By Sarah Goff-Tunks and Jessica O’Bryan
Energy bill relief will be extended to the end of the year, with all households and approximately a million small businesses receiving $150 rebates directly off their electricity bills until the end of the year, it was announced in the federal budget tonight.
About $1.8 billion will be allocated to electricity bills, Treasurer Jim Chalmers told parliament.
The announcement comes after the nearly $5 billion of bill relief already delivered so far in 2024-25, through the $300 allocated in the last budget to each household for energy bills.
The energy bill relief saw electricity prices reduced by 25.2 per cent during 2024, with Chalmers commenting in his budget speech that the previous two rounds of energy rebates had helped “take some of the sting out of energy costs”.
He added: “The government will also be using the powers and penalties of the energy regulators and the ACCC to help ensure the energy companies offer customers cheaper deals, that pensioners receive the discounts that they are entitled to, and that Australians get the value that they deserve.”
Earlier this month, the Australian Energy Regulator released its proposal to increase the Default Market Offer (DMO). The DMO, which places caps on how much energy regulators can charge households and businesses, would see energy prices increase between 2.5 per cent and 8.9 per cent for Australians in New South Wales, South East Queensland, and South Australia.
Energy costs had already been higher than average due to an increase in fossil fuel prices since the Russia-Ukraine war began in February 2022.
Dr Roger Dargaville, Associate Professor of renewable energy at Monash University, said the increase in costs from the Ukrainian energy crisis had a flow on effect, putting “pressure on household bills”.
“When gas prices are high and staying for long periods of time, that pushes up our electricity prices,” he said.
Dr Dargaville said it was one of the main causes for increasing energy prices in Australia, and he suspected it is why prices have gone up, despite Prime Minister Anthony Albanese promising to reduce energy prices by $275 for households by 2025.
But various economists and energy experts warned the rebates are not the most effective measure and wouldn’t make much of a difference in easing the cost of living pressures for the majority of Australians.
Consumers lose because they’re still paying for high cost power and when these subsidies finish… the power prices will jump back up.
Dr Dargaville said the impact of the rebate on the cost of living would vary depending on people’s circumstances.
“For people doing it tough, that is going to make a potentially significant difference in the difference between paying your energy bill and buying food … but yeah, for the majority, it’s not [going to impact] an awful lot, and it does sound a bit like just trying to win votes,” he said.
Flavio Menezes, a professor of economics and director of the Australian Institute for Business and Economics at the University of Queensland, said the energy rebates would be better as a “targeted subsidy”.
“[In an] ideal setting, you would have a means-tested payment,” he said.
Menezes believes higher income earning Australians should not receive the full $150 rebate.
Instead of the rebates, Dr Dargaville said the funding would be better suited towards energy efficiency measures for lower socioeconomic groups that are most exposed to high energy prices, including measures like improving insulation in homes and electrifying gas appliances.
“It’s a longer term fix, whereas $150 just off your energy bill is a one-off, or maybe it gets extended again, but energy measures to help with energy efficiency, reduce energy bills forever into the future,” Dr Dargaville said.
Peter Swan, Professor of finance at the University of New South Wales, also dismissed the rebates as a band-aid solution.
“The consumers lose because they’re still paying for high cost power and when these subsidies finish, they will, following the election, or not long after, the power prices will jump back up. So it’s just purely an illusion, a very costly illusion,” he said.
He added renewable energy was too expensive and was not viable.
“The energy market is a victim of the government’s policy of closing down coal-fired stations and replacing them with renewable energy power from either the wind or the sun.”
The cost of building new projects and storage will be significant, but the savings from reduced reliance on fossil fuel will also be significant.
Dr Dargaville said he would like to have seen additional support in the federal budget towards meeting the government’s renewable energy target.
“It would be wonderful to see a more rapid acceleration towards renewables, but the federal government already has quite ambitious targets of 82 per cent renewables by 2030, which is a challenge in itself,” Dr Dargaville said.
He said the likelihood of meeting the 2030 target “ebbs and flows”, and sustained investment in new renewable projects is needed to make it happen.
If the 2030 target is reached, Dr Dargaville said higher levels of renewables usage will “probably be more or less cost neutral” for consumers.
“The cost of building new projects and storage will be significant, but the savings from reduced reliance on fossil fuel will also be significant,” he added.
“The expectation from most studies that I’ve seen is that those two factors will more or less balance out, and we shouldn’t see significant increases in electricity prices as renewables increase in their contribution to our electricity sector.”
The Coalition’s energy policies have also come under fire.
Opposition Leader Peter Dutton claimed rolling out nuclear reactors nationwide would reduce energy bills by 44 per cent.
Minister for Climate Change and Energy, Chris Bowen discounted the idea during question time earlier today, saying Australia’s leading energy bodies had over the past 12 months declared “the best thing we can do is keep on going with the rollout of renewable [energy]”.
Dr Dargaville said Dutton’s proposed policy plan “does not make sense at all”.
“We have plentiful wind and solar and combined with storage, that is a much more cost-effective way of generating electricity compared to nuclear,” he added. “In addition to it being costly, nuclear is not a good match for high penetration renewable energy systems.”
Main image by cloudhoreca/Pixabay.
