Prime Minister Anthony Albanese has asserted a temporary price cap on gas won’t impact new investments in the sector.
Measures capping gas at $12 a gigajoule for 12 months started on Friday after being signed off by the government.
Federal parliament was recalled last week to pass the legislation for the temporary cap, following an agreement between Mr Albanese and state and territory leaders at national cabinet.
The price cap will apply to new domestic wholesale gas contracts by producers on the east coast.
Mr Albanese said the caps were aimed at providing energy relief.
“The truth is that there is no impact on new investment on any proposition that went through the parliament,” he said in Sydney on Friday.
“The cap on prices of $12 for gas is time limited, it does not apply to new projects and people are very aware of that.”
In a joint statement, Energy Minister Chris Bowen and acting treasurer Senator Katy Gallagher said the cap would help to keep energy prices low following increases stemming from the war in Ukraine.
“The Albanese government’s responsible and meaningful action on gas prices is about ensuring a stable and well-functioning gas market for the benefit of Australian households, industry and manufacturers,” the statement said.
“The government has taken a responsible approach that will shield households, industry and manufacturers from the worst of the predicted gas price spikes and save jobs.”
The intervention in the gas market is expected to lower gas prices by 16 percentage points during the 2023/24 financial year.
The last federal budget previously forecast rises in gas prices of 20 per cent during both the current and the next financial years.
Mr Albanese said the price caps were a modest proposal, with similar measures also introduced in European nations,
“I want to stand up for households and businesses, including Australian manufacturers, who cannot sustain global prices that have increased by multiple times whilst the costs of production have not increased,” he said.
“There has been no increase in the cost of production here in Australia and yet there was massive, in some cases, a quadrupling of prices that were being offered to customers. That’s unacceptable.”
The legislation passed last week also allowed for a mandatory code of conduct for gas retailers.
The code is set to be put in place earlier next year, with submissions on how the code would operate set to close in early February.
The consumer watchdog will also be given powers to oversee and enforce the code.
A review of the code will be carried out after six months.