Want more jobs in Australia? Cut our ore exports and make more metals at home


Trucks taking iron ore from mines in Western Australia where it will probably be shipped overseas.
Shutterstock/Inc

Michael Lord, University of Melbourne

Australia could create tens of thousands of new jobs and generate many billions of dollars in export revenues if it turned more to manufacturing metals rather than exporting ore to other countries.

That’s a finding of our report, From Mining to Making, released by the Energy Transition Hub.

As international climate action accelerates, there is a need to produce goods without the carbon emissions. The report describes opportunities for Australia to use its exceptional wind and solar resources to make zero-emissions metals.




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The need for metal

Demand for metals is set to grow, not least because of their importance in nearly all renewable energy technologies. Wind turbines are made from steel, copper and rarer metals such as cobalt and neodymium. Solar panels and batteries use metals including silicon, lithium, manganese, nickel and titanium.

As the global economy tries to reduce carbon emissions we must change the way metals are made. Metal production is energy intensive and accounts for around 9% of global greenhouse gas emissions. Herein lies Australia’s opportunity.

Australia is already a major source of the world’s metal. It is among the top three exporters of iron ore, bauxite, lithium, manganese and rare earth metals.

A small proportion of these metals are refined domestically, but most are shipped overseas in their raw mineral form. For example, we found Australia converts less than 1% of its iron ore into steel.

By exporting raw ores, Australia is selling non-renewable resources at the lowest point of the value chain. Processed metal is worth much more than ore.

Metal needs energy

Many metals are made through electrically-driven processes so we can reduce carbon emissions by switching to cheaper renewable electricity.

One example for this approach is Sun Metals, near Townsville in Queensland. The company built a 125MW solar farm to supply a third of the energy required by its zinc refinery. It is now considering adding wind power and battery storage.

Similar opportunities exist with the production of other metals such as manganese, copper, nickel and rare earths.

Another angle for Australia is to make specialised metal products with higher profit margins. Element 25, in Western Australia, plans to produce high-value manganese metal using an energy-efficient process developed with CSIRO. The company says a 90% renewable energy mix could lower production costs and help it compete with Chinese producers.

Renewable energy could even relieve Australia’s ailing aluminium industry. The owners of three of Australia’s existing aluminium smelters said they were “not sustainable” with current electricity prices. Could cheap wind and solar energy provide a lifeline?

The usual objection is that aluminium smelters need a steady power input, not variable solar and wind energy. But, new technologies enable more flexible operation, allowing smelters to react to market conditions, while relieving pressure on the grid during peaks in demand.

Steel production presents a different kind of problem. It uses so much coal that it accounts for 7% of global emissions. But new steel can be made without coal.

Many steelmakers around the world use an alternative process, called direct reduction, fuelled by natural gas. This technique reduces emissions by about 40% and can be modified to run on pure renewable hydrogen, enabling production of near-zero emissions steel.

At least five companies in Europe are actively pursuing hydrogen-based steel production as part of their efforts to eliminate emissions. So far there are no similar plans in Australia despite this country’s unrivalled wealth of iron ore and renewable resources.

The jobs boom

Zero-emissions metals could become a major export industry. Our report explores a scenario in which Australia could double the value of its iron and steel exports to A$150 billion by converting just 18% of currently mined iron ore into steel using renewable hydrogen.

This would be a welcome boost for the national balance of trade, counteracting any reduction in coal exports due to climate and energy policies among Australia’s trading partners.

Making this amount of zero-emissions steel requires a huge amount of renewable electricity – almost double the total electricity generated in Australia in 2018.

But this demand for renewable energy is part of the point – Australia can do this, most of our competitors cannot due to their greater energy demand relative to land suitable for generating renewable energy.

A successful zero emissions metal industry would bring many thousands of steady jobs, often in regional areas with higher unemployment. It could also support towns such as Portland, in Victoria, and Gladstone, in Queensland, where metal producers are already the chief employer.

The market for zero-emissions metals is likely to be enormous. Until recently, emissions embodied in materials have been neglected. But this is changing, as hundreds of the world’s largest companies commit to reducing the emissions of their supply chains.

For example, car makers Volkswagen and Toyota are aiming for zero-carbon production.

In September the World Green Building Council challenged the global construction sector to ensure all new buildings have net-zero embodied carbon by 2050. Such public commitments are a strong signal to manufacturers everywhere.

Make it happen

Zero-emissions metals could be one of Australia’s most significant new industries of the 21st century.




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To make it happen, our report recommends governments acknowledge this opportunity by creating a National Zero-Emissions Metals strategy, committing serious resources to ensure it succeeds. This strategy should identify and evaluate Australia’s best opportunities within the metals sector.

If we don’t do something then, as South Australian Senator Rex Patrick put it, we’ll just continue to “export rocks” and let others reap the benefits from developing technologies to process them.The Conversation

Michael Lord, Zero Carbon Researcher, University of Melbourne

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

Our ability to manufacture minerals could transform the gem market, medical industries and even help suck carbon from the air



Pictured is a slag pile at Broken Hill in New South Wales. Slag is a man-made waste product created during smelting.
Anita Parbhakar-Fox, Author provided

Anita Parbhakar-Fox, The University of Queensland and Paul Gow, The University of Queensland

Last month, scientists uncovered a mineral called Edscottite. Minerals are solid, naturally occurring substances that are not living, such as quartz or haematite. This new mineral was discovered after an examination of the Wedderburn Meteorite, a metallic-looking rock found in Central Victoria back in 1951.

Edscottite is made of iron and carbon, and was likely formed within the core of another planet. It’s a “true” mineral, meaning one which is naturally occurring and formed by geological processes either on Earth or in outer-space.

But while the Wedderburn Meteorite held the first-known discovery of Edscottite, other new mineral discoveries have been made on Earth, of substances formed as a result of human activities such as mining and mineral processing. These are called anthropogenic minerals.

While true minerals comprise the majority of the approximately 5,200 known minerals, there are about 208 human-made minerals which have been approved as minerals by the International Mineralogical Association.

Some are made on purpose and others are by-products. Either way, the ability to manufacture minerals has vast implications for the future of our rapidly growing population.

Modern-day alchemy

Climate change is one of the biggest challenges we face. While governments debate the future of coal-burning power stations, carbon dioxide continues to be released into the atmosphere. We need innovative strategies to capture it.

Actively manufacturing minerals such as nesquehonite is one possible approach. It has applications in building and construction, and making it requires removing carbon dioxide from the atmosphere.




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Nesquehonite occurs naturally when magnesian rocks slowly break down. It has been identified at the Paddy’s River mine in the Australian Capital Territory and locations in New South Wales.

But scientists discovered it can also be made by passing carbon dioxide into an alkaline solution and having it react with magnesium chloride or sodium carbonate/bicarbonate.

This is a growing area of research.

Other synthetic minerals such as hydrotalcite are produced when asbestos tailings passively absorb atmospheric carbon dioxide, as discovered by scientists at the Woodsreef asbestos mine in New South Wales.

You could say this is a kind of “modern-day alchemy” which, if taken advantage of, could be an effective way to suck carbon dioxide from the air at a large scale.

Meeting society’s metal demands

Mining and mineral processing is designed to recover metals from ore, which is a natural occurrence of rock or sediment containing sufficient minerals with economically important elements. But through mining and mineral processing, new minerals can also be created.

Smelting is used to produce a range of commodities such as lead, zinc and copper, by heating ore to high temperatures to produce pure metals.

The process also produces a glass-like waste product called slag, which is deposited as molten liquid, resembling lava.

This is a backscattered electron microscope image of historical slag collected from a Rio Tinto mine in Spain.
Image collected by Anita Parbhakar-Fox at the University of Tasmania (UTAS)

Once cooled, the textural and mineralogical similarities between lava and slag are crystal-clear.

Micro-scale inspection shows human-made minerals in slag have a unique ability to accommodate metals into their crystal lattice that would not be possible in nature.

This means metal recovery from mine waste (a potential secondary resource) could be an effective way to supplement society’s growing metal demands. The challenge lies in developing processes which are cost effective.




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Ethically-sourced jewellery

Our increasing knowledge on how to manufacture minerals may also have a major impact on the growing synthetic gem manufacturing industry.

In 2010, the world was awestruck by the engagement ring given to Duchess of Cambridge Kate Middleton, valued at about £300,000 (AUD$558,429).

The ring has a 12-carat blue sapphire, surrounded by 14 solitaire diamonds, with a setting made from 18-carat white gold.

Replicas of it have been acquired by people across the globe, but for only a fraction of the price. How?

In 1837, Marc Antoine Gardin demonstrated that sapphires (mineralogically known as corundum or aluminium oxide) can be replicated by reacting metals with other substances such as chromium or boric acid. This produces a range of seemingly identical coloured stones.

On close examination, some properties may vary such as the presence of flaws and air bubbles and the stone’s hardness. But only a gemologist or gem enthusiast would likely notice this.

Diamonds can also be synthetically made, through either a high pressure, high temperature, or chemical vapour deposition process.

Synthetic diamonds have essentially the same chemical composition, crystal structure and physical properties as natural diamonds.
Instytut Fizyki Uniwersytet Kazimierza Wielkiego

Creating synthetic gems is increasingly important as natural stones are becoming more difficult and expensive to source. In some countries, the rights of miners are also violated and this poses ethical concerns.

Medical and industrial applications

Synthetic gems have industrial applications too. They can be used in window manufacturing, semi-conducting circuits and cutting tools.

One example of an entirely manufactured mineral is something called yttrium aluminum garnet (or YAG) which can be used as a laser.

In medicine, these lasers are used to correct glaucoma. In dental surgery, they allow soft gum and tissues to be cut away.

The move to develop new minerals will also support technologies enabling deep space exploration through the creation of ‘quantum materials’.

Quantum materials have unique properties and will help us create a new generation of electronic products, which could have a significant impact on space travel technologies. Maybe this will allow us to one day visit the birthplace of Edscottite?




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In decades to come, the number of human-made minerals is set to increase. And as it does, so too does the opportunity to find new uses for them.

By expanding our ability to manufacture minerals, we could reduce pressure on existing resources and find new ways to tackle global challenges.The Conversation

Anita Parbhakar-Fox, Senior Research Fellow in Geometallurgy/Applied Geochemistry, The University of Queensland and Paul Gow, Principal Research Fellow, The University of Queensland

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

Space can solve our looming resource crisis – but the space industry itself must be sustainable


Richard Matthews, University of Adelaide

Australia’s space industry is set to grow into a multibillion-dollar sector that could provide tens of thousands of jobs and help replenish the dwindling stocks of precious resources on Earth. But to make sure they don’t flame out prematurely, space companies need to learn some key lessons about sustainability.

Sustainability is often defined as meeting the needs of the present without compromising the ability of future generations to meet their own needs. Often this definition is linked to the economic need for growth. In our context, we link it to the social and material needs of our communities.

We cannot grow without limit. In 1972, the influential report The Limits to Growth argued that if society’s growth continued at projected rates, humans would experience a “sudden and uncontrollable decline in both population and industrial capacity” by 2070. Recent research from the University of Melbourne’s sustainability institute updated and reinforced these conclusions.

Our insatiable hunger for resources increases as we continue to strive to improve our way of life. But how does our resource use relate to the space industry?




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There are two ways we could try to avert this forecast collapse: we could change our behaviour from consumption to conservation, or we could find new sources to replenish our stocks of non-renewable resources. Space presents an opportunity to do the latter.

Asteroids provide an almost limitless opportunity to mine rare earth metals such as gold, cobalt, nickle and platinum, as well as the resources required for the future exploration of our solar system, such as water ice. Water ice is crucial to our further exploration efforts as it can be refined into liquid water, oxygen, and rocket fuel.

But for future space missions to top up our dwindling resources on Earth, our space industries themselves must be sustainable. That means building a sustainable culture in these industries as they grow.

How do we measure sustainability?

Triple bottom-line accounting is one of the most common ways to assess the sustainability of a company, based on three crucial areas of impact: social, environmental, and financial. A combined framework can be used to measure performance in these areas.

In 2006, UTS sustainable business researcher Suzanne Benn and her colleagues introduced a method for assessing the corporate sustainability of an organisation in the social and environmental areas. This work was extended in 2014 by her colleague Bruce Perrott to include the financial dimension.

This model allows the assessment of an organisation based on one of six levels of sustainability. The six stages, in order, are: rejection, non-responsiveness, compliance, efficiency, strategic proactivity, and the sustaining corporation.

Sustainability benchmarking the space industry

In my research, which I presented this week at the Australian Space Research Conference in Adelaide, I used these models to assess the sustainability of the American space company SpaceX.

Using freely available information about SpaceX, I benchmarked the company as compliant (level 3 of 6) within the sustainability framework.

While SpaceX has been innovative in designing ways to travel into space, this innovation has not been for environmental reasons. Instead, the company is focused on bringing down the cost of launches.

SpaceX also relies heavily on government contracts. Its profitability has been questioned by several analysts with the capital being raised through the use of loans and the sale of future tickets in the burgeoning space tourism industry. Such a transaction might be seen as an exercise in revenue generation, but accountants would classify such a sale as a liability.

The growing use of forward sales is a growing concern for the industry, with other tourism companies such as Virgin Galactic failing to secure growth. It has been reported that Virgin Galactic will run out of customers by 2023 due to the high costs associated with space travel.




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SpaceX’s culture also rates poorly for sustainability. As at many startups, employees at SpaceX are known to work more than 80 hours a week without taking their mandatory breaks. This problem was the subject of a lawsuit settled in 2017. Such behaviour contravenes Goal 8 of the UN Sustainable Development Goals, which seeks to achieve “decent work for all”.

What’s next?

Australia is in a unique position. As the newest player in the global space industry, the investment opportunity is big. The federal government predicts that by 2030, the space sector could be a A$12 billion industry employing 20,000 people.

Presentations at the Australian Space Research Conference by the Australian Space Agency made one thing clear: regulation is coming. We can use this to gain a competitive edge.




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By embedding sustainability principles into emerging space startups, we can avoid the economic cost of having to correct bad behaviours later.

We will gain the first-mover advantage on implementing these principles, which will in turn increase investor confidence and improve company valuations.

To ensure that the space sector can last long enough to provide real benefits for Australia and the world, its defining principle must be sustainability.The Conversation

Richard Matthews, Research Associate | Councillor, University of Adelaide

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

If the Adani mine gets built, it will be thanks to politicians, on two continents



Re-elected Indian prime minister Narendra Modi might have helped the Adani mine in the Galilee Basin to get over the line.
southwind.com.au, CC BY-SA

Quentin Beresford, Edith Cowan University

With the final approval of the Adani Carmichael coal mine now apparently imminent, it is important to ask how it has seemingly defied the assessment of experts that it is not financially viable.

After all, it’s only a week since the Chinese owner of another mine planned for the Galilee Basin, the China Stone mine, suspended its bid for mining leases because of commercial considerations.

The numbers appear not to add up because the location is remote, the coal would be expensive to transport, and the price is expected to fall.

But such a purely financial analysis ignores the political forces driving the development of the coal industry in both India and Australia.

Mates in India, mates in Australia

In short, both are locked into what I describe as a model of crony capitalism, in which special deals are handed out to projects such as Adani that tip the scales in favour of development.

The actions of China and Japan in deploying enormous state power to export their respective coal technologies to Southeast Asia strengthens the hands of those pushing such developments.

In my recent book, Adani and the war over coal, I outline a network of power that for several decades has promoted the development of Australia’s coal resources in the interests of national and international corporations.

The mining companies, then the big four banks became part of it, lending billions in the rush to develop Australian coal mines as Asian countries sought to lock in long-term supplies. The Minerals Council of Australia, the New South Wales Minerals Council and the Queensland Resources Council, with their collective close ties to both political parties, handled public relations.




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Yet they have faced resistance from the rise of an anti-Adani movement that links grassroots environmentalists, peak environmental lobby groups and progressive organisations such as GetUp!

By mid-2018, these campaigners seemed to have backed the Carmichael mine into a cul de sac by scaring off both Australian and foreign investors. They had also pressured the Queensland government to withdraw its support for a loan to the project from the Commonwealth government’s Northern Australia Infrastructure Facility.

Then Adani surprised them by announcing that it would scale back the project and fund it from its own resources. On the face of it this seemed unlikely, but it had help.

Adani and Modi have history

The chairman and founder of the Adani group, Gautam Adani, has had a long relationship with the recently re-elected Prime Minister of India, Narendra Modi.

Modi played a decisive role in paving the way for Adani’s latest mega deal: selling coal-fired power from a plant in the Indian state of Jharkhand to nearby Bangladesh.

The power for Bangladesh is set to be fired by Carmichael coal. Many Australians would be concerned to learn that our coal is to be used to power one of the most climate-challenged countries on the planet, but we have this on the authority of Adani’s previous Australian-based chief executive, Jeyakuma Janakaraj.

Twelve days before the 2019 Indian election date was announced, the Modi government gave approval for an Adani project in Jharkhand to become the first designated power project in India to get the status and benefits of a Special Economic Zone, saving Adani billions of dollars in taxes, including clean energy taxes.

The Indian state will provide land, infrastructure and water for the project and shoulder the burden of pollution. The cost of the power to Bangladesh is not expected to be cheap.

Will we be asked for more?

Adani’s form suggests it might come back to Australia for more. Following the re-election of the Morrison government it is already being speculated that the pro-coal Minister for Resources, Matt Canavan, will revisit the original proposal for a billion-dollar government-sponsored loan from the Northern Australia Infrastructure Facility to construct the railway from the Galilee Basin to the Abbot Point coal port.

The Adani saga points to a critical flaw in the Paris climate agreement. It is an agreement between nation states, but what those states do is often determined by arrangements between politicians and private companies that feel no particular obligation to keep global warming to less than two degrees.

We are pawns in a larger, climate-destroying game.




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The Conversation


Quentin Beresford, Professor of Politics, Edith Cowan 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.

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



File 20190401 177171 85g2ya.png?ixlib=rb 1.1
The budget points to weaker times ahead unless wages and spending pick up.
Wes Mountain/The Conversation, CC BY-ND

Warren Hogan, University of Technology Sydney

A weaker domestic economy has cost the budget A$15 billion over the next four years, but booming international commodity markets are more than offsetting this. The net result is a budget that will remain comfortably in surplus for the next four years, assuming the economic situation improves rather than disappoints.

Much lower payments on a range of different programs have also given the government some extra money to play with. Lower spending on the National Disability Insurance Scheme, a big drop in debt servicing costs and lower pension income support payments are just a few of the expenditure surprises that paint a very healthy picture of federal government finances right now.



But weaker domestic economic numbers have come at a considerable cost to the budget in an ominous warning about how vulnerable the government’s finances would be to a domestic economic recession.

Since the release of the mid-year economic outlook last December, economic data have generally disappointed expectations, culminating in a much-weaker-than-expected GDP report for the December quarter of 2018. This has forced the Treasury to reset the government’s baseline for the economy and its revenues.

This has been quite small in the scheme of things, with economic variables such as consumption, GDP and wages down by about 0.25% to 0.5% for this year and next.




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But these otherwise small changes to the economic baseline have had a big impact on government finances. Revisions to the outlook for wages have cost the budget $800 million in 2019-20 and a total of $8.1 billion over the four years to 2022-23.

Weaker-than-forecast consumption has knocked $1.7 billion out of GST receipts for 2019-20. It’s not a problem for the feds, but another sign that state government budgets are about to take a walloping over the next few years.

Economic story hasn’t changed, even if the starting point has

In terms of the picture the government is painting of the economy over the next three years, the economic forecasts are basically unchanged from those presented in the update in December. Sure, there have been some substantial downward revisions to the current year’s numbers and a knockdown in growth in 2019-20. But this is almost entirely the result of a weaker starting point courtesy of the soft GDP numbers we received last month.

The economic story hasn’t changed. Australia’s economy is set to ride out the bursting of the housing bubble in Sydney and Melbourne. Employment is expected to continue to grow at a pace that is strong enough to soak up new entrants into the labour force.

Meanwhile the international economy will maintain a healthy growth rate of 3.5% over the next few years. There is no US recession, no sudden shift down in China’s rate of growth.

The Treasury has adopted a pleasingly conservative approach to international commodity prices. Both met coal and iron ore are expected to drop back to more sustainable price levels over the next year in what is an important nod to good budgeting assumptions.

Iron ore is forecast to fall back to US$55 a tonne by March 2020 and then stay at that level while met coal is expected to shift back down to US$150 a tonne over the same time frame.

The oil price, interest rates and the Australian dollar are all forecast to stay at current levels over the forecast horizon. With bond yields having fallen to near-record lows in Australia in recent weeks, this assumption has had a dramatic effect on Australia’s debt service costs, delivering the government a financial windfall of $2.7 billion over the next four years.

Blue Skies or foggy glasses?

Against this backdrop Australia’s economic expansion is forecast to go well past the 30 -year mark in 2021. Unemployment is projected to be 5% and wages growth rises back to 3.5%.

This is a rosy picture of the economic outlook. The wage growth forecasts will rightly come in for some criticism. The risks to this forecast are not evenly balanced.



At least the government can’t be criticised for being at odds with the Reserve Bank (RBA). The RBA’s latest set of forecasts, released just a few weeks ago, are basically the same. If anything, the RBA is even more optimistic than the Treasury, with an unemployment forecast of 4.75% versus the government’s 5% for as far as the eye can see.

Even though the RBA and the Treasury seem to be on the same page about Australia’s economic outlook, there is now a clear distinction between what private and public sector forecasters are looking for over the next few years.

Over the past three months there has been a substantial shift in private sector forecasts for the economy, which has not been replicated by either the RBA or the Treasury.

This has left the RBA and the Treasury at the top of the range of forecasts for the economy. You’d be hard pressed to find a private sector forecaster more optimistic on Australia’s economic outlook than our policymakers are right now.

A short-term fiscal stimulus could keep the RBA at bay

The great fear within financial markets and across the business community is that Australia’s domestic economy could buckle under the weight of high household debt and falling house prices. A run of weak economic data in the last three months has added weight to these concerns and seen a number of economists call for interest rate cuts.

Even though businesses have thus far maintained a deal of optimism about the economic outlook, the concern is that eventually business will shelve hiring and investment plans if consumer demand weakens enough.

Money markets are factoring in a half-percentage-point cut to the cash rate, taking it from 1.5% to 1% over the next year. In effect, the markets are projecting much weaker outcomes than the RBA or the government.

This budget represents a smart short-term fiscal stimulus at a time when consumer sentiment and domestic demand are under pressure. This certainly should take some pressure off the RBA to cut interest rates in the next few months and may even keep monetary policy on hold for an extended period.

The centre piece of the fiscal injection is the lift in the Low and Middle Income Tax Offset (LMITO). This offset has more than doubled to $1,080 and is effective from this financial year. This means 4.5 million Australians will be positively impacted by a higher offset when they file their 2018-19 tax returns after July 1 2019.




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This is as close to a cash handout as you can get without it being a cash handout – a cash handout by a government ideologically opposed to cash handouts.

This is not only a direct cash injection for many households but a retrospective tax cut in the sense that it dates back to July 1 2018.

People won’t have the extra money until after July, but they know it’s coming and this should immediately help alleviate some financial concerns.

The next leg of the immediate fiscal stimulus is the broadening of the instant asset write-off for small and medium businesses with revenue of up to $50 million. This was previously accessible to small business with revenues of up to $10 million. The asset write-off has been increased to $30,000 (from $25,000).

This too is effective immediately and will last through to June 2020. This is a strong incentive for a vast number of businesses around Australia to increase capital expenditure in the months ahead of the end of this financial year, and then again next financial year.

Even if it doesn’t have much impact on investment plans, it will impact profitability.

Longer-term personal income tax cuts that are happening against the backdrop of a budget that remains in surplus over the medium to long term also have the potential to support consumer confidence.



A strong government financial position will help curtail precautionary saving from households worried about the future of the economy and their finances.

For financial markets the question is whether this fiscal stimulus is enough to keep the RBA at bay over the months and years ahead. This fiscal injection is smart policy and represents a much nimbler government than we’re used to.

In an environment where the effectiveness of interest rate cuts is an open question, a short sharp fiscal injection like this one might make the difference in keeping demand at a rate that will maintain our current low rate of unemployment.The Conversation

Warren Hogan, Industry Professor, University of Technology Sydney

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

Morrison government approves next step towards Adani coal mine


Kevin's Walk on the Wild Side

Michelle Grattan, University of Canberra

The Morrison government has ticked off on the groundwater management plan for the proposed Adani coal mine, an important but not a final step for the central Queensland project receiving the go-ahead.

The decision, taken by Environment Minister Melissa Price, comes after intense pressure from Queensland Liberal National Party members, including a threat by senator James McGrath to publicly call for Price’s resignation if she failed to treat the Adani project fairly.




Read more:
View from The Hill: It’s the internal agitators who are bugging Scott Morrison on Adani


But the Adani decision will not help Liberals fighting seats in the south, with strong anti-Adani campaigns in some key electorates.

Price said in a statement on Tuesday: “CSIRO and Geoscience Australia have independently assessed the groundwater management plans for the Carmichael Coal Mine and Rail Infrastructure project”, and both had confirmed the revised plans…

View original post 660 more words

Grattan on Friday: The Coalition is trapped in its coal minefield


Michelle Grattan, University of Canberra

Sydney shock jock Ray Hadley was apoplectic. Home Affairs Minister
Peter Dutton, one of Hadley’s favourites, who has a regular spot on his 2GB program, had just committed blasphemy.

Dutton said he didn’t believe in the government building a new
coal-fired power station. Hadley couldn’t credit what he was hearing. “You’re toeing the [Morrison] company line”, he said accusingly.

It’s another story with Dutton’s cabinet colleague and fellow
Queenslander, Resources Minister Matt Canavan, who is part of the
Queensland Nationals’ push for support for a new power station in that state.

“Studies have come back always saying that a HELE [high-efficiency, low-emissions] or a new coal-fired power station would make a lot of sense in North Queensland,” Canavan said this week.

The two ministers’ divergent views are not surprising on the basis of where they come from. In Brisbane voters tend to share similar opinions on climate change and coal to those in the southern capitals – it’s the regions where support for coal is stronger.

What’s surprising is how the rifts at the government’s highest levels are being exposed. In these desperate days, it is every minister, every government backbencher, and each part, or sub-part, of the Coalition for themselves.

Never mind cabinet solidarity, or Coalition unity.

The most spectacular outbreak came this week from Barnaby Joyce,
declaring himself the “elected deputy prime minister” and pressing the government for a strongly pro-coal stand.

It was a slap at besieged Nationals leader Michael McCormack, after rumourmongering that McCormack might be replaced even before the election. Predictably, the NSW Nationals, fighting a difficult state election, were furious.

The Joyce outbreak was further evidence that the federal Nationals are a mess, over leadership and electorally. They have a party room of 22 – there are fears they could lose up to four House of Representatives seats as well as going down two in the Senate.




Read more:
View from The Hill: Coal turns lumpy for Scott Morrison and the Nationals


(However it’s not all gloom in the Nationals – at the election they will gain three new women, two in the Senate – Susan McDonald from Queensland and Sam McMahon from the Northern Territory – and Anne Webster in the Victorian seat of Mallee. Whatever happens to the party’s numbers overall, the women will go from two to four or five, depending on the fate of Michelle Landry, who holds the marginal seat of Capricornia. The Nationals’ NSW Senate candidate is also a woman but is unlikely to be elected.)

By mid week Joyce was back in his box, stressing that McCormack would take the party to the election. But he was still in the coal advocacy vanguard.

The coal debate and the assertiveness of the Queensland Nationals
smoked out a clutch of Liberal moderates, who question spending
government money on coal projects (although there is some confusion between building power stations and underwriting ventures).




Read more:
Queensland Nationals Barry O’Sullivan challenges Morrison over coal


The government’s policy is for underwriting “firm power” projects, on a technology-neutral basis, if they stack up commercially.

The marauding Nationals were derisive of moderate Liberals trying to protect their seats. “Trendy inner-city Liberals who want to oppose coal and the jobs it creates should consider joining the Greens,” Queensland National George Christensen said tartly on Facebook.

It was a rare appearance by the moderates, who have made a poor
showing over the last few years, True, some were crucial in achieving the same-sex marriage reform. But in general they’ve failed to push back against the right’s tightening ideological grip on the Liberal party, and the government has suffered as a result.

The week highlighted, yet again, that instead of a credible energy
policy, the government has only confusion and black holes.

With his recent announcements, Morrison has been trying to show he’s heard the electorate on climate change. But actually, these were mostly extensions of what had been done or proposed.

The Abbott government’s emissions reduction fund (renamed) is getting an injection, given it would soon be close to exhausted. And the Snowy pumped hydro scheme, announced by Malcolm Turnbull, has received the go-ahead. Didn’t we expect that? There was also modest support for a new inter-connector to transmit Tasmanian hydro power to Victoria.

The government can’t get its “big stick” legislation – aimed at
recalcitrant power companies – through parliament. It will take it to the election. But who knows what its future would be in the unlikely event of a re-elected Coalition government? It would face Senate hurdles and anyway “free market” Liberals don’t like it.

And then we come to the underwriting initiative. The government has 66 submissions seeking support, 10 of which have “identified coal as a source of generation”.

Sources say it is hoped to announce backing for some projects before the election. But this will be fraught, internally and externally, for the government.

One source hinted one project might involve coal. Even if this is
true, it won’t satisfy the Coalition’s coal spruikers, deeply unhappy that Morrison has flagged there won’t be support for a Queensland coal-fired power station. (The Queenslanders liken Morrison’s cooling on coal to Kevin Rudd’s 2010 back off from his emissions trading scheme.)

On the other hand, underwriting of any coal project would alarm
Liberals in the so-called “leafy-suburbs” electorates.

Given the proximity to the election, the government could do little more than give promises to particular projects. There is also the risk of blow back from those whose bids are unsuccessful.

There would be no obligation on a Labor government to honour any
commitments, because formal agreements would not have been finalised.

Meanwhile the government is trying to promote a scare against Labor’s climate policy, still to be fully outlined, which includes reducing emissions by an ambitious 45% by 2030 (compared with the government’s pledge of 26-28%).

But unlike, for example, the scare over the ALP’s franking credits
policy (dubbed by the government a “retirement tax”), this scare is much harder to run, except in specific regional areas.

The zeitgeist is in Labor’s favour on the climate issue, not least
after sweltering summer days and bushfires.

The public have a great deal of faith in renewables – in focus groups people don’t just like them, they romanticise them.

It seems the government can’t take a trick on climate and energy
policy – even the school children are reminding it of that.




Read more:
Students striking for climate action are showing the exact skills employers look for


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.

The Chinese coal ‘ban’ carries a significant political message


File 20190228 150688 12m2l1x.jpg?ixlib=rb 1.1
The market reaction to the “ban” was telling, underscoring the problem of being so reliant on a single client.
Shutterstock

Tony Walker, La Trobe University

As a standoff over Australian coal shipments through the northern Chinese port of Dalian continues, it underscores the extent of Australia’s economic dependence on China.

One-third of all Australia’s exports globally are China-bound.

Market reaction to a Chinese coal “ban” was telling and reflected concerns about an over-dependence on one client.

The Australian dollar tumbled before recovering. Coal producers were pegged back.

Initially, the decision was attributed to local customs officials, but this misunderstood the nature of the Chinese regime.

No decision to restrain imports from China’s largest supplier of raw materials would be taken without the imprimatur of the leadership in Beijing.

While the freeze on Australian coal imports through Dalian may prove to be a short, sharp shock, what China’s action does convey is a message that Beijing can turn an import spigot on and off at will.

Why it might have chosen now to remind Australia of its vulnerability to central planning decisions, arbitrarily applied, is not clear. But it’s reasonable to speculate that politics is involved.




Read more:
Huawei executive’s arrest will further test an already shaky US-China relationship


What is notable about China’s action is that it does not, at this stage, affect Russian and Indonesian coal imports. Australia appears to have been singled out.

Australia is far and away the world’s largest coal exporter. It accounts for more than 20% of China’s coal imports, the bulk of it thermal coal for greedy power stations.

China’s foreign ministry has said there is no “ban” on Australian coal imports through the Dalian port. But with demurrage charges mounting on coal carriers obliged to stand offshore for 40 days or more, use of the word “ban” is moot.

If politics is a factor, then several possibilities present themselves in what has been a rocky relationship over the past several years. Beijing could be signalling its displeasure over Australia’s decision to bar the technology company Huawei from participating in the build-out of Australia’s 5G communications network.

Other possible causes of Chinese unhappiness include Canberra’s decision to deny a re-entry permit to Australia for businessman Huang Xiangmo. This follows a decision to deny Huang Australian citizenship on grounds that his links with the Chinese Communist Party render him a security risk.

Delicate late-stage negotiations between the US and China on trade could also be a factor. Beijing might regard meting out a bit of grief to one of America’s closest allies as a reminder of its ability to exact retribution if things do not go its way.

Then there are the twin issues of the South China Sea and China’s push into the southwest Pacific.

Canberra is a persistent – if low-key – critic of Beijing’s militarisation of disputed territory in waters that are subject to claims and counter-claims before international tribunals.

These waters span trade routes through which the bulk of Australia’s seaborne trade passes to its markets in north Asia, including trans-shipment points like Dalian.

Beijing will also not have overlooked a vigorous campaign against its interests being waged by elements of the Australian foreign and security policy establishment.

At the forefront of this criticism is the government-funded Australian Security Policy Institute. ASPI spokespeople have focused particularly on China’s alleged breaches of cyber security.

Sections of the Australian media, feeding off ASPI criticism of cyber breaches, will have added to Chinese displeasure.

Then there are irritants like the continued detention on security grounds of Chinese-Australian writer Yang Hengjun. Yang has been a persistent critic of the Communist Party.

While a freeze initiated by Beijing – during which no senior Australian official visited China for high-level talks for the better part of two years – has been lifted, relations remain problematic.

Foreign Minister Marise Payne went to Beijing late last year for talks with her Chinese counterpart. These were designed to “re-set” the relationship. But episodes like the “ban” on coal shipments foreshadow further difficulties in the Sino-Australia relationship as China’s power and influence grow.




Read more:
Australia and China push the ‘reset’ button on an important relationship


Other explanations offered for what appeared to be, on the face of it, arbitrary action against Australian coal shipments relate to pressures on China’s hard-pressed domestic producers.

In a slowing Chinese economy, competition from higher-quality and competitively priced imports has battered domestic coal producers.

In other words, a number of factors are likely to have been at play in China’s decision to halt Australian coal imports through Dalian, if only temporarily.




Read more:
Australian-Chinese author’s detention raises important questions about China’s motivations


These coal shipments, it should be noted, amount to a relatively small proportion of the 300 million tonnes shipped annually.

About 7 million tonnes passes through Dalian. This is coking or metallurgical coal for the steel industry, to distinguish it from thermal coal for power generation.

In 2017-19 coal exports to China were worth about A$13 billion, second only to exports of A$50 billion of iron ore and concentrates.

However, if the ban spreads to other ports Australian exporters will have cause for much deeper concern.

Uncertainties among Australian exporters are not helped by an opaque Chinese system that denies transparent explanations – unless it suits Beijing – of actions that are unfriendly to its trading partners.

China’s slowdown in imports of Australian wine last year is a case in point. The problem has eased, but the episode unnerved wine exporters whose production is geared significantly to a booming Chinese market.

Australian officials will also be concerned about action taken against Canadian nationals who have been detained in apparent retaliation for Canada’s arrest – pending extradition to the US – of the daughter of the Huawei founder.

Meng Wanzhou, Huawei’s chief financial officer, has been fighting extradition through the courts in Vancouver to prevent her removal to the US, where she has been charged with violations of sanctions against doing business with Iran.

The arrest of two Canadians – former diplomat Michael Kovrig and businessman Michael Spavor – for allegedly endangering China’s national security is widely viewed as retaliation against Canada for the arrest of Meng.

What all this tells us is that dealing with a more nationalistic, assertive and ruthless China in pursuit of what it regards as its national interests will become more, not less, difficult.

Western officials can talk about a rules-based international order until they’re blue in the face, but if the rules don’t correspond with Beijing’s own preferences, then chances are it will disregard them.

This is a reality that has taken some time to impress itself on those who might have believed that encouragement to China to live up to expectations of it becoming a “responsible stakeholder” will survive an encounter with Chinese self-interest.

In that regard, Beijing and Washington are not dissimilar in a new era in which a more nationalist US is shunning multilateral trading agreements like the Comprehensive and Progressive Agreement for Trans Pacific Partnership and looking to a narrower self-interest.

The new US-China trade deal is set to be concluded next month. You can be sure that interruptions to Australian coal shipments to China will be very far from their concerns.The Conversation

Tony Walker, Adjunct Professor, School of Communications, La Trobe University

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