Household gas bills will be significantly lower than first predicted in the next financial year, according to Treasury modelling, which confirmed the government’s price caps on domestic gas would make a significant reduction to inflation.
The Albanese government mandated a 12-month, $12 a gigajoule price cap on wholesale gas prices in December to tame prices sent soaring by a global energy crunch caused by Russia’s invasion of Ukraine.
Household bills are expected to rise despite price caps on wholesale gas reducing the extent of forecast spikes. Credit:John Woudstra
Treasury forecast in October that household gas prices would rise 20 per cent in 2022-23 and a further 20 per cent in 2023-24.
Department officials told a Senate estimates hearing on Wednesday that while gas bills were still expected to rise, the price caps on wholesale gas, which are passed on to household customers by gas retailers, would cut the forecast rise in gas bills by 2 per cent this financial year and 16 per cent from July.
Treasury secretary Steven Kennedy said coal and gas caps are expected to reduce inflation.Credit:Alex Ellinghausen
“At Budget [in October] we expected consumer prices would rise by 20 per cent in 2022–23 and another 20 per cent in 2023–24, but now expect prices to rise 18 per cent and 4 per cent over the two years,” the department said.
The Albanese government also imposed a $125-a-tonne cap on the price of coal, designed to lower forecast spikes in power bills when coupled with the gas market intervention.
Treasurer Jim Chalmers revealed earlier this week that electricity futures prices had fallen 34 per cent for Victoria and 41 per cent for NSW compared to November 30 before the coal and gas price caps were announced.
Treasury secretary Dr Steven Kennedy said his department now expects the coal and gas caps to reduce inflation by 0.5 percentage points in the 2023-24 financial year.
“Households and businesses will still face substantial increases in energy bills, but the package will make a material difference to reducing cost-of-living pressures,” he said.
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