FORMER PM John Howard says Australia's greatest immediate policy challenge was barely mentioned in the federal budget - the looming energy crisis.

Speaking at a post-budget business breakfast with former New Zealand PM John Key, Mr Howard described the risk of supply and price rises as scandalous given Australia natural endowments of energy sources.

The nation had 38 per cent of the world's easily recoverable uranium reserves, hundreds of years of coal reserves, was a major natural gas producer and could also produce plenty of solar and wind power, he said.

"That we should be facing a potential energy crisis in the eastern states is a serious condemnation of the political process," he said.

"That gas exploration has been hampered, narrowed, redirected and prohibited by some state governments is a policy scandal of the first order."

He also claimed state governments had overzealously embraced renewable energy targets, leading to a massive increase in costs.

"When my government was defeated in 2007, the renewable energy target was two per cent and it should never have been increased?" he said.

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Some major energy users have shut some operations as a result, such as Rio Tinto, while others are threatening to do so, such as Glencore coal boss Peter Freyberg in comments this week.

Mr Howard said Australia was extremely fortunate economically and was approaching a world record of consecutive quarters of growth, but was getting to the "brake linings" and falling behind competitors.

A Senate that was more diverse than in his time made the crucial economic reform needed more difficult to pass, he said.

He said he was "uneasy" about what he called a bank tax hike, that was part of this week's budget.

Mr Key said Australia's long-term economic good times made it harder for governments to convince voters that reform was needed, especially in industrial relations.

Australia's labour participation rate was lower than New Zealand's, but if it was the same the unemployment rate would be 12-13 per cent, he said.