Turnbull backed against the wall by rebel Nationals on bank inquiry


Michelle Grattan, University of Canberra

Prime Minister Malcolm Turnbull and Treasurer Scott Morrison appear to have become hostages to rebel Nationals determined at all costs to secure a commission of inquiry into the banks.

On Monday a second federal National, Llew O’Brien, from Queensland flagged he is likely to cross the floor in the House of Representatives to support the private member’s bill sponsored by Queensland Nationals senator Barry O’Sullivan to set up a commission of inquiry that would investigate a broad range of financial institutions.

O’Brien, who has inserted an extra term of reference to protect people with mental health issues from discrimination, said “I like what I see” in the proposed bill. But he added that he would respect his party’s process. The bill is due to go to the Nationals’ partyroom on Monday.

The bill, which has the numbers to get through the Senate, is supported in the lower house by Queensland MP George Christensen, who after Saturday’s Queensland election apologised to One Nation voters for “we in the LNP” letting them down.

Backed by Christensen and O’Brien, together with Labor and crossbenchers, the bill would have the required 76 votes to enable its consideration by the lower house – although when it can get to be debated there is not clear.

In a discussion last week – later leaked – cabinet considered whether the government should adopt a pragmatic position and give in to calls for a royal commission. But Turnbull and Morrison have refused to do so.

Now the cabinet looks like it will have to decide whether to own the process of an inquiry or have it forced on it.

If Monday’s Nationals’ party meeting endorsed the bill, that would escalate the situation dangerously for the government, unless it had softened its opposition to an inquiry. It would amount to the minor Coalition partner formally rejecting a government position.

Cabinet would have to back down, or find some other way through.

As the crisis over the banking probe deepens for the government, there is currently no-one with the authority or availability within the Nationals to manage the situation.

Barnaby Joyce remains leader but he’s absorbed in Saturday’s New England byelection, which is his path back into parliament. Senator Nigel Scullion is parliamentary leader but has little clout to curb the determined rebels.

With the commission push gaining momentum there is also less desire from some senior Nationals to fight it. Joyce is said to be relaxed about having a banking inquiry, which would be popular among voters and could be chalked up as a win for the Nationals.

The election loss in Queensland has strengthened the federal Nationals’ determination to pursue brand differentiation.

O’Sullivan has repeatedly referenced the example of Liberal Dean Smith’s use of a private member’s bill to pursue the cause of same-sex marriage, arguing he is following Smith’s pathway.

But there are still divided opinions within the parliamentary party about the bank probe. Resources Minister Matt Canavan, a member of cabinet, on Monday reaffirmed his opposition to a royal commission.

Joyce is likely to attend Monday’s party meeting although he will not be formally back in parliament by then.

Nationals are not clear whether they will elect their new deputy on Monday to replace Fiona Nash, who was ruled ineligible by the High Court because she had been a dual British citizen when she nominated. There is some speculation that this might be delayed to give aspirants time to lobby.

If there is no deputy leader chosen on Monday, it would mean that the minor party would be literally leaderless on the government frontbench in the House of Representatives. Infrastructure Minister Darren Chester would be the most senior National sitting behind Turnbull in Question Time.

Christensen on Monday launched a website with a petition seeking signatures for a banking inquiry.

“Misconduct is not in the ‘past’,” he says on the site. “It is not being fixed by the industry to a standard acceptable to the community. Although positive steps are being made by government reforms, gaps still exist.

“Enough is enough … unless the government acts to establish a royal commission, I will be acting before the end of this year to vote for a commission of inquiry into the banks.” The site also invites people “bitten by the banks” to “tell your story”.

The ConversationA commission of inquiry differs from a royal commission in being set up by and reporting to parliament, rather than being established by and reporting to the executive.

https://www.podbean.com/media/player/nqtdd-7bf599?from=site&skin=1&share=1&fonts=Helvetica&auto=0&download=0

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

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Why we are still convinced robots will take our jobs despite the evidence


Jeff Borland, University of Melbourne

The tale of new technologies causing the death of work is the prophecy that keeps on giving. Despite evidence to the contrary, we still view technological change today as being more rapid and dramatic in its consequences than ever before.

The mistaken view that robots will take our jobs may come from a human bias to believe that “we live in special times”. An absence of knowledge of history, the greater intensity of feeling about events which we experience first-hand, and perhaps a desire to attribute significance to the times in which we live, all contribute to this bias.

History repeating

In the 1930s, John Maynard Keynes envisaged that innovations such as electricity would produce a world where people spent most of their time on leisure activities. In the United States in the 1960s, Lyndon Johnson established a Presidential Commission to investigate fears that automation was permanently reducing the amount of work available.

Australia has not escaped the prophecy, with similar concerns about the future of work expressed in the 1970s.

In their history of Monash University, Graeme Davison and Kate Murphy report that:

In 1978, the historian Ian Turner, organised a symposium on the implications of the new technologies. The world, he predicted, was about to enter a period as significant as the Neolithic or Industrial revolutions. By 1988, at least a quarter of the Australian workforce would be made redundant by technological change…

Some years later, Barry Jones continued the gloomy forecasts in his best-seller Sleepers Wake!:

In the 1980s, new technologies can decimate the labour force in the goods producing sectors of the economy…

Of course, none of this came to pass in Australia; just as work did not disappear in the 1930s in the United Kingdom, or the 1960s in the United States.

Yet today, we are seeing the resurrection of the prophecy. Commentary on the Australian labour market abounds with claims that the world of work is undergoing radical and unprecedented change.

The increased application of computer-based technologies in the workplace is suggested to be causing a reduction in the total amount of work available; or to be bringing a more rapid pace of substitution of machines for humans than has been seen previously.

No evidence for the death of work

In recent research with Michael Coelli, we argue that the prophecy is no more likely to be realised in the 2010s in Australia than in the 1970s.

Certainly, there is no evidence that the death of work is at present underway. Since the mid-1960s the aggregate hours worked by the Australian population (on a per capita basis) has remained stable.

In particular, there has been no long-run decline in the aggregate amount of work that matches the timing of the progressive introduction of computers to the workplace since the early 1980s.


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Source: Borland, J. and M. Coelli (2017), ‘Are robots taking our jobs?’, Australian Economic Review, forthcoming, Figure 3


Moreover, the pace at which workers are churning between jobs in the Australian labour market is not getting quicker. Not only is there no evidence that more workers are being forced to work in short duration jobs, but what is apparent is that the opposite has happened. The proportion of workers in very long duration jobs has increased over the past three decades.


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Source: Borland, J. and M. Coelli (2017), ‘Are robots taking our jobs?’, Australian Economic Review, forthcoming, Figure 9


Why work is not disappearing

There are good reasons why we should not expect new technologies to cause the death of work. New technologies always cause job losses, but that is only part of the story. What also needs to be understood is how they increase the amount of work available.

One way this happens is through the increases in incomes that accompany the application of new technologies. With the introduction of these technologies, it may take less labour time to produce what used to be consumed, but higher real incomes, together with an apparently unlimited human desire to spend, bring extra demand (for existing products as well as for new types of goods and services), and hence for workers to provide those extra goods and services.

As well, new technologies are likely to substitute for some types of workers, but to be complementary to, and hence increase demand for, other types of workers. Computer-based technologies appear to be complementary to workers who perform non-routine cognitive jobs.

In a report on the digitally enabled workforce, Stefan Hajkowicz and co-authors suggest a range of examples for Australia – such as an increase in demand for photographers at the same time as demand for photographic developers and printers has decreased; an increase in demand for graphic designers versus a decrease in demand for printers and graphic press workers; and a decrease in demand for bank tellers simultaneously with an increase in demand for finance professionals.

The ConversationThe end of work is no closer in Australia today than at any time in the past. So, perhaps there is a need to keep disproving the prophecy, to change our mindset.

Jeff Borland, Professor of Economics, University of Melbourne

This article was originally published on The Conversation. Read the original article.

Public investment in electricity generation – a hot-button issue in Queensland?


John Quiggin, The University of Queensland

One of the most striking features of the Queensland election campaign is that all major parties are advocating public investment in electricity generation.

The real choice to be made is whether this investment will promote the goal of a decarbonised energy system, or whether it will seek to delay this transition and prolong Australia’s reliance on coal-fired electricity.

Labor and the Greens are advocating public investment in renewables, while the LNP and One Nation want a new coal-fired power station.


Read more: Twitter analysis shows Queensland Labor has put Adani behind them


This choice, in turn, depends on attitudes to mainstream climate science. If the findings of mainstream science are accepted, a complete phase-out of coal-fired power, and its replacement by renewables, must take place over the next couple of decades. This implies a target of 50% renewables by around 2030.

The Queensland Renewable Energy Expert Panel modelled the achievement of a 50% renewables share for Queensland. The Expert Panel identified economic benefits of a renewable investment program including an average gain of 6,400 jobs.

Queensland has retained publicly owned electricity generators, primarily focused on coal-fired power. It would make sense for the public to diversify more into renewables.

Where the parties stand

At its recent conference, Labor committed to continued public ownership in the electricity sector and a 50% renewables target by 2030. The conference motion proposed a publicly owned energy corporation committed to protecting customers’ interests and building at least 1000 MW of clean energy.

The Greens propose more comprehensive public ownership with investment of $15 billion over the next 5 years to build publicly-owned clean energy and storage, estimated to create 5,500 jobs every year. The Labor-Green emphasis on renewables is consistent with the movement of the global mainstream.

Last week, at the UN Climate Conference in Bonn, 19 nations including the UK, New Zealand and Canada joined the Powering Past Coal Alliance, pledged to phase out coal-fired power altogether.


Read more: Bonn voyage: climate diplomats head into another round of talks


In sharp contrast, One Nation’s policy is based on the claim that climate change is a hoax, promoted by the United Nations as part of its sinister Agenda 21 policy, which, according to the One Nation platform, seeks to control you and your life .

This position is, at least, internally consistent. The willingness of conservative, liberal and labour governments around the world to sign up to a common climate change policy is seen by One Nation as evidence that the UN is making progress towards its goal of world domination.

The LNP takes a more ambivalent position. While backing coal and opposing renewables, its Queensland state conference narrowly rejected a motion calling on Australia to withdraw from its Paris commitments to reduce greenhouse gas emissions.

‘HELE’ of a big gamble

The key idea used to reconcile these contradiction is the idea that we can meet our commitments using “high efficiency, low emissions” (HELE) coal-fired power stations.

HELE power stations rely on the process of ultra-supercritical generation. That sounds impressive, but the reality is more prosaic. The term supercritical refers to the fact that at high temperatures and pressures, fluids are neither liquids (in this case, water) nor gases (steam) but display characteristics of both. Supercritical boilers are 10-20% more efficient than subcritical boilers.


Read more: Ultra, super, clean coal power? We’ve heard it before


The first supercritical boiler was invented in the 1920s. The technology was fully commercialised by the 1990s. Coal-fired power stations built in Queensland since 2000 operate on supercritical technology.

‘Ultra-supercritical’ plants, first installed around 2000, operate at even higher temperatures and pressures, but the additional increase in efficiency is limited, by the physics of the Carnot cycle, to between 10 and 15 per cent. The HELE acronym is misleading: emissions are lower than those of 20th century plants, but higher than any other generation technology.

So, the moment any substantial carbon price is imposed the proposed power plant will cease to be financially viable and will become a stranded asset. Investment in such a project is a bet that all the world’s scientists and every other government in the developed world have got things wrong or, alternatively, that Australia can go it alone on this issue.

It’s hard to see any financial institution taking a risk like this. Given the warnings already issued by regulators about the dangers of investing in stranded assets, a loan that goes bad will leave the lender open to litigation and regulatory sanctions. Will banks be willing to lend the necessary billion dollars or so on such collateral.

The ConversationShould the LNP gain office, then, their policy will face a critical test. Even with a substantial public investment, will any private firm be willing to take an equity stake in what looks certain to become a stranded asset? If not, will the Queensland public be forced to bear the entire risk?

John Quiggin, Professor, School of Economics, The University of Queensland

This article was originally published on The Conversation. Read the original article.

Young Australians will wear the costs of Turnbull’s middle income tax cut


Danielle Wood, Grattan Institute and Hugh Parsonage, Grattan Institute

Malcom Turnbull has promised tax cuts for middle-income earners in the next budget or even earlier. The short-term political benefits of pre-election tax cuts are not in doubt. But unless the government is willing to increase taxes elsewhere to pay for these sweeteners, there will be longer-term costs for the budget and the economy. And younger Australians will wear these costs.

Young people will pay the price

If the government goes ahead with tax cuts and nothing else changes, we can look forward to the announcement in the 2021 budget of Australia’s 13th successive budget deficit. This is despite the fact Australia is in the midst of the longest period of uninterrupted economic growth anywhere in the developed world. And the unlucky recipients of this legacy of poor budget management are the young.

Grattan Institute research shows that each year the government runs a A$40 billion deficit, it increases the lifetime tax burden for households headed by a person aged 25 to 34 by A$10,000. This is based on the share of debt they would have to repay – with interest – over time. With each successive budget deficit, the tab grows for today’s young Australians.

And the government is magnifying the cost of future economic downturns. Australia was well placed to respond to the global financial crisis because of its healthy fiscal position. But with net debt now sitting at A$322 billion (18.4% of GDP), the government has less room to respond if there is another serious downturn.

Middle-income earners are hit by bracket creep

In the 2017-18 budget, the government was clear: if the senate won’t support spending cuts, then tax increases will have to do the “heavy lifting” on budget repair. And this heavy lifting is largely happening through bracket creep – growth in income taxes as a share of wages.

Middle-income earners are particularly hurt by bracket creep. Based on the wages growth projected in the 2017 budget, the average tax rates for people in middle-income groups will increase by between 1.9 and 2.9 percentage points by 2021. For example, a person earning A$50,000 a year will go from paying an average tax rate of 17.1% in 2017 to 19.5 % in 2021 – and that’s before the government’s proposed increase in the Medicare levy.

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No government likes to go to an election with taxes going up, so the temptation to “give back” bracket creep was always going to prove irresistible in next year’s pre-election budget. And as the prime minister flagged, there is also an economic case for such tax cuts. High marginal tax rates for middle income earners can significantly affect incentives to participate in the workforce, particularly for for women with children in childcare.

Tax cuts will blow the surplus

But the kicker is the effect of the promised tax cuts on the budget bottom line. The Australian government has been running budget deficits since 2009. In the last budget, the treasurer promised a return to surplus in 2021.

That promised surplus always relied on optimistic assumptions: strong wages growth, healthy growth in profits, government spending restraint, and, importantly, no cuts to income taxes. The government’s proposal is light on details, but even modest cuts to tax rates could eliminate the forecast surplus.

For example, if the government was to reduce the tax rate only in the middle bracket (A$37,000-$80,000) from 32.5% to 30%, the cost to the budget bottom line would be about A$7.3 billion in 2021, almost wiping out the promised A$7.8 billion surplus.

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If Malcolm Turnbull wants to cut income taxes but is still serious about delivering on his commitment to return the budget to surplus, then he will need to look elsewhere for revenue. Winding back the capital gains tax discount or negative gearing, better targeting of superannuation tax concessions and tax breaks for older Australians, or increasing or broadening the GST are just a few policies we could suggest.

The ConversationBut if the PM pursues the sugar hit of tax cuts without the difficult work on paying for them, then politics will once again have trumped policy and the economic future of today’s young Australians.

Danielle Wood, Program Director, Budget Policy and Institutions, Grattan Institute and Hugh Parsonage, Associate, Grattan Institute

This article was originally published on The Conversation. Read the original article.

Turnbull wants to take middle-income earners’ income tax both up and down


Michelle Grattan, University of Canberra

If you were running a well-honed political strategy you’d surely have your prime minister announce his plan to give middle-income earners income tax relief in a major speech around Australia Day, forming a launchpad for 2018. You wouldn’t be tossing it out there at the fag end of a disastrous year, amid the general chaos.

But Malcolm Turnbull is operating on tactics rather than strategy.

Regardless of how long the tax aspiration had been in the pipeline, his Monday night speech to the Business Council of Australia did its job of securing a “look-over-here” effect, when Turnbull was under fire for cancelling next week’s House of Representatives sitting.

It achieved the front–page headlines despite being totally without detail.

Apart from general sentiments about the desirability of lower personal income tax, all Turnbull said in the way of specifics was: “In the personal income tax space, I am actively working with the treasurer and all my cabinet colleagues to ease the burden on middle-income Australians, while also meeting our commitment to return the budget to surplus”.

How much this will amount to in the end and when taxpayers would get something tangible remain to be seen. Asked on Tuesday when he thought he would deliver the tax cuts, Turnbull said: “Well, this is going to be our focus next year. Obviously we’ve got the budget coming up, as always, in May. But we are determined to make sure that there is more money in the pockets of hardworking Australians.”

If in the event the tax relief became an election promise, rather than pre-election money in the pocket, would voters be sceptical?

In the meantime, Labor – which proposes a higher tax regime – had plenty of ammunition, not only to assert that Turnbull was looking for a distraction but to remind people that this year’s budget actually flagged an increase in personal tax. This is in the form of a higher Medicare levy to help fund the National Disability Insurance Scheme.

From July 2019 the Medicare levy will rise from 2% to 2.5%. This will be a nice little revenue-earner, raising A$8.2 billion over the forward estimates.

As Deloitte’s Chris Richardson points out, after finding deep spending cuts too hard a road in trying to repair the budget, the government in May opted for higher taxes (although it had just passed some of its business tax cuts from the 2016 budget and was still pressing the rest).

Richardson dubs the May strategy Plan B, after Plan A, based on spending cuts and epitomised by the 2014 budget, had been abandoned.

“Surely they can give Plan B longer than six months,” Richardson says. It seems not.

Richardson says tax cuts are not needed to stimulate the economy, and are counter-productive for fiscal repair – which is dependent on projected revenue growth.

“The figures show that what gets us to [the projected] surplus in 2020-21 is higher taxes. The move from deficit to surplus between 2016-17 and 2020-21 is a swing of 3% of national income. Of that, 2.5% is from revenue and 0.5% from spending cuts,” Richardson says.

Personal income tax cuts would be costly. On Tuesday former minister Eric Abetz, speaking on Sky, suggested the priority should be on income tax cuts over the company tax cut for big business that’s stymied in parliament. Any retreat on the business tax cut would be a major backflip from the government.

A Parliamentary Budget Office paper released a few weeks ago notes that the average tax rate for individuals is estimated to increase by 2.3 percentage points from 2017-18 to 2021-22.

There are increases in every income quintile although they vary. The largest increase is expected in the middle quintile (taxable incomes from $37,000 to $56,000) where taxable income is expected to be an average $46,000 this financial year. These taxpayers are projected to see their average tax rate increase by 3.2 percentage points by 2021-22, the paper says.

As for the Medicare levy increase, it “has the greatest impact on individuals in the third, fourth [$56,000 to $85,000], and fifth [$85,000 and over] income quintiles. Medicare levy concessional arrangements eliminate this impact for the first income quintile and limit the impact for the second,” the paper says.

So we have the government simultaneously planning a tax rise while now talking about tax relief for middle-income earners.

The ConversationAnd that takes us to the question of whether Turnbull can manage this new tax debate he has opened. This includes making sure he and his treasurer are on the same page, and the backbench doesn’t run off prematurely and in multiple directions. At an earlier stage of his prime ministership, a debate about tax directions didn’t go well. He can’t afford that sort of mess now that he has so little political capital.

https://www.podbean.com/media/player/nqtdd-7bf599?from=site&skin=1&share=1&fonts=Helvetica&auto=0&download=0

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Income tax relief on Turnbull’s agenda


Michelle Grattan, University of Canberra

Malcolm Turnbull has raised the prospect of personal income tax relief to help middle-income earners, saying he is “actively working” on it.

As the government is still trying without success to get the remaining part of its company tax plan through parliament, which would deliver lower tax to big companies, Turnbull has moved to hold out the prospect of relief for individuals.

Speaking to the Business Council of Australia on Monday night, he noted the government had already lifted the second-highest income tax bracket threshold from A$80,000 to A$87,000, keeping some half-a-million people from moving into a higher bracket. It had also spared people facing a permanent top marginal rate of 49.5% by not making the temporary deficit levy permanent.

“You know our plans on corporate tax,” he said. “In the personal income tax space, I am actively working with the treasurer and all my cabinet colleagues to ease the burden on middle-income Australians, while also meeting our commitment to return the budget to surplus.”

He said his commitment to all Australians was: “Whether you are starting out in your first job, a worker providing for their family, or a business hiring staff, our goal is always to leave more money in your pocket, not in ours.

“Higher taxes penalise people who are trying to get ahead. But when you reward hard work and enterprise, you encourage hard work and enterprise.

“It’s pretty simple – more investment, more jobs. That’s the key.”

He recalled that his earliest foray into the personal income tax debate in 2005 as a fairly new MP was not uniformly welcomed. He did not spell out that then-treasurer Peter Costello was furious.

But the concerns that underpinned a report he released then still existed: “The tax system remains complex and compliance is a burden, our marginal tax rates are high, bracket creep is a constant challenge that needs to be addressed”.

Turnbull said that “just because we’re in challenging fiscal times doesn’t mean we should raise the white flag on making the tax system work better”.

A Treasury analysis showed Australia risked being left behind by the rest of the world in the competitiveness of its business tax, he said, citing in particular the US and the UK.

The Conversation“If we don’t reduce our corporate rate to 25% as planned – in our Enterprise Tax Plan – over the coming decade, the only advanced nations that will exceed Australia’s tax rate are Japan and Malta.”

https://www.podbean.com/media/player/nqtdd-7bf599?from=site&skin=1&share=1&fonts=Helvetica&auto=0&download=0

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Step up Australia, we need a traffic cop in space



File 20171116 15403 15bl321.jpg?ixlib=rb 1.1
Right now there are more than 20,000 objects in space.
NASA

Duncan Blake, University of Adelaide

Right now there are around 21,000 artificial objects being tracked in Earth orbit (and many millions too small to be tracked). Only about 1,750 of these are functional satellites.

If we don’t adequately manage the traffic of objects in outer space, many services on which we depend will no longer be available.

I argue that Australia should step up and fill this role. “Space traffic management” could be an enduring, national beacon project to inspire and galvanise the Australian space industry. This will be particularly important as the prospective Australian space agency builds momentum in 2018.


Read more: Yes, Australia will have a space agency. What does this mean?


The US is stepping back

Non-functional orbiting objects are known as space debris. It’s an ongoing problem and only likely to become worse, with plans to add many thousands of small satellites to the current population of active satellites.

Right now, the US Air Force is trying to divest itself of the space traffic management role – a responsibility that it has previously assumed for the world by default. The US Federal Aviation Administration has said that it is willing to take this on, but there are many issues to resolve, including control over assets, finances and human resources.

The Australian space industry, facilitated by the prospective Australian space agency, can seize this opportunity. We are well suited to play a role that will be valuable from a commercial perspective, and that will place us in a strong strategic position in the future global space industry and its governance.

Defining the problem

There’s a fair amount of debate about the scope of space traffic management. At the very least it encompasses a means of knowing:

  • what’s up there orbiting Earth
  • where orbiting objects are, in as near to real-time as possible
  • whether they pose any risk of damage, such as a future conjunction between two objects, or interference, such as between the frequencies on which they transmit.

It could also encompass an advisory, or even directive, service to satellite operators to avoid collisions and avoid contributing to the existing space debris population. That implies that space “rules of the road” may be established.

Of course, satellites cannot physically stop at “intersections”, like we see in traffic management on Earth. But we could see development of means to actively prevent collisions, for example, by changing the orbit of space debris. That might be by another space object capturing and physically moving the space debris, or it could be done remotely, such as by a ground-based laser using photon pressure.

Australia is qualified

While Australia already has an active space industry, it is thinly spread. Government departments and agencies, universities, contracted aerospace companies (mostly large and foreign), local start-ups (mostly small) and some established Australian companies, all currently make up Australia’s participation in the space industry.

The Space Industry Association of Australia presented a case for an Australian space agency in its March 2017 White Paper. From the current 0.8% share of a US$340 billion global space industry, the Australian space industry is forecast to grow to 4% within 20 years. That calculation assumes that the efforts of the Australian space industry can be coordinated and facilitated by an Australian space agency.

Now that an Australian space agency has been announced, a key focus of the national space agency will be coordinating what already exists.

In respect of managing space traffic from Australia, here are some capabilities we already have.

Tracking sensors. Australia has a growing number of sensors for tracking objects in space, including C-Band radar, Space Surveillance Telescope and space object laser tracking. Australian companies such as Saber Astronautics have been developing the means to “mine” the enormous amount of space-related data from radio astronomy sensors, notwithstanding that these were not originally designed with space traffic management in mind.

Moving debris. The Space Environment Research Centre is exploring how lasers for space object tracking based in Australia could be used for moving space debris at risk of colliding with active satellites. It also conducts other research to improve the quality of orbital predictions.


Read more: Trash or treasure? A lot of space debris is junk, but some is precious heritage


Position reporting. The University of New South Wales has been conducting research into the use of satellite-based GPS receivers for position reporting and research to better understand and predict the orbital path of space debris. Drawing on the air traffic management analogy, it is also developing a space traffic management system.

Australia’s reputation. Australia has a strong reputation in respect of air traffic management and search and rescue – we provide these services for more than 11% of the Earth’s surface by ourselves.

Historical and positive role in space. Australia has been active in the Committee on Peaceful Uses of Outer Space since its inception in 1959. Australian initiatives are given serious consideration by the international community, without the political polarisation that our superpower ally, the USA, can draw.

Australia is therefore not only well suited to contribute to space traffic management in a physical sense, but also in a regulatory sense – including facilitating the establishment of an appropriate regulatory regime.

Australia can benefit

Both myself and others have advocated for the global strategic importance of normalising the space environment. This involves establishing regular and predictable patterns of behaviour through legal rules and less formal practices and procedures. It is also a matter of national strategic significance.

An international space regulator is almost certainly going to emerge in the next decade and is likely to have some sort of gatekeeper function, including ensuring safety and sustainability in space through effective space traffic management.

Whichever nations play an active part in this role stand to gain significant international influence, and also significant commercial opportunities. This is particularly important with the impending launches of mega-constellations whose operating satellites must be protected.

The ConversationAustralia can and should have a key part in global space traffic management.

Duncan Blake, PhD candidate, law and military uses of outer space, University of Adelaide

This article was originally published on The Conversation. Read the original article.

Why big projects like the Adani coal mine won’t transform regional Queensland


John Cole, University of Southern Queensland

Queensland election campaigns often focus on big projects for the regions, such as for roads, power plants and mines. But research suggests that mega projects, such as in gas and coal, have not transformed skills or improved employment prospects in regional Queensland.

Take away the temporary booms from construction and other short-term jobs, and employment growth overall is no better than before the global financial crisis. Certainly Queensland’s regions are no more resilient. Instead of these mega projects, what’s needed are new sources of economic value in knowledge, services, and technology.


Read more: Here’s 49 small communities innovating as well as the big cities


Between 2010 and 2013 investment in coal mining surged 400% in the Bowen Basin. Further south, in the Surat Basin and at Gladstone, four international consortia spent more than A$70 billion fast-tracking a coal seam and liquid natural gas industry.

These projects fell far short of generating new skills and enduring businesses in the regions. Continuing dependence on resources and agriculture also creates its own vulnerabilities, as both are challenged by market and investment volatility, and increased climate risk.

Overall the focus on mega projects has weakened social and economic resilience in communities across Queensland. Resilience refers to the capacity of regional communities to handle risks and manage change. Resilient regions deepen and diversify their economies.

Megaproject sugar highs

Annual construction spending in the resources sector peaked at A$36.6 billion in Queensland in 2013-14, and has dropped by 70% since. Unemployment has doubled in Queensland’s northern, central and outback regions.

The impact is seen in Townsville, Rockhampton, and Gladstone, who are now pitching to become bases for “Fly In Fly Out” workers. Rather than drive their own local economic development, these cities are punting on the next big mining project.

Gladstone is already the pin-up of the construction boom-bust development model. The port city boasts a highly trained workforce in alumina and aluminium processing, cement, liquid natural gas and chemical manufacturing. Still, it waits on the next big mining construction boom.


Read more: If Queenslanders vote on economic issues the Labor government is looking good


What regional Queensland really needs is politicians to abandon short-term economic fixes, in favour of a sustainable long term vision. Policies would have greater impact if they focused on skills and enterprise training. Stronger regional collaboration to broker opportunities for smart businesses is essential.

Just north of Brisbane, Moreton Regional Council is showing the way by transforming a former industrial site into a university campus. Tertiary education will come to the fast growing region along with a research and technology park, creating the jobs of the future.

Regional Queensland can also learn from the European Commission’s “smart specialisation” structural assistance programs that help regions build knowledge-based competitive industries through strategic public funding and support for research and development etc.

By 2020, smart specialisation in Europe is expected to deliver 15,000 new products to market, 140,000 new startups and 350,000 new jobs.

Integral to the European strategy is strong collaboration between the research and university sectors, and regional industries. Strong cooperation between levels of government is key to the success. The industries are as varied as cheese manufacturing in Spain, new transport systems in Finland, and materials manufacturing in France.

The Europeans have found that changing business culture and boosting entrepreneurship are just as important to creating opportunity as large infrastructure projects.

What Queensland should do

Queensland should rethink its big projects for a big country approach. Regional jobs that depend on project investment without generating local income are not sustainable. Small business and community must be restored to centre stage in development strategy.

Small and medium businesses collectively account for more than 99% of all business in Queensland, and three times as many people work in the state’s A$20 billion manufacturing sector (169,000) as work directly in the resources sector (48,000).

But small and medium businesses lack the profile of the “big end of town”, and the large resources companies have been effective at selling the narrative that they are central to the A$300 billion Queensland economy.


Read more: Bust the regional city myths and look beyond the ‘big 5’ for a $378b return


The priority for developing Queensland’s regions should be investment that generates small business growth, local income, new skills and communities. Particular emphasis has to be given to attracting and retaining talented people.

The state government can best help regional Queensland by heeding the Productivity Commission’s call to help regional Australia adapt and exploit the opportunities of ever present change. This requires greater local initiative, making the most of competitive strengths, and training people to better engage with the world.

The global services sector is a $US47 trillion industry. For regional Queensland to tap into this sector will require skills in fields as diverse as big data, biotechnology, genetics, robotics, communications, and digital manufacturing.

A good start has been made in the Advance Queensland Regional Innovation Programs which have challenged regions to think outside the box, collaborate, and come up with their own strategies. It complements the federal government’s Building Better Regions Fund.

The ConversationThis approach challenges the current politically dominated top down model of regional development. It’s a vision for regional Queensland that extends beyond resources, agriculture, tourism and construction to the people themselves.

John Cole, Executive Director, Institute for Resilient Regions, University of Southern Queensland

This article was originally published on The Conversation. Read the original article.

Vital Signs: Australia’s mining boom transition is on shaky ground


Richard Holden, UNSW

Vital Signs is a weekly economic wrap from UNSW economics professor and Harvard PhD Richard Holden (@profholden). Vital Signs aims to contextualise weekly economic events and cut through the noise of the data affecting global economies.

This week: Australia continues to grow jobs, but wages aren’t keeping up and policymakers are running out of options.


Let’s begin with an economy that is doing relatively well.

In the US, the data were both predictable and moderately positive.

Consumer prices (as measured by the CPI) were up only 0.1% in October, but this was in line with expectations. Recall that two major hurricanes drove up gasoline prices in September, and those increases rolled off (they were up 13.1% in September and fell 2.4% in October). The year-on-year CPI increase was 2.0% – again, in line with expectations.


Read more: Trump’s ‘America first’ trade policy ignores key lesson from Great Depression


The Producer Price Index (PPI) rose by a healthy 2.6% on a year-on-year basis – despite a drop in gasoline prices for producers of 4.6% (note the difference between wholesale and retail price changes). Perhaps most importantly, there were relatively strong increases in elements of the index that the US Federal Reserve cares most about (as they are less cyclical than, say, energy prices), like healthcare costs.

Less expected, but happy news, was the 0.2% rise in retail sales. That puts retail sales up 4.6% on an annual basis. This is further evidence of the solid rebound in the US economy.

And now to Australia.

On the plus side, a fair number of jobs are being created. As Treasurer Scott Morrison was eager to point out on Thursday, 296,400 jobs have been created this year; 236,000 of them full-time.

But the continued depressing news is about wages. The wage-price index was up 0.5% for the third quarter, below market expectations of 0.7%. That puts annual wages growth at 2.0%. With inflation running at 1.8%, that means real wages growth is effectively zero. And it has been like that for a long time.

This is causing enormous problems for Australian households and policymakers.

Recall that Australian households are among the most highly leveraged in the world – with debts at around 190% of GDP. So what is going to reduce that debt?

There are two possibilities: more inflation or more income. Inflation helps reduce the debt in real terms, and income helps for obvious reasons. Right now, both avenues look shaky.

On the former, the Melbourne Institute reported on Thursday that inflation expectations fell this month, providing further evidence that future inflation is likely to be low.

On the latter, there has been a continued run of low wages growth. This is an experience being felt in advanced economies around the world. That suggests it is something to do with technology, or global economic conditions, and therefore not all that amenable to policy.


Read more: Is faster profit growth essential for a pick-up in wages growth?


That leaves us with heavily indebted households, with no obvious way out. This, of course, puts a strain on consumer spending, which in turn affects business investment and employment, and the whole (vicious) cycle loops back on itself.

What is the cut-through for policymakers?

The RBA could drop interest rates from their current 1.50% level – and increasingly some economists are suggesting that. The worry is that a rate cut might further fuel housing prices, making the problem worse, not better.

Federal income tax cuts would be another avenue, but with the budget in structural deficit, and with an economically illiterate crossbench, that looks unlikely.

The government could embark on a major infrastructure spending plan, which could rejuvenate regional employment in areas hit by the forces of globalisation. With interest rates at very low levels, for very long maturities, this seems like a good idea, as long as the projects are assessed on a rational basis.

The concern in this regard is politics. Both major parties have their predilections and bases to pander to. A bad outcome would be, for example, a big coal mine investment by the Coalition, and some uneconomic green-energy boondoggle by the opposition.

The ConversationAs I have said before in this column, the US seems to be navigating the post-2008 economic world relatively well, although caution is certainly warranted. Australia is doing much less well. And the narrative that we have “successfully transitioned from the mining boom” seems a lot more like wishful thinking than hard evidence.

Richard Holden, Professor of Economics and PLuS Alliance Fellow, UNSW

This article was originally published on The Conversation. Read the original article.

Zimbabwe’s financial system is living on borrowed time – and borrowed money



File 20171031 18730 lzg8n8.jpg?ixlib=rb 1.1
An illegal money changer holds bond notes outside a bank in Zimbabwe’s capital Harare.
Reuters/Philimon Bulawayo

Roger Southall, University of the Witwatersrand

Zimbabwe’s financial system increasingly resembles a house of cards. Were one card to give way – for instance, if South Africa’s power utility, Eskom, were to have the temerity to suggest that Zimbabwe actually pay for the electricity that it’s supplying the country – the entire edifice would collapse.

To put it another way, the government is bust. It is again printing money to cover its spiralling costs, and inflation is rising. And given that there’s an election looming in 2018, Zimbabwe’s ruling party, ZANU-PF doesn’t want to cut-back. Far from it, it wants to carry on spending, as fast as it can.

The rot goes back to the early 2000’s. ZANU-PF profligacy had been fuelled by acontinuous cycle of simply printing more money, and resultant runaway inflation. Mega-inflation meant that ordinary people lost their pensions and whatever savings they had, as the Zimbabwe dollar lost its value and people resorted to barter or the use of other currencies.

Ultimately, the government faced no choice but to accept reality. In 2008 it scrapped the Zimbabwe dollar in favour of a basket of other currencies, although within a short time, this meant in effect the reign of the US dollar.

“Dollarisation” allowed for the pursuit of more rational policies by the coalition Government of National Unity which followed the disputed 2008 election. However, its control of the electoral machinery ensured that ZANU-PF won a resounding victory in the 2013 election. Within a short space of time it returned to its familiar policy mix of profligacy, corruption and populist economics.

Yet ZANU-PF faced major problems. Above all, “dollarisation” meant that the cost of Zimbabwe’s exports on international markets was high. Worse, the dramatic collapse in agricultural production since the early 2000s (following the appropriation of white farms) alongside the decimation of the country’s manufacturing industries meant that there was relatively little to export anyway. Tobacco production has recovered a little, but the quality is less than it used to be, so returns are relatively less.

Meanwhile government insistence that mines should be 51% Zimbabwean owned has done nothing to entice inward investment or boost exports.

In short, the capacity of the economy to earn US dollars by selling goods externally has fallen dramatically, and the supply of money circulating within the country has dried up. Unemployment stands at around 90%.

President Robert Mugabe’s latest response has been to replace finance minister Patrick Chinamasa, who had been warning of the structure’s fragility in ever more urgent tones. The new finance minister is Ignatius Chombo, a party loyalist, who will brook no talk of any need for structural reform.

The bond notes

Faced by a looming crisis, the ZANU-PF government has resorted to three key strategies.

One has been the issue of “bond notes” (of different denominations) by the Reserve Bank of Zimbabwe. Officially, they’re designed to swell the amount of money in circulation within the country. The problem is that apart from having no value outside the country, nobody trusts them as they have been issued by a ZANU-PF government, and it was this government that presided over the hyperinflation.

ZANU-PF’s announcement that it was issuing bond notes was met with a run on the banks as depositors sought to withdraw dollars as fast as they could. Their assumption was that this was a government ploy to reintroduce the Zimbabwean dollar. The Reserve Bank of Zimbabwe responded by limiting the amount of dollars individuals could withdraw.

People are reluctant to use the bond notes. But they’re still sometimes forced to accept them because of the sheer shortage of “real” money. As a result when they can, they rush off to the local bus station where they can sell them for dollars to currency traders – albeit illegally.

The second strategy has been the rapid expansion of country’s ability to manage electronic transactions. Its aim has been to expand the amount of money in circulation without using up “real” dollars.

Accordingly, government employees are now largely paid electronically Similarly, government employees (and everyone else) now pay nearly all their bills within the country electronically.

And Zimbabweans are rarely able to convert the notional sums of dollars they hold in the bank into real cash – unless they make use of the currency traders in illegal transactions.

Meanwhile, with the rate of inflation continuing to rise combined with the widespread lack of faith in the banks, many Zimbabweans spend their bank balances on consumer goods as quickly as possible rather than attempting to “save”. After all, if times get hard, you won’t be able to get rid of your bond notes, but you may be able to sell your fridge.

Fanciful financial system

But it’s the third strategy which the government has pursued which is really fuelling a fanciful financial system.

Since 2013, government expenditure has steadily increased year by year, despite the country earning very little internationally. The ZANU-PF government may have hoped to fund this by its old trick of literally printing money, that is, by expanding the supply of bond notes.

But such was the negative popular sentiment that the Reserve Bank of Zimbabwe seems to have restricted their issue. Supposedly the issue of bond notes is backed by a USD$200 loan by the Afreximbank, but no-one really knows how many have been issued because the central bank provides no information.

What the government has done instead is to fund its rising costs by issuing treasury bills (whereby the government touts for loans on the capital market against promises of later redemption). No-one in their right mind would want to buy them, but Zimbabwe’s banks today have little option. As inward investment into the country has dried up to a trickle, there is little else for them to spend their money on, and the interest rates that the government promises to pay are, at face value, attractively high.

The coalition government of national unity recorded budget surpluses for three of the four full years in which the opposition controlled the Treasury. For its part, the ZANU-PF government recorded deficits of USD$186 million and USD$125 million in 2014 and 2015. Recently, the then finance minister Chinamasa projected a deficit of USD$1.41 billion for 2017. As of June 30, 2017, there were USD$2.5 billion worth of Treasury bills on issue.

The ConversationIn other words, the spending will continue. Zimbabwe’s financial system is living on borrowed time and borrowed money. It will again end in financial ruin, as it did in 2008. But all ZANU-PF cares about is ensuring that it wins the next election and allowing its political elite to “eat”.

Roger Southall, Professor of Sociology, University of the Witwatersrand

This article was originally published on The Conversation. Read the original article.