Saturday, April 23, 2011

Labor left holding the ashes

Are these the signs that Labor's climate change policy is heading for a second disaster? Big unions and big business are in revolt as the mining boom's strong dollar squeezes the rest of the trade-exposed economy. Households are up in arms over surging power bills.

And since the shambles of the late 2009 Copenhagen climate summit, Labor hasn't doused worries that its carbon tax would put Australia in front of the world, a critical risk for a carbon-intensive economy.

This treble of jobs, cost of living and international competitiveness engulfs Julia Gillard and Greg Combet as they attempt to reverse Kevin Rudd's humiliating 2010 retreat on his emissions trading scheme. It is replete with political and policy failures, some of which are only now becoming evident.

Facing a revolt among steel industry members, Australian Workers Union secretary Paul Howes last week vowed to oppose Labor's carbon tax if it cost just "a single job", even with unemployment below 5 per cent. Remember this is Wayne Swan's union, which was mostly responsible for replacing Rudd with Gillard. Helped by a $US1.07 Aussie dollar, Tony Abbott has hammered a wedge between the blue-collar AWU and Labor's Green alliance, echoing what John Howard did to Mark Latham over Tasmanian forests.

Big business this week joined the rebellion, including a terse return fire of letters with Gillard. Business Council of Australia president Graham Bradley objected to Combet's April 13 National Press Club promise to quarantine more than half the carbon tax money to overcompensate mostly low-income households.

Business fears that Combet's vow to "put households first" will leave a cash-strapped minority government with less to protect industries threatened by the carbon tax, particularly compared with Rudd's 2009 emissions trading scheme deal with Malcolm Turnbull.

Yet the Labor-Greens carbon tax design looks costlier and more uncertain for business than the Rudd-Turnbull plan, for instance by ruling out industry access to international emissions permits that would eat into Canberra's carbon tax revenue.

And the Greens rejected the Rudd-Turnbull deal in part because they reckoned it was too generous to big carbon "polluters".

As well, Gillard needs to hand over more to households because electricity price cost-of-living pressures have worsened. Since late 2006, capital city average household power bills have jumped 52 per cent, or 35 per cent more than the consumer price index. While still a small share of family income, the power bill hikes send out a jolt of sticker shock.

This is before any general carbon price. And it is not happening in other developed economies. Labor's climate change adviser Ross Garnaut figures that real electricity prices in the seven big advanced nations rose only 5 per cent between 2006 and 2009.

This Australian peculiarity is a material change since 2007, when Howard proposed his own emissions trading scheme for an economy that generates 80 per cent of its electricity by burning coal.

Already since then, the power bill shock helped force Rudd's February 2010 backdown and was embodied in Abbott's August 2010 election campaign slogan against a great big new tax on everything. And it is ongoing, bewildering for voters and largely self-inflicted.

NSW households will be slugged with a further 17.6 per cent hike in electricity bills from July 1 following last week's ruling by the state's Independent Pricing and Regulatory Authority. In the coming financial year, NSW households on average will pay between $228 and $316 more for power.

Of this 18 per cent jump, 10 percentage points will come from higher "network" costs and six percentage points from recent changes to the federal government's own renewable energy target, says IPART chairman and adviser to Labor's multiparty climate change committee, Rod Sims.

Sims and Garnaut suggest this reflects two critical policy failures.

The first is the $39 billion five-year electricity network investment surge by mostly state government-owned transmission and distribution monopolies such as Ausgrid (NSW), Energex and Ergon (Queensland) and Aurora (Tasmania).

The high-voltage metal towers that connect generators to substations and the lower-voltage wires and poles that send the power from substations to customers account for about half of retail electricity bills.

As some point out, the electricity network infrastructure boom is almost as big as Labor's contentious National Broadband Network.

Yet Sims and Garnaut suggest that the national energy market regime that regulates these network monopolies encourages excess investment and even "gold plating" under the cover of replacing ageing assets, insuring against a repeat of storm damage blackouts in NSW and Queensland and coping with the sharper peaks in demand.

Under these rules, the regulator can't reject the network monopolies' investment plans unless it can prove they are not "reasonable". The monopolies can cherry-pick specific points to appeal. These rules are more monopoly-friendly than in Britain, where appeals are rare.

The implication is that state treasuries ensured that the Australian Energy Regulator rules protected strong dividend flows from their network monopolies. That is, the rules support generous risk-free regulated rates of return on excess capital spending. These regulated network costs then flow to separately regulated retail prices. As a policy issue, it has slipped under the radar until now.

The second failure is Labor's Renewable Energy Target, which requires 20 per cent of energy to be generated from renewables such as wind and solar by 2020.

Garnaut notes that Labor's RET originally was estimated to add 4 per cent to electricity prices between 2010 and 2015, or less than 1 per cent a year. Yet Sims's IPART ruling says the splitting of the RET into large-scale and small-scale renewable energy early this year alone will increase NSW electricity bills by 6 per cent.

"Green schemes have emerged as a new driver of price increases," warns IPART.

It's the result of federal and NSW incentives for households to install solar panels on their roofs. The bigger than expected take-up has overtones of Labor's disastrous home insulation program. It serves the yearning by higher-income environmentally aware consumers to save the planet by acting locally while getting other consumers to subsidise their power bills.

Sims slams the combination of federal and NSW solar panel incentives as "an expensive, cost-ineffective way of reducing carbon emissions". "Its cost will be borne either by consumers or taxpayers for many years to come," the IPART ruling says. Of course, the whole point of a carbon tax is to eliminate the need for such high-cost abatement. Yet the power price increases fuelled by high-cost green schemes are inflaming the catch-22 backlash against a lower-cost carbon price.

The pre-carbon tax power price surge also is aggravating the cost and hence jobs squeeze on carbon-intensive industries - including steel, aluminium and motor vehicles - exposed to the strengthening exchange rate. Imposing a carbon tax on top of a mining boom means a double hit for manufacturing and processing industries.

Swan this week made the business case by blaming the strong dollar for reducing non-mining company profits in 2010 and, in turn, hitting his budget tax revenues. The dollar averaged US78c in the mining boom mark I before the financial crisis hit. The day after Swan's pre-budget speech, it broke up through $US1.07.

This two-speed economy tension also is provoking claims that Labor is putting Australia in front of global climate change efforts. The notion that Australia should act in tandem with the rest of the world remains central to the nation's climate change policy. While Australia is a heavy per capita emitter, it accounts for only 1.5 per cent of global emissions. Getting out in front may only shift carbon-intensive industries and their pollution offshore.

This risk has been brewing since Rudd's self-inflated hopes of helping to broker a post-Kyoto global climate change deal collapsed at Copenhagen. Recall his private remarks about being "rat f . . ked" by the Chinese.

Combet's suggestion that countries such as China, the US and India are in front of Australia is not yet convincing and is undercut by Productivity Commission analysis. Labor is setting expectations of an initial $20 to $26 per tonne carbon tax before the Productivity Commission has reported on the effective carbon price in other key countries, as required by the country independents' deal with Labor.

In one of his two letters to Gillard, Bradley said Australia "must recognise this reality" that a meaningful cut to global greenhouse gas levels required "international action led by major emitting nations".

He warned that a unilateral carbon price penalty on trade-exposed manufacturing. agricultural and resource sectors would "damage Australian businesses with no net benefit to the world environment". And a carbon price that hit the asset values of coal-fired power generators would require higher rates of return for future generation investment and so lead to higher electricity prices that would undermine productivity across the economy.

In quick reply, Gillard demanded to know whether the Business Council still supported Australia's bipartisan target for reducing emissions by 5 per cent by 2020 and whether it still preferred "using a market mechanism by putting a price on carbon".

Gillard appears to have figured that Rudd's big mistake was to have abandoned his emissions trading scheme, even if it was at her own urging. With the Greens due to get the power balance in the Senate, reviving a carbon price became a political key to her 2011 year of minority government decisiveness.

Yet doing this with the Greens also required her to break her election promise not to introduce a carbon tax.

Labor's disaster scenario now is that the political climate for a carbon price has deteriorated, rather than brightened, since the 2010 federal election. Last month's NSW election wipeout included big Labor losses in its Illawarra and Hunter Valley industrial heartlands and setbacks for the Greens. And the mood may darken further after Swan's budget belt-tightening in two weeks.


Refugee riot highlights a dilemma

THE trashing of Villawood detention centre by asylum-seekers will make the Australian public more hostile to boatpeople and pose a significant test for Labor's new Immigration Minister, Chris Bowen.

The political and policy dilemma Bowen faces is acute. He must take a firm stand against criminal behaviour in detention centres yet the current crisis also demands detention management reform and Labor's delivery on its previous pledge to keep detention to a short base period.

The sharper edge to this Villawood riot is that the instigators, according to Bowen, are mainly people whose claims for refugee status had been rejected at the first point. Bowen said in many cases such claims had been rejected at the second point, the independent merits review. Some claims were now before the courts.

In short, people were unhappy because Australia had found against their refugee claim. The minister said Villawood was under-capacity and rejected assertions that overcrowding was the spark for the riots. Given the damage, certain to run into millions of dollars, with the computer room, kitchen and medical facilities destroyed and firefighters impeded from stopping the blaze, Bowen said the public had "a right to be angry" at the violent behaviour. Indeed, he announced that "I share their anger".

The minister said there was evidence of threats against other detainees. Frankly, it is hard to imagine an event guaranteed to make the Australian public more hostile to boatpeople.

The anger of the rioting inmates is understandable. If you self-select Australia as your destination, pay people-smugglers thousands of dollars, travel a third of the way around the world, transit through several countries and are well aware of your rights on arrival, then rejection is a cruel blow.

This process means that genuine refugees become part of a wider movement where people may be evacuating failed states or searching for improved economic prospects, that is, seeking a migration result. That does not constitute grounds for refugee status.

For Australia, effective border protection is a non-negotiable obligation for Labor and Coalition governments alike. The problem, however, lies in the means and the law.

Opposition Leader Tony Abbott was quick to repeat the principle on which the Coalition will stand. "This is criminal conduct," Abbott said. "People who are guilty of criminal conduct don't get permanent residency. The government has to make it absolutely crystal clear that people can never expect permanent residency in Australia if they are guilty of criminal acts against Australian officials, Australian government agents and destruction of Australian taxpayer-funded property."

The public would back overwhelmingly Abbott's position. Indeed, along with proper staff management and faster processing, this principle is basic to winning stability in detention centres. Once people know their residency claim will be delayed or destroyed, such behaviour will be curtailed.

The reality, however, is Bowen feels constrained by the Migration Act. It is a truly monstrous document seeking to govern people movement to this country but not always with success.

"Australia does not make its visa decisions based on protest action," Bowen said after the initial riot. Yes, people who have been rejected cannot intimidate a decision reversal. But what of those waiting to have claims processed?

Bowen says he can use section 501 of the Migration Act, where a visa can be refused or cancelled on "character grounds". After the Christmas Island violence and now Villawood the minister has said he will apply the character test to the people involved. "And I'll be applying it vigorously," he said on Thursday.

Really? The evidence over many years suggests the character test is a paper tiger. Indeed, at face value it seems almost worthless. Its use has been limited in the extreme. Shadow minister Scott Morrison said then: "This government learns nothing from every incident that takes place. We had some veiled threats about potential uses of section 501 of the Migration Act that this government simply has no form in implementing."

After the December 2009 riot on Christmas Island 11 boatpeople were charged. Of these, eight had their charges dismissed. Three were convicted, two being placed on a good behaviour bond and one fined. Each of these three was granted a visa late last year. These facts were confirmed by the Immigration Department yesterday.

They show several things highly relevant to Villawood and Bowen's dilemma. First, it is hard to bring successful convictions against asylum-seekers. Second, having an asylum-seeker convicted is no impediment to them later getting a visa. Third, the actual application of the character test - Bowen's principal weapon - is shown to be ineffective. If the Australian public was aware of this situation it would become even more angry.

Morrison identified and hammered the above example. "Crimes were committed last night again in Villawood and the Australian people expect the government to take control of the detention network," Morrison said on Thursday.

Bowen's problem is that in relation to criminal records, the Migration Act essentially requires a prison sentence for more than 12 months for the character test to be applied. That is, being a criminal is OK; the problem arises only if you are a serious criminal.

The same constraint will apply at Villawood. It will be hard to get convictions. It will be hard toget convictions beyond a 12-month sentence. Therefore, it will be hard for Bowen to say such criminal behaviour rendered theVillawood asylum-seekers ineligible for Australian residency.

It has been reported that as many as 100 people were involved in the riots and violence. This seems a high number. The point, however, is that the history of such riots and the operation of the Migration Act leave no basis for confidence that the criminal behaviour, in its own right, will make the individuals ineligible for a visa.

There is an alternative so-called general provision of the Migration Act under which the minister can veto an asylum-seeker on character grounds. Immigration sources said yesterday the use of this alternative discretion was contentious and would be challenged in the courts.

What does Bowen do? His credibility is on the line. Labor looks weak on asylum-seekers and it cannot tolerate looking any weaker on an issue where it should, on merit, take a stand. Bowen is not the sort of politician who likes being played for a mug.

He may need to seek a quick review of the relevant provisions of the act, explain its shortcomings to the public and, if required, propose tougher amendments to the law. At some stage, however, he will run into the power of the judges and their reluctance to concede power in this jurisdiction.

Interviewed yesterday, Morrison told Focus the problem was the Labor Party, not the law. Morrison identifies the general provision under which the character test can be applied. He argues it is workable, it should be used by the minister and that section 501 has a caveat that "natural justice does not apply", thereby constraining the courts from overruling the minister.

"My first step as immigration minister would be to send a message that people who engage in this behaviour have their processing immediately suspended," Morrison says. "There needs to be an immediate sanction across the entire detention network that misbehaviour will freeze your claim and may stop your claim."

This event is a micro example of the great dilemma presented by boatpeople. This is not a contest of right against wrong. It is about clashing principles and realities in the globalised world.

Under the 1951 Refugee Convention asylum-seekers have the right in international law to be protected and granted residency if found to be genuine refugees regardless of their numbers, their origins or the burden they impose on host nations.

This conflicts with the competing principle that one of the pivotal privileges the public enjoys in a constitutional democracy is the right to protect its borders, uphold its sovereignty and decide who is allowed to join its society and its citizenship.

Governments cannot easily solve this dilemma. They can only find an uneasy balance. Detention, a Labor initiative, is now bipartisan policy. Villawood is alarming because it exposes both the psychological damage suffered by inmates as well as their false belief they have a right to be accepted into Australia.

It is Bowen's task to restore order to the system and show that criminal behaviour has no place.


Big Government talking down to big Australians

The Australian government is bent on making fat people slim in the most condescending way possible. Last month, an incredibly juvenile media campaign was launched to encourage Australians to make healthier lifestyle choices. The “Swap it, Don’t Stop it” campaign is a multimedia extravaganza, featuring television, print and radio ads, an iPhone app and Facebook page.

I feel stupider for receiving healthy lifestyle tips from a simple-minded balloon called Eric. Some pearls of wisdom from the portly blue balloon include swapping “big for small” portions on your plate and “often for sometimes” in regards to naughty treats.

The campaign reaches its nadir with the audacious promise that you can “lose your belly without having to lose out on the things you love.”

Eric doesn’t want to end up with cancer, type-2 diabetes and heart disease, much like a non-balloon person. But diet and exercise is a personal choice and I would be staggered if anyone adopted a healthier lifestyle because the government tells them to.

With the budget bottom-line looking perilous, the taxpayer shouldn’t be funding an enormous health campaign imploring us to swap four scoops of ice-cream for a calorie-light two. It’s an expensive way to inform Australians of the completely obvious.

A utilitarian might rationalise that a costly public health campaign is justified if a healthier public reduces the burden on the government-funded health system. As the saying goes, prevention is cheaper than a cure.

Health Minister Nicola Roxon referred to the cost of obesity when announcing the “Swap it, Don’t Stop it” campaign—claiming that it cost Australia $58.2 billion in 2008 alone. Fat people are not only cardiovascular time-bombs but, according to these figures, economic vandals too.

Roxon’s claiming, in effect, that a healthy society is responsible economic management. But the obese aren’t a great burden on the government’s finances—simply because unhealthy people tend to die prematurely. A healthy pensioner, after all, costs the government more than a dead one.

I’m not saying that a healthier society isn’t an end in itself but that economic considerations shouldn’t be used to justify government health campaigns when all the data isn’t included in their headline-grabbing figures.

The “Swap it, Don’t Stop it” campaign also raises the important issue of whether the government is overreaching, especially when we presently have all the information we need that eating junk food is bad for you and exercise good.

Even the empty-headed understands the virtue of brown bread over white, a regular morning walk and pitfalls of a KFC Double Down burger. There is no information vacuum around these simple lifestyle choices and no such thing as an unwitting glutton.

A constant criticism of Labor is that it doesn’t know what it stands for but I would argue it does.

Since the Rudd government was elected in 2007, Labor has demonstrated an ideological commitment to big government. It’s a uniquely Labor trait for the government to impose itself on the country.

The Labor government suffered from delusions of grandeur in economic management, stimulating the economy in 2008 with malfunctioning pink batts, overpriced school halls and cash handouts for everyone; it intends to build; operate and monopolise a $36 billion national broadband network; it re-regulated the workplace via the Fair Work Act; it imposed a gratuitous new tax on the mining industry without consultation; it hiked taxes on cigarettes and is legislating to deprive smokers the right to choose an aesthetically pleasing brand—for an entirely legal product, mind you; it’s seeking to de-carbonate the economy; and now wants to protect us from ourselves in relation to diet and lazy lifestyles.

Maybe the government should stick to its core functions and leave people with the responsibility to lead relatively healthy lives.

If people want to be gluttons, so be it—they’ll suffer the consequences.

Anyway, few people are going to eat less or exercise more because the government says so, especially when its spokesman is a balloon.


Tony Abbott is grabbing the workers away from the Labor Party

It helps that he comes across as fair dinkum

TONY Abbott went west this week, talking tax and drinking beer with blue-and-yellow workshirt-wearing miners in Western Australia's Pilbara region. It was Abbott's new comfort zone, carved out in recent months at factory gates in Sydney and Melbourne.

When Abbott started courting workers as part of his relentless assault on the Government's carbon pricing "great big new tax on everything", he was mocked by trade union leaders.

The Australian Workers Union's national secretary Paul Howes said he'd be happy to go to the factory floor with Abbott, adding derisively that the Liberal leader was really visiting the bosses, not the workers.

A week ago Howes dropped what could be the death notice for the carbon tax plan by demanding a guarantee that "not one job" go under its implementation.

It's a demand the Government can't meet. Pricing carbon is about economic transformation and, as was the case with breaking down tariff walls 20 years ago, jobs must go, if only to make way for new ones or so the theory goes.

Abbott quickly welcomed Howes' support in his fight against the Government's carbon plan, using it as a rhetorical backdrop to his bar-room schmoozing with the iron ore crowd.

He also had a ready-made comeback for Howes and his "no job losses" demand on Gillard.

"I can guarantee that under the Coalition's climate change policy not a single job will be lost because we won't have a carbon tax," said Abbott.

The miners in the front bar were cheering.

To the minds of some Labor figures Howes' intervention was akin to senior NSW Right powerbroker John Della Bosca belling the GST cat (he said it wasn't such a bad tax) in an interview in late 2000 derailing federal Labor's campaign against John Howard's own big new tax.

There's a growing perception that senior Labor figures are underestimating Abbott, taking refuge in seemingly poor poll numbers for the Liberal leader to deflect from the correspondingly shocking Labor primary vote.

This week's Nielsen poll had Abbott on a net negative approval rating of minus 9 per cent and eight points behind Julia Gillard as preferred prime minister. Newspoll and Galaxy tell a similar story.

However, the voting intention numbers make these figures less relevant. A 16 per cent primary lead and a whopping 56-to-40 two-party preferred advantage means Abbott would become prime minister at a canter if an election was held this weekend.

Another reason to discount Abbott's relatively poor showing is that Gillard's approval is also in negative territory, albeit just over half that of the Opposition Leader.

Unpopular opposition leaders have a habit of becoming popular prime ministers or premiers, having been willing to take the knocks of carping attacks on government policies in return for voter support in the game that matters winning the election.

After Abbott addressed an anti-carbon tax rally outside Parliament House, standing in front of a few sexist, nasty anti-Gillard posters, Labor ministers were lining up to pronounce the Opposition Leader unelectable.

While it was at best poor staff work on Abbott's part to allow himself to be photographed with such offensive posters, it has had no impact on his standing with his personal ratings hardly moving.

"When I saw Abbott on TV with that `bitch' banner in the background, I knew he'd pay a high price," said one minister.

Another remarked that voters were not going to make someone who associated with "the mad right mob" prime minister of Australia.

These perceptions which are regarded as accepted wisdom among most senior Labor politicians reinforce the view formed after last year's election that the 2010 poll was Abbott's best chance.

"That was the speech of someone who knows he's never going to make it to the top," said one senior minister after hearing Abbott's response to Gillard's deal with the Independents to form her government.

Since then Abbott has continued to attack the Government without rest, travelling constantly and delivering the same lines time and again. Meanwhile, Labor's standing in the polls has slipped to historic lows.

Late last year Abbott went off for a very short break, declaring that he would use this year to broaden his political and policy agenda, moving on from his tireless oppositionist position.

Even some of Abbott's Coalition colleagues doubted he would change his spots, something that was given currency by the early renewed attacks on all things Labor.

But Abbott has been quietly rounding out an agenda, adopting one of Kevin Rudd's successful tricks from his 2007 campaign against Howard.

Then Rudd would anticipate Government action and announce Labor's policy on whatever upcoming policy Howard had in the works.

Abbott in recent weeks has stolen a march on Gillard twice, first on welfare to work and this week on mental health. It not only unsettles the Government, it devalues the eventual official announcement.
In his book Battlelines (also unrated by Labor), Abbott reflects approvingly on Howard's strategy of stealing voters from Labor's home turf, calling him "the great boundary buster" of Australian politics.

It's clear Abbott is trying to out-bust his hero - and he's having some marked success.


1 comment:

Paul said...

Isn't Paul Howes looking publicly like the hollow opportunist that he always was.