Urgent action needed on energy

Urgent action needed on energy

Governments must act immediately to get more gas supply into the grid, Australia’s largest and most representative business network said today.

Australian Chamber of Commerce and Industry chief executive officer Andrew McKellar said the report issued by the Australian Energy Market Operator (AEMO) should ring alarm bells inside federal and state governments.

AEMO has indicated that coal fired power stations will close at a much faster rate than is currently scheduled.

Yet the transition to renewables as coal power is phased out is running well behind schedule.

“AEMO is forecasting that demand for gas power production will double by 2050, but gas reserves are dwindling and stronger co-ordination across all levels of government is required to secure the necessary supply needed for the future,” Mr McKellar said

“Adding more gas into the energy mix in the short to medium term will make that transition to renewables much smoother and help us to reach net zero carbon by 2050”.

“Businesses now face even higher energy costs with the early closure of coal and slow rollout of renewables increasing pressure on the system.

“This is a wake-up call to our governments who have done little to get extra gas into the energy grid, despite repeated warnings from the gas industry of a looming shortage.”

Last week AEMO sent a threat notice to the gas industry, warning that gas supply on the east coast may be inadequate to meet demand in 2024.

The situation is expected to get even worse over the next three years.

The notice follows high demand for heating during a cold snap in eastern Australia and an earlier warning from AEMO that generators may need to burn diesel to secure electricity supply.

Mr McKellar said urgent action is needed to get more investment in gas exploration and supply and that the threat of forced shutdowns of manufacturing would hit business hard.

“At a time of low economic growth and rising labour costs this is the last thing business needs,” Mr McKellar said.

“Attracting new investment to open fresh gas reserves is desperately needed if we are to meet current demand as well as the increasing demand for power generation over the next 25 years.”

ACCI-Westpac Business Survey shows economy on a ‘tightrope’

ACCI-Westpac Business Survey shows economy on a ‘tightrope’

After a slower than usual start to the year, new orders lodged with Australian manufacturers rebounded, the latest ACCI-Westpac Survey of Industrial Trends has found.

Westpac economist Ryan Wells said that the improvement in demand marks a welcome turnaround from recent weakness, although there remain challenges and uncertainties in the outlook for manufacturers.

“The Westpac-ACCI Actual Composite improved materially heading into mid-year, lifting from 43.4 in the March quarter to 54.1 in the June quarter,” Mr Wells said.

“With a reading above the break-even threshold of 50, this indicates that conditions are improving in the manufacturing sector. Compositionally, a bounce in new orders and an increase in output were the key drivers, while respondents reported further declines in employment and overtime.

“The broader economic backdrop for manufacturers has been challenging over the past year, highlighted by stalling new orders growth. This culminated in a material decline in orders in March 2024, marking a slower than usual return to business from the summer holidays.

“That weakness was not expected to last though, and orders have posted a solid rebound in June 2024, with a net 20 per cent of firms reporting a rise.

“The Expected Composite moderated slightly, from 54.7 in March to 52.8 in June, indicating that firms still expect demand conditions to improve, albeit at a more modest pace.

“That said, supply-side issues remain a key concern of manufacturers. The improvement in labour availability last quarter looks to have been temporary, with a net 12.1 per cent of respondents finding labour ‘more difficult to find’, providing manufacturers with limited scope to expand the size of their workforce.

“Additionally, cost pressures facing manufacturers remain acute and incredibly volatile. The latest survey finds a net 71 per cent of firms reported a rise in average unit costs, the highest result since the cycle peak of a net 76 per cent in December 2022.

“While costs have eased slightly on a year-average basis, from a net 68 per cent in June 2022 to 51 per cent in June 2023, they remain well above the 2009-2019 average of 19 per cent.

“The mood of manufacturers about the general business outlook for the next six months has improved but remains deeply pessimistic. Those expecting a deterioration outnumber those expecting an improvement by a net 42 per cent in June, compared to a net 56 per cent in March.

“Profit expectations improved, following the bounce in demand. However, they remain well below average levels, as elevated and volatile cost pressures continue to loom over manufacturers. On balance, respondents neither expect an improvement or a deterioration in profits over the coming year.

ACCI chief executive Andrew McKellar says the survey results show the economy is walking a tight rope.

“The challenges we are already seeing for businesses will be compounded by inflexible, productivity-sapping industrial relations legislation over the coming months,” Mr McKellar said.

“More business investment is needed to lift productivity and drive economic activity.”

Mr McKellar urged the federal government to take immediate action to address stalled productivity.

“Lifting productivity has been identified as a key priority by the government and it must take decisive action to support Australia’s businesses immediately,” Mr McKellar said.

He also pointed to the recent minimum wage increase awarded by the Fair Work Commission as another burden for businesses to bear.

“The cost-of-doing-business pressures are mounting and significant wage increases through the annual wage review will heavily impact businesses,” Mr McKellar said.

See the report here
Maximising energy options minimises risk

Maximising energy options minimises risk

The Coalition has today formally committed to nuclear energy in Australia should it win government. This would be a significant change in energy policy in Australia.

The Australian Chamber of Commerce and Industry has a policy of fuel-source neutrality, meaning that it supports allowing all fuel sources to compete in providing our energy needs while meeting our emissions targets.

“Maximising energy options minimises the risk of being caught out down the track with higher cost electricity,” ACCI chief of policy and advocacy David Alexander said.

“Australian businesses need affordable and reliable energy over coming decades, and our energy costs will need to be competitive with other countries.

“We cannot know the future competitiveness of individual energy sources over future decades, but the way to ensure that we don’t get caught short down the track is to allow the full range of energy sources.”

Mr Alexander said ACCI recognises the burden high energy costs have on businesses and their customers.

“As we go down the path to net zero it is important that we focus on real-world consequences and keep costs minimised for business and the broader community,” Mr Alexander said.