View from The Hill: Malcolm Turnbull’s home truths on the NEG help Labor in the climate wars


Michelle Grattan, University of Canberra

An Easter weekend in an election campaign might be a bit of a challenge for a pair of leaders who were atheists. But fortunately for Scott Morrison and Bill Shorten, declared believers, it wasn’t a problem.

Both attended church services during the so-called campaign cease-fire that the main parties had proclaimed for two of the four days.

Morrison on Sunday was pictured in full voice with raised arm at his Horizon Pentacostal church in The Shire, where the media were invited in. On Friday he’d been at a Maronite Catholic service in Sydney.

Sunday morning saw Shorten at an Anglican service in Brisbane, his family including mother-in-law Quentin Bryce, former governor-general.

Neither leader was hiding his light under a bushel.

Church, chocolate and penalty rates

Sunday was an opportunity to wheel out the kids, chasing Easter eggs (Shorten) or on the Rock Star ride at Sydney’s Royal Easter Show (Morrison). This was campaigning when you’re not (exactly) campaigning.

The minor players weren’t into the pretend game. For them, the relative restraint on the part of the majors presented rare opportunity. Usually Centre Alliance senator Rex Patrick would have little chance of being the feature interview on the ABC’s Insiders.

But while Friday and Sunday were lay days for the major parties Saturday was not (and Monday won’t be either).

For Labor, Easter has meshed nicely with one of the key planks of its wages policy – restoration of penalty rate cuts by the Fair Work Commission. Even on Sunday, Shorten pointedly thanked “everyone who’s working this weekend”.

It was the start of Labor’s campaign focus turning from health to wages this week, when it will cast the election as a “referendum on wages”.

Turnbull resurrects the NEG

The weekend standout, however, was the intervention of Malcolm Turnbull, who launched a series of pointed tweets about the National Energy Guarantee (NEG).

Turnbull was set off by a reference from journalist David Speers to “Malcolm Turnbull’s NEG”.

“In fact the NEG had the support of the entire Cabinet, including and especially the current PM and Treasurer. It was approved by the Party Room on several occasions”, the former prime minister tweeted.



“It had the support of the business community and energy sector in a way that no previous energy policy had. However a right wing minority in the Party Room refused to accept the majority position and threatened to cross the floor and defeat their own government”.

“That is the only reason it has been abandoned by the Government. The consequence is no integration of energy and climate policy, uncertainty continues to discourage investment with the consequence, as I have often warned, of both higher emissions and higher electricity prices.”

He wasn’t finished.



“And before anyone suggests the previous tweet is some kind of revelation – all of the economic ministers, including myself, @ScottMorrisonMP, @JoshFrydenberg spent months arguing for the NEG on the basis that it would reduce electricity prices and enable us to lower our emissions.”

And then:

“I see the @australian has already described the tweets above as attacking the Coalition. That’s rubbish. I am simply stating the truth: the NEG was designed & demonstrated to reduce electricity prices. So dumping it means prices will be higher than if it had been retained. QED”

“The @australian claims I ‘dropped the NEG’. False. When it was clear a number of LNP MPs were going to cross the floor the Cabinet resolved to not present the Bill at that time but maintain the policy as @ScottMorrisonMP, @JoshFrydenberg& I confirmed on 20 August.”



(Frydenberg, incidentally, has lost out every which way on the NEG. As energy minister he tried his hardest to get it up, only to see it fall over. Now he is subject to a big campaign against him in Kooyong on climate change, including from high-profile candidates and GetUp.)

Turnbull might justify the intervention as just reminding people of the history. But it is damaging for the government and an Easter gift for Labor – which is under pressure over how much its ambitious emissions reduction policy would cost the economy. It also feeds into Labor’s constant referencing of the coup against Turnbull.

Turnbull’s Easter tweets are a reminder

  • the Coalition sacrificed a coherent policy on energy and climate for a hotchpotch with adverse consequences for prices;

  • it dumped that policy simply because of internal bloodymindedness, and

  • the now-PM and treasurer were backers of the NEG, which had wide support from business.

Shorten has strengthened his commitment on the NEG, indicating on Saturday he’d pursue it in government even without bipartisan support.

“We’ll use some of the Turnbull, Morrison, Frydenberg architecture, and we will work with that structure,” he said.

Given the hole it has left in the government’s energy policy, pressing Morrison on the economic cost of walking away from the NEG is as legitimate as asking Shorten about the economic impact of his policy.




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The Conversation


Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Congestion-busting infrastructure plays catch-up on long-neglected needs


Phillip O’Neill, Western Sydney University

Infrastructure spending is one of the central themes of Treasurer Frydenberg’s budget speech. His headline announcement was the promise to increase the ten-year federal infrastructure spend from the A$75 billion announced last year to a target of $100 billion.

Major projects previously announced – like the Melbourne Airport rail link, Western Sydney’s north-south airport rail link and Queensland’s Bruce Highway upgrade – are affirmed. A fast rail connection from Melbourne to Geelong is added. Also added are nation-wide packages of roadworks targeted at reducing congestion and improving regional freight corridors.

So the announcements continue the infrastructure program detailed in the 2018-19 budget, as promoted regularly in the government’s expensive “Building Our Future” advertising campaign that gives prominence to the government’s ten-year “Infrastructure Pipeline”.




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Lack of transparency is an issue

It needs saying that analysts have found it difficult to verify what last year’s $75 billion promise actually involved. The claim is the subject of a major investigative paper by the Australian Parliamentary Library, with its authors observing:

The Parliamentary Library has been unable to locate any public document which provides a transparent overview of [the federal government’s] total infrastructure commitments.

One suspects that scrutiny over coming weeks of the $100 billion infrastructure spending promises will be thwarted by a repetition of this lack of transparency.

Why are infrastructure needs so great?

The national population growth story is the key framework for assessing the Coalition’s infrastructure plan. Between 1901 and 1948, the nation grew steadily, but modestly, from a population of 3.8 million to 7.7 million. Then the population surged on the back of a post-war baby boom and an expansion of immigration. The population grew by between 2.0 and 2.5 million people each decade from the 1950s through to the 2000s.

But in the last decade, the nation has added nearly 6 million people, with the east coast cities overwhelmingly hosting the increase. Urban infrastructure planning and spending have lagged. Both quality of life and economic productivity have been affected adversely as a consequence.

The infrastructure spending in this budget responds to community concerns about these declines.

We now know we failed to properly plan for and fund the surge in urban growth that has carried congestion on its back. Instead, large federal government surpluses from the 1990s were steered into debt paybacks.

The Future Fund was also created to cover public service pension liabilities. That fund is now custodian of over $150 billion worth of assets.

Dissolving pension liabilities is wise economic management. Australia’s problem is that this resolution took place at the expense of national capital works spending. Around this time, the state-owned utilities that had taken responsibility for the roll-out of post-war infrastructure – with their regular, predictable annual capital works budgets and their vast in-house planning and delivery offices – were on their last legs.

The loss of committed funding and the erosion of the utilities stalled infrastructure delivery at a time in Australian history when it was most needed. The urban infrastructure projects for coping with the acceleration of urban growth are only now coming on stream.

New funding streams have had to be found, led by a new round of state-based asset sell-offs – in New South Wales especially – and new models of private sector delivery, ownership and operation. Pretty much all new urban infrastructure projects in Australia are now some sort of private public partnership.

But, as this budget confirms, private sector involvement in infrastructure spending and delivery needs to be leveraged on the back of public funding and protected from project risk by a raft of government measures. An important risk amelioration measure involves decision-making technologies.

Here, the growing expertise within the federal government’s Infrastructure Australia unit is increasingly important. Established by the Rudd Labor government a decade ago, IA struggled for legitimacy for many years. Now we can see Infrastructure Australia’s priority lists – based on its independent assessments – dominating government budget announcements. Indeed, the government’s ten-year Infrastructure Investment Pipeline is a very close reproduction of Infrastructure Australia’s national priority listing. Which is a good thing.

Why the focus on roads?

The problem, of course, is that rather than infrastructure steering urban growth, as would have been the case had the Howard Coalition government not dramatically lowered the level of national capital works spending, infrastructure spending now chases urban growth.

Not surprisingly, the Morrison government packages a bundle of roads spending as “urban congestion” measures, acknowledging that transport planning has been inadequate.




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The concentration on roads spending also acknowledges that the millennial growth surge in our cities has been geographically perverse. Greenfields residential projects are rarely aligned to public transport systems. And jobs growth has been a mix of CBD obsession and suburban scatter.

The result is congestion of antiquated CBD-centric public transport systems and suburban journey-to-work patterns that make retrofitting of public transport an impossible task.

No doubt there will be criticism of this budget’s apparent obsession with roads spending. The unfortunate reality is that large sections of our cities are stuck with the roads-based configuration that was instilled into their DNA from the get-go. Roads – not rail – are the thoroughfares that define transport options across our new suburban areas into the future.

Getting used to road spending and having constructive things to say about road use are a major challenge.The Conversation

Phillip O’Neill, Director, Centre for Western Sydney, Western Sydney University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The government’s electricity shortlist rightly features pumped hydro (and wrongly includes coal)


Mark Diesendorf, UNSW

The federal government this week released a shortlist of 12 project proposals for “delivering reliable and affordable power” to be considered for subsidy under its Underwriting New Generation Investments program.

The shortlist features six renewable electricity pumped hydro projects, five gas projects, and one coal upgrade project, supplemented by A$10 million for a two-year feasibility study for electricity generation in Queensland, possibly including a new coal-fired power station.

The study is unnecessary, because the GenCost 2018 study by CSIRO and the Australian Energy Market Operator already provides recent cost data for new power generation in Australia. It shows that new wind and solar farms can provide the lowest-cost electricity, even when two to six hours’ worth of storage is added.

Hence there is no economic case for new coal-fired power in Australia. After a century of coal, it should not be subsidised any longer.




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State of the states

While Queensland and Victoria have state government policies to drive the rapid growth of large-scale solar and wind, New South Wales does not even have a renewable electricity target. Yet the retirement of large, old coal-fired stations is in the pipeline: Liddell, nominally 1,680 megawatts, in 2022 and Vales Point, nominally 1,320MW, possibly in the late 2020s.

Coal baron Trevor St Baker bought Vales Point from the NSW government for the token sum of A$1 million in 2015. He wants to refurbish it and run it until 2049 – and his plan has made it onto the government’s shortlist.

Given that Vales Point is now arguably a A$730 million asset, St Baker has made a huge windfall profit at the expense of NSW taxpayers, and so a government subsidy to upgrade it would be unjust.

With the price of solar and wind electricity still falling, it will soon be cheaper to replace old operating coal stations that have paid off their capital costs with new renewable electricity, including storage.

Unfortunately, the newly elected NSW Liberal-National Coalition government has no policies of substance to fill the gap left by retiring coal stations with large-scale renewable electricity. It will therefore be up to the federal government after the May election to provide reverse auctions with contracts-for-difference, matching the policies of the ACT, Victorian and Queensland governments. Also, increased funding to ARENA and the Clean Energy Finance Corporation is needed for dispatchable renewables (those that can supply power on demand) and other forms of storage.

Driving the change

The transition to renewable electricity is already well under way, as even the federal energy minister Angus Taylor admits. The low costs of solar and wind power are driving the change. To maintain reliability, dispatchable renewables (as opposed to variable sources such as solar and wind) and other forms of storage are needed in the technology mix.

Batteries excel at responding rapidly to changes in supply and demand, on timescales of tens of milliseconds to a few hours. But they would be very expensive for covering periods of several days, even at half their current price. So there is a temporary role for open-cycle gas turbines (OCGTs) to meet demand peaks of a few hours, and to fill lows of several days in wind and/or solar supply.

Small-scale pumped hydro, in which excess local renewable electricity does the pumping, has huge potential for storage over periods of several days, but takes longer to plan and build, and has higher capital cost per megawatt, compared with OCGTs.

Small-scale pumped hydro should be the top priority for the federal program. In particular, the off-river proposal by SIMEC Zen Energy, which is part of Sanjeev Gupta’s GFG Alliance, will use a depleted iron ore pit and provide cheap, reliable, low-emission electricity for both GFG’s steelworks at Whyalla and other industrial and commercial users.




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Hydro Tasmania’s proposed “Battery of the Nation” would involve building a new interconnector across the Bass Strait, together with possibly three new pumped hydro plants. It’s very expensive and is already receiving A$57 million in federal funding. Its inclusion in the shortlist is worrying because it could soak up all the program’s unspecified funding for pumped hydro.

Furthermore, the need to greatly increase Tasmania’s wind capacity to deal with droughts appears to be an optional extra, rather than an essential part of the project.

Little information is available for the other shortlisted pumped hydro projects. UPC Renewables is proposing a huge solar farm, together with pumped hydro, in the New England region of NSW. In South Australia, Sunset Power (trading as Delta Electricity, chaired by Trevor St Baker), in association with the Altura Group, is proposing an off-river pumped hydro project near Port Augusta, and Rise Renewables is proposing the Baroota pumped hydro project. BE Power Solutions, which does not have a website, is proposing pumped hydro on the Cressbrook Reservoir at Crows Nest, Queensland.

Pumping for Snowy 2.0 (which is not part of the program) will be done mostly by coal power for many years, until renewables dominate supply in NSW and Victoria. Therefore, I give low priority to this huge and expensive scheme.




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To sum up, new coal power stations and major upgrades to existing ones are both unnecessary. They are more expensive than wind and solar, even when short-term storage is added – not to mention very polluting.

A few open-cycle gas turbines may be acceptable for temporary peak supply during the transition to 100% renewable electricity. But the priority should be building pumped hydro to back up wind and solar farms. This will keep the grid reliable and stable as we do away with the old and welcome the new.The Conversation

Mark Diesendorf, Honorary Associate Professor, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

India destroys its own satellite with a test missile, still says space is for peace


Bin Li, University of Newcastle

On March 27, India announced it had successfully conducted an anti-satellite (ASAT) missile test, called “Mission Shakti”. After the United States, Russia and China, India is now the fourth country in the world to have demonstrated this capability.

The destroyed satellite was one of India’s own. But the test has caused concerns about the space debris generated, which potentially threatens the operation of functional satellites.

There are also political and legal implications. The test’s success may be a plus for Prime Minister Narendra Modi, who is now trying to win his second term in the upcoming election.




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But the test can be viewed as a loss for global security, as nations and regulatory bodies struggle to maintain a view of space as a neutral and conflict-free arena in the face of escalating technological capabilities.

According to the official press release, India destroyed its own satellite by using technology known as “kinetic kill”. This particular technology is usually termed as “hit-to-kill”.

A kinetic kill missile is not equipped with an explosive warhead. Simply put, what India did was to launch the missile, hit the target satellite and destroy it with energy purely generated by the high speed of the missile interceptor. This technology is only one of many with ASAT capabilities, and is the one used by China in its 2007 ASAT test.

Power and strength

Since the first satellite was launched in 1957 (the Soviet Union’s Sputnik), space has become – and will continue to be – a frontier where big powers enhance their presence by launching and operating their own satellites.

There are currently 1,957 satellites orbiting Earth. They provide crucial economic, civil and scientific benefits to the world, from generating income to a wide range of services such as navigation, communication, weather forecasts and disaster relief.

The tricky thing about satellites is that they can also be used for military and national security purposes, while still serving the civil end: one good example is GPS.

So it’s not surprising big powers are keen to develop their ASAT capabilities. The name of India’s test, Shakti, means “power, strength, capability” in Hindi.

Danger of space debris

A direct consequence of ASAT is that it creates space debris when the original satellite breaks apart. Space debris consists of pieces of non-functional spacecraft, and can vary in size from tiny paint flecks to an entire “dead” satellite. Space debris orbits from hundreds to thousands of kilometres above Earth.

The presence of space debris increases the likelihood of operational satellites being damaged.

Although India downplayed the potential for danger by arguing that its test was conducted in the lower atmosphere, this perhaps did not take into account the creation of pieces smaller than 5-10 cm in diameter.

In addition, given the potential self-sustaining nature of space debris, it’s possible the amount of space debris caused by India’s ASAT will actually increase due to the collision.

Aside from the quantity, the speed of space debris is another worrying factor. Space junk can travel at up to 10km per second in lower Earth orbit (where India intercepted its satellite), so even very small particles pose a realistic threat to space missions such as human spaceflight and robotic refuelling missions.

Regulatory catch-up

As we’re seeing clearly now in social media, when technology moves fast the law can struggle to keep up, and this leads to regulatory absence. This is also true of international space law.

Five fundamental global space treaties were created 35-52 years ago:

  • Outer Space Treaty (1967) – governs the activities of the states in exploration and use of outer space
  • Rescue Agreement (1968) – relates to the rescue and return of astronauts, and return of launched objects
  • Liability Convention (1972) – governs damage caused by space objects
  • Registration Convention (1967) – relates to registration of objects in space
  • Moon Agreement (1984) – governs the activities of states on the Moon and other celestial bodies.



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These were written when there were only a handful of spacefaring nations, and space technologies were not as sophisticated as they are now.

Although these treaties are binding legal documents, they leave many of today’s issues unregulated. For example, in terms of military space activities, the Outer Space Treaty only prohibits the deployment of weapons of mass destruction in space, not conventional weapons (including ballistic missiles, like the one used by India in Mission Shakti).

In addition, the treaty endorses that outer space shall be used exclusively for peaceful purposes. However, the issue is how to interpret the term “peaceful purposes”. India claimed, after its ASAT test:

we have always maintained that space must be used only for peaceful purposes.

When terms such as “peaceful” seem to be open to interpretation, it’s time to update laws and regulations that govern how we use space.

New approaches, soft laws

Several international efforts aim to address the issues posed by new scenarios in space, including the development of military space technologies.

For example, McGill University in Canada has led the MILAMOS project, with the hope of clarifying the fundamental rules applicable to the military use of outer space.




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A similar initiative, the Woomera Manual, has been undertaken by Adelaide Law School in Australia.

Though commendable, both projects will lead to publications of “soft laws”, which will have no legally binding force on governments.

The UN needs to work much harder to attend to space security issues – the Disarmament Commission and Committee on the Peaceful Uses of Outer Space can be encouraged to collaborate on the issues regarding space weapons.

It is in everyone’s best interests to keep space safe and peaceful.The Conversation

Bin Li, Lecturer, University of Newcastle

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Many professions have codes of ethics – so why not politics?



File 20190401 177190 9hb294.jpg?ixlib=rb 1.1
original.

Sidney Bloch, University of Melbourne

Al Jazeera’s explosive investigation, “How to Sell a Massacre”, exposed the One Nation party’s attempts to weaken Australia’s gun laws with pro-gun PR training and donations from the National Rifle Association.

The party joins a growing group of our politicians who have recently behaved unethically.

Already in the first weeks of 2019, a senator attended a rally of far-right extremists using A$3,000 of tax payer money; another accepted the gift of a family holiday from a travel agent with political connections; and the prime minister flew to Christmas Island at a cost of A$60,000 for a PR-laced 20 minute press conference.




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Given this dismal record, unethical conduct will likely feature again in the months ahead, and in myriad forms. It’s no wonder Australians are disillusioned with the standard of politics.

It’s time all nine of Australia’s parliaments join thousands of professional organisations and devise a common code of ethics for their members.

Past attempts to ‘clean house’ have sadly failed

Initiatives over more than half a century to manage unethical conduct in the political realm have proved ineffectual. John Howard, Kevin Rudd and Malcolm Turnbull made paltry efforts – knee jerk reactions essentially – to rein in the shabby behaviour of their own ministers, asserting only a prime minister could determine the offender’s fate. Such judgements would surely lead to arbitrary rulings and bias.

Where independent commissions against corruption have been established, defining their goals and procedures has proved problematic. With corruption and conflict of interest as their principal points of focus, a plethora of other forms of misconduct have been given short shrift.

One would imagine the threat of an enforced, humiliating resignation; the possible end of a parliamentary career; and heartbreaking effects on the offender’s family would deter politicians from behaving improperly.

Yet unethical conduct continues.

A model for a code of ethics

There is nothing new in what I am proposing. Indeed, it is rare today to encounter a professional body that has not established a set of ethical principles to guide their members.

So why should politicians, who have the most pivotal jobs in the nation, not follow suit?

One model they can draw from is the code of ethics of the Royal Australian and New Zealand College of Psychiatrists (RANZCP), with which I have been involved for 30 years.




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In 1990, our members determined a code of ethics could help instil in us a commitment to “cultivate and maintain the highest ethical standards” in our care of patients.

The resulting set of morally informed principles was devised in collaboration with college members, key stakeholders in the mental health field (advocacy organisations like SANE and MIND) and, most relevantly, people with experience of mental illness.

The 11 principles of the current code cover readily recognisable aspects of psychiatric practice, among them respecting patients’ dignity, maintaining confidentiality, providing the best attainable care, obtaining informed consent and never denigrating colleagues.

Most of the ethical challenges politicians face are also readily identifiable, falling under the rubric of always respecting their constituents and never forgetting to place the national interest ahead of their own.

And given politicians across the country grapple with similar ethical dilemmas, we can envisage a single code to serve them all.

How would a code for Australia’s politicians be devised?

Many options present themselves. One possibility that echoes the procedure followed by RANZCP would see the country’s parliamentarians setting up an independent working group charged with the task of devising an ethical code aimed at promoting their moral integrity.

The group could be chaired by an esteemed judge and comprise retired politicians, one from each state and territory and one federal. They would be highly respected for the moral integrity they exhibited during their parliamentary career. A moral philosopher and a legal scholar, both experts in the domain of professional ethics, would consult to the group.

Their initial step would be to invite submissions from all parliamentarians, past and present, relevant stakeholders and the community at large.




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Copies of an advanced draft would be distributed to all current parliamentarians, requesting feedback, substantive and stylistic.

Taking the feedback into account, representatives of each parliament would unite to review the penultimate version and submit any final suggestions.

And like RANZCP and may other organisations, it would be revised every five years. It would bear in mind new developments in ethics, relevant societal changes and how the code improved politicians’ conduct during the preceding five years.

A common criticism of codes of ethics is their lack of teeth. While the RANZCP much prefers to use its code to promote ethical behaviour and moral integrity, serious consequences for any transgressions prevail, including the radical step of expulsion from the college.

Steps would be taken to remind politicians, the very people who have had a hand in devising the code, that its principles apply directly to them and warrant their continued attention. Any ethical misconduct would be dealt with by the offender’s parliament following an agreed procedure.

On a positive note, ethical conduct would be highlighted at every opportunity.

This would include ethics workshops for newly elected MPs; an annual ethics conference for all MPs with participation from moral philosophers and international parliamentarians; and ensuring the national code is readily available online and in all nine parliaments.

Nothing to lose

I may be regarded as naive in proposing a code of ethics for all the nation’s parliamentarians.




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However, given its widespread acceptance by thousands of professional organisations universally, establishing a code for politicians devised by politicians is worth a shot. There is nothing to lose except the funds allocated to the process should it flounder.

Given so many politicians have breached moral principles over the years, at times placing our fragile democracy at risk, we need to act vigorously and without delay. Australians deserve politicians of integrity who they can trust and respect unreservedly.The Conversation

Sidney Bloch, Emeritus Professor in Psychiatry, University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.

What will the Coalition be remembered for on tax? Tinkering, blunders and lost opportunities


Robert Breunig, Crawford School of Public Policy, Australian National University and Kristen Sobeck, Crawford School of Public Policy, Australian National University

This article is part of a series examining the Coalition government’s record on key issues while in power and what Labor is promising if it wins the 2019 federal election.


Politicians often invoke the word “reform” to convey the significance, or gravitas, of a particular policy change they are proposing.

However, the tax policies implemented over the six years of the Abbott-Turnbull-Morrison government should be more aptly described as: no reform, lots of tinkering, two blunders and some lost opportunities.

To be fair to the leaders of the Coalition, both Abbott and Turnbull began their prime ministerships professing a large appetite for tax reform.

In opposition Abbott and his treasury spokesman Joe Hockey had promised a major inquiry. Hockey said it would pick up where Labor’s Henry Tax Review left off:

We thought the Henry Tax Review was going to be a proper process. Now, that has obviously been an abject failure. We’ve said – Tony Abbott announced
in Budget and reply speech – we will have a proper process for proper tax reform, and whatever comes out of that process, which will be a white paper, we will take to a subsequent election, seeking the mandate of the
Australian people – their approval.

Treasury’s Re:think tax discussion paper, which is as far as the tax white paper process got.
Source: Commonwealth Treasury

It got as far as a discussion paper, seeking submissions.

When Turnbull assumed the leadership, the draft white paper, which would have followed the discussion paper, was scuttled, and the process ended.

Tinkering…

Instead what resulted were marginal changes to personal income tax. One of the brackets was expanded and a new low and middle income tax offset was added.

Marginal changes to superannuation tax further added to the complexity of the tax system as a whole. The current superannuation system disproportionately rewards higher income earners because most contributions are taxed at the same low rate (15%) regardless of the taxpayers’ income tax rate.

The Coalition’s response was to apply a 30% tax on contributions for those earning $250,000 or more (down from the previous threshold of $300,000) and to cut the cap on concessional contributions from $30,000 ($35,000 for those aged 49 and over) to $25,000. And it capped at $1.6 million the amount that could be transferred into the “retirement phase” where fund earnings in retirement were exempt from tax.

It made the system much more complex, and it could have been done more simply, perhaps by reimposing tax on super earnings in retirement (at a low rate) or by taxing by contributions at a standard discount to taxpayers at a marginal rate, as recommended by the 2009 Henry Tax Review.

Alongside these marginal changes, there was also a failed attempt to cut the company tax rate (only the tax rates for small companies were cut) and a muddled discussion about the progressivity of the income tax system.

All in all, many a tinker, but no reform.

Blunders…

Human-induced climate change is compromising the sustainability of our planet. The only way to solve it is by changing incentives using the economic toolkit at our disposal. The Carbon Tax was a good tax. It shifted the costs of pollution onto those who created it, instead of subsidising processes that damaged the environment.

No solution to climate change is possible without corrective taxes.

At some point we’ll have to climb that mountain again, assuming the mountain is not underwater before politicians come to their senses.

The repeal of the Minerals Resource Rent Tax was also a step backwards. By taxing rents (excess profits) instead of profits, it avoided the disincentives created by traditional company taxes. And, it was a good example of the kind of taxes that could eventually replace or supplement company tax.

…and lost opportunities

Changing the GST could have ensured at least one significant contribution to overall tax reform. At 10%, the rate is relatively low by international standards and applies to a shrinking share of spending, as more and more of our money is spent in places or on goods that aren’t taxed.


Value-added (GST) tax rates in OECD and selected Asian countries.
Re:think, Treasury tax discussion paper, March 2015

These factors, combined with the fact that GST is difficult to evade and less costly to administer, suggest that broadening the base is low hanging fruit on the tax reform tree, ripe for picking.

Instead, it may as well be forbidden fruit from the Garden of Eden. We’ve gone in the wrong direction by adding even more exemptions and cutting short talk of increasing the rate.

The failed debate on company tax cuts was another missed opportunity.

What remains is a system that applies different rates to different company sizes, one of few remaining dividend imputation systems in the world, and no discussion about the sustainability of corporate income tax revenue in the future.

All up, the government’s approach over the past six years has largely been piecemeal. It also managed to dismantle two of the most significant tax reforms that could have contributed to a more sustainable tax base in the long run.

Would Labor be better?

It remains to be seen whether a Labor government will be able to achieve more. Some of the party’s proposed changes, such as the treatment of capital gains, head in the right direction, but what it is offering falls short of comprehensive reform.

At the same time, many of its proposed changes will add additional complexity, fail to account for interactions within the entire tax system and use tax exemptions to reach goals that could be better achieved with payments.

Many an international tax reform was engendered by crisis, so there’s hope, of a sort. The opportunity still remains to get in early before weaknesses inherent in the current system become grossly apparent.

What we’ve got is unfair and its complexity rewards those with the resources to pay to understand and exploit it. It is overly reliant on income and company tax in place of indirect taxes, like consumption tax, and it tries to achieve too many disparate objectives, without consideration for the workings of the family and social security payments system.

There is much scope to improve things. What we need most are fearless leaders, from all sides of the political spectrum, who treat comprehensive tax reform as important and can work together to achieve it.




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What will the Turnbull-Morrison government be remembered for?


The Conversation


Robert Breunig, Professor of Economics and Director, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National University and Kristen Sobeck, Senior Research Officer, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Infographic: Budget 2019 at a glance


Emil Jeyaratnam, The Conversation and Wes Mountain, The Conversation

The budget bottom line will surge to a surplus next financial year on the back of higher than expected revenues from commodities, strong corporate profits and low unemployment.

The estimated surplus of A$7.1 billion for 2019-20 will be the first time the budget has entered positive territory since 2007-08.





Read more:
Iron ore dollars repurposed to keep the economy afloat in Budget 2019


How will the government spend this unexpected windfall of revenues?

Simplifying the tax system will cost the government $158 billion over the next ten years. The measures include:

  • doubling the low and middle income tax offset from $530 to up to $1,080 for people earning up to $126,000, starting from the current 2018-19 financial year

  • changing the 32.5% threshold to be $45,001 to $120,000 from 2022-23, with the 19% bracket covering incomes from the tax-free threshold up to $45,000

  • reducing the 32.5% tax rate to 30% from 2024-25 onwards, and changing the income thresholds so that the 30% rate applies to all earners from $45,000 to $200,000

  • removal of the 37% rate altogether from 2024-25.




Read more:
View from The Hill: budget tax-upmanship as we head towards polling day



Other major cuts and spending items are listed below.



Despite the boost in revenue the government expects to reach its long-term target of surplus being 1% of gross domestic product later than estimated in the December budget update.

The government now expects surplus to exceed 1% of GDP in 2026-27.



This budget, like many before it, predicts wages to increase over the next four years. The government expects the wage price index to increase from its current 2.1 to 3.5 by 2022-23.



Net debt as a share of the economy is expected to peak in 2018-19 (19.2% of GDP), and will then commence a downward trend until fully eliminated in 2029-30.




Read more:
Frydenberg’s budget looks toward zero net debt, but should this be our aim?



Government receipts are expected to climb from 24.2% of GDP in 2017-18 to 25% by 2022-23. Payments are expected to be 24.5% of GDP in 2022-23.The Conversation



Emil Jeyaratnam, Data + Interactives Editor, The Conversation and Wes Mountain, Multimedia Editor, The Conversation

This article is republished from The Conversation under a Creative Commons license. Read the original article.

View from The Hill: budget tax-upmanship as we head towards polling day


Michelle Grattan, University of Canberra

For the government this “election budget” is an exercise in juggling. On the one hand, it is throwing out voter bait. On the other, it is running hard on the theme of economic responsibility.

For the second budget in a row, there are highly generous tax cuts, amounting to A$158 billion over a decade. This is on top of the earlier $144 billion.

The government wants this election to be all about tax.

The tax cuts you will get, now and later. The “higher taxes” that Bill Shorten would impose – by cracking down on negative gearing and cash refunds for franking credits. And by claiming that Labor’s climate policy is a “carbon tax”.

A theme in Treasurer Josh Frydenberg’s speech was that the government was taking its initiatives “all without increasing taxes”.

Under the budget’s tax cuts, low- and middle-income earners would pocket up to $1,080 within weeks of the election – for families with a dual income, this amounts to $2,160.




Read more:
Tax giveaways in Frydenberg’s ‘back in the black’ budget


The government points out that its tax cuts are the most generous since John Howard’s time. But two things might be noted about this comparison. The 2007 tax package has since been much criticised for being irresponsible – and Howard did not win the election of that year.

Despite earlier speculation, the Coalition won’t try to rush any of the tax package – which includes a reduction in the 32.5% rate to 30% from July 2024 – through parliament this week.

The government wants to set up as much of a contrast between itself and Labor on tax as possible. Frydenberg told a news conference the tax bills were “a package” covering the immediate tax relief and the rate change. The government was asking the public “who do you trust?” to deliver lower taxes.

Finance Minister Mathias Cormann said: “We are just not prepared to haggle with the Senate in the next 24 hours.” It was up to the Australian people to back the government in, he said.

But in a game of bluff and counter-bluff on tax, Labor could simply match the immediate relief – which it did instantly.

This neutralises part of the tax argument, although the government can still highlight the contrast between its longer-term tax regime and Labor’s “higher taxing” agenda.

On economic responsibility, the budget’s boast is for a $7.1 billion surplus next financial year – the first surplus in 12 years. “The budget is back in the black and Australia is back on track,” Frydenberg told parliament, as he outlined the growth of surpluses to a total of $45 billion over four years.




Read more:
Iron ore dollars repurposed to keep the economy afloat in Budget 2019


We can be sure that in the election campaign Labor will match or even better the budget’s surplus figures.

Shadow treasurer Chris Bowen has learnt from the experience of the last election, when the Labor program came in with a slightly worse fiscal bottom line over the forward estimates than the government’s. The difference wasn’t huge but it was enough to be a political handicap.

The budget’s economic projections seem credible enough, although there is the perennial question over its forecast for wages growth – 2.75% in 2019-20 and 3.25% in 2020-21.

The fact that early in the imminent election campaign the departments of Treasury and Finance produce a detailed economic outlook imposes a discipline on the pre-election budget. A government that tried to fiddle the forecasts would quickly get caught out.




Read more:
Frydenberg’s budget looks toward zero net debt, but should this be our aim?


Frydenberg’s speech was notably sombre about the outlook for the economy, despite saying the fundamentals were sound.

“There are genuine and clear risks emerging both at home and abroad,” he warned, highlighting the cooling of the residential housing market and global trade tensions.

His words are a reminder of how quickly things can change – including the prospect of strong surpluses projected into the future. Good economic times suddenly turned bleak in the early days of the Rudd government, as a result of the global financial crisis.

The budget provided a nice reality check on the beat-up the government indulged in over the medevac bill. Remember all the hyperbole Scott Morrison sprouted, when he said he was going to have to spend more than $1 billion reopening Christmas Island?

The budget includes just $178.9 million to manage the transfer of people from Nauru and Papua New Guinea for medical treatment, $3.2 million to increase the police presence there and $3 million to reinforce the campaign to discourage people getting on boats.

The government says that if it is re-elected it will repeal the medevac bill and close the Christmas Island facility by July 1 – returning any people who have been transferred back offshore.

Questions to the office of Home Affairs Minister Peter Dutton this week about whether anybody had been transferred under the new legislation received the response that no comment was being made.

Morrison told his party room on Tuesday, before the budget, that three dates were available for the May election – May 11, 18 or 25. The general expectation is that he will announce the poll quickly. The budget might look benign, but the government does not want an extended period of Senate estimates next week which would facilitate picking it apart.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.