The Australian government has set to decision to cap coal and gas prices for a one-year period in a bid to shave utility bills for households and businesses hit by soaring costs appeared after Russia's invasion of Ukraine, Prime Minister Anthony Albanese said Friday.

Gas prices will be capped at AU$12 ($8.13) per gigajoule (GJ), while the limit for coal will be AU$125 per ton for 12 months, with the government supporting coal producers whose costs exceed that figure, he said.

"Extraordinary times call for extraordinary measures, and we know, with the Russian invasion of Ukraine, what we've seen is a massive increase in global energy prices," Albanese told reporters after a national Cabinet meeting with state leaders.

The government also agreed to provide assistance of up to AU$1.5 billion to homes and small businesses, starting from the second quarter of 2023.

It was not immediately clear whether the coal and gas price caps would apply only to uncontracted volumes or on contracted volumes as well.

Gas producers had urged the government not to impose the price cap, saying it would deter future investment in supply, which would be key to driving down prices in the long run.

Producers that could be hit by the gas price cap include ExxonMobil Corp, Shell Plc, Origin Energy, Woodside Energy Group, Santos Ltd. and South Korean steel giant POSCO International Corp's Senex Energy.

Coal producers that will be affected include Glencore Plc, Banpu Resources Australia, a unit of Banpu PCL, Coronado Global Resources and Peabody Corp., which supply coal to power plants in New South Wales and Queensland states.

The Australian Petroleum Production and Exploration Association (APPEA) had urged the government to give time for a recent agreement with three liquefied natural gas (LNG) exporters to boost east coast supply before intervening in the market.

"National Cabinet must avoid the temptation of radical market interventions that risk future energy security and lead to higher prices for households and businesses down the track," APPEA Chief Executive Samantha McCulloch said in a statement before the national cabinet met.

The Australian Industry Group welcomed the price caps but said they were not the best solution.

"They will be messy to implement ... but they look likely to be very helpful in dampening the immediate economic pain of this global energy crisis," Ai Group chief executive Innes Willox said in a statement.