by other nations. But we should not forget that Australia's carbon tax raised the same amount of tax in its first 6 weeks as the Californian scheme is projected to raise in its first 2 years.


Official estimates suggest that the Renewable Energy Target will generate a transfer of $20 billion from householders and industrial users by 2020.

We have turned an economic strength into a weakness, and are beginning to feel the consequences. Across the Pacific, by contrast, the United States has turned a weakness into a strength, and is seeing its manufacturing sector expand rather than contract.

Meanwhile, in the European Union - which Australia mistakenly adopted as a model for its energy policy - the de-industrialisation is accelerating.

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This article was first published in The Australian.

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About the Author

Brendan Pearson is chief executive of the Minerals Council of Australia.

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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