Ai Group chief executive says staff and production cuts possible as gas prices soar

Businesses could be forced to choose between slashing staff or production or raising prices as a “perfect storm” triggers a surge in energy costs, the Australian Industry Group says.

A decade of argument over climate and energy policy combined with aging coal-fired power stations, the war in Ukraine and onset of winter had immense consequences for industry and households, according to Ai Group chief executive Innes Willox.

He cited as an example the 50-fold increase in the price of gas in Victoria,

“I was talking with a member company just yesterday operating nationally. Let’s say their gas bill was $100,000 a year. They just signed a contract this week for $270,000 a year, so a 2.7 per cent increase – now told quite upfront on the one offer they got [that] if you don’t sign now, next week, it’ll be $500,000,” Willox told ABC RN Breakfast.

“All of that has consequences. Gas is everywhere … it’s in fertilisers, it’s in paper production. It’s in food processing, it’s in steel, it is very consequential to industry.

“When they’re dealing with those sort of rises and you’re seeing a market failure around them, they have to make choices around what they make, who they employ or do they put prices up.

“And in the end consumers, business or households will have to pay more.”

Willox said Treasurer Jim Chalmers was right when he said there was no immediate fix to energy prices, “but there is an immediate problem that needs to be addressed”.

“They’ve got to work with the states. States pull a lot of levers here, they’re responsible for preventing gas exploration and extraction in Australia over many years.

“If they had a light bulb moment on that, that would help – not immediately but it would help.”

Pulling the trigger on Australia’s domestic gas security mechanism was a “big call” people had been “whispering about,” Willox said.

“But those whispers are getting louder. But it’s a huge call because of the consequences. Do we look at things like rationing of power? All of those sorts of things. There’s no easy choice, but the government’s got to address it [as a] first-order priority.”

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