With the Carbon Tax imminent, it seems appropriate to look at Electricity prices since Labor came into Government in 2007. They will of course point out it has nothing to do with a Carbon Tax, but they have sat back and watched these prices rise well beyond what should be reasonably expected and without allowing Australia the luxury of a Nuclear Power Reactor that every major Country with stable electricity prices have had for at least the last 10 years.
At average 2011 exchange rates, Australia had higher average household electricity prices than the average prices in the other countries examined. In 2011/12 average household electricity prices in Australia (just under 25cents/kWh) were 12% higher than average prices in Japan, 33% higher than the EU, 122% higher than the U.S. and 194% higher than Canada. The Australian Energy Markets Commission(AEMC) projections of household electricity prices in 2013/14 show they will be close to 30c/kWh.
Electricity prices for Japan, 27 countries of the EU, USA, and Canada, have been stable over the last decade.
Australia’s position in the worlds highest household electricity prices by country, and state:
- South Australia
- Western Australia
21 Northern Territory
A question arises on the extent to which the comparison is affected by changes in the Australian dollar exchange rates, since the Australian dollar has risen significantly against the Euro, U.S. Dollar and Canadian Dollar over a similar period to which prices have risen significantly in Australia. But foreign currencies are converted into Australia dollars using average exchange rates in 2007 (this year was chosen because this is the year after which prices in Australia began to rise significantly and also because exchange rates were lower in 2007 before the effect of the mining boom).
Even using 2007 exchange rates, average household prices in Australia in 2011 are still higher than in Japan, the EU, U.S. and Canada. It seems fairly clear that the rise of the Australian dollar (relative to the
Euro, U.S. Dollar and Canadian Dollar although not the Japanese Yen) only partly explains changes in relative prices since 2007. However the bigger effect is that prices in Australia have risen significantly since 2007.
Around three-quarters of all expenditure incurred by Australia’s electricity network service providers is capitalised.
The bulk of this capitalised expenditure is for equipment imported from other countries, particularly the U.S., countries in the EU and Japan. The appreciation of the Australian dollar relative to the Euro and US Dollar, and the depreciation relative to the Japanese Yen will affect the Australian Dollar cost of imports. In view of the general appreciation of the Australian Dollar, and the significance of imported components, the expectation should be that this would be reflected in generally lower electricity prices
in Australia. While price changes may lag cost changes to some extent, it is reasonable to expect that household electricity price increases in Australia between 2007 and 2011 would be even higher than they have been, had the Australian dollar not appreciated relative to the U.S. Dollar and Euro. Although it must be noted these hikes in prices only occurred after the ALP came into power and the Electricity suppliers were given free reign as to their prices while contemplating a Carbon Tax over the past 2 years.