Wednesday, September 11, 2013

Palmer tries to hose down split on carbon tax

New divisions within the Palmer United Party over the carbon tax scheme threaten to derail Coalition plans to repeal the scheme and install its Direct Action funding program.

Tasmanian Jacqui Lambie – expected to be a senator for Clive Palmer’s party – said on Tuesday the Coalition should not expect her support to repeal the carbon scheme, despite the PUP’s clear policy on the issue.

“If he [Tony Abbott] thinks Pauline Hanson was a pain in his rear-end in the past, I can assure you he hasn’t come up against Jacqui Lambie yet, and I’ll be going in hard,” Ms Lambie told ABC radio. “There still needs to be a carbon tax, but it just needs to be a lot lower than it is.”

But Mr Palmer said Ms Lambie had “got confused” and both PUP senators would support the repeal of the carbon scheme. “She was talking about our ­policy on ethanol pricing, she just got mixed up,” Mr Palmer said.

The push for reform of the Senate voting system has gained momentum with the Australian Electoral Commission revealing there was nothing to stop front parties being established to farm Senate preferences to other candidates.

The Australian Financial Review has revealed the Liberal Democratic Party – which emerged from obscurity to secure a Senate spot in NSW – was behind the Outdoor Recreation Party and the Smokers’ Rights Party.

“There is no explicit provision that prevents the same person being the registered officer of more than one political party,” AEC spokesman Phil Diak said.

Highlighting the complex Senate preference flows at this election, it looked increasingly likely on Tuesday the Australian Motoring Enthusiast Party would win the last Victorian Senate spot with the support of preferences from the Animal Welfare Party, WikiLeaks Party, Drug Law Reform Party and Sex Party. As a result, the Coalition is likely to have 33 senators and will require the support of six crossbenchers after July 1 to overturn the ­carbon scheme, if Labor refuses to budge from its position of opposing repeal in this Senate or the next .

Democratic Labor Party senator John Madigan has indicated he will support repeal, and three likely senators-elect have also said they would – the PUP’s Glenn Lazarus, Bob Day of Family First and David Leyonhjelm of the Liberal Democratic Party.

The Coalition would need to win the support of a further two likely crossbench senators. Ricky Muir of the AMEP  and Wayne Dropulich of the Australian Sports Party have refused to say how they would vote.

South Australian senator Nick Xenophon has said he will only support repeal legislation if it is replaced with the baseline and credit emissions scheme proposed by Frontier Economics in 2009.

It would be even more difficult for the Coalition to introduce Direct Action with the Liberal Democrats and DLP indicating they would not support such a scheme. Prime Minister-elect,Tony Abbott, said he expected Labor to respect his mandate and work with him to abolish the carbon and mining taxes, describing them as “handbrakes” on jobs and investment.


Tony Abbott instructs bureaucrats to prepare to axe carbon tax

PRIME Minister-elect Tony Abbott has personally instructed his new departmental secretary to make preparations to axe the carbon tax and activate Operation Sovereign Borders to stop asylum boats.

Mr Abbott got down to business this morning after his landslide election victory, with a briefing with Department of Prime Minister and Cabinet Secretary Ian Watt.

Meetings were scheduled with Treasury secretary Martin Parkinson and Finance Department head David Tune, while Mr Abbott was also due to hold talks with senior Coalition colleagues later in the day.

He told Dr Watt to prepare the ground for the Coalition to implement its agenda swiftly, and he was confident the public's "reasonable expectations" could be met.

"Obviously, a very early item of business is scrapping the carbon tax," he told Dr Watt at the commencement of their meeting.

"There's border security, there's economic security and the people expect, quite rightly, that the incoming government will build a strong and prosperous economy for a safe and secure Australia.

"I deeply respect the professionalism in the Australian Public Service. You are experts at policy implementation and I'm confident that we will be able to successfully implement our agenda because that's what people expect of us."

As Labor enters a period of deep introspection over its future, Mr Abbott has also begun to field calls from world leaders, receiving a congratulatory call from UK Prime Minister David Cameron earlier this morning.

Voters last night delivered an emphatic verdict on six turbulent years of Labor rule, sending the party packing on the back of strong results in NSW, Tasmania and Victoria.

Mr Abbott has a packed agenda for his first 100 days in office. On the top of his agenda is rescinding the carbon tax.

But senior Labor figures have warned they are unlikely to recognise his claimed mandate to axe the measure, and are likely to frustrate the measure if the Senate numbers allow it.

Coalition finance spokesman Andrew Robb said the economy was in for a confidence jolt, declaring an Abbott government would "reboot" the mining boom and "massively" boost jobs.

"We can do so much," he said.

"We can get Australia open for business, we will restore an appetite for risk and investment."

With more than ten million ballots counted, the Coalition has received more than 53 per cent of the primary vote, and looks like ending up with about 90 seats to Labor's 57.

Labor suffered its worst primary vote in 100 years, but Mr Rudd managed to hang on in Griffith and former treasurer Wayne Swan appears to have retained his seat of Lilley.

Greens MP Adam Bandt retained his seat of Melbourne, while the party also looks like gaining a Victorian senate seat, despite a slump in the party's national vote.


New treasurer Joe Hockey likely to take a sharp knife to bureaucracy

It was the morning before election day that the cracks widened in Tony Abbott’s plan to overhaul the $400 billion-a-year cost of governing Australia. Speaking to 3AW’s Neil Mitchell as part of his last-minute pitch to the electorate, Abbott copped a curly question on one of his more prosaic of election promises: an audit of government finances by the end of the year.

Known as a commission of audit, the exercise is typically adopted by incoming state and federal conservative governments and Abbott’s audit would be the 14th commissioned since 1988.

For the Coalition, a commission of audit is the answer to its relentless attacks on Labor’s “waste and mismanagement”. In the dying days of the campaign, Labor tried unsuccessfully to paint a Coalition audit commission as a type of nightmarish inquisition of Australia’s thousands of public servants.

Mitchell was not satisfied with Abbott’s reassurance that a Coalition would “wait and see what it comes up with”. The radio host wanted to know if the commission recommended cuts, would the Coalition do it?

As election day grew closer, Abbott’s commission of audit – where everything would be “on the table” – was a little more selective.

“What we aren’t going to do is we’re not going to cut health spending, we’re not going to cut education spending,” Abbott said.

“We’re not going to reduce pensions, we’re not going to change the GST – all of the scares that Kevin Rudd has been hyper­ventilating over, over the last few weeks, is simple nonsense.”

There would be no vote-killing moves to axe nurses, doctors, teachers or teachers’ aides. As Abbott pointed out, the Commonwealth doesn’t employ any nurses, doctors or teachers.

“If we can get the money to the schools and to the hospitals more effectively with fewer bureaucrats, why wouldn’t we?” he asked.

And so the great political and economic compromise begins.

There’s a political cliche: never commission an inquiry if you don’t know the answer. But it seems the Coalition – like governments before it – will get some answers it won’t like.

The grandfather of audit commissioners, Professor Bob Officer, who was the chairman of John Howard and Jeff Kennett’s audit commissions, says cutting jobs from education and health bureacracies is exactly what an Abbott government should do.


What’s more, the GST and the way the Commonwealth pays the states to deliver services such as health and education, as well as which level of government should have those responsibilities, will inevitably be part of a would-be auditor’s interrogation.

One of Treasurer-elect Joe Hockey’s first jobs will be to pick the person who will lead a commission of audit to find savings across the Commonwealth.

It will be a tough job with the report due by Christmas, in time for the Coalition to map a path toward next year’s May budget in which it will aim to introduce sweeping cuts across the public service.

The person who takes on the job will need nerves of steel to tell the government news it does not want to hear.

There are several big names believed to be on the Coalition’s candidate short-list, including Business Council of Australia chief executive Jennifer Westacott, Merril Lynch chief economist Saul Eslake, who served on the original Howard government’s audit commission secretariat, Doug McTaggart, who recently completed the Queensland government audit commission, former NSW auditor-general Tony Harris, and former Liberal Victorian Treasurer Alan Stockdale.

Then of course, there are the Coalition’s “three wise men” – the co-founder of Ac­cess Economics, Geoff Carmody, former public service head Peter Shergold, and former Queensland auditor-general Len Scanlan.

There are compelling reasons why a “once-in-a-generation” review of government – as Abbott describes it – is crucial.

The budget will remain in structural deficit until the end of this decade, and ad hoc spending cuts are unlikely to solve the problem any time soon.

The Business Council of Australia’s election manifesto says short-term budgetary fixes, involving the time of policy changes or “deft” accounting treatments, have undermined the credibility of the federal government’s books.

“Such a review is needed because already-existing long-term fiscal pressures are being compounded by community expectations that governments will provide new services and spend more on existing ones,” the BCA says.

“We need to get a better handle on which level of government is best placed to deliver services and make sure there is appropriate funding support.”

Westacott, who served on South Australia’s 2009 commission, has told the Coalition its commission of audit must look at some of the most untouchable agencies within government to ensure they have an adequate grasp on long-term fiscal sustainability. These include the Parliamentary Budget Office, Cabinet’s Expenditure Review Committee, the Australian National Audit Office and the supposedly three-yearly Intergenerational Reports.

Scott Prasser, the Australian Catholic University’s Institute of Public Policy executive director, would add the Productivity Commission, the Council of Australian Governments and the COAG Reform Council to that list.


The new audit commission will also take into account the impact of the Coalition’s own election promises on the size of government, Prasser says.

Professor Prasser and his colleague Kate Jones have just completed a six-month research project on audit commissions – a timely interest given the debate Australia is about to enter.

The audit’s findings could have both the Coalition and Labor squirming as signature policies come under the knife.

There’s Labor’s DisabilityCare Australia scheme which some forecast will cost more than $20 billion a year, and Abbott’s own policy baby, the Paid Parental Leave scheme.

Then there’s a whole new layer of bureaucracy that will come with the Coalition’s well-intentioned plans to include business representatives at every level of policy development.

A brief by Coalition-aligned lobbying firm Barton Deakin, sent to clients on Tuesday, identifies at least 26 new review bodies that will include business representatives. Twenty ministerial advisory councils consisting of business, not-for-profit and industry representatives will meet cabinet ­ministers four times a year to advise on cutting red tape, administration, procurement and policy.

One of Abbott’s tasks in his first six weeks of government will be to meet Maurice Newman – the inaugural chair of the Prime Minister’s Business Advisory Council, which will be the most important business conduit to federal cabinet.

Business wants a better dialogue with government, but the mechanism to do it could be just as “constipating” as the multi-committees choking the interaction between federal and local governments in the COAG process, Prasser says.

Previous audit commissions have recommended widely lauded changes, like the Charter of Budget Honesty from the Howard-era audit and the corporatisation of government-owned business enterprises.


But other recommendations can be politically unpalatable.

These include privatisations, outsourcing of government services, and, of course, job cuts.

The Queensland audit commission, by former treasurer Peter Costello, Doug McTaggart and James Cook University vice-chancellor Sandra Harding, recommended culling 20,000 public service jobs.

Queensland Premier Campbell Newman baulked at that number and settled for 14,000 job cuts, but the backlash was still white-hot in its intensity.

Doug McTaggart, one of the auditors of the Queensland government’s finances, complained in June that the state would not reclaim its AAA credit rating quickly without the widespread asset sales his audit recommended.

McTaggart grumbled that the Liberal National Party government had ruled out the sale of the state-owned energy companies Powerlink, Energex and Ergon Energy, one of the key recommendations of the audit.

“Why would I as a taxpayer want to own a high-voltage or low-voltage distribution asset like Powerlink or Energex?” he said at the time.

“Why lock up $20 billion in an asset they can’t use?”

The Coalition has already committed to selling Medibank Private, now worth quite a bit less than the $4 billion it was valued at in 2010, at “the best time for Commonwealth taxpayers”.

The problem is that the easy dollars from asset sales are not available for the Coalition government. Qantas, Telstra and Commonwealth Bank have already been sold and the Snowy Hydro scheme needs the approval of its other owners, the NSW and Victorian governments.

Bob Officer says there is still plenty of “low-hanging fruit” in the bureaucracy, and he is confident Abbott will tackle some of that. However, he is less certain about whether the new Prime Minister will address the need for deeper reform, such as addressing the division between states and Canberra on services and funding.

“I think it is relatively low-hanging fruit, but the politicians might not see it that way when they’ve got to downsize significant departments and the states equivalently are going to have to assume more responsibility – not that they’re that way inclined, they’d rather shoot the responsibility back to the feds,” Officer says.

Asked whether the new government has the determination to tackle large scale reform, Officer says; “I’d love to think so, but I’ve got no real feeling for Abbott.

“Like a lot of us, I’ve looked at his history. He’s very much a Howard man, and Howard was a consummate politician but – apart from the GST, which was a brave move – was not inclined to rock the boat too much.”


Australia-China trade no longer just a resources story

Australia has become more reliant on China as a buyer of its exports than any other trading partner in the past 63 years, surpassing the dependence on Britain after World War II.

In the second quarter of 2013, China bought 35.4 per cent of all Australian exports, a new record high and more than double the level of five years ago.

China is not only the largest buyer of Australian minerals, but also the No. 1 purchaser of agricultural products and has surged past Singapore and South Korea in recent years to be the fourth-largest buyer of our manufactured goods.

Not since the wool boom of 1950 has Australia been so reliant on a single trade relationship. Even Japan in the early 1970s and late 1980s was not as significant, according to data from the Australian Bureau of Statistics.

“As you become more exposed to one country, you become increasingly vulnerable to short-term shocks,” said Scott Haslem, a senior economist at UBS in Sydney.

And while economists remain fiercely divided on the likelihood of a hard landing for the Chinese economy, a recent run of positive data suggests the strong trade performance will continue in the near term.


China now accounts for 38 per cent of all mineral exports and 20 per cent of rural exports, but to the surprise of many it has also become a strong buyer of Australia’s manufactured goods.

High-value medical and pharmaceutical exports to China have grown by more than 200 per cent over the past three years and now command the largest share of Australia’s manufacturing exports to China – worth $856 million in the first quarter.

This can be seen in the strong growth experienced by medical device companies Cochlear and ResMed , but also drug manufacturers such as AstraZeneca, which has a plant in Sydney.

The British drug maker expects exports to grow by 33 per cent by 2015 and has brought forward an additional $20 million in capital expenditure to meet growing demand in China.

But even exports of power generation equipment, beverages (wine) and explosives have grown by more than 50 per cent over the past three years.

“The exponential nature of our resource export growth to China masks the fast growth in . . . rural and manufacturing exports,” Mr Haslem said.


In the second quarter of 2011, China surpassed Japan as the number one destination for Australian rural exports. Meat, oil seeds, cotton and dairy products have seen growth of between 50 per cent and 400 per cent over the past three years. Australian wheat exports could reach 4 million tonnes this season, making China the number one buyer ahead of Indonesia.

This year, China could overtake Korea as the third-biggest buyer of Australian beef behind Japan and the US.

And next year it is tipped to become the biggest single-country buyer of Australian lamb, although the Middle East is the top importing region. “China is the biggest growth market,” said Tim McRae, Meat and Livestock Australia’s chief economist.

“Growth in beef exports to China has taken off in the last 12 months but for lamb and mutton, there has been consistent growth over the last five to 10 years.”

BHP Billiton demonstrated its confidence in the China food story on Tuesday by investing an additional $2.85 billion in its Canadian potash project.

BHP said its bet on potash, a key ingredient in fertiliser used for growing crops, was based on a belief that an additional 250 million Chinese would move to cities over the next 15 years and demand higher-quality food.


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