Wednesday, October 02, 2013

The burning issue of inequity in the Solar Bonus Scheme

The comments below refer to Queensland but the situation is similar in other States

BEWARE of governments bearing subsidies because if you're not getting any of what's on offer, then you're definitely paying for someone else who is.

That's how it works of course. Governments, like Robin Hood, are always redistributing the wealth, collecting taxes and fees here and building schools and roads there.

But sometimes the government's cash grab is so blatant and unfair you wonder why people aren't marching in the streets.

Take the former state Labor government's Solar Bonus Scheme to encourage homeowners to install domestic solar power systems.

The government's carrot was it would let households sell all their excess power back to the grid at 44¢ per kilowatt hour, which was about 10 times more than the cost of coal-fired electricity.

The scheme was so wildly successful Energex has had to spend $167 million buying solar power from homeowners in the 2012-13 financial year, even though it had budgeted for only $7 million.

It's the same story for Ergon, which credited solar-powered households $76 million during the year, compared with just $28 million the year before.

And what's wrong with that you might say? Isn't solar good? Right up there with motherhood? And don't we want more of it for the day we can finally say goodbye to coal-fired power?

Well, yes to all that. But there are some principles of equity here that are being trampled in our rush to go green.

The problem is that the money being paid to all those virtuous households with solar power is coming straight out of the pockets of the state's other, non-solar-power users by way of higher electricity bills.

The huge take-up of home solar system is also creating further expense for the power distribution companies, which have to upgrade their networks to take electricity flows in both directions - another cost that gets passed on to all power users.

All up, the scheme will add about $32 to the average power bill this year, climbing to $67 next year and $276 by 2015-16.

The Newman Government has been trying to reduce this growing imbalance between the solar haves and have-nots by slashing the feed-in tariff from 44¢/kWh to 8¢/kWh as of mid-last year.

But anyone already on the old rate can keep reaping their profits at the higher level until the 20-year scheme runs out in 2028.

The LNP says that even with the new lower rate, the eventual cost to taxpayers will be about $900 million.

No matter how you look at it, this was a remarkably badly conceived idea, which reinforces two points. One is that governments are terrible at thinking much past the three-year political cycle.

When the Bligh government launched the Solar Bonus Scheme in 2008, all the rhetoric was about addressing climate change and helping the local renewable energy industry. There was no discussion about how much it might all one day cost.

As late as September 2011, less than six months before Labor lost office, then energy minister Stephen Robertson was insisting the program "doesn't place upward pressure on electricity prices".

This particular policy also highlights the dangers inherent in governments trying to influence the way markets operate. In this case it encouraged consumers to buy solar systems by offering them a price for their excess energy hundreds of per cent above the going rate.

Not a bad deal for those who could afford the initial cost and it certainly worked. Queensland now has the highest solar take-up rate in the country, with 290,000 households installing panels so far.

Proof indeed, you might argue, that government intervention in the marketplace can work. But at what cost? And even if you think $900 million or so is fair value, why should householders who couldn't afford or weren't able to install solar systems have to foot the bill?

In any event, if solar is such a good idea, householders, in response to ever-increasing power prices, will twig eventually, with or without a government subsidy.

When the Labor government introduced the Solar Bonus Scheme everyone thought it was a good idea, even LNP MPs, then in opposition, who argued the feed-in rate being offered should have been even higher.

But in the end, this really was just a cynical vote-buying scheme that bought the Labor government some green credibility. Not that anyone who managed to climb aboard this particular solar-powered gravy train before it left the station would agree with that proposition.

Let's hope though that they've got the good grace to occasionally say thanks to their non-solar-powered neighbours.


Tony Abbott's Indonesia visit seals deal over live-cattle trade

TONY Abbott's Jakarta visit has been rewarded with a breakthrough in restoring the live cattle trade, with a special quota for 53,000 additional animals and in-principle resolution of a dispute that was threatening the introduction of a new Indonesian import quota system.

The cattle trade breakthrough was managed by negotiators from the two agriculture ministries on the eve of the Prime Minister's arrival, but his impending visit gave impetus to the resolution.

They agreed to compromise on Indonesia's demand for animal health tracking information, something the Australians had rejected as unacceptable.

That in turn cleared the way for Indonesia to issue a special quota for 53,000 "slaughter-ready" cattle, in addition to the December quarter quota of 46,000 head for fattening in Indonesian feedlots.

The only problem is that Top End pastoralists are unlikely to be in a position to muster the necessary numbers, or the larger sizes wanted by the Indonesians, before the end of the year.

Elders chief executive Malcolm Jackman said numbers of available cattle were well down because of destocking, in response to a poor wet season and adverse trade conditions in Indonesia, and the opening of markets in Vietnam and The Philippines.

"I suspect that 53,000 in three months will be a bit of a struggle but I think that people will get after it pretty rapidly," he said.

However, Australian producers would want to reassure Indonesians they were the first-ranking market.

"It's by far the most natural market -- the market's well-established, the relationships are well-established and because it's so close, it works really well," said Mr Jackman, who was a member of Mr Abbott's heavyweight business mission.

In another step towards stabilising the troubled industry, Mr Abbott yesterday flagged a positive response to Indonesia's plan to invest in 1.5 million hectares of northern cattle land, though the purchases will likely be subject to Foreign Investment Review Board scrutiny.

Mr Abbott was claiming no premature victories on the live trade, which has been reduced by 60 per cent since 2010.

Instead, he was intent on contrasting the Coalition's "open for business/no surprises" approach against the Gillard government's mid-2011 suspension of the live trade, in response to an animal cruelty scandal.

"We can work together -- but it will take some effort, especially after the shock of the former Australian government cancelling the live-cattle export trade in panic at a TV program," he told a business breakfast.  "Nothing like this can ever be allowed to happen again."

However, the Prime Minister provoked anger from animal rights activists with his following observation.  "Last year, I visited abattoirs in Indonesia which were quite comparable to those in Australia and reject any notion that Indonesian standards are lower than Australia's."

Former agriculture minister Joel Fitzgibbon claimed the government was considering winding back the Export Supply Chain Assurance System safeguards put in place after the scandal. "That would be a disaster for the industry and a complete misread of the mood of the broader Australian community, which expects the highest animal welfare standards," Mr Fitzgibbon said.

The new biosecurity standard is within a broader agreement, still to be finalised, to replace Indonesian cattle import quotas, which had gradually choked the trade, with a market price-based "trigger" system.

Indonesian importers and Australian exporters hope the new system will let Indonesian shipments next year reach 500,000 head and build from there towards the 2009-10 peak of 718,074 head.


A huge Labor Party boondoggle

The Labour Party didn't start this but they had 6 years to get it right

A MEDICAL scheme that was meant to boost the rural workforce has delivered just one new doctor to the bush after nine years.

And doctors receiving a $16,000 taxpayer funded medical school scholarships under another rural workforce scheme are opting to work overseas to avoid their bush practice obligation.

A Grattan Institute paper on rural doctor shortages says its proof that current solutions to the crisis aren’t working.  The Grattan Institute is a Melbourne-based non-aligned public policy think tank.

A government review of health workforce programs says the $13 million a year Medical Rural Bonded Scholarship Scheme that supplies doctors with $16,000 a year scholarships if they work in the bush should be phased out.

Students who get the scholarship are meant to work for up to six years in a rural or remote area when they graduate.  There are over 1200 participants in the scheme but to date fewer than 50 recipients have commenced their return of service period.

“The Department has suggested it is common for participants to make representations seeking a way out of their obligations, which for some may include pursuing employment overseas,” the report said.

The report’s author says the older Bonded Medical Scheme should also be closely monitored.

This scheme, set up by the Howard Government in 2004, allocated 25 per cent of first year university medical places to solving the rural workforce shortage.

Those who accepted the places had to work in the bush once they graduated.

The scheme has over 4500 participants but a recent survey found only one graduate had so far started a return of service obligation in the bush while three others had bought their way of their obligation.

At least one in four participants planned to withdraw from the scheme once they graduated, a recent survey found.

This will mean they have to pay back 75 per cent of the cost of their education but the review says this works out cheaper than paying full fees for a medical degree.

“The unintended consequence of the scheme could be that for a substantial minority of participants it becomes an alternative to a full-fee-paying medical course,” the report said.

“Since the cost of ‘buying out’ represents approximately 75 per cent of the total cost of the medical school placement, it may be perceived by participants as a low cost or interest free loan that can relatively easily be repaid once fully qualified,” the report said.

The Grattan Institute Report says at current rates of improvement it will be 65 years before remote areas of Australia get the same level of GP services those in big cities get today.

A Rural Doctors Association of Australia survey shows some rural residents are waiting six months to see a GP and two in three had to leave their local area to get health treatment.

The Grattan Institute says the solution to the crisis is to allow pharmacists in these areas to write repeat prescriptions for a drug the doctor has already prescribed and deliver vaccinations.

It also suggests producing an army of three-year trained physician assistants who, working under a GP, could order blood tests, X-rays and write prescriptions to ease the rural workforce shortage.


Flexibility needed to prune public staff costs

Commonwealth bureaucrats must be cheaper, more mobile and easier to sack if the federal government is to achieve its ambitious savings targets, a public sector labour expert says.

Meyer Vandenberg lawyer Jennifer Wyborn says next year's civil service-wide enterprise bargaining round is a chance for the Abbott government to keep a lid on wages growth, achieve productivity gains and curb the bureaucracy's generous redundancy payouts.

Enterprise agreements for the country's 170,000 federal public servants expire on June 30, next year and Ms Wyborn, writing in Fairfax Media's Public Sector Informant, says the talks are a test of resolve for the government.

Unions are likely to demand a move towards ending the pay gaps - of tens of thousands of dollars, in some cases - between public servants working at the same level in different departments.

However, Ms Wyborn says looking at raw wage numbers is a simplistic approach to an increasingly complex internal jobs market in the public service because it "ignores the variety of work performed across the APS [Australian public service]," she writes.

"No two jobs are the same; different work is performed and different skills are needed, even though the positions may be at the same level.

"The system isn't perfect, but it allows agencies to offer wages that are attractive to skilled workers and which, arguably, reflect the market value of their labour."

Ms Wyborn says an "economically responsible" government should "resist populist calls to artificially inflate wages." She writes: "Any increases should be linked to productivity gains and reflect the value of the work performed."

However, after several years of "efficiency dividends" those productivity gains could be hard to come by. "Given that the APS has already been through several efficiency dividend increases in recent years, agencies will need to engage in some serious reflection and analysis to identify productivity gains or efficiencies that could be achieved to justify wage increases, " she says.

It is also time the government critically examined redundancy and flexibility provisions in the public service and it may need to get tough on generous payouts to retrenched public servants, Ms Wyborn says.

"The cost of potential redundancies will not be far from the minds of the government," she says. "The current APS standard provides for up to 48 weeks' pay, depending on age and length of service.

"This is significantly more than the maximum entitlement of 12 weeks in the Fair Work Act, making redundancies in the APS a costly exercise."

The lawyer argues that the controversial "spill and fill" redundancy procedure, whereby a number of workers are asked to apply for a lesser number of jobs, should be formalised.

"The advantage of this is it allows an employer to use a merit-based process for filling a reduced number of positions, and can avoid allegations of discrimination or inequality associated with the 'last on, first off' procedure," she writes.

Ms Wyborn also says departments should have the power to send workers to regional Australia, "where it would be more efficient for those roles to be performed than in metropolitan areas".

Agency bosses should also have the flexibility to allow their staff to move to part-time arrangements.


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