The view from Grogs

My Guardian column has a look at the latest inflation figures that came out yesterday.  

They showed a jump in the growth of average prices from 3.6% to 3.8%. But they also indicate just how much our economy is caught up in the ramifications of Russia’s illegal invasion of Ukraine, which sent gas prices higher – and with it our electricity prices.

Electricity was the biggest driver of inflation over the past year, but in October electricity prices fell 10.2%.

This confusion is due to the interaction of electricity rebates and inflation.

In July 2023, the Albanese government introduced rebates to protect against the increase in prices due to the Russian invasion of Ukraine. In July 2024, the states began to get involved as well. And October last year saw the largest impact of the federal and state government rebates on electricity prices. But these rebates did not last, and over the past 12 months they have begun to be unwound – and so prices began to rise. Then in August they were extended across a number of areas – and so electricity prices fell again.

But they remain well above where they were in October last year.

The problem for Australia is that since the opening of the Gladstone LNG terminal, gas prices on the eastern seaboard have been linked with the world price of gas. Because Russia is a major producer of gas, its invasion of Ukraine and subsequent sanctions of Russian gas and other trade sent world gas prices soaring – doubling from January 2022 to September that year.

And gas is an expensive way to generate electricity – much more so than renewables, but under the National Energy Market the most expensive generation determines the prices. And so electricity prices follow gas:

So have all those big gas prices that led to big gas exports and profits also led to a big jump in PRRT revenue? That would be the biggest “Yeah, nah” in history.

Read more about it here