Wednesday, July 08, 2009

Urban planners are the biggest culprits in keeping grocery prices higher than they need to be

By Michael Costa

THE decision by Kevin Rudd and Consumer Affairs Minister Craig Emerson to scrap the federal government's ill-conceived Grocery Choice website has to be applauded. Grocery Choice was a political stunt that was inevitably bound to backfire on the government. The real problem with retail price increases is to be found in the archaic anti-market planning laws that deliver significant economic rents to those with the resources to establish monopolies over the limited key retail sites.

While it is appropriate to criticise the government for making its announcement on the day Michael Jackson died, so that it could minimise the political fallout from this significant political backflip, it should not be the main concern with the decision.

Emerson, having worked as an adviser to Bob Hawke, saw first-hand the importance of sensible market reform. Having inherited the portfolio from Chris Bowen, who with no doubt an eye to promotion, appears to have become enamoured with Rudd's anti-market rhetoric, Emerson would have realised the potential political disaster Grocery Choice was. The failure of Grocery Choice will, for political purposes, no doubt be blamed on the major supermarket chains. The reality is that with or without the co-operation of these supermarket chains, this was a ham-fisted way to address retail competition.

Despite the claims of Choice, the self-appointed friend of consumers, there was no chance of the website working properly or gaining broad community participation. The problem for consumers has never been information; it has been a real lack of competitive alternatives at the point of the actual retail spends. If Choice wants to bat on with Grocery Choice it should do it at its own expense, not with taxpayers' funds. A subscription-based service will prove whether there is a real public demand for this sort of information.

The July 2008 Australian Competition and Consumer Commission report into the competitiveness of retail prices for standard groceries concluded that while there was "little doubt that food prices have increased significantly in recent times in Australia", this was due to a number of domestic and international factors. Domestic factors such as the drought and international factors such as an increased global demand for food production resources have led to rising farm input costs such as fuel and fertiliser. On the basis of an examination of these factors and the gross margins of the major retail chains, the ACCC concluded that only "one-twentieth of the increase in food prices over the past five years could be directly attributable to the increase in gross margins" by the dominant duopoly.

This conclusion sits uncomfortably with other observations within the report that seemed to highlight the clear dominance of the majors in key retail sub-categories, such as dry groceries. The ACCC observed "that gross margins have experienced larger increases in categories where Coles and Woolworths have a relatively larger share of national sales". The report further observed that the more efficient of the two majors, Woolworths, has earning margins among the highest of all international grocery retailers. Whatever the degree of economic rent flowing to the majors because of the structure of the industry, it is clearly difficult to determine. Nevertheless there is a problem and a public perception that this is leading to higher grocery prices.

The real danger in the government's decision to walk away from its election commitment is not lack of consumer information but rather that the major underlying problem in retail competition, planning barriers to entry, will not be addressed effectively. Problems here are in jurisdictions normally outside the control of the federal government: state government planning departments and local councils. The ACCC correctly identified that state planning laws which contributed to a lack of suitable sites for new grocery retailers were a significant barrier to entry for competitors to the majors. Its recommendation that competition issues be taken into account when approvals are assessed for new supermarkets is laudatory but politically naive. State planning departments and local councils are structurally incapable of implementing this recommendation.

The issue is both ideological and political. Most state and local government planning agencies have been captured by planning zealots who are hostile to market-driven economic development. These planners believe the market is the fundamental problem in urban land use allocation. Rather than harnessing the power of the market to produce economically sensible land allocation outcomes they try to fit these decisions within the current cookie-cutter ideological fashion. The present fashion in urban planning focuses on what are called centres policies and urban villages. This fashion is dressed up in different language in different areas for local consumption but is essentially the same approach to urban planning and is not unique to Australia.

The policy results in the concentration of major retail activity in central locations and satellite local centres with much more limited retail opportunities. Urban planners don't seem to understand that by mandating that major retailers be concentrated in a limited urban footprint they are creating artificial scarcity, higher prices and monopoly opportunities. Retailers in the urban villages can't compete against the price advantages the large volume retailers have and they are limited in their consumer offerings. Eventually the areas become economically unviable and potentially urban crime zones.

This urban planning ideology creates an uncompetitive environment as new entrants cannot locate in the centres because these prime monopoly positions have already been secured by the major retail operators. The consequence of this type of planning approach as the ACCC noted is that it "significantly impedes the ability of competing supermarkets to access prime locations". This of course leads to higher retail prices for consumers.

There are many examples, as the ACCC acknowledges, where major retail operators, shopping centre providers and major supermarkets have used the planning laws to try to frustrate direct competition. In states such as NSW where local government areas haven't been properly reformed the problem is even greater for retail consumers, due to the greater influence of small community interest groups, who don't even support the restrictive centres policy and seek to eliminate all retail expansion, even within the designated centres.

Until there is a properly functioning competitive market for retail space it is impossible to gauge whether existing retail competition and retail margins are reflective of sound economic factors, or monopolistic rent seeking behaviour. The federal government needs to deal with urban planning and land use as part of its national competition reform agenda. The argument that this is a state and local government issue does not have credibility given the federal government intrusion through its environmental legislation into what were traditionally state and local government issues.

Surely the economy is still as important as the environment.


The Liberal Party must defend the Howard economic legacy

WHEN a long-lasting government is cast into electoral darkness, it can sometimes spend years reshaping itself back to relevance.

Kim Beazley, Simon Crean and Mark Latham seemingly never recovered from defeat, never quite working out what to keep and what to jettison of the Keating legacy. Not until Kevin Rudd repositioned Labor as economic realists did the ALP regain power.

On the “what to keep, what to scrap” issue, John Howard is increasingly concerned that the Liberal Party is not sufficiently defending an economic legacy that is one of the party’s biggest political strengths.

Howard chooses his words carefully, understanding that his era ended when the government lost office. Not for him the rambling, rumbling ruminations of a disgruntled former PM such as Paul Keating. Late last week, Howard told The Australian that “when I walk down the street now I am confronted by more spontaneous expressions of support from people for the economic record of the Howard government than I got six months ago”.

Howard’s point is that right now, in the midst of the global financial crisis, there is no more important time to defend the economic legacy of the Howard government. Not as some teary remembrance for lost times or things past. But as a straight directive to voters at the next election that the Liberal Party has a proud track record as economic managers.

Others said the same thing privately last week when opposition treasury spokesman Joe Hockey made an off-the-cuff remark that it was “reasonable criticism” to say that the Howard government spent too much on tax cuts and family benefits. As one senior Liberal MP said, in exasperation, to The Australian: “Which party is Hockey a member of?” To criticise the Howard government for cutting taxes too much is like the Greens now deciding it is bad policy to save too many trees.

The kindest, and perhaps likeliest, reading of Hockey’s comments about tax cuts is that it was a stuff-up. But it is the sort of lazy blunder that the Liberal Party can ill afford to make. On the contrary, it ought, as Howard is now suggesting, to be hammering the point that the Liberal Party has a proud record of paying off debt, building surpluses and growing the economy. If it fails to defend the legacy, the opposition plays into the hands of those who peddle the myth that Australia’s economic prosperity was due only to the mining boom.

The former foreign minister, Alexander Downer, also has plenty to say about the need to defend the legacy.

He told The Australian: “It’s not only intellectually important, it’s politically very important to defend the economic legacy of the Howard years because it demonstrates to Australians the virtues of voting for a Liberal government in terms of their living standards and the overall living standards of the country. If people start criticising the Howard government’s economic legacy that’s what Labor wants.”

Asked if he is comfortable that the opposition is sufficiently reminding people of the economic record of his government, he, too, is careful in his choice of words: “Look, they should never stop reminding people of the Howard government’s economic record. They have made very strong arguments about the size of the deficit and the growth of debt - and they have done that well - but they need to link that to saying: ‘Well, when we were in government we did all of those things (paying off debt, cutting taxes, etc).’ They should never criticise the legacy of the former government. The Labor Party never criticises its former governments. They don’t even criticise the Whitlam government, which was the worst government Australia has had since Federation, at least economically.”


And this guy is an economist??

Population increase is going to lead to an increase in demand for housing -- and what does increased demand do in the face of a restricted amount of available housing land? It pushed UP the prices. Real estate values in desirable places ALWAYS increase over the long term. UWS should persuade him to shut up for the sake of their reputation

CONTROVERSIAL economist Steve Keen has refused to back down from his doomsday prediction that house prices in Australia will almost halve over a decade despite growing evidence to the contrary.

Nine months after his dire prediction that property prices will fall by 40 per cent over 10 years, fellow economists have pronounced Professor Keen - who was held up as one of the few commentators to see the global economic downturn coming - "spectacularly wrong" on his outlook for the housing market.

Professor Keen, an associate professor of economics and finance at the University of Western Sydney, was so convinced the bottom would fall out of the housing market that he sold his two-bedroom apartment in the inner-city Sydney suburb of Surry Hills in October last year to avoid financial pain from the predicted downturn.

But an analysis of price trends in Surry Hills suggests that had Professor Keen held on to the apartment, he would have realised a capital growth of about 7 per cent, The Australian reports. According to property data agency Residex, the apartment market in Surry Hills experienced an average capital growth rate of 7.08 per cent in the year to May.

But Professor Keen insisted yesterday that Australia was on the cusp of a prolonged depression "in which house prices will fall as collateral damage".



Three articles below:

Great Barrier Reef will be gone in 20 years, says prophet

This B.S. about disappearing coral has been going on for decades but the reef is still there. The galah below "forgets" that "coral reefs were exposed throughout their geological history to higher temperatures and CO2 levels than at present and yet have persisted". See here

The Great Barrier Reef will be so degraded by warming waters that it will be unrecognisable within 20 years, an eminent marine scientist has said. Charlie Veron, former chief scientist of the Australian Institute of Marine Science, told The Times: “There is no way out, no loopholes. The Great Barrier Reef will be over within 20 years or so.”

Once carbon dioxide had hit the levels predicted for between 2030 and 2060, all coral reefs were doomed to extinction, he said. “They would be the world’s first global ecosystem to collapse. I have the backing of every coral reef scientist, every research organisation. I’ve spoken to them all. This is critical. This is reality.”

Dr Veron’s comments came as the Institute of Zoology, the Royal Society and the International Programme on the State of the Ocean (IPSO) held a crucial meeting on the future of coral reefs in London yesterday. In a joint statement they warned that by mid-century extinctions of coral reefs around the world would be inevitable.

Warming water causes coral polyps to eject the symbiotic algae that provide them with nutrients. These “bleaching events” were widespread during the El Niño of 1997-98, and localised occurrences are becoming more frequent. (During an El Niño, much of the tropical Pacific becomes unusually warm.) Reefs take decades to recover but by 2030 to 2050, depending on emissions and feedback effects, bleaching will be occurring annually or biannually.

Although surface sea temperatures are rising fastest in tropical regions the other big threat to coral reefs comes from the higher latitudes. The cold water there absorbs atmospheric carbon dioxide more readily than warm water and acidifies more easily. When carbon dioxide concentrations reach between 480 and 500 parts per million warm water is no barrier to acidification, and the pH in equatorial regions will have dropped so far, meaning higher acidity, that coral reef growth becomes impossible anywhere in the ocean. [In fact, ocean acidification is a scientific impossibility. Henry's Law mandates that warming oceans will outgas CO2 to the atmosphere (as the UN's own documents predict it will), making the oceans less acid. Also, more CO2 would increase calcification rates]

“Coral reefs are the most sensitive of marine ecosystems,” said Alex Rogers, scientific director of IPSO. “Increased temperature and decreased pH will have a double-whammy effect. Reefs were safe at CO2 levels of 350 parts per million. We are at 387ppm today. Beyond 450 the fate of corals is sealed.”

In the five mass extinction events in geological history, key was the carbon cycle, in which carbon dioxide is the primary currency. Its concentration in the atmosphere is higher than it has been for 20 million years. In the Permian extinction, as in all the big extinctions, tropical marine life was the hardest hit. Reef-building corals took more than ten million years to return.

The Great Barrier Reef, the world’s largest and most diverse marine ecosystem, is worth $4.5 billion (£2.8 billion) a year to Australia. Worldwide, reefs are worth $300 billion. “But that is trivial compared with the costs if coral reefs fail,” Dr Veron said. “Then it won’t be a matter of no income, it will be a matter of damage to livelihoods, economies and ecosystems.”

Yesterday’s meeting renewed calls for networks of marine conservation zones to boost the resilience of reefs.


It's getting chilly but still not cool to be a sceptic

Andrew Bolt

NOW that it's so chilly, I can understand why Climate Change Minister Penny Wong wants us to stare at the sea, instead. Better that than have us stare at the latest satellite data showing the world has now cooled down to the average temperature of the past 30 years.

Last month Family First senator Steve Fielding asked Wong a question she could no longer ignore: what proof did she really have that man's gases were heating the world to hell? And what got her attention was Fielding's threat: if she didn't give a good answer, the Rudd Government would not get his crucial vote in the Senate for its plan to slash our emissions with huge new taxes.

Specifically, asked Fielding: "Is it the case that carbon dioxide increased by 5 per cent since 1998 while global temperature cooled over the same period? If so, why did the temperature not increase; and how can human emissions be to blame for dangerous levels of warming?" An excellent question, even if it's more accurate to say the world has cooled since 2001, despite a big increase in the gases we're told will make us fry.

So I thought the media might be interested in Wong's remarkable response a week later, given that she now said we'd all been wrong to fret about the air temperature. You see, "at time-scales of around a decade, natural variability can mask the atmospheric warming trend caused by the increasing concentration of greenhouse gases". Translated, that means, sure, it might be cooling now, which we still refuse to actually confirm, but one day it will warm again, just like we said. Just wait.

And then there was this appeal to start checking the seas instead: "(I)n terms of a single indicator of global warming, change in ocean heat content is most appropriate." So all that ominous talk about hotter temperatures at this city or that town? Just kidding. Meaningless.

Last weekend we could understand better why Wong is no longer keen on data on surface and atmospheric warming. NASA's Aqua satellite - one of the four main measurements of world temperature - found June had dropped back to just .001 degrees above the average for the past 30 years. That means we're back to "normal", even if "normal" now is slightly warmer than the average for last century, during which the planet came out of the Little Ice Age that ended 150 years ago.

Other land and satellite records agree the planet has cooled for most of the past decade, and while it's still too early to say global warming has stopped, rather than just paused, it's not too early to ask why there's less warming than most climate models predicted.

But what of Wong's claim that the true measure of global warming is the sea? Well, even Fielding's scientific advisers agree that's true, even if Wong never mentioned that before. But as world-ranked climate scientist Professor Roger Pielke Sr noted this week, three recent papers confirm that even the oceans seem to have stopped rising and warming since about 2004, or at least have slowed in doing so. "All of these analyses are consistent with no significant heating in the upper ocean and a flattening of sea level rise, and even more clearly, that these climate metrics are not 'progressing faster than was expected a few years ago'," he said.

I know the panic is on. I know almost no politician, other than Fielding, dares publicly confess that the science of global warming is not at all settled. But know this: the data shows less warming than the alarmists claimed, and no warming for several years. It may start warming again soon, but until then a sane person will keep his head -- and his doubts.


Climate change laws to "de-energize" poor Australians

POLITICALLY correct zealots penning new national energy laws have pulled the plug on the word "disconnection". The word is being replaced with the bizarre term "de-energisation". Angry consumer groups have accused the boffins behind the draft of making it easier for power companies to hide harsh treatment of customers struggling to pay their bills.

Consumer Action Law Centre policy director Nicole Rich said the bureaucrats were out of touch and should go back to the drawing board. "This is more than political correctness gone mad," she said. "It's worse, because it could have the effect of keeping the community in the dark about hardship problems by lumping in records of these disconnections with power being cut for maintenance and safety reasons."

The warning comes as households and businesses brace for higher electricity bills because of policies to combat climate change.

A team of state and territory bureaucrats wrote the draft of the National Energy Customer Framework, which notes: "De-energisation of premises means the deactivating or closing of a connection in order to prevent the flow of energy from a distribution system at the supply point".

Ms Rich said there was a distinct difference between power shutdowns for maintenance, or when customers moved house, and supply cuts to those battling with bills. Critics fear the national laws will also strip Victorians of protections such as bans on late payment fees, security deposit restrictions and compensation of $250 a day for wrongful disconnections. But the Herald Sun believes Victoria will not sign the laws unless key consumer protections are retained.

Ms Rich said the number of Victorians disconnected for not paying had dropped to the nation's lowest rate, about 6500 a year, since a renewed focus on repayment plans and hardship policies from 2004. Federal Energy Minister Martin Ferguson's office said the document was an early draft, and more consultations would be held.


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