Australian Politics
Tuesday, December 05, 2023
There are three core issues that look likely to ensure that Albo has had his chips
Economic management, border protection and national security/defence; all three have now landed on the Prime Minister’s table with a thump.
As opposition leader Albanese fought to successfully neutralise all of these ahead of the last election. His promise of a safe pair of hands on the economic tiller and the pledge of a unity ticket with the Coalition on boats and defence – despite his own pedigree – were electorally accepted.
But this is now the nightmare before Christmas Albanese had been hoping he would not have to revisit. The political vulnerabilities for Labor that have always been its most acute have now returned to haunt him like ghosts of the Rudd/Gillard past.
Yet there appears to be no political strategy for how to deal with this perilous triumvirate.
Even more lacking is a unified message that would seek to convince the electorate Labor has command of any of them. The polls bear this out.
The memory of its 2013 election loss should be seared into the memories of the more senior members of the Labor caucus.
Internal disunity and the policy crisis over immigration – namely losing control of the nation’s borders – were defining issues.
Albanese has done everything within his power since becoming leader to avoid this topic ever becoming a problem again for Labor in government, even staring down his own left faction on boat turnbacks and offshore processing.
He gets the issue more than many in his caucus, having lived through it last time Labor was in government, and despite his previous ideological leanings.
But this has now been undermined by the complete mismanagement of the High Court’s decision on indefinite detention of criminally convicted non-citizens – a decision now extended by the Federal Court to apply to asylum-seekers. As a result, this issue is unlikely to end as a result of whatever legislation is passed this week. The risk of a repeat of the border disasters of the Rudd/Gillard government is as real as it is perceived.
And whatever political damage has been caused, or may present in the future, it has been entirely of the government’s own making.
While Albanese’s instinct was to look tough, this again was undermined by other ministers who overreached with their attacks on Peter Dutton. Somehow, the government turned a wedge against the Coalition into a wedge against itself. This was a major tactical error on a critical political issue.
On defence and broader national security, again, the government has of its own doing brought an issue back to the table that it had worked hard to politically defuse in opposition.
Albanese’s response to the Chinese aggression against Australian navy divers and Foreign Minister Penny Wong’s handling of the domestic messaging over the Israel-Hamas conflict have undone some of the kudos Albanese had worked hard to establish through his international engagements. Labor was building significant equity in this space. That has been unnecessarily put at risk.
On the economy, the government believes it has a sound story to tell. This narrative, however, has been consumed by the reality that the government presides over a dramatic fall in living standards.
Albanese is also captive to the reality that inflation as an economic problem is not well suited to Labor’s traditional policy toolkit.
And because inflation hurts everyone, Jim Chalmers is in a battle with well-established laws of economics on how to deal with it, which presents a policy dilemma for a traditional Labor government response.
The risk for the government is that it emerges in the new year with Australia having lost its economic pre-eminence among OECD countries, a status it has enjoyed for more than a decade, and being at the back of the pack on dealing with inflation.
This will go to the heart of the political contest over economic management, with Labor having also lost its political advantage over the Coalition on cost of living – aka, handouts – lest it risk adding to the inflation problem.
Albanese has at least one thing going for him. He still has the benefit of a degree of broader unity within the party, despite the recent displays of ill-discipline by members of the cabinet.
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Peak stupid? NSW Liberals back Greens and Labor on Net Zero target
In Parliament, the Liberals joined the Greens in the Lower House to push Labor to adopt a bolder target of 70 per cent reduction in emissions by 2035. That exceeds the previous Coalition target of 50 per cent by 2030 and moreover sets the target in legislation.
The usual suspects cheered from the sidelines.
Natalie Collard of Farmers for Climate Action said: ‘It’s fantastic that the government, the NSW Liberal Party, NSW Nationals, Greens, and crossbenchers worked together to get an excellent result.’
Georgina Woods, the former head of research at the Lock the Gate Alliance, reported that the speeches given were a ‘joy to read’.
The Nature Conservation Council of NSW and Farmers for Climate Action joined the chorus.
Some of us thought that Peak Stupid might have been achieved in the last few years but the latest move by Chris Bowen at the federal level and this state initiative have torpedoed that hope.
Nothing has been learned from the very clear evidence from Britain and Germany that legislating targets will not work. What happened to the lesson taught by King Canute (that used to be in every primary school syllabus) that even the King’s order can’t restrain the tide?
Sadly, the power system may have to fail comprehensively to wake up the punters and arouse them to send a rocket to their local members.
Across the road at the top of Martin Place, forces opposing ‘Reckless Renewables’ rallied to oppose the blight of wind and solar facilities across the regions and offshore. Alan Jones, Craig Kelly, and Barnaby Joyce led the speakers, with some other sitting members, backed up by a roster of local champions standing for their farms and the surrounds.
Passion was the order of the day. Some of the stories from the land were heart-breaking and the troops maintained morale with chanting and support from a folk singer with musical accompaniment.
There was power as well as passion, compelling arguments about the impossibility, the cost, the damage, and the security implications of enriching China who provide the hardware while we wreck our own economy and the countryside as well.
The numbers did not do justice to the cause. Many country folk are harvesting and fire-fighting. The mainstream media did not help with coverage although the usual suspects on our side did their bit.
The organisers were not dismayed by the turnout. This is just the start, never mind the lunacy on display across Macquarie Street ‘we are up for the fight and we are in this for the long haul’.
There will be a rally in Canberra next year with more lead time and most likely many more supporters from the land.
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Hydrogen hype
In a report published on Sunday, the Grattan Institute has called on the federal government to back hydrogen production but be realistic about its uses. The analysis from the think tank says incentivising the production of hydrogen could cost between $600m to $2bn a year.
Grattan Institute energy and climate change program director Tony Wood said hydrogen was not the only solution to the climate transition. “We need to dial down the hype about hydrogen – it’s now clear it will not be the sole clean fuel in a net-zero world,” Mr Wood said.
Across seven recommendations, the Melbourne-based institute calls on the government to be strategic about where hydrogen is used and incentivise its use for some industries while appreciating it was not a comparable replacement for fossil fuels in all circumstances.
The report finds Australia has the potential to be a hydrogen superpower as the country also has the resources and space to be a renewable energy heavyweight.
But the report warns hydrogen faces a “green premium”, with many materials cheaper to produce using fossil fuels.
The report calls on the government to close the cost gap, by ensuring cheap access to renewable energy which could be used to generate hydrogen, put in place barriers to goods from high-carbon polluting countries and support the production of hydrogen for select industries.
The Grattan Institute calls on the government to back hydrogen production through a contracts-for-difference scheme that would underwrite the risk of producing the gas.
The report notes a scheme that underwrote the replacement of all existing ammonia, alumina, and iron facilities in Australia would cost between $11.6bn and $36.8bn over an 18-year period.
Sydney’s WestConnex tunnels system, which connected the M4 and M8 motorways cost almost $20bn to build.
Ammonia, alumina, and iron production are key industries identified by the report for hydrogen to be used.
The report also warns governments must “get serious” about hydrogen and avoid subsidising its use in inefficient areas.
“For many applications, hydrogen is currently a second-best option, and future technological and economic developments could make hydrogen more or less competitive as a tool to decarbonise,” it notes.
“Using hydrogen for heating and cooking in homes and commercial buildings is unrealistic.”
The report also warns against subsidising hydrogen export, warning the costs on both sides of the trade were enormous.
“If such a buyer were to appear – one who wanted to buy Australian-produced hydrogen for export, and was willing to underwrite the capital for the supply chain – then Australia should welcome that investment,” the report note.
“But if governments are seeking the best return for effort, they should not go chasing after liquid hydrogen exports at the expense of domestic uses that could build a viable industry.”
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Our governments must wake up to powder kegs they have created
Myopic decisions mean high interest rates and increasing costs of living are here to stay
The massive spending power of Australians not under mortgage or rent stress has stunned retailers during the Black Friday sales period, with many recording incredible sales increases of around 13 per cent.
In September many people did not believe me when I alerted readers to a significant change in the spending mindset among the 70 per cent of the population not in financial stress.
That mindset switch has exploded beyond my expectations, although the Christmas/Boxing Day spending is unlikely to maintain the Black Friday rate of increase.
But the latest spending boost means interest rate pain must continue for most of 2024 and perhaps longer, unless federal and state governments wake up to the powder kegs they are creating. But a severe downturn is not likely.
Meanwhile in the US, Federal Reserve Chairman Jerome Powell is adamant he has no plans to reduce interest rates and may in fact increase them.
But, despite recent nervousness, the US bond markets this week bet on the most powerful central banker in the world being completely wrong and that US rates will fall. Gold and bitcoin skyrocketed. It’s a big market call.
Irrespective of what may happen to US interest rates, Australia’s underlining powder kegs will make it very difficult for the Reserve Bank to significantly reduce inflation and interest rates in 2024 and there is a clear danger rates may rise further.
What is taking place within our country is different to most other nations because we have created these dangerous powder kegs:
Powder keg 1: Governments are embarking on crazy infrastructure spending, where various arms of governments are pursuing projects which ignore what other arms are doing, therefore accelerating the construction costs of labour and raw material led by steel and concrete.
The cost increases for exploding renewable projects will be monumental and create high Australian power costs for a generation.
In non-energy infrastructure the worst rises look set for Queensland, where the estimates for the Olympic Games infrastructure costs are becoming far too low given the explosion in Queensland costs.
Victoria is not far behind, but its problem can be eased by pigeonholing the $125bn (real cost $300bn) South West rail link and the $12bn (real cost $25bn) airport rail link.
The biggest infrastructure need in all states is housing and unless the pet projects of the various politicians are cut back the cost of this housing will also explode.
However, most states can actually contain the cost of housing, but it requires the Commonwealth government to substantially cut back on grants to states unless they streamline their approval and permit processes to slash costs.
NSW is the worst so has the greatest potential. The cities that are best placed to overcome housing shortages have cheap inner-city land that is often on top of rail lines. Melbourne has huge quantities.
Powder keg 2: The most severe pain is not actually taking place in the mortgage area because banks are not exercising their mortgage security and evicting people when they fall behind in payments.
In most cases, if people make a fist of tailored regular payments, they will retain residency of their home.
Accordingly, while mortgage-stressed people’s spending is being squeezed hard they are surviving by cutting back and embracing casual jobs.
But there is no such payment protection in rental areas where appalling living conditions are sometimes required because of high rents.
To encourage investment in this area the states need to make their rental laws fair to landlords. But if the building approval process is made smooth and costs and skills shortages are not inflated by “infrastructure sprees“ the capital is available. If state governments don’t wake up to the disaster they are creating, the community revolt by the renters may get violent as they watch the ‘70 per cent’ go on a spending spree.
Powder keg 3: After almost two years of wage restraint, where the real income of Australians fell sharply, large parts of the nation are saying “enough is enough”. The wage rise pressures are now starting at around 4 per cent but often revolve around 5 per cent. If inflation keeps up those pressures will intensify and increase.
Even without wage pressure increases the cost of businesses, including skyrocketing power costs, a wide variety of other goods and services will rise sharply unless our high interest rates boost the dollar.
Businesses which cannot pass on these costs will suffer and will need to retrench staff which is exactly what the Reserve Bank is trying to achieve with its higher interest rates, but is being thwarted by the powder kegs, labour shortages and other factors.
If prices respond to the next round of wage, power and other cost rises then interest rates will certainly rise further.
Powder keg 4: The industrial relations bill has been prepared as a union agenda for a world that has dramatically changed. In overall terms productivity will fall and inflation will rise but in specific terms it will make it almost impossible for employers to hire casual workers, adding extreme pressure to mortgage and rent stress. Contracting services will be high risk.
Powder keg 5: In seven months’ time, the tax cuts legislated by the Morrison government will come into effect. They will greatly stimulate the economy. The biggest beneficiaries will be the 70 per cent of people not under rent and mortgage stress.
Finally, if the US bond market is right and American rates are about to fall and our rates are maintained or increased then the Australian dollar will rise further. This will certainly offset some of the power in the above powder kegs, but they are still issues which need to be tackled.
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Also see my other blogs. Main ones below:
http://dissectleft.blogspot.com (DISSECTING LEFTISM -- daily)
http://antigreen.blogspot.com (GREENIE WATCH)
http://pcwatch.blogspot.com (POLITICAL CORRECTNESS WATCH)
http://edwatch.blogspot.com (EDUCATION WATCH)
http://snorphty.blogspot.com/ (TONGUE-TIED)
http://jonjayray.com/blogall.html More blogs
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Evelyn Rae, a conservative Australian political commentator
Margo Robbie -- a beautiful australian
My son Joe at ANU
One of the happiest pictures ever -- Cleo Smith, aged 4
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