RBA governor calls for agreement on energy policy
Reserve Bank governor Philip Lowe has called for parliament and the states to get their act together on energy policy, warning it is up to them to reduce power prices, business costs and encourage investment.
Testifying before the parliamentary economics committee in Canberra on Friday, Dr Lowe said he hoped the days of "high energy prices are behind us" in his first intervention in the energy debate that has divided Canberra.
"From an [inflation] perspective it would be good, from a cost of doing business perspective it would be good and from an investment perspective it would be good," he said. "It is up to the parliament here and the states."
For consumers, falling energy costs would be helped by rising wages, which should start to turn a corner on the back of a pretty "good set" of local economic numbers as businesses bid up wages amid a shortage of workers due to strong employment growth.
The Coalition has been racked by public infighting over its National Energy Guarantee (NEG), with up to four MPs reserving their right to cross the floor on the legislation, which seeks to lock in an emissions reduction target of 26 per cent by 2030.
Cabinet ministers hosed down talk of a leadership challenge against Prime Minister Malcolm Turnbull over the issue on Friday, fuelled by restless conservative backbenchers who are demanding greater government investment in coal-fired power to bring down energy costs.
Mr Turnbull is battling for agreement on three fronts. He must secure the support of Labor to pass the legislation to reduce emissions through parliament. He could face defeat if he fails to secure the rebel votes within his own party.
His Environment and Energy Minister, Josh Frydenberg, is negotiating separately with the states on the mechanism that would allow the target to come into force, which needs their unanimous approval because each state controls part of the National Energy Market.
Dr Lowe said lower energy prices - as operators start to respond to increased scrutiny and regulation from state governments - along with reductions in the cost of car registrations and child care, should mean headline inflation dips a little in the September quarter.
The central bank has an inflation target range of between 2 and 3 per cent in order to keep economic growth at a sustainable rate.
"If we get low inflation because of these reasons, it isn't because the economy is doing poorly, it is because of decisions that government is making to reduce cost-of-living pressures and giving people more money to spend elsewhere," Dr Lowe said. "I think it is unambiguously good news, even if it means inflation is going to be a bit lower for longer."