Australia’s peak industry lobby group says gas prices are still not affordable for business despite signs the market is improving.

December 13, 2017

Australia’s peak industry body has warned manufacturers still face damaging gas prices despite a report showing improvements in the market.

The Australian Industry Group has welcomed a new report from the Australian Competition and Consumer Commission that shows gas supply has improved and a looming crisis has been avoided.

However the ACCC found the cost of gas for businesses remains far from affordable and Ai Group chief executive Innes Willox said industry was still paying historically high prices.

“The prospect of a supply crunch in 2018 and 2019 is receding.” Mr Willox said in a statement, crediting Prime Minister Malcolm Turnbull’s gas supply guarantee arrangement with exporters for the improvement.

“However, while the retail gas prices facing industry have clearly fallen from the extraordinary highs of February, they remain twice to three times their historic average.”

Mr Willox said although gas prices appeared to still be well above export parity, he was hopeful costs would fall further as the new gas supply agreements took full effect.

“It should never again be more expensive to buy gas in eastern Australia than it is in the East Asian markets we export to,” Mr Willox said.

Mr Willox said the “new normal” in pricing will still be uncomfortably high for the foreseeable future for many of Australia’s foundational industries.

“This challenge is not going away,” he said.

The ACCC report, released on Wednesday, contains a new forecast for 2018 ranging from a surplus of 20 petajoules of gas to a shortfall of 33PJ in a high-demand scenario.

The forecast for 2019 ranges from a surplus of 30PJ to a shortfall of 24PJ.

Previously a shortfall of up to 55PJ had been forecast for 2018.

The consumer watchdog found while large commercial and industrial users had received “substantially lower price offers than in early 2017” and had entered into agreements for 2018, smaller businesses weren’t faring as well.

In some cases small users reported receiving no offers from gas retailers, or only one or two offers, putting jobs and businesses at risk.