We asked 13 economists how to fix things. All back the RBA governor over the treasurer


Peter Martin, Crawford School of Public Policy, Australian National University

Thirteen leading economists have declared their hands in the stand off between the government and the Governor of the Reserve Bank over the best way to boost the economy.

All 13 back Reserve Bank Governor Philip Lowe.

They say that, by itself, the Reserve Bank cannot be expected to do everything extra that will be needed to boost the economy.

All think that extra stimulus will be needed, and all think it’ll have to come from Treasurer Josh Frydenberg, as well as the bank.

All but two say the treasurer should be prepared to sacrifice his goal of an immediate budget surplus in order to provide it.

The 13 are members of the 20-person economic forecasting panel assembled by The Conversation at the start of this year.

All but one have been surprised by the extent of the economic slowdown.




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The 13 represent ten universities in five states.

Among them are macroeconomists, economic modellers, former Treasury, IMF, OECD and Reserve Bank officials and a former government minister.

The Bank needs help

At issue is the government’s contention, spelled out by Frydenberg’s treasury secretary Steven Kennedy in evidence to the Senate last month, that there is usually little role for government spending and tax (“fiscal”) measures in stimulating the economy in the event of a downturn.

Absent a crisis, economic weakness was “best responded to by monetary policy”.

Monetary policy – the adjustment of interest rates by the Reserve Bank – is nearing the end of its effectiveness in its present form. The bank has already cut its cash rate to close to zero (0.75%) and will consider another cut on Tuesday.

It is preparing to consider so-called “unconventional” measures, including buying bonds in order to force longer-term interest rates down toward zero.




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Governor Lowe has made the case for “fiscal support, including through spending on infrastructure” saying there are limits to what monetary policy can achieve.

The 13 economists unanimously back the Governor.

Seven of the 13 say what is needed most is fiscal stimulus (including extra government spending on infrastructure), three say both fiscal and monetary measures are needed, and three want government “structural reform”, including measures to help the economy deal with climate change and remove red tape.

None say the Reserve Bank should be left to fight the downturn by itself without further help from the government.

There is plenty of room for fiscal stimulus, particularly infrastructure spending – Mark Crosby, Monash University

I agree with the emerging consensus that monetary policy is no longer effective when interest rates are so low – Ross Guest, Griffith University

It is time for coordinated monetary and fiscal policies to boost domestic demand – Guay Lim, Melbourne Institute

The surplus can wait

Eleven of the 13 believe the government should abandon its determination to deliver a budget surplus in 2019-20.

Renee Fry-McKibbin. Ease surplus at all costs.
ANU

Economic modeller Renee Fry-McKibbin says the government should “ease its position of a surplus at all costs”.

Former Commonwealth Treasury and ANZ economist Warren Hogan says achieving a surplus in the current environment would have “zero value”.

Former OECD director Adrian Blundell-Wignall says that rather than aiming for an overall budget surplus, the government should aim instead for an “net operating balance”, a proposal that was put forward by Scott Morrison as treasurer in 2017.

The approach would move worthwhile infrastructure spending and borrowing onto a separate balance sheet that would not need to balance.

Political debate would focus instead on whether the annual operating budget was balanced or in deficit.

Former treasury and IMF economist Tony Makin is one of only two economists surveyed who backs the government’s continued pursuit of a surplus, saying annual interest payments on government debt have reached A$14 billion, “four times the foreign aid budget and almost twice as much as federal spending on higher education”.

Tony Makin. Surplus needed for budget repair.
Griffith University

Further deterioration of the balance via “facile fiscal stimulus” would risk Australia’s creditworthiness.

However Makin doesn’t think the government should leave everything to the Reserve Bank.

He has put forward a program of extra spending on infrastructure projects that meet rigorous criteria, along with company tax cuts or investment allowances paid for by government spending cuts.

Former trade minister Craig Emerson also wants an investment allowance, suggesting businesses should be able to immediately deduct 20% of eligible spending.

It’s an idea put forward by Labor during the 2019 election campaign. Treasurer Josh Frydenberg has indicated something like it is being considered for the 2020 budget.

Emerson says it should be possible to deliver both the investment allowance and a budget surplus.

Quantitative easing would be a worry

Five of the 13 economists are concerned about the Reserve Bank adopting so-called “unconvential” measures such as buying government and private sector bonds in order to push long-term interest rates down toward zero, a practice known as quantitative easing.

Jeffrey Sheen and Renee Fry-McKibbin say it should be kept in reserve for emergencies.

Adrian Blundell-Wignall and Mark Crosby say it hasn’t worked in the countries that have tried it.

A quantitative easing avalanche policy by the European central bank larger than the entire UK economy has left inflation below target and growth fading. Quantitative easing destroys the interbank market, under-prices risk, and encourages leverage and asset speculation – Adrian Blundell-Wignall

Steve Keen says in both Europe and the United States quantitative easing enriched banks and drove up asset prices but did little to boost consumer spending, “because the rich don’t consume much of the wealth”.

The treasurer should step up

Taken together, the responses of the 13 economists suggest it is ultimately the government’s responsibility to ensure the economy doesn’t weaken any further, and that it would be especially unwise to palm it off on to the Reserve Bank at a time when the bank’s cash rate is close to zero and the effectiveness of the unconventional measures it might adopt is in doubt.

Measures the government could adopt include increasing the rate of the Newstart unemployment benefit, boosting funding for schools and skills training, borrowing for well-chosen infrastructure projects with a social rate of return greater than the cost of borrowing, further tax cuts that double as tax reform (including further tax breaks for business investment) and spending more on programs aimed at avoiding the worst of climate change and adapting to it.

The economists are backing the governor in his plea for help. They think he needs it.


The 13 economists surveyed




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The Conversation


Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

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

Is the Morrison government ‘authoritarian populist’ with a punitive bent?



Scott Morrison’s government may be more authoritarian populist than strictly conservative.
AAP/Lukas Coch

Carol Johnson, University of Adelaide

In a recent interview Malcolm Turnbull raised the possibility that these days many so-called “conservatives” in the Liberal Party might be better described as “authoritarian populists”.

It would be easy to dismiss his comments as being those of a bitter former leader. But maybe Turnbull has a point, and perhaps it might even be applied more broadly to the Morrison government.

Although the term “authoritarian populism” is often associated with far-right parties, it has also been used to describe mainstream governments, such as those of Margaret Thatcher (1979-1990).




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Thatcherite populist rhetoric mobilised the people against big government and elite special interests, which was combined with authoritarian measures such as increased policing of ethnic minorities and militant unions.

Authoritarian populist is a term now sometimes applied to Donald Trump. So it is well worth asking whether the Morrison government also has some authoritarian populist tendencies.

This is particularly the case given Morrison’s recent embrace of a Trump-influenced anti-globalist rhetoric, which seems partly aimed at asserting Australian independence from international human rights frameworks.

The populist tinge to Morrison’s politics was obvious during the 2019 election campaign. Morrison countered Labor’s own populist arguments (standing against the “top end of town”) by using an alternative populism that mobilised the people against big-spending, big-taxing Labor governments. He argued that Labor would rip off ordinary citizens, run up big debts and ruin the economy, costing jobs in the process.

Morrison’s election persona of “ScoMo”, the warm and friendly daggy dad from the suburbs, might not seem authoritarian. However, even then, there were authoritarian tendencies creeping in to his populism. This is not just in his attitudes to asylum seekers, but also to Australians. For example, Morrison’s slogan: “A fair go for those who have a go” implied that some welfare recipients didn’t deserve the benefits they were getting.

Morrison’s ‘daggy dad’ persona may not seem authoritarian, but there are strains of it in his populism.
AAP/Craig Golding

Indeed, the Morrison government’s authoritarian policy agenda also has a punitive element that has become more evident since the election. Not only has the government emphasised it won’t increase Newstart (despite even business groups calling for an increase), but welfare recipients have been increasingly demonised.

The social services minister reportedly rejected increasing Newstart on the grounds that many welfare recipients would just spend the money on drugs and alcohol. The government has instead revived punitive mandatory drug-testing proposals for welfare recipients.

The government has also supported an expansion of the cashless welfare card, despite trenchant criticisms from the Australian Council of Social Service.

Meanwhile, Peter Dutton has suggested climate change protesters should face mandatory imprisonment and lose their unemployment benefits.

Morrison has dismissed calls for greater media freedom with the populist argument that journalists should not be “above the law”. (In doing so, he implies journalists are an elitist group demanding special privileges denied to ordinary people.)

Yet it is governments that make the law, including authoritarian and punitive laws that can shield them from proper democratic scrutiny. Suggesting that the attorney-general should have the final say on whether police proceed with prosecutions against journalists compounds, rather than reduces, the problem.

It is not just powerful media organisations facing the government’s authoritarian streak. Attacking higher energy prices is a popular move (and easier for the Liberals than developing a full energy policy, given internal divisions).

But businesses have expressed their concern at the “big stick” potentially being wielded against them. Predictably, though, it is unions that face the government’s most authoritarian measures, with the ACTU arguing the proposed new laws are designed to bust them.

Admittedly, as I have argued elsewhere, none of these authoritarian tendencies are totally new. The Howard government had a history of tough legislation against unions and of defunding advocacy groups.

Australian governments have introduced increasingly authoritarian measures that the United Nations and human rights organisations have criticised previously for undermining Australian democracy, including under Turnbull’s watch.

Many moderate Liberals who remembered Turnbull from his libertarian spycatcher days, opposing British government secrecy, were sadly disappointed by his failure to stand up to the right-wingers in his party on such issues. (Admittedly, Labor often capitulated on so-called national security issues as well.)

Nor is it unusual for conservatives in the party to demonise protesters. Indeed, a NSW Liberal premier once reportedly urged a driver to run them over.




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However, the attitudes towards Newstart, for example, are very different from the days when Robert Menzies was proud of increasing unemployment benefits. The authoritarian industrial relations measures are also a far cry from the social liberal traditions that used to influence the Liberal Party. The eroding of civil liberties will be concerning to many small-“l” Liberal voters, as well as to more left-wing voters.

Some Turnbull supporters would have felt relieved when he was replaced by Morrison rather than the Coalition’s hard man, Dutton.

However, perhaps “ScoMo” is just a more personable Dutton in some respects. Whether his government’s punitive measures will eventually undermine Morrison’s warm and friendly election image remains to be seen.The Conversation

Carol Johnson, Adjunct Professor, Department of Politics and International Relations, University of Adelaide

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

Why the government’s proposed facial recognition database is causing such alarm



Andrew Hastie said the broad objectives of the identity-matching system were sound, but key changes were needed to ensure privacy and transparency.
Lukas Coch/AAP

Sarah Moulds, University of South Australia

Since before the 2019 election, the Morrison government has been keen to introduce a new scheme that would allow government agencies, telecos and banks to use facial recognition technology to collect and share images of people across the country.

While there are some benefits to such a system – making it easier to identify the victims of natural disasters, for example – it has been heavily criticised by human rights groups as an attempt to introduce mass surveillance to Australia and an egregious breach of individual privacy.

The plan hit a roadblock when the government-controlled Parliamentary Joint Committee on Intelligence and Security (PJCIS) handed down an extensive report calling for significant changes to the legislation to ensure stronger privacy protections and other safeguards against misuse.




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What are the identity-matching laws?

The identity-matching bills aim to set up a national database of images captured through facial recognition technology and other pieces of information used to identify people, such as driver’s licenses, passports, visa photos. This information could then be shared between government agencies, and in some cases, private organisations like telcos and banks, provided certain legal criteria are met.

The proposed database follows an agreement reached by the Commonwealth and the states and territories in 2017 to facilitate the “secure, automated and accountable” exchange of identity information to help combat identity crime and promote community safety.

Critical to this agreement was that the system include “robust privacy safeguards” to guard against misuse.

The agreement gave the federal government the green light to introduce laws to set up the identity-matching system.




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Access to the service could potentially encompass a wide range of purposes. For example, a government agency could use the system to identify people thought to be involved in identity fraud or considered threats to national security.

But the bill also includes more pedestrian uses, such as in cases of “community safety” or “road safety”.

The proposed laws contain some safeguards against misuse, including criminal sanctions when an “entrusted person” discloses information for an unauthorised purpose. In addition, access by banks or other companies and local councils can only occur with the consent of the person seeking to have their identity verified.

However, much of the detail about precisely who can access the system and what limits apply is not set out in the bills. This will be determined through government regulation or subsequent intergovernmental agreements.

Concerns about scope and safeguards

The Coalition government’s bills were first introduced in 2018, but didn’t come up for a vote. After the government reintroduced the bills in July, the PJCIS launched an inquiry and invited public submissions.

Legal bodies have argued that amendments are needed to tighten the boundaries of who can access the identity-matching services and for what purposes. They note that as currently drafted, the proposed laws give too much discretionary power to government officials and actually create opportunities for identity theft.




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This is particularly problematic when coupled with the potential for the rapid spread of facial recognition technology in Australian streets, parks and transport hubs.

The Human Rights Law Centre said the proposed system is “more draconian” than the one launched in the UK. Another concern is that it could be used by a wide range of agencies to confirm the identity of any Australian with government-approved documentation (such as a passport or driver’s license), regardless of whether they are suspected of a crime.

The Australian Human Rights Commission also pointed to research suggesting the software used to capture or match facial imagery could result in higher error rates for women and people from certain ethnic groups.

What’s next for the bills?

When handing down the committee’s unanimous report, Andrew Hastie said the broad objectives of the identity-matching system were sound, but key changes were needed to ensure privacy protections and transparency.

While the PJCIS cannot actually stop the bills from being passed, it has a strong track record of turning its recommendations into legislative amendments.

The states and territories also have an interest in ensuring a national identity-matching scheme gets the balance right when it comes to addressing identity crime and assisting law enforcement and protecting individual privacy.

The question is whether these calls for improvements will be loud enough to put these bills back on the drawing board.

The future of the legislation will tell us something important about the strength of human rights protections in Australia, which rely heavily on parliamentary bodies like the PJCIS to help raise the alarm when it comes to rights-infringing laws.The Conversation

Sarah Moulds, Lecturer of Law, University of South Australia

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

The evidence is clear: the medevac law saves lives. But even this isn’t enough to alleviate refugee suffering



Protesters holding a vigil last year for deceased asylum seeker Hamid Khazaei, who died in a Brisbane hospital due to an infection at the Manus Island detention centre in 2014.
Darren England/AAP

Sara Dehm, University of Technology Sydney

Tasmanian Senator Jacqui Lambie has some sobering reading to do over the coming weeks: an 88-page Senate report into the government-sponsored bill to repeal the medevac law that allow refugees and asylum seekers in Papua New Guinea and Nauru to seek medical care in Australia. The publication of the report last Friday paves the way for a Senate vote on the bill in mid-November.

As predicted, the Senate committee that issued the report split along party lines, with the Coalition majority calling for the medevac provisions to be repealed and the ALP, Greens and Centre Alliance senators releasing dissenting reports.




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What is less predictable is how the report will influence Lambie’s deciding vote. She has indicated she will approach the bill as a conscience vote, saying

Tasmanians don’t want deals done over humanity.

An overwhelming health crisis in offshore detention

The medevac law allows a person to be transferred to Australia for medical treatment or assessment if two Australian-registered doctors recommend such care is necessary and unavailable in PNG or Nauru. There are limited exceptions for the minister of home affairs to reject a transfer on security and character grounds.

Since the law came into effect in March, over 130 people have been transferred for care.

The Coalition government maintains the pre-medevac medical transfer policy for refugees was adequate. This allowed transfers only in life-threatening cases in which the required specialist medical care could not be provided on PNG, Nauru or a third country like Taiwan.

However, evidence given to the Senate committee showed a drastic drop in medical transfers to Australia from 2015 to mid-2018, despite clear medical need.

Statistics given to the committee by the National Justice Project, a not-for-profit legal service that acts on behalf of refugees, documented how some patients had to wait more than four years for medical transfers to Australia.

Tony Bartone, the Australian Medical Association president, described the government’s pre-Medevac process as “torturous” and involving “long periods of delay,” without any appropriate oversight.

Court injunctions and prospective litigation from mid-2018 onwards did compel the government to bring around 350 people to Australia for urgent medical treatment or as an accompanying family member. But such court interventions can be costly, slow and resource-intensive for those in need of immediate medical attention.




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And that need is still extremely high for those refugees remaining in offshore detention. An independent health assessment in June found a staggering 97% of those in detention and processing facilities have been diagnosed with physical health conditions. A further 91% were experiencing mental health problems, including severe depression and PTSD.

All but two of the 95 public submissions received by the committee were strongly in favour of retaining the medevac law.

Tellingly, those two submissions were from the Department of Home Affairs and the International Health and Medical Service, a government-contracted health provider on Nauru.

Overlooked refugee suffering in Australia

What is missing from the Senate report is any mention of the intolerable situation that refugees and asylum seekers face even after they have been transferred to Australia.

Although people can access critical medical treatment here, most remain in community detention, facing economic insecurity and legal uncertainty about their future. Research shows such legal limbo can lead to feelings of despair and dehumanisation.

The day before the report’s release, 32-year-old Afghan doctor Sayed Mirwais Rohani died in Brisbane, the victim of an apparent suicide. Rohani had come to Australia for medical treatment two years ago, after spending four years in immigration detention on Manus Island.

After his death, his former roommate posted on Facebook:

We shared same pain for long time, long enough to destroy someone’s life.

Rohani’s death was at least the 13th among refugees held in offshore detention on Manus or Nauru.

‘Trying to kill themselves because they’ve lost hope’

No doubt the government will use the Senate report to convince Lambie to support its bill when the vote happens next month.

So far, Lambie has remained relatively reticent, even if she did rebuff Dutton’s claim that the “vast majority of veterans” want her to vote to repeal medevac.




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Instead, Lambie indicated she would look to “national security” considerations in weighing up the report’s findings, including the dissenting reports. She has in the past called for children not to be in immigration detention and voted against the Coalition government’s bill to introduce temporary refugee visas in 2014.

Even if the medevac provisions stay in place, the status quo of Australia’s offshore detention regime remains unsustainable and inhumane.

As former MP Kerryn Phelps, a key architect of the medevac law during her brief time in parliament, stated in her evidence to the Senate committee, refugees and asylum seekers are

not trying to make a point; they’re trying to kill themselves because they’ve lost hope.The Conversation

Sara Dehm, Lecturer, University of Technology Sydney

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

Snowy 2.0 will not produce nearly as much electricity as claimed. We must hit the pause button



Prime Minister Scott Morrison in front of the Tumut 3 power station at the Snowy Hydro Scheme. New analysis suggests the benefits of Snowy 2.0 have been overstated.
AAP

Bruce Mountain, Victoria University

The federal government’s much-vaunted Snowy Hydro expansion is supposed to smooth out the bumps in electricity supply as Australia transitions to renewables. But not only is the project a bad deal for taxpayers, our analysis suggests it will deliver a fraction of the energy benefits promised.

Fossil-fuel power generators store coal or gas at the point of production. This means electricity can mostly be created on demand when homes and businesses need it. Renewable energy cannot do this. If wind or sun is not abundant, solar panels and wind turbines may not produce enough electricity to meet demand. At other times they might produce more than required.

The Snowy 2.0 project is supposed to provide a solution to this problem – storing renewable energy for when it is needed.

The project’s cost and time estimates have blown out massively. It would now be surprising if Snowy 2.0, including the transmission upgrades it relies on, comes in at less than A$10 billion or is finished before 2027.

But there is another serious problem. Our analysis has revealed that of the extra pumped hydro capacity promised by the project, less than half can be delivered. There is now overwhelming evidence the project should be put on hold.

The Tumut 3 scheme, with which Snowy 2.0 will share a dam.
Snowy Hydro Ltd

The problems we know about: cost and time blowouts

The list of possible alternatives to Snowy 2.0 is long. Aside from other pumped hydro projects, it includes chemical batteries, encouraging demand to follow supply, gas or diesel generators, and re-orienting renewable generators to capture the wind or sun when it is less plentiful.

But despite this plethora of options, the federal government announced the Snowy 2.0 project without a market assessment, cost-benefit analysis or indeed even a feasibility study.




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When former Prime Minister Malcolm Turnbull announced the expansion project in March 2017 he said it would cost A$2 billion and be commissioned by 2021. This was revised upwards several times and in April this year, a A$5.1 billion contract for partial construction was awarded. This excludes the costs of transmission and other considerable expenses.

The main contractor says the project will take eight years to build – bringing us to 2027 before the full scheme is completed. We will happily wager that more delays and cost increases will be announced.

Then prime minister Malcolm Turnbull during a tour of Tumut 3 power station when announcing the expansion in 2017.
Lucas Cochairs/AAP

Snowy Hydro has not costed the transmission upgrades upon which the project depends. TransGrid, owner of the grid in New South Wales, has identified options including extensions to Sydney with indicative costs up to A$1.9 billion. Massive extensions south to Melbourne will also be required.

Snowy Hydro contends it should not pay for the new transmission lines because the benefits would flow to the entire grid, not just its venture. In other words Snowy Hydro argues, conveniently, that we should count the benefits but ignore the costs when thinking about their project.

The numbers simply do not add up

The Snowy 2.0 project grandly claims it could generate at its full 2,000 megawatt capacity for 175 hours – or about a week. This capacity can also be expressed as 350 gigawatt hours (GWh).

Energy Minister Angus Taylor has talked up the project’s superiority to smaller-capacity alternatives such as batteries.

But the maximum additional pumped hydro capacity Snowy 2.0 can create, in theory, is less than half this. The reasons are technical, but worth taking the time to understand.

The figure below outlines the main physical features that define Snowy 2.0. It includes four dams: Tantangara, Talbingo, Jounama and Blowering. For simplicity, we have numbered these from 1-4 in the following explanation.



The Conversation, CC BY-ND

When Snowy 2.0 generates electricity, water will be released from Dam 1 at the top of the system. It will flow through a long tunnel to the smaller Dam 2. The flow of water drives turbines which generate energy. When the turbines are reversed, the water is pumped back to the top to continue the cycle.

For Snowy 2.0 to produce the 350 GWh of electricity claimed, the top dam must be full and all that water released through the system. But replenishing the top dam after this event would take many months of pumping water from elsewhere in the system, and use up 40% more electricity than was originally generated. So the 350 GWh would never be achieved because it is extremely inefficient and inflexible.

In reality, the pumped hydro capacity of Snowy 2.0 is defined by the amount of water that the smaller Dam 2 can hold. If the scheme was a closed system, with no other water flowing in or out, it could produce around 230 gigawatt hours (GWh) of electricity.

But the system does not exist in isolation. Part of the existing Snowy Hydro scheme, known as Tumut 3, also uses Dam 2. It creates pumped hydro electricity by cycling water between that dam and the even smaller Dam 3 below it.

For Snowy 2.0 to operate at full cyclical capacity, Dam 2 must be empty to receive the water. That would entail emptying Dam 2 into the smaller Dam 3 and from there to Dam 4 at the bottom of the system. This water could not be used again to generate electricity. This “lost” water would have generated 60 GWh worth of electricity in the Tumut 3 scheme.

Khancoban Dam, part of the soon-to-be expanded Snowy Hydro scheme.
Snowy Hydro Ltd

This means that as a cyclical pumped hydro system, Snowy 2.0 does not add 230 GWh of capacity. When you subtract the 60 GWh from the 230 GWh, Snowy 2.0 adds just 170 GWh of recyclable pumped hydro. This is less than half the claimed storage capacity.

And this is the maximum cyclical capacity in theory only. Snowy 2.0 would never produce continuously for the time needed to generate and then pump 230 GWh because it would never be economically viable to run it this way.

In practice if Snowy 2.0’s lower dam is operated in future as it is now – almost always close to full – the cycling capacity of Snowy 2.0 may be as low as 40 GWh – around one tenth of the promised number.

What does all this mean?

These facts put Snowy 2.0 in a completely different light. There are many competing alternatives that can provide storage far more flexibly for a fraction of Snowy 2.0’s price tag. These alternatives would also have far fewer environmental impacts or development risks, in most cases none of the transmission costs and could be built much more quickly.

It is always difficult to press the pause button on a major project once it has begun. But the evidence for doing this is overwhelming. In pursuit of the public interest, the federal government should put the project on hold and ask a reputable investment bank to publicly advise, perhaps through the Productivity Commission, what Snowy 2.0 would be worth if built.

A credible independent valuation would establish with some confidence how deeply Snowy Hydro will have its hands in the public’s pockets. A panel of independent experts should then be asked to publicly advise whether taxpayer money is needed to meet the demands of a renewables-dominated power system, and if so, the best way it should be spent.The Conversation

Bruce Mountain, Director, Victoria Energy Policy Centre, Victoria University

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

View from The Hill: Malcolm Turnbull delivers the unpalatable truth to Scott Morrison on climate and energy


Michelle Grattan, University of Canberra

Sometimes birthdays are best let pass quietly. The Liberals are finding the 75th anniversary of their founding another occasion for the blood sport they thought they’d put behind them.

Tony Abbott and Malcolm Turnbull are out of parliament – for which Scott Morrison is much thankful – but their passions are unabated. Each has let fly in interviews with The Australian’s Troy Bramston to mark the anniversary.

Abbott repeated that it was Turnbull’s undermining which did him in (only the partial truth) and indicated he wouldn’t mind returning to parliament but didn’t think the Liberal party would ask him (absolutely true).

Turnbull’s was the more pertinent and, from where the government stands, pointed interview because it fed very directly into central issues of the moment, climate change and energy policy.

“The Liberal Party has just proved itself incapable of dealing with the reduction of greenhouse gas emissions in any sort of systematic way,” Turnbull said.

“The consequence … is without question that we are paying higher prices for electricity and having higher emissions.”




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He knows what he’s talking about. These issues were critical (though not the only factor) in Turnbull losing the leadership twice – first in opposition and then in government. And that was despite doing deals and trade offs to try to satisfy the right in his party.

He still frets about the battles which cost him so much for so little gain. He told the Australian, amid boasts about what his government had done, that his biggest regret as PM was not settling a new energy policy.

What Scott Morrison really thinks on the climate challenge, or what he would do if he were just driven by policy concerns without regard to party considerations or electoral judgements are in that category of known unknowns.

In few areas can Morrison’s beliefs be divined free of political context.

But we do know two things.

Firstly, we don’t have a satisfactory energy policy: emissions are rising; power prices are too high; investment is being discouraged. An analysis released by the Grattan Institute this week was damning about how federal government policies were discouraging investment including by “bashing big companies” (the so-called “big stick” legislation, allowing for divestment when an energy company is recalcitrant, is still before parliament).

Secondly, climate change is again resonating strongly in the community.




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Critics dismiss the attention young activist Greta Thunberg has received internationally, and this week’s “Extinction Rebellion” demonstrations, and many in the government would point to the election result to note that climate change did not carry the day with the “quiet Australians”.

The Morrison win, however, doesn’t mean the issue lacks cut through, or won’t have potency in the future. And although the Liberals like to talk about the miracle victory, it should be remembered the win was by a sliver, not by 30 seats. What made it so notable was that it defied expectations.

Turnbull said in his interview the Liberal party had been influenced by a group that was denialist and reactionary on climate change.

It still is, but this group is not giving trouble at the moment because Morrison, unlike his predecessor, is not provoking them.

The problem for Morrison is that keeping his party calm doesn’t solve the policy problem. Unless that is more effectively tackled, it could come back to bite him, regardless of the positive tale he tries to spin, such as in his United Nations speech.

Turnbull also said in his interview that, among much else, in government he had been “very focused on innovation” which, as we remember, was his catch cry in his early days as PM.

And, if we take information from the Harvard Kennedy School’s Center for International Development, reported in Tuesday’s Australian Financial Review, Australia needs innovation to be a much higher priority.

Australia fell from 57th to 93rd between 1995 and 2017 on the index of economic complexity, which measures the diversity and sophistication of countries’ exports. Our wealth comes from the minerals and energy that form the bulk of our exports but “Australia⁩ is ⁨less complex than expected⁩ for its income level. As a result, its economy is projected to grow ⁨slowly.⁩ The Growth Lab’s ⁨2027⁩ Growth Projections foresee growth in ⁨Australia⁩ of ⁨2.2%⁩ annually over the coming decade, ranking in the ⁨bottom half⁩ of countries globally,” the data says.

“Economic growth is driven by diversification into new products that are incrementally more complex. … ⁨⁨Australia⁩ has diversified into too few products to contribute to substantial income growth.⁩”




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The Turnbull government is all but finished, and the Liberals will now need to work out who they are


Turnbull’s talk of innovation, agility, and the like was seen by many in his ranks, particularly in hindsight, as too high falutin’. It certainly went down badly in regional areas, which is why in 2016 the Nationals sharply differentiated themselves in the election campaign.

The Harvard work suggests Turnbull’s innovation ambition was on the right track. But the political evidence showed he was a bad salesman for this (and a lot else).

Morrison is a good marketing man. But the test of his prime ministership will be whether he can use his marketing skills to sell policies that the country needs, rather just what he thinks will go over easily with his constituency.

The most effective leaders (and that excludes both Abbott and Turnbull) can both identify what the nation requires and persuade enough of the voters to embrace it, even when it’s difficult. They operate not on the principle of the lowest common electoral denominator, or simplistic descriptions of their supporters – rather they pursue the highest achievable goals.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.

‘Developing’ rift points to growing divisions between Coalition and Labor on China


Tony Walker, La Trobe University

At last, a healthy divergence of views between the Coalition and Labor about how Australia might manage its relations with its cornerstone trading partner and rising power in its own region.

It is a debate that is long overdue.

We now have contrasting narratives between the Coalition government and the Labor opposition.

That contrast was given sharp expression at the weekend by deputy Labor leader Richard Marles in an interview on the ABC’s Insiders program.

Marles accused the government of mismanaging a “complex” relationship. After visiting Beijing last week for conversations with a range of Chinese opinion-leaders, he described relations as “terrible”.

Prime Minister Scott Morrison, he said, had engaged in megaphone diplomacy on his visit to the United States, insisting China be regarded as a “developed” country for trade and other purposes. This includes its climate change obligations.

What we saw was the prime minister in the United States in the context of there being trade tensions between the US and China, and from there, taking pot shots against largest trading partner. The context in which he has engaged in this megaphone diplomacy is absolutely the issue, and it’s not the way in which this issue should be dealt with in a respectful way.

These observations might be taken with a pinch of salt from an opposition spokesman. But it is true that relations are now at a low ebb for a variety of reasons, some of the government’s making, some not.

Australia did not initiate a trade war, but fractious relations with China are collateral damage.

Significantly, what is emerging in Australian domestic politics is an erosion of what has been a bipartisan consensus on how to relate to China in what are very challenging circumstances.




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This is, potentially, a watershed moment in the evolution of the Australian policy towards China. This policy has, more or less, been settled business since Gough Whitlam normalised relations in 1972 as one of his first acts as prime minister.

Morrison’s embrace of American calls for China to be declared a developed country under World Trade Organisation rules means there is now a sharp point of difference between the government and opposition.

This is the nub of what the prime minister had to say on the issue to The Chicago Council on Global Affairs.

China’s economic growth is welcomed by Australia and we recognise the economic maturity that it has now realised as a newly developed economy… The world’s global institutions must adjust their settings for China in recognition of this new status. That means more will be expected, of course, as has always been the case for nations like the United States who’ve always had this standing.

Labor does not regard China as a “developed” country under World Trade Organisation auspices, nor, for that matter, does most of the rest of the world. This is an American preoccupation, now signed onto by Canberra.

Why it should have been necessary for Morrison to take sides in this debate is not clear. On the face of it, his interventions have been unwise.

What should be understood about emerging differences over China’s “developed” country status, is that it represents, in an Australian context, a wider divergence of views between the government and opposition on how to manage China’s rise.

The government believes China should be pulled into line. Labor is more circumspect while acknowledging that Beijing’s behaviour is exerting considerable – and unwelcome – stress on an international rules-based order.

Whether he pretends otherwise or not, Morrison has aligned Australia with the Donald Trump White House view of China as a mercantilist power seeking ruthlessly to extend its power and influence in the Indo-Pacific and beyond.

In its mirroring of the US position, the government is indicating it believes China needs to have its wings clipped.

Morrison’s visit to the United States may come to be regarded, therefore, as a watershed moment in Australian foreign policy in which a choice was made.

Whether the government pretends otherwise or not, Morrison’s interventions on his US visit have been interpreted in Beijing as hostile.

Enter the Labor Party into this debate in a way that represents its boldest intervention in a foreign policy question since then Labor leader Simon Crean detached his party in 2003 from supporting the ill-fated rush to war in Iraq.

The difference between then and now is that getting policy settings right in the great US versus China debate is far more important to Australia’s well-being than an ill-conceived decision two decades ago that turned the Middle East upside down and empowered Iran.




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The view promulgated by former Prime Minister John Howard that Australia did not need to choose between its historical alignment with America and its geographical proximity to China is no longer sustainable.

The question now is how Australia positions itself between the elephants in the jungle to avoid getting crushed. Conspicuously siding with one of the elephants, unless necessary, would not seem to be the wisest course.

In all of this, one might spare a thought for Trade Minister Simon Birmingham, whose role has been to try to ensure Australia’s trade in merchandise and services is not harmed by a trade war between China and the United States.

Birmingham has been doing his best. He has not been helped by his leader’s injudicious remarks to The Chicago Council on Global Affairs.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.

Australia to send naval and air assistance to protect Middle East sea lanes: Morrison


Michelle Grattan, University of Canberra

Australia will commit a frigate, an aircraft and some headquarters staff to an American-led freedom of navigation operation in the Middle East.

Scott Morrison, announcing the long-expected commitment at a Canberra news conference on Wednesday, stressed this was an international mission, but so far the United Kingdom is the only other country to have signed up.

Under questioning, the Chief of the Australian Defence Force, General Angus Campbell, said the operation would be United States-led. But Campbell avoided spelling out in detail the rules of engagement in the event of being involved in an incident, other than referring to legal obligations.

Iran has seized ships in recent months, amid escalating tensions.

This week, an Iranian oil tanker was released after being detained by the British overseas territory of Gibraltar on suspicion of taking oil to Syria. The US tried unsuccessfully to have Gibraltar extend the vessel’s detention.

Morrison said Australia had made very clear both to the US and the UK “that we are here as part of a multinational effort”.

“This is a modest, meaningful and time-limited contribution …to this international effort to ensure we maintain free-flow of commerce and of navigation,” he said.

“Australia will defend our interests, wherever they may be under threat, we will always work closely with our international allies and partners.”




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Morrison looking at details for commitment to protect shipping


Morrison emphasised that the safety of shipping lanes was vital to Australia’s economic interests.

The government had been concerned over incidents in the Strait of Hormuz, he said. “30% of refined oil destined for Australia travels through the Strait. It is a threat to our economy.”

The Australian contribution will be

  • a P-8A Poseidon maritime surveillance aircraft for one month before the end of 2019;

  • an Australian frigate in January 2020 for six months; and

  • ADF personnel to the International Maritime Security Construct headquarters in Bahrain.

One complication for Australia in finalising the commitment was the fact there was no Australian frigate in the area, with the next deployment not due until January.

Australian ships participate in counter-piracy and counter-terrorism operations in the Middle East.

The Americans were very pressing in their request to Australia to join the force, including in public statements during the recent AUSMIN talks.

Morrison has emphasised Australia wants to see the de-escalation of tensions in the area and separates its commitment to the freedom of navigation operation from America’s other activities in relation to Iran.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.

Frydenberg outlines financial sector reform timetable


Michelle Grattan, University of Canberra

Treasurer Josh Frydenberg has issued a timetable for the government’s dealing with the recommendations from the royal commission into banking, superannuation and financial services, which aims to have all measures needing legislation introduced by the end of next year.

The opposition has accused the government of dragging its feet on putting into effect the results of the inquiry, which delivered its final report early this year.

“The need for change is undeniable, and the community expects that the government response to the royal commission will be implemented swiftly,” Frydenberg said in a statement on the timetable.

Fydenberg said that in his final report Commissioner Kenneth Hayne made 76 recommendations – 54 directed to the federal government (more than 40 of them needing legislation), 12 to the regulators, and 10 to the industry. Beyond the 76 recommendations, the government had announced another 18 commitments to address issues in the report.

The government had implemented 15 of the commitments it outlined in responding to the report, Frydenberg said. This included eight out of the 54 recommendations, and seven of the 18 additional commitments the government made. “Significant progress” had been made on another five recommendations, with draft legislation in parliament or out for comment or consultation papers produced.




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Frydenberg said that, excluding the reviews to be conducted in 2022, his timetable was:

  • by the end of 2019, more than 20 commitments (about a third of the government’s commitments) would have been implemented or have legislation in parliament

  • by mid 2020, more than 50 commitments would have been implemented or be before parliament

  • by the end of 2020, the rest of the commission’s recommendations needing legislation would have been introduced.

When the Hayne report was released early this year, the government agreed to act on all the recommendations.

But one recommendation it has notably not signed up to was on mortgage brokers.

Hayne found that mortgage brokers should be paid by borrowers, not lenders, and recommended commissions paid by lenders be phased out over two to three years.




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The government at first accepted most of this recommendation, announcing the payment of ongoing so-called “trailing commissions” would be banned on new loans from July 2020. Upfront commissions would be the subject to a separate review. Four weeks later in March Frydenberg announced the government wouldn’t be banning trailing commissions after all. Instead, it would review their operation in three years.

Releasing the timetable, Frydenberg said the reform program was the “biggest shake up of the financial sector in three decades” and the speed of implementation “is unprecedented”.

“It will be done in a way that enhances consumer outcomes with more accountability, transparency and protections without compromising the flow of credit and competition,” he said.

He undertook to ensure the opposition was briefed on each piece of legislation before it came into parliament.

“This will begin with the offer of a briefing by Treasury on the implementation plan. Given both the government and opposition agreed to act on the commission’s recommendations, we expect to achieve passage of relevant legislation without undue delays,” he said.

He said the industry was “on notice. The public’s tolerance has been exhausted. They expect and we will ensure that the reforms are delivered and the behaviour of those in the sector reflects community expectations.”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.

Scott Morrison tells public servants: keep in mind the ‘bacon and eggs’ principle



Morrison describes the “the bacon and eggs principle” where “the chicken is involved, but the pig is committed”.
AAP/Shutterstock/The Conversation

Michelle Grattan, University of Canberra

Scott Morrison has a sharp lecture for bureaucrats about their KPIs, in a comprehensive speech laying down how he expects the Australian Public Service to operate under his government.

Morrison stresses the service must be responsive to both its ministers and the “quiet Australians”, look beyond the noisy “bubble”, and be more open to outsiders, in a Monday address to the Institute of Public Administration, issued beforehand.

He calls for a “step-change” in improving delivery, greater diversity of views within the service, and the “busting” of regulatory congestion.

The Prime Minister is producing his blueprint ahead of formally receiving the report from the comprehensive review led by businessman David Thodey, which is coming within weeks – although Morrison has had discussions on its content and reportedly told the panel to take a tougher line on performance standards.

His speech themes build on views he has previously articulated, directly to departmental secretaries and in media comments. His focus is heavily on better service delivery, and his message to the bureaucrats is to remember they are on tap not on top. His concept is narrower than the ideas in a report, commissioned by the Australia and New Zealand School of Government (ANZSOG) and released last week, which highlighted the need for more creative thinking and a greater scope for public servants to speak truth to power in their advisory role.




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In his speech Morrison also has very direct words for his ministers, about running their departments. Responsibility for setting policy lies with those elected, he says – ministers must be clear about what they are asking of their public servants.

They must not allow a policy leadership vacuum to be created, expecting the public service to fill it and do their job. One of the worst criticisms politicians can make of each other is that a minister is a captive of their department.

He says he has “selected and tasked my ministers to set and drive the agenda of our government”.

Morrison points out that accountability to parliament and the public for the government’s policies rests with those who are elected.

“Only those who have put their name on a ballot can truly understand the significance of that accountability. I know you [public servants] might feel sometimes that you are absolutely right in what you are suggesting, but I can tell you when it is you that is facing the public and must look your constituents in the eye, it gives you a unique perspective.”

He says his rugby coach used to describe this as “the bacon and eggs principle – the chicken is involved, but the pig is committed.

“That is why under our system of government it must be ministers who set the policy direction.”




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Grattan on Friday: Morrison can learn a lot from the public servants, but will he listen?


Morrison sets out six “guideposts” for the evolution of the public service and his priorities:

  • the “respect and expect” principle, defining the relationship between government and the bureaucracy

  • the centrality of implementation

  • “look at the scoreboard” – a strong emphasis on “priorities, targets and metrics across all portfolios”. (He says he has established a Priorities and Delivery Unit in the Prime Minister’s Department, and cabinet ministers are developing objectives and targets.)

  • having eyes on “middle Australia” – looking “beyond the bubble” of the “many highly organised and well resourced interests” that go often to Canberra and are in the media

  • following the “Ray Price principle”, a reference to a former leading Rugby League player dubbed “Mr Perpetual Motion” – adapting amid constant change

  • honouring the public service code of governance and integrity across the bureaucracy.

On implementation, Morrison says: “Ensuring services are delivered seamlessly and efficiently, when and where they are needed, is a key priority of my government.

Good government is about receiving excellent policy advice. But that advice is only as good as the consideration in detail that it gives to implementation and execution.

And this is not an exercise in providing a detached and dispassionate summary of risks that are logged in the ‘told you so’ file for reference in future memoirs.

It’s about telling governments how things can be done, not just the risks of doing them, or saying why they shouldn’t. The public service is meant to be an enabler of government policy not an obstacle.




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To restore trust in government, we need to reinvent how the public service works


Morrison says the thinking behind his establishment of Services Australia – in the post-election reshuffle – “isn’t some fancy re-branding exercise.

It’s a message to the whole of the APS – top-to-bottom – about what matters to people.

It’s about ‘doing the little things well’ – everything from reducing call waiting times and turnaround on correspondence right through to improving the experience people have walking into a Centrelink office.

Highlighting the “quiet Australians”, Morrison says “the vast majority” of people “will never come to Canberra to lobby government. They won’t stay at the Hyatt. Or lunch at the Ottoman. Or kick back in the Chairman’s Lounge at Canberra airport after a day of meetings.”

But these members of the public are the public service’s stakeholders – not the “vested and organised interests that pretend to this status,” he says.

I want the APS to have a laser-like focus on serving these quiet Australians. Those you don’t meet with and never hear from. Australians who just get on with it, but who often feel their voice gets drowned out by shoutier ones in our public square.

There is strong evidence that the ‘trust deficit’ that has afflicted many Western democracies over recent years stems in part from a perception that politics is very responsive to those at the top and those at the bottom, but not so much to those in the middle.

This will not be the case under my government.

Middle Australia needs to know that the government (including the public service) is on their side.

Declaring the public service should value diversity, Morrison says “a commitment to diversity should encompass diversity of viewpoints within the APS. There is compelling evidence that this helps teams find answers to complex problems by bringing together people who approach questions from different points of view.

It’s vital that the APS avoid the sort of stale conventional wisdoms and orthodoxies that can infuse all large organisations.

Urging more two-way flow between the public service and outside employment, Morrison says: “We need to find new ways for smart, dedicated Australians to make a contribution to public service, to see a stint in the public service as part of their career journey. And likewise for career public servants to see time outside of the APS in the non-government sector and in business as an important part of their career journey.”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.