Gas prices have begun to fall and supply has improved since the Turnbull government struck a deal with LNG exporters to secure additional supply.
But the Australia Competition and Consumer Commission report, to be released on Wednesday, also warns the outlook for prices in the southern Australian states, especially Victoria, is not positive given the combination of insufficient gas production, the need to transport gas from Queensland and a moratorium on exploration in some states.
And the east coast gas market "is still not functioning effectively and domestic prices are still in excess of the ACCC's estimates of benchmark prices", according to the report.
The report singles out moratoriums on exploration in Victoria, NSW and Tasmania for particular blame in creating the shortages that have driven up the cost of supply, and contrasts it with Queensland, where supply is booming and prices are on average lower.
The ACCC's September report into the gas market warned major gas shortages in 2018 of between 55 and 108 petajoules were in prospect for households and businesses because of booming exports of gas.
In October, Prime Minister Malcolm Turnbull and senior representatives from Shell, GLNG Operations and Australia Pacific LNG formally signed off on a deal to deliver extra domestic supply in 2018 and 2019, avoiding direct market intervention by the government to limit exports.
The ACCC's revised forecasts for 2018 are for somewhere between a surplus of 20 petajoules to a shortfall of 33 petajoules, under a high-demand scenario, and a similar forecast for 2019.
Treasurer Scott Morrison said the report demonstrated the government's approach to tackling and reducing sky-rocketing gas prices had begun to work.
"We are now on target to have a 20 petajoule surplus of gas in the coming year, based on expected demand," he said. "Just three months ago, the ACCC estimated Australia would face a shortfall of between 55 PJ, on expected demand.
"More gas in the domestic market means more contracts for businesses, more offers to customers, and lower prices.
" While our interventions have had the desired impact and have likely saved us from a shortfall in 2018, we need to continue to address the issues identified by the ACCC. The report also notes gas users in southern states are paying an extra $2 to $4 per GJ to transport gas from Queensland as a result of a shortage of gas in their states."
