Government regulation and government failure lie at the heart of the rise in power prices, with the debate over energy policy more reminiscent of the "policy dysfunction" that is the normal state of affairs in some parts of Africa and Latin America, a former senior public servant has warned, but that has not been Australia's experience – until now.
"The inconvenient truth is that the increasingly high prices for increasingly unreliable electricity are a direct consequence of the increasingly high utilisation of renewable energy required by government regulation," Gary Banks, a former head of the Productivity Commission, said in a speech to Infrastructure Partnership Australia on Thursday night.
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"Energy markets are admittedly complicated things. However the logic is unassailable that if a cheap and reliable product is penalised, while expensive and less reliable substitutes are subsidised, the latter will inevitably displace the former. No amount of sophistry, wishful thinking or political denial can change that basic economic reality.
"Changing the mix of energy use away from low-cost but emissions-heavy fossil fuels has of course been the whole point," he said. "The resulting costs and difficulties have been greatly compounded, however, by governments choosing a policy path that is essentially anti-market, one violating basic principles of demand and supply.
"The energy crisis is self-evidently not the result of market failure but of government failure."
Blaming the private sector for Australia's energy problems risks the policy mistakes that caused it being compounded by further policy mistakes, he warned.
"We seem destined to end up in a third- or fourth-best world ... when the first- or second-best were well within reach."
"The intervention spawned by the failure of the energy/carbon policy accordingly looks to become a self-perpetuating process," he said, and wasreminiscent of the approach of those protecting domestic industry from global competition in the past.
![Malcolm Turnbull announcing plans to expand the Snowy last month.](/web/20170407195406im_/http://www.watoday.com.au/content/dam/images/g/v/0/e/4/m/image.related.articleLeadwide.620x349.gvf7ms.png/1491491325588.jpg)
The transformation of Australia's economic performance since the 1980's involved both the politicians and public servants working together, but the pre-requisites for good policy had been "manifestly lacking" more recently.
"Ministerial staffers have traditionally played a key role in turning good policy into good politics," Mr Banks said. Increasingly, political staffers were younger people with their own political aspirations and mainly concerned with "issues management".
![Former head of the Productivity Commission, Gary Banks.](/web/20170407195406im_/http://www.watoday.com.au/content/dam/images/g/n/h/o/u/s/image.related.articleLeadwide.620x349.gvf7ms.png/1491491325588.jpg)
"The displacement of policy grunt with tactical flair has unfortunately coincided with this youthful cohort having a bigger say in what passes for policy development itself," he said, with the adverse effect of changes to enhance the "responsiveness" of the public service compounded by "a serous loss of analytical firepower in departmental ranks".
"While reform has no doubt become more challenging today compared to the 'reform era', recent experience has convinced me that the capacity of government to prosecute it has actually declined," he said.
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