ANDREW CLENNELL: Resources Minister Madeleine King is in Sydney today at a mining and resources conference. She’s not ruling out drastic action against gas companies, including a price cap. But as the minister who has to deal with the gas companies, appears a bit more circumspect about her description of the gas companies than her industry minister colleague Ed Husic.

Madeleine King joined me on the sidelines of that event where I began by asking her whether she expected the budget’s forecast energy price rises when she signed a new heads of agreement with the gas companies.

MADELEINE KING: When we were negotiating the heads of agreement those figures were not available to us. The figures that did become available to us were those that the former government had chosen to hide during the election campaign where we knew there were some increases in power and gas but not nearly on the magnitude that we have seen revealed in this budget. So there’s no doubt that that has changed the game a little.

But, nonetheless, to reflect on the heads of agreement itself, it was a tool of the former government, and given we had come into government and very quickly were faced with this gas crisis we had to use, and I had to use the tools at hand to try and make sure we had not only supply for next year but also an oversupply which would work to bring down prices.

And given the heads of agreement itself was a voluntary agreement, you know, I needed to be careful and not push the exporters out of the room so there was a risk that we would not have that supply. So that’s the – as well as considerations around investments and so forth.

ANDREW CLENNELL: One of the questions out of it, I guess, is how much would prices have risen by if there was no heads of agreement?

MADELEINE KING: Well, it is a good question, and to be honest we do not know the answer. Unfortunately in this country because of many years of inaction and an opaque market it is still hard to discover what the actual prices are being offered. Different ministers are getting different stories. I’m getting similar stories to my colleague and friend Minister Husic, but I’m also getting other figures from other wholesalers of gas. So it’s my firm determination to – along with the ACCC and the Treasurer – dive into this market to find out exactly what’s going on so that we can have a solid and sustained solution that government creates to the gas pricing situation in this country.

ANDREW CLENNELL: Well, you mentioned Ed Husic. In recent weeks he compared gas companies to a plague of locusts. Was that helpful?

MADELEINE KING: Well, everyone is entitled to their opinion, Andrew. I’ve been very open about that. There is, you know, something like 44 retailers of gas right around this country. There are a number of exporters. There are those in the Queensland coast, also those in Western Australia and in the Northern Territory. They provide thousands of jobs over many years. They’ve provided even more indirect jobs in communities such as Broome and Darwin and Gladstone. So they have brought prosperity to certain regions.

Equally, people are seeing high gas prices. They don’t like it. That’s understandable. But there is a market in this country that’s more than just the three gas exporters in Queensland. There’s a number of retailers and there’s questions about what prices they are charging as the sort of middlemen, if you like, in this gas market.

So, as I said, we need to let the light shine through and find out what is going on in this market so we can have a sustainable solution and not an ad hoc, knee-jerk response which leads us to longer problems in the future.

ANDREW CLENNELL: All right. Just on that, let’s look at some of the solutions that are being mooted. What would a mandatory code of conduct do, and is that on the table?

MADELEINE KING: Well, we’ve spoken about the code of conduct a lot, and the code of conduct that – the heads of agreement, the three producers have agreed to implement it. They’re doing that right now, so it’s – whilst it’s voluntary, they are doing it. And as the AI Group have said in the past, it’s up to them to prove themselves. And I totally agree with the Australian Industry Group in that regard.

The mandatory code of conduct we’re talking about is reviewing the existing code of conduct, which I accept not everyone is happy with, but it was a tool that was available in the short time we had. What I think needs to happen is that all gas suppliers and retailers and even power generators need to be considered in this whole story of rising gas prices and not just targeting the export industry when there is, in fact, a wider industry that is all playing its part in the problems we see emerging.

ANDREW CLENNELL: All right. The other thing spoken about is a price cap. Now, Rod Simms suggested yesterday you wouldn’t have to cap the price, to do so would cause unintended consequences. And he said if you sat gas companies down and threatened them with export controls that would be enough. Is he right or do we need to see a cap?

MADELEINE KING: Well, at the moment that is exactly what is happening, and it’s been happening since the Turnbull government, the Malcolm Turnbull government, brought in the Australian Domestic Gas Security Mechanism. There is – that exists. We do have this legislation that does threaten export controls. And we are reviewing that. We’ve got the existing legislation and the reform of that. So I totally support what Rod Simms is saying but equally would confirm that that’s already happening. But it’s not all about exporters. We do have –

ANDREW CLENNELL: So that would indicate that’s not enough?

MADELEINE KING: Well, what I’m saying is that there is more than just those exporters in this market. There are retailers that are playing a part in it. There are other wholesalers. I mean, I know we have arguments about the lack of supply coming out of Victoria and South Australia and New South Wales in particular, but those markets – well, not New South Wales, but Victoria and South Australia do produce gas and it does go into the market and Victoria has lifted its moratorium on conventional gas and we expect more will go into the market.

Equally, Woodside has its Bass Strait assets. So how that all participates in this opaque market that we see increased prices yet we don’t quite understand what all the prices are. So that’s what I am determined to find out. And I think understanding that helps with the solutions around particularly transparency. And I’ve said this for a long time, that transparency is important.

We see anecdotal stories of very large manufacturers being asked to pay high prices whereas then there are wholesalers then offering lower prices for future years. So maybe there’s a situation where some, you know, purchasing departments aren’t doing the ring around to get better prices. Like, you know, we’ve been encouraged in the past to shop around for better interest rates for our mortgages, or we shop around in the gas retail system for households for better prices. And that’s, I think, what a lot of manufacturers need to do. And that’s easier said than done for smaller manufacturers. I totally accept that. But, you know, if we shine some light on this market, I am confident things will improve, but I do accept it is a challenge at the moment and a very serious one.

ANDREW CLENNELL: Is the government looking at a price cap on gas?

MADELEINE KING: I think I and other ministers have made clear that all options are on the table. They have to be. A responsible government will look at all options. We’ll consider it. We accept – you know, I acknowledge concerns people have around that. I acknowledge concerns they have around other aspects of what might be proposed. And we will hear from them, and we will listen and we will make a decision in the best interests of the nation.

ANDREW CLENNELL: Will a decision made by the end of the month on what to do on this?

MADELEINE KING: We are still working on this. It is a big body of work. It is hard to comprehend sometimes the complexity of the gas market that has emerged on the east coast over the past 15 or 20 years, made more complex by the export industry that’s created, which has reaped its own benefits but made things difficult at the moment.

So whilst we are urgently doing this, we’re not going to rush into the void and make things up. We’ve seen what’s happened with other governments when they rush to make decisions – it puts them in and the nation in worse places. So we will consider this thoughtfully, work with the ACCC and other departments to make sure we get all the information, all the facts, a wide variety of opinions and make sure we act in the national interest in resolving this crisis.

ANDREW CLENNELL: Could we see a domestic gas reservation like we have in Western Australia?

MADELEINE KING: I’ve said this before, it’s very difficult to retrofit something when investment decisions have been made some 15 years ago. It’s also multi-jurisdictional, you know, crossing a number of state borders. Having said that, the heads of agreement is a kind of reservation where the gas that hasn’t been contracted to international buyers and investors is now reserved, if you like, that 157 petajoules is reserved for local sales of gas into the domestic market.

So it’s not the ideal reservation policy such as we see in Western Australia, which was a hard-fought policy many years ago under a state Labor government. But it is the best we have at the moment. We’ll work to see what other ideas can be furthered along.

ANDREW CLENNELL: All right. In terms of electricity prices, curtailing gas prices is one thing. What can be done, if anything, about coal prices at the moment and the state of coal-fired generators?

MADELEINE KING: Yeah, well, as you know, each coal-powered generator in this country now has a closing date. And so the challenge is on, of course, to make sure that that power is replaced by other sources. Much of that will be renewables, and I expect some of it will be an increase in the use of gas. But our focus is on – and the state governments’ focus, particularly New South Wales and Victoria, is on moving ahead with offshore wind and renewables.

So in the meantime, though, the coal price is high. It’s not the highest price setting part of the power story. Gas comes in last to the supply of your power, even though in any given day in Victoria and New South Wales it is powered between 75 and 85 per cent by coal. Gas powers maybe zero to 2 per cent, but as the last item in on that power generation, it tends to set the price.

So these markets and the commodities that fire our power generators on the east coast are all linked, and it is a difficult thing to separate them out.

ANDREW CLENNELL: Could electricity bills be capped given it’s more than just about gas?

MADELEINE KING: Well, electricity bills and electricity is run out of the states. They do the charges. We know AEMO put restrictions on parts of that industry. That’s something I know Minister Bowen will be talking about with his state counterparts.

ANDREW CLENNELL: All right. And, finally, we’ve seen the iron ore price come down in recent weeks. How much of a concern is this to the economy, and how much is attributable to the Chinese lockdown policies?

MADELEINE KING: Well, iron ore is, you know, our largest export, and as a Western Australian it’s an industry I’m particularly proud of. It’s now a while back that I visited the other day Newman, you know, basically rebuilt Tokyo and has rebuilt the great cities of China. So it’s an important resource and it will remain an important resource for some time to come.

Having said that, the industry itself has known that its demand will plateau for iron ore and that will lead to a price decrease. There’s been an extraordinary price flux in iron ore as well, and what we’re seeing today is probably the more normal levels of sales. There is no doubt with the Covid lockdowns in China there is less building of cities, and the Chinese build cities, you know, at a remarkable pace from the steel that they make from our iron ore and our coal.

So that will have a flow-on effect. I am not overly concerned, but, you know, it’s good to be aware of these things, of course, because, you know, iron ore is the backbone of our economy.

ANDREW CLENNELL: Madeleine King, thanks so much for your time.

MADELEINE KING: Thank you very much.