Institute for Private Enterprise » ACCC

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.

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.

Morrison Falls Short of Coherent Leadership; Victorian Coalition Likewise.

Des Moore — Sun, 27 Jan 2019 05:16:28 +0000

Morrison’s Behaviour Raises Questions About His Leadership

My previous Commentary have argued that, as a Coalition leader facing an election, Scott Morrison needs to get cracking on enunciating policies asap in the New Year. But although active since early January, he seems to have focussed on matters which are mostly “organisational” and would have limited appeal to the electorate in general. Indeed, his poor handling of some of these matters might even have attracted negative comment or a sort of “well what was that all about”.

Now we have a situation in which three of his ministers have said they will not stand again but, in what seems bad strategy for the Coalition, will remain as ministers right up to the election and yet whatever they pronounce will have no application as future policy in itself. Morrison’s response is that such “refreshing” is normal but it gives the appearance of rats leaving a sinking ship (see Morrison Loses Three Ministers). Moreover, while the “pick” by Morrison of former President of the Labor party, Warren Mundine, for the seat of Gilmore should help retain that closely fought seat, Morrison seems to have mishandled the arrangements for the de-selection of a popular local candidate and he felt forced to publicly attack that candidate. This has apparently upset not only the candidate but other local Liberal members, some of whom resigned. It will not have helped the next Newspoll by the Coalition.

Today’s article in the Herald Sun by Peta Credlin points out that, while Mundine “delivered a devasting indictment of the party that had been his DNA for decades”, the “immediate attention of the media focussed on the cack-handed way the former Liberal candidate was replaced and the unhappiness of local branch members. Instead of Mundine’s move signifying just how much the coming election matters, its been treated as further evidence of Liberal chaos” (see Re: Credlin on Mundine Highlighting Added). With what is almost despair Credlin adds “As you know, I’ve been a critic of the current government for not being sufficiently different from Labor, whether that’s been rolling PMs or pandering to the green lobby by destroying Australia’s energy advantage. But for all the government’s mistakes, Mundine’s move highlights the gulf that still remains between the two big parties. Labor’s instinct is always for more spending, more regulating and more taxing, especially on anyone who works hard to get ahead”.

Importantly, neither Morrison nor his Energy Minister (Taylor) seem to have been able to indicate why they have not made any substantive change in energy policy and/or how they are going to effect the promised reduction in electricity prices. Alinta, one of the our large retailers, has indicated that no reductions are likely in the next 18 months. If correct that would follow the about doubling of wholesale prices in Victoria over the last six years (which covered the closing of Haxelwood) and similar increases in other states.

Note that Alinta was bought by a Chinese group in 2017 “from private equity for $4bn as part of a wave of foreign investments targeting growth opportunities in Australia’s power and utility sectors following a jump in gas and electricity prices over the past few years” ie it would seem that the Chinese saw that the increased prices offered high returns and no effective action was subsequently taken by the ACCC to try to ensure competition, rather the so-called regulatory solution. (see Power Prices To Rise further). The implication is that Atlinta feels that any policy changes by either the Victorian or Federal governments will be accompanied by price increases.

Indications remain (but without detail) that, to ensure (sic) reliability and to control prices, the Morrison government will likely announce a highly regulated energy policy, possibly in the budget. Such a de facto nationalisation would naturally suit Labor, which has been attributing part of current problems to privatisations undertaken by former Premier Jeff Kennett. But instead of pointing out the gross inefficiency of the SECV when he came to office, the latter’s main contribution to existing political difficulties facing the Coalition seems to be to push some of the oldies in the Liberal Party to resign, including existing “conservatives” such as Kevin Anderson and Tony Abbott. Yet Morrison shows no sign of even bringing them back as ministers, even though that should at least improve the image from the existing left of centre!

The concern which the extreme left feels about a return of Abbott to the Coalition ministry is indicated by the front page article published by today’s Age. It is headed “An Olympian’s Task: to kick out Abbott” and written by two journos, Peter FitzSimons & Bevan Shields, whose writings would raise a question about The Age’s claim of being “always independent”. According to these two, “World champion athlete-turned-barrister Zali Steggall has called time on Tony Abbott’s “destructive and divisive” 25-year career in federal politics, launching a major bid to seize the former prime minister’s blue-ribbon Sydney seat of Warringah… the four-time Winter Olympian said Mr Abbott was an “aggressive” national figure who had lost touch with the affluent electorate and deserved to be thrown out of Parliament for his role in the demise of Malcolm Turnbull, and views on the environment… Tony Abbott, who has been a handbrake on Australian progress on many fronts but particularly effective action on climate change”. (Note that my first message conveying this article was rejected because “the content was rejected due to suspected spam”. When I sent the same message again the suspected spam had disappeared!).

The Coalition’s (Federal & Victorian) failure to enunciate a coherent energy policy was important in the abysmal handling of the policy during the heat wave and may well constitute another challenge or two in the period ahead if (as is forecast) further high temperatures occur. In considering the various policy “explanations” it is pertinent to assess what the main policy makers said that during the heat wave yesterday (see The Incredible Story of Vic Energy Policy under “Extreme” Eventsextracted from reports/comments in yesterday’s Australian):

Federal energy minister Angus Taylor said the government was closely monitoring the energy situation in Victoria and thanks AEMO for the job it has done managing a difficult situation in collaboration with the wider energy industry. “The conditions experienced over the last two weeks across the national electricity market reinforce the need for investment in reliable 24/7 generation and the retailer reliability obligation.“That is why the government is backing in new reliable generation investment through its Underwriting New Generation Investments program which has had strong responses to its registration of interest process that closed on 23 January.“The government will carefully consider all proposals and will have more to say once we have considered all the submissions and feedback received during this process.”
Labor leader Bill Shorten said he was very concerned about the load shedding, suggesting the Morrison government was partly to blame.“Ever since the federal government said they could lower power prices and took responsibility for the power debate, it’s now partly on the federal government’s head this challenge of blackouts,” Mr Shorten said.“They’re the ones who said that renewables were a waste of time – well they’ve been in charge now for the best part of six years.
“I do expect the federal government, having said they could lower prices, to do more for the reliability of the system rather than just blame the states but it is most serious and let’s just keep our fingers crossed.” Mr Shorten said the last six years of energy policy had been a disgrace.“While this government has been debating the scientists and the community about renewable energy there has been a virtual freeze on investment in power generation and now sadly when we need our power the chickens have come home to roost,” he said. “While you have a government that can’t deliver a coherent national power policy, there will not be investment in new generation and where you don’t have investment in new generation, sooner or later the old generation will fall over and then we face these sorts of crises.“To me it highlights everything that’s wrong with the LNP and the Liberal government in Canberra in 2019 – they spend so much time arguing about the politics, and now we’ve wasted 2000 days and we’re no better off, indeed we’re worse off, than we were six years ago.”
Victorian Energy Minister, Ms D’Ambrosio said voters had spoken loudly and clearly on the Coalition’s credibility on energy policy at the November election.“They had no energy policy. The only energy policy they took to the last state election was to build a new coal-fired power station which – even if you started building it today – would take eight years to come”. “No-one is prepared to finance it, and we can see that the problems we’ve got now is that we’ve got a 20th Century system for a 21st Century climate, and the fact is our thermal generators are ageing, they are becoming less and less reliable.“That has been palpably evident in the last couple days.” “More energy supply is available to us in Victoria this summer than it was this time last year. That’s because of our strong emphasis on renewable energy: the quickest form of energy to be built, the cheapest and, of course, if we have a look at today, the most reliable.“Wind power came through today. Wind power produced sufficient power generation – as was anticipated.“Our batteries – our large batteries – were available last night when we needed them the most.” AEMO data showed the batteries generating just 25 megawatts of a Victorian total of 8,622 megawatts at 7pm last night.
Wind is currently generating 8.1 per cent of Victoria’s energy.
Victorian opposition leader Michael O’Brien said the load shedding today in Victoria has shown the failure of the Andrews government’s energy policies.“Something is seriously wrong when the power goes out in Victoria because we don’t have enough supply,” the Liberal leader said.“On a day of extreme temperatures, there are serious health and safety concerns with deliberately cutting off supply.“When Labor policy led to the closure of Hazelwood Power Station, the Liberals and Nationals warned that Victoria was left exposed.“We are not a Third World country. We deserve a safe and reliable power grid.
“Daniel Andrews loves to boast he’s good at ‘getting things done’. Keeping the power on would be a good start.”
Victorian opposition acting energy spokesman David Southwick said it defied belief that in a first-world country like Australia, Victoria has a state government that can’t guarantee enough electricity for people to go about their daily lives.“Melbourne is currently hosting thousands of international tourists for the Australian Open who must be wondering why the state government is asking its citizens to refrain from using common household appliances to prevent large scale blackouts,” Mr Southwick said. “Most Victorians agree that renewable energy is the future but we need to make it a sensible transition that doesn’t threaten power supplies and cost Victorians a fortune.“Daniel Andrews owes all Victorians an explanation as to why he can’t keep the lights on.”

Conclusions

Readers of this Commentary will recognise the ineptness of these statements of policy makers, both Liberal and Labor. Of course, Australia can increase the usage of renewable but the limited wind yesterday showed that they produced only 8 per cent of power in Victoria. This low contribution occurs quite frequently (similar low contributions occur in other states). If the reliance on renewable is increased so too will there be a need for considerable additional investments in back-up power sources, such as gas and diesel. This futher addition to the cost of producing power requires either additional subsidies by taxpayers (already large) or further increases in prices (already doubled in the last six years). A reduction in the unnecessary government restrictions on investment in gas would also help as it has enormously in the US.

The cost of producing more power, and reducing electricity prices, would also be reduced if the existing policy of reducing emissions from coal usage was either dropped or substantially reduced and the non-binding agreement in Paris was dropped or reduced.

A belated Happy Australia day

Morrison’s Energy Policy Must Be Changed

Des Moore — Fri, 26 Oct 2018 02:18:14 +0000

Morrison Must Change Energy Policy

I was a bit surprised at having two letters on climate change published in succession by The Australian and the latest one along with almost all other letter writers having similar questioning of Morrison’s energy policy as enunciated so far. Of particular interest, but worryingly true, is the heading to the letters below.

Morrison’s approach to energy should suit Labor

The Australian, October 26, 2018

You report that the Morrison government will ask energy companies to reduce power prices by January 1 and that energy retailers will be required to set their prices for small businesses and households. Scott Morrison also says he’s open to bolstering funds for greenhouse gas reductions but claims Labor’s 45 per cent reduction target would have a bigger impact on household electricity prices than the carbon tax (“PM weighs cheap loans for clean coal plants”, 24/10).

It is not surprising the Opposition Leader has no problems with the huge increase in proposed regulations, although Bill Shorten suggests the national energy guarantee be revived. If achieved, the de facto nationalisation of the electricity industry by Morrison would suit Labor.

But the PM is attempting to adopt contradictory and politically suicidal positions to satisfy colleagues’ varying views. The rhyme about shaking your right foot all about to do the hokey-pokey provides a turnaround towards Labor.

Des Moore, South Yarra, Vic

Your editorial of September 28 (“Soaring price tag must be faced”) correctly stated that Australia was “responsible for only 1.8 per cent of global greenhouse gas emissions”, so when John Williams (“We fiddle, our coal burns across the world”, 24/10) says “Australia is responsible for 1.3 per cent of the world’s emissions”, and Doug Hurst (Letters, 25/10) tells us “his facts cannot be disputed”, then the truth is that global warming deniers have no idea what facts are.

Williams’s central premise that Australia’s contribution “would have almost no impact on the world’s climate” is disproved by one fact — we are the world’s biggest coal exporter.

With company directors accepting that climate change is our greatest challenge, it is conservative ideology and media groupthink that prevents the fact-based truth from penetrating the denial cult.

Chris Roylance, Paddington, Qld

The reason the young will abandon the Liberals is because they are so brainwashed with lies about global warming that they now believe it to be fact. It’s long overdue for the government to counter these stories and expose the IPCC for publishing false information and rubbery computer models. This should be played on till the truth gets into their minds and gets them to realise that the climate is controlled by the Earth’s elliptical cycle around the sun.

Brian Doherty, Beenleigh, Qld

How blissful it is to row with the flow of the stream. But the realities of life are that we must frequently row hard against it. Prosecuting the case against socialist ideology and monetary greed of the players in the climate change industry is now the only option to preserve Western democracy (“Young will abandon us for climate inaction, Lib warns”, 25/10). These climate alarmists, socialist elites in political parties, in carefree suburbs, academics and student bodies, media and industry leaders whose interests are clearly on profit, have blindly swallowed the alarmist propaganda of man-made CO2 killing the planet, when hundreds of senior scientists have denounced it as based — at best — on failed computer modelling and at worst fraud and manipulation of data.

Every natural aspect, from the influence of the sun, ocean oscillations, clouds, water vapour — far more abundant and 1000 times more potent as a greenhouse gas than CO2 — not to mention three decades of evidence, have all been ignored in their so-called science.

We are on the precipice of economic insanity and Western leaders should read, learn and argue the case, rather than lean back on the oars and end up in the deep.

Kevin Begaud, Dee Why, NSW

Any hope some common sense would be brought to the climate change debate by Scott Morrison and Alan Tudge have been dashed. Interviewed on Sky News, Tudge is still talking glowingly on how the Coalition will meets its emission targets, and how Malcolm Turnbull will make a great contribution to the Bali conference. In contrast, his proposed actions to reduce electricity prices have to be described as weak, at best.

The Coalition stills sounds and looks like a clone of Labor, the only difference being the renewable targets and just how much pain they are going to impose on voters.

The future looks black whichever party wins the next election.

R. Watson, Sunnybank Hills, Qld

The Australian, which as previously mentioned has a new editor, has also published three articles on its Commentary page which are questioning of the Morrison approach to energy policy so far. This article by Chris Kenny directs attention to a survey by the Australian Institute of Directors which finds that “climate change is their top issue” and which has attracted considerable publicity. Amazingly, the chief executive of the Institute seems to take as given the jump in concern of company directors and makes no reference at all to the now widespread critiques of the analyses (sic) of what causes climate change (see Company Directors on CChange). Perhaps the Institute has informed its members of other views but there is no sign of it here or in what the Business Council of Australia says in public. And BHP has recently publicly supported more action to reduce emissions.

I don’t agree with everything Kenny says but his article includes the pertinent comment that “the trouble with this argument is that other countries are not reducing emissions; our own coal exports to China, Japan, South Korea and Japan are fuelling continued global emissions growth. There simply is not another nation crippling itself with energy policy contortions to meet emissions reductions targets — Canada is the best comparison and it is missing all targets and winding back emissions reductions measures”.

The other two articles published by The Australian, one by Maurice Newman and one by Henry Ergas, are not directly on climate change but are similarly critical of the attempts to reduce emissions. Ergas for example says “And in climate change policy, which attracted such attention in the by-election, the government has managed both to undersell the carbon emissions it has secured and to systematically understate the vast costs securing them imposes, inviting the incessant clamour for more”. Newman draws attention to the fact that Christiana Figueres, who “led the Paris climate conference that captured Australia” is a Marxist. She has publicly declared that she wants to get rid of capitalism.

Another concern about Morrison’s handling of energy policy is that, before issuing the press release on it with two other Ministers (it was attached to an earlier Commentary by me and is available on my web site), he appears to have failed first to consult the head of ACCC, who has previously been closely involved in the framing of policy. Ministers are not required to make such consultations but it would have been wise to do so, particularly given the complexity of the policy as announced (see Morrison Hasn’t Discussed Energy Policy with ACCC).

I have previously referred to a recent address by US professor Richard Lindzen, an expert on meteorology with over 200 published analyses. He told a London audience that conventional thinking on global warming is “nonsense”, that Australia’s holiday sanctuaries on the Barrier Reef are not in any danger, and that man-made climate change does not appear to be a serious problem. Lindzen suggested that Australia’s political class “has gone completely bonkers in their response to climate change” and argued that the IPCC report reduced the alleged tipping point from 2C to 1.5C simply because there had been no significant warming for 20 years. There was an obvious need, he said, for something more plausible to ‘sustain’ the renewables bubble.

Lindzen is only one of many scientists in the US and Australia to take a sceptical view about the dangerous global warming thesis. In the US over 30,000 scientists have done so. His expertise on climate change suggests that Morrison should invite him to come to Australia and address audiences in our capital cities and Cabinet. That would help members of the Coalition (and others) to update their assessments of the costs and benefits of policies designed to reduce CO2 emissions and whether any policy adjustment would be warranted.

Perchance, it would eliminate the Turnbullism which seems to be so influencing Morrison.

Morrison Fails to Get Over It

Des Moore — Thu, 13 Sep 2018 13:01:06 +0000

Morrison Fails to Get Over It

In yesterday’s editorial The Australian concluded by saying that “at some stage we need a serious debate about what we are doing and why” on energy policy (see OZ Editorial on Energy Policy, 12/9). Also yesterday Morrison answered Shorten’s question in the House about why Turnbull has been sacked by telling him to “get over it”. But he is the one who needs to “get over it” – the “it” being Turnbull, who is reportedly still busy from New York telling colleagues to have Dutton’s eligibility to be a minister tested in the High Court. Morrison had no real option but to reject this proposal.

The trouble is that Morrison has made no attempt to explain Turnbull’s abandonment and, what’s more, it is difficult to see any substantive difference between the energy policy announced so far and that followed under the Turnbull government. In fact, while Morrison has drawn attention to areas which require policy attention neglected under Turnbull, such as industrial relations and banking, he has given no indication as to what he might have in mind.

True, he continues off and on to say the number one priority is to reduce power prices. But yesterday he made the absurd statement that Australia has to adopt climate change policies supported by Pacific Islands (a well known regular attempt to get more aid but which would not benefit from the changes sought). Today he is reported as assuring two backbenchers that he will not dump renewable energy targets (see Morrison Endorses Renewable (13/9).

Further, Morrison’s abandonment of the NEG policy, and the legislation embracing the Paris agreement to reduce carbon emissions, do not themselves reduce power prices. The policy that seems to have replaced Paris still involves the same reduction in emissions and the target for renewable is retained. Both of these increase costs once the required additional back-ups are taken into account.

Some reduction may be achieved through possible operative reforms of the energy market as suggested in the ACCC report. But the reported rise in prices in the futures market since the abandonment of NEG suggests downward pressures would have minimal effect. Unless the new government adopts a credible energy policy its Newspoll will be stuck at an unelectable level.

As National Political Editor James Campbell points out in today’s Herald Sun, if the polling booths repeat anything like the Newspoll of a Coalition primary vote of only 34 per cent (Labor 42 per cent), that would slaughter the government (see Campbell on Morrison(13/9). He argues that the Coalition has no chance of winning unless its primary vote is above 40 per cent.

Today’s article by Chris Kenny (who has experience working in a minister’s office) identifies a number of problems areas, viz

“The change in style is everything to Scott Morrison. And this looms as a strategic mistake because he needs to reshape the substance as well”.
“The new leader couldn’t resist the temptation to remake the Coalition in his own image, looking to neutralise most areas of conflict with Labor”.
“Turnbull lost the leadership because he had taken the party to the left, so Morrison needs to show he is taking it back to the mainstream right-of-centre where it belongs. Climate and energy policy is key”.
” Already several backbenchers are agitating to withdraw from Paris and former assistant minister Keith Pitt has rejected a frontbench position to argue this stance. Critics portray them as ideologues, whereas in fact supporting cheap energy is practical and pragmatic; it is making costly and futile climate gestures that is ideological”.
” Our Prime Minister ought to make clear that if something needs to give on electricity prices, reliability or emissions targets, it is the climate goals that will be disregarded”.
”If Morrison runs a version of the Turnbull government, only with an approachable and down-to-earth style, he won’t implode but he won’t win. If he backs that up with a few substantial measures demonstrating his government is firmly rooted in mainstream Coalition territory, winning won’t be out of the question.

Morrison’s Energy Policy

Des Moore — Sun, 02 Sep 2018 13:31:08 +0000

Why Have We Changed Government?

At his first press conference with Frydenbrg (held before Turnbull’s resignation had been effected legally), Scott Morrison said “I want to start by thanking, and he still is the Prime Minister, Malcolm Turnbull. I have known Malcolm for a long time, as you know. He has been a dear friend. He has served his country, in a noble, and professional way. Josh and I have watched and worked with him as he has led our Cabinets and the achievements. We have been proud to serve with him as a government, whether it is in the economy, whether it is in all the other areas that Malcolm has outlined today at his earlier press conference. He is a great Australian who has contributed a great deal to this country and our party and our nation will be very grateful for his contribution” (See Morrison First Pres Con). At that press conference, he had little to say about his government’s policies but was questioned about energy policy and answered as follows

Is the national energy guarantee, and perhaps Josh might care to answer this, still the government’s policy? Are there areas you are looking at changing? And if this is the end of the Turnbull-Abbott era, is there any prospect of Tony Abbott joining the ministry?

These are going to matters of detail, at this stage they are not going to go into. Don’t you said that our government is going to put electricity prices down. We will put in place what we have said from the CCC report, which is to put in the safety net on price. We will put the big stick to ensure that the big energy companies to the right thing by you, the customers. And we will be backing investment in a new energy generation capacity. That is what we will be doing. Specific matters of policy and any changes in that area, I’ll consult with the new Cabinet.

Chris Kenny has argued (see Kenny on Energy as Pivotal) that

“Energy is the pivotal issue. Turnbull’s desire for emissions reductions, Paris compliance and bipartisanship triggered his demise. Morrison has done well in splitting the portfolio from environment and installing Angus Taylor. Now the lignite hits the road. Price and reliability must trump all else, and the clearest way to send that signal would be to withdraw from Paris. But for reasons of diplomatic consistency and trade positioning the Coalition seems loath to do that. It will need not only to articulate how the Paris targets will not drive policy — as Taylor has started to do — but also to demonstrate this reality. Whether it acts to extend the life of the Liddell coal-fired power station in NSW’s Hunter Valley or underwrites new investment in dispatchable generation, it must get something done before the election. It needs a fierce battle with Labor: lower prices versus lower emissions”.

But it is difficult to see from Environment Minister Taylor’s first speech on 30 August that there will be much difference between the major elements of the policy foreshadowed by Turnbull and those now canvassed by Morrison in a 5 page document (see Taylor on Energy Policy). The main points include the following:

He is the minister for reducing power prices and acknowledges that “we had a mess and we are now fixing it, with one aim only – to reduce power prices”;
He makes no reference to the implications of Morrison’s decision to stick to the 26% reduction in emissions and no indication is given to whether this went to Cabinet. Nor does he acknowledge that the substitution of expensive renewable for the usage of coal will in itself add to power prices;
He acknowledges however that there has been “sharp increase in retail electricity [prices], particularly the doubling” under Labor. But he makes no reference to the doubling in whole sale prices since 2015 under Turnbull or to the increase in retail prices which has also occurred in that period. He claims that ”retail and wholesale prices have turned a corner” but does not explain why;
He sees a “strong role for commercially viable renewable, alongside continued focus on coal and gas”. But he says nothing about reducing/eliminating renewable, despite acknowledging that “as more intermittent generation has come into the market, baseload coal generators have left”. He claims new supply can come from “many different sources” and ”we can create an environment where there is sufficient confidence to invest”. No indication is given as to how this could occur for coal-fired generators;
He is “not skeptical about climate science” but he is about the emissions reduction schemes. And he acknowledges that hitherto Governments have done little more than raise electricity prices or government spending. Yet ”we are well past the point” of leaving it to the industry to fix the problems in the electricity industry. Hence, “We need to “empower customers with a price safety net”. As the ACCC has recommended a “default market price”, “we will require retailers to use this” when advertising;
He notes that the PM and Treasurer have already announced “a programme to underwrite new stable, low cost generation for commercial and industrial customers” and that work is being done on the detail;
Price gouging needs to stop and the government accepts ACCC proposals to address this. It may include divestment;
Taylor concludes that ”If industry steps up and does the right thing on price, government can step back and focus on other things”.

No doubt more detail will emerge on energy policy. But the basic situation seems to be unchanged compared with that being developed under Turnbull/Frydenberg. The cost raising targets for emissions and renewable remain extant and the thesis also remains that the government will intervene in the electricity market to an even greater extent, including by guaranteeing “low cost” (ie subsidized) generation. Labor will probably accept the basic approach, but without saying so.

More Ridiculing of Turnbull’s Policies 18/8

Des Moore — Sat, 18 Aug 2018 05:40:50 +0000

For Now Dutton Stays Loyal to Turnbull, But …

Commenting on this morning’s media speculation that he might challenge Turnbull for PM, Peter Dutton said “In relation to media stories today, just to make very clear, the Prime Minister has my support and I support the policies of the Government. My position hasn’t changed from my comments last Thursday.” (see Dutton Says Supports Turnbull). That of course is a short time ago and he has also said that, while in Cabinet, he is bound to support government policy.

The outstanding question is whether Turnbull’s responses to the critiques of (in particular) NEG are being accepted as providing satisfactory answers. If not, then Dutton and one or two others could resign from being ministers and, with at least 10 rebels also, Turnbull would be in a position from which he would find it virtually impossible to govern.

Reports indicate that, in addition to Turnbull’s initial “concession” of removing any legislative requirement to reduce emissions by 26% by 2030 (but retain it as a policy), he may be developing a scheme or schemes which would supplement what is in the draft NEG legislation. Astonishingly, that legislation has only been released to Labor and this was done last Wednesday.

As mentioned in yesterday’s Commentary, the main supplementary focus is on controlling prices. As shown in the graph attached to my last Commentary, there has already been a further doubling or trebling since 2011 under policies which would be adopted under NEG. But (importantly) the Turnbull/Frydenberg clique, now supplemented with help from Treasurer Scott Morrison, would need to show how their frequent promises to get lower prices under NEG could be achieved.

In reality, in what is a powerful critique of Turnbull’s policies generally, Terry McCrann’s analysis below suggests that under NEG it is virtually impossible to deliver lower prices. He points out that, to meet the additional renewable target, there will need to be considerable additional investment in generation backups to cover the periods when the wind doesn’t blow. That in turn must add to generation costs, including for the renewable certificates which have to be purchased by retailers. Unless some method of hiding the adverse effects on the Budget, prices paid by consumers would increase further.

Comments by climate expert Alan Moran (see Moran on Turnbull) also suggests that

“To rescue the situation, Turnbull is pretending to focus on prices saying “If we need to use a big stick to lower prices, we will use a big stick to lower prices”. He says he will place the policy changes within the regulations rather than the legislation itself, a measure that will further allow for the flexibility the NEG was supposed to counter. And he is now requiring regulators and the ACCC to publish the price consequences of any higher emissions target. This is utter fraud since, as we can see from countless previous modelling outcomes, the answers provided are what those paying for the model runs want, irrespective of how detached from reality these answers may be”.

It is moot as to how much longer rebels within the Coalition can wait for Turnbull to produce any meaningful answers to existing critiques. The answers so far have added to the opposition from within particularly as they come on top of dissatisfaction with his handling of other policy areas.

Last Weekend for Turnbull?

Des Moore — Fri, 17 Aug 2018 13:00:07 +0000

Chaos Reigns Supreme

I suggested in yesterday’s Commentary that Turnbull’s proposals on NEG policy (sic) have created a chaotic situation in which changes now seem to be made almost every day in an attempt to persuade rebel MP’s to re-think their opposition to the policy and avoid resignations by some Ministers. These rebels are particularly opposed to any legislation which seeks to lock in the 26 per cent reduction in emissions under the Paris accord. It should be noted that, while 10 rebels have been publicly identified, there appear to be others who are also unhappy with some of the existing NEG proposals. Former Major General Jim Molan (now a Senator), for example, told Sky News last night that he did not accept any legislation endorsing the 26 per cent reduction in emissions.

However, today’s developments suggests that the Turnbull regime is concentrating on what will happen to prices under NEG (see Turnbull Attacks Big Three Gentailers). It seems that, despite Frydenberg’s repeated claim that prices have already started to fall, senior ministers now recognise that it is no longer accepted publicly that NEG would produce lower prices. Instead, one of two promises today on policy is that action will be taken against the big generators/retailers (known as “gentailers” because they operate both generators and retailing) for ripping off consumers by unjustifiably raising prices and profits.

Ironically, these ministers claim that the very body which is supposed to ensure competition (the ACCC) should already have evidence to support taking such action and, according to Treasurer Scott Morrison, the mere warning that action may be taken will itself lead the companies to downward adjust their prices as happened with gas prices when export controls were threatened. But that seems unlikely with domestic electricity prices and there is no explanation as to why the ACCC (which recently published an extensive report on the energy “system”) has not already taken action against the companies and why it should not do so now – and immediately.

Just why these gentailers and other retailers have been able to get away with exploitative action is not clear. But the ACCC and the Turnbull government must be held responsible for the price increases which have occurred over recent years. The attached graph shows the increase in wholesale prices plus the addition to costs arising from the cost of renewable certificates which electricity suppliers have been required to pay. This shows that since around 2011 the total costs of electricity have doubled or trebled in the states, with South Australia’s increase being the highest (see Increase in Electricity Prices 2011-2018).

Thus, even before there is any NEG in operation, the regulations imposed under the renewable and emissions policies which Turnbull has operated have been the major contributors to this very large increase in costs born by consumers. As NEG legislation would continue such policies, it is virtually certain that prices will continue to increase unless controls are imposed on electricity prices, which may be under consideration (see Crowe on NEG).

But while Turnbull himself would doubtless be prepared to extend government controls on electricity prices, it seems unlikely that most of Coalition would be prepared to do so in circumstances where the general public has become more aware of the doubts about the usefulness of NEG. Now that a draft of the legislation has been passed to Labor but (amazingly) not to Coalition MPs, it is likely that those doubts will be increased.

Yesterday I referred to adverse analysis made by The Australian’s political editor Dennis Shanahan on the situation facing Turnbull. Today he winds up his piece thus

“Yet while Turnbull tries to placate MPs over prices, there is a growing, wider discontent over his political handling of energy and other issues, including his response to the by-election losses, an inability to put pressure on the ALP and the selling of the government’s tax agenda. Not enough time was spent earlier to address the concerns of the Coalition partyroom and so avoid what is now a sizeable revolt, as well as the impression of a leader being forced to capitulate to internal critics. MPs are frustrated that he did not act earlier on widespread concerns about energy prices and the advantage of being seen to embrace reliable coal-fired power. Instead, he left decisive action to the last minute and seems wedded to the idea of being the only nation to legislate Paris targets”.

Will this weekend wind up Turnbull’s Prime Ministership?

ACCC Report on Electricity Prices

Des Moore — Tue, 10 Jul 2018 22:57:37 +0000

ACCC Report on Electricity Prices

The ACCC report on electricity prices, and the associated address by Turnbull at the Queensland Press Club, were not available on either’s webites at the time of writing this at 9.00pm and after. However copies of the report were available to the media, which also had an oral version of Turnbull’s 15 minute to the Press Club. These articles from The Australian include references to what appear to be the main points or the main emissions made orally by both Turnbull and Sims. It appears that the prices issue will again be a major item tomorrow in The Australian.

The main points emerging from statements made by Turnbull/Sims include

Turnbull has recognised that prices rises are a major political, intra-party issue and, as such, must be explained (sic) as not being due to climate change policy. Sims seems to agree that something must be done to stop other causes (ie non-policy) of price rises, which he “explains” as due to an electricity market that has been prevented from working competitively. He does not say why the Competition Commission did not take preventative action when “unacceptable” price rises previously occurred, but makes undesirable proposals such as the government underwriting the construction of “firm” low-cost generation.

This seems to be supported by Turnbull and it implies that in addition to the guarantees in the NEG scheme (which Sims diplomatically supports), the government will now include in those guarantees some provision on prices which was, as Abbott recently pointed out, absent from its original version. This is obviously an attempt by Turnbull to attract support from the Nationals , who have been calling for governmental support for coal-fired generators. Whether it will be supported by Turnbull remains to be seen.

If carried out, Abbott and other conservatives would accept that the bottom line will be even further government intrusion into the electricity market by price controls (this despite Turnbull boasting to his Queensland audience that he supports market forces!) . With the increase in costs to electricity production and supply caused by CC policy, there will also have to be an increase in subsidies to producers, not a reduction as one or both the speakers suggested, to prevent the price rises which would otherwise occur. Overall, this would suit Turnbull’s socialistic tendencies and would doubtless suit Labor.
Virtually no reference was made by Turnbull to the policy of reducing carbon emissions in accord with the 2015 Paris agreement and which was ratified by Turnbull. This has been the major cause of the increase in wholesale electric prices since 2015 (varying from over double in NSW to 250 percent in Victoria and South Australia) and to which have to be added the doubling of the cost of renewable energy certificates required by major generators. This appears to be contrary to the claim by both Turnbull and Sims (ACCC head) that retailers have been mainly responsible for the increase in prices, the implication being that retailers have colluded to add significantly to the prices which they obtained from wholesalers (in some cases, however, the retailers are owned by the wholesalers). The increase in wholesale prices and renewable certificates indicate that it is not the retailers who are the main offenders.
The hope by Turnbull is that he can continue to support the nonsense that Australia has to accept Paris and this NEG is the way to do it. He judges that he can carry this through to the next election, even if he doesn’t do well in the upcoming by elections. If the Coalition doesn’t do well in the main election, does that matter to Turnbull?

Polling and Electricity Prices Commentary – Correction

My Commentary of 9 July discussing the latest Newspoll needs a correction because I wrongly stated that it only covered the February-March period in 2018 and this only showed an increase in Coalition polling from 46/54 TPP in the October-December period to 47/53 in Feb-March. In fact, I overlooked the latest Apr-June polling period showing a 48/52 Coalition poll, an increase of two percentage points on the Oct-Dec period. I also incorrectly suggested that The Australian’s political editor, Simon Benson, was wrong in using the 48/52 poll as the latest: my apologies to Simon. This error doesn’t mean that the implications I drew need changing: the Coalition is still well below its 2016 election result of 50.4 percent and still needs radical changes in its policies and leadership.

Polling and Electricity Prices

Des Moore — Mon, 09 Jul 2018 02:38:39 +0000

Polling Gone Mad

Today we have been “flooded” by opinion polls which, while not showing any overall deterioration in the Turnbull Coalition’s polling, confirm its continued inability to effect any significant improvement in that polling. The state by state Newspoll for the February-March quarter also suggests there is a continued problem in Queensland, where the One Nation vote is much higher than in other states and has increased significantly since the 2016 election result (from 5.5 to 13 percent in the February- March quarter).

Because this state by state Newspoll only covers to the end of March it needs to treated with more than the usual reservation about polling. However, while it shows a slight increase on the previous quarter’s 46/54, the Coalition’s polling of 47/53 for the February-March on a TPP basis does not let the Coalition off the need to radically change its leadership and policies (the Australian’s political editor, Simon Benson, mistakenly had the Coalition at 48/52).The poll remains well below its 2016 election result of 50.4/49.6 and suggests that there will not be an early election. The slight improvement in Turnbull’s net satisfaction rate (to minus 20) may help but no change was recorded in his better PM rate of 40 (Shorten on 34).

Although the Coalition polling improved significantly in Queensland (from 45/55 to 49/51), that was way down on its election result of 54/46 and suggests an increased threat of seat loss in that state. But it has reportedly reached an agreement on preferences with One Nation, which should help but may require some agreement on energy policy and a difficulty with implementing the NEG. My recollection is that then LNP leader in Queensland did not have a preference deal with One Nation in his (lost) State election.

A separate Fairfax/Ipso poll for the first quarter of 2018 suggests that at 53/47 Labor is also ahead on the same basis as Newspoll. But by contrast with Newspoll, it shows Labor ahead in Queensland by 52/48. This has led the AFR’s left political editor to suggest Labor could win up to 16 seats from the Coalition, including the seat of Home Affairs minister Dutton. But the AFR has become so left-wing that this opinion needs to be questioned.

Another separate poll in Victoria, where there is a State election in November, also shows Coalition problems with Labor which could carry over to the Federal election. The poll shows Labor ahead on a 51/49 TPP basis. However, low primary votes of 35.4 for Labor compared with 39.4 for the Coalition suggest uncertainty at this stage about exactly how preferences will be allocated. In that regard, it is the first time One Nation will participate in Victoria since 1999 and it got a 3.6 per cent primary vote in the poll. Also, the Coalition is well ahead (55.8% compared with 44.2%) on which party is judged best to maintain law and order. Against that, the Victorian media is pro Labor.

Electricity Prices

There is no doubt that a major cause of the poor Coalition polling outlined above reflects the failure of Turnbull and Energy minister Frydenberg to explain the causes of the increase in electricity prices and how the new proposal to supposedly handle energy policy will work in practice to get prices down. The address by Tony Abbott drew attention to the latter issue, which is increasingly concerning voters particularly those on lower incomes.

Turnbull is now close to a panic situation and his latest response is not only to claim that prices have already started to come down but that he has in effect commissioned the ACCC to publish on what has happened and what will happen. Today he is reported as stating that “an “illuminating” Australian Competition and Consumer Commission report on the electricity sector will be released this week and the same (but separate) report suggests that a Royal Commission might be established on whether prices are determined in a competitive framework (see Possible RC on Electricity Prices).

The attached report has Turnbull claiming “We’ve turned the corner on electricity prices,” Mr Turnbull told reporters at Avebury Mine, in the north-west Tasmanian seat of Braddon on Monday. “You’ve seen price reductions across the east coast as a result of the policies of my government.” Mr Turnbull pointed to measures to push down gas prices by moving to restrict exports and its own National Energy Guarantee as proof of action. “The NEG will provide a level playing-field, technology agnostic, certain environment for people to invest and deliver lower cost for generation over time,” he said.

I am hoping to publish an analysis on prices but there is no doubt that it has become a major policy issue which Turnbull had tried to hide by claiming that “experts” will solve the problem by constructing a NEG. As I and others have already suggested, this is not the case (and the forced reduction in gas prices is not relevant to NEG). The fact that Turnbull felt is necessary today to say something about it, rather than his No2 Frydenberg, suggests he has at least realized that this is a problem which cannot easily be hidden away in a NEG which is likely to involve higher prices.

It seems unlikely that his colleagues have realized that it may be necessary to abandon the NEG approach in order to improve the Coalition’s polling. Turnbull himself has a reputation for wanting to split the Liberal Party and may not be too concerned if he presides over a Coalition loss. Time to go now rather than at an election.