Nice to read that the Government has decided to keep electricity costs low. Good that Government is talking about targeted subsidies.
This is welcomed in the short-term, but we all need to be wary of the long-term effects.
Electricity costs are driven by global energy supply and demand factors. I’m not an economist, but I don’t think anyone can propose an alternative to how energy costs are priced. Of course, this can be subsidised but the costs can run into billions of dollars. Quite expensive.
The danger of continuous energy subsidies is perpetuating the expectation that energy costs can be “adjusted” by the Government. This is not a realistic situation in the long run. As consumers of energy, we need the right price signals to ensure behaviour changes when it comes to consumption of energy.
When there is no incentive to save energy, then there is not opportunity to invest into new technologies that can drive energy efficiencies, alternative sources of energy etc. And this in the long-run creates an economic system that becomes increasingly more stagnant which will hurt income growth.
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