Comment

John Hewson
Time to act on gas and ASIC

It’s a disturbing feature of our leadership over the past several years that major policy challenges have been allowed to drift, despite all evidence of their magnitude and urgency. This drift has been an important factor in the loss of trust in government, and in the dominance of issues such as integrity, transparency and accountability in the most recent federal election. In practical policy terms, these unaddressed problems have become so big that they will require dramatic policy responses, which may prove difficult to deliver. 

The Albanese government’s first budget was constrained by having to deal with issues that had been neglected for decades – such as aged care and disability care, childcare and energy costs – as well as waste in government spending. All this was also in the context of high inflation and the need for quite dramatic budget repair. These problems are mostly not of this government’s making, but the opposition was quick to dissociate itself from any responsibility and reluctant to offer any level of bipartisan support to deal with them. Indeed, Peter Dutton has adopted the arrogant Peter Costello smirk as he watches Anthony Albanese and his team struggle to respond to the mess that the Coalition deliberately left them.

Given the extent of policy drift during past decades, it was unrealistic to expect this first budget to have dealt with all the issues. But it can certainly be seen, as one of my colleagues described it to me, as stage one, “house cleaning” – laying the basis for more reforming budgets, starting next May and then throughout the rest of this government’s term.

Two issues that are still very much adrift have been a focus in recent days: the failure of the Australian Securities and Investments Commission (ASIC) to ensure effective penalties for corporate misconduct and, as the response to the budget has highlighted, the availability and cost of energy.

It is pleasing to see that the corporate watchdog will finally come under heavy parliamentary scrutiny. Indeed, two committees have committed to such a review, namely the senate economics references committee, chaired by Liberal Andrew Bragg, and the parliamentary joint committee on corporations and financial services, chaired by Labor’s Deborah O’Neill. Irrespective of which committee ends up doing the job, I suspect there will be forces beyond politics that drive the outcome. 

The specific focus of the planned review is ASIC’s capacity and capability to respond to reports of alleged misconduct. Pressure to conduct it was driven by a report by independent economist John Adams that emphasised, using ASIC’s own data, the paucity of its responses to reports of corporate misconduct. It should be recalled that the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in 2019, under commissioner Kenneth Hayne, had been very critical of ASIC’s performance and culture, specifically its basic approach in preferring to negotiate with the accused rather than to initiate judicial prosecutions.

A principal concern has been that this approach has resulted in a lack of accountability, and effective penalties, that has dangerously enabled bad corporate behaviour. 

The politicking that went on behind the establishment of the committees is itself noteworthy. An outsider might have assumed, given the intensity of the current political focus on integrity, driven by the result of the election, that it would have been a no-brainer for the major parties to latch onto this issue and run it hard. However, the government is yet to officially declare a position, and O’Neill  is operating as if it’s just business as usual for her committee. Bragg’s proposal isn’t an official stance of his party; indeed I have heard that his leadership on this issue has led to some backbiting. It was the Greens that supported him, with no sign of a politically motivated alliance between them and Labor. 

I’ve also heard reports that Shadow Treasurer Angus Taylor is opposed to legislation proposed by the Greens to impose civil penalties for banking misconduct. This would be quite consistent with the Coalition’s delay in calling the banking royal commission, and then their failure to embrace its recommendations with enthusiasm. 

High standards of integrity should apply not only to our politicians, who should be accountable to a long-awaited national anti-corruption and integrity commission, but to all our key institutions, including the Reserve Bank, the Australian Competition and Consumer Commission, and the Australian Energy Regulator. 

Ironically and somewhat disappointingly, the budget has been punished for its honesty in relation to the likely increases in both electricity and gas prices in the next few years. Unfortunately, the debate since the budget has been an unedifying blur, with deliberate obfuscation by the opposition and their media mates, the gas producers and the usual energy commentators. There’s been a fair bit of arse-covering but little light shed on a sensible path forward. 

This issue is a classic case of how government can do itself gratuitous harm by constantly ducking an issue, naively hoping it will somehow go away, or even solve itself. I am sure Treasurer Jim Chalmers would have been hoping for a more adult conversation that would crystallise as progress for the political system as a whole.

The Morrison government knew that power prices were about to increase significantly and consciously, by regulation, and delayed a report on energy prices until after the election, a time bomb for the incoming government. However, while Labor has made this point well, it now needs to demonstrate that it can deal with it. The opposition has been most unhelpful, trying to create the impression that the government should give cash handouts to those most affected and ignoring the inevitable inflationary consequences. This is irresponsible populism at its worst, and it makes no attempt to deal with the issue. There should be no doubt that the previous Coalition government had every opportunity to solve the problem.

Another annoying aspect of the recent debate has been the nonsensical argument that the shift to renewables somehow compounded the global effect of Russia’s invasion of Ukraine and the subsequent energy crisis, when actually it was the reverse – not enough renewables. While the invasion certainly did kick off increases in energy prices and global inflation, this argument ignores that gas prices in Europe and Asia have since collapsed, as much as 70 per cent from their highs in August. Indeed, there has been some oversupply, as the United States and others increased production.

Unfortunately, recent discussions about the solution have seen a lot of vested-interest advocacy and misrepresentation, ignoring the voluminous evidence as to what will work. It’s so easy to say, “just cap the gas price”, but experience tells us that price controls are unlikely to work, and they are likely to screw up future energy investment decisions. 

There are two batches of evidence and experience that should bring an air of reality to the discussion. Western Australia’s gas reservation policy has worked well, the evidence being the much lower gas price now and prospectively in the West relative to the east coast, with no supply issues. This experience also exposed the fallacy of the claims by the gas producers that such a scheme would discourage investment in the industry.

The second is the Bioenergy Roadmap commissioned and then ignored by Angus Taylor, based on a Deloitte study that suggested nearly a quarter of total pipeline gas could be biogas by 2030, and 5 per cent by 2025, with some 45 projects across the country ready to deliver 28 petajoules to the market. I am aware of projects now under way that can deliver biogas at the desired long-term price for hydrogen, namely $20 a petajoule. 

This is surely a no-brainer for governments wanting to also address waste and minimise landfill, needing a regional development strategy and committed to serious decarbonisation goals. Biogas would provide affordable and reliable supply to gas-dependent manufacturers and assist them in meeting their emissions reduction objectives. It was estimated that this would add $10 billion to gross domestic product per annum, much of it from regional areas, creating 26,200 jobs, reducing emissions by 9 per cent, and diverting an extra 6 per cent of waste from landfill. Moreover, biogas has considerable export potential.

This is not new information; it has been available to governments for many years. Other ideas aimed at improving the taxation of gas producers are also worthy of consideration. A revamped resources rent tax should be a feature of an effective tax package, and should be considered along with many other tax reforms in the next budget to help tackle the long-term challenge of structural budget repair.

This is not the time to continue a pointless and misleading debate. The government has enough evidence and experience to act, rather than let the situation drift further, beyond fixing.

This story was modified on November 5, 2022, to clarify the type of penalties sought by the Greens.

John Hewson was chairman of Bioenergy Australia and now chairs the Renewable Gas Alliance.

This article was first published in the print edition of The Saturday Paper on November 5, 2022 as "Catching our drift".

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