Institute for Private Enterprise » Climate Change

Robin Hood & Costs of Inaction

Des Moore — Wed, 08 May 2019 11:26:36 +0000

As Election Time Approaches Shorten Proposes Increasingly Unrealistic Policies

Part of my upbringing involved learning nursery rhymes one of which covered the life of Robin Hood. In those days Robin Hood was portrayed, at least to me, as an outlaw who lived in the forest and whose income came either from the proceeds of his attacks on the local town or from those passing through the forest. But he was portrayed as a hero because he (supposedly) gave the proceeds to the poor. It was only later that I realized that RH’s “fair go” came from failing to allow the local sheriff from observing the law and protecting those who maintained it.

In her article today Janet Albrechsten portrays Shorten as like a Robin Hood who is promising a plethora of “fair go’s” if he receives the necessary votes on May 18. But use of that term inevitably creates problems. Albrechtsen also makes the important point that his historical Labor approach to government is not in Labor’s tradition as represented by Hawke and Keating but more like Whitlam’s. My (considerable) experience of Whitlam is that, while he is still regarded as Labor’s icon, under his regime it was a complete shambles. That led to him only winning an internal challenge from Jim Cairns by one vote and forced him to make Cairns the Treasurer of Australia. But economic management went adrift.

If Shorten wins on May 18, it is likely that his government’s regime would operate similarly to Whitlam’s, although it would be difficult to be as bad. Shorten would likely be followed fairly quickly by left Anthony Albanese becoming the leader (in the internal election in 2013, which included party members as well as members of Parliament, Albanese got more votes than Shorten but not have enough under this system to obtain the Opposition leadership). The large number of policy changes under Shorten, would cause internal disruption even within the Labor party and would be likely to force him out. It would almost certainly make economic management much harder and could see a recession.

Albrechtsen draws attention to policies which are focused on distributional issues and which would cause concern within the party as well as outside it. This would be particularly so in regard to industrial relations, which PM Morrison has dodged in the debates between him and Shorten. By “industrial relations” I include the latter’s policies on relativities between sections of the workforce , such as child care. In my previous Commentary I suggested that Morrison needed to attack the large economic deficiencies in many of these items, including the overall effect on the economy. But while he handled the specifics well in tonight’s debate, he again failed to drive home the inadequacies for the economy.

One of these inadequacies is Shorten’s attempt to dodge the adverse economic effects of his climate policy. His refusal to acknowledge that his policy would have no such effect without taking account of the (unstated) costs of inaction left open a wide area of exposure of which Morrison did not make use. My letter published in today’s Australian obviously (see below) did not reach Morrison or his advisers.

Climate plan costs unjustified

Letter published By The Australian,12:00AM May 8, 2019

You report that, when asked on ABC’s Q&A program about the costs of his environmental policies, Opposition Leader Bill Shorten told host Tony Jones that “you can’t have a debate about climate change without talking about the costs of inaction”.

Well, let’s have a debate about the costs of inaction.

Perhaps the best expert asked to estimate the costs of inaction was Dr Ross Garnaut, who published two long reports for the government on the dangerous warming threat. His conclusion was that the most likely cost of inaction was that dangerous warming would occur in the next century.

One wonders whether Shorten agrees with Garnaut’s best estimate and, if not, when he predicts dangerous warming would start. It is dumb for the Opposition leader to rely on a Garnaut-like estimate but at the same time justify aggressive costs being incurred before 2030 with his economically damaging proposal to reduce emissions by 45 per cent.

Des Moore, South Yarra

Uncertainty in Labor’s Policies; Islamic Threat

Des Moore — Thu, 25 Apr 2019 09:48:13 +0000

What Are Labor’s Policies?

Today’s Australian has published considerable material on the failure of Labor to clearly enunciate its policies. I have previously drawn particular attention to Labor’s failure to publish aggregates alternative to those in the Coalition’s budget and to costings for the economy of its global warming policy. This defect remains.

But the recent emergence of many questions about Labor’s policies on specific policy issues has opened the way for much wider challenges to be made. The opening up of this area should also allow Morrison to reduce his announcements of funding small projects, which appear too much as vote buying, and focus more on attacking Shorten. It has also led The Australian to inter alia run the main letters column today with the heading Uncertainty Surrounds Labor’s Announced Policies. I was fortunate in having my epistle included as “lead letter” – as set out below.

Uncertainty Surrounds Labor’s Announced Policies

Letter Published in The Australian, April 25, 2019 (Bits in square brackets omitted by Ed).

Those closely following the election had been expecting that after Easter Labor would publish proposed budget aggregates and their costings – just as the Coalition did in its budget. No such luck. What we are getting are reports that material distributed by some Labor candidates omit to mention Shorten is their leader.

This may reflect the failure of Labor to decide [internally] on detailing the reasons for some of its decisions. Take the decision to require half of new vehicles to be electric by 2030.

It now appears that the recording of high electric sales in Norway [(much tinier than Australia)] may be due [importantly] to a near 100 per cent sales tax there on non-electric cars. Would Labor provide that “incentive” here?

Then there is the proposed Adani coal mine, for which the Coalition has given approval to all legal federal requirements.

But despite having said that he is being “governed by the law”, Shorten is not prepared to accept such approvals. Instead, he says this proposed investment by an Indian company is a matter for the Queensland government. Does this mean that Labor would cease to have the federal government determine foreign investment policy?

The foregoing are not the only Labor policy issues which are uncertain. Decision time has surely arrived.

Des Moore, South Yarra, Vic

I also include in this Commentary some very brief references to recent commentaries on some other specific issues, viz

After humming and hawing Shorten now says he would not review environmental decisions made by the Coalition. Yet at the same time Labor would not sign the “pledge” by the largest union, the CFMEU, tosupport the coalmining industry and, in implied support for the proposed Adani mine, for “coalmining developments that meet regulatory requirements”. Contrary to Shorten, some Labor candidates say they would leave the question of reviews open (see Shorten Says No Adani Review);
Shorten leaves open the possibility of tax reductions for those on high incomes (see this article);
Wong (Shadow Minister for Foreign Affairs) refuses to answer questions on the Australia-US alliance, Taiwan and refugees (see this article);
GetUp has removed its extraordinary ad denying (in effect) that Abbott is a surf life saver and, while agreeing with the removal, Abbott’s main challenger (Stegall) amazingly denies she has any connection with GetUp (see this article);
How can Shorten’s promise to alleviate the cost of living be met with the latest zero increase in the cost (see this article)?

The other two attachments reflect, firstly, the differences of view about the role of Muslims in the Sri Lankan bombings and the over 300 killings . As Andrew Bolt points out, it has exposed a general refusal of the political left to openly “admit” that one Islamic aim is to eliminate Christians, which is now certain in the case of the Sri Lankan killings. Of particular interest is the possibility that the SK killings are a revenge for the killings of Muslims in Christchurch New Zealand. Bolt’s analysis is revealing in identifying prominent politicians, including Obama and Hilary Clinton, who have refused to even acknowledge that the death of Christians has been the aim (see Bolt on Denials of Muslims in Sri Lankan).

The second attachment outlines the extent of persecution of Christians and the widespread failure of believers in Christianity to do much about it. The author is Bill Muelenberg who is an expert in Jihadism and who worked in the Institute of Public Affairs when I was also there. He points out that “there have been 34,891 deadly Islamic terror attacks since 9/11. That occurred 6,431 days ago. So we are now averaging five and a half such attacks each day since then. It is getting worse”(see attached Sri Lanka, Jihadist Massacres, and Western Denial).

In an earlier Commentary I have also written about Mark Durie who has written a new book, THE QUR’AN AND ITS BIBLICAL REFLEXES, which convincingly argues that the Koran requires Muslims to kill non-Muslims.

Coalition’s Budget & Labor’s Reply

Des Moore — Fri, 05 Apr 2019 20:39:00 +0000

Shorten’s Budget Reply Speech Leaves Many Questions Unanswered

Economic Effects From Budget Aggregates

Shorten’s reply to Morrison’s Budget for 2019-20 does not offer any aggregate estimates for spending and revenue next year or for the four years aggregate to 2022-23. These are normally provided as a budget presentation and Morrison’s/Frydenberg’s figures are in the published Budget papers (see this summary in Federal Govt Budget Aggregates 2018-19 to 2022-23) .

Of course, Shorten does not have the access to the bureaucracy needed to construct estimates but he does have access to the Parliamentary Budget Office which will have provided confidential advice to him on possible variations to the official estimates. Yet even Shorten’s promise to have larger estimated surpluses than Morrison does not provide any indication of what the figures are. For one thing, while Morrison’s estimated surpluses for the four years are around a very poor $45bn (about 2% of GDP for those years), Shorten’s claim could be easily presented simply by indicating a miniscule higher estimate (say) $50bn. More questionably, Labor might have estimates for both total revenue and spending which are (say) 5 percentage points higher than Morrison’s but are undisclosed and yet still have the same estimate for surpluses. That would mean a significant increase in the size of government (tax and spending) with potential adverse effects on the economy and the private sector.

In short, so far Shorten has mentioned less about aggregate figures and focussed more on claiming what Labor will spend on a wide range of estimates of specific items. He does for example claim to be spending more on health and education, which will be among those which feature in the election debate. Perhaps the election debate will force him to expose the composition of the more important items of expenditure where he claims to be a bigger spender.

Shorten has of course attracted particular attention to his proposal to provide $2.3bn for a Medicare cancer plan through better diagnostic services and free cancer consultations, and this has attracted wide support because many people face expenses in attempting to overcome the disease. However, while this initiative seems to deserve applause, it does not provide a perspective on other items covered by the estimates for health or on spending already made on components of the plan.

It is pertinent that the Morrison government’s estimated total spending on Health over the next four years is about $500bn, including about $90bn to the states under the National Health Reform program and about the same amount for specific purpose payments on health to the states. Assessing the “new” cancer plan also needs to take account of the fact that public health is primarily a state matter and some of the items in the “new” cancer plan would already be provided by state run public hospitals. Thus this plan is not all new but is to a considerable extent increasing the eligibility for accessing the treatment of cancer already in place.

Economic Effects of Changes in Tax & Spending Policies

The Medicare Cancer plan illustrates on a relatively small scale how changes in government policy can improve the financial and health positions of individuals. What seem to have been neglected are the changes in tax policies which are likely to have net adverse effects on the decision making of the private sector and the economy as a whole.

This analysis derives from today’s article in Weekend Australian by Terry McCrann (see McCrann on Labor’s Budget & CC Policies). He argues that “Labor has a two-stage strategy to destroy Australia”, even suggesting that Labor could take us down the Venezuelan track.

McCrann’s Stage One,

“to be delivered immediately, is designed to destroy the entrepreneurial, investing, business risk-taking, job-creating class — with a $200 billion-plus tax attack on them and them very specifically and deliberately, the biggest in Australian history. It is sobering to detail what a Labor-Green government — as it will be, with the Greens in de facto coalition and Richard Di Natale de facto deputy PM — proposes to do from the get-go.

End franking credit refunds.

All but abolish negative gearing.

Double capital gains tax.

Increase taxation of trusts.

Increase the top personal tax rate to 49 per cent.

Not cut the major corporate rate from an increasingly globally uncompetitive 30 per cent”.

A detailed analysis would need to be made of the adverse economic effects of these policies and of the likely adverse effects not mentioned by McCrann of the establishment of a policy of a living wage and the increased regulation of wages and conditions of employment (virtually nothing was done to make use of the Dyson Heydon report made when Abbott was PM). But when put together these policies certainly have the potential to seriously detract from Australia’s economic performance. The detraction could be similar to what occurred under Whitlam.

But account also needs to be taken of the adverse effects of McCrann’s Stage Two, the implementation of the climate change policy. Such a policy did not exist under Whitlam but was started under the Howard government and is now having serious adverse economic effects, notably in higher electricity prices which have increased by a large percentage under the Turnbull/Morrison governments and which would increase further under a Labor government (or require much higher subsidies than already exist). Labor’s policy was outlined in more detail last Monday before the Budget and it includes for the first time a policy requiring that 50% of motor car vehicles to be fuelled by electricity by 2030 (!) and a regulatory policy restricting the cutting down of trees.

Viewers of my Commentary will be aware of the many reasons why the rationale of the dangerous global warming theory does not stand up to close examination. I have also suggested that there is scope to moderate the existing policy. Such a moderation at the start of the electoral debate may provide the only way the Coalition can save itself in the election.

I conclude with one the last remarks made by McCrann in his article, viz

“What the old-is-new-again Labor party of Bill Shorten — a man with a figurative cloth cap and a brain to match but a wardrobe full of, if not Zegna, still Super 120s suits and a taste to go with them — proposes is to destroy the two core foundations of not just a modern economy but modernity itself and indeed civilization”.

Commonwealth Budget 2019/20

Des Moore — Wed, 03 Apr 2019 08:53:18 +0000

Commonwealth Budget For 2019/20 Won’t Save The Bacon

Today’s Media has included many comments on the Morrison Government’s Budget for 2019-20 as well as estimates of revenue and expenditure for the following three years. These include a large number of decisions and it would not be appropriate here to examine them in any detail: indeed I challenge anyone to examine what one journalist described as “a budget speech littered with references to plumbers, couriers, cranes, hard hats, teachers, tradies and nurses”. My general conclusion on the speech I watched on TV was that it did not impress most on the Coalition benches and some of those there tended to drop off and, after a time, showed little encouragement as Frydenberg continued well after the half-hour finishing time allocated to budget speeches. In consequence, what my comments below mainly relate to are the totals of revenue, expenditure and what is commonly treated as the deficit or surplus for the four years.

But these need also to take account of the possible reactions to budget decisions on taxation and spending on capital projects which increasingly purport to extend beyond the four years. For instance, the Morrison government’s budget announcement included an addition of $25bn to the existing infrastructure program of $75bn which is spread over in ten years. This reflects the increasing involvement of the Commonwealth in what are (or should be) basically State matters including the congestion resulting from higher immigration but which the Federal government also believes it needs to be involved in order to attract votes. The result of the election in NSW, in which both the Liberal and National parties lost seats, led the Morrison government to publicise in the Federal budget its involvement in regional NSW. On tax, the difficulty in assessing the tax policy is that the second round of personal tax reductions will not start until 2022-23 and that is then reflected in a reduction in about half the estimated surplus for that year.

In interpreting the budget it is also important to realise the Coalition will face the election in May with electoral polling which indicates it is almost certain to lose. As such, apart from possibly indicating the Coalition’s budget as no more than a manifesto with which to start the election debate, the same applies to the manifesto which Shorten has announced. He is now further developing that by announcing yesterday the 50% compulsory electric cars by 2050, which has (rightly) been widely characterised as absurd. Shorten has also failed to indicate the costs of his environmental policies. This situation further widens the gap between the two parties on the issue of dangerous global warming which appears likely to be a major discussion item. Unfortunately, the Treasurer’s budget address re-stated the Coalition’s existing policy of reducing emissions as stated in Paris and announced a $3.5bn “climate solution package” apparently designed to soften the moderates within the Coalition. Another bad poll would provide the opportunity to moderate this policy but it looks as though such a moderation is not politically possible.

Yet it is reported today that three senior ministers, including Morrison, have decided over-night to add over $300mn to energy supplements and amend the budget the day after it was introduced!

In a situation of emergency one possible policy change on the environment might extend to pointing out that the prediction in temperatures by supposed climate experts has been three times higher than the actual increase in temperature as published by the IPCC. This failure of “scientists” to get anywhere near a meaningful prediction in temperatures indicates the need to urgently review the dangerous warming belief and provides a basis for at least moderating current policies (see advertorial Global Warming as published in today’s Australian by the Climate Study Group). This research indicates that the most highly likely warming over the period to 2100 does not justify the current expenditure by governments of squillions of dollars on reducing the usage of coal.

Following are my brief comments on the major items in the Budget:

Overall, there is no indication that the Morrison government aims to reduce the size of government. Estimated payments (ie expenditure) by the Federal government are about the same proportion of GDP throughout the four years covered by the budget (24.5 -24.6%). That is fractionally lower than in 2018-19 (24.9%) but that probably reflects a spending splurge in that year to reduce the amount to be allocated in the budget year. That is estimated at 25.2% of GDP, which is fractionally higher than in the last year of the Keating government in 1995-96 and is higher than in the last few years of the Howard government;
Treasurer Frydenberg (and Morrison) have claimed that the budget showed they had not increased taxation. But tax as a proportion of GDP is shown as slightly higher in 2019-20 than in the previous year (23.1%) and only fractionally lower in the last of the four budget years (2022-23) for what that may be worth. As there is no data readily available on the split between company and personal income tax, the increase in company profits may mean that personal tax proportion of GDP may have been reduced. But total estimated taxation in the current and next three years is the highest proportion of GDP since the final years of the Howard government in early 2000s;
As has been much acclaimed by the Treasurer and Morrison, after 11 years in budget deficits and a consequent increase in net debt, a surplus is estimated for 2019/20 (0.2% of GDP). But this is not a result that a government would normally boast about, which is probably why Frydenberg has limited his reference to the four year total. It is also exposed to possible minor adverse effects from reduced company profits due to falls in commodity prices. It’s good to be “back in the black” but the aim should be to achieve a much higher surplus and pay off more debt.

Overall this is a useful budget (a “B” perhaps) but it falls short of what is needed to avoid scattering spending to buy votes, to reduce debt and does not provide a bulwark against attack from serious adverse changes in economic conditions here or overseas. It does provide a test for whether Labor is prepared to maintain the aim or fall back to the deficits incurred by Rudd. Hopefully, the latter are so recent that Shorten will be able to persuade his left wing to stick to the surplus aim.

How to Solve the Dangerous Warming Threat

Des Moore — Thu, 21 Mar 2019 22:29:44 +0000

How to Solve The Dangerous Warming Threat

I am presenting a Commentary which has no attachments because their inclusion would make it difficult to circulate the Commentary with the attachments and because I can send an attachment to those who wish to see it. The whole Commentary with attachments will also be in my web site.

When controversial policy issues come under discussion in the public arena, there are often weird suggestions proposing government action. And the media publicises a supposed issue to give the impression that ““something needs to be done”. Take for example the idea that action to solve the dangerous warming threat might come if school children miss school one day and parade down the streets all over the country (and in other countries too) with placards instructing our elected politicians that urgent action is required. This is just what has happened. But has this publicity simply led to the school children going back to school and are people a bit tired of being told that much quoted models “prove” that climate change action is needed by government? Do such models actually so prove.

Climate expert and prominent journalist James Delingpole points out that climate scientist Bjorn Lomborg has a model which shows that even spending $1.5 trillion would reduce temperatures by only 0.04 of a degree by the end of the century (see Spending $1.5 trillion Estimated to Reduce Temps By only 0.048 Of a Degree by Century’s End). “Those kids are protesting on the basis of one massive lie”, Delingpole claims.

Of course, there are lots of other models, some taking a different view.

A model predicting future temperatures has been made by the Australian National University’s School of Art and Design with colleagues from the ANU Climate Change Institute. It purports to show that, unless emissions of greenhouse gases are much reduced, temperatures in 2050 will be so high that winters will cease to exist! (see No More Winters?). Even the Reserve Bank has jumped on the band wagon and published an article arguing that changes in climate may have adverse effects not simply at the time they occur but later too. According to this theory, “we need to think in terms of trend rather than cycles in the weather”. Yet no evidence is provided to justify this claim and there is no model. I have written to the bank asking that this analysis not be treated as official bank policy (see RBA Publishes Surprise Pre-election Analysis of CC). In a more comprehensive article in The Australian, Judith Sloan describes the analysis as “superficial and speculative” (see Sloan on RBA’s Surprise Pre-election Analysis of CC).

Then along comes another climate expert by the name of Brian Fisher who has just published a model showing the cost for Australia of achieving targeted emissions reductions by 2030 ranging from $70 billion for the Coalition to $1.2 trillion for Labor. He doesn’t predict what happens to temperatures but, although now retired, he previously advised both Labor and Coalition governments on climate policy. Yet a few days ago Labor rejected Fisher’s analysis this time. But as a poll just published in today’s Australian shows that support for Labor’s policy drops from 61 points to 9 in circumstances where implementing this policy would reduce projected 2030 wages by $9000 a year — or about $347 a fortnight – as Fisher’s analysis indicates. It seems possible that Labor (and the Coalition) could now decide to lower their emissions reductions targets so as to ensure that children keep their pocket money (see Modelled Economic Effects Show Costly for CC Policy).

Any such changes might also lead to more questioning of teachers by children about what the various model show about likely future temperatures. Assuming teachers are honest, they would have to admit that 102 of the (average of) temperature predictions by different experts (sic) show temperatures much higher than what happened with actual temperatures as used in IPCC reports (which uses temperature measurements that also overstate the actuals because of faulty measurements).

The difference between actual temperatures and those predicted from models is shown in a graph based on research by US climate scientists Roy Spencer and John Christy, both of whom have made presentations to US Congress committees. This graph is included in a short article headed “Climate Warming/Change Theory Reviewed”. It was written in Melbourne by The Climate Study Group (sponsored by Richard Morgan) and published in the Herald Sun (see Graph on CC).

The averages of world temperature (a mid-tropospheric measurement) of the 102 prediction models shown in the top line of the graph have risen from 0.0 degree in 1975 to about 0.8 degree in 2014 while actual temperatures ( as used by the IPCC) have only risen by about 0.2 degree over the same period. Thus the average predictors have temperatures rising about four times more than the actual temperatures. By contrast, if the actual temperatures continued to increase at about the same rate as they have been since 1975, by 2100 world temperatures would be only about 0.4 degree higher than now. In short, it is difficult to accept that such a small increase in likely future temperatures justifies government action to spend trillions of dollars on substituting costly sources of power for the usage of much cheaper coal.

It is relevant that, following President Trump’s appointment of physicist Dr Will Happer to head a Commission to review (in effect) the science of climate change, a very large number of climate experts has written expressing support for the project. In the second paragraph they say

“In our view, an independent review of these reports is long overdue. Serious problems and shortcomings have been raised repeatedly in the past by highly-qualified scientists only to be ignored or dismissed by the federal agencies in charge of producing the reports. Among major issues that have been raised and that we hope the commission will scrutinize: the models used have assumed climate sensitivities to CO2 concentrations significantly higher than recent research warrants; the models used have predicted much more warming than has actually occurred; predictions of the negative impacts of global warming have been made based on implausible high-end emissions scenarios; the positive impacts of warming have been ignored or minimized; and surface temperature data sets have been manipulated to show more rapid warming than has actually occurred. An underlying issue that we hope the commission will also address is the fact that so many of the scientific claims made in these reports and by many climate scientists are not falsifiable, that is, they cannot be tested by the scientific method.

It goes without saying that this is the kind of policy approach we need in Australia. It also shows that there are many climate experts and/or climate scientists who do not accept the dangerous warming thesis and the need for massive government spending on reducing the usage of coal. In previous Commentary I have argued that in Australia a much reduced target for emissions (and for renewable) would have virtually no effect on total world emissions which are increasing mainly because of the policies adopted by two of the biggest emitters and the announced intention to withdraw from Paris by the US. Our political leaders have missed the opportunity to (validly) save government spending and the welfare of our citizens.

RBA Publishes Surprise Pre-election Analysis Of CC

Des Moore — Thu, 14 Mar 2019 10:42:54 +0000

Is RBA Preparing for a Labor Government

I was surprised yesterday to see a report on a speech made by the RBA’s Dep Gov, Guy Debelle, on climate change and the possible implications for the economy and monetary policy (see RBA Dep Gov Says CC Has Trend Effects). I judged that, with just a few weeks until the election, it would be wrong to publish an analysis on how to treat changes in climate when that subject is probably the most controversial between the political parties. Statements by government bodies which can influence attitudes, add to the controversy and possibly favour one party, should not be made at this time. This generally accepted rule applies to the Reserve Bank notwithstanding its claim to be “independent” and the more so as Debelle claims climate change influences monetary policy.

I wrote a letter to The Australian pointing out the foregoing and adding that “Debelle enhances the problem of analysis by claiming that “we need to think in terms of trend rather than cycles in the weather” and “to reassess the frequency of climate events”. Yet he provides no evidence to justify this claim and he omits an important conclusion by the IPCC that cyclones do not exhibit a trend, that is they occur but infrequently. Analysis by Australian experts, not quoted, suggest the same as regards droughts. I call on the Governor of the RBA to state that his deputy’s speech does not necessarily reflect the bank’s official view” (see Climate Change). My letter was not published today.

In addition to having potentially improper political influences, it is concerning that this speech by Debelle was made at a forum run by the Centre For Policy Development (CPD) in Sydney. This organisation was started in 2007 and its stated objective is “long-term policy development” (as distinct from what it describes as “short term fixes and political gains”). While such an objective is obviously acceptable , and the CPD claims to be “independent and non-partisan”, it was started by John Menadue who was private secretary to Gough Whitlam for 7 years from 1960 to 1967. Although Menadue also later worked at News Ltd and for Malcolm Fraser, his public comments today remain strongly left-inclined (he publishes a public affairs blogsite). Menadue also continues as a “Fellow” of CPD, which also has several Fellows with stated Climate Change “expertise” and its publications on that subject adopt the dangerous warming thesis. The current Board Chair is Terry Moran who was appointed Secretary of PM&C by Kevin Rudd (and continued there under Julia Gillard) from March 2008 to September 2011 (Gillard continued as PM until 2013). I have not been able to establish whether it has government funding but it would not be surprising if it has. It names Julian Burnside and Fred Chaney as its Patrons.

In short, it is clear the CPD is Labor-inclined and supportive of the alleged threat from dangerous warming. Also, Labor supporters naturally recognise the importance of having senior Labor-inclined public servants. While Tony Abbott appointed a “conservative” head of PM &C (Michael Thawley), he resigned soon after Turnbull became PM and we now have his appointee, Martin Parkinson, as head of PM&C (Parkinson was the inaugural head of the Climate Change Department). It seems likely that Parkinson will remain head of PM&C if Labor wins the election. Debelle’s speech might have had this in mind.

Debelle’s Analysis

I judge there are serious questions about the analysis by Debelle in his speech (see Debelle on Climate Change). The essence of his analysis is that changes in climate not only affect the economy around the time they occur but they have trends and therefore have effects which continue over time. This means, he says, we need to reassess how to handle such changes both generally and in regard to monetary policy. Specifically, Debelle says the following on page 2:

“We need to think in terms of trend rather than cycles in the weather. Droughts have generally been regarded (at least economically) as cyclical events that recur every so often. In contrast, climate change is a trend change. The impact of a trend is ongoing, whereas a cycle is temporary.

We need to reassess the frequency of climate events. In addition, we need to reassess our assumptions about the severity and longevity of the climatic events. For example, the insurance industry has recognised that the frequency and severity of tropical cyclones (and hurricanes in the Northern Hemisphere) has changed. This has caused the insurance sector to reprice how they insure (and re-insure) against such events.

We need to think about how the economy is currently adapting and how it will adapt both to the trend change in climate and the transition required to contain climate change. The time-frame for both the impact of climate change and the adaptation of the economy to it is very pertinent here. The transition path to a less carbon-intensive world is clearly quite different depending on whether it is managed as a gradual process or is abrupt. The trend changes aren’t likely to be smooth. There is likely to be volatility around the trend, with the potential for damaging outcomes from spikes above the trend.

Both the physical impact of climate change and the transition are likely to have first-order economic effects.

Debelle then devotes a considerable proportion of the rest of his lecture to considering examples of possible climate occurrences which may have what he classifies as trend effects. He refers in particular to reports by the IPCC and Australia’s BOM and CSIRO, viz

“The United Nations’ Intergovernmental Panel on Climate Change (IPCC) report documents that 1 degree of warming has already occurred from pre-industrial levels as a result of human activities.[2] It provides strong evidence that another half degree of warming will occur in the next 10 to 30 years if warming continues at the current rate. That is the average outcome, with some areas experiencing greater warming.

There is also likely to be significant volatility around that outcome, with an increase in the frequency of extreme temperatures. This volatility is highlighted in the first graph in the recent Bureau of Meteorology (BoM) and CSIRO report, State of the Climate. The report states that ‘Australia’s climate has warmed by just over 1 degree C since 1910, leading to an increase in the frequency of extreme heat events’, and expects further warming over the next decade.[3] These extreme events may well have a disproportionately large physical impact.

There is also a greater possibility of compound events, where two (or more) climatic events combine to produce an outcome that is worse than the effect of one of them occurring individually. Combined with the increased volatility, this increases the likelihood of non-linear impacts on the economy.

Both the IPCC and the BoM/CSIRO reports highlight the changed environment that the economy will need to adapt to. They also provide evidence on what change is predetermined and what can be affected by actions to strengthen the global response to the threat of climate change.

These analyses of climate and its effects from changes by Debelle are highly controversial and are subject to extensive queries. For example, while there is general agreement that temperatures are higher than they were in pre-industrial levels, there has been at least one considerable period (from the late 1940s to the mid 1970s) when official temperatures used by the IPCC fell at the same time as carbon emissions were increasing. This suggests there is no trend in temperatures and that there is no evidence suggesting that predetermination of temperatures can be effective from a policy viewpoint.

Further, future periods predicting warming need to be examined to see whether some may be due to unpredictable natural events (as has sometimes been the case) or to human activity involving the production of greenhouse gases from usage of fossil fuels. Debelle refers to models in his speech but he makes no mention of the failure of the existing predictive models to even get close to actual temperatures. More questions can also be raised about the assertions by both the IPCC and BOM quoted by Debelle, including in regard to the accuracy of temperature measurements. In effect, Debelle is simply accepting the view of dangerous warmists without examining the detail of what happened. and his thesis of trends does not stand up.

Importantly, Debelle also provides no explanation of the large benefits from the considerable agricultural and forest growth having occurred under existing policies. In other words, while we and others have had droughts, these have been more than offset by the growth in output from agriculture and forestry.

Debelle’s thesis of trends does not stand up to close examination.

Coalition Remains in Serious Trouble

Des Moore — Fri, 01 Mar 2019 01:34:30 +0000

Newspoll & Subsequent Policy Announcements Suggest Coalition Still in Serious Trouble

Due to a major technical problem which put my computer out of action for two days (possibly caused by a hacker I was advised) I am now in a catch-up position in regard to circumstances where numerous pre-election statements have been floated around by both major sides of politics. It has almost seemed like a new policy per day, which seems unlikely to have attracted votes because of the limited attention by the Coalition to explaining benefits. One commentator even described Morrison as a Muppet and, despite his increased media appearance, it is difficult to see a closing of the polling gap next time.

The February Newspoll left the Coalition on a 47/53 TPP for the third successive time and showed a fall in Morrison’s net satisfaction rate from minus 2 to minus 4 (Shorten’s also fell to a similar extent). This polling occurred despite expectations that Labor would be adversely affected politically over the passage of the Medivac bill instigated by Labor/Phelps/Greens and passed because the government had lost its control of the lower House. This legislation allows refugees and asylum-seekers to be fast-tracked to Australia for medical treatment on the orders of two doctors and involves an effective loss of border control decisions by a Minister, although the concern seems more about what would be likely to happen under a left wing Labor government than about the exploitation of the Medivac.

In fact, instead of a Labor win, Morrison appears initially to have instigated a favourable course of action by announcing that existing asylum seekers on Manus/Nauru will be transferred to Christmas Island and this initially secured approval from Shorten. However, Shorten has since backed away from his “approval” and it is not clear if the possible “misuse” of the legislation can be made there too.

That aside, Morrison has responded to pressure from within the Coalition, and of course from Labor’s accusations (and from some media “experts”) that it is taking no action on climate change or to fulfill its undertaking to reduce electricity prices. Morrison has apparently decided to make various day by day announcements designed to convey the impression that action is being taken. But the measures announced would be unlikely to involve any significant reduction in prices (unless accompanied by increased subsidies) and are suddenly focused on increasing the Coalitions’ reliance on renewable as a major part of its CC policy, viz

“the Prime Minister said the government’s support for big hydro projects was vital and economically prudent, as Australia’s energy market “continues to transition towards renewables”. “If you want to have a renewables future, you’ve got to have big batteries like this, and the commercial element of that is quite compelling and that’s what the numbers so far have shown,” he said. “We get the economic harvest, we get the jobs harvest, we get the energy harvest, and we get the renewable and the sustainable energy harvest that delivers on our environmental commitments.” The opposition said the government’s commitment to hydro power “only make sense under Labor’s renewable energy policies” (see Morrison Announces More on Renewables).

However, in the same article Energy Minister Angus Taylor claimed the new energy efficiency measures would cut energy bills while lowering carbon emissions. “We know that businesses and community groups are struggling under the weight of high power prices,” he said. “That’s why we’re taking strong steps to ensure they get the practical support that they need to reduce their energy use without reducing productivity.”

True, the reduction in emissions from the (newly announced) shift to renewable would in themselves favour lower prices. But renewable additions would also add to costs (including of course the additional back-ups needed in case renewable are not available) and would be unlikely to lead to lower prices overall (see also Coalition Climate Policy).

It was particularly disheartening to see on Sky News that there was agreement amongst participant that Turnbull’s decision to expand Snowy Hydro was endorsed by Morrison as a major component of his latest climate change policy. No account seemed to be taken of the much higher cost of such expansion compared with the cost of producing the electricity using fossil fuels. As Judith Sloan points out, “were the electricity market not so distorted, there would not be any economic case for Snowy 2.0. The project has been around for many years and it never stacked up. The cost and the execution risk made it a complete non-starter. The fact the Coalition government refuses to unpick the distortions in the market, rather than adding to them by promoting Snowy 2.0, is a sad indictment of where energy policy has landed. And, by the way, for the sort of investment being devoted to Snowy 2.0, you could get several high efficiency, low emissions coal-fired plants” (see Sloan Says Snowy2.0 Fairy Story).

Many others have concluded that the Snowy2.0 should not be started but it seems likely that bureaucrats in PM&C and Environment have promoted the case.

In considering possible electricity price reductions, it is pertinent to note that under policies adopted by the various states in recent years (which have been based on the perceived need to reduce the usage of coal because of the supposed danger from higher temperatures):

The adoption of such policies has been a major contributor since 2010-11 to a trebling in average wholesale electricity prices, rising from about $30-40 per MM to about $80-110 per MM;
While businesses and households would be unlikely to have experienced similar such increases at the retail level (data for retail prices back to 2010-11 are not readily available), they would undoubtedly have increased since 2010-11 at a much faster rate than pre 2010-11;
The retail figures available for 2017-18 show an increase of more than 10% on the previous year according to figures published by theAustralian Energy Market Commission (AEMC), which was set up by the Council of Australian Governments through the Ministerial Council on Energy in 2005. In the current year the AEMC estimates a reduction of about 3% followed by another reduction of about 9% in 2019-20. The AEMC says the estimated falls since 2017-18 are “driven primarily by wholesale costs” but details of these estimated costs are not readily obtainable.
At this stage it is difficult to see any significant price reductions except by the Federal government establishing the Default price it has canvassed and by enforcing a maximum price at a lower level. Such a policy, said to be operated by regulation and claimed not to require legislation, would imply that there is inadequate competition in the current market and that seems to have been assumed in regard to the major generators. But no explanation has been given as to why the ACCC could not act to enforce competitive measures rather than the government itself establish a regulatory direct.

Minority Govt Problems; Over-rule Qld Labor’s Refusal on Adani Coal Mine

Des Moore — Sat, 16 Feb 2019 05:08:59 +0000

The Problem Facing Morrison’s Minority Government

In yesterday’s Commentary I drew attention to Labor’s success in forcing legislation through Parliament which allowed asylum seekers on Nauru and Manus Island to “doctor” themselves to Australia for treatment without ministerial approval (except for security reasons). I added that “it also remains to be seen how long he can run a minority government where there is an opposition which is able to force legislation right through Parliament and effectively change the Coalition’s policies on other matters too” .

I added that “there has already been a (failed) attempt today to establish a Royal Commission on some failure of access to disabilities and there will inevitably be a debate on aspects of the budget set to be presented in early April. That would provide Labor/Greens with opportunities to have amendments to the budget passed through Parliament not by the Coalition but by the Opposition”.

Some recipients of Commentary indicated that they did not understand my analysis and in particular my (and others) view that an early election might be called. Today we have an illustration of what I meant. A report in Weekend Australian reports that

Scott Morrison is on track for an unprecedented second defeat on a key piece of legislation within two weeks, with Labor “confident” of passing a small-business policy in an alliance with Greens and independents. The government was considering last night how to deal with another potential loss on the floor of the House of Representatives after it suffered the first defeat on legislation in nearly 80 years with the passage of Labor’s refugee medivac bill on Tuesday. The Prime Minister faces internal spotfires as rebel Nationals MPs threaten to support Labor’s small-business overhaul in a damaging move that could split the Coalition, test the leadership of Deputy Prime Minister Michael McCormack and undermine Mr Morrison’s authority (see More Challenges to Minority Government).

As Parliament is sitting again from 18-21 February before the budget there are likely to be further attempts to “govern” by Labor/Greens, including in regard to the alleged need for more “action” on climate change. Then there is the period after the budget but before the election when Parliament will again be sitting from 4-18 April and when more attempts at governing by Labor/Greens/et al would be likely to occur.

All this suggests that it would be in Morrison’s own interests to call an early election, not now but as soon as possible after the budget has been presented.

Qld Left Labor Runs The State & Is Stopping Adani Coal Mine From Starting

Readers will be aware that the Indian owners of the Adani coal proposal in Queensland have been seeking approval for 7 years and thought they had it only to find that the Queensland Labor government has made a last minute attempt to stop it by asking an active environmentalist to advise whether the risk to an endangered finch would be too great. He duly did so advise.

Today’s Weekend Australian reports that “an extraordinary alliance of industry, unions and councils were last night in talks to lobby for Premier Annastacia Palaszczuk’s intervention to save the project that promises thousands of jobs. The contentious review of Adani’s black-throated finch management plan was ordered by Environment Minister Leeanne Enoch’s department in December, just weeks after Adani announced it had funding for the mine. The findings of the review — chaired by Brendan Wintle, a Melbourne University academic associated with anti-coal activism — are set to delay construction of the mine, which cannot begin without state approval of the plan to protect the endangered bird. After Ms Trad yesterday called on Adani to “engage in the process” led by Professor Wintle, Adani chief executive Lucas Dow claimed the review’s “misinformed and conflicting findings” demonstrated the report was biased and must be scrapped. In a letter to the government, Mr Dow outlines five key areas where he says the review contradicts the previous evidence accepted by the Environment Department, which had workshopped the plan with the company over 18 months and seven drafts before it was submitted” (see Morrison Cautions on Adani)

Unfortunately, the best that Scott Morrison could respond yesterday was to caution “the state government against “playing games” with jobs in north Queensland, which already suffered high unemployment before it was ravaged by floods this month. “I think the people of Queensland are dealing with enough at the moment without having decisions to take away their jobs,” the Prime Minister said.“We support the mining industry. We want to see mining jobs and we want to be able to see projects stand on their two feet and be given a go on the basis of their commercial realities.”

Given the changeable voting in Queensland for federal elections Morrison should be weighing in much more strongly. My attempt failed to have published a suggested response published. However, that suggested response may be worth repeating here, viz

It is not surprising that Queensland’s Labor government has established an inquiry into the dangers from an Adani coal mine to a finch. As you point out, that government is controlled by the left-wing and the Premier is just a front ( “Labor can no longer pretend it supports Adani”, 15/2). And, as shown by its behavior in forcing Shorten to edge open border controls without proper ministerial decisions, the left-wing constitutes a real threat to governing Australia federally if constituents are fooled into voting Labor in May.

The Morrison government needs to find ways of attracting the attention of voters to what they are in for if Labor wins. One possible way of getting their attention would be to adopt the same strategy as Clive Palmer has in full scale adverts on TV and published media. Of course, by presenting such rubbish in such a way Palmer is now losing the attention of voters.

A Coalition adverts strategy would be structured to identify the many problems in the policies already announced by Labor, such as border openings, increases in taxation and unbelievable reductions in emissions by 2030. It is not too early to start a Palmer-like strategy now.

There are other possibilities, including asking a credit rating agency to examine Queensland’s rating. Queensland’s LNP opposition has undertaken to restore the AAA rating which Labor lost and it could play that role with Federal support. It might even be possible for the Federal government to use its external affairs power to approve the mine by saying it is important for Australia’s foreign relations with India and its foreign investment policy that it go ahead.

It is in the interests of the Morrison government, both economic and political, to do as much as it can to have the Adani mine started.

Border Controls; Early Election Now Likely

Des Moore — Thu, 14 Feb 2019 01:11:34 +0000

Morrison Says No Early Election – But For How Long Can He Run A Minority Government

On Tuesday I referred to Andrew Bolt’s suggestion on Sky News that the decision by Labor to push legislation through the lower House allowing asylum seekers on Nauru and Manus Island to “doctor” themselves to Australia for treatment without ministerial approval and, by obtaining court approval, to then “recuperate” here for a indefinite period. With the support of the Greens et al, this legislation has now passed the Senate too but, despite his strong attack on Shorten and accusation that he has broken what had seemed a bipartisan agreement on border control, Morrison has said that he will not call an early election. Even so, Bolt tonight again repeated on Sky News his advocacy of an early election by taking advantage of the policy windfall provided by Labor.

Morrison’s attack on Shorten for showing “weakness” in handling Caucus is obviously correct (as the emergence of Deputy Albanese on TV suggests) and provides a useful stick for Morrison to use and argue that, if Labor were to win the election, they would again allow border controls to be breached. Morrison has already established that up to 300 refugees have obtained the approval of doctors to be transferred to Australia (see Possible Effects of Labor Legislation on Refugeesand Bolt Says Labor’s Legislation Allows Asylum Seekers to Come To Aus). It seems likely that under Labor border controls would be eased and smugglers would again penetrate access in one way or another (see Sheridan Says Labor Shameful).

But as electorally beneficial as it would likely be, Morrison can’t rely only on using such a stick. Other policies need to be finalized and presented, including the budget.

It also remains to be seen how long he can run a minority government where there is an opposition which is able to force legislation right through Parliament and effectively change the Coalition’s policies on other matters too. There has already been a (failed) attempt today to establish a Royal Commission on some failure of access to disabilities and there will inevitably be a debate on aspects of the budget set to be presented in early April. That would provide Labor/Greens with opportunities to have amendments to the budget passed through Parliament not by the Coalition but by the Opposition.

Labor’s success in obtaining the passage of legislation on Manus/Nauran refugees has changed the management of government picture and makes it more realistic for the Coalition to think of an early election. This is not simply to take advantage of its win on border control strategy but to avoid the potential loss of control of Parliament and its own policies.

Energy Policy

I have already criticized the energy policy developed by Energy Minister Taylor particularly its retention of the targets for reducing emissions and his support for increased usage of renewable and the emergence of estimates of much higher costs for the latter than previously thought. I have also questioned the use of divestiture powers by a minister who would be doing so on the basis that he accepted advice that a company displayed “market disconduct” and was not allowing prices to fall.

Reports emerged this afternoon that, instead of voting on a bill to give effect to Taylor’s “model” (sic), Treasurer Frydenburg has announced that the divestiture power would become a component of election policies. He is reported as saying that

“Our legislation to prohibit energy market misconduct is an important reform that aims to hold the big energy companies to account and drive competition in the market and lower prices for consumers. We will be taking this policy to the election which forms our response to the ACCC inquiry into retail electricity prices. It was on the Labor Party’s watch when they were last in government that electricity prices doubled and now they are obstructing key reforms which save money for Australian families and businesses” (see Coalition Says Big Sticks Policy Now To Be Taken to The Election).

The report also makes it clear that had the government attempted to pass the bill now it would have faced major amendments from Labor. This seems to confirm that there is likely to be an early election – possibly immediately after the budget.

Can Electricity Prices be Reduced?

Des Moore — Thu, 31 Jan 2019 12:14:43 +0000

Will Electricity Prices Be Allowed by Governments to Fall?

The improvement in the Coalition’s Newspoll on 29 January (still down at 47/53 TPP) has almost been forgotten and questions continue as to whether Morrison is able to address the “two big things” (quit Paris accord and slash immigration) needed to give the Coalition a chance. The need for quitting the Paris accord has been enhanced by what has happened under heat waves in Victoria, South Australia and now NSW.

Since my 29/1 Commentary the possibility of the Coalition establishinga policy which would, as promised, allow lower electricity prices to happen and be sustained continues to be highly unlikely– except of course if government controls are able to be imposed legally and producers/retailers are compensated for a proportion of the existing higher costs which would otherwise be met by consumers of electricity, but with taxpayers then having to pay the costs. As indicated in the this article (Forward Electricity Prices Increase), at present futures markets are operating on the basis that the increasing reliance on renewables under announced policies will mean that there will be periods when major shortages of supply occur given that states have policies which will rely on up to 50 per cent of power coming from renewable and prices will have to increase to choke off a proportion of demand (the discussion in the article is confused because the author and the AFR itself supports existing policy).

This is basically what happened during last week’s heat wave and little wind power and which led to a sudden major increase in costs. It is reported that Victorian and South Australian consumers of electricity had to pay additional costs of about $1bn for just two days last week, which indicates the frailty of existing policies operated by those two states (see Power Costs Increase by $1bn in Two Days) and which other states also operate. Indeed, NSW has today experienced blackouts which appear less than in Melbourne but which include outages (and additional costs) in hospitals (see Blackouts in NSW Too).

Note that Federal Resources Minister Canavan said that this occurrence “justifies investment in reliable sources of power, such as coal-fired power”. But he fails to recognise that the private sector will not make any such investments under the existing climate change policy which aims to reduce usage of coal. Note also that the climate “expert” employed by The Australian, Graham Lloyd, comments that “Renewable energy might be the cheapest option to build but it makes sense only if there is power available when it is needed”(see Graham Lloyd on Renewable). But he doesn’t canvass a reduction in usage of renewable or a basic problem with policies.

The “solution” of course is to withdraw from the Paris accord which Turnbull signed on our behalf (sic) and, instead, adopt a climate change policy which preferably eliminates any target for using renewable or reducing carbon emissions but at least reduces such targets to a major extent. Properly handled, that would provide a major weapon with which to fight the election given that Labor has adopted an even larger bunch of targets to use renewable and to reduce carbon emissions. But Morrison has first to indicate that his government is now not in agreement with CC policies adopted under Turnbull.