Joyce will be safe in New England but the High Court disrupts the government


Michelle Grattan, University of Canberra

In more than an understatement, Malcolm Turnbull opened his news conference after the High Court’s swingeing blow to the government by saying this was “clearly not the outcome we were hoping for”.

And indeed, not the outcome Turnbull had so unequivocally predicted when, in August, he told parliament that Deputy Prime Minister Barnaby Joyce “is qualified to sit in the house and the High Court will so hold”.

As the weeks have gone by the government has become less and less confident that the position of Joyce and his deputy, senator Fiona Nash, would be upheld. At the same time, the betting on the survival of the third National, Matt Canavan, firmed, as the complexities of Italian law were examined.

Joyce himself says he wasn’t surprised he was disqualified. “In my gut I thought this is the way it was going to go,” he told reporters on Friday. As things have turned out, Joyce’s gut was a better predictor than Turnbull’s barrister background.

In a not-so-subtle dig, Joyce told the ABC’s 7.30 that tactically, it would have been better to have gone to a byelection immediately when he became aware he was a New Zealand citizen by descent, but he had deferred to the solicitor-general’s advice – which played up the prospect of a court victory.

Of the seven current and ex-MPs before the court in the dual citizenship cases, only Canavan and Nick Xenophon have had their eligibility upheld. Not that Xenophon is staying around in federal politics – he made his farewells on Friday and after clearing some odds and ends he will be off to create a storm in South Australian politics.

As well as kiboshing the two Nationals, the court knocked out One Nation’s Malcolm Roberts, who is now pitching for Queensland politics; it also rejected the eligibility of the two Greens, Larissa Waters and Scott Ludlam, who’d already resigned from the Senate.

The December 2 New England byelection that Joyce will now contest is a huge distraction for the government. As it battles with the states to get its energy policy in place, and deals with other issues in coming weeks, a mini judgement day is the last thing it needs.

The government has moved to get the byelection over as quickly as possible, with writs issued immediately.

In the only good news Joyce received on Friday, Tony Windsor, the one-time independent member for New England, announced he won’t contest the byelection.

Windsor had tormented Joyce by a submission to the High Court arguing against his eligibility, and by keeping open the option of entering the race if there was a vote.

But, apart from any other considerations, he probably judges that his chances of taking the seat would be poor. Even though he is not a candidate, the Nationals expect he will be running interference in the campaign.

It is nearly unthinkable that Joyce won’t win, whomever he now faces. Labor polls poorly in the seat. A protest vote could go to the Shooters, Fishers and Farmers Party, One Nation, and independents. But recent polling, which was done assuming Windsor ran, has shown Joyce in a comfortable position.

The court decision leaves the cabinet something of a mess. A temporary patch-up has had to be done until after the byelection, with Turnbull taking Joyce’s ministerial duties – he was sworn into agriculture and water resources on Friday – and other ministers acting in Nash’s roles. This obviously means there will be some limbo in the affected portfolios.

A permanent reshuffle has to wait. When it comes the Nationals are expected to lose a frontbench position, because in a recount for Nash’s seat a Liberal is set to replace her.

After the dust settles the Nationals will also have to elect a new deputy.

With Joyce and Nash out, the Nationals’ voice will be more muted in cabinet for a time, although at least Canavan is back, returned on Friday to his resources ministry.

The Nationals have been preparing for this court outcome (if only they had been as diligent in checking their MPs’ constitutional eligibility). Joyce has been paying a noticeable amount of attention to his seat in recent weeks. On Friday night the Nationals were setting up their Tamworth campaign office, and people were appearing in Barney Army t-shirts.

Leadership arrangements were also smoothly put in place, by the Nationals’ parliamentary party and the party’s organisation. Joyce is staying overall party leader while the party’s Senate leader, Nigel Scullion, becomes the interim leader of the parliamentary party.

But, in a sign of the immediate disruption the High Court fallout is causing the government, Turnbull has delayed his trip to Israel – he was due to leave Saturday to join the commemoration of the 100-year anniversary of the Battle of Beersheba.

And late Friday, the government couldn’t say who will be acting prime minister when Turnbull undertakes the Israel trip or goes to APEC soon. While Nationals might accept that Julie Bishop would be more obvious than Scullion for that role, they were not pleased to see the Bishop name in the media. They will be wanting Turnbull to observe the niceties of proper consultation.

The opposition will use the coming weeks to cause what mischief it can. Joyce being disqualified means the government has lost its majority on the floor of the house, although Turnbull told the media “we have a majority of members in the House of Representatives, even in the absence of Barnaby Joyce”. This is, if you count in the casting vote of Speaker Tony Smith.

The government has a buffer, thanks to the crossbench and the Speaker, against any no confidence vote. But prepare for coming Labor shenanigans in parliament. It won’t try a no-confidence motion that would look bad and be lost. But it could, for example, join with crossbenchers to push for a motion for a royal commission on banking, and something on penalty rates, trying to lure Queensland National George Christensen across.

Labor is also questioning the ministerial decisions Joyce and Nash made. Labor deputy leader Tanya Plibersek said: “Every decision made by both Barnaby Joyce and Fiona Nash since October last year is under a legal cloud. Labor will now take some time to work carefully through the implications of the [High Court] decision.”

Just to complicate the situation further, there is a general anticipation of an imminent announcement of a Queensland state election, with neither side of politics confident in predicting the likely outcome but both anticipating that One Nation could hold the balance of power.

How the Liberal National Party polls in Queensland will have Canberra fallout, because it will be read as a pointer to the general mood there – and Queensland will be critical to the federal Coalition at the next election.

The ConversationAs for New England, while no-one anticipates Joyce will fail to retain the seat, the sort of result he gets will be important to how the government ends a difficult year.

https://www.podbean.com/media/player/g8gar-796795?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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Turnbull government says no to Indigenous ‘Voice to Parliament’


Michelle Grattan, University of Canberra

The government has rejected the Referendum Council’s call for a national Indigenous representative assembly to be put into the Constitution, effectively taking the debate about constitutional recognition back to square one.

Malcolm Turnbull, Attorney-General George Brandis and Indigenous Affairs Minister Nigel Scullion, responding to the council’s report, said: “The government does not believe such an addition to our national representative institutions is either desirable or capable of winning acceptance in a referendum”.

The proposal for the body came late into the debate about recognising Indigenous people in the Constitution. It was driven by prominent Indigenous leader Noel Pearson, and taken up by the May convention of Indigenous people in the Uluru Statement from the Heart, before being put forward by the council.

The cause of getting an Indigenous voice also gained support from some constitutional conservatives who preferred it to adding to the Constitution or rewriting parts of it.

The longer the debate about a constitutional change has gone on, the less chance there has seemed of community consensus. It has become clear that Indigenous people will not countenance a minimalist position, while a more radical proposal would not get the support required in a referendum, which must obtain an overall majority and win in a majority of states.

ALso, many Indigenous people are now more interested in pursuing a treaty than the earlier-canvased options for constitutional change.

The council proposed that the “Voice to Parliament” would have “the right to be consulted on legislation and policies that relate to Aboriginal and Torres Strait Islander peoples”.

The government’s Thursday statement said: “Our democracy is built on the foundation of all Australian citizens having equal civic rights – all being able to vote for, stand for and serve in either of the two chambers of our national parliament.

“A constitutionally enshrined additional representative assembly which only Indigenous Australians could vote for or serve in is inconsistent with this fundamental principle.

“It would inevitably become seen as a third chamber of parliament. The Referendum Council noted the concerns that the proposed body would have insufficient power if its constitutional function was advisory only.”

The challenge was to find a constitutional amendment that would succeed and which did not undermine the principles of unity, equality and one-person one-vote, the statement said. The government wants consideration to return now to work done over the past decade “largely with bipartisan support”.

The rejection of the Voice to Parliament was backed by Tony Abbott, who as opposition leader and prime minister promoted constitutional recognition of Indigenous people. He favoured a minimalist model and at one stage aimed for a May 2017 referendum, to coincide with the 50th anniversary of the historic 1967 referendum.

Abbott said in a Facebook post on Thursday that recognition should “come in a way that brings all of us together and this proposal, for a further level of indigenous representation, was unlikely to achieve that”.

But Labor’s shadow assistant minister for Indigenous affairs, Pat Dodson, one of several Indigenous members of federal parliament, described the government decision as “a real kick in the guts for the Referendum Council”.

Pearson told the ABC Turnbull had “broken the first nations’ hearts of this country” expressed in the Uluru Statement.

“The prime minister and his cabinet have arrogated to themselves the entire judgement of this fundamental issue of how do we recognise Indigenous Australians,” he said.

“Why not just put it to the Australian people, as we are putting to a plebiscite the question about same-sex marriage at this very moment?”

The Uluru Statement Working Group said it was disappointed at the government’s decision. Its co-chair, Josephine Crawshaw, said Turnbull understood that a minimalist approach would not satisfy many Indigenous people.

The Conversation“Our aspirations are high, but the prime minister appears to believe that the Australian people will not support those aspirations. This is a very unfortunate view for the prime minister to hold, particularly when he has the highest platform to inspire all Australians to achieve great things for this country and for all its people.”

Michelle Grattan, Professorial Fellow, University of Canberra

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

Jacinda Ardern to become NZ prime minister following coalition announcement



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Jacinda Ardern is set to become New Zealand’s new prime minister.
CC BY-ND

Richard Shaw, Massey University

During the dim, distant past of New Zealand’s recent election campaign, soon-to-be-former prime minister Bill English grumbled that the “stardust” that was falling thick and fast on new Labour leader Jacinda Ardern would settle.

Well, it just has – in such quantities that some time next week Ardern will be sworn in as the 40th – and second youngest – prime minister of Aotearoa/New Zealand.

From stardust to PM

It is quite some denouement to an extraordinary period in New Zealand’s political history. A little under three months ago, Ardern was the deputy leader of a Labour Party that was polling in minor party territory. From deputy leader of a struggling opposition party to prime minister in under three months – that’s stardust on an industrial scale.

For Winston Peters, too, who is likely to become the next deputy prime minister (for the second time), it is a spectacular return to form. Three times Peters has been the veto player in the government formation process. On each occasion he has kept everyone guessing, including, it appears, members of his own caucus.


Read more: Long live the kingmaker: Winston Peters and the NZ election


So, here’s what we know. The new government will comprise a formal coalition between Labour and NZF (the first executive coalition we’ve had on this side of the ditch since 2005). As a minority administration, it will govern with support on confidence and supply from the Greens.

NZF will hold four cabinet positions and an additional slot outside of cabinet. This means that just over half of its caucus will be in the political executive. The Greens, too, will – for the first time in their history – have ministerial portfolios: three outside of Cabinet and one parliamentary under-secretary.

But there’s plenty we don’t yet know. We’re not sure who will occupy which portfolios (although we’re fairly sure Peters will be the deputy prime minister). Neither will we know the nature of the policy detail (if any) in the executive agreement and its associated confidence and supply document until next week.

Few rules to form a government

The last time NZF was in formal coalition – ironically, with the National Party in 1996 – there was an awful lot of devil in that detail. Since then, New Zealand governments have moved away from policy-prescriptive agreements to arrangements that emphasise procedural certainty and clarity. However, the attention that has clearly been paid to matters of policy in the negotiations over the last three weeks suggests we may see a swing back to a greater emphasis on policy substance.

Once the dust – wherever it happens to have come from – has settled on today’s momentous events, a number of features of this election will merit careful reflection.

In particular, questions will certainly be asked of the way in which New Zealand governments are formed. Almost alone amongst mature parliamentary democracies, there are few or no formal rules governing the process. Apart from the constitutional requirement that the government is formed by the party or parties able to demonstrate to the governor-general that they command the confidence of parliament, there is little formal guidance and few restrictions on the process.

That goes a long way to explaining why it has taken a few days short of four weeks to form this government and why, for the first time under the mixed member proportional (MMP) electoral system in New Zealand, the incoming government will not be led by the party that won the largest number of seats in the election. All of this is perfectly constitutional, but disconcerting for some New Zealanders nonetheless.

Expect big, boisterous opposition

What next? National will be furious. Expect some talk over the next couple of days of the “moral authority” the party had to govern, given that it won a clear plurality of parliamentary seats. While the constitution recognises no such thing, National certainly had political precedence on its side.

National will ride that wave of righteous anger – internally at least, if not outwardly for public consumption – for some time to come. Hell hath no fury and so forth. And if the Labour/NZF/Green governing bloc starts fraying at the edges, then National’s claim to “moral authority” will start to look a little less imaginary.

But this might not have been a bad election for National to lose. The party can now move on from the Key years, start generating fresh ideas and begin bringing through some of its younger talent as it remakes itself as a conservative force. Moreover, National will comprise a big, boisterous opposition. The parliamentary conventions and rules governing the allocation of questions in the house, speaking time and membership on select committee positions mean that it will be able to make life very challenging for the new administration.

Human face of capitalism

And what of the new government? For Labour, NZF and Greens – which between them represent 50.5% of those who cast party votes in the election (against National’s 44.4%) – this is the chance to effect change following nine years of orthodox neoliberal government from National.

Peters’ claim when announcing his decision that he wanted to be part of a government that would restore ‘capitalism with a human face’ falls far short of a clarion call for the destruction of neoliberalism. It does, however, signal a significant change in policy direction. For those New Zealanders on the wrong side of the ledger when it comes to our dire performance in health, housing, productivity, wage and salary growth, poverty and so on, that change can’t come soon enough.

The ConversationThis, then, will be a legacy government, one that represents a generational shift in thinking away from the priorities of the baby boomers towards the concerns of the millennials. The irony that such a thing has been brought about by a man on the other side of 70 won’t be lost on anyone. “Let’s do this” was Ardern’s campaign slogan. Now we get to see how New Zealand’s political odd couple go.

Richard Shaw, Professor of Politics, Massey University

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

Household savings figures in Turnbull’s energy policy look rubbery


Michelle Grattan, University of Canberra

The big questions about Malcolm Turnbull’s energy policy will be, for consumers, what it would mean for their bills and, for business, how confident it can be that the approach would hold if Bill Shorten were elected.

The government needs to convince people they’ll get some price relief, but even as Turnbull unveiled the policy the rubbery nature of the household savings became apparent.

Crucially, the policy aims to give investors the certainty they have demanded. But the risk is this could be undermined if Labor, which is well ahead in the polls, indicated an ALP government would go off in yet another direction.

And most immediately, there is also the issue of states’ attitudes, because their co-operation is needed for the policy’s implementation. Turnbull talked to premiers after the announcement, and the plan goes to the Council of Australian Governments (COAG) next month.

Turnbull describes the policy as “a game-changer” that would deliver “affordability, reliability and responsibility [on emissions reduction]”.

Unsurprisingly – given it would end the subsidy for renewables, rejecting Chief Scientist Alan Finkel’s recommendation for a clean energy target – the policy sailed through the Coalition partyroom with overwhelming support.

Finkel later chose to go along with it rather than be offended by the discarding of his proposal. The important thing, he said, was that “they’re effectively adopting an orderly transition” for the energy sector, which was what he had urged.

In the partyroom Tony Abbott was very much a minority voice when he criticised the plan; his desire for a discussion of the politics was effectively put down by a prime minister who had his predecessor’s measure on the day.

The policy – recommended by the Energy Security Board, which includes representatives of the bodies operating and regulating the national energy market – is based on a new “national energy guarantee”, with two components.

Energy retailers across the National Electricity Market, which covers the eastern states, would have to “deliver reliable and lower emissions generation each year”.

A “reliability guarantee” would be set to deliver the level of dispatchable energy – from coal, gas, pumped hydro, batteries – needed in each state. An “emissions guarantee” would also be set, to contribute to Australia’s Paris commitments.

According to the Energy Security Board’s analysis, “it is expected that following the guarantee could lead to a reduction in residential bills in the order of A$100-115 per annum over the 2020-2030 period”. The savings would phase up during the period.

When probed, that estimate came to look pretty rough and ready. More modelling has to be done. In Question Time, Turnbull could give no additional information about the numbers, saying he only had what was in the board’s letter to the government.

So people shouldn’t be hanging out for the financial relief this policy would bring. Although to be fair, Turnbull points to the fact it is part of a suite of measures the government is undertaking.

Business welcomed the policy, but made it clear it wanted more detail and – crucially – that it is looking for bipartisanship.

The Australian Chamber of Commerce and Industry said the policy’s detail “and its ability to win bipartisan and COAG support will be critical”. Andy Vesey, chief executive of AGL, tweeted that “with bipartisan support” the policy would provide investment certainty.

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The Australian Industry Group said it was “a plausible new direction for energy policy” but “only bipartisanship on energy policy will create the conditions for long-term investment in energy generation and by big energy users”.

It’s not entirely clear whether the government would prefer a settlement or a stoush with the opposition on energy.

Turnbull told parliament it had arranged for the opposition to have a briefing from the Energy Security Board, and urged Labor to “get on board” with the policy.

But Labor homed in on his not giving a “guarantee” on price, as well as the smallness of the projected savings. Climate spokesman Mark Butler said it appeared it would be “just a 50 cent [a week] saving for households in three years’ time, perhaps rising to as much as $2.00 per week in a decade”.

But while the opposition has gone on the attack, it is also hedging its bets, playing for time.

“We’ve got to have … some meat on the bones,” Butler said. “Because all the prime minister really announced today was a bunch of bones.”

“We need detail to be able to sit down with stakeholders, with the energy industry, with big businesses that use lots of energy, with stakeholder groups that represent households, and obviously state and territory governments as well, and start to talk to them about the way forward in light of the announcement the government made today,” he said.

The initial reaction from state Labor is narky. Victorian Premier Daniel Andrews said it seemed Finkel had been replaced by “professor Tony Abbott as the chief scientist”, while South Australia’s Jay Weatherill claimed Turnbull “has now delivered a coal energy target.”

These are early days in this argument. Federal Labor will have to decide how big an issue it wants to make energy and climate at the election. Apart from talking to stakeholders and waiting for more detail, it wants to see whether the plan flies at COAG.

If it does, the federal opposition could say that rather than tear up the scheme in government, it would tweak it and build on it. That way, Labor would avoid criticism it was undermining investment confidence.

The ConversationBut if there is an impasse with the states and the plan is poorly received by the public, the “climate wars” could become hotter.

https://www.podbean.com/media/player/sk78v-786f19?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.

Federal government unveils ‘National Energy Guarantee’ – experts react


Alan Pears, RMIT University; Anna Skarbek, Monash University, and Dylan McConnell, University of Melbourne

The federal government has announced a new energy policy, after deciding against adopting the Clean Energy Target recommended by chief scientist Alan Finkel.

The new plan, called the National Energy Guarantee, will require electricity retailers to make a certain amount of “dispatchable” power available at all times, and also to reduce the electricity sector’s greenhouse emissions by 26% relative to 2005 levels by 2030.

The government says it will save the average household up to A$115 a year after 2020, while also ensuring reliability. Below, our experts react to the new policy.


Read more: Infographic: the National Energy Guarantee at a glance


“The federal government will be even less important in energy policy”

Alan Pears, Senior Industry Fellow, RMIT University

Business, state governments and the energy industry have been clamouring for more certainty from the federal government. Now they have it: the federal government will be even less important in shaping energy and climate policy than in the past, leaving states and territories, local government, business and households to focus on driving the energy revolution and cutting emissions.

The new policy will impose a reliability obligation on energy retailers, who will presumably have to select an appropriate mix of energy suppliers to meet it, and the devil will be in the detail. If the required proportion of dispatchable electricity is reasonable, and if retailers and new renewable energy generators are free to decide how to deliver it, then the cost and difficulty of compliance may be modest.

For example, retailers and generators could piggyback on the demand response capacity volunteered for the ARENA Demand Response project. This could help accelerate the rollout of a variety of energy storage solutions, in turn reducing the market power of the big generators and driving down energy prices.

On the other hand, if the options are limited, the obligation could increase the market power of the gas industry, meaning no relief from high wholesale prices.

It will also be interesting to see if the obligation is applied across all new generation. If so, it could significantly increase the cost of new coal generation, as retailers would have to cover the risk of failure of a large generation unit, as well as managing its slow response to changing demand.


“Australia’s electricity sector can cut emissions more”

Anna Skarbek, Chief Executive, ClimateWorks Australia, Monash University

The key question is whether the emissions guarantee will be strong enough for Australia to meet its current and future climate obligations under the Paris Agreement.

Electricity creates more than one-third of Australia’s total emissions. If we don’t reduce the emissions in our electricity, then we don’t unlock other emissions reduction opportunities such as electric vehicles.

If the National Energy Guarantee aims at cutting emissions by only 26% by 2030 then other sectors across the economy would have to make greater emissions
reductions sooner.

But our research shows that Australia’s electricity sector can cut emissions by 60% below 2005 levels by 2030. Harnessing this potential will help us to reach future targets that progressively increase under the Paris Agreement.

If you don’t achieve deep emissions reductions in the electricity sector, a major strengthening of policy will be needed for the other sectors where there is less momentum currently. For example, stronger action would be needed in transport, buildings, industry and land.

Australia’s climate policy, which is being reviewed before the end of the year, will need to cover more than just the electricity sector. Other measures should include the introduction of vehicle emissions standards, a more stringent
national building code, a dramatic improvement in the uptake of energy efficiency measures across industry and stronger incentives for reforestation.


How the reliability guarantee will work

Dylan McConnell, Researcher at the Australian German Climate and Energy College, University of Melbourne

Under the NEG retailers are responsible for ensuring continuous supply of energy. But retailers don’t always generate the energy they sell. In order to meet the NEG’s reliability obligation retailers will most likely enter into cap contracts with generators.

Unlike other kinds of contracts, which impose a fixed price, cap contracts only come into play when high demand pushes energy prices over a certain pre-agreed level. At that point, generators with flexible dispatchable power guarantee that they will provide extra energy.

The extreme peaks, where the price heads to A$14,000 per megawatt hour – only come a couple of times a year, if at all. To compensate generators for building all that extra capacity, retailers pay a daily premium. Cap contracts essentially act as insurance: they protect retailers from extremely high prices during intense demand, and they offer generators the chance of steep profits.

Cap contracts are a standard part of the market, and retailers already used them to manage their risk exposure. The Energy Security Board has said:

This reliability guarantee would require retailers to hold forward contracts with dispatchable resources that cover a predetermined percentage of their forecast peak load.

If the new reliability standards are in line with retailers own internal guidelines, the impact on the market should be minimal. But if the government imposes higher standards, retailers will have to purchase more cap contracts (or build their own dispatchable power plants).

If demand for cap contracts increase, it would most likely encourage investment in gas and hydro power plants.


The ConversationThis article was updated on October 18.

Alan Pears, Senior Industry Fellow, RMIT University; Anna Skarbek, CEO at ClimateWorks Australia, Monash University, and Dylan McConnell, Researcher at the Australian German Climate and Energy College, University of Melbourne

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

The government’s energy policy hinges on some tricky wordplay about coal’s role


John Quiggin, The University of Queensland

The most important thing to understand about the federal government’s new National Energy Guarantee is that it is designed not to produce a sustainable and reliable electricity supply system for the future, but to meet purely political objectives for the current term of parliament.

Those political objectives are: to provide a point of policy difference with the Labor Party; to meet the demands of the government’s backbench to provide support for coal-fired electricity; and to be seen to be acting to hold power prices down.

Meeting these objectives solves Prime Minister Malcolm Turnbull’s immediate political problems. But it comes at the cost of producing a policy that can only produce further confusion and delay.


Read more: Federal government unveils ‘National Energy Guarantee’ – experts react


The government’s central problem is that, as well as being polluting, coal-fired power is not well suited to the problem of increasingly high peaks in power demand, combined with slow growth in total demand.

Coal-fired power plants are expensive to start up and shut down, and are therefore best suited to meeting “baseload demand” – that is, the base level of electricity demand that never goes away. Until recently, this characteristic of coal was pushed by the government as the main reason we needed to maintain coal-fired power.

The opposite of baseload power is “dispatchable” power, which can be turned on and off as needed.

Classic sources of dispatchable power include hydroelectricity and gas, while recent technological advances mean that large-scale battery storage is now also a feasible option.

Coal-fired plants can be adapted to be “load-following” which gives them some flexibility in their output. But this requires expensive investment and reduces the plants’ operating life. The process is particularly ill-suited to the so-called High Efficiency, Low Emissions (HELE) plants being pushed as a solution to the other half of the policy problem, reducing carbon dioxide emissions.

Given that there is only limited capacity to expand hydro (Turnbull’s Snowy 2.0 is years away, if it ever happens) and that successive governments have made a mess of gas policy, any serious expansion of dispatchable power would realistically need to focus on batteries. The South Australian government reached this conclusion some time ago, making a decision to invest in its own battery storage. That move was roundly condemned by the federal government, which at the time was still focused on baseload.

The government’s emphasis on baseload was always mistaken, but the confusion and noise surrounding energy policy meant that few people understood this. That changed in September when the Australian Energy Market Operator (AEMO) reported that Australia’s National Electricity Market faced a capacity shortfall of up to 1,000 megawatts for the coming summer, and that older baseload power stations will struggle to cope.

Clearly this situation called for more flexibility in dispatchable sources in the short term, and widespread investment in dispatchables for the long term.

A question of definition

Obviously, this presented Turnbull with a dilemma. The policy advice clearly favoured dispatchables, but vocal members of his backbench wanted a policy to subsidise coal.

The answer was breathtakingly simple. The new policy redefines coal as dispatchable, despite it having the opposite technological characteristics.

This is not an entirely new approach. Before the government decided to abandon the proposed Clean Energy Target it put a lot of effort into redefining coal as “clean”. The approach here involved creating confusion between carbon capture and storage (CCS) and HELE power stations. CCS involves capturing carbon dioxide from power station smokestacks and pumping it underground, thereby avoiding emissions. This would be a great solution to the problems of carbon pollution if it worked, but unfortunately it’s hopelessly uneconomic

By contrast, HELE is just a fancy name for the marginal improvements made to coal-fired technology over the 30-50 years since most of our existing coal-fired plants were designed and built. The “low” emissions are far higher than those for gas-fired power, let alone renewables or, for that matter, nuclear energy (another uneconomic option).

The core of the government’s plan is a requirement that all electricity retailers should provide a certain proportion of dispatchable electricity – a term that has now been arbitrarily defined to include coal. By creating a demand for this supposedly dispatchable power, the policy discourages the retirement of the very coal units that AEMO has identified as ill-suited to our needs.

Elusive certainty?

Given that the policy is unlikely to survive beyond the next election, it’s unlikely that it will prompt anyone to build a new gas-fired power station, let alone a coal-fired plant. So the only real effect will be to discourage investment in renewables and create yet further policy uncertainty.

This undermines the basis for the (unreleased) modelling supposedly showing that household electricity costs will fall. These savings are supposed to arise from the investment certainty resulting from bipartisan agreement. But the political imperative for the government is to put forward a policy Labor can’t support, to provide leverage in an election campaign. If the government had wanted policy certainty it could have accepted Labor’s offer to support the Clean Energy Target.

The ConversationIt remains to be seen whether this scheme will achieve the government’s political objectives. It is already evident, however, that it does not represent a long-term solution to our problems in energy and climate policy.

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

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

Middle income earners probably won’t be paying as much tax as the government expects



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The PBO has likely overestimated future personal income tax revenue.
Shutterstock

Phil Lewis, University of Canberra

The federal government’s return to a budgetary surplus by 2020/21 will mainly be due to a projected increase in personal income tax revenue, according to a report from the Parliamentary Budget Office (PBO).

The PBO modelling shows that people in the middle of the income spectrum will bear the brunt of this, due to bracket creep. This occurs when tax thresholds (including the tax free threshold) stay constant while income grows due to inflation.

But the PBO modelling includes assumptions about inflation and wages growth that do not bear a resemblance to what is happening in the economy. Both inflation and wages growth have been depressed for some time, and there’s little reason to believe there will be a sudden increase.


Read more: How market forces and weakened institutions are keeping our wages low


The fundamental assumption driving the PBO projections is nominal (not adjusted for inflation) income growth of between 4% and 5%. This consistutes 2% to 2.5% annual inflation and 2.5% to 3% percent annual increase in real income.

The difference between nominal and real incomes is important as it is increases in real income (adjusted for inflation) that result in higher standards of living. But taxes are levied on our nominal incomes, regardless of inflation. Because of this difference, bracket creep means that real incomes after tax (otherwise known as disposable income) will actually fall.

What the PBO report projects

To calculate how much tax we will be paying in the future, the PBO first makes assumptions about inflation and real earnings growth and uses these to project individual incomes. Current income tax rates are then applied to these projected incomes, and the increased amount paid by each individual is added together.

According to the PBO’s modelling, the average individual tax rate will increase by 2.3% from 2017–18 to 2021–22. And every income group will see their tax rates increase over this period.

The largest tax increase is expected for individuals in the middle incomes, who have an average taxable of A$46,000 in 2017/18. This group are projected to face an increase in their average tax rate of 3.2% by 2021–22. Their average tax rate is expected to increase from 14.9% to 18.2%.

Meanwhile, those in the second lowest and two highest income quintiles are expected to see their average tax rate rise between 1.9% and 2.5%. The average tax rate for individuals in the lowest income group is projected to rise by only 0.2%, as most of their income remains below the tax free threshold.

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The increases in average tax rates are even greater if a comparison is made with 2016/17, the latest year for which individuals have been paying tax. As you can see in the previous chart, when compared to 2016/17, individuals in the middle income quintile will see their average tax rate rise by 3.8%.

As you can see, the largest burden of the tax brack creep will fall on “average Australians”. This is because they will see their nominal (before adjusting for inflation) incomes rise. Typically, the lowest income earners do not earn enough to get above the tax free threshold and the highest income earners already pay a large portion of their tax at the top marginal rates.

Because of increasing inflation and wage growth, the Parliamentary Budget Office projects that even the lowest income earners will be liable to pay income tax by 2019/20.

Heroic assumptions?

The 2% to 2.5% inflation assumed in PBO’s forecast is in the mid-point of the Reserve Bank’s target range of 2% to 3%, so this is not entirely unreasonable assumption.

But both PBO’s inflation and wage growth (2.5% to 3%) assumptions are currently way above the levels seen in the economy. According to the ABS annual inflation currently stands at just 1.8%, and the earnings of all Australian employees is growing at 1.6% per annum.

The reasons for persistent low inflation, not just in Australia but in most other industrialised countries, are not well understood or agreed upon.

And a number of theories have been put forward to explain low real wage growth including, the degree of underemployment, reduced job security, declining bargaining power of unions and increased potential competition, either from advances in technology or from international competition.

But regardless of the reasons for the persistently laggard growth in wages and inflation, there are also no signs that these rates will rise significantly any time soon, let alone to the levels assumed by the PBO.


Read more: Budget explainer: why is Australia’s wage growth so sluggish?


Given the information contained in the PBO report we can’t calculate exactly what the impact of these tax increases will be for individuals.

However, it is clear that if the current wage and price conditions persist the actual tax revenue will fall way short of the projected figures for all years up to and including 2021/22 and make a Budget balance even further off.

We can also make some extrapolations based on averages. As a simple example, consider someone on an annual income of A$84,000 in 2017/18 (which is around the current average earnings in Australia). Under the assumption that nominal incomes increase by only 2% per year, the tax paid (including Medicare levy) in 2020/21 would be A$23,158.

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However, if you compare this to nominal income growth of 5% (which is what the PBO assumes) the tax paid would be A$26,357 in 2020/21.

That is, tax collected from this individual would be 12% less under a low growth scenario than under the PBO’s more optimistic scenario. In the years 2018/19 and 2019/20 the tax collected would be respectively 4% and 8% less. This illustrates how precarious the projection of a balanced Budget in 2020/21 is.

The ConversationWhatever the outcome, it is for certain that income earners will see any nominal increases eroded not just by inflation, but also through bracket creep.

Phil Lewis, Professor of Economics, University of Canberra

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

High stakes for Turnbull government as High Court hears MPs’ citizenship cases


Michelle Grattan, University of Canberra

Barnaby Joyce is on tenterhooks. Despite Malcolm Turnbull’s confidence that the High Court will find for him, Joyce’s parliamentary eligibility is a key to how the government finishes the year.

From Tuesday to Thursday, the court will consider what is surely one of the most extraordinary set of cases to come before it – the constitutional position of seven current and former MPs who were dual citizens.

All but Joyce are or were senators, which means that the only potential byelection that could be caused is for Joyce’s seat of New England. Three are Nationals: Joyce, Fiona Nash and Matt Canavan. Canavan quit the ministry (but not the parliament) when his issue arose; Joyce and Nash remain on the frontbench.

The two Greens, Scott Ludlam and Larissa Waters, resigned from parliament when they discovered their dual nationality. It was Ludlam’s departure that started the dominoes falling, as others checked their positions. Both Greens argue they were ineligible to sit – although the Commonwealth is actually saying Waters was eligible.

The remaining two are One Nation’s Malcolm Roberts, and Nick Xenophon.

Roberts, Ludlam and Waters were born overseas. The rest had foreign citizenship by descent. Joyce and Ludlam were New Zealanders; Nash, Xenophon and Roberts had British citizenship; Waters found herself a Canadian because she was born there during her parents’ brief stay; Canavan was Italian.

There have been some bizarre twists. Canavan said initially his mother had signed him up to Italian citizenship without his knowledge; later it was found she hadn’t had to – he already had it.

This latter fact is important for the Commonwealth’s legal argument. It is contending the constitutional provision about citizenship was only intended to exclude those who acted positively to obtain foreign citizenship or knowingly kept it. If Canavan’s Italian citizenship was gained by positive action, he wouldn’t be protected by that argument, as he would be if he were Italian by descent.

Xenophon had a very weak form of British citizenship, via his father, who had emigrated from Cyprus, which was a British territory.

The court has already declared that Roberts, who sent questions about his status to defunct email addresses, was a British citizen when elected, although it has not yet ruled on his eligibility.

Section 44 (i) of the Constitution reads clearly enough, on the face of it.

A person cannot be chosen for or sit in federal parliament if he or she:

… is under any acknowledgement of allegiance, obedience, or adherence to a foreign power, or is a subject or a citizen or entitled to the rights or privileges of a subject or citizen of a foreign power.

To clear themselves of this potential problem, an aspiring parliamentarian has to take proper steps to renounce a foreign citizenship.

It’s notable the major parties, which have good vetting, aren’t caught up in this case, although there have been allegations against some of their MPs.

The government is arguing that if the MP was Australian at birth (whether born here, or abroad to Australian parents) and wasn’t aware of their dual citizenship, they should not be found ineligible – in other words, that ignorance is a defence.

But if the MP was born overseas and later naturalised, the government argues, they were on notice about potentially being a foreign citizen, regardless of what they thought was the case. In this instance, according to the government’s argument, ignorance is not a defence.

If the court clears most of the MPs, it would be an effective rewrite, through interpretation, of the literal wording of this section.

The potential implications of the court’s decisions are wide and varied.

With Ludlam and Waters already out of parliament, the issue is just how they are replaced. If the court agrees with their own assessments that they were ineligible, their replacements will be the next candidates on the Greens 2016 tickets in Western Australia and Queensland, respectively Jordon Steele-John and Andrew Bartlett (a one-time Australian Democrats senator and leader).

If the court upheld the eligibility of one or both, the replacement or replacements would be chosen by the party. Ludlam has indicated he would not seek nomination; Waters, anxious to return to parliament, would be expected to do so.

It’s always possible, incidentally, for someone elected via a countback to then resign, leaving the way for the party to choose the replacement.

If Roberts is knocked out, the next on the One Nation ticket is Fraser Anning, who recently avoided another constitutional impediment: bankruptcy.

Disqualification of Xenophon would see Tim Storer of the Nick Xenophon Team (NXT) installed. But if Xenophon’s eligibility is upheld, he will leave the Senate anyway, to contest the South Australian election. In that circumstance, his party would choose who followed him.

The disqualification of Nash and Canavan would lead to candidates down their respective 2016 New South Wales and Queensland tickets replacing them. That would create some internal complications regarding the numbers between the Coalition parties.

Professor Anne Twomey, from the University of Sydney Law School, noted that if Nash were disqualified and a recount held, she would most likely by replaced by the Liberal who was next on the joint ticket. She said:

Even if that Liberal then resigned in an effort to pass the seat back to the Nationals, the constitution requires that the person who fills the seat is a member of the same party as the senator who was ‘chosen by the people’.

This would not have been Nash, as she was disqualified, and therefore never validly chosen. It would be the Liberal who won the seat on the recount. This would mean that she would have to be replaced by a Liberal, upsetting the balance in the Coalition.

The loss of one or both National senators would also mean a reshuffle of portfolios. This would fit with Turnbull’s desire for an end-of-year reshuffle, but test the Nationals’ talent pool. (Canavan is out of the ministry but Joyce is acting in his roles.)

But it is the finding on Joyce that has the big implications. If he were forced to a byelection, it would rock the government – even though he would almost certainly retain his seat.

The first issue would be whether he stood down from the ministry.

Twomey noted that while the constitution allows a person to be a minister for three months without holding a seat, the problem would be that Joyce had not validly held a seat since July last year – “which suggests that his three-month grace period is well and truly over. On that basis he would have to stop acting as a minister immediately.”

With Joyce out of parliament, the government would lose its majority on the floor of the House of Representatives. The result of particular votes would depend on the issue, the crossbenchers and – if it came to that – the Speaker’s casting vote.

Fighting a byelection would be distracting and disruptive for a government struggling in the polls.

The former independent member for New England, Tony Windsor, who is maintaining in the High Court that Joyce should be disqualified, has not ruled out running in a byelection. One Nation could be in the field, as could the Shooters, Fishers and Farmers Party, whose support will be tested in the NSW byelections this weekend.

The Newspoll quarterly breakdown, published this week, has found the government under pressure in regional areas. But a ReachTEL poll done last month for the Australia Institute found the Nationals polling 44.6% in New England, Windsor 26.5% and One Nation 9.8%, Labor 8.4%, and the Greens 2.4%.

The Queensland election, expected to be announced very soon, would be another dynamic in a byelection situation.

If, on the other hand, Joyce’s eligibility is upheld, Turnbull’s end-of-year reshuffle becomes much easier, especially with a strong win for the “yes” case now expected in the marriage ballot.

That still leaves the challenge of energy policy. Energy Minister Josh Frydenberg on Monday signalled the government was turning its back on a clean energy target, a reflection of the strength of the conservative voices within Coalition ranks – a combination of right-wing Liberals and the Nationals.

On the present timetable, the government is likely to take the broad outlines of its energy policy to the Coalition partyroom when parliament resumes next week.

The ConversationBut the situation is fluid, with the outcome in the High Court the known unknown. While the timing isn’t precise, the court is expected to be quick with its decision. It is obviously not driven by politics, but it is alert to the need to provide political certainly as soon as possible.

Michelle Grattan, Professorial Fellow, University of Canberra

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

The government’s new gas deal will ease the squeeze, but dodges the price issue



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The government has so far refrained from putting a legal limit on LNG leaving our shores.
Ken Hodges/Wikimedia Commons, CC BY

Samantha Hepburn, Deakin University

The deal signed this week by the federal government and the nation’s biggest three gas producers will ease Australia’s gas supply squeeze, but it will do nothing to address the current high prices.

Under the contract, Shell, Origin and Santos have agreed to supply more domestic gas to avert the predicted shortfall for 2018.

In so doing, the government seemingly sidestepped the need to trigger its own powers to forcibly restrict gas exports.

Sighs of relief all round, then. But here’s the thing: neither the new deal, nor the legislation that governs export controls, actually addresses the issue that is arguably most important to consumers – the high prices Australians are paying for their gas.


Read more: To avoid crisis, the gas market needs a steady steer, not an emergency swerve


Australia has vast gas resources, and yet somehow we find ourselves with rising prices and a forecast shortfall of up to one-sixth of demand in the east coast gas market in 2018.

This is partly understandable, given that rising global demand has fuelled a lucrative export market. The primary destination is Asia, which will assume more than 70% of global demand. In geographical terms this puts Australian exporters in a very strong position, and by 2019 Australia is forecast to supply 20% of the global market – up from 9% today.

However, the strong global demand for liquefied natural gas (LNG) does not in itself provide the full explanation for rising gas prices in Australia’s east coast gas market. This is caused by a weak regulatory environment.

Policy levers

The Australian Domestic Gas Security Mechanism, which took effect in July 2017, gives the federal resources minister the power to restrict exports of LNG in the event of a forecast shortfall for the domestic market in any given year.

This five-year provision was designed as a short-term measure to ensure domestic gas supply. If triggered, it would require LNG exporters either to limit their exports or to find new sources of gas to offset the impact on the domestic market.

To trigger the mechanism, the minister must follow three steps:

  1. formally declare that the forthcoming year has a domestic shortfall, by October 1 of the preceding year;

  2. consult relevant market bodies, government agencies, industry bodies and other stakeholders to determine their view on the existing and forecast market conditions; and

  3. make a determination by November 1 on whether to implement the measures.

Any export restriction implemented under the ADGSM would potentially apply to all LNG exports nationwide, including those from areas with no forecast gas shortage, such as Western Australia. The minister does have the ability to determine the type of export restriction that is imposed. An unlimited volume restriction does not impose a specific volumetric limitation and can be applied to LNG projects that are not connected to the market experiencing the shortfall. A limited volume restriction imposes specific limits on the amount of LNG that may be exported and may be applied to an LNG project that is connected to the market experiencing the shortfall.

Non-compliance with the export limits imposed on gas projects would have a range of potential consequences for gas companies. These include revocation of export licence, imposition of different conditions, or stricter transparency requirements.

The new deal

The agreement signed with the big three gas producers effectively relieves the government of the need to consider triggering the ADGSM. As such, 2018 has not been officially declared to be a domestic shortfall year.

But the agreement is not grounded upon any specific legislative provision. Therefore it is essentially only enforceable against the gas companies that are parties to it. And in accordance with the private terms and conditions that those companies agree to.

The broad agreement is that contractors will sell a minimum of 54 petajoules of gas into the east coast domestic market (the lower limit of the forecast shortfall) and keep more on standby in case the eventual shortfall turns out to be bigger.

But what about prices?

The deal contains no specific provision regarding domestic pricing. So, although there will be more gas in the domestic market, this does not necessarily mean that the current high prices will drop.

In the short term, the provision of additional supply may curtail dramatic increases in domestic gas prices. However, the gas deal does not address the core problem, which stems from our enormous commitment to LNG exports and the connection of domestic gas prices to the global energy market.

Indeed, the commitments are so great that many LNG operators have had to take conventional gas from South Australia and Victoria to fulfil their export contracts. This has put significant pressure on domestic prices.

The unequivocal truth is that gas prices were much cheaper before the LNG export boom. The only way to achieve some level of protection for domestic gas prices is to implement stronger regulatory controls on the export market. This should involve taking account of the public interest when assessing whether export restrictions should be imposed.

The ADGSM legislation does not incorporate any explicit public interest test, despite the fact that gas is a public resource in Australia and gas pricing is a strong public interest issue.

Compare that with the United States, where public interest is a key principle in assessing whether to approve any LNG exports to countries with no US free trade agreement (such as Japan). Public interest tests in the United States involve a careful determination of how exports will affect domestic supply and the potential impact that a strong export market will have upon domestic prices.


Read more: Want to boost the domestic gas industry? Put a price on carbon


The Australian government’s decision to broker a deal with gas suppliers, rather than extend the long arm of the law, means that regulators will need to keep a close eye on the gas companies to check that they are holding up their end of the bargain.

That job will fall to the Australian Competition and Consumer Commission (ACCC). ACCC chair Rod Simms this week warned gas suppliers to ensure that their “retail margins are appropriate”.

The ConversationIn the absence of any explicit rules compelling gas producers that signed the deal to provide clear and accurate information and adopt stronger transparency protocols, the ACCC may face a very onerous task.

Samantha Hepburn, Director of the Centre for Energy and Natural Resources Law, Deakin Law School, Deakin University

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

How the government and One Nation may use media reforms to clip the ABC’s wings


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It would be easy to set up an inquiry into the ABC – with the findings already known.
Shutterstock

Denis Muller, University of Melbourne

Among the four concessions concerning the ABC that senator Pauline Hanson extracted from the federal government in exchange for her support of its recent media ownership law changes, one in particular has the potential to do real damage to the national broadcaster.

This is the promised inquiry into the ABC’s competitive neutrality.

It has been on the agenda of News Corp for years to have the ABC’s wings clipped, for the obvious reason that it sees the ABC as a commercial rival. If News Corp had its way, the ABC’s big strategic move into digital broadcasting more than a decade ago would have been cut off at the pass.

So Hanson, whether she knew it or not, has played into the hands of New Corp on this, and given the government a political opportunity to do yet one more favour for Rupert Murdoch.

Since the government does not need a vote in parliament to set up an inquiry like this, it is easy to see how it might unfold.

An eminently well-qualified chairman could easily be found. To pick a name at random: Maurice Newman, former chairman of the stock exchange, former chairman of the ABC and now public ideologue opposed to public-sector broadcasting. He wrote a polemic in The Australian in April asserting that the ABC and SBS no longer served a public purpose.

The government could effortlessly craft terms of reference consistent with that axiom of politics – you never hold an inquiry without knowing the outcome.

A high-profile firm of economic consultants could be engaged to conduct an analysis of the impact of the ABC’s activities on private-sector media.

Using suitable assumptions, a selection of data and a fitting framework of economic theory, it might easily find that the ABC, despite manifold inefficiencies, was indeed using its public funding in an anti-competitive way to crowd out the private sector.

Recommendations would naturally ensue that the range of ABC activities had strayed well beyond the confines imagined by its founding fathers in the early 1930s. It would therefore follow that its funding should be cut in order to see it focus on outputs that no commercial broadcaster would touch with a barge pole.

Perfectly respectable.

Of the other three concessions to Hanson, the one likely to do the most mischief is the one requiring the ABC to publicly disclose the salaries and conditions of all staff whose packages amount to more than A$200,000 a year.

While in principle it seems reasonable that the salaries of people on the public payroll should be public, in fact the pay of individual public servants is generally a private matter.

This is the case not only because a person’s financial affairs are inherently private, but because it is a disincentive for good people to join the public sector if their private affairs are going to be trawled over in public for political purposes.

It has already happened with ABC salaries when they were inadvertently released under freedom-of-information laws a couple of years ago.

The combination of fame and their type of work magnifies the privacy issue for high-profile ABC journalists and presenters. No-one cares what some obscure under-secretary in the Department of Veterans Affairs gets paid, but politicians like Hanson salivate over the pay of people like Leigh Sales and Barrie Cassidy.

The remaining two concessions are not likely to have much impact on the ABC.

The one that got all the attention at the start was the insertion of “fair” and “balanced” into the ABC’s charter.

This is a sideshow. The ABC’s charter is contained within section six of the ABC Act, so amending it will require a parliamentary vote. Senator Nick Xenophon has said his team will not support it, and since his team’s support is likely to be necessary, it looks like an empty gesture by the government.

In any case, the requirements for fairness and balance are already built into the ABC’s editorial policies, which are binding on ABC journalists, so the practical effect would be nonexistent.

However, a parliamentary debate on the ABC’s impartiality would keep this matter bubbling along in the public mind and furnish an opportunity for reactionary politicians to further ventilate their suspicions.

Finally, there was a concession concerning provision of broadcasting services to regional areas. The ABC has already announced a A$50 million package
to enhance regional services. And anyway, this is a level of operational detail that generally lies beyond the reach of politicians.

A bit of cosmetic arm-wrestling between Communications Minister Mitch Fifield and the chair of the ABC, perhaps some pointed questions at Senate estimates, and a tweak of the ABC’s budget will probably satisfy this concession.

The ConversationTaken together, then, three of these concessions have considerable nuisance value. But the fourth contains the seeds of a serious challenge to the ABC’s future.

Denis Muller, Senior Research Fellow in the Centre for Advancing Journalism, University of Melbourne

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