Australia's economic future is increasingly precarious as the country grapples with high energy prices, gas shortages, and a troubling over-reliance on its mining sector. Recent reports indicate that the East Coast gas price has surged to $24, double the government's price cap, putting Australia at a significant disadvantage compared to the United States, where gas prices are one-fifth of what Australians pay. This situation is further compounded by imminent gas shortages in Victoria, which may force the state to choose between supplying gas to households or manufacturers. Companies like Brickworks are already considering shutting down operations due to these high prices and shortages [57b7eb58].
The mining sector, which generated A$455 billion (US$306 billion) in 2023, accounts for two-thirds of Australia's overseas income and employs about 230,000 people, or 2% of the workforce. However, average Australians are reportedly worse off now than they were a decade ago, with household debt exceeding A$260,000. The growth rate for 2023 is projected at a mere 1.5%, the lowest since the early 1990s, highlighting the vulnerabilities in the economy [46910bd8].
Australia's East Coast exports 80% of its gas, yet it does not reserve gas for domestic use, leading to high prices for local consumers. The report from MacroBusiness advocates for a domestic reservation system and regulation of domestic gas prices at $6 per gigajoule, which would allow Australians to benefit from their own resources while ensuring fair pricing [57b7eb58].
The lack of a genuine resource tax mechanism has resulted in stagnant tax revenues from the boom in natural gas exports. In contrast, countries like Norway have implemented effective resource taxation policies, generating significant wealth for their citizens. Norway taxes its oil and gas sector at around 80% and has invested its windfall in a sovereign wealth fund, a model that could be beneficial for Australia to consider [46910bd8].
Leith van Onselen, Chief Economist at the MB Fund, has criticized the federal government for its failure to reserve East Coast gas for domestic use, arguing that the current policies prioritize the welfare of foreign consumers over Australians. He emphasizes that cheap energy is essential for boosting Australia's manufacturing capacity and competitiveness, as the country's gas and electricity prices are among the highest globally [ca144d16].
In addition to energy challenges, the mining sector's reliance on fluctuating commodity prices poses risks. For instance, iron ore prices have dropped from US$144 to US$100, and Australia ranks 93 out of 133 in economic complexity. This reliance on mining without adequate reinvestment strategies has left the economy vulnerable amid shifting global conditions [46910bd8].
The Australian Energy Market Operator has warned that the Iona facility in Victoria could run out of gas before the end of winter unless drawdown is significantly reduced. Major suppliers, like Orica, may need to import ammonia for their manufacturing plants if affordable gas is not available, further illustrating the challenges facing Australia's manufacturing sector [3ce45603].
Overall, the combination of high energy prices, gas shortages, and an over-reliance on mining resources underscores the urgent need for Australia to reassess its economic strategies. Implementing a domestic reservation system, regulating gas prices, and learning from successful resource management models like Norway's could provide a pathway to a more sustainable and equitable economic future [57b7eb58].