Climate change will hurt, but we can still be the Lucky Country

What are we in for with climate change? How will it change the environment, the way we live and the way we earn our living? Is it all bad news for the economy, or is there some upside? And, by the way, how much is it costing us as taxpayers?

The previous federal government didn’t want to think about these questions, much less talk about them. You could read the budget papers each year and hardly find a mention.

But all that’s changed with the change of government. So, no surprise that last week’s budget has a lot in it about climate change.

In various parts of the budget papers, the Albanese government acknowledges that, with the globe already having warmed by an average of 1.1 degrees above pre-industrial levels, global warming will continue changing our weather (short-term changes) and climate (longer-term patterns) for the rest of this century.

It will endanger more species and reduce biodiversity. It will adversely affect human health, with more days of extreme heat leading to more deaths of old people.

The productivity of labour and the number of hours worked are expected to decline as temperatures increase, particularly for people who work outdoors in agriculture, construction and some manufacturing.

Treasury expects farming yields to decline, and I expect that, over time, the production of different crops and the grazing of animals will migrate to the parts of Australia where the climate is less unsuitable.

Speaking of migration, you’d expect our population to grow faster where it’s relatively cooler, with fewer people wanting to live where it’s even hotter than it is today.

And that’s before you get to people – refugees, even – moving between countries in response to rising sea levels. Starting, in our case, with people from the islands of the South Pacific.

Treasury says the increased frequency and severity of natural disasters will also lead to reductions in the production of goods and services through disruptions to economic activity, and to the destruction of private property and road, bridge and rail infrastructure.

It shows that the value of insurance claims has steadily increased over the past decade, with temporary peaks caused by the floods in Queensland and NSW in March 2013, Cyclone Debbie and Sydney hailstorms in March 2017, then bushfires and hailstorms in NSW and the ACT in the last quarter of 2019 and the first quarter of 2020.

So far, the greatest insurance claims – $6 billion-worth – were from the floods in south-east Queensland and NSW in the March quarter last year. Then there were (less costly) floods in NSW, Victoria and Tasmania late last year.

Treasury says our economy will be reshaped by both the physical impacts of climate change and by the efforts of the more than 150 countries that have now signed up to the target of net-zero emissions by 2050. What they do will affect us, plus what we ourselves do.

Australia is one of world’s biggest exporters of fossil fuels, so we can expect our exports of coal and gas to decline steadily over the next decade or two, as our overseas customers reduce their own greenhouse gas emissions from burning the dirty fuel they bought from us.

Of course, not all of them will have their own plentiful sources of renewable energy. They’ll have to import it from somewhere, just as they’ve had to import our fossil fuels.

Which gives us an opening. As our great apostle of smart climate change, economics Professor Ross Garnaut, was first to realise, Australia’s huge expanse, full of sun and wind, means we’ll be able to produce far more renewable energy than we need for our own use. And do it cheaply.

Gosh, what good luck we’ve got. Turns out the move to renewables will give us a “comparative advantage” in international trade we didn’t know we had. All we’ve got to do is play our cards right and get in quick before other, less well-endowed countries sign up our potential customers.

The former government wasn’t interested but, as the budget papers make clear, the Albanese government is. The “net-zero transformation”, which represents one of the most significant shifts in the industrial structure of the economy since the Industrial Revolution, “holds major opportunities for Australia, given our endowment of renewable energy sources and our large reserves of many critical minerals,” the papers say.

There is a problem, however. As yet, there isn’t an economic way to ship raw clean electricity and green hydrogen across the sea to other countries.

But this could be a good thing. We can “embed” our renewable energy in our mineral exports by further processing our iron ore into green steel, and our bauxite into green aluminium, before we export them.

Whereas in the old, fossil fuel world the further processing of our minerals before export wasn’t “economic” (profitable) – in the renewables world it could well be economic.

Get it? We could give our declining manufacturing industry a whole new lease on life. What’s more, it would make economic sense to do the further processing out in the regions, close to the solar and wind farms generating the clean electricity.

Implementing such a transformation would require huge capital investment and risk-taking, the early part of which would have to come from the government.

So, yes, climate change – both the bad bits and the good bits – will come at a great cost to the budget, and thus to taxpayers.

The budget papers reveal the Albanese government planning to spend an extra $25 billion on new climate-related programs over several years in its first budget last October, and now a further $5 billion in last week’s budget. Don’t think that will be the last of it.

So, get ready to hand over more in taxes as the government seeks both to ameliorate the costs of climate change and turn the world’s energy transformation to our advantage.

At least now we’ve got a government willing to get off its backside.

Read more >>

Climate choice: cling to past glories or strive for prosperous future

The big question facing our political leaders is: are we content to allow climate change to turn us from winners into losers, or do we have the courage and foresight to transform our mining, energy and manufacturing industries into clean energy winners?

For most rich countries, playing their part in limiting global climate change is simply about switching from fossil fuels to renewable energy. For us, however, there’s a double challenge: as one of the world’s biggest exporters of fossil fuels, what do we do for an encore?

When it comes to deciding how we can earn a decent living, economists are always telling politicians to pursue our “comparative advantage” – concentrate on doing what we’re better at than other people, and they want to buy from us; then use the proceeds to buy from them what they’re better at than we are.

Turns out our “natural endowment” makes us better at farming and mining. Climate change will be bad for farming (not that the world will stop wanting to eat), and the only future for fossil fuel exports is down and out. It may take a decade or two to reach zero, but there’ll be no growth from now on.

Most economists have little to say about what you do when your natural endowment becomes a stranded asset and our comparative advantage evaporates. Except for Professor Ross Garnaut, who was the first to realise that nature has also endowed us with a bigger share of sun and wind.

If we tried hard enough and were quick enough, we could not only produce all the renewable energy we need for our own use, but find ways to export it to less well-endowed countries, probably embodied in green steel and aluminium.

This, of course, involves innovation and risks. We’re talking about technological advances that haven’t yet been shown to work, let alone commercialised. Doing things that have never been done before.

When it comes to technology, Australia is used to following the leader, not being the leader. Until now, this has been sensible for a smaller economy like ours. But we’re facing the impending loss of our biggest export earner. If we can’t find something just as big to sell, we’ll see our standard of living rapidly declining.

The threat we face isn’t quite existential. We’ll still be alive, just a lot poorer – and kicking ourselves for not seeing it coming and doing something about it.

The solution’s in two parts. First, the federal government must make clear to the coal and gas industries, the premiers, the mining unions and the affected regions that there’ll be no further support or encouragement for anyone pretending they haven’t seen the writing on the wall. Anyone trying to stop the clock and keep living in the past.

There’ll be plenty of support and encouragement, but only for those industries, workers and regions needing help to move from the old world to the new. As part of this, the government must do what now even the UN secretary-general says every country must do: end subsidies of fossil fuels and use the money to assist the move to renewables and green production.

Help coal miners relocate or retrain – whatever. Promise that, wherever it made sense, the new renewable and green industries would be set up near the old mines.

Ideally, the policy of ending the old and moving to the new should be bipartisan. No opposition should take the low road of courting the votes of those preferring to keep their head in the sand.

But if that’s too much to ask of a two-party duopoly, Anthony Albanese and the Labor premiers should take their lives in their hands and overcome their life-long fear of what the other side will say when you put the national interest first.

Second, pick winners. Econocrats spend their lives telling governments not to do that – not to subsidise new industries you hope will become profitable.

Trouble is, politicians being politicians, you can be sure they’ll be putting taxpayers’ money on some horse in the race. And if they’re not trying to pick winners, they’ll be doing what they’re doing now: backing losers. Which would you prefer?

More importantly, it’s a neoliberal delusion that new industries just spring up as profit-seeking entrepreneurs seek new ways to make their fortunes. Doing something never done before is high risk. The chance of failure is high. Banks won’t lend to you.

We don’t stand a chance of becoming a green superpower without a lot of government underwriting with, inevitably, some big losses. But I can think of many worse ways of wasting taxpayers’ money.

Read more >>

Voters turn from the big parties, increasing political competition

John Howard is right to describe the NSW election result as a “conventional change of government”. An old and disfigured government was tossed out and the other side given a go. It’s common when a government’s been in power for a decade or more. But don’t let this convince you nothing’s changed about the way we vote.

What’s happening is that the longstanding two-party system of government is breaking down before our eyes. Years of bad behaviour by the Coalition and Labor are leading more people to vote for minor parties and independents.

This means it’s become rare for any government, state or federal, to be elected with a big majority. Majorities now tend to be narrow, and minority governments are common, particularly at state level.

The big two are always telling us a “hung parliament” would be a terrible thing, causing “chaos and confusion”. Not true. They say this because it would be a terrible thing for them, requiring them to do deals with people they hate, to get the numbers to govern.

The “crossbenchers” usually drive a hard bargain. NSW’s four-year, fixed-date elections were forced on Liberal premier Nick Greiner in 1991 by three independents. Julia Gillard’s short-lived carbon tax was forced on her by the Greens, when she fell short of a majority in 2010.

So weaker governments are bad for the major parties, but good for democracy and voters, who get more to choose from.

Why is any of this the business of an economics writer? Because the nature of competition between a few big players in a market – “oligopoly” – is a subject economists study. And two-party government has a lot in common with markets dominated by two huge companies – duopoly.

But first, a closer look at the latest election. The “landslide” to Labor is looking a fair bit less than it looked on Saturday night. Chris Minns hasn’t yet secured a majority, and if he does, it will be narrow. Why? Because so many people are voting for minor parties and independents. At this stage in the counting, 28 per cent of voters spurned the big two. This compares with almost 32 per cent at the federal election last May, where the big swing away from the Liberals gave Labor just a narrow majority.

In NSW, the Greens look to have retained their three seats in the lower house, with independents looking sure of eight seats, and probably more. One of the new independents was backed by teal money.

An American economist named Harold Hotelling is famous for talking about a beach with two ice-cream sellers. From the swimmers’ perspective, the best place for them would be one at the quarter-mark and the other at the three-quarter mark. This would minimise the distance anyone had to walk to get a cone.

But Hotelling figured that the two would end up back-to-back at the centre of the beach. Why? Because that was the way each could ensure the other got no more than half the “market share”.

The social psychologist Hugh Mackay says that the key to competition is to focus on the customer, not your competitor. That’s just what oligopolists and our political duopolists don’t do.

If there’s one thing most people don’t understand about politics it’s the way each big party obsesses about what the other side’s doing, and how it will react to what they do.

It was this that caused Anthony Albanese to go to last year’s election promising to do nothing that could offend anyone much. Promise to make needed but controversial changes and the other side launches a scare campaign. It’s only when politicians tell us how bad the other side’s policies would be that we’re tempted to believe them.

The two sides are always trying to “wedge” each other by announcing a bad but popular policy and hoping the other side will be silly enough to oppose it.

Trouble is, they rarely fall for it. They sidestep the wedge by supporting the policy. Which means both sides end up agreeing to do bad things. This is why Albanese agreed to the AUKUS pact sight unseen and, earlier, to stick with the stage three tax cut that’s biased against Labor voters.

This is where the minor parties come in, particularly those sharing the balance of power in the Senate. They can use their power to stop, or at least tone down, the bad policies the government of the day foolishly locked itself into.

Consider this. Last week Climate Change Minister Chris Bowen loudly vowed not to negotiate with the Greens over his “safeguard mechanism”. But by Monday, wiser heads had prevailed, and a deal was done, making the mechanism much more effective.

The big two each offer voters a policy package-deal not very different to the other one’s. Whichever package you pick will include policies you don’t like. But the minor party and independent “new entrants” to the political market give consumers a wider choice by forcing the big guys to “unbundle” their packages.

Sounds more like democracy’s supposed to be.

Read more >>

Labor is just pretending to be tough on climate change

Labor talks the talk, but doesn’t walk the walk. Last week’s “final warning” from the Intergovernmental Panel on Climate Change – and the Albanese government’s refusal to be moved by it – should be a game-changer in our assessment of Labor’s willingness to do what must be done.

The IPCC’s message – driven home by UN Secretary-General Antonio Guterres – was that we’re almost out of time to avoid much of the worst climate change. Whatever plans we had to reduce greenhouse gas emissions, we must step them up, and speed them up.

Regarding last year’s federal election, the message is that Labor’s plan is complacent and compromised, and the Greens and teals were right to demand much tougher, faster action.

But not only did Climate Change Minister Chris Bowen show no sign of getting the UN’s message, he announced his refusal to negotiate with the Greens to make improvements to his “safeguard mechanism” legislation.

You need to know that Albanese Labor hates the Greens more than it hates the Liberals. Bowen could have decided to use the need to win the Greens’ support for his bill in the Senate as cover for making the bill stronger than Labor promised in the election campaign.

Instead, he decided to put the interests of our grandchildren second to this fabulous chance to “wedge” the Greens. They could either vote for Labor’s bill as is, or they could join the Coalition in voting it down – just as they did when they voted down Kevin Rudd’s carbon pollution reduction scheme in 2009.

This would leave the government with no means of achieving its target of reducing emissions by 43 per cent by 2030. And, Bowen bellowed in the House, that would be all the Greens’ fault. (It doesn’t seem to have occurred to Bowen and his boss that if they go to the 2025 election having done nothing to fight climate change, blaming it all on the Greens won’t be a good enough excuse.)

But last week showed that the problem with Labor isn’t just its political cynicism and game-playing. Until last week, it was possible to see the Greens’ demand that no new coal and gas projects be approved as the kind of over the top zealotry you’d expect from those crazies. And, as it happens, the teals.

This is what Guterres said last week in welcoming the IPCC’s final warning. “The climate time-bomb is ticking.” We do have time to defuse it, “but it will take a quantum leap in climate action”.

We must “massively fast-track climate efforts by every country and every sector and on every timeframe”.

He was proposing an “acceleration agenda” with, specifically, “no new coal and the phasing out of [existing] coal by 2030 in [the rich] countries and 2040 in all other countries. Ending all international public and private funding of coal” and “ceasing all licensing or funding of new oil and gas”, as already proposed by the International Energy Agency and “stopping any expansion of existing oil and gas reserves. Shifting subsidies from fossil fuels to a just energy transition”.

That’s not some crazy greenie, that’s the UN secretary-general.

Yet, the very same week, Bowen had the temerity to claim that stopping new projects would be “irresponsible”. That’s now the opposite of the truth.

It’s not by chance that Bowen is the Minister for Climate Change and Energy. It’s not just the Coalition that’s in bed with the fossil fuel industry; Labor is too. Labor just does a better job of covering it up.

Federal Labor will not commit to stopping the proposed 116 new coal and gas projects. When Albanese went to India recently, he took fossil fuel people with him, so they could sell more coal.

The many state Labor governments are committed to approving new projects. That’s another thing that happened last week: on election night in NSW, the new state Labor minister made it clear the Minns government would not be stopping new projects.

Labor wants to be in bed both with those who want real action on climate change and the fossil fuel industries. Someone famous once said, “No one can serve two masters”. One of his saintly followers once prayed, “Lord, make me pure – but not yet”. That’s Labor.

Which brings us to the safeguard mechanism Labor is refusing to improve. Bowen has conned some conservation groups into supporting his plan because, though it’s not perfect, “something is better than nothing” and “it’s a start: get it passed, and seek to improve it later”.

Come in, sucker. What last week shows is that there isn’t time to improve it later. Labor has tried to wedge the Coalition by building its reduction scheme on the base of Tony Abbott’s safeguard mechanism, which was largely for show and did nothing to reduce emissions.

But if Labor is taking over an ineffective scheme from the secret climate change deniers, now’s the time to make it effective, not later. The fact is, the safeguard mechanism is riddled with loopholes.

The first loophole is our fossil fuel exports. Under the UN’s rules, a country is responsible for the emissions that occur on its own territory. Bowen’s renovations would, in theory, reduce the local emissions of our biggest polluting industries. It would also reduce the local emissions from any big new coal and gas export projects.

But it would permit other countries to maintain or increase their emissions from fossil fuels they bought from us. The UN will blame them for those emissions, not us. Great loophole, eh?

Trouble is, greenhouse gas is a global problem, not a local one. And we’re one of the biggest exporters of fossil fuels in the world. We export far more future emissions than we emit ourselves. So, what we do at home doesn’t add to climate change nearly as much as what others do with the coal and gas we sell them.

Bowen’s version of Abbott’s safeguard mechanism has a second major loophole. The big polluters must either progressively reduce their emissions according to the government’s phase-down, or buy the equivalent carbon credit offsets from someone else – often a farmer who’s planted more trees.

First problem is that there’ll be no limit to the extent that a polluter can resort to carbon credits. So it’s possible they’ll continue pumping out greenhouse gases, and mainly just buy credits from elsewhere.

This could lead to far more reliance on credits than the UN agreements envisaged. Credits were supposed to be used mainly by industries, such as cement and steelmaking, that find reducing emissions exceptionally difficult.

The other problem is that a lot of the carbon credit offsets are dodgy – they’re not like for like as a substitute for genuine emission reductions.

These were the main loopholes in Bowen’s rejigged safeguards mechanism that the Greens, the teals and Senator David Pocock were hoping to see improved by negotiations with Labor.

They make it debatable whether, in this case, something is better than nothing. One advantage of voting down Bowen’s bill would be to stop Labor pretending it had done something meaningful about climate change while actually prolonging the future of our fossil fuel industries.

Read more >>

Labor's new plan to reduce our emissions is riddled with loopholes

While I was on holiday, I noticed a tweet that left me in no doubt about the subject of my first column back. It said: “I genuinely think the next generation will not forgive us for what we have done to them and the world they will have to live in.”

I, too, fear they won’t. I don’t know whether our political leaders ever think such thoughts, but it fills me with dread. Maybe the pollies think what I reluctantly think: With any luck, I’ll be dead before the next generation realises the full extent of the hell our selfish short-sightedness has left them in.

But the climate seems to be deteriorating so rapidly I’m not sure I’ll get off that easily. I love my five grandkids, but I’m not looking forward to the day they’re old enough to quiz me on “what I did in the war”. What was I saying and doing while our leaders were going for decades kicking the problem down the road as the easiest way to get re-elected?

“Well, I was very busy writing about the shocking cost of living – oh, and rising interest rates.” Really? Is that the best excuse you can offer, Grandad?

We elected a bloke called Albo who promised to try a lot harder than his predecessors to reduce our emissions of greenhouse gases. He said he’d cut them by 43 per cent by 2030. He was quick to put that target into law, and his people worked through the Christmas holidays to outline the “safeguard mechanism” he’d use as his main measure to achieve the reduction.

While the rest of us were at the beach, Climate Change Minister Chris Bowen announced a few weeks ago that Australia’s 215 biggest industrial polluters – running coal mines, gas plants, smelters and steelworks – will have their emissions capped, with the caps lowered progressively by 30 per cent come 2030.

Businesses whose emissions exceed their cap will face heavy fines. To the extent they can’t use cleaner production processes to reduce their emissions, they’ll be allowed to buy “carbon credits” from other heavy polluters who’ve been able to reduce their emissions by more than required, or from farmers who’ve planted more trees.

Trouble is, it wasn’t long before the experts started pointing to all the holes in the scheme. For a start, the combined emissions of these biggest polluters account for only 28 per cent of Australia’s total emissions.

For another thing, the notion that, as well as reducing the carbon we’re adding to the atmosphere, we should find ways to remove some of the carbon that’s already there is a good one in principle, but riddled with practical problems.

Whereas the carbon we emit may stay in the atmosphere for 100 years or more, the carbon sequestered by a new tree will start returning to the atmosphere as soon as it dies or is cut down. It’s hard to measure the amount of carbon that tree-growing and other agricultural activities remove, which makes such schemes particularly easy to rort.

In his recent report into expert criticism of our carbon credits scheme, Professor Ian Chubb sat on the fence. While judging the scheme to be “well designed”, he identified various dubious practices that should be outlawed. And he stressed that big polluters must not rely on buying carbon credits to the extent that they’re able to avoid reducing their emissions in absolute terms.

A further weakness in the government’s scheme comes from its refusal to prohibit any new coal mines and gas plants, despite the International Energy Agency and other international agencies saying the world won’t have any chance of avoiding dangerous climate change if it’s relying on new gas or coal projects.

So, the scheme involves leaning on our existing 215 biggest polluters to reduce their emissions by 30 per cent, while allowing a bunch of new big emitters to set up, provided they then start cutting those emissions back.

Really? This is how we’re going to cut our total emissions by 2030? Seriously?

Last year a reader rebuked me for failing to make it clear that nothing Australia does to reduce its own emissions can, by itself, have any effect on our climate. Why not? Because climate is global, and we’re not big enough to have a significant effect on total world emissions.

The best we can do is set a good example, then pressure the bigger boys to do likewise. So far, we’ve been setting them a bad example.

It’s the global scale of the problem that makes our efforts actually to increase our exports of coal and gas so irresponsible – and, to our offspring, unforgivable. We’re the world’s third-largest exporter of fossil fuels, after Saudi Arabia and Russia.

Australia’s emissions within our borders are dwarfed by the emissions from the coal and gas we export. But never mind about that. Let’s just extract a few more shekels before the balloon goes up.

Read more >>

RBA warning: our supply-side problems have only just begun

In one of his last speeches for the year, Reserve Bank governor Dr Philip Lowe has issued a sobering warning. Even when we’ve got on top of the present inflation outbreak, the disruptions to supply we’ve struggled with this year are likely to be a recurring problem in the years ahead.

Economists think of the economy as having two sides. The supply side refers to our production of goods and services, whereas the demand side refers to our spending on those goods and services, partly for investment in new production capacity, but mainly for consumption by households.

Lowe notes that, until inflation raised its ugly head, the world had enjoyed about three decades in which there were few major “shocks” (sudden big disruptions) to the continuing production and supply of goods and services.

When something happens that disrupts supply, so that it can’t keep up with demand, prices jump – as we’ve seen this year with disruptions caused by the pandemic and its lockdowns, and with Russia’s attack on Ukraine.

What changes occurred over the three decades were mainly favourable: they involved increased supply of manufactured goods, in particular, which put gentle downward pressure on prices.

This made life easier for the world’s central banks. With the supply side behaving itself, they were able to keep their economies growing fairly steadily by using interest rates to manage demand. Put rates up to restrain spending and inflation; put rates down to encourage spending and employment.

The central banks were looking good because the one tool they have for influencing the economy – interest rates – was good for managing demand. Trouble is – and as we saw this year – managing demand is the only thing central banks and their interest rates can do.

When prices jump because of disruptions to supply, there’s nothing they can do to fix those disruptions and get supply back to keeping up with demand. All they can do is strangle demand until prices come down.

So, what’s got Lowe worried is his realisation that a lot of the problems headed our way will be shocks to supply.

“Looking forward, the supply side looks more challenging than it has been for many years” and is likely to have a bigger effect on inflation, making it jump more often.

Lowe sees four factors leading to more supply shocks. The first is “the reversal of globalisation”.

Over recent decades, international trade increased significantly relative to the size of the global economy, he says.

Production became increasingly integrated across borders, and this lowered costs and made supply very flexible. Australia was among the major beneficiaries of this.

Now, however, international trade is no longer growing faster than the global economy. “Trading blocs are emerging and there is a step back from closer integration,” he says. “Unfortunately, today barriers to trade and investment are more likely to be increased than removed.”

This will inevitably affect both the rise in standards of living and the prices of goods and services in global markets.

The second factor affecting the supply side is demographics. Until relatively recently, the working-age population of the advanced economies was steadily increasing. This was also true for China and Eastern Europe – both of which were being integrated into the global economy.

And the participation of women in the paid labour force was also rising rapidly. “The result was a substantial increase in the number of workers engaged in the global economy, and advances in technology made it easier to tap into this global labour force,” Lowe says.

So, there was a great increase in global supply. But this trend has turned and the working-age population is now declining, with the decline projected to accelerate. The proportion of the population who are either too young or too old to work is rising, meaning the supply of workers available to meet the demand for goods and services has diminished.

The third factor affecting the supply side is climate change. Over the past 20 years, the number of major floods across the world has doubled and the frequency of heatwaves and droughts has also increased.

This will keep getting worse.These extreme weather events disrupt production and so affect prices – as we know all too well in Australia. But as well as lifting fruit and vegetable prices (and meat prices after droughts break and herd rebuilding begins), extreme weather can disrupt mining production and transport and distribution.

The fourth factor affecting the supply side is related: the transition from fossil fuels to renewables. This involves junking our investment in coal mines, gas plants and power stations, and new investment in solar farms, wind farms, batteries and rooftop solar, as well as extensively rejigging the electricity network.

It’s not just that the required new capital investment will be huge, but that the transition from the old system to the new won’t happen without disruptions.

So, energy prices will be higher (to pay for the new capital investment) and more volatile when fossil-fuel supply stops before renewables supply is ready to fill the gap.

Lowe foresees the inflation rate becoming more unstable through two channels. First, shocks to supply that cause large and rapid changes in prices.

Second, the global supply curve becoming less “elastic” (less able to respond to increases in demand by quickly increasing supply) than it has been in the past decade.

Lowe says bravely that none of these developments would undermine the central banks’ ability to achieve their inflation target “on average” - that is, over a few years – though they would make the bankers’ job more complicated.

Well, maybe. As he reminds us, adverse supply shocks can have conflicting effects, increasing inflation while reducing output and employment. The Reserve can’t increase interest rates and reduce them at the same time.

As Lowe further observes, supply shocks “also have implications for other areas of economic policy”. Yes, competition policy, for instance.

My conclusion is that managing the economy can no longer be left largely to the central bankers.

Read more >>

Treasury's advice now back in favour with the government

The Coalition’s practice of sacking a bunch of government department heads whenever it gets back to office is clearly calculated to discourage bureaucrats from giving frank advice. Fortunately for us, the Albanese government is not as arrogant.

In my experience, weak managers surround themselves with yes-persons, so their brains – and, as they see it, their authority – aren’t challenged.

Strong managers want frank advice from their experts, so they’re less likely to stuff up. They’re confident of their ability to sift through conflicting advice and pick the best way forward.

This Liberal policy of frightening bureaucrats into keeping their opinions to themselves began when they returned to power in 1996 under John Howard. It was repeated when Tony Abbott got back in 2013, sacking then Treasury secretary Dr Martin Parkinson and various other Treasury-related department heads (narrowly missing Treasury’s incumbent, Dr Steven Kennedy).

Their crime, it seemed, was that they actually believed in the Rudd-Gillard government’s policy of using an emissions trading scheme to limit carbon emissions. Guilty as charged. Like almost all economists, Treasury accepted the scientists’ advice on the science, and believed the best tools for fighting climate change were economic instruments such as “putting a price on carbon”. Labor’s Department of Climate Change was staffed manly by Treasury people.

But the Libs’ peak disdain for the public service came under Scott Morrison who, upon attaining the top job, told the bureaucrats he wanted no advice from them, just diligent implementation of the policy decisions made by Cabinet.

What gave this bunch of not-so-super men (and the odd woman) the arrogance to believe they could govern wisely without the bureaucrats’ policy advice? Mainly, their ability to fall back on the small army of taxpayer-funded, but unaccountable ministerial staffers, mainly youngsters with political ambitions and the willingness to interpose themselves between the minister and the department.

These young punks, who think they outrank the most senior public servants, are generally big on politics, but weak on policy. Which, you’d have to say, was the Coalition cabinet’s “revealed preference”.

The apotheosis of this decadence was revealed in evidence to the robo-debt royal commission last week. Advice sought from an outside law firm, which found that the government’s cost-cutting scheme was unlawful, was paid for but not passed up the line to the minister – presumably because the bureaucrats judged it would not be welcome.

But in a little-noticed part of a recent speech by Treasurer Jim Chalmers, he left no doubt that, under Labor, Treasury’s advice would be sought, and used to improve the government’s decisions. What’s more, Treasury’s ability to convey its views to the public would be enhanced.

Chalmers noted that, even after the government had dealt with the inflation challenge, “we will have to manage a budget weighed down by persistent structural spending pressures”. Doing this required new thinking and deeper thinking, he said.

“It requires us rebuilding the evidence base for policymaking. Because, to get better, more-forward-looking economic policies, we need better, more-forward-looking policy foundations.”

Chalmers revealed six ways in which he will be “rebuilding the evidence base for policymaking”. One was “putting Treasury back at the centre of climate modelling again”, to build on “the new approach to climate risks, costs and opportunities” revealed in last month’s budget papers.

Second, Treasury’s annual statement on “tax expenditures” would be made “more accessible, more useful analysis of what tax concessions are costing the budget” and their effect on the distribution of income between high and low earners.

Economists have long believed that such “tax expenditures” are equivalent to actual government spending in their effect on the budget balance, and should be subject to just as much critical reassessment as actual spending.

But the Libs didn’t agree. Since taxes are evil, anything you do to reduce them must be a good thing, even if the concessions go to some (usually higher-earning) taxpayers and not others. They sought to play down the tax expenditure statement – which hugely annoys the interest groups receiving concessions on such things as superannuation savings, and the 50 per cent discount on taxing capital gains – by renaming it the “tax benchmark and variations statement”. Not anymore.

The third, even more significant change will be the appointment of an “evaluator-general” to regularly and publicly examine the effectiveness of government spending programs. Many programs don’t do much to achieve their stated objectives, but ministers and their department heads are notoriously reluctant to have them rigorously examined, for fear of embarrassment.

But, as first proposed by economist Dr Nicholas Gruen, such a person and their agency would have similar powers and independence to those of the much-feared Auditor-General. This should work, provided governments couldn’t do what Morrison did to the Auditor-General: cut his funding.

The appointment of an evaluator-general is official Labor policy, and has been championed by the assistant assistant treasurer, Dr Andrew Leigh, whose outstanding economic expertise is negated by his failure to align with any Labor faction.

No doubt Leigh will be keen for the evaluator to make use of the latest in evidence-based decision-making, randomised controlled trials.

The point is that one thing Treasury (and the Finance department) should be hugely knowledgeable about – but aren’t – is what policies work, and what policies don’t. An evaluator-general will fill this vacuum.

Fourth, Treasury will work with Finance Minister and Minister for Women Katy Gallagher to “ensure gender considerations are at the core of our work”, building on last month’s “gender-responsive budgeting”.

Fifth, Treasury will produce Australia’s first “national wellbeing statement” next year, which will be “a hard-headed way to gauge progress by recognising that a robust and resilient economy relies on robust and resilient people and communities”.

And finally, Chalmers will step up production of the Intergenerational Report from five-yearly to three-yearly, in the middle year of each parliamentary term. He promises the document will be “depoliticised”.

It’s true that former treasurer Joe Hockey trashed this exercise by turning it into a blatant attack on his Labor predecessors. It was hard to take subsequent reports seriously, especially when they imposed an artificial cap on tax collections over the next 40 years, while letting government spending run wild.

We need the report to be a much more balanced assessment of future budgetary challenges, not just a Treasury tract on the supposed evils of runaway government spending. We need more acknowledgement of the possible effects of climate change on the budget over the next 40 years – a start to which was made in last month’s budget.

And it would be nice if the report lived up to its name by having much more to say about intergenerational equity issues and trends, such as the effect of ever-rising house prices, and the longer-term consequences of the way the Howard government kept stacking the odds in favour of the old at the expense of the young, particularly favouring the self-proclaimed “self-funded retirees” (who never mention the huge superannuation tax concessions they’ve been given, nor that many of them also get a part-pension).

So, well done, Jim. With better advice and a better “evidence base”, now all Labor needs is the courage to stand up to a few powerful interest groups, including those industries that get the relevant union to plead their case in the new-look Canberra.

Read more >>

A damaged environment leads to an unlivable economy

Economists are paid to worry about the economy, which they usually define fairly narrowly. And, like all specialists, they tend to overemphasise what they know so much about and underrate everything else.

Karl Marx usually gets the credit for saying that, in the economy, “everything’s connected to everything else”. The most conservative economist would agree. The economy is circular because what’s an expense to you, is income to me.

But what applies inside the economy applies equally outside it. Everything inside what we call the economy is connected to everything outside it. What is outside it? The rest of the world – the natural world.

The “economy” sits inside what we call “the environment”. Without the environment, there wouldn’t be an economy. Humans wouldn’t be here, and we wouldn’t need one.

When you step back from our daily preoccupations – at the minute, inflation and interest rates – the bigger picture reveals that economic activity – producing and consuming goods and services – mainly involves doing things to the natural environment: we clear the forest to grow food, scar the countryside to mine minerals, which we manufacture into a thousand kinds of machines.

As we get more prosperous, the population grows, our towns and cities get bigger and we clear more forest to build more houses, roads, highways and bridges. We pull more fish from the sea. We move around a lot. And we power it all by digging up fossil fuels and burning them.

As the population’s grown, but more particularly as consumption per person has multiplied, we’ve done more and more damage to the environment.

But here’s the trick: we’ve hit the environment so hard, it’s started punching back.

That’s why the most important economic event of recent times is not the latest rise in interest rates, it’s last month’s State of the Environment report – whose release was delayed until we found a government with the courage to break the bad news.

The report’s significance is not only its rollcall of how much damage we’ve done so far, but its account of the way that damage is damaging the humans who’ve done it.

We’ve been damaging the environment in many ways – loss of habitat and species, introduction of invasive animals and plants, pollution and waste disposal, salinity and other damage to soil and waterways, overfishing – but the greatest single source of damage, of course, is climate change.

The five-yearly report brings the bad news that climate change is compounding all the other problems. And whereas previous reports warned of future damage from climate change, this one shows it’s already happening – and getting worse.

It documents the extreme floods, droughts, heatwaves, storms and bushfires that have occurred across Australia in the past five years. The immediate effects have been millions of animals killed and habitats burnt, enormous areas of reef bleached, and people’s livelihoods and homes lost.

But there are many longer-term effects still to play out. Extreme conditions put immense stress on species already threatened by habitat loss and invasive species. An extreme heatwave in 2018, for example, killed 23,000 spectacled flying foxes, making them an endangered species.

Many of our ecosystems have evolved to rebound from bushfires. But now that the fires are coming more often and are more intense, the bush doesn’t have enough time to recover, which scientists expect will make it weedy – only those species that live fast and reproduce quickly will thrive.

But enough about plants and animals, what about us? While cyclones, floods and bushfires directly destroy our homes and landscapes, Professor Emma Johnston, of Sydney University, an author of the report, writes that heatwaves kill more people in Australia than any other extreme event.

Heatwave intensity has increased by a third over the past two decades. And climate change worsens air quality through dust, smoke and emissions. The Black Summer of 2019-20 exposed more than 80 per cent of our population to smoke, killing about 420 people.

As Liz Hanna and Mark Howden, of the Australian National University, remind us, clean air is just one of the “ecosystem services” the environment provides to you and me in the economy. Another is clean food. A lot of our recent complaints about the cost of living – the high cost of meat and vegetables, the mythical $10 iceberg lettuce – come from the delayed effect of the drought and the recent effect of the floods.

Yet another service is clean water. But many country towns had to truck in water during the last drought. Land clearing affects water quality. Run-off from agriculture damages water ecosystems and encourages algal bloom and species loss. More than 4 million people depend on the Murray-Darling rivers for their water, but the catchments are rated as poor or very poor.

Finally, the report reminds us that contact with (healthy) nature is associated with mental health benefits, promotes physical activity and contributes to overall wellbeing. Biodiversity and green and blue spaces in cities are linked to stress reduction and mood improvement, increased respiratory health, and lower rates of depression and blood pressure. Enjoy ’em while they last.

Read more >>

Maybe Left versus Right is turning into smart versus not-so

Here’s a funny thing to think about on a holiday Monday: what if all the well-educated people voted Labor and the lowly-educated voted Liberal or National? How would that change our politics? A preposterous notion? Not as much as you may think.

As I’ve mentioned once or twice before, the great political stereotype is that the Liberals are the party of the bosses, while Labor, with its link to the union movement, is the party of the workers. So the people who own and manage the country vote Liberal, whereas the people who do as they’re told vote Labor.

This is the basis for the Liberals' instinctive confidence that they’re the natural party of government. Such belief is reinforced by their having spent far more of the past 75 years in office than their opponent has.

The better-situated, better-off suburbs in any city tend to vote Liberal, while the inner and outer, less-desirable suburbs vote Labor. Most people living in country areas and voting for the Nationals tend to be on modest incomes, similar to the stereotypical Labor voter.

The owners and managers tend to be pretty happy with the world as it is, whereas those further down the pecking order, with less wealth and less income, can always think of things they’d like to see changed. The Liberals defend the status quo, while Labor is the party of “reform”.

This is the basis for the standard perception of politics as a conflict between the privileged Right and the discontented Left.

But what if this conventional setup was changing - being undermined – before our eyes? We all know that strange things happened in last month’s federal election. As usual, we’ve tried to understand these from the top down. How the parties’ share of the national vote changed, then looking by state and even at the 151 electorates.

But Luke Metcalfe, founder of the property and data analytics consultancy, Microburbs, (and, as it happens, a nephew of mine), has done a bottom-up, more “granular” analysis.

He’s taken the Australian Electoral Commission’s voting figures by polling booth and matched them with all the detailed demographic information for corresponding small statistical areas in the 2016 census. They’re not a perfect fit, but they’re a good guide.

Metcalfe finds that “we’re seeing a continuation of the trend in the [2019] federal election, where the Coalition’s support base is shifting towards poorer, less-skilled, less-educated people born in Australia”.

When Labor lost in 2019, many people noticed the swing against Labor in regional mining seats in the NSW Hunter Valley and Central Queensland. What few noticed was the swing to Labor in many safe Liberal seats.

This time, Metcalfe says, rich, educated professionals swung 11 to 12 per cent against the Coalition, while the country’s working poor - the fifth of polling booths paying the lowest rent, earning the lowest incomes and with the least skills - swung only 3 to 4 per cent against it.

As we know, much of this shift away from the Liberals came via the teal independents in Liberal heartland seats in Melbourne, Sydney and Perth. The teal seats’ most dominant characteristic was their high levels of “educational attainment”.

Unsurprisingly, income and education are highly correlated. But Metcalfe says it’s education, not income, that’s doing the driving.

Many people think they’ve detected in recent election results a growing divide between city and country in Australia, but also in Britain and America. But maybe it’s more about the better-educated concentrating in the big cities – where the best-paying jobs are – leaving the less well-educated in outer suburbs or back in country towns, feeling the world has changed in ways they don’t like and thinking of voting One Nation.

Some political scientists think voters in the rich economies are dividing between the globalists and the nationalists. In the same vein, David Goodhart famously explained Brexit as a battle between those who could live and work “anywhere” and those who had to live “somewhere”.

But it still gets down to education and the way ever-rising levels of educational attainment - particularly among women – are remodelling the party-political landscape.

Take climate change. The better educated you are, the more likely you are to accept the science, believe we should be acting, and not be worried about either losing your job in the mine or paying a bit more for power.

Wouldn’t it be funny if the party of the workers became the party of the well-educated, while the party of the bosses became the party of the battlers?

I can’t see that happening, it’s too incongruous. There’s no way the Coalition could get enough seats without the Liberals’ leafy heartland. But it will need radical policy change to get the well-educated back into the fold, or into bed with the Neanderthal Nationals.

Read more >>

Election: a win for the punters against the party professionals

Listening to Anthony Albanese’s victory speech on Saturday night – promising to be a better, more inclusive leader than his predecessor, to help the needy as well as the party heartland, to work hard fixing as many of our problems as humanly possible – my inner accountant came out. Yes, but how will you pay for it all?

If ever there was a case of oppositions not winning elections but governments losing them, this is it. Much more than usually, this election result was voters rejecting not so much the Liberal Party and its policies, but the party’s leader and his divisive, often disrespectful way of conducting himself and his preoccupation with clinging to a fossil-mining past rather than striving for a future as a renewable energy super-power.

What motivated all those people – particularly women – in the most prosperous parts of Sydney and Melbourne to break the habit of a lifetime and vote for a teal independent rather than the Liberal member they had no special gripe against?

It was their overwhelming desire to see and hear no more from the most un-Christlike Christian they could imagine. A bulldozer, indeed. It’s significant that the people they voted for were well-educated, successful businesswomen. Female equality was also a big motivation for the Liberal revolt.

So too, Scott Morrison’s puzzling resistance to the obvious need for a federal anti-corruption commission “with teeth”. If he had nothing to fear, what was his problem?

But it wasn’t just the teals. What about the resurgence in the Greens’ vote, and all the Liberal and Labor voters in Brisbane who switched to the Greens? It’s obvious from the two separate revolts against both major parties that the need for more urgent action against climate change was the election’s single biggest issue.

This despite the majors’ desire to avoid talking about climate change – which the media meekly accepted. It’s significant that both the Greens and the teals were promising much earlier and bigger reductions in emissions. Albanese ignores this message at his peril.

The one issue the majors were happy to debate was the cost of living. So, with the media’s willing acceptance, this became the central issue of the campaign. The great cost-of-living election, with the Reserve Bank making a guest appearance.

Really? Where’s the evidence of that being a key influence on the result? Well, I guess it’s the main reason Labor – the party promising to increase wages – did take a number of seats away from the Libs, in the way the two-party textbook says elections should work.

But we’ve yet to see whether Labor won enough of those seats to form a majority government.

The notion that minority government is a recipe for instability bordering on chaos is a self-serving lie spread by the two majors.

Look at the record – federal and state – and you find that the deals the majors have done to guarantee “confidence and supply” not only achieve stability, they allow the crossbenchers to achieve valuable reforms – often to do with transparency and accountability – that neither of the majors fancies.

With the Gillard minority government, the main gain was a tax on carbon – which, had it survived the depredations of Tony Abbott, would have left us much better-placed today.

We seem to have moved to a non-praying prime minister, but if I were Albanese I’d be praying to be left in a position where I had to let the Greens or the teals impose on me a much more adequate policy on climate change – consistent with the electorate’s now-revealed preference.

This election is no ringing endorsement of Labor, Albo and his small-target policies. The new government has won with an amazingly low primary vote. Timid Labor was not the nation’s first preference.

The election is a step-change in the public’s long-running move away from the two-party system. It was the voters’ message to the Lib-Lab duopoly: “Stuff you and your how-to-vote cards, I’m doing it my way.” If Labor thinks it’s just the Libs with a problem, it’s not thinking.

Albanese’s other problem is that his small-target strategy involved tying one hand behind his back. What he thought he had to do to win government is the opposite to what he now must do to prove himself worth re-electing.

He has inherited a big budget deficit and massive public debt, and will be under great pressure to get that deficit down.

How? He’s promised to deliver the Liberals’ hugely expensive and unfair tax cut in 2024, while promising no tax increases. By cutting spending on health, education, welfare and the NDIS? They’re the things he’s promised to spend more on.

You want to do something about unaffordable homeownership? That requires increasing the tax on home-owners and investors. Where’s Harry Houdini when you need him?

Read more >>

In this election, one critical issue stands above all others

In this campaign we face a bewildering array of problems needing attention: the punishing cost of homes, the appalling treatment of people in aged care, the high cost of childcare, the neglect of every level of our education system, the continuing destruction of our natural environment and the pressure on our hospitals, not to mention the cost of living.

But there’s one problem that’s the most threatening to life, livelihood and lifestyle, the most certain to get a lot worse, the most imminent and the most urgent.

It’s not the cost of living, nor the risk of war with the Solomons (I joke), nor even the dubious behaviour of Scott Morrison and his ministers and their refusal to establish a genuine anti-corruption commission.

I’ll give you a clue: as I write, my fifth grandchild is on the way. I find it hard to believe anyone could be so self-centred and short-sighted as to think any problem could be more important or more pressing than action to limit climate change.

But the pressing need to discover whether the contending pollies have memorised a list of facts and figures has left little time for debating such minor matters as which side has the better policy on global warming.

And, whatever I may think, it’s clear most voters don’t rate climate change that highly. Recent polling by the Australian National University’s Centre for Social Research and Method shows voters rank reducing the cost of living most highly (65 per cent), followed by fixing the aged care system (60 per cent), strengthening the economy (54 per cent), reducing health care costs (53.5 per cent) and – at last – “dealing with global climate change” (just under 53 per cent).

But I’m pleased to say – and you may be surprised to hear – that the nation’s economists are in no doubt on what matters most. Three-quarters of the 50 top economists surveyed by the Economic Society of Australia nominated “climate and the environment” as the most important issue for the election.

Professor John Quiggin, of the University of Queensland, says the key message from the latest report of the Intergovernmental Panel on Climate Change is that “if the world acts now, we can avoid the worst outcomes of climate change without any significant effect on standards of living”.

But the report said it’s “now or never” to keep global warming to 1.5 degrees. Action means cutting emissions from the use of fossil fuels rapidly and hard. “Global emissions must peak within three years to have any chance of keeping warming below 1.5 degrees,” he says.

If you wanted to pick the worst continent to live on as the climate changes, it would be Australia, according to Quiggin. We are a “poster child” for what the rest of the world will be dealing with. Not that we care.

The economic costs of the transition to renewable energy would be marginal, he says. “The required investment in clean energy would be around 2.5 per cent of gross domestic product. That’s far less than the cost of allowing global heating to continue, with costs further offset by clean energy’s zero fuel costs and lower operating costs.”

Voters complain there’s no real difference between the parties, but on climate change we’re being offered the full menu of varying strengths. Climate Analytics, a non-profit research group founded by Bill Hare, has assessed three parties’ policies, plus Zali Steggall’s climate bill, which the teal independents are supporting.

The Liberals have supported zero net emissions by 2050, but refused to increase their commitment to reduce emissions 26 or 28 per cent by 2030. This is judged to be consistent with global warming of 3 degrees, bordering on 4 degrees.

Labor’s target is emission reduction of 43 per cent by 2030. Its plan is supported by the Business Council of Australia. This is judged to be consistent with global warming of 2 degrees, which would be “very likely to destroy the Great Barrier Reef”.

Steggall’s climate bill has a target of 60 per cent reduction in emissions by 2030, which is close to, but within, the upper boundary of modelled 1.5 degrees pathways for Australia. A higher target would give a higher probability of meeting the 1.5 limit.

The Greens’ target of a 74 per cent reduction by 2030 is judged consistent with limiting warming to 1.5 degrees. Some parts of the Barrier Reef would survive. Globally, the most extreme heat events could be nearly twice as frequent as in recent decades. In Australia, an intense heat event that might have occurred once a decade in recent times could occur every five years and would be noticeably hotter. Phew.

If you’ll forgive a little colourful characterisation, the choice ranges from the Liberals’ “let’s just say we’ll do something, so we don’t offend Barnaby and his generous donors” to Labor’s “let’s do a lot more than the Libs, but go easy on coal and coalminers” to the Greens’ “let’s not muck about”.

And the many Liberal voters in the party’s leafy heartland who really do care about climate change now have a way to make their views felt.

Read more >>

Easter offers no escape from our responsibility for climate change

Easter is a good time to look up from the daily business of life – getting and spending – and think harder about what we’re doing and why we’re doing it. How grateful are we to those who make sacrifices for us, and how much of our effort goes into sacrificing for others?

For years, I’ve been proud to support Tearfund, a Christian overseas aid organisation. This year its meditations for Lent have focused on its report, They Shall Inherit the Earth: Christian attitudes to climate change.

Why should Christians be particularly concerned about climate change – or what someone in the report prefers to call “climate justice”?

One reason is that those who are and will be worst affected by climate change tend to be the poor – both those in relative poverty in our wealthy country and those in absolute poverty in less developed countries.

You don’t really understand Jesus and his teaching if you haven’t noticed his preoccupation with the poor.

But another reason is that Christians are called to be “stewards of the earth”.

Tim Healy, a lecturer at Alphacrucis College, says “our acceptance of the God-given mandate to care for the earth is an expression of obedience to Jesus’ command to ‘love our neighbours’ – not only those down the street but ‘down time’ as well.

“It’s those who live in the years beyond our own who stand to benefit the most from our faithful and responsible stewardship,” he says.

Susy Lee, an author, says she prefers the term “climate justice” because “the people most likely to be causing [climate change] are not the people most likely to suffer from it.

“The Kingdom of God has a lot to say about justice. God created the world and asked us to look after it justly.”

The report recounts the experience of Hattie Steenholdt, who was on a Scripture Union beach mission trip when bushfires raged through Mallacoota in the early hours of New Year’s Eve in 2019, and stayed around to help.

“We’re called to be stewards of the earth, and yet we live in a time and a society that puts the self first . . . so it is countercultural to go ‘hey, this is something big that’s going on and we’re all playing a part in it’.”

The Christian notion that we’re all responsible for caring for the earth doesn’t sound a million miles from the Aboriginal commitment to “country”.

Many Australian overseas aid agencies include our First Nations people among those they help. And, when it comes to climate change, our Torres Strait Islanders are (forgive the pun) in the same boat as the other South Pacific nations whose worries about climate change we’ve taken so little notice of.

Aunt Rose Elu, last year’s Queensland Senior Australian if the Year, is from Saibai, one of the seven Torres Strait Islands.

“When I was young,” the report quotes her as saying, “I remember that the sea was beautiful, crystal clear and the sea breeze would blow through the houses so beautifully.

“Recently I was home on Saibai and I was shocked by the changes I saw. I cried for my home. The sea level was higher than I have ever seen it. The walls were not working. The graves of my ancestors are being eroded. The high tide washes them away.”

Kuki Rokhum is a director of one of the local Christian organisations that Tearfund works with in India. She says “it is the poorest countries, and within them the poorest people – who have produced the lowest carbon emissions, and have the least resilience to allow them to respond – that feel most strongly the effects of climate-change related disasters, droughts, floods and extreme temperatures.

“With increased disasters there will be more climate-related displacement.”

Farmers in north-west India are already struggling because of unpredictable rainfall and extreme heat, but they know that future generations will feel the impact of a changing climate even more acutely, the report says.

For the family of 80-year-old Dhulji Meghwal, and many others, rainfall has become sporadic over the past two decades and extreme temperatures have led to dry and degraded soil.

“One bigha of land [around 0.4 acres] used to produce enough for the whole year. Now, that land will produce only enough for six months. People are falling into debt because they are purchasing seed from the market and then not getting the production they expect,” Meghwal says.

Economists eschew “anecdotal evidence” and prefer to stick to lofty concepts, backed up by copious facts and figures. Perhaps they’d be more persuasive if they got down to cases more often - as aid agencies have long understood.

Read more >>

Blaming the states for national policy failures won't wash

It seems everywhere you look you see governments failing to lead, failing to take charge, failing to be prepared for problems they should have seen coming.

Last week it was the flooding, before that, the distribution of rapid COVID testing kits and vaccines, before that, the Black Summer bushfires, and before that, soaring prices in the National Electricity Market along with the federal Coalition’s inability to agree on action to reduce greenhouse gas emissions.

The items on this seemingly disparate list have a few things in common. Most arise from the effects of climate change. All of them involve shared responsibility by the federal and state governments, with the all too familiar squabbling, duck-shoving and cost-shifting.

We’re learning hard lessons about what’s needed to get a better-functioning federation. One is that when ordinary Australians are facing dire emergencies of flood or fire or cyclone, they demand that both levels of government be on-the-job doing what needs doing.

Another lesson is that when you’ve got one federal, two territory and six state governments, one of them has to take the lead, and the one that should do so is obvious: the feds.

On climate change, it’s not just that the Morrison government has failed to do anything much to “mitigate” (reduce) our greenhouse gas emissions beyond belatedly accepting the target of somehow achieving net zero emissions by 2050.

It’s also that it has failed to lead the states in adapting to the climate change we already have and, even if we do make it to net zero on time, will get more of: worse and more frequent extreme weather events.

Why does Scott Morrison seem so bad at working on problems we can see coming, until they’ve actually arrived, and we’re in crisis? Then, when we are in crisis, he makes the excuse that it’s a “state responsibility”, which so infuriates the people left stranded by fire or flood.

I think part of the reason is his deliberate downgrading of public service advice on policy. Until recent years, it’s been a prime responsibility of department heads and their senior people to advise the minister of looming problems in their area of responsibility and to develop detailed options on how the feds – often in partnership with the states – could go about fixing the problem.

But when you tell the public servants that you want their diligent obedience, not their advice – as Morrison did – all you’re left with is advice from the growing number of ambitious young Liberal apparatchiks that populate ministers’ offices.

Plus, of course, the occasional expensive report from one of the big four accounting-turned-consulting firms, whose business model is to produce lovely reports with lots of glossy pictures, that tell the paying customer what you think they want to hear.

What they don’t want to be told is that they should get started on a response to this potential problem or that one, just in case they come to a head some time in the future. “That’s the boring stuff public servants are always banging on about, and it’s a real pain.”

“Do you know they’ve been harping on for years about being prepared for some possible pandemic? Yeah, sure. What other long-shot bet do you want me to waste money on? Talk about useless.”

The beauty of getting your advice from the young would-be-pollies in your office is that, like their masters, they’re always focused on the politics of the now. “How can we draw attention away from the latest stuff-up? How can we look like we’re responding decisively? Why don’t we rush through a law making illegal something that already is? The punters would love it.”

As soon as the election is called officially, the public service goes into “caretaker mode” and begins preparing extensive policy recommendations for the incoming government. They prepare a Blue Book to give the Coalition should it win, and a Red Book should Labor win.

The Grattan Institute, our leading independent think tank, has a tradition of preparing its own Orange Book, proposing policy priorities for whichever side wins. It includes a section on energy and climate change, one of the most important areas of shared, federal and state responsibility.

Grattan’s Tony Wood says that, one of the three things that should be done to ensure electricity plays its major role in achieving “net zero” is to “better co-ordinate state and federal government objectives in the National Electricity Market.

“Frustrated at a decade of federal ‘climate wars’, state governments are increasingly going their own way on electricity and gas [and electric vehicles],” Wood says.

That’s another lesson we need to learn: whenever the feds leave a policy vacuum, the states fill it – badly. Only leadership by the Federal government can make our ramshackle federation work.

Read more >>

The climate-change changes the politicians don't want to talk about

It’s strange to think that both sides of politics are leading us to a policy-free federal election campaign at a time when we have so many problems we should be debating. Not that the parties won’t have policies written on a bit of paper somewhere, but that they don’t want to talk about them.

Why not? Because any policy you propose can be used by your opponent to spread scare stories about your intentions. Last time, for instance, Scott Morrison used Labor’s support for electric vehicles to claim it was out to destroy the weekend.

This time, one issue neither side wants to dwell on is climate change. We have – at long last – reached bipartisan agreement on getting carbon emissions down to net zero by 2050. And on the question of how far we should have got by 2030 (yes got, not gotten; you may have reverted to English as it was spoken when the Pilgrim Fathers left England in 1620, but I haven’t), the parties are offering a genuine choice between ambitious and unambitious.

But neither side wants to talk about how we’ll get to net zero. Which leaves us in debt to a top energy expert, Tony Wood, of the independent think tank the Grattan Institute, who does want to talk about it.

Wood and his team flesh out something we know: that the main strategy is to get as much as possible of the energy we need from electricity.

“Households and business will rely on low- or zero-emissions electricity more than ever as it replaces their current use of petrol and diesel for transport and gas for cooking and heating,” he says.

Thanks to the move to renewables, emissions from the electricity sector have fallen consistently over the past five years and are expected to fall much further over this decade. But, on present policies, emissions from all other sectors – including transport, industry and agriculture – are expected to stay much the same.

To achieve net zero by 2050, demand for electricity is likely to double, at least. That means installing a lot more wind and solar (including rooftop) to meet this increased demand and to replace existing coal and gas-fired power stations as they’re retired.

As the anti-renewables crowd continually reminds us, this requires much ingenuity, effort and expense to ensure a reliable supply of power across the national electricity grid, despite the ups and downs of demand and the vagaries of wind and sun.

But it also involves a lot of investment in changing the transmission grid from one that largely moved high-voltage electricity from a handful of big power stations in the country to the big cities, to one that joins up a multitude of small commercial and household sources of solar and wind power. An increasing proportion of homes will be putting power into the grid sometimes and taking it out other times.

The Morrison government is insisting on a large and continuing role for natural gas in the electricity system. Wood is far from convinced. “The large-scale use of gas as a ‘transition fuel’ – supplying ‘base-load power’ with lower emissions than coal – does not stack up economically or environmentally,” he says.

Nearly 80 per cent of Australia’s hugely increased gas production is exported as liquefied natural gas. It’s sold at the world price, meaning “the good old days of low-priced east-coast gas are gone, making gas an increasingly expensive energy source”.

At present, gas provides about a quarter of Australia’s local energy consumption and contributes close to 20 per cent of our emissions. And whereas electricity prices have been falling, gas prices have been rising.

Gas has been declining as a share of Australia’s power supply since 2014, and this is likely to continue. “Gas will play an important backstop role in power generation when the sun isn’t shining and the wind isn’t blowing – but this role will not require large volumes of gas.”

In the home, people value being able to choose between gas and electricity for cooking and heating, but this can’t continue. They’ll save money and reduce emissions when all new houses are all-electric.

“The uncomfortable truth is that natural gas is most likely in decline in Australia, and achieving the net-zero target requires that to happen … Attempts to hold back the tide through direct market interventions, such as contemplated in [Morrison’s] National Gas Infrastructure Plan, will probably require ongoing subsidies at great expense to taxpayers.”

As for cars and other light vehicles, achieving net zero by 2050 requires all new cars to be electric or hydrogen-powered by 2035. That’s because, on average, our cars stay on the road for more than 15 years. The alternative is “costly and inefficient measures to scrap large numbers of cars in the 2030s and ’40s.”

To achieve the 2035 target, we need to do what almost every other rich country does. We need to do what the car manufacturers have asked for: set mandatory emissions standards. But neither major party is willing.

Read more >>

There are many ways to stuff up productivity

A good New Year’s resolution for readers of the business pages would be to read more widely and think more broadly, so their thinking about economic problems and their solutions doesn’t get into a rut, returning repeatedly to the same old solutions to the same problems.

No reader of these pages needs to be told that the key to higher material living standards is improved productivity – the ability to create more outputs from the same quantity of inputs of land (raw materials), labour and physical and intangible capital.

Almost continuous productivity improvement over the past two centuries is the outstanding achievement of capitalist, market economies, the proof of capitalism’s superiority as a system of organising production and consumption.

It’s what’s made us so much more prosperous than our forebears were, with much of that prosperity spilling over from the owners of capital to the middle class and people near the bottom.

But, as I’m sure you know, over the past decade or so the rate of productivity improvement in Australia and all advanced economies has slowed to a snail’s pace. Hence, all the talk about productivity and what we can do improve its rate of improvement.

So far, a decade of hand-wringing hasn’t got us anywhere. We need to think more broadly about the problem.

One new thought is to wonder if there is – or should be – more to the good life than economic growth and a higher material standard of living. If there are ways we could improve the quality of our lives even if they didn’t lead to us owning more and better toys.

A negative way to express the same thought is to wonder if being able to afford better houses and cars will be much consolation if we succeed in stuffing up our climate, with more heat waves, rainy summers, droughts, bushfires, floods, cyclones and a rising sea level.

But we’ll return to those thoughts another day, and descend now to the more prosaic. One rut we’ve got into is thinking it’s up to the government to lift our productivity by “reforming” this or that intervention in the economy.

This is model-blind thinking on the part of econocrats, hijacked by rent-seeking businesses and high income-earners wanting more power to limit the earnings of their employees and more of the tax burden shifted to other people in the name of improving “incentives”.

The same people show little interest in reforms that really would increase economic growth by increasing women’s participation in paid work, such as free childcare.

Another rut we’re in is thinking that we won’t get faster economic growth until we get back to faster productivity improvement.

This has much truth, but it misses the deeper truth that the relationship between economic growth and productivity can also run the other way: maybe we’re not getting faster productivity improvement because we’re not getting enough economic growth.

In practice, what does much to increase the productivity of labour is businesses – in mining, farming and manufacturing, but also the service industries – replacing old machines with the latest, most improved models.

But business investment has long been at historically low levels, making our weak productivity performance hardly surprising. And the dearth of new investment spending is also hardly surprising considering consumer spending has been so weak for so long.

Nor is weak consumer spending surprising when you remember how weak the growth in real wages has been. One reason wage growth has been so weak, as Reserve Bank governor Dr Philip Lowe has pointed out, is the present fashion of businesses using any and every means – legal or otherwise – to limit labour costs and so increase profits. There are other paths to profitability.

While we’re thinking unfamiliar thoughts on the possible causes of our productivity plateau, remember this one: when businesses have been investing strongly in new equipment in the past, it’s often been a time when labour costs have been rising rapidly, giving them a strong incentive to invest in labour-saving machines.

(Note, it’s precisely because this increases the productivity of labour, and thus increases real national income, that the pursuit of labour saving simply shifts the demand for labour from goods-producing industries to services-producing industries, leaving no decline in the demand for labour overall.)

Last year some economists at the International Monetary Fund wrote a blog post on yet another contributor to weak productivity improvement, which will certainly come as a surprise to “Brother Stu,” federal Education Minister Stuart Robert, who late last month sent a “letter of expectations” to the government’s Australian Research Council outlining the Morrison government’s desire to prioritise short-term research jobs that service the interests of commercial manufacturers.

It’s possible he and Scott Morrison merely wish to swing one for the Coalition’s generous business backers, but my guess is they imagined they were striking a blow for higher productivity. If so, they’ve been badly advised.

Research by the IMF economists finds that productivity improvement in the advanced economies has been declining despite steady increases in research and development, the best indicator we have on “innovation” effort, the thing so many business people give so many speeches about.

But get this: they find that what matters for economic growth is the composition of spending on R&D, with basic scientific research affecting more sectors for a longer time than applied research (commercially oriented R&D by companies).

“While applied research is important to bring innovations to market, basic research expands the knowledge base needed for breakthrough scientific progress,” they say.

“A striking example is the development of COVID-19 vaccines which, in addition to saving millions of lives, has helped bring forward the reopening of many economies . . . Like other major innovations, scientists drew on decades of accumulated knowledge in different fields to develop the mRNA vaccines.”

Which suggests the Morrison government has just jumped the wrong way in its latest intervention into the affairs of our universities. Should have done more R&D of their own before jumping.

Read more >>

Masterpiece: the spin is Morrison's plan to reach net zero is dizzying

The more our politicians are full of bulldust – known euphemistically as “spin” – the more they rely on our short attention span. They make a grand announcement that doesn’t bear close scrutiny, but the media caravan moves on before it’s had time for a closer look. Well, not this time.

I’ve been looking more closely at the Plan to achieve net zero emissions of greenhouse gases by 2050 that Scott Morrison unveiled last week, shortly before jetting off to Glasgow.

It’s full of . . . hyperbole. A masterpiece of the spin doctor’s art. A document carefully crafted to mislead.

For someone claiming to have a Plan to achieve a difficult objective over the next 29 years, it was surprising to see Morrison claiming the Plan contained no new policy measures. By implication, no additional cost to taxpayers.

That’s true – and untrue. We know, for instance, that Morrison had to promise to spend a lot of money just to get the National Party’s permission to commit to achieving net zero by 2050.

So, what policy promises did Morrison make, and how much will they cost? We weren’t told. They weren’t mentioned in the 130-page plan. We’re told we’ll be told sometime before the election.

The Plan says Morrison’s “technology investment roadmap” will “guide” more than $20 billion of government investment in low emissions technology to 2030. So, further spending of $20 billion?

If that’s what you thought, the spin merchants would be pleased. They love giving the impression we can have our cake and eat it. But no, this is not new policy. All the $20 billion has already been announced.

And much of it has already been spent. Much of it by the previous Labor government. A bit over half of it is spending by the Australian Renewable Energy Agency and the Clean Energy Finance Corporation.

These were set up by the evil Julia Gillard in 2011, in association with her job-destroying and cost-of-living killing carbon tax. Tony Abbott tried to abolish them along with the tax, but failed.

Now they’re produced as evidence of how much the Morrison government’s doing to promote new emissions-reducing technology.

The Plan claims the government’s $20 billion will “leverage” more than $80 billion from government and the private sector by 2030. (What it doesn’t mention is that Australia’s total spending on research and development has plummeted since the Coalition returned to power in 2013.)

As to whether the Plan commits the government to spending a lot more, note that the modelling showing we can get to net zero by 2050 rests on various assumptions about the success of future new technology in producing clean products at specified low costs.

For instance, clean hydrogen will be produced for under $2 a kilogram. Carbon emissions from fossil fuels will be captured and stored at a cost of less than $20 a tonne.

But these happy assumptions come with an asterisk. The asterisk leads to very fine print saying “subject to offtake agreements”.

Oh yes, what are they? The Plan doesn’t say. But they’re the government agreeing to buy loads of the clean product at a price that allows the real customers to pay a very low price. That is, it’s a massive subsidy.

How much will the government buy? At what price? Morrison couldn’t tell us if he wanted to because these deals are way off in the future – if they ever happen. They’re not a new policy to spend taxpayers’ money, they’re just an assumption the modellers needed to make - that the necessary money would be spent - to achieve their prediction that we’d get to net zero by 2050.

You’ve noticed that the Coalition which, ever since Abbott rolled Malcolm Turnbull as Liberal opposition leader in 2009, has been vigorously opposed to doing anything much to reduce emissions, has now embraced the net zero target.

But have you noticed that now he’s big on reducing emissions, Morrison is quietly rewriting history to remove any trace of that former opposition? Worse, have you noticed Morrison is now taking credit for any progress we’ve made to date?

Any progress made by the policies of his evil Labor opponents and – as with the pandemic – any progress owed to the policies of those appalling premiers?

This is why politicians have spin doctors. “Our Plan will continue the policies and initiatives that we have already put in place and that have proven to be successful, reducing emissions and energy costs,” some spinner wrote.

Next, Morrison’s claim that Australia’s on track to reduce emissions by “up to” 35 per cent by 2030, well above the government’s target of 26 to 28 per cent. Independent analysis commissioned by the Australian Conservation Foundation confirms this is quite believable.

But, apparently, it’s all the Morrison government’s doing. He speaks of “our record of reducing emissions and achieving our targets” and “our strong track record, with emissions already more than 20 per cent lower”. “We have already achieved 20 per cent,” his energy minister says.

But Bill Hare, of Climate Analytics, says the feds are doing little, but claiming credit from the hard work of the states and territories.

It was the NSW and Queensland governments that saved most of the 20 per cent by restricting land clearing. It’s the states that encouraged the record rollout of rooftop solar and large-scale renewables.

NSW, Victoria, the ACT and South Australia have strong electric vehicle policies. Meanwhile, Morrison & Co have been encouraging gas production with new subsidies – which, of course, won’t be paid for by increasing your taxes.

Spin is claiming credit for any good thing, but blaming others for anything bad. You’ve heard that the Plan “will not cost jobs, not in farming, mining or gas”.

But the actual promise says that “not one job will be lost as a result of the government’s actions or policies under the Plan”.

Get it? Jobs will be lost, but we’ve set it up so no one will be able to blame us.

Read more >>

Net zero can't be reached by magic, but we can ease the pain

Scott Morrison’s long-term plan for net zero emissions by 2050 won’t impress anyone who’s been following Australia’s long and tortuous battle over climate change. But then, it’s not intended to.

His “learning” after miraculously wining the unwinnable election in 2019 is that whatever half-truths he tells voters will be believed by enough of them. Particularly since God is on his side, not the side of those other, untruthful and ungodly people.

No, his Plan – which is not a plan to achieve net zero, just an optimistic forecast that it will be achieved – is largely a political document, intended to be sufficient to convince those voters who aren’t paying attention that he’s “doing more” to cope with climate change.

His goal is not so much to fix the climate as to neutralise it as an issue at next year’s election. Climate change is an issue that naturally favours Labor. He wants all the focus to be on two issues that naturally favour the Coalition: the economy and national security.

He was walking a tightrope last week. He had to discourage voters in Liberal heartland seats who were worried about global warming from trying to send their party a message by voting for liberal independents – as they’ve done in Tony Abbott’s former seat and, briefly, Malcolm Turnbull’s – by convincing them he was serious about reducing emissions.

At the same time, however, he needed to reassure voters in the National Party’s various Queensland coal-mining seats that he wasn’t serious.

His solution was to produce a document that says: the boffins I hired assure me we’re on track to eliminate net emissions by 2050 but, don’t worry, this will be achieved by the miracle of new technology, without anyone feeling a thing.

There’ll be no new taxes, no new regulations forcing people to do things and no new costs on households, businesses or regions. We won’t shut down coal and gas production, and no jobs will be lost.

Does it sound a bit too good to be true? Voters in the Liberal heartland tend to be well educated and well informed. I doubt it will do the trick.

As we’ve seen with the pandemic, when our federal leaders fail to lead, others feel a need to fill the vacuum. The premiers, of course, but also many people from business and the community.

The latest report from Tony Wood and colleagues at the Grattan Institute, Towards net zero: a practical plan, offers a more realistic assessment of the challenge we face, says why we must get more achieved by 2030 and proposes ways this can be done without too much pain.

Perhaps because he’s not standing for office, Wood is frank about the difficulty in getting to net zero. The scale and pace of change involved in a net-zero target are “daunting, but they are outweighed by the consequences of the alternative.

“Factors outside Australia’s control will shape the flow of capital and the demand for our exports, while climate change itself will increasingly threaten Australians’ lives and livelihoods.”

Just so. Only a fool would believe we can avoid pain by doing nothing. We can seek to delay the pain, but that would relinquish our ability to influence our future, as well as making the pain greater.

The longer we leave it to make big progress towards net zero, the more pain we ultimately suffer. But also, our failure to throw our support behind the global push for earlier progress – which is what we’re failing to do in Glasgow this week – increases the risk that the goal of limiting warming to 1.5 degrees will be exceeded by the end of this decade, making it less likely we ever get back below it.

But while it’s foolish to think we can avoid pain, we shouldn’t imagine the pain will be intolerable. And here’s the trick: provided it’s done sensibly, paying a bit more tax and putting up with a bit more regulation is actually intended to reduce the amount of pain, and share it more fairly.

Wood accepts Morrison’s figuring showing that we’re likely to exceed the 26 to 28 per cent reduction in emissions by 2030 we promised to make in 2015. But we’ll still fall short of the 45 to 50 per cent reduction we’re being asked to make and other rich countries are agreeing to.

Wood’s plan for getting up to the higher target is neither heroic nor frightening. While we wait for the technological breakthroughs Morrison’s modelling assumes will come, we should get on with applying the technology we already have.

Generate electricity almost completely from renewables, and step up the move to electric cars and vans by tightening emission standards for petrol-driven cars, giving EVs tax breaks and supporting the spread of charging stations.

This is the first step towards the new green manufacturing industries that will provide the regional jobs for miners and gas workers to move to as other countries stop buying our coal and gas.

It won’t be easy or painless, but it’s not beyond the wit of decent governments.

Read more >>

Praying for costless climate change: Lord, send down a miracle

Picture Scott Morrison kneeling by his bed, hands together, eyes closed, asking God to send him another miracle. Or maybe just giving Santa a list of all the things he’d like for Christmas.

Five things, actually. First, technology not taxes. That is, a sudden, unforced flowering of new technology that allows us to go on selling our fossil fuel to the world while – at negligible cost – the technology eliminates all our net emissions of carbon dioxide and other greenhouse gases.

Second, we reach net zero emissions by 2050 with “expanded choices, not mandates”. That is, no one should be forced to do anything. They’ll just choose to implement the new technology because it’s so wonderful.

Third, somebody somehow will “drive down the cost of a range of new energy technologies”. That is, reduce the cost of doing things without emissions so that it’s lower than the cost of doing things by, say, burning coking coal or burping methane. This, however, won’t destroy any jobs.

Fourth, we keep energy prices down with affordable and reliable power. That is, the solar and wind energy that we disparaged for many years is now cheaper than the coal-and-gas-fired power that we’re still trying to prop up, so you can thank us when electricity prices fall.

Fifth, we are accountable for progress. That is, just because we won’t show you our modelling, or tell you how much the deal with the Nationals will cost or what it’s going on, doesn’t mean we won’t tell you after the media’s lost interest.

We’re assured that Australia’s Long-term Emissions Reduction Plan will “achieve net zero emissions by 2050 in a practical, responsible way that will take advantage of new economic opportunities while continuing to serve our traditional export markets.

“This plan does not rely on taxes and it will not put industries, regions or jobs at risk. No Australian jobs will be lost as a result of the Commonwealth Government’s actions or policies under the Plan.”

As Energy Minister Angus Taylor summarised it, the plan “won’t impose new costs on households, businesses or regions.” Morrison says it will not “shut down coal and gas production”.

Other countries are pondering long and hard about how on earth they’re going to get to net zero. Until this week we had no idea either. Now, however, we have a plan that tells us how it can and will be done – at no perceptible cost to anyone or anything.

And if that isn’t hard enough to swallow, try this: the plan doesn’t involve announcing any new policy. So what’s changed since Monday? What’s different? What’s new is that Morrison now has modelling that says we’ll get to net zero with a bit to spare – without the need for any more changes.

The boffins added up the numbers and – surprise, surprise – we’re already on track to net zero. Is ScoMo lucky or what? The Americans, the Europeans, the Chinese, they’re all still struggling with it, but we’ve got it figured.

Funny thing is, it has the feel of Amateur Hour. Who wrote the report? The experts in the Energy Department? No, it was written by management consultants – McKinsey, and has all the colourful diagrams and big type and blank pages you expect from management consultants.

I hadn’t heard that McKinsey was expert on energy or climate science or technological innovation, but maybe I’m wrong.

So who did the modelling? Well, not Treasury – what would they know about modelling? We’ve been given the impression the modelling was done by McKinsey, but my guess is they contracted it out to some outfit that actually knows about modelling.

But management consultants and modellers do share a common temptation: to find out what bottom line the client’s after, and work back from that – a thought that came to me when I saw all the nice round figures in McKinsey’s lovely chart showing how net emissions in 2005 will be reduced to zero by 2050.

Reductions to date – 20 per cent (mainly from once-off land clearing restrictions in Queensland and NSW, which occurred before the 2005 starting point and the 2030 target were chosen). Next, reductions projected to arise from the government’s technology investment road map - say, 40 per cent.

Then reductions from “global technology trends” - say, 15 per cent. Reductions from “international and domestic offsets” – 10 to 20 per cent, but make it 10 per cent. Next, reductions from “further technology breakthroughs” - say, another 15 per cent.

Okay, you can stop there. We’ve made it to a neat 100 per cent. (I think I’m starting to see why Morrison isn’t keen to let the experts see the modelling.)

In a new paper from the Australia Institute, Bending the Curve, Dr Richard Denniss and colleagues assess the plausibility of the Morrison government’s belief that the course of our economy can be significantly altered without changes in policy, without the introduction of taxes and without new regulation or even legislated targets.

The authors say the plan “is based on the assumption that it is not just possible to forecast which technologies will be developed in the decades ahead, and the cost of deploying those technologies, but that such development is inevitable.

“In reality, as those who have pursued ‘carbon capture and storage’ in Australia for the last 30 years have clearly shown, it is not just possible that new technologies might be more expensive than expected, it is possible that they will fail completely to eventuate.”

The plan is just the latest iteration of “techno optimism,” albeit at the more optimistic end of the spectrum, they say.

“White it is inevitable that the cost of some existing technologies will fall rapidly, and that some new technologies will be developed, there is nothing inevitable about the timing of such improvements,” they conclude.

Morrison says his plan involves delivering net zero “the Australian way”. That bit I believe. This is the “no worries – she’ll be right, mate” way of doing it.

Read more >>