Electricity and inflation crises work for the new government, but for how long?

There’s something about hearing the government of Australia’s largest state asking its residents to minimize their electricity use during certain hours that evokes a sense of dilapidation. Australia is a place that has felt beyond those things for most of our lives. And yet, here we are, checking news sites every few hours to see if power cuts are about to happen.

Meanwhile, in closely related news, inflation is galloping away from our earning power, taking lettuce out of reach, with promises of worse to come. Largely for this reason, the Fair Work Commission decided this week to raise the minimum wage by 5.2%. And inflation will probably exceed even that within a few months.

The energy and inflationary crises suit the new government, but for how long?Credit:Andre Dyson

Ordinarily, such crises would be disastrous for the federal government. But this is spectacularly wrong in this case for two reasons. First, the Albanian government is too new to be blamed for these things, or to be expected to have done much about them. Second, the two crises underscore the worldview of the new government to the exclusion of that of its predecessor.

This is easier to see in the example of the minimum wage because the increase in the commission essentially corresponds to the recommendation of the government. This is significant because when Anthony Albanese announced this position during the election campaign, Scott Morrison immediately seized on it as proof of his economic laxity.

If the Fair Work Commission had ultimately concluded that the increase recommended by the government was clearly too high, perhaps there would have been something to that criticism. Having campaigned to be a champion of real wage increases for the most vulnerable, Albanese would have appeared both inefficient and economically unsound. As things stand, he can claim to have read economics better than the Coalition, while prioritizing those who struggle the most.

But the energy crisis, too, gives a story. We are in this situation largely because of a failure of our coal plant. Its infrastructure is aging, not well maintained, leaving us with a significant proportion of our coal-fired generators offline, just when the weather means we need them most. Part of this is scheduled maintenance. But some of them are also unexpected breakdowns.

Worsening inflation will lead to a further rise in food prices.

Worsening inflation will lead to a further rise in food prices.Credit:wayne taylor

Meanwhile, gas is not taking over because we export a lot of what we produce, and the war in Ukraine has made it extremely expensive. All of this has pushed electricity prices beyond a level that many consumers can afford, and beyond what our electricity regulator deems acceptable. As a result, the regulator imposed a maximum price, which energy suppliers considered unprofitable. This has led to these suppliers withdrawing from supply, hence the threat of outages. Now the energy regulator will basically pay them to put more energy into the grid.

It is difficult to reconcile this with the traditional Coalition narrative that coal is the cheapest and most reliable source of energy. Granted, we’ve also suffered from low wind and solar generation, but there’s a basic infrastructure problem here that compounds the problem. Simply put, our grid isn’t getting the most out of renewables because it’s not made for them. You could update it, but the federal government would have to implement renewable energy policies that attract that kind of investment. This was not the forte of the Morrison government. But it happens to fit with Labor policy of “rewiring the nation”.

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