Institute for Private Enterprise » Terry McCrann

Coalition Election Campaign Starts Poorly

Des Moore — Sun, 14 Apr 2019 11:33:11 +0000

Is Coalition Able to Persuade Electorate of Dangers in Labor’s Program?

The campaign for the election on 18 May started officially on11 April although statements of policy had been made prior to that, as had media assessments. Two prominent conservative commentators had in fact already indicated their view that Labor will win.

Terry McCrann wrote on 11 Apr “One thing is absolutely crystal clear about the election. If Labor wins — as to me, seems certain — it will hit the ground running, straight after the election, in June”. He added that “it has a program to dramatically increase taxes on negative gearing, franking credits, capital gains and trusts; it will not cut the company tax on big companies from 30 per cent, which is now very uncompetitive, with the US down to 21 per cent, and will revisit the cut on medium-sized companies; it will also further squeeze especially small and medium-sized businesses with the so-called “living wage”; and then there’s the whole issue of power prices, which will just continue to increase and increase at an accelerating rate under Labor’s so-called climate change policy” (see McCrann Says Coalition Won’t Win).

Andrew Bolt doesn’t rule out the remote possibility of a Coalition win but argues that Morrison must upgrade himself and the Coalition. He asks “Where on earth is your mongrel? Your fight? Your big wake-up-Australia cry? You’re starting behind, remember. Three seats short of a majority already, and with every poll saying you’re headed for a hiding”. Bolt adds that the Coalition also faces a starting point that the “polls show they’ve been itching to do for two and half years – to vote out this brawling, divided Coalition Government that’s given us three different Prime Ministers but next to no wage growth”. Yet, he asks, “what does Morrison do in his first and most important speech of the election campaign? What a snooze-fest” (see Bolt Says Morrison Must Attack Labor Policies).

The Weekend Australian’s editorial does not predict the likely winner of the election campaign but points out that, while “the Prime Minister is offering to boost incomes through a larger economy, running on his party’s traditional values, such as hard work, enterprise and aspiration”, the Opposition Leader promises to “radically change an economic system … Labor’s method is more spending on services, funded by new taxes on high earners, property owners, retirees and investors. To raise award wages for some workers, Mr Shorten will hand more power to unions and revamp the terms by which the industrial umpire determines the minimum wage. This is old-school Labor, buried in 1983 after Bob Hawke won office: redistribution to promote equality. ‘When everyday Australians are getting a fair go, then this economy hums’, Mr Shorten said on Thursday in a backyard appeal to voters”itorial (see OZ Editorial).

In short, there is a wide view that a win for Labor would likely mean a major change in how the economic system operates, with a bigger role for government services, a major deterrent to private investment and a slower rate of economic growth. Australia would move away from America and towards the European Union (sic) from which some members are trying to escape. This possibility should provide a basis for a Coalition attack.

What is the Likely Effect of Labor’s Proposed Expansion In Government

The extent to which government might expand under Labor is indicated by its proposed increase in the level of taxation to almost 26 per cent of GDP over the next ten years. At this level Labor would be the highest taxing government ever: the previous highest was 24.3% of GDP in 2005-06 (see AFR Quotes Treasury Estimates Of Australia Being Highest Taxer Under Labor).

By contrast, the Coalition’s 2019/20 budget estimate for taxation is 23.3% of GDP and that is not estimated to increase over the following three years. It also has a self-imposed undertaking to not increase taxation to more than 23.9% of GDP. Note that if tax levels were at Labor’s 26% of GDP next year that would mean total taxation of about $520bn, or about $60bn or 13% more than estimated by the Coalition ie this would be about an increase in the size of government at the Federal level.

There are precedents for large increases in the size of the Federal government in Australia.

First, when the Labor government was in office under Hawke from March 1982, taxation levels increased in the four years from 1982-83 to 1986-87 by no less than about 60% in real terms. In 1986-87 taxation revenue reached the same level as is estimated next year – 23.3% of GDP – up from 21.7% in 1982-83. At the same time, moreover, the budget deficit increased and ran at a much higher level, which led then Treasurer Keating to warn that Australia was in danger of being regarded as a banana republic. Then, thanks mainly to then Labor Finance Minister Walsh, action was taken to reduce spending for three years in a row (from 27.0 % to 22.9 % of GDP) and a budget surplus also followed for three years. An almost complete reversal of budget policy.

Second, in response to the global financial crisis originating in the US, the first Rudd government (2007-10) moved the budget from a surplus of 1.7% of GDP to a deficit of 2.1% in 2008-09 and deficits and relatively high levels of spending continued into the next few years. Whether this had any substantive effect in “saving” the economy remains in dispute. But Australia’s relatively strong banking system and high levels of trade with China certainly helped maintain growth and prevent any recession. Then, despite expenditure reductions by the Abbott government in 2014-15, deficits continued at relatively high levels under the Turnbull government (2015-18) until 2017-18 when that government brought the deficit down to 0.5% of GDP. However, expenditures remained at the relatively high level of 24.5% of GDP in that year and have continued at around that level even after the Morrison government took office in August 2018 and produced the 2019-20 budget.

In short, Hawk’s attempt in the 1980s to effect a large increase in the size of government did not succeed and nor can Rudd claim success in his attempt to adopt a Keynesian increase in spending and deficits in response to the global financial crisis which centred in the US. The Australian economy was primarily “saved” by our relatively strong banking system and our trade with China. However, under Labor and Turnbull, taxation levels have crept up again to over 23% of GDP since 2018-19 and we now face the prospect that Labor would increase that further to 26% of GDP at some time over the next ten years.

Conclusion

Labor’s proposal to increase the level of taxation to 26% of GDP, and to concentrate increases on those on high incomes, is likely to have adverse effects on investment and economic growth (see Uren’s Analysis Shows Labor’s Taxes Increase More Than Spending Plans). Such adverse effects would also come if Labor proceeds with reductions in emissions and increases in renewables at both the Federal and State levels. History also suggests that Labor finds it difficult to, as Morrison has said, “manage money”. Also, while it claims to be aiming for bigger budget surpluses than the Coalition, it is unclear as to how much it will aim to exceed the Coalition’s present estimate of about 0.5% of GDP.

As to the budget overall, we can speculate that with Labor having, say, a 1% GDP budget surplus and 26% of GDP from tax, that leaves 25% of GDP for spending. This is only about 0.5% of GDP higher than the Coalition’s estimates for each of the four years to 2022-23. It suggests that Labor’s additional spending for each of those years might not be much greater than present Coalition estimates. Still the opportunity is there for the Coalition to attack Labor’s proposed increases in levels of taxation and spending, reminding the electorate of Labor’s failures with higher levels of spending in the past and the adverse economic effects of higher levels of taxation. This requires Morrison to stop announcing “handouts” and concentrate on informing the electorate of the problems with Labor’s proposals.

Polling Shifts for Parties

Des Moore — Sun, 07 Apr 2019 22:46:17 +0000

Polling Improves Coalition’s Position But Still Leaves Them Struggling

Two new polls tell different stories, one favouring the Coalition but the other not.

First, Newspoll shows the Coalition’s TPP as up by two percentage points with Labor’s down the same two points compared with the March 7-10 poll. Hence the Coalition is up from 46 to 48 while Labor’s is down from 54 to 52 now. Also, while the primary votes ( before taking account of preferences from other parties) for the Coalition have improved (from 36 to 38), Labor’s have fallen (from 39 to 37). These send out a hopeful signal to the Coalition.

Newspoll also shows an improvement of two percentage points in Morrison’s net satisfaction rate (from 43/45 to 45/43) and, although Shorten’s also increased that was only by one point (36/51 to 37/51). As to who is regarded as better PM, Morrison improved from 43 to 46 while Shorten fell from 36 to 35.

The National Political Editor of The Australian describes this as a “bounce” for the Coalition (see Benson Says Newspoll Gives Coalition a Bounce) although it is still well below even the 50.4% vote it reached in the double dissolution election in 2016 when Turnbull was leader. That election gave the Coalition only a one seat majority in the Lower House of 150 and it had a swing against it of 3.5%. In the Senate the Coalition had 30 seats, Labor 26 and others had a record 20. In other words, the Coalition needs to do much more than catch up to Labor if it is to be able to at least control a Lower House which will have several independents as well.

Second, an Ipsos poll run by the Sydney Morning Herald ( the timing is presumably designed to display competition) shows that on a TPP basis the Coalition has fallen since its last poll in February 12-15 from 49 to 47. By contrast, over the same period Labor has increased from 51 to 53. Ipsos also shows a reduced net satisfaction rate for Morrison (from 49/40 to 48/39).

The Newspoll is generally regarded as a more accurate and reliable poll and Ipsos operates less frequently than Newspoll. It’s result is also questionable on this occasion given that its poll reported 41% believed the budget was a “fair” one and only 29% thought it wasn’t. More generally, the Budget appears to have been well received and it would be unlikely to have caused a fall for the Coalition. In fact, Labor would seem to have been more likely to have had a fall given the announcement of a policy requiring half of motor vehicles to become electrified by 2030 (there are now less than 1%) and the failure to provide details of how the proposal will proceed and what it will cost. These and other developments suggest that the Ipsos poll is not an accurate reflection of the views of the electorate.

As pointed out in my previous Commentary (see in particular Coalition’s Budget & Labor’s Reply on 6 April), while Labor has announced many policies there has been little back up so far on the costs whereas the Coalition has published a comprehensive budget and Labor has had access to the Parliamentary Budget Office which should have allowed it to publish estimates of the costs of major items of spending and major tax changes. Given the general dissatisfaction with the plethora of announcements on new policies, it would not be surprising if an increasing proportion of the electorate now wants more back-up.

I refer again to Terry McCrann’s piece of April 6 arguing that “Labour has a two-stage strategy to destroy Australia”. He lists policies announced by Labor which call on the Coalition to publicly attack and demand costs if it is to have a chance of winning the election.

Des Moore

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”.

Coalition Must Take Now Risks with Policies & leaders

Des Moore — Tue, 12 Mar 2019 07:32:43 +0000

Time to Take Risks

In yesterday’s Commentary I argued that, given the latest Newspoll (and for policy reasons too), the Coalition should “change courses” asap. I also sent a letter to OZ (unpublished) advocating the cancellation of Turnbull’s membership of the Liberal Party. My advocacies are based on my perspective that, although risky, the Coalition needs to take risks now if it is to have any chance of winning the election and that an improved set of policies would in any event provide a better starting point in Opposition to a Labor government.

It was encouraging to receive a number of responses in basic agreement with this approach. And in his article yesterday’s Herald Sun (see Bolt on Abbott as Possible Leader), and again in his presentation last night on Sky News, Andrew Bolt rejected the idea of a new leader who is “a near-unknown that no one hates” because “such risk-aversion rarely ends well”. Instead, he suggests that Abbott would be best and that “helping him will mean that the Liberals after the election will again be overwhelmingly conservative, given how many of the Left are resigning or likely to lose”.

Of course, in principle nobody wants yet another change in leadership. But while Morrison has tried hard, the polling and such limited policy changes as he has offered, are clearly insufficient to swing voters. This is particularly the case with the policy that will be most important in the period prior to the election – energy. Yet Morrison has just rejected the idea of withdrawing from the Paris Agreement and has ignored the adverse economic effects from the retention of the Coalition’s target to reduce emissions by 26-28 per cent by 2030. Except for possible initial “voluntary” falls, the promised lower electricity prices would only occur if dictated by Federal Energy Minister Taylor.

However, in today’s Herald Sun, Terry McCrann points out, first, that while “the government’s proposed 26-28 per cent cuts are anything but timid, (they) are among the biggest cuts proposed by any country anywhere in the world”. And, second, that Labor’s proposed cuts in emissions of 45 per cent are equivalent to 55 per cent in per capita terms, which would be “entirely and exactly pointless. Those cuts can’t and won’t move the ‘Earth’s temperature’ even by one-ten-thousandth of a degree” (see Labor’s 45% Emissions Cuts Equal 55% per Cap: McCrann).

This analysis could provide a basis for a leader of the Coalition to at least moderate its emissions target and tell voters that Labor’s energy policy would cause much greater economic damage than the Coalition’s. Abbott as a leader would be well placed to convey that to voters if the Liberal’s were prepared to take that risk.

Monetary Policy

These days not many observers of the politico/eco scene take a close interest in monetary policy and many look to central banks to just keep them as low as possible without considering possible adverse economic effects. But it is important to recognise that “low” interest rates may have such adverse effects, including over a period of time. On 11 March I had a letter published in the AFR pointing out that the household saving ratio fell from 10% in 2008-09 to just over 5% today and this has been reflected in an increase in household debt and may account for “an increased tendency to reduce spending rates on consumption and housing. One possible explanation is that monetary policy allowed interest rates at relatively low levels for too long, resulting in higher borrowings and excessive debt levels” (see letter as published below).

In short, the recent slow-down in economic growth may be partly reflecting a pause in spending as household debt reaches levels which consumers and small businesses judge to be too high in present “risky” political conditions. Almost coincidentally, it was reported that RBA experts found that, ”all else being equal, a 1 per cent drop in interest rates would, over the long run, boost house prices by 17 per cent. The cash rate has been slashed from 4.75 per cent throughout most of 2011 to its current record-low level of 1.5 per cent as the central bank attempted to offset the end of the mining boom and encourage activity in the housing and consumption sector” (see RBA Analysis Suggests “Low” Interest Rates Stimulate Housing Construction).

In other words, the RBA may have allowed interest rates to go down too far or to go too low for too long, resulting, first, in excessive house prices and debt and, second, that this may have contributed to the current slow-down in GDP. If this is correct it may mean that, contrary to some analysts, there should not be any further reduction in interest rates – unless of course an unlikely recession occurs.

Interestingly, the US Federal Reserve has made four increases in interest rates whereas our RBA Head, Phillip Lowe, after threatening increases, has backed off. Of course, it would not be a good time politically for Lowe to increase rates even if he felt the inclination: from that viewpoint better to stay at present rates. Note that the head of the US Fed, Jerome Powell, has been under pressure from Trump to “keep rates low” with a view to help maintaining the strong growth in the US. But in what has been described as an “unusual” interview in public, Powell has asserted his independence (see Fed Chair Makes Unusual Interview). Lowe would be well advised to make his independence clear when he reports RBA monthly meetings to Treasurer Frydenberg.

Rate Cut Wrong in an Era of High Debt
(Letter by Des Moore published in AFR, 11 March 2019)

Newspoll Lift Helpful But Coalition Has a Long Way to Go

Des Moore — Tue, 29 Jan 2019 10:24:15 +0000

Helpful Lift in Coalition Newspoll But Still Well Behind

Today’s first Newspoll for 2019 shows a helpful improvement for the Coalition in its TPP gap from 45/55 in early December to 47/53 but Morrison’s “Satisfactory” rate as PM went down from 42 to 40 and his “Dissatisfaction” rate went up from 45 to 47. By contrast, the “Satisfactory” and “Dissatisfaction” rates for Shorten each improved by a point and left him only 3 rates behind Morrison. In the “Better PM” rate Morrison also dropped a point while Shorten’s rate was unchanged, albeit at 7 points behind Morrison. This Newspoll was taken during the period when three ministers announced they would not stand at the next election (see Newspoll TPP Loss Reduced to 53/47).

One might say that the improvement in the Coalition’s TPP is not cancelled out by the deterioration in satisfaction and better PM rates. But the improved TPP has also to be assessed by noting that it is still suggests a 3.4 per cent swing against the government since the July 2016 double dissolution election won by Turnbull by one vote. Remember also that the Turnbull government itself experienced a swing against it then of over 3 per cent ie the Coalition has a lot of ground to make up.

The NSW State election on 23 March (for all seats in the lower house) will provide the next electoral test for the Coalition, although there will also be more Newspolls before then.

In my Commentary on 27 January I argued that Morrison needed to get cracking on enunciating policies asap and drew particular attention to the problems arising from existing energy and climate change policies, including of course the large blackouts in Victoria. Commentary concluded that “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”. I also argued that increased usage of renewable is not the way to reduce electricity prices.

Note too that, according to Simon Benson at News, Morrison believes that the Coalition’s attack on Labor’s negative gearing and dividend imputation policies “represent a significant vulnerability in Labor’s economic argument”. But the (correct) attack on such policies is likely to have only a limited effect on polling.

So far there is no sign of any movement on the most important policies and Morrison’s announcement today of tax concessions for small businesses, apparently at a cost of $750mn , is only touching the edges of policy (see Morrison Announces Tax Concessions for Small Businesses). Equally, to meet his prediction that there will be an increase in jobs of 1.25 mn over the next five years (similar to Abbott’s successful prediction), appropriate policies and circumstance will need to be in place.

In today’s Herald Sun et al, Terry McCrann says “Sorry Scott and Josh, but there ain’t anything you can do to stop it. Labor is going to win the federal election. The two of you, and especially Scott, won’t do the two big things that are so critical to Australia’s future and, properly argued “axe-the-tax style”, could at least make a fight of it. That’s to slash immigration and walk away from the Fake Paris Climate Accord” ( see McCrann: Labor will Shutdown Lights/Economy)

Morrison needs to address in a substantive way the “two big things” mentioned by McCrann.

Newspoll; Chief Scientist Finkel

Des Moore — Mon, 10 Dec 2018 11:59:05 +0000

Newspoll Show No Improvement But Identifies Turnbull Problem

In yesterday’s Commentary I said that, while an early election as suggested by Terry McCrann would risk the Morrison government being portrayed as a “cut and run” attempt at winning and avoiding outstanding issues, it would have the potential to bring the Liberal party closer together and take advantage of various issues on which Morrison seems actually or potentially head of Shorten, including the now near absence of Turnbull as a policy maker. In particular, an election in March would “lock in” the likely favourable budgetary and economic forecasts in the MYEFO publication (next Monday) and prevent any significant change in the Pre-Election Economic and Fiscal Outlook (PEFO) which is made by Treasury before an election.

Today’s Newspoll shows no change in the Coalition’s Two-Party Preferred vote of 45/55 (the third time) but a slight decline in the assessment of Morrison’s own performance (higher are Less Satisfied and lower as Better PM). But the most important part of the poll is that dealing with the role of Turnbull, viz

40% of all voters assess him as DISLOYAL, with 56% of the Coalition doing so;
29% of all voters say he should be EXPELLED from the Liberal Party, with 36% of the Coalition. Interestingly, the highest proportion of those against expulsion was in Labor voters (64%). This might be taken as indicating that Labor wants to have Turnbull around as a Liberal party member.

The Australian’s political editor, Simon Benson, rightly describes Morrison as having a “titanic task” to turn the Coalition’s position around and says that Newspoll has “all but written it off” despite Morrison having delivered a “significant blow” against Shorten last week on border protection and national security. Benson does acknowledge however that the poor standing of the Coalition importantly reflects the disloyalty shown by Turnbull (see Benson on Turnbull. Note that the detail of Newspoll can be seen by clicking the sentence “mobile users click here to see PDF”which occurs after the Newspoll heading).

In previous Commentary I have argued that, since becoming PM in a party room vote, Morrison has been too slow in distancing himself from Turnbull. Now, with the Newspoll showing a majority of the Coalition assessing Turnbull as disloyal, it would be timely to make a statement which, in effect, says that the policies stated by Morrison are what the Coalition is now pursuing and, at the same time, provide a list of them.

This list would need to include as part of energy policy that it will aim to produce a major reduction in electricity prices: an emphasis on such a reduction could be an election winner if properly explained. It would also need to indicate that the idea of legislating to provide authority for directing electricity producers to set prices will be abandoned (if an early election was to be held there would of course be no opportunity to legislate). In addition, part of energy policy would be to indicate that the emissions reduction target set by Turnbull in Paris would be lowered to bring it more into line with what other countries are doing, viz lower than promised in Paris.

Bolt v Finkel

In an unusual step Chief Scientist Finkel, who was appointed by Turnbull, has accused leading journalist Andrew Bolt of wrongly interpreting his view on climate change. This was done by sending letters to various newspapers referring to opinion pieces by Andrew Bolt which they published and which “included a reference to me ‘admitting’ that we “could stop all Australia’s emissions – junk every car, shut every power station, put a cork in every cow – and the effect on the climate would still be ‘virtually nothing’”. Finkel wrote that “those are Andrew Bolt’s words, not mine, and they are a complete misrepresentation of my position. They suggest that we should do nothing to reduce our carbon emissions, a stance I reject, and I wish to correct the record” (see Finkel on Andrew Bolt).

Finkel’s letter includes an acknowledgement he had previously made at a Senate hearing, and which sceptics have frequently used, that the elimination of Australia’s 1.3% of total carbon emissions would have virtually no effect on climate. But in his letter he now adds that he “immediately continued by explaining that doing nothing is not a position that we can responsibly take because emissions reductions is a little bit like voting, in that if everyone took the attitude that their vote does not count and no-one voted, we would not have a democracy. Similarly, if all countries that have comparable carbon emissions took the position that they shouldn’t take action because their contribution to this global problem is insignificant, then nobody would act and the problem would continue to grow in scale”.

Bolt has now responded in an article in today’s Herald Sun and again on Sky News. In regard to Finkel’s statement that he “rejects the notion that we should do nothing to reduce emissions” Bolt says “actually, nowhere have I said or suggested that this was Finkel’s stance, even though it clearly should be. It is my stance. So there is nothing in my article to “correct”.

In regard to Finkel’s addition in the paragraph above, Bolt rightly says “Tosh”. I note that Finkel was not a climatologist: his CV says he is a neurologist, engineer, entrepreneur, philanthropist.

An Early Election?

Des Moore — Sat, 08 Dec 2018 21:47:38 +0000

An Early Election?

In Thursday’s Commentary I referred to the view of The Australian’s political editor (Dennis Shanahan) that Morrison still has a “last chance” of winning the election. In Weekend Australian Shanahan acknowledges that “the Liberal Party is in a mess” but also points out that “Labor finished the last week of parliament for the year on the back foot over national security and border protection, giving Morrison a reprieve from the dismal Liberal outlook. The Prime Minister was able to declare there would be a budget surplus next year, he changed Liberal leadership rules, intervened to stop a preselection brawl, asserted his authority over Turnbull and avoided an embarrassing defeat on the floor of parliament” (see Shanahan Says Morrison Has a Reprieve).

It is pertinent that Shorten has a three day national conference starting on 16 December for which he has already conceded a chink in border protection policy by supporting watered-down immigration rules that would hand doctors the power to relocate “medically-needy” (sic) refugees to Australia (see Benson on Labor’s Softening of Border Policy). He may be under pressure at that conference to make some further softening from the left in Labor.

Given that Morrison played a leading role in “stopping the boats” when working as a minister under the Abbott government, any such softenings provide Morrison with an opportunity to further attack Shorten and, more generally, to emphasise the risk of a Labor government. Interestingly, the Italian government has announced that Italy will not sign the UN’s Global Compact on Migration (the Morrison government has also refused to sign) and the Italian Parliament has approved (396 to 99) what is described as a tough new immigration and security law that will make it easier to deport migrants who commit crimes and strip those convicted of terrorism of their Italian citizenship. Morrison has already seen the “attack Shorten opportunity” in an article published in Friday’s OZ in which he accuses Shorten of “incrementally dismantling the government’s successful border protection policies”.

Also pertinent is Labor’s climate change policy of a 45% reduction in emissions and 50% increase in renewable by 2030. This provides a basis for Morrison to attack its much higher economic cost (including higher electricity prices) than the Coalition’s policy adopted under Turnbull, which provides for a 26-28% reduction in emissions by 2030 and a 23.5% increase in renewable by 2020.The Coalition has also dropped the (unworkable) NEG “formula” approved under Turnbull and which Labor has now indicated that it may use.

Further, now that Turnbull seems to have lost his position as a self-appointed adviser, there should be scope to reduce Coalition targets on the basis, first, that Labor has energy policies which are highly damaging economically and will cause higher electricity prices, second, that it has reviewed policies made while Turnbull was PM and will make adjustments which bring Australia’s policies more in line with those being pursued by other countries and, third, that the emissions targets set in Paris in 2015 do not seem to be being followed. In fact the estimate for 2018 shows an increase of 2.7% in world emissions and initial reports from the current IPCC conference being held in Poland suggest that China and India are seeking to exempt themselves from making reports on what their emissions actually are.

In his article in Weekend Australian Chris Kenny points out that the protesters openly calling for action to reduce emissions fail to recognise the extent of action which has actually been taken by Australia and “which has elevated our energy costs and contributed to job losses and economic dislocation, and delivered no environmental benefit because global emissions continue to rise substantially”. He rightly points out that “when students call for ‘action’ they mean they want additional action: on top of the Kyoto targets, Paris commitments, the renewable energy target, solar subsidies, battery subsidies, light globe laws, renewable energy grants, Snowy Hydro 2.0 and direction action projects. When they protest in the streets their teachers, parents and many politicians cheer them rather than inform them”.

The publication by the Morrison government of an assessment showing that Australia has already taken much more action than almost all other countries would help justify adjustments to existing policies and at the same time put the Coalition in a position where it could point out that Labor’s policy would further widen the economic cost compared with other countries and would significantly reduce Australia’s international competitiveness. Kenny notes that, ”in interviews this week, I asked a protester’s parent and Richard Denniss of green-left think tank the Australia Institute if they could name a country that was doing more on climate action at greater economic cost than Australia. Neither gave me an answer”.

Apart from the foregoing differences with Labor, Morrison also has scope to point to the improvement in the federal government’s budgetary position which will be published in the normal Mid-Year Economic and Fiscal Outlook sometime this month and which Treasurer Frydenberg has already indicated will (at last) show a surplus, possibly this financial year. It will also doubtless include a (justifiable) claim that Australia is performing better economically than other OECD countries. Labor will find it difficult to counter these claims, particularly as it has already indicated that if elected it will increase taxes by lifting the marginal tax rate from 47 to 49 per cent, ceasing negative gearing provisions and not reducing taxes on “big businesses”.

The foregoing has led Terry McCrann to suggest that an earlier election than May would be justified. An election in March would “lock in” the favourable budgetary and economic forecasts in the MYEFO publication and prevent any significant change in the Pre-Election Economic and Fiscal Outlook (PEFO) which would be made by Treasury before the election (see McCrann Suggests Early Election). By contrast, a May election could suffer from any slow-down in the economic/budgetary outlook, which many forecasters are predicting following the “weak” economic figures just published for the September quarter.

An early election would run the risk that the Morrison government would be portrayed as a “cut and run” attempt at winning and avoiding outstanding issues. But it would have the potential of bringing the Liberal party closer together as well as taking advantage of the issues mentioned above on which Morrison seems to be ahead of Shorten, including of course the absence or near absence of Turnbull as a policy maker. If Morrison can perform as well as he did in the last week of Parliament, an early election could prove a last chance winner.

Morrison’s Poor Attempts at Compromise

Des Moore — Thu, 25 Oct 2018 10:45:17 +0000

If you are going to “do a deal”, and start from a weak position, you will doubtless have to compromise. But not so that you undermine the essentials of your position. But that is what Morrison is in fact doing with his energy policy: he says that his prime aim is to reduce power prices but at the same time he sticks to the emissions reduction policies and does nothing to reduce subsidies for renewable. This is a contradiction and lower power prices will not be achieved in any degree if the joint energy policy statement by Taylor, Morrison and Frydenberg is realised.

Morrison has also made the astonishing decision to send Turnbull to a UN Bali conference which will be attempting to agree on climate change policies which would (somehow, but nobody knows how in fact) protect the oceans. This decision further undermines confidence in the capacity of the Morrison team, which has ministers who could have gone. Some such conferences are even attended by the local ambassador and it is unbelievable that Morrison implied that only Turnbull had to replace him because of his other (undisclosed) commitments.

Andrew Bolt and Terry McCrann have shown how absurd the current attempt is at compromising. Bolt’s analysis is below and McCrann’s is attached in McCrann on Morrison.

Andrew Bolt: Turnbull no good for ScoMo and must be dumped

POOR Scott Morrison is in an abusive relationship and can’t get out. Memo to the Prime Minister: dump him. Don’t send Malcolm Turnbull to Bali. Turnbull is no good for you. You keep giving in to him but he’ll keep slapping you around.

So here’s where you make a stand: tell that bully he’s out. You’re not sending him as your representative to next week’s Ocean Conference in Bali after all.

It is astonishing that Morrison does not see how stupid it is to send Turnbull to a conference where organisers say “participants are encouraged to announce their commitments …. to preserve the oceans’ health” from threats including “climate change-related impacts”.

Really? What a dumb decision from the get-go. After all, Morrison has been trying to convince voters he’s actually keener on cutting their power prices than on cutting global-warming emissions, which was Turnbull’s obsession. He’s boasted how he won’t send another dollar to the United Nations’ Green Climate Fund, to which the Liberals handed $200 million. So how does it help the Morrison Government to now send a red-hot, global-warming believer like Turnbull to a conference demanding more action on global warming?

It can only make Morrison seem a flake or a fraud. If he really needs to send an ex-prime minister to Bali, he should send climate sceptic Tony Abbott, instead. That would send a more accurate or consistent message.

But I get it. Morrison was desperate to keep Turnbull sweet after he was dumped as prime minister two months ago. He didn’t want Turnbull lashing out in his famous fury, leak damaging secrets or wrecking the Liberals’ recovery — just like Turnbull ratted out late billionaire Kerry Packer to the Australian Broadcasting Tribunal when they fell out over their bid to buy the Fairfax newspapers. Scott Morrison should send climate sceptic Tony Abbott to Bali instead, to send a more accurate or consistent message.

So Morrison gave Turnbull this Bali trip as a sop to his wounded pride. He also guaranteed him a travel fund and, at every stage, insisted on praising Turnbull rather than burying him. But with every gift, how did Turnbull reward him? With a slap in the face.

Turnbull quit parliament, forcing a totally unnecessary by-election in his seat of Wentworth that would cost the government its one-seat majority. Turnbull also pointedly rejected urgent appeals to help Liberal candidate Dave Sharma, who lost narrowly.

Meanwhile, Turnbull surrogates and relatives urged voters to reject the Liberals and made fake claims of Liberal MPs bullying women. Someone also leaked Cabinet secrets to rob Morrison of credit for government announcements.

It was pathetic. And it was war. How much more evidence does Morrison need that Turnbull has a deep need for the Liberals to fail, to prove to himself that they were wrong to sack him? Turnbull will keep abusing the Liberals, perhaps for the rest of his life, so for Morrison to keep trying to placate the implacable makes him seem a poor judge of character.

But, worse, it makes Morrison look weak, and in every which way. Here is Morrison rewarding a man who sabotaged his campaign to save Wentworth. That’s weak.

Here is Morrison even now making Turnbull look needed, as if sacking him really was an awful mistake by a party which can’t now survive without him.

That’s weak, too. How does it help the Morrison Government to now send a red-hot, global-warming believer like Turnbull to a conference demanding more action on global warming?

Morrison is also presenting Turnbull as the best person he could find — better than himself, his Foreign Minister or his Environment Minister — to represent Australia in Indonesia. That makes his whole government look weak. What’s more, Morrison is giving a platform to a former prime minister who now wants the Liberals dead. That doesn’t just make the Liberals look weak, but makes them so.

And Morrison is using Turnbull to promote exactly the global- warming issue that Labor, the Greens and the ABC will use to smash the Liberals at the next election. That weakens the Liberals even more. Morrison needs to show some strength and independence from the ghost he’s invited on to his table.

So ring Turnbull, Prime Minister. Tell him he is a backstabber. Tell him he’s neither wanted nor needed. Tell him there are plenty of people in the government who could represent Australia better.

Dump him. No Bali for him. Of course, you risk having Turnbull’s dwindling bunch of mates in the government — people like the ineffable Craig Laundy, say — then going the full jihad on their own side.

That would weaken the government, too. But in this battle of the weak, wouldn’t it be good not to seem weak yourself?

I have succeeded in having a letter published in today’s Australian, albeit with a chunk deleted (see text below). The Australian also ran other letters (see OZ Letters) which are sympathetic to the sceptic view as reflected in an article by Senator Williams published in The Australian pointing out the large number of, but still increasing, coal-fired power stations in overseas countries. The Australian, which has a new editor, also published a rather “mixed” article on attitudes to climate change within the Coalition and to the meeting being arranged by Energy Minister Taylor with State counterparts tomorrow (see Morrison “Selling” Energy Policy).

I have been unable to download today’s AFR’s lead article headed “Labor rejects big stick on energy”, but which implies that Labor will generally support what would amount to the de facto nationalisation of the electricity industry by Morrison, assuming his policy is fulfilled.

Closing off coal would result in self-inflicted wounds

Letter by Des Moore Published in The Australian, 25 October 2018 (Bits in square brackets deleted by Ed).

You report that [, following its electoral defeat at the Wentworth by-election,] the Morrison government will set a price benchmark for power bills from next July. This is on the advice of Chief Scientist Finkel [appointed by Malcolm Turnbull] that the government should do more on climate change because it is an issue of concern to “everyday voters”, despite Finkel’s acknowledgement that the reduction in emissions by Australia is having no effect on the climate.

Perhaps Morrison’s decision also reflects the view of the Wentworth winner, Dr Phelps, that the government has lurched “too far to the right”. Instead the Morrison government will take its first step towards a socialist economy under which governments controls electricity prices.

[Will the next step be to adopt Dr Phelps objective of having 100 percent renewable? As Alan Jones suggested on 2gb this morning, perhaps Morrison could experiment with electricity fuelled by100 percent renewable in Wentworth, with numerous wind farms along its coastline.]

Waiting for Godot?

Des Moore — Wed, 29 Aug 2018 22:08:07 +0000

Waiting for Godot?

My Commentary on 27/8 was headed “Better Than Turnbull, but …”. This qualification reflected my concern about Morrison’s decisions on the composition of Cabinet but also about the fall in the Coalition’s 44/56 TPP in the Newspoll. This suggested that he would be unlikely to be given a honeymoon and would need to get going if the Coalition is to “sell” policies which would be accepted at the next year’s election.

I followed that by sending a letter yesterday to The Australian suggesting that a statement on energy policy was urgently needed. That was not published and, although I did send it to some, I now repeat it to my full distribution list, viz

“The sacking of Malcolm Turnbull for the second time primarily because of his climate change policy must surely send a message to the Morrison government, viz most Liberal MPs reject action to reduce carbon emissions which result in higher electricity prices and reduce Australia’s competitiveness. Scott Morrison himself is reported as declining to acknowledge human induced climate change exists and has appointed an energy minister (Angus Taylor) who is reportedly sceptical about the thesis of dangerous global warming.

But what is urgently needed is a statement of policy based on Australia not leading the way in the Paris accord but giving priority to the avoidance of action which has adverse effects on our economy, as many other countries are doing. It should also indicate that the latest expert analysis here in Australia suggests that the moderate warming in temperatures is due more to natural causes than to emissions of fossil fuels. As former supervisor of the Bureau of Meteorology (William Kininmonth) concluded in yesterday’s Quadrant , “the Paris Agreement has been negotiated from faulty premises”.

Although Morrison has succeeded in getting publicity for having told new energy minister Angus Taylor that his prime task would be to reduce electricity prices, no indication has been given as to how this might be achieved and to what extent. It is relevant that earlier tonight on Sky News Andrew Bolt pointed out that it is important to make a policies announcement asap.

Also relevant to Morrison’s apparent reluctance to make such an announcement at least in general terms is the attached article by The Australian’s National Editor Simon Benson. He suggests that the composition of the Cabinet “reveals an underlying and inherited structural weakness to Morrison’s leadership” and that this “renders it potentially unstable” (see Benson on Control by Moderates).

In similar vein, Terry McCrann argues that in regard to the banks Morrison has “to deal with them in super-quick time; going to the election with a “trust us, we’ll make the banks behave, some time in the future, if we get re-elected”, just won’t do. It would also look a — potentially, very big — gift horse in the mouth. He needs to see the bad behaviour of the banks exposed by the RC not as a problem but as an opportunity; a huge opportunity on so many levels (see McCrann on Banks et al).

It is too late now to change the composition of Cabinet. Morrison will have to involve himself more closely with those portfolios where there are “structural weaknesses”. The need to get cracking is reinforced by the announcement by Julie Bishop that she will stay in Parliament and by Julia Banks (a Victorian MP who was a Turnbull strong supporter) announcing that she will not contest the seat she holds at the next election.

Already we see a fragility in Morrison’s unexpected win as PM. This may be able to be reduced by effecting a policies announcement.

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.