Graeme Goodings:
On the subject of money, a $2.5 billion taxpayer bailout of the Tomago aluminium smelter has raised serious questions according to the Institute of Public Affairs. Joining us now is IPA research fellow Saxon Davidson.
Saxon, good morning to you.
Saxon Davidson:
Good morning.
Graeme Goodings:
Thank you for having me. What do you make of the bailout?
Saxon Davidson:
What I make of it is that it’s become clear, I think, to everybody that our manufacturing sectors and our energy sectors are now just basically things that provide us with our sovereign capability, the things that we need to survive and the things that we create so that we can rely on ourselves, cannot survive the net zero transition. It’s simply put that you can’t create things if you are forced to reduce your emissions because ultimately emissions is just human activity and human creation. And if you can’t create and you can’t act, you’re not going to be able to have a manufacturing sector. That’s what’s become clear to me.
Graeme Goodings:
So do you see other major industries needing similar bailouts?
Saxon Davidson:
Well, we’ve already seen similar bailouts be applied to other smelters across the country, whether it be in copper and Mount Isa up in Queensland, and then also in Whyalla as well. So I think that this is going to be a trend that we’re going to continue to see. And I think it’s incredibly alarming the fact that this is happening increasingly more often and the government’s doing nothing to change the fundamental policy situation that we’re in. The government’s not doing anything about net zero, it’s not halting the renewable transition, even though it’s a rising power prices, which is becoming a huge negative impact on many of our manufacturing sectors across the country.
Graeme Goodings:
So you’re saying there’s a direct link between net zero and power affordability?
Saxon Davidson:
Well, of course there is. Net zero, and especially the type of net zero transition we’re doing here in Australia, which is dominated by wind and solar, is making our energy grid more unreliable because our energy grid is not built for variable supply of energy. Which means that if your energy grid is more unreliable, ultimately it means your power prices are going to be more expensive.
Graeme Goodings:
You’ve mentioned the impact of the Safeguard Mechanism. Explain that to us.
Saxon Davidson:
So the Safeguard Mechanism is the federal government’s marketing net zero policy, which impacts large projects and facilities. And what it does is that it creates a emissions cap, which reduces by 5% every financial year. And what they must do is reduce their emissions to below that cap or purchase carbon credit in order to operate, to offset those excess emissions. What this does is create a price on carbon. So essentially it’s a carbon tax. And what we did yesterday was calculate the carbon tax that the Tomago aluminium smelter is due to face up to 2030, which is $114 million. Now this is just one cost on top of a myriad of other costs that the smelter faces due to red tape emission reduction targets, and also on top of rising power prices due to net zero. But what this does prove is that there are a myriad of Byzantine costs that the smelter faces. And this is all due to the policy of net zero and before that, other emission reduction targets that have been put onto it as well.
Graeme Goodings:
So why can’t manufacturing thrive under net zero?
Saxon Davidson:
Well, because to have a manufacturing sector, low power prices and reliable energy are a base must. It is the minimum requirement for it to occur because smeltering is very emission intensive and requires a lot of energy. It’s one of the largest users of energy in New South Wales. And if the grid is unreliable, it’s not going to be able to function at a very basic level.
Graeme Goodings:
So how can we stabilise as a grid? Because coal-fired power stations are being phased out there beyond their useful life?
Saxon Davidson:
Well, we actually just need to create more coal-fired power stations to stabilise the grid. The CSIRO a few weeks ago produced their most recent gen cost report in which they revealed that coal is the cheapest form of power when you take into account this relationship with the system of the energy system. And when before that, in the previous iterations of the gen cost report, they hadn’t done that, they’d only looked at it at the asset level. And that’s how Chris Bowen and a lot of other people who do believe in net zero were able to say that wind and solar are cheaper forms of energy than coal. But the cheapest energy future going forward is to actually just to bring more coal into the system and more gas.
Graeme Goodings:
But surely that would go against everything the government stands for.
Saxon Davidson:
Absolutely. But ultimately, the government needs to actually bring results for Australian. And one of those results, as we heard many times before they were elected in May 2022, was to lower power prices. And if they want to bring results to Australians, which is ultimately what Australians also expect from their government, Australians don’t really expect ideological fervour. They expect results. And if results means they have to go back and admit their fault, I’m sure most Australians would appreciate that more than just continuing down the wrong path.
Graeme Goodings:
You’re calling for the reestablishment of coal as a major source of power. Should we be giving more though to nuclear, which is emissions free?
Saxon Davidson:
Oh, absolutely we should be. But ultimately nuclear is banned under the EPBC Act, and I’m all for removing that ban. But it would take a while for that industry to start up. But in the meantime, we have so much coal here in Australia, just like how we have so much uranium. But if we are to start a nuclear industry, in the meantime, we should be using our coal.
Graeme Goodings:
What about the role of gas?
Saxon Davidson:
Absolutely. I’m all for using gas in the system as well to firm up when perhaps if a coal-fired power station were to break down, which they do a lot. So the government claims quite a lot that our coal-fired power stations break down because they are ageing and no one can deny that. But what they don’t mention is why they are ageing. They’re ageing because they’re being used as a stopgap for renewable energy as they go through their transition. But coal-fired power stations aren’t meant to be turned on and off in the way that they are. And there is a myriad of red tape in place which prevents the operators of coal-fired power stations to upgrade the power plant, which means that they’re being aged. There’s not much that we can do to reverse that ageing, and we’re not building any new ones. So I’m also using gas and I’m all for using coal to shore up the energy grid, lower power prices, and make our grid more reliable again.
Graeme Goodings:
Saxon, great. That’s Saxon Davidson, IPA research fellow. What are your thoughts, folks?
This transcript with Saxon Davidson talking on Mornings – fiveAA from 14 August 2026 has been edited for clarity.
