Slow Motion Disintegration
A Labour administration in Australia knows its in serious trouble when cheerleading media such as the Sydney Morning Herald give up on the government. Paul Sheehan is a columnist and editorial writer for the Herald. He is frustrated with Julia. Climate change legislation is looking like a deadly torpedo heading straight for Julia’s midships. It’s staggering that a minority government would have attempted such a radical and revolutionary shift in the country’s direction. For some reason, known only to her, Gillard apparently thought that the support of a few flaky independents and the Greens, forged around a commitment to tax carbon, represented a Grand Alliance. Pity she forgot about the electorate.
Labor all tied up in red and green tape
July 25, 2011
There was a moment last week, as the Prime Minister was out among the people selling her breathtaking political gamble, when a woman asked Julia Gillard what other countries were doing about reducing carbon emissions. The Prime Minister rattled off various overseas reforms. China, she said, was leading the world in building wind turbines.
Gillard delivered this with the robotic sing-song she uses when she is trying to sell something. It does her no good. Even by the low expectations of TV soundbites, her answer was an assault on honesty. The public has worked this out. The cartoon version of current politics is that the federal Labor government has sunk to an abysmal 26 per cent primary vote in opinion polls because of the unpopularity of its carbon tax. It is much deeper than that.
If this were a single-issue malaise for the government, a mere broken promise, Gillard could have worked her way out of trouble as everyone got used to a new tax regime after July 1 next year. She still may if her government survives that long. But her problem is more intrinsic and has been building for some time.
Let’s go back to the Chinese wind turbines. Yes, China is building more wind turbines than anyone else and intends to dominate the technology, and many other new energy technologies. China has become the world’s leading developer of thorium technology, touted as the next generation of nuclear power and infinitely cleaner.
Problem: China is also building coal-fired power plants on a massive scale, more than 30 a year, a program that dwarfs Australia’s entire energy sector. So talking about wind turbines in China when coal, gas and nuclear power are the main game is narrowly true but broadly nonsense.
The Prime Minister and her government have a trust problem. Even a program as low-tech as providing roof insulation turned into a costly, dysfunctional blowout in the hands of this government. Every signature reform the Rudd-Gillard governments have undertaken, from managing asylum seekers to building school halls to the National Broadband Network have seen wildly inflated costs.
Now comes the most grandiose scheme of all. Most people cannot grasp the detail of the proposed carbon tax scheme, but they can grasp the certainty that their power bills will increase by twice the rate of inflation, and sense the scale, cost and complexity of what has been proposed, and the track record of the people proposing it.
The prevailing lack of confidence goes deeper than political sentiment. It is reflected in poor consumer confidence figures and flat retail sales. This decline is more than structural or cyclical. It is social, and reflected in the small business sector, the engine room of job-creation, which is stressed.
The carbon tax will simply add another layer of cost to business and consumers. The money being pumped in from the mining boom is masking a sluggishness elsewhere in much of the economy. Gillard’s carbon tax gamble will ensure the economy is bound in green tape, in addition to existing red tape, while making almost no impact on the global environment. The workforce of the Department of Climate Change and Energy Efficiency has already grown tenfold in the past three years. It now employs more than 1000 public servants.
This is just the start. The proposed carbon tax regime requires the creation of a Clean Energy Finance Corporation, a Clean Energy Regulator, an Australian Renewable Energy Agency and a Climate Change Authority. These agencies will have billions to spend. Funding will go to new programs including the Energy Efficiency Information Grants, the Clean Technology Food and Foundries Investment Program, the Clean Technology Focus and the Clean Energy Skills Package.
These bureaucracies will be charged with transforming the energy sector. Their great challenge will be to reconcile the cost chasm. Productivity Commission figures show the cost of electricity generation last year broke down this way: coal power $79 per megawatt hour; gas $97; wind, $1502; solar $4004.
Last month the Independent Pricing and Regulatory Tribunal announced electricity prices for residential and small business customers in NSW would increase by an average 17.3 per cent from July 1, or more than three times the rate of inflation. One cause of the higher cost of electricity is government tinkering with costly alternative energy schemes. Other costs have been imposed by greater regulatory burdens, requiring expensive surplus capacity to prevent blackouts.
These higher costs flow through the rest of the economy, to basic needs. In January this column warned: ”You can expect sticker shock at some point this year, or next, when paying for the weekly food shopping. We’ve had oil shocks. Prepare for food shocks.” At the time, the global Food Price Index, formulated by the United Nations’ Food and Agriculture Organisation, was 215. Since then it has risen to 234, a 9 per cent increase in six months, and 39 per cent higher than June last year.
Ten years ago, the index stood at 92. It has risen 250 per cent in a decade. The world’s food supply is under a stress that is growing, not diminishing.
Add to this the high and unstable cost of oil, rising energy prices, and the uncertainty flow-on from massive and unsustainable debt in western Europe, the US and Japan. Then wrap it all up in green tape. It adds up to Labor’s brand of big government sliding into structural trouble.