The lead up to the Budget (on Tues 9 May) is normally pretty quiet except for advance leaks by the government on what we might expect – or not. So far the main possibility being foreshadowed is action to reduce housing “affordability”, which sounds like a worrying move by a government which should be reducing expenditure. But as it happens, some other issues have emerged since Parliament had the break after two weeks in Canberra.
The continued poor polling by the Turnbull government was publicly recognised by Immigration Minister Dutton, who is a possible candidate for PM if a spill occurs. The Australian’s cartoonist has also drawn attention to the Coalition’s 10 bad Newspolls in succession. Dutton acknowledged the Coalition’s need to turn the polls around (see AFR report below, with Cartoon).
That need is enhanced by a reported review (to which a brief reference is made in the AFR report) of the Liberal Party’s 2016 election campaign, which receives front page treatment in The Australian under the heading “Three years of mistakes dented Libs”. The review itself has not been released but what has been leaked so far indicates the two review leaders (the now retireds Andrew Robb and Barry O’Farrell) would have pulled no punches. One conclusion is apparently that the conduct of the election campaign allowed Labor to define the government, in effect a damning reference to both Turnbull and the very recently resigned federal director, Tony Nutt.
I have previously argued that the major reason for the large increase in electricity prices is the requirement that there be considerable usage of renewable sources. This is required under federal legislation (23% by 2020) and by policies adopted in the states of SA, Victoria and Queensland, not to mention the ACT which has a target of 100%. Costs aside, the SA blackouts experience shows that renewable are insecure once usage reaches a high level.
The latest warning has come from the former highly respected head of the Productivity Commission, Gary Banks, who has given a considered oration criticising this development and exposing the foolhardiness of some political leaders. Following is an extract from his article in today’s AFR (see Gary Banks on Energy Policy):
“The inconvenient truth is that the increasingly high prices for increasingly unreliable electricity are a direct consequence of the increasingly high utilisation of renewable energy required by government regulation. Energy markets are admittedly complicated things. However, the logic is unassailable that if a cheap and reliable product is penalised, while expensive and less reliable substitutes are subsidised, the latter will inevitably displace the former. No amount of sophistry, wishful thinking or political denial can change that basic economic reality. Changing the mix of energy use away from low-cost but emissions-heavy fossil fuels has of course been the whole point. While Australia’s own actions can have no discernible impact on global carbon emissions, let alone on Australia’s climate, there is broad support for the idea that playing our part is a precondition for a joint international endeavour that could. This requires a leap of faith, but it is a legitimate policy objective, even if a particularly costly one for this country given its resource endowments. The resulting costs and difficulties have been greatly compounded, however, by governments choosing a policy path that is essentially anti-market, one violating basic principles of demand and supply. The energy crisis is self-evidently not the result of market failure but of government failure”.
Banks’s entire oration (complete version attached) deals with more than energy problems. In his conclusion he suggests that:
“the biggest challenge we face in public policy today is no longer knowing what to do (which can be difficult enough), but how to get it done. The obstacles in contemporary politics and media have undoubtedly increased, but these are reflective of underlying changes in Australian society and are unlikely to change. The only path to the policy high ground lies within executive government itself, and the restoration of capabilities that served us so well in the past. I’m sure we’d all agree that this is ultimately a matter of leadership. But is that really too much to ask?
This oration is of course relevant to more than Australian politics and media. But it is certainly very pertinent here in regard to the Turnbull government.
In fact, that government is continuing to pronounce an energy policy involving both renewable and non-renewable energy usage. In a speech to the Sydney Institute prior to a three day visit to India, Turnbull said he will assure the Indian government that Australia will be a reliable provider of coal, uranium, gas and renewable energy technology to ensure the country has energy security as it grows into a regional power (see Turnbull on Energy Security). One wonders whether we have the capacity to play such a role. And Turnbull makes no mention of the fact that Indian PM Modi has not agreed to a target for reducing emissions of CO2.
Also relevant to energy policy is the policy recently announced by the Victorian Coalition Opposition. Leader Matthew Guy indicated in March that he would abolish the renewable energy target and he told the State Council on April 3 that he would not close any more brown coal-fired power stations. This is a policy which Turnbull should adopt (I have advocated for some time that Turnbull abolish the renewable target) and he now faces a situation in which the Liberal Party’s federal policy is at odds with their Victorian state policy on an important issue.
Hugh Morgan has drawn my attention to a published analysis by a US expert on air defence forces, Dan Grazier, about what appears to be serious concern about the capability of the F-35 plane, of which Australia is scheduled to buy 70 at a cost of $17bn. Two such planes arrived in Australia on 4-5 March and Turnbull welcomed their proposed purchase without indicating that any problems existed or that further structural changes might need to be made. Yet Grazier has indicated that further tests do need to be made and that the President, Defence Sec and Congress would then need to decide whether to approve its use. Also relevant is that Trump was reported in mid-December as saying that the F-35’s cost is out of control.
Grazier seems to believe that it is not too late to make the necessary changes to the F-35 program. The implication is that, with such changes, it would be worth continuing to produce it. But further tests are needed and the President, Defence Sec and Congress would then need to decide to finish it. However, Trump was reported in mid-December as not only saying that the F-35 cost is out of control but that he will “save billions”. At the very least the Turnbull Government should be saying is that our purchases will depend on Trump and his Defence Sec first giving it a tick. Hugh Morgan is seeking further reactions to this disturbing analysis.
US Missiles Attack on Syrian Airport
While the implications of this are unclear, it is of some interest that Australia received forewarning and that Turnbull quickly endorsed the decision by Trump even though Australia is not involved and is not at war with Syria. It may lay the way for endorsements of other Trump decisions having international implications.