Australia will cap coal and gas prices in a bid to shave utility bills for households and businesses hit by soaring costs because of the Ukraine conflict, Prime Minister Anthony Albanese said on Friday.

Gas prices will be capped at A$12 per gigajoule (GJ), while the limit for coal will be A$125 per tonne 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 A$1.5 billion to homes and small businesses, starting from the second quarter of 2023.

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. (Reporting by Sonali Paul; Editing by Clarence Fernandez)