Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Friday, 17 August 2018
KIERAN GILBERT: Good morning, welcome to the program. First today, the Prime Minister is not ruling out a heavy handed intervention in the energy market. A Government source has told me that look at what we did on gas prices. Don’t think that we will hesitate before doing something similar to the big electricity companies to force prices lower. Quote, if we need to use a big stick to lower prices, we will use a big stick to lower prices. The Government is considering a crackdown on how companies bid into the wholesale electricity market and secret contracts between different players. My understanding as well that the Government is also interested in whether there needs to be closer scrutiny of energy companies buying and selling electricity internally between their own generation and retail companies at inflated prices, which then pushes up the power price for the everyday consumer. Now my understanding as well is that changes are under consideration which would shine a light on the contracts gentailers as they are called, to ensure transfer prices put the consumer first. Let’s go live to the Finance Minister and Leader of the Government in the Senate, Mathias Cormann. How can the Government achieve that in terms of those gentailers as they are called, generators and retailers, to make sure that the tough words are matched with action in that sense and people get a bit of relief in their power bills?
MATHIAS CORMANN: That is the conversation that is going on at the moment. The Prime Minister has been reaching out to those colleagues who expressed concern in relation to aspects of the National Energy Guarantee package earlier in the week. Our concern, all of us in the Coalition are united in our commitment to bring down the cost of electricity, to improve affordability and reliability. It is well understood that the National Energy Guarantee is an important framework to attract investment, which will have an impact more over the medium term. The complementary measures that are being considered are really all focused on providing cost of living pressure relief, driving prices down in the short term to improve affordability over the short term.
KIERAN GILBERT: So there is more that can be done parallel to the National Energy Guarantee via the Treasurer and others who are trying to find a way through here, to give relief in the short term. Do you think that that, is it achievable?
MATHIAS CORMANN: The National Energy Guarantee is a policy framework that provides certainty to investors to invest more in increased generation and supply of energy. As you increase generation and supply of energy that helps bring down prices. But it is fair to say that there is a lead time involved in terms of the investor response. So as we did in relation to gas where the Prime Minister directly intervened with relevant exporting companies, to ensure that there was increased supply of gas into the domestic market, which helped to bring prices down. The Prime Minister, the Government is currently considering what complementary measures, what other complementary measures could be sensibly pursued in the context of the ACCC report and other potential avenues to ensure that we have an immediate, short term effect in bringing power prices down. We are concerned about the indications of price gouging in parts of the national electricity market. These are things that we would want to see addressed as soon as possible.
KIERAN GILBERT: And it is always a balancing act I guess between an intervention like this but also letting the market run which is obviously the instinct of yourself and fellow liberals.
MATHIAS CORMANN: We do want the market to run. But we also understand that it will take time for the market to rebalance once we have the certainty of the National Energy Guarantee facilitating, providing certainty to investors and facilitating increased investment into energy generation and supply. We do appreciate that there is a need to pursue some short term measures that will have a more immediate effect in bringing power prices down.
KIERAN GILBERT: When it comes to the ambition of the energy guarantee, if you go the emissions component now, I know that some of your colleagues say it is too onerous a commitment and that sort of thing. But modelling done for the electricity security board shows that it is likely, the sector, the power sector itself to have emissions reductions of 24 per cent this is by 2021, nine years before the 2030 mark, which is a 26 per cent reduction aim, it is not actually that onerous is it?
MATHIAS CORMANN: That is the reason why the Abbott Government decided to go to Paris with a 26 to 28 per cent target range. As you say the legislation provides for a 26 per cent emissions reduction target. That is because all of us in the Coalition in the past have been committed to do the right thing by the environment in a way that is economically responsible. We certainly believe that the 26 per cent emissions reduction target that we signed onto in Paris is economically sensible, is economically responsible, while also being focused on doing the right thing by the environment. If you compare that with what would be the emissions reduction target if Labor was in government, they would be pursuing a 45 per cent emissions reduction target, which would hurt the economy, which would drive up the cost of electricity, which would damage the economy, cost jobs and hurt families and pensioners.
KIERAN GILBERT: It seems to be a lot of focus on an emission reduction target and concerns about it which we are going to meet anyway, in terms of the 2030 target. My talking to experts in the field and some of your won colleagues, there is very little doubt that the nation across the board is going to meet that by 2030. And as I say, the power sector itself this pro rata reduction of 26 per cent by 2030, it’s 24 per cent without trying. So what do you say to your colleagues who are raising this as a big, onerous threat?
MATHIAS CORMANN: The reason we believe the National Energy Guarantee is the right way forward is precisely because of what you have just said. That is no doubt also the reason why from consumer groups, to small business, to the manufacturing industry, to bigger businesses, to electricity generators, there is broad support for the National Energy Guarantee as the right way forward, because not only will it help attract increased investment into increased generation and supply of energy, it also helps to facilitate us meeting a very sensible emissions reduction target, an eminently achievable emissions reduction target, in a way that is economically responsible.
KIERAN GILBERT: It is an interesting situation that Josh Frydenberg and the rest of the Government, yourself and others find yourselves in because you are copping flak on the one hand from Labor for legislating, what they say is a weak target, but then copping it from some of your own colleagues for legislating, as Tony Abbott says and capitulating to bureaucrats in Paris. Can you placate all of those by saying, not pick the fight with all of those is a better way to put it, by not legislating the target? Given what we have said this morning and you and I obviously agree that the nation is going to reach that target without basically too much effort. Why does it have to be legislated as part of this Energy Guarantee approach?
MATHIAS CORMANN: These are questions that go well beyond my area of portfolio responsibility. I have not been involved in the discussions that Josh Frydenberg has had with the States. In his judgement legislation was required. But let me just say, Labor here has taken an entirely opportunistic and reckless approach. Bill Shorten wants to impose a 45 per cent emissions reduction target on the nation, which would do great harm to our economy, it would cost jobs, it would do harm to households, to families and to pensioners. What I would say to all involved in this conversation is that the 26 per cent emissions reduction target is one that the Australian Government has signed on to ever since the period of the Abbott Government. It was chosen at that time because it was economically sensible as well as providing the appropriate environmental benefit. It was the appropriate balance in our judgement at the time and nothing really has changed. It is now a question before …interrupted
KIERAN GILBERT: What do you say to the backbenchers? The rebels?
MATHIAS CORMANN: I talk to my colleagues privately. I am not going to lecture anyone publicly. What I would say is we do obviously have to find the sensible landing here. The Prime Minister is reaching out to colleagues who expressed concerns to find a common ground basis forward. The Prime Minister is very aware and very conscious of the need to provide cost of living pressure relief in the short term as well as making sure we get the policy settings right to attract additional investment into energy generation and supply over the medium to long term.
KIERAN GILBERT: Is the fact that, is it true that some of your colleagues will not be placated regardless of whatever he does?
MATHIAS CORMANN: I am not going to provide a running commentary. All I can say is that the Prime Minister is engaging with all colleagues who have expressed concerns about aspects of the National Energy Guarantee proposal. All of us who are in Government, we have a responsibility to engage in these processes constructively and in good faith and I am very confident that that is what is happening.
KIERAN GILBERT: There has been a lot of focus on the comments made by your friend the Home Affairs Minister Peter Dutton on 2GB with Ray Hadley yesterday. I will read a little bit for our viewers if they have not caught up with it. He says we do not get everything right, but I think we have done a good job, he is talking about his own portfolio, I want to make sure I can be a part of restoring our fortunes and making sure we are in a winning position by the time of the next election. I am not going to deviate from that path. Now if my position changes, that is it gets to a point where I cannot accept what the Government is proposing or I do not agree, then the Westminster system is very clear, you resign your commission, you do not serve in that Cabinet, you make that very clear in a respectful way. That is what Peter Dutton said to Ray Hadley yesterday. It has been seen by some as a bit of a shot across the bow. How do you read it?
MATHIAS CORMANN: It was not that. He was responding to a question by explaining in a factual way the way the system works. Peter Dutton is an outstanding Home Affairs Minister. He will go down in history as having made an incredibly strong contribution to our national security, to the safety of all Australians. He is doing a great job in that portfolio. As he has indicated he is committed to continuing to do that job. All of us, if we sign up to be a member of the team, the executive team, we support the captain and we support the team decisions. That is the way it works. Anyone who cannot do that, that is just a statement of fact, if you do not want to be part of the executive team, you are not part of the executive team.
KIERAN GILBERT: What about the talk that there are some conservatives urging Mr Dutton to throw his hat in the ring?
MATHIAS CORMANN: I am not aware of any such talk. That is something, nobody has raised that with me.
KIERAN GILBERT: And is that something you think, as I said you are very good friends with him, you do your early morning walks, you talk a lot about no doubt your careers and so on. Is it something you think he would consider?
MATHIAS CORMANN: We are both very committed to the success of the Turnbull Government and to winning the next election. I did have four walks with Peter this week at 5:30 in the morning up Red Hill. It was very hard after a six week break to get up that hill because the fitness levels had dropped off a bit. We talk about a lot, but do not think that we just talk politics for an hour every day as we walk up that hill.
KIERAN GILBERT: And for the moment there is nothing to see here?
MATHIAS CORMANN: No, we strongly support the Turnbull leadership of course and we want to see the Coalition Government successfully re-elected early next year when the election is due.
KIERAN GILBERT: Finally, I should ask you before you go, the focus after energy turns to company tax. What is the plan there and are you feeling optimistic with the crossbench right now?
MATHIAS CORMANN: The legislation is going to come up on Monday. It is the first item on the agenda in Government business. For all of the reasons that we have discussed many times, to make sure we give families the best possible opportunity to get ahead, we need to ensure that the businesses that employ them have the opportunity to be viable, and competitive and successful into the future. We would like to see the Senate pass the legislation, but we do not take anything for granted. We are open to engage constructively with the crossbench on any suggestions right up until the last minute.
KIERAN GILBERT: Minister, as always, I appreciate your time. Thanks, we will talk to you next week.
MATHIAS CORMANN: Always good to talk to you.