Friday, October 14, 2011

Carbon Tax no victory for Gillard

It’s a victory for the Greens, Windsor, and Oakeshott

“The suggestion that the passage of the so-called Clean Energy bills is a major political victory for Julia Gillard is wrong, “Senator Boswell said. It is a victory for the Greens and independent MP’s Tony Windsor and Rob Oakeshott.

The Prime Minister promised before the last election that there would be no carbon tax under a government she led. She changed her mind because it was a condition of support from the Greens and the independents. The Prime Minister has effectively, repeatedly, conceded that.

The result is that we now have a carbon tax, morphing into a carbon trading regime in 2015 that is a Tyrannosaurus Rex, disguised as a Panda.

The Greens and the independents have driven this transformation. In 2008 Tony Windsor sought to legislate an 80% reduction in emissions by 2050. That is now the Government’s target. The Bills do not even mention the superseded 5% target.

The trajectory of caps under the scheme will therefore have to be much steeper than under the old target - which is now no more than a default position. The price of carbon will be precisely the $23 nominated by the Greens in January 2010, and will rise by several per cent a year, as suggested by the Greens at the same time.

Caps will be recommended by a Climate Change Authority, as sought by the Greens and the Member for Lyne, who will no doubt be deeply disappointed by the fact that parliament retains a role. He fought for it to be totally sidelined.

There will be a $10 billion slush fund for rent seeking green power entrepreneurs, as demanded by the Greens.

It is obvious that the so- called multi-party Climate Change Committee was simply cover for the government’s concessions to the extreme positions of the Greens and Mr Windsor.

The passage of the Clean Energy Bills is in no way a victory for Julia Gillard. It is a pyrrhic victory for Bob Brown, Christine Milne, Tony Windsor, and Rob Oakeshott.

Press release above from National Party Senator Ron Boswell (

Billions will be wasted painting pork barrel green

by: Henry Ergas

SO it's done. But it's hardly a shining achievement. Even the government's hope is that by the next election most voters will have forgotten it. And who knows, like an unpleasant visit to the dentist, the climate change legislation may fade with time. But it will still be the most expensive dentist's visit in our history.

Not that the government is willing to admit it. That's understandable, for it knows the community is unwilling to make sacrifices for a policy that seems pointless. But even on Treasury's assumptions, the carbon tax will cost a year's national income: that is, $1 trillion.

If that $1 trillion saved us from policies that were even worse, it might be worth bearing. But the government is not proposing to scrap the myriad handouts that masquerade as climate change policies: rather, using the proceeds from the tax, it intends to vastly scale them up. And that means we lose twice: first, through the harm the tax causes; and then a second time, by squandering the moneys it collects.

Nowhere is that clearer than with the government's sop to the Greens, the $10 billion Clean Energy Finance Corporation. The path it will take, of subsidies to renewable energy technologies, is well-trodden, not least by the US government. The recent spectacular failure of Solyndra, a solar manufacturer that received over $US500 million in US government loans, highlights the waste such programs invariably involve.

For this is spending without any sensible purpose. There is no evidence of under-investment in renewables: rather, global investment in renewable energy has reached record highs, with annual outlays exceeding $200bn. Indeed, the concern is that too much money is chasing too few ideas, while on the manufacturing side capacity has expanded ahead of demand. Getting into this activity now is as sensible as the Hawke government's Multi-Function Polis, which sought to launch Australia into electronics just as the world market plunged into a profitless glut.

The Multi-Function Polis was laughable. The CEFC, in contrast, is plain irrational. After all, our comparative advantage lies in abundant natural resources, including vast reserves of coal and uranium. Were the CEFC investing in stimulating world use of those resources, it might add to our national wealth. But to appease the Greens, it will stay well away from anything that involves coal or nuclear, and actively promote technologies that replace them. So if it works, taxpayer dollars will have been used to erode, not enhance, the basis of our prosperity.

Luckily, there is no prospect of it working. Rather, study after study finds such schemes fail as surely as the sun rises.

This is first because the people running the operation won't have their own money at stake. True, the government will appoint a board of green-tinged corporate types, along with the usual cronies. But it's not their funds that will be at risk. And with the government indemnifying them against being sued, as it has the directors of NBN Co, they will face few pressures to take the tough decisions. So when projects go sour, instead of pulling the plug and embarrassing the government that appointed them, they will bury their mistakes, postponing the reckoning to the future.

Yes, some hapless official in Department of Finance will monitor the operation. But he or she is unlikely to have the commercial nous to run a chook raffle, much less the clout to prevent a high-profile board from taking poor decisions. As for the minister, there too all the incentives will be to hide losses as long as possible. For even if it eventually fails, the government is hardly likely to go after the minister responsible: look at the Victorian Economic Development Corporation, which lost millions of dollars under treasurer Rob Jolly's watch. Did he go to jail? Far from it. He is now a consultant on renewable energy.

That is what economists call moral hazard: when decision-makers lack incentives to take proper care. And that moral hazard means there is little chance of CEFC choosing and managing projects wisely. But there is even less chance of its being offered the projects that are really worth funding.

The CEFC, Treasury says, will provide finance on "commercial terms" such that its loans "earn a positive return". But good projects don't need the CEFC to get those terms: they can secure them from venture capitalists. It is the losers, for whom even commercial terms are a great deal, that the CEFC will attract. That is what economists call adverse selection: when good risks and bad risks are offered the same terms, it is the bad risks that come flocking.

Combine those factors and you get a stampede in which taxpayers' interests get trampled. Having enjoyed their international junkets, the suits on the CEFC will hardly reject every proposal put to them. Rather, to justify their existence, they will make some high-profile investments, no matter how dubious.

As for the politicians, they will crave the photo ops from contract signings and factory openings. Since the CEFC's mandate includes helping existing manufacturers convert to "green energy", every constituency can have one, presumably with a billboard advertising the government funding. Ever alert, the rent seekers won't take long to cotton on. And with the CEFC excluded from the Productivity Commission's periodic reviews of the government's package, there will be little to slow the gravy train.

But none of this will come cheaply. Rather, analyses consistently conclude that each dollar spent on this type of government venture simply crowds out one dollar of private investment elsewhere in the economy. But that government dollar both achieves less than the dollar it displaces and costs more, because distorting taxes are needed to raise it. It therefore ends up costing two or more dollars in lost income.

So make that $20bn wasted on painting the pork barrel green.

But what are a few billion dollars more when you are set to trash a trillion? Pocket money. Pity it's our pockets it will be coming out of.


Australia's doors are now wide open to illegal immigration

JULIA Gillard has predicted an increase in boat arrivals after yesterday being forced to abandon offshore processing and softening the treatment of asylum-seekers who arrive by sea.

Under Labor's new asylum-seeker regime, increasing numbers of arrivals will be allowed to live in the community and work while on bridging visas as their claims are processed.

After failing to garner the support of enough crossbenchers for legislation that would revive her proposed Malaysia Solution, the Prime Minister last night warned "we are at a real risk of seeing more boats" but urged Australians to blame Tony Abbott.

"There is only one reason that we are not in the circumstances to have offshore processing and that's because of Mr Abbott and his determination to trash the national interest," Ms Gillard said in Canberra yesterday. "Mr Abbott's conduct leads us to circumstances where we are at real risk of seeing more boats."

As the drama unfolded last night, refugee sources told The Australian in Jakarta that four boats were within several days of sailing, carrying about 300 asylum-seekers in total.

However, the Indonesian national police's anti-people-smuggling taskforce is at a high state of readiness, working closely with Jakarta-based Australian Federal Police agents,

Since the August 31 High Court decision knocked down Canberra's Malaysia Solution, four vessels carrying 392 asylum-seekers have made it to Australian waters. In that time, however, the Indonesian police have prevented at least three other departures by intercepting up to 200 passengers travelling on land.

Another boatload of 44 people was intercepted at sea last month off Sulawesi after mechanical trouble.

The Prime Minister's comments drew contempt from the opposition, with immigration spokesman Scott Morrison saying Labor had capitulated to the Greens and calling for Ms Gillard and Immigration Minister Chris Bowen to resign. The Opposition Leader urged Labor to admit it could not deal with border security and call an election.

The Greens, most refugee advocates and Labor MPs from the Left faction welcomed the move, saying onshore processing was the most humane way of dealing with asylum-seekers. Under the government's plan, most eligible boatpeople will be issued with sub-class 050 bridging visas, the same visa issued to asylum-seekers who arrive by plane.

It is understood the government will begin issuing bridging visas to boatpeople sooner rather than later. Although the government retains spare capacity for about 2400 asylum-seekers in the overstretched detention network, officials are keen to ensure pressure in the system is relieved before it is allowed to build.

The bridging visas allow asylum-seekers to be paid 89 per cent of a Special Benefit allowance (roughly the same as the Newstart allowance). This means singles get $443 a fortnight, and families $570.

After two hurried cabinet meetings and a caucus meeting, Ms Gillard last night revealed the new arrangements, under which all asylum-seekers will be processed onshore. All would face mandatory detention on arrival, but after existing detention facility space was exhausted, the government would allow detainees to move into the community on bridging visas.

The changes come only weeks after bureaucrats and experts warned Ms Gillard that a failure to reinstate offshore processing, which was declared illegal by the High Court in August, would trigger an increase in people-smuggling. The experts predicted about 600 irregular arrivals a month, and warned of resulting social unrest.

Announcing the move last night, Ms Gillard said offshore processing in Malaysia would have been the most effective method to deter the people-smugglers. She warned that onshore processing would spark "the real risk" of more boats.

"I understand that will cause community anxiety," the Prime Minister said. "I believe it is very important that if we do see more boats, to separate in the community's mind, in all of our minds, the problem of seeing more boats from the people who are on those boats. We are a generous country, we are a compassionate country. It is not a matter of blaming the people who are on the boats for these circumstances."


Jewish community wants Islamic group Hizb ut-Tahrir outlawed

VICTORIA'S Jewish community wants a radical Islamic group banned, claiming it poses a security risk. Hizb ut-Tahrir, which is banned in several countries, is due to hold a conference against the Afghanistan war in Melbourne tonight. The group's Australian branch has also recently criticised a new counter-terrorism website launched by the Federal Government.

Victorian Jewish Community Council president John Searle said yesterday that Hizb ut-Tahrir's beliefs were contrary to those of most Australians. "They peddle a very virulent form of anti-semitism and anti-Zionism, and they are the sort of group that would encourage home-grown terrorists," he said.

"We are not happy that they are here at all. We don't believe they are a desirable influence on young minds."

Mr Searle said the Jewish community council wanted the group banned and was concerned that speakers at tonight's event could inspire people to take extreme actions. "They are certainly at the very extreme end and extremists do not produce any good results for anybody," he said.

But Hizb ut-Tahrir spokesman Uthman Badar denied the group was extremist or anti-Semitic. "The claims made about us are based on hearsay," he said. "We are happy for them (Jewish community members) to come down and have a look at our conference." Mr Badar said the group had a problem with Israel because of the occupation of Palestine.

Federal Attorney-General Robert McClelland said Hizb ut-Tahrir's views were well out of step with the Australian community and the question of banning the group was constantly being reviewed by security and intelligence agencies.

"The Government takes a hard line against groups that advocate terrorism, and will act upon advice from its security agencies as to whether they should be proscribed," he said.


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