David Leyonhjelm on electricity prices

Electricity prices are skyrocketing because of decades of government mismanagement. It will take time to undo the damage, but there is something the government can and should do straight away to alleviate the pain of rising electricity prices; it should make electricity GST-free.

Making electricity GST free would immediately save a typical household around $200 each year.

Electricity is an essential service, like water. But while water is GST-free, electricity is not. Because of GST, electricity prices are 10 per cent higher than they need to be. By removing GST the government can cut electricity prices by 10 per cent immediately and prove that it truly cares about the electricity bills of everyday Australians.

As we are all discovering, these electricity bills are horrendous and getting worse. Households face a 20 per cent hike in electricity bills this quarter, with a typical annual bill increasing from around $2,000 to $2,400. That’s $400 many households simply cannot afford. In fact, a lot of low-income households report they are going without heating this winter because of electricity prices. This is sure to cause deaths, a scandalous situation in any first-world country but unforgivable in a country so rich in resources.

And this spike in prices follows a horror decade in which the cost of electricity across the nation rose by an average 8 per cent each year.

Even though the revenue is passed on to the states, the GST is a federal tax. Thus the federal government could immediately make electricity GST-free without seeking support from the states. Such support would never come in any case; the states are addicted to GST revenue and rake in the dough with every electricity price rise.

Taking GST off electricity would cut state revenues by $2 billion a year. State budgets could bear this; for instance, while the NSW and Victorian Governments would each suffer reduced revenues of around $500 million, this would still leave them with a healthy budget surplus. The Western Australian Government, which receives far less GST revenue, would only suffer a hit of around $80 million. More importantly, the people of each state would face dramatically lower electricity bills.

I am pushing the federal government to immediately make electricity GST-free, and if it doesn’t budge now, it will be a key issue on which the Liberal Democrats will campaign at election time.

But making electricity GST free is just the beginning when it comes to cutting electricity prices. The mess we are in is the result of decades of governments discouraging the construction of new coal fired power stations.

The discouragement of cheap power has come in the form of the Renewable Energy Target which effectively forces coal-fired power stations and electricity consumers to provide annual subsidies of more than $2 billion to unreliable renewable generators. Ongoing threats of carbon pricing are also having a discouraging effect.

To achieve long term cuts in electricity prices, including for Australian businesses, we need to abolish or suspend the Renewable Energy Target and provide a guarantee to prospective investors in new coal fired power stations that there will be no carbon price.

At the very least this should apply while countries emitting more than us continue to increase their greenhouse gas emissions. These countries currently include China, Russia, India, Indonesia, Saudi Arabia and South Korea. It is pointless for Australia to cut its emissions while bigger emitters raise theirs. We should also withdraw from the weak and unenforceable Paris Agreement that allows this and abandon the commitment to reduce Australian emissions by 26 to 28 per cent until the rest of the world does the same.

Finally there should be no further rounds of taxpayer-funded handouts under Abbott’s Direct Action Plan, and we should remove the government’s evidence-free ban on modern nuclear power, which offers reliable, zero-emissions electricity.

A return to cheap and reliable electricity would not only be welcomed by households. Every Australian business and employer, including what remains of our manufacturing sector, would feel the relief. To coin a phrase from Trump, let’s make electricity cheap again.

David Leyonhjelm is a Senator for the Liberal Democrats

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43 Responses to David Leyonhjelm on electricity prices

  1. stackja

    ALP/Greens created this problem. What are ALP/Greens doing?

  2. Tator

    stackja,
    “We need certainty so we will implement a price on carbon” and thus drive costs upward again.
    “We need to invest more government funds into renewables” and thus drive costs upward even more.
    Rinse and repeat ad nauseum as lies repeated enough times becomes the truth to the left.

  3. a reader

    More of this, less of the drugs and SSM and you’d get a lot more attention from the general community

  4. Senile Old Guy

    Well, well.

    Very, very good piece from DL.

    There is, of course, no chance that the stupid LNP will do this.

  5. Tezza

    Narrowing the base of a broad consumption tax is always a bad idea. Every vested interest will scurry out of the woodwork to lobby for exempting their particular ‘necessity’ and in a few years we’d be back at a wholesale sales tax type outcome, with multiple rates, many exclusions and a narrow base.
    An idea like this should be the last to appeal to the Lib Dems.
    The last 5 paras are quite sound. Just delete everything before them!

  6. Bob of Brisbane

    Rip van David Winkel has just woken up from a deep sleep. Surprise! Electricity prices are high!

  7. Tim Neilson

    Narrowing the base of a broad consumption tax is always a bad idea.

    Much as I’m in favour of tax cuts I have to agree with this.
    It’s great politics by Leyonhjelm, but it’s bad policy.

    He ought instead to be arguing for an income tax cut at the lowest taxable income band (about between $18,000 and $37,000) to compensate for the GST on electricity.

    But his comments about ruinables, nuclear and fossil fuel powered stations are spot on.

  8. Rafe Champion

    Taking up the point of the confused old misfit (the other one) it would be nice to have a single site listing all the rorts and absurdities and their costs – like the Northern Ireland scandal that amounted to billions, the Spanish solar farms that ran on electric lights overnight, the forests chopped down in the US to provide wood pellets for carbon credits in Europe, etc.

  9. closeapproximation

    Narrowing the base of a broad consumption tax is always a bad idea

    Yes and yes. Meg Lees & friends white-anted GST, negating one of the its many “plusses” being a simplification of the tax system.

    Removing GST on electricity will provide a “sugar hit” but will likely not last long when all the pressures are pushing upwards anyway (see Retail energy riding riding the upswing). Just like; who the hell remembers that the Carbon Tax was axed, and did we notice the difference?

    See also first home-owner’s grant, unless you want to join Di Natale in calling for retail energy price controls and/or give the ACCC more profile (no thanks).

    So fail on GST idea, but DL 100% sound on every other policy item.

  10. Entropy

    Opening the door to special cases on what GST applies to is a policy that falls into the catergory of a Very Bad Idea. As soon as the LDP argues for electricity exclusion, the rent seekers will be out seeking exemptions for other ‘essentials’, like fuel, plumbing materials, school uniforms, computers, mobile phones and Friday night vodka shots (or are they, as an important source of carbohydrates, a food and thus already Exempt?). You can make a case for exemption for anything a tax like the GST applies to.

    And then the greens and other fellow travellers will start campaigning for exemptions on the base of identity politics.

    This is a bad idea, a David, and you need to not make it offical LDP policy.

    Why not campaign for the hard yards of getting rid of bad regulations and schemes like the RET? You are just as likely to be successful. Or has th LDP made this shallow decision on policy because a simple mcGuffin like electrickry GST exemption will attract low info voters?

  11. jupes

    It is pointless for Australia to cut its emissions while bigger emitters raise theirs.

    Nearly there Dave. Good post.

    The more you can bring this up in parliament the better.

  12. Rococo Liberal

    If electicity was GST-free, the government would end up having to pay the producers and the wholesalers a refund every month to take into account the GST included in their inputs. This means that the electricity prices could be cut by more than 10%

  13. Roger

    Even if it were feasible a GST exemption provides small beer; it is more fiddling at the edges of a problem created by government policy.

    Ditch the policy and the subsidies and put all energy resources back on an even playing field, including nuclear.

  14. Entropy

    I am also trying to fathom the merit of complaining about prices rises of $400 and then announcing a ‘fix’ of $200, but leaving the original cause of the price rise in place to cause future rises in price. What will be you ur quick fix next time?
    I reckon the public will love it. Not. It reminds me of that scene in Animal House, where the prep boys have to bend over and then after each whack from the paddle are made to say “thank you sir may I have another!” The politicians still get to whack us in future, with even more borrowed money.

    This I’ll thought through policy needs to taken into the backyard, shot and buried before it bites the hand that fed it.

  15. BoyfromTottenham

    IMO the LRET is the main culprit – driving up retail prices by requiring retailers to buy useless and expensive non-despatchable unreliable power, whilst forcing efficient base-load power generators to go to the back of the queue to sell their power AND to subsidise ‘renewables’ generators to the tune of $85.00/MWh regardless of their efficiency. ABOLISH THE LRET before our once reliable and cheap power networks are gutted.

  16. Senile Old Guy

    He ought instead to be arguing for an income tax cut at the lowest taxable income band (about between $18,000 and $37,000) to compensate for the GST on electricity.

    Leaving everyone else paying for expensive electricity?

  17. Rafe Champion

    Eliminating GST for essentials, don’t forget toothpaste and contraceptives. And petrol.

  18. The Deplorable Barking Toad

    FFS, why complicate the tax system even more. GST should be on everything, the exemptions in place
    now cause unnecessary complications.

    The pricing on electricity can be fixed easily.

    Scrap the RET and don’t even think about CET and remove all subsidies for “renewables” and all policies
    that favour them.

    Scrap every government department and quango that has “climate” in its name.

    Any politician disagreeing should be deported to South Venezaustralia.

  19. Entropy

    This is such a stupid policy the clowns in the LDP responsible should be sent to South Australia for the term of their natural lives.

  20. .

    The GST thing is a good gag because then people might start asking questions like why they pay so much income tax.

    It is also a better-qualified argument than “tampons”.

  21. “countries emitting more than us continue to increase their greenhouse gas emissions.”
    No, because ‘greenhouse gas emissions’ is fantasy. There is no ‘greenhouse gas’, because the ‘greenhouse effect’ is the product of a fertile imagination. Dreams about radiative gases are nonsense, as are imaginary demons such as ‘global warming’, and ‘sea level rise’.

  22. Entropy

    Yes, a short term ‘fix’ with a design focussed on generating media attention and hopefully votes. The sort of brain fart that ends up with people hating politicians. The media and attentive voter won’t be interested in the detail of the RET and its problems, so let’s give them a sugar hit and maybe snag a few votes?

    Bread and circuses, bread and circuses.

  23. Stan

    These are eminently sensible and ideology-free proposals. Which is why they will never get up.

  24. Fulcrum

    Even if every alt right supporter in the march was invited to luxurious cells, gently manhandled and temporally held in a safe space, using the Cuban model of justice, the dogs of war would still be unsatisfied.

    n were

  25. Dr Fred Lenin

    Stop all subsidies for carpetbagging “renewables” , removeexhor itantimposts on coal and gas reopen Hazelwood and help companies to expand production with new cleaner power stations
    . Remove states from power industry to stop them looting and rooting the whole thing ,ail to make Australia the cheapest most reliable power on the planet then watch the jobs increase .Defund vexatious litigation and make the moaners pay all costs even if it bankrupts their families then open de tors prisons for them to remain in till the debts are paid .

  26. Derek Smith

    Dear David If you are serious about reducing electricity prices please see the POST on the https://www.facebook.com/Like2CentTax/ and visit the website at http://like2percenttax.com.au/

    Best wishes Derek

  27. Rafe Champion

    Fred they could work in the coal industry to discharge their debts. Make them useful!

  28. I think David has been in parliament too long.
    Others above have mentioned why narrowing the GST base is a bad idea. I’ll mention why invoking nuclear is a bad idea.
    Nuclear is more expensive than coal and will take at least 20 years or more before a single plant is up and running. Imagine the never ending court cases by the econazis.
    And why would you embark on nuclear when we have hundreds of years worth of cheap coal? At some stage in the future, all that coal will be rendered worthless by new technology. Use it now while it’s the cheapest form of energy.
    I’d be OK with Hydro where feasible, if only because we need the water storage as well as the power.

  29. val majkus

    The pricing on electricity can be fixed easily.

    Scrap the RET and don’t even think about CET and remove all subsidies for “renewables” and all policies
    that favour them.

    Scrap every government department and quango that has “climate” in its name.

    totally agree deplorable!

  30. incoherent rambler

    Simpler. Abolish all energy taxes and subsidies.
    This leaves coal producing @ 4c per kwh (or less)*.

    Double it for retail margin and “poles and wires”, we get 8c per kwh (retail).

    This makes everybody happy except the scammers.

    * 99% of customers will choose the cheapest form of electricity. If only they had the choice.

  31. .

    Nuclear is more expensive than coal and will take at least 20 years or more before a single plant is up and running. Imagine the never ending court cases by the econazis.

    It is bad because the greenies don’t like it? You’ve lost me on how this works.

  32. incoherent rambler

    Hey dot. I like the idea of nukes too.
    But at the moment, in Australia the technology of coal, the price of coal is hard to compete with.
    A modern plant emits not much more than CO2 and water.
    Nuke technicians we don’t have.

  33. Entropy

    It is bad because the greenies don’t like it? You’ve lost me on how this works.

    It would be strangled at birth by red tape and law fare, regardless of merit. Coal mines we already have, so lawfare less effective.

    Mind you, I wonder how many years CSG wells need to operate without incident before the gas companies can sue Lock The Gate and Alan Jones and other greenies for their misrepresentations and outright scare tactics.

  34. incoherent rambler

    Imagine a 5 gigawatt nuke at Roxby Downs. Commissioning would be delayed due to all government services being diverted to handle the vast number of fainting snowflakes.

  35. Rayvic

    The proposal to make electricity GST free is wishful thinking.

    Would not Turnbull need to get the agreement of all States to do this? A tall ask.

  36. Entropyty

    The other problem with fiddling with GST is that it would present a golden opportunity for the vultures to raise it on everything else.

  37. David Brewer

    Bad policy, though possibly good politics, as others have said.

    One other reason it’s bad policy: if it works as desired, it relieves the pressure to get rid of all the interference that has caused the high prices in the first place.

    Removing the GST would in effect subsidise electricity compared to everything else. It is thus a typical statist response to the consequences of excessive statist involvement, an example of Reagan’s dictum about how the attitude of government to business can be summed up in three simple phrases: “If it moves, tax it. If it’s still moving, regulate it. If it stops moving, subsidise it.”

    The only thing wrong with the Gipper’s observation is that it implies the stages are seriatim, whereas in fact they often coexist. A classic example is housing. Tax purchases. Regulate land release. Subsidize home buyers. Result: Unaffordable housing. Reason: Broken price mechanism from buggering both supply and demand. Why do people, even people as smart as David Leyonhjelm, find these things so hard to grasp, and to avoid next time?

  38. Combine Dave

    Great idea.

    Do it!

  39. Howard Hill

    More bandaids!

    I don’t want GST removed from the electricity scam.
    I want the all the scams removed. FO with the bandaids.

  40. Empire

    It may not be flash policy, but it’s sensible politics.

    We’ve probably crossed the Rubicon on energy. We cannot afford the indulgence of policy purity. The clean up will be messy.

    The states are now full leftard on energy policy and dependent on GST revenue. The Commonwealth could twist their nuts by trimming their handout and sharing the pain.

    They won’t because Mike Talkbull and the dripping wets are owned by windmill salesmen while their enemies have already moved on to the battery guy and the gas dudes.

    I reckon DL ought be paid danger money for working in a sewer.

  41. sinman

    Thanks DL for floating some sane ideas on energy. It amazes me we are even having this discussion with the plethora of alternatives at our disposal, however it is a timely reminder of the dangers of political correctness and the rise of the lunatic left. Common sense seems in short supply as we argue world changing events such as SSM and Paid puppy leave for the unionized public service. ( 2.8 million and counting ), don’t get me started on the NBN. Please go with your ideas and give us some hope. cheers.

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