Essay by Eric Worrall

RBA Governor “… One way of tackling inflation induced by supply-side shocks is to address the supply…”.

Lowe says more gas could make ‘substantial’ difference to inflation

Jacob Greber Senior correspondent
Nov 28, 2022 – 5.51pm

Reserve Bank governor Philip Lowe has pushed federal and state governments to get more gas into the domestic energy market to curb inflation as federal Labor rushes to finalise a plan that could include a price cap that would potentially discourage investment in new gas wells and pipelines.

Amid calls for redistribution or diversion away from export markets of existing sources of gas, Dr Lowe said the focus should be on what “we can constructively do to increase” supply, which he said would help make a “substantial contribution” to controling inflation in coming years.

“One way of tackling inflation induced by supply-side shocks is to address the supply said,” Dr Lowe told Senate estimates committee hearing on Monday.

“And if we can do something on energy and rents next year, inflation will come down quickly.”

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Among options that remain on the table are price caps, which have strong support inside the government because their impact on household and business bills would be immediate.

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Read more: https://www.afr.com/politics/federal/lowe-says-more-gas-could-make-substantial-difference-to-inflation-20221128-p5c1w7

The apparent eagerness to embrace price caps rather than supply side reforms seems astoundingly reckless.

My impression is the leftwing greens who run the Federal Australian Labor Government are ideologically opposed to permitting more fossil fuel extraction. The Victorian state Labor government went even further, they enshrined a ban on fracking in the state constitution.

Perhaps Australia’s new leaders genuinely believe their green energy revolution will shortly eliminate the need for fossil fuel. This could explain the recklessness – they don’t care about the damage price caps will do to market confidence, because they plan to eliminate the market, and ban fossil fuel extraction, as soon as renewables eliminate the need for gas.

Whatever the explanation for the recklessness, I’m glad I live somewhere warm, where I can still live in comfort when home heating is no longer available.