A week after the release of a book depicting him as not intelligent enough and not mentally fit to be trusted as commander-in-chief, Donald Trump has done it again. On the same day he cancelled a visit to London to open the new US embassy there, a move many interpreted as an attempt to avoid embarrassing protests, he embarrassed himself further by demanding to know why the US deigns to accept immigrants from “shithole countries”.
Before this latest outburst, the White House had spent a week trying in vain to rise above the account of Michael Wolff’s Fire and Fury, which uses the words of people in Trump’s White House and inner circle to argue that Trump, in the alleged private words of secretary of state, Rex Tillerson, is a “fucking moron”. Having failed to block the book’s publication and instead hastened it, the White House pivoted instead to denigrating Wolff and one of his primary sources, the former White House chief strategist and Trump ally Steve Bannon.
Trump pursued the mission with both anger and enthusiasm via his favourite medium, Twitter, slamming the book as “really boring and untruthful” and dismissing Bannon as “Sloppy Steve”.
Besides reinforcing his image as a temperamental, ill-informed man-child, Trump’s counter-attack misses the point. Even if Wolff is a huckster peddling dubious quotes, as more than a few journalists claim, others have been spreading the message publicly and privately since the day Trump took office.
Chief among them, via his own actions and words, is Trump himself. But there’s also Democratic senator Jack Reed, who in July 2017 told his Republican counterpart Susan Collins, “I think – I think he’s crazy. I mean, I don’t say that lightly and as a kind of a goofy guy.” Collins responded: “I’m worried.” Republican senator Bob Corker, the chair of the Senate Foreign Relations Committee, first said that Trump “has not yet been able to demonstrate the stability nor some of the competence that he needs to demonstrate in order to be successful” and later called the White House “an adult day care centre”.
The cabinet, too, are more than worried. Besides Tillerson’s reported contempt, Trump’s secretary of defence, James Mattis, and his chief of staff, John Kelly have reportedly made a pact that one of them will be in the US at all times.
But in Wolff’s account, the foremost figure to question Trump’s faculties is Steve Bannon, the hard-right ideologue who arguably propelled Trump to victory.
Treasonous and unpatriotic
Wolff depicts a Bannon out for himself and his agenda, even at the cost of tearing down Trump and his family. “Javanka”, the husband-wife team of Trump’s son-in-law Jared Kushner and daughter Ivanka, meet with Bannon’s unbridled derision: Kushner is financially compromised, including by Russians, and Ivanka is “dumb as a brick”. The elder Trump himself, meanwhile, is a pliable simpleton.
But far more importantly, Wolff’s Bannon inserts the Trumps into the middle of the alleged collusion with Russia during the 2016 campaign. Donald Trump Jr., Kushner, and then-campaign manager Paul Manafort are “treasonous” and “unpatriotic” for a June 2016 meeting with three Kremlin-linked envoys in Trump Tower in New York City, arranged by Trump Jr. to discuss Russia’s provision of material damaging to Hillary Clinton.
In Wolff’s rendering, Bannon thinks the ultimate downfall of Trump and Co. will be revelations of Russian financial input into the campaign: “It goes through Deutsche Bank and all the Kushner shit. The Kushner shit is greasy. They [Mueller’s team] are going to go right through that.”
After the book dropped, Bannon did not deny any of his statements. Under pressure from his billionaire backers the Mercer family, he clarified that the words “treasonous” and “unpatriotic” refer only to Manafort, who is already under indictment on financial, tax and lobbying charges related to the Trump-Russia investigation.
Bannon has become the most conspicuous casualty of the Fire and Fury fallout, not only dismissed as “sloppy” by Trump but now ousted from his position at far-right soapbox Breitbart. But even with Bannon mostly stripped of his influence, the complaints against Trump raise a disturbing question: why are so many people who think Trump is mentally unfit still willing for him to remain in office?
The answer is that no matter how unstable and vacuous he may be, Trump is a very useful vehicle for other people’s ambitions.
The useful idiot
Even after his supremely unedifying first year, Trump still serves as a conveniently empty vessel for all manner of enablers. Having resuscitated his career after six bankruptcies by playing a businessman on reality TV, he now plays the role of chief executive so industries can get pesky regulations rolled back.
As he keeps up his stream of offensive, irresponsible pronouncements, GOP legislators put up with it so they can finally secure their $1.5 trillion tax giveaway. And as white supremacists proclaim their moment has come: as David Duke, former KKK Grand Wizard, explained at the violent Charlottesville march in August 2017: “We are going to fulfil the promises of Donald Trump. That’s what we believed in.”
As long as Trump serves that purpose, it does not matter how many conflicts of interest he has, how many women accuse him of sexually harassing or assaulting them. It does not matter how many memoranda or constitutional clauses he does not read or understand. And it does not matter how many Russians he and his inner circle might have met and assisted.
But Trump’s usefulness might well expire when Robert Mueller completes his work. That could be sooner than many people would like – with Manafort indicted and former national security advisor Michael Flynn pleading guilty to lying to the FBI, the next probable target is Kushner – and from there, it’s only one rung up the ladder to Trump himself. Then again, Mueller’s probings could take months or years more to get there. Until then, this emperor’s new clothes nightmare continues with no end in sight.
In 2018 there will be elections in the Australian states of Victoria, South Australia and Tasmania, as well as in Italy, the US and Mexico.
Essential has released polling for the five mainland Australian states, conducted from October to December. Figures are given by month for the three eastern seaboard states.
In South Australia, Labor led 51-49 in October to December, a one-point gain for the Liberals since July to September. Primary votes were 34% Labor (down three), 31% Liberals (up one), 22% for Nick Xenophon’s SA-BEST (up four) and 8% Greens (up two). The South Australian election will be held on March 17.
Newspoll had SA-BEST at 32% from polling conducted in the same period as Essential. Essential is assuming SA-BEST preferences flow to the Liberals at a 60-40 rate, but at the 2016 federal election, these preferences flowed to Labor at a 60-40 rate. Essential’s justification is that the Liberals have lost far more primary votes than Labor since the 2014 state election.
In Victoria, the Coalition led 51-49 in December, a two-point gain for the Coalition since November. Primary votes were 46% Coalition (up three), 37% Labor (steady) and 9% Greens (down one). For the October to December period, Labor was just ahead, 51-49. The Victorian election will be held November 24.
The Age commissioned ReachTEL polls of the Labor-held Victorian seats of Tarneit and Cranbourne on January 5. On the primary votes, there is a substantial anti-Labor swing in Tarneit, but little swing in Cranbourne.
There were many questions in the ReachTEL polls on youth crime. About two-thirds in both seats said the main youth crime issue was African gangs, and more than 55% said they were less likely to go out at night. A positive for Labor was that Premier Daniel Andrews had a large lead over Opposition Leader Matthew Guy on dealing with crime.
In the New South Wales Essential poll, Labor led 52-48 in December, a three-point gain for Labor since November. Primary votes were 40% Coalition (down three), 40% Labor (up three) and 9% Greens (steady). For October to December, Labor led 51-49.
I believe this is the first time Labor has led in a NSW state poll since shortly after the 2007 state election. The next NSW election will be held in March 2019.
In Queensland, Labor led 55-45 in December, a four-point gain for Labor since the November election. In Western Australia, Labor led 57-43 in October to December, a three-point gain for Labor since July to September.
The Tasmanian election is likely to be held in March, and it appears Labor is ahead under its popular leader Rebecca White.
The Italian election will be held on March 4. 37% of seats in both chambers of the parliament will be elected using first-past-the-post voting, while the rest use proportional representation.
Polling gives the right-wing coalition about 37%, the left-wing coalition about 27%, and the left-wing populist Five Star Movement about 28%. As the left is more split than the right, the right will have an advantage in the first-past-the-post seats, though it will probably be short of an overall majority.
The Mexican election will be held on July 1. The president is elected by first-past-the-post, and the left-wing candidate, Andrés Manuel López Obrador, is currently ahead. By antagonising Mexicans, US President Donald Trump could cause the election of a left-winger who would strongly oppose the proposed border wall.
The FiveThirtyEight poll aggregate currently gives Democrats a 11-point lead over Republicans in the race for the US Congress. Midterm elections will be held in early November, in which all 435 House of Representatives members and one-third of the 100 Senators are up for election. The Senate seats up this year went to Democrats by 25-8 in 2012, and a few Democrats will be defending states Trump won easily in 2016.
Even though Republicans only have a 51-49 Senate majority, the House of Representatives is more likely to switch party control than the Senate.
Left-wing parties performed better than expected in 2017 elections
In 2016, Trump was elected US president, and the UK voted to leave the European Union. Trump and Brexit were triumphs for the populist right, and it was expected that the left would also struggle in 2017. However, in both Australian and overseas elections held in 2017, the left generally performed better than expected.
At the March 2017 Western Australian election, Labor won a landslide, with 41 of the 59 lower house seats.
At the November Queensland election, Labor won a majority, and One Nation won just one seat. There had been much speculation that One Nation would win many seats and hold the balance of power.
A year after Trump’s victory, US Democrats easily won the Virginia and New Jersey gubernatorial elections. In the Alabama Senate byelection, Democrat Doug Jones defeated Republican Roy Moore by a 50.0-48.3 margin, overturning Trump’s 62-34 Alabama margin over Hillary Clinton in 2016.
Jones was sworn in as a US senator on January 3, replacing Luther Strange, who had been appointed by the Alabama governor after Jeff Sessions resigned to become attorney-general. Republicans now have a 51-49 majority in the US Senate, down from 52-48.
In an April article published after Theresa May called the June 8 UK general election, I said a Conservative landslide was likely – a widely held view. Under Jeremy Corbyn, Labour’s vote instead increased almost ten points from 2015, and the Conservatives failed to win a majority – though they clung to power with support from Northern Ireland’s Democratic Unionist Party.
In the May French presidential election run-off, Emmanuel Macron crushed Marine Le Pen 66-34. While Macron is a centrist and not a left-winger, he is clearly preferable to a conservative or Le Pen from a left perspective.
In October, Labour won the New Zealand election (which was held in September) after securing a coalition agreement with NZ First. Labour had been polling in the mid-20s before Jacinda Ardern became its leader in August.
While 2017 was generally a good year for the left, there were two poor results. At the October Austrian election, a conservative/far-right government was formed after more than a decade of coalition governments between the major left and right-wing parties.
At the German election in September, the far-right achieved its highest vote share since the second world war (12.6%). The major parties had formed a grand coalition, and both slumped, with the Social Democrats falling to their lowest vote (20.5%) since 1932. Despite this terrible result, it appears likely there will be another grand coalition government led by Angela Merkel.
Where there has been a clear difference between the major left and right-wing parties (the UK, the US and New Zealand), the left-wing party has performed strongly. The dismal results for the left in Germany and Austria have occurred in left/right coalitions, where there was perceived to be little difference between the left and right.
Furthermore, embracing a left-wing agenda neutralises some of the far-right’s appeal. The UK Independence Party won just 1.8% of the vote at the 2017 election, down almost 11 points from 2015, though some of this fall was caused by the Conservatives’ support for Brexit. Macron vigorously attacked Le Pen’s policies, and thrashed her by a bigger than expected margin.
The far-right tends to perform best when voters perceive little difference between the major left- and right-wing parties.
On January 8, former Malaysian prime minister Mahathir Mohamad announced his intention to contest the next general election, due sometime before August this year.
In an unprecedented political turnaround, Mahathir is now leader of the alliance of opposition parties bidding to oust the incumbent, Najib Razak. Mahathir handpicked Najib in 2009 to head his former party, the United Malays National Organisation (UMNO), and the coalition it has led since the 1970s, Barisan Nasional.
To add further intrigue, Mahathir now appears to be on a unity ticket with his old enemy, Anwar Ibrahim, for control of the country.
Mahathir, who first rose through UMNO ranks to become prime minister in 1981, is 92. His decision to stand again has raised questions about the state of politics in this young nation, whose median age is 28. Malaysian and international media outlets alike have carried comments along the lines that nominating somebody so old is a “laughable” choice.
Yet the key to this decision is not in the nation’s age profile but the calculus of building electoral coalitions in a diverse nation bearing the scars of political battles fought since 1998.
Look also to Mahathir’s singular skillset in building such coalitions over decades, through a combination of Malay nationalism, a pro-capitalist Islamist ethic and selective minority representation. During his career, Mahathir mastered the use of such political themes, alongside tactics such as granting favours and opportunities to allies while exerting civil and judicial pressure on opponents.
Mahathir led Malaysia for 22 years. In that time, he transformed the nation for better and for worse, depending on which constituency you consult. He resigned in 2003, after famously sacking his deputy and finance minister, Anwar Ibrahim, in 1998.
Anwar, who became his most formidable opponent, has since led the opposition alliance that Mahathir now heads, with Anwar’s wife, Wan Azizah, as his deputy.
Anwar himself has nearly completed a second prison term – the first instigated by Mahathir, the second by Najib – and is only due for release in June, at which point he is likely to seek a royal pardon to readmit himself to political life. Anwar’s convictions have resulted from charges of corruption and sodomy – a criminal offence in Malaysia – both of which he has consistently denied.
Unless Anwar wins a pardon from the king, he will not be able to participate in politics for an additional five years after his release. Nonetheless, the plan is to find a way for Anwar to take over – presumably from Mahathir, or potentially from Wan Azizah.
In 2013, at the last election, Anwar led the opposition parties to win the national popular vote. But he did not win sufficient seats to form government, which Barisan retained.
Anwar has perfected a form of political code-switching, which allows him to argue for democratic reforms using both Islamic and secular liberal principles. This is a skill many voters, Muslim and non-Muslim, consider impressive.
Nevertheless, he failed to win important rural seats – whose largely Malay Muslim voters hold disproportionate power in this largely urban nation. Many voters in these seats view their economic and political interests as tied up with UMNO and Barisan, along with their development schemes, subsidies and loans that have propelled many Malay Muslims into better jobs in a modernising economy.
Appointing Mahathir as opposition figurehead is a bid to win these seats: the one missing ingredient in the opposition parties’ 2013 bid for power. It is for this reason that the “nonagenarian”, as Najib calls him, is suddenly running again. He is a critical component of an opposition pitch to these voters, sending the message that the opposition will not turn their lives or the polity upside down, as many fear it will.
That these fears exist is not a mystery. They circulate in comments made in public forums both by government ministers and by other figures linked to UMNO and its affiliated NGOs. They include the assertion that the opposition is un-Islamic because it includes parties like the Democratic Action Party, whose membership is largely ethnic Chinese.
Allowing this coalition to come to power, the argument goes, would allow it to dismantle the web of state protections that protects Malay Muslims not only from poverty but also from the country’s other “races.” It would also lead to an ethnic Chinese bid for power that would displace Malay Muslims in their own nation – from which they only ejected their last group of colonisers at independence in 1957.
Installing Mahathir as a figurehead is a signal to these voters – and their political patrons – that there will be no dismantling of Malay Muslim privileges. Nor will there be a public reckoning for members and officials of UMNO if their party falls, as Mahathir signalled earlier this week.
Instead, the logic goes, voting for the opposition will only rewind and reset the nation at the point it had reached 20 years ago – when Mahathir and Anwar were last leading the nation together, as the leaders of the very same Barisan that these voters continue to support.
There are two important additional constituencies that Mahathir aims to reassure, even while they express concern over a potential second era of “Mahathirism” and seek to delimit how much power he might wield in a new government.
These are non-Muslim Chinese, Indian and “other” minorities, along with so-called “liberal” Malay Muslims – a term generally given to urban professionals comfortable with interracial and mixed-gender politics. Many of these voters are already comfortable with the opposition, and may fear not only Barisan, but also the government’s new apparent allies, the Pan-Malaysian Islamic Party (PAS).
PAS has left the opposition alliance and is now working in co-ordination with Barisan. It commands a large following of supporters, although it has lost some leaders and supporters to a new party that subsequently split from it, Amanah, which has remained in the opposition.
If the opposition fails, and Barisan wins decisively, minorities and liberals will not like the price PAS will likely extract from Barisan in return for its support – which many fear includes hudud laws and a wholesale Islamisation of the state and public life. But such a transformation would be risky for Malaysia, and destroy its cultivated reputation as a safe and diverse nation in which “moderate” Islam prevails.
Through the 1990s, Mahathir presented himself to these voters as a bulwark against PAS, which he has characterised as similar to the Taliban and opposed to minority rights. A strong argument along these lines might disrupt Barisan-PAS co-ordination, and potentially deliver Barisan a weak win, whose legitimacy the opposition parties will likely challenge.
Najib has instigated a new battery of national security laws that he might consider using if political disaffection continues after a weak result. But, again, using them will be risky, as Malaysia also projects itself as a democracy.
As for the likelihood of an outright opposition win – this would take a surge of energy that seems not to be evident in supporters demoralised by the seeming impossibility of dislodging Barisan and especially UMNO. Even the multi-billion-dollar scandal that broke in 2015, and which remains the subject of a Department of Justice investigation in the US, seems not to have weakened its position.
Nonetheless, the campaign has begun in all but formal terms.
Soft power is the ability of a country to shape other countries’ views, attitudes, perceptions and actions without force or coercion. Its importance has been acknowledged for centuries, though the term was only coined by American political scientist and author Joseph Nye in the late 1980s.
A country’s soft power depends on many factors, including its performance, global image and international reputation. A state can use soft power to attract supporters and partners towards its policies, views and actions.
Take, for instance, the case of China’s giant pandas.
In 685 AD Empress Wu Zetian of the Tang Dynasty presented two giant pandas to the Japanese emperor. More than a millennium later, in 1941, Chinese leader Chiang Kai-Shek gifted another pair to the Bronx Zoo in appreciation of the US’s wartime help. Pandas remain a hallmark of Chinese soft power even today.
These animals have become symbols of China’s efforts in wildlife preservation and environmental protection. They are a way for China to communicate a caring and genial approach and culture.
And soft power will remain a key strategy for China into the coming decades. In October 2017, at the governing party’s national congress, President Xi Jinping outlined steps to enhance China’s soft power and make its culture more globally appealing:
We will improve our capacity for engaging in international communication so as to tell China’s stories well, present a true, multi-dimensional and panoramic view of China, and enhance our country’s soft power.
China is stepping into a soft power vacuum created by the US’s new administration. Since Donald Trump was elected president, the US has eschewed soft power. It’s withdrawn from a global climate change agreement; renegotiating a number of bilateral treaties and taken an openly “America first”, and somewhat isolationist stance. Its cordial relations with many traditional allies have become strained.
China has spotted the gap and is attempting to woo many countries whose US relations are wavering. One of China’s key weapons is the “One Belt, One Road” programme, a USD$900 billion initiative that aims to strengthen land and sea transportation links through major investments in transport infrastructure in Asia, Europe and Africa.
This is the equivalent of the US’s Marshall plan, which significantly improved West European countries’ economies after World War II. This help was not altruistic; nor is China’s “One Belt, One Road” programme. Assisting other nations through economic growth is a way of wielding soft power and advancing a country’s global standing. This will be important for China, which needs to counter its reputation as a one party state with hegemonic intentions.
Culture and tourism are always important aspects of soft power. Some 138 million tourists visited China in 2016, a growth of 3.5% over 2015
Similarly, 122 million Chinese visitors went abroad in 2016, a growth of 4.3% over 2015. This increasing interchange of the visitors will give foreigners an insight into Chinese culture, history and its economic might – all of which will further enhance China’s soft power.
China is also emerging as a global leader in terms of academic and research progress. High income countries’ share of global research and development (R&D) expenditure fell from 88% to 69.3% between 1996 and 2013.
China alone filled this gap. It increased its share from a paltry 2.5% to 19.6% in 17 years. Recently, China’s average annual R&D expenditure growth has been 18.3%, compared to an anaemic growth rate in upper and middle income countries of 1.4%.
Increased educational and research activities have ensured that the number of foreign students in China is increasing rapidly. China now ranks third in attracting foreign students, after the US and UK. Its universities are climbing the global rankings. This, along with rapid internationalisation, policies that support foreign students, and affordability of study and living costs compared to the West, means China could soon become the top destination for international students.
And the reverse is also true. Of some 5 million international students pursuing higher education outside their countries, nearly 25% are Chinese. It’s another form of cultural interchange that will contribute to China’s soft power, as are the many Confucius Institutes set up around the world to showcase China’s culture, history, language, economic and social development. The idea is somewhat similar to the UK’s British Councils, Germany’s Goethe Institutes and France’s Alliance Francaise.
China fills gap left by US
American soft power, on the other hand, is now in retreat.
The asymmetry of views between leaders of the world’s two soft powers has made Xi the poster child for globalisation, free trade and international cooperation.
During the Asia-Pacific Economic Cooperation Summit in November 2017, in Vietnam, Trump reconfirmed his “America first” policy. This approach will further decrease America’s soft power.
Meanwhile, Xi is singing from a different hymn sheet. Also in Vietnam, he noted in his speech that globalisation is an “irreversible historical trend” and championed multilateral trading regimes.
He presented a vision of the future that is interconnected and invited “more countries to ride the fast train of Chinese development.”
China’s rise as the world’s leading soft power will not be without hurdles. It must tackle border issues with its neighbours; navigate the current South China Sea disputes and find solutions to its extensive environmental pollution problems, among other things.
Despite these challenges, the US’s many missteps and China’s demonstrated social and economic success – as well as its increasing use of soft power – mean that the Asian giant is on the rise.
But for most Australians, the most visible impact of this crisis has been their ever-increasing electricity bills. Electricity prices have become a political hot potato, and the blame game has been running unchecked for more than a year.
Electricity retailers find fault with governments, and renewable energy advocates point the finger at the nasty old fossil-fuel generators. The right-wing commentariat blames renewables, while the federal government blames everyone but itself.
The truth is there is no silver bullet. No single factor or decision is responsible for the electricity prices we endure today. Rather, it is the confluence of many different policies and pressures at every step of the electricity supply chain.
Four components make up your electricity bill. Each has contributed to this increase.
The biggest culprit has been the network component – the cost of transporting the electricity. Next comes the retail component – the cost of billing and servicing the customer. Then there is the wholesale component – the cost of generating the electricity. And finally, the government policy component – the cost of environmental schemes that we pay for through our electricity bills.
Each component has a different tale, told differently in every state. But ultimately, this is a story about a decade of policy failure.
Network costs form the biggest part of your electricity bill. Australia is a big country, and moving electricity around it is expensive. As the graph above shows, network costs have contributed 40% of the total price increase over the past decade.
The reason we now pay so much for the network is simply that we have built an awful lot more stuff over the past decade. It’s also because it was agreed – through the industry regulator – that network businesses could build more network infrastructure and that we all have to pay for it, regardless of whether it is really needed.
Network businesses are heavily regulated. Their costs, charges and profits all have to be ticked off. This is supposed to keep costs down and prevent consumers being charged too much.
That’s the theory. But the fact is costs have spiralled. Between 2005 and 2016 the total value of the National Electricity Market (NEM) distribution network increased from A$42 billion to A$72 billion – a whopping 70%. During that time there has been little change in the number of customers using the network or the amount of electricity they used. The result: every unit of electricity we consume costs much more than it used to.
There are several reasons for this expensive overbuild. First, forecasts of electricity demand were wrong – badly wrong. Instead of ever-increasing consumption, the amount of electricity we used started to decline in 2009. A whole lot of network infrastructure was built to meet demand that never eventuated.
Second, governments in New South Wales and Queensland imposed strict reliability settings – designed to avoid blackouts – on the networks in the mid-2000s. To meet these reliability settings, the network businesses had to spend a lot more money reinforcing their networks than they otherwise would have.
Third, the way in which network businesses are regulated encourages extra spending on infrastructure. In an industry where you are guaranteed a 10% return on investment, virtually risk-free – as network businesses were between 2009 and 2014 – you are inclined to build, build, build.
The blame for this “gold-plating” of network assets is spread widely. Governments have been accused of panicking and setting reliability standards too high. The regulator has copped its share for allowing businesses too much capital spend and too high a return. Privatisation has also been criticised, which is slightly bizarre given that the worst offenders have been state-owned businesses.
The second biggest increase in your bill has been the amount we pay for the services provided to us by retailers. Across the NEM, 26% of the price increase over the past decade has been due to retail margins.
This increase in the retail component was never supposed to happen. To understand why, you must go back to the rationale for opening the retail sector to competition. Back in the 1990s, it was felt that retail energy was ripe for competition, which would deliver lower prices and more innovative products for consumers.
In theory, where competition exists, firms seek to reduce their costs to maximise their profits, in turn allowing them to reduce prices so as to grab as many customers as possible. The more they cut their costs, the more they can cut prices. Theoretically, costs are minimised and profits are squeezed. If competition works as it’s supposed to, the retail component should go down, not up.
But the exact opposite has happened in the electricity sector. In Victoria, the state that in 2009 became the first to completely deregulate its retail electricity market, the retail component of the bill has contributed to 36% of the price increase over the past decade.
On average, Victorians pay almost A$400 a year to retailers, more than any other mainland state in the NEM. This is consistent with the Grattan Institute’s Price Shock report, which showed that rising profits are causing pain for Victorian electricity consumers. Many customers remain on expensive deals, and do not switch to cheaper offers because the market is so complicated. These “sticky” customers have been cited as the cause of “excessive” profits to retailers.
But the new figures provided by the ACCC, which come directly from retailers, paint a different picture. The ACCC finds that the increase in margins in Victoria is wholly down to the increasing costs of retailers doing business.
There are reasons why competition might drive prices up, not down. Retailers now spend money on marketing to recruit and retain customers. And the existence of multiple retailers leads to duplications in costs that would not exist if a single retailer ran the market.
But these increases should be offset by retailers finding savings elsewhere, and this doesn’t seem to have happened. History may judge the introduction of competition to the retail electricity market as an expensive mistake.
So far, we have accounted for 65% of the bill increase of the past decade, and neither renewables nor coal have been mentioned once. Nor were they ever likely to be. The actual generation of electricity has only ever formed a minor portion of your electricity bill – the ACCC report shows that in 2015-16 the wholesale component constituted only 22% of the typical bill.
In the past year, however, wholesale prices have really increased. In 2015-16, households paid on average A$341 a year for the generation of electricity – far less than they were paying in 2006-07. But in the past year, that is estimated to have increased to A$530 a year.
Generators, particularly in Queensland, have been engaging in questionable behaviour, but it is the fundamental change in the supply and demand balance that means higher prices are here to stay for at least the next few years.
The truth is the cost of generating electricity has been exceptionally low in most parts of Australia for most of the past two decades. When the NEM was created in 1998, there was arguably more generation capacity in the system than was needed to meet demand. And in economics, more supply than demand equals low prices.
Over the years our politicians have been particularly good at ensuring overcapacity in the system. Most of the investment in generation in the NEM since its creation has been driven by either taxpayers’ money, or government schemes and incentives – not by market forces. The result has been oversupply.
Up until the late 2000s the market kept chugging along. Then two things happened. First, consumers started using less electricity. And second, the Renewable Energy Target (RET) was ramped up, pushing more supply into the market.
Demand down and supply up meant even more oversupply, and continued low prices. But the combination of low prices and low demand put pressure on the finances of existing fossil fuel generators. Old generators were being asked to produce less electricity than before, for lower prices. Smaller power stations began to be mothballed or retired.
Something had to give, and it did when both Alinta and Engie decided it was no longer financially viable to keep their power stations running. Far from being oversupplied, the market is now struggling to meet demand on hot days when people use the most electricity. The result is very high prices.
A tight demand and supply balance with less coal-fired generation has meant that Australia increasingly relies on gas-fired generation, at a time when gas prices are astronomical, leading to accusations of price-gouging.
Put simply, Australia has failed to build enough new generation over recent years to reliably replace ageing coal plants when they leave the market.
Is it renewable energy’s fault that coal-fired power stations have closed? Yes, but this is what needs to happen if we are to reduce greenhouse emissions. Is it renewables’ fault that replacement generation has not been built? No. It’s the government’s fault for failing to provide the right environment for new investment.
The current predicament could have been avoided if we had a credible and comprehensive emissions reduction policy to drive investment in the sector. Such a policy would give investors the confidence to build generation with the knowledge about what carbon liabilities they may face in the future. But the carbon price was repealed in 2014 and replaced with nothing.
We’re still waiting for an alternative policy. We’re still waiting for enough generation capacity to be built. And we’re still paying sky-high wholesale prices for electricity.
Green and gold
Finally, we have the direct cost of government green schemes over the past decade: the RET; the household solar panel subsidies; and the energy-efficiency incentives for homes and businesses.
They represent 16% of the price increase over the past 10 years – but they are still only 6% of the average bill.
If the aim of these schemes has been to reduce emissions, they have not done a very good job. Rooftop solar panel subsidies have been expensive and inequitable. The RET is more effective as an industry subsidy than an emissions reduction or energy transition policy. And energy efficiency schemes have produced questionable results.
It hasn’t been a total waste of money, but far deeper emissions cuts could have been delivered if those funds had been channelled into a coherent policy.
The story of Australia’s high electricity prices is not really one of private companies ripping off consumers. Nor is it a tale about the privatisation of an essential service. Rather, this is the story of a decade of policy drift and political failure.
Governments have been repeatedly warned about the need to tackle these problems, but have done very little.
Instead they have focused their energy on squabbling over climate policy. State governments have introduced inefficient schemes, scrapped them, and then introduced them again, while the federal government has discardedpolicies without even trying them.
There is a huge void where our sensible energy policy should be. Network overbuild and ballooning retailer margins both dwarf the impact of the carbon price, yet if you listen only to our politicians you’d be forgiven for thinking the opposite.
And still it goes on. The underlying causes of Australia’s electricity price headaches – the regulation of networks, ineffective retail market competition, and our barely coping generators – need immediate attention. But still the petty politicking prevails.
The Coalition has rejected the Clean Energy Target recommended by Chief Scientist Alan Finkel. Labor will give no guarantee of support for the government’s alternative policy, the National Energy Guarantee. Some politicians doubt the very idea that we need to act on climate change. Some states have given up on Canberra and are going it alone.
We’ve been here before and we know how this story ends. Crisis wasted.
As we approach the end of the year, it’s useful to look back and forward. Now is an auspicious time, as two major energy-related reports have been released this week: the federal government’s review of their climate change policies, and a discussion paper from the Australian Energy Market Operator (AEMO) on future energy paths.
The difference between the two is striking. The AEMO paper is practical, direct and realistic. On the other hand, the climate policy review relies essentially on Australia buying lots of international carbon permits to meet our Paris target (and, implicitly, on state governments taking up the challenge their Canberra colleagues have largely abanondoned).
It’s amusing to read a document that plays with numbers in such creative ways. But it is a fairy story, and it’s no way to drive national climate policy.
But things have in fact shifted a long way – the revolution is accelerating and unstoppable. The federal government is almost irrelevant; the public statements and policies it presents are simply aimed at getting “something” through the Coalition party room, or trying to throw blame on others. It’s very sad.
The real games are being played out within state governments; in battles between energy policy agencies and regulators; by emerging industry players who do not even have formal roles in energy legisation; and by business and the community as they defend themselves from the failures around them by implementing “behind the meter” solutions and working together.
The real heavy lifters
Medals of Valour should be awarded to Chief Scientist Alan Finkel, AEMO chief executive Audrey Zibelman, and South Australian Premier Jay Weatherill.
The government’s response to this year’s Finkel Review showed that no amount of compromise would allow a sensible energy and climate policy to pass through the minefield of the Coalition party room. Prime Minister Malcolm Turnbull and Environment and Energy Minister Josh Frydenberg, both of whom know what they need to do, simply have too little political capital within that place to drive realistic energy policy.
But the Finkel Review also successfully recommended many changes that will help to fix the physical operation of the grid. Innovation and the laws of physics have finally begun to triumph over market politics and ideology.
AEMO worked out a way to get around the glacial and obstructive tactics of the Australian Energy Market Commission on demand-side action by setting up a “pilot project” to drive demand response. It has been clear for decades that this is a very cost-effective tool. Zibelman has been a voice of practical reality and clear understanding of the future of energy, including the demand side, and AEMO’s future energy paths reflects that.
Weatherill has weathered a storm of abuse over his state’s innovative energy strategy. His government has shown how a diversified approach can transform an energy system in little more than a year. But he needs to put more effort into long term energy efficiency and energy productivity improvement measures integrated with renewables and storage, to reduce pressure on electricity systems over time. For example, home cooling comprises a third of South Australia’s peak electricity demand, but could be slashed by efficient buildings and cooling equipment.
What lies ahead
Looking forward, the coming year will be shaped by some key issues, some of which are already playing out at a frenetic pace. Consider a small sample of many recent events:
As mentioned, AEMO has released a discussion paper framing a very different electricity future, and including a low-carbon scenario.
The Victorian Essential Services Commission has proposed a new “time of day” feed-in price for rooftop solar that reaches 29 cents per kilowatt-hour in afternoons and evenings. If approved, this will be a game-changer, as adding battery storage to rooftop solar will become far more attractive.
Meanwhile the federal government has released energy modelling to underpin ongoing negotiation on the National Energy Guarantee (NEG) that is simply irrelevant and embarrassing. The Energy Security Board’s involvement in this has undermined perceptions of its independence, especially when it is contrasted with the vision AEMO is discussing in its paper.
While the states have agreed to continue discussion on the NEG in April, there are some major hurdles. Primarily, states must be allowed to set and achieve their own energy targets: the federal energy minister has put the blame for problems on the states, and they now have to be seen by their voters to act.
Second, the design must ensure it does not give the dominant energy companies even more power to distort markets. Some members of the Energy Security Board seem to understand the challenges, and are optimistic they can be overcome. Time will tell.
The next South Australian election will be held in three months, on March 17, 2018. A South Australian Newspoll, conducted October to December from a sample of 800, had primary votes of 32% for Nick Xenophon’s SA-BEST party, 29% Liberal, 27% Labor, and 6% Greens.
On the better premier measure, Nick Xenophon had 46% of the vote, followed by incumbent Jay Weatherill on 22% and Opposition Leader Steven Marshall on 19%.
Xenophon’s strong performance is partly explained by the dire ratings of both Weatherill and Marshall. Weatherill had 53% dissatisfied, 34% satisfied, for a net approval of minus 19. Marshall had 50% dissatisfied, 27% satisfied, for a net approval of minus 23.
The previous South Australian Newspoll was taken in late 2015. A Galaxy poll taken for the Australian Bankers’ Association in early October gave the Liberals 31% of the primary vote, SA-BEST 30%, and Labor 26%. The better premier measure in that poll had 41% Xenophon, with Weatherill and Marshall both on 21%.
If the primary votes in Newspoll were replicated at the March 2018 election, SA-BEST would probably win a clear majority of lower house seats. Both major parties’ supporters dislike the other major party, so most Labor voters will preference SA-BEST ahead of the Liberals, and vice versa.
There are still three months until the election, and SA-BEST will be attacked ferociously in the coming weeks. However, the disdain for both major parties, and Xenophon’s popularity, gives SA-BEST a real opportunity to end the major party duopoly in South Australia.
The total vote for all “others” in Newspoll is 6%. At the 2014 state election, Family First won 6%. This poll does not suggest the Australian Conservatives, formed by Cory Bernardi, are surging.
Turnbull loses his 25th successive Newspoll, 53-47
This week’s Newspoll, conducted December 14-17 from a sample of 1,670, gave federal Labor a 53-47 lead, unchanged from last fortnight. Primary votes were 37% Labor (steady), 36% Coalition (steady), 10% Greens (steady), and 7% One Nation (down one).
This is Malcolm Turnbull’s 25th successive Newspoll loss. Tony Abbott lost 30 in a row before he was dumped.
Turnbull’s ratings were unchanged at 57% dissatisfied, 32% satisfied, for a net approval of minus 25. Bill Shorten’s net approval fell three points to minus 24. Turnbull led by 41-34 as better prime minister (39-33 last fortnight).
The 7% for One Nation is its lowest support in Newspoll since December 2016, before One Nation was included in the party readout. On the overall vote for left- and right-wing parties, the left leads by 47-43 in this Newspoll (47-44 last fortnight). This is the first change in the overall left/right balance since October.
The passage of same-sex marriage legislation through parliament and the media furore over Sam Dastyari do not appear to have improved the Coalition’s position. Most voters realise that the large “yes” vote in the plebiscite forced the Coalition to act. It is likely that only partisans are interested in Dastyari.
Newspoll (paywalled) asked who was better at handling the economy, national security, asylum seekers, cost of living, and tax cuts. Turnbull had more than 20-point leads over Shorten on the first three issues, and a 40-33 lead on tax cuts. Shorten led by 43-41 on cost of living.
These questions are biased in favour of Turnbull, as they appeal to the Coalition’s perceived strength on the economy, national security and asylum seekers. There were no questions regarding issues like health, education and climate change, where Labor is perceived to be better than the Coalition.
Incumbent prime ministers tend to outperform their party, so Labor would probably have obtained more favourable results had Newspoll asked Coalition vs Labor, not Turnbull vs Shorten.
Essential 53-47 to Labor
In this week’s Essential, the Coalition gained two points since last fortnight, reducing Labor’s lead to 53-47. Primary votes were 38% Labor, 37% Coalition, 9% Greens and 7% One Nation. Essential uses a two-week sample of about 1,800, with additional questions based on one week’s sample.
All proposed reforms of political donations were very popular, with the exception of banning donations and making all political party spending taxpayer-funded (50-30 opposed).
Respondents were asked whether the last 12 months had been good or bad for various items. The economy had a net +11 rating, large companies a net +22, your workplace a net +34, and you and your family a net +27. The planet had a net -22 rating and Australian politics a net -36.
Respondents were also asked about their expectations for 2018, though Essential apparently thought the next year is 2017.
By 54-29, voters disapproved of the proposed A$50 billion in company tax cuts to medium and large businesses (50-30 in October). By 47-8, voters thought personal income tax cuts were more important than business tax cuts, with 33% for both being equally important.
37% thought interference in Australian politics by foreign countries is a major problem, 36% a minor problem, and 12% did not think it was a problem at all.
Bennelong preference flows
With virtually all votes counted in Saturday’s Bennelong byelection, Liberal John Alexander defeated Labor’s Kristina Keneally by 54.9-45.1, a 4.9-point swing to Labor since the 2016 election. Primary votes were 45.1% Alexander, 35.8% Keneally, 6.7% Greens, 4.3% Australian Conservatives, and 3.1% Christian Democrats.
The informal rate of 8.1% is far too high, and indicates savings provisions should be introduced so that votes can still be counted even if voters do not number every square. There is confusion in New South Wales because state elections use optional preferential voting.
I have information about preference flows from one booth in Bennelong from a Labor scrutineer. At this booth, Keneally won 88% of Greens preferences, but Alexander won 85% of Australian Conservatives’ preferences and 77% of Christian Democrat preferences.
Preferences of other candidates split evenly between Keneally and Alexander. This booth may not be representative of the whole electorate, but these preference flows seem reasonable.
While Newspoll and Galaxy understated Alexander by four-to-five points, these polls were of one seat. Australian pollsters have been bad with seat polling, but very good with national and state polls. The error in Bennelong does not affect the trustworthiness of Newspoll’s national polls.
There is not a great deal to be said for Malcolm Turnbull’s reshuffle, and quite a lot to be said against it.
The immediate concentration has been on the angst it’s caused – and that is due to Deputy Prime Minister Barnaby Joyce, who has the right to nominate his party’s ministers.
Joyce’s decision to axe Victorian National Darren Chester from his cabinet line-up in favour of a first-term Queenslander, David Littleproud, trashes the notion of merit and calls into question the Nationals leader’s judgement, to say nothing of his loyalty to colleagues.
A competent minister who came through as a measured voice for the Nationals when Joyce was away on his byelection trail, Chester has been unceremoniously pushed out on the ground that his retention would make for one Victorian National too many in the cabinet.
To an extent, Chester invited his own execution. He successfully advocated fellow Victorian Bridget McKenzie for deputy leader, believing – as he put it after his demotion – that “our party needs to connect more with younger voters, with female voters, and Bridget speaks in a way on issues that perhaps not all National Party members speak about”.
Joyce would have preferred Queensland senator and fellow cabinet member Matt Canavan as deputy, although sources say he didn’t canvass in the contest. Joyce and Canavan are close – Canavan previously was his chief-of-staff. Canavan is also deeply conservative on social issues, and he and Chester were on opposite sides of the marriage debate.
Only Joyce can know whether these factors counted against Chester as well as his being from Victoria – he’s certainly not going to admit they did.
If Joyce wanted to deal with his Victorian excess in a much less disruptive way he could have swapped Chester with Michael McCormack. McCormack is a member of the outer ministry and from New South Wales, as was Fiona Nash, the previous Nationals deputy who was turfed from parliament by the High Court. That would have retained the old state balances.
But Joyce felt he had a Queensland problem – the Nationals from the north have been vociferous about wanting to boost their presence in the higher reaches of the government.
The intention was to demote Chester to an assistant ministry, opening a vacancy for him by sacking Queenslander Keith Pitt, with whom Joyce doesn’t get on.
But Chester declined the assistant minister offer. Meanwhile, Pitt – who believed he should be promoted – was furious. When an assistant ministry was offered back to him, he said no. The position went to Damian Drum – a Victorian.
Littleproud, who holds the outback Queensland seat of Maranoa, is spoken well of as a future talent. But he’s been in Canberra for the parliamentary equivalent of five minutes, and has had no frontbench role before now.
A cabinet minister has not just their own portfolio to think about, but they need to be strong contributors across government, which requires time to acquire skills and knowledge. Disgruntled Nationals say Pitt would have been a more obvious choice if it hadn’t been for the serious personality clash between Joyce and him.
So Joyce can boast that he has delivered a Queensland National into cabinet, but the cost has been creating resentment in his ranks and a bad vibe around the reshuffle generally. Turnbull appeared dismayed, distancing himself from the decision, describing Chester as an “outstanding” minister, and regretting his loss.
It is not just the axing of Chester that is a problem in this reshuffle.
Turnbull pressed Attorney-General George Brandis to take the London high commissioner job, despite Brandis recently warning Turnbull that his departure would diminish the Liberal voice from Brisbane. As it happens, Brandis’ Liberal replacement in cabinet, John McVeigh, represents Groom, based on Toowoomba.
Losing Brandis from cabinet will also weaken the voice of the moderates at the senior level of the government.
It will likely mean there will be less of a check on Peter Dutton and his new home affairs super-portfolio.
Incoming attorney-general Christian Porter has plenty of qualifications for the job – he was attorney-general in Western Australia. But he will probably be less inclined to be a tough watchdog on home affairs and its highly assertive minister than Brandis would have been.
The move is a prestigious one for Porter. But for a man who has been seen as a possible future leadership contender, it is one that takes him into something of a political cul-de-sac. It is not a portfolio that gives its occupant the exposure or sort of experience useful for climbing the greasy pole.
Brandis’ replacement as Senate leader, Mathias Cormann, is one of the most competent ministers, and a skilled negotiator with the crossbench. He will do a good job.
Michaelia Cash, who has been under criticism for the way she and her office handled what was a political pursuit of Bill Shorten’s union past, has been given expanded responsibilities.
Several changes are deck-shuffling, or unremarkable steps up.
And notably, the reshuffle has not increased the number of women in cabinet. All that’s happened on this front is one woman Nationals deputy has slid into the place of another.
Prime Minister’s Malcolm Turnbull’s reshuffled cabinet has five new faces, but one of the Nationals’ best performers, Darren Chester, has been unceremoniously dumped by his party leader Barnaby Joyce.
Christian Porter replaces George Brandis – who quits parliament to become high commissioner to London – as attorney-general, in an extensive frontbench overhaul that Turnbull said focused on the dual themes of economic growth and jobs and national security. Porter is a former Western Australian attorney-general.
The new faces in cabinet are the Nationals’ freshly elected deputy Bridget McKenzie, Michael Keenan, Dan Tehan, John McVeigh, and David Littleproud.
McVeigh and Littleproud entered federal parliament only last year, and have leapt straight from the backbench, although McVeigh served as a minister in the Queensland parliament.
Joyce, who takes Chester’s infrastructure portfolio, told him he had to go from cabinet on geographic grounds. Both Chester and McKenzie – whom Chester strongly backed to become deputy over Joyce’s preferred candidate Matt Canavan – are from Victoria, a state in which the Nationals only have four federal MPs.
When quizzed at his news conference about Chester being dropped, Turnbull indicated it was Joyce’s call – the Nationals’ leader gets to choose the party’s ministers – saying pointedly: “Barnaby Joyce will no doubt be able to explain this directly”.
“Plainly the Nationals have a very large component of their partyroom that comes from Queensland and Barnaby was keen to see that reflected in their representatives in the cabinet,” Turnbull said.
Turnbull said Chester had been an “outstanding minister” and he regretted he was no longer on the frontbench.
Chester told a news conference he had been offered a position of assistant minister but he had declined it.
He made it clear he felt he had been treated badly. “I don’t think my loyalty to the leadership team has ever been questioned. I’ve gone above and beyond on many occasion to support the prime minister and the deputy prime minister, Barnaby Joyce,” he said.
Joyce has also sacked Keith Pitt, who is from Queensland, as an assistant minister.
The catapulting into cabinet of the inexperienced Littleproud, who is from the Queensland seat of Mananoa, to replace Chester, is likely to stir resentment among Nationals who have waited much longer for promotion.
McKenzie, who as deputy Nationals leader goes automatically into cabinet, will become minister for sport, rural health and regional communications.
Keenan, previously justice minister, moves to human services; Tehan goes from veterans’ affairs to social services, held before by Porter; McVeigh takes regional development; while Littleproud gets agriculture and water resources.
As earlier announced, Peter Dutton has a new mega portfolio of home affairs. Two junior ministers and an assistant minister will sit under him. Angus Taylor becomes minister for law enforcement and cyber security, and Alan Tudge will be minister for citizenship and multicultural affairs. Alex Hawke is assistant minister for home affairs.
Michaelia Cash, who has been employment and workplace relations minister, becomes minister for jobs and innovation, which includes the industry area.
Arthur Sinodinos, who has been industry minister, is being treated for cancer and asked not to be considered for the new ministry, while making it clear he hoped to return to a senior ministerial or other government role later.
Finance Minister Mathias Cormann adds permanently to his responsibilities the post of special minister of state, which he has recently overseen in a temporary capacity.
Cormann, seen as very competent in negotiating with the Senate crossbenchers, also steps up into the Brandis’ role of Senate leader.
In changes in the outer ministry, Craig Laundy has been promoted to minister for small and family business, workplace and deregulation. This will include direct responsibility for workplace relations, recently a controversial area for Cash who, however, retains overall responsibility as the senior portfolio minister.
Turnbull said Cash, Laundy and Zed Seselja, who becomes assistant minister for science, jobs and innovation, “will work together to make sure we harness the jobs of the future through new industries and small business”.
Paul Fletcher stays as minister for urban infrastructure, with some expanded responsibilities.
Michael McCormack, a National, moves from small business to veterans’ affairs and defence personnel.
Backbencher Melissa Price is elevated to become assistant minister for the environment.
The Nationals’ David Gillespie moves to a newly created role of assistant minister for children and families.
Victorian National Damien Drum will be assistant minister to the deputy prime minister.
David Coleman becomes assistant minister for finance, while Luke Hartsuyker moves to become assistant minister for trade, tourism and investment.
Opposition Leader Bill Shorten said: “All that we can deduce from this reshuffle is that the civil war which is a fact of life in the Liberal Party has now infected the National Party. How else can you explain a competent minister like Darren Chester being demoted?
“What we have here is we have a prime minister and a deputy prime minister who are engaging in such hubris and arrogance that they are now just punishing the people they don’t like in their own party.”