After AUKUS, Russia sees a potential threat — and an opportunity to market its own submarines

Alexei Druzhinin/AP

Alexey D Muraviev, Curtin UniversityThe global opinions on the new AUKUS security pact between Australia, the US and the UK have been decidedly mixed. China and France immediately blasted the deal, while others, such as Japan and the Philippines, were more welcoming.

Russia, one of the other few nations armed with nuclear-powered submarines, was more low-key and cautious in its initial reaction.

The Kremlin limited its official commentary to a carefully crafted statement that said,

Before forming a position, we must understand the goals, objectives, means. These questions need to be answered first. There is little information so far.

Some Russian diplomatic officials joined their Chinese counterparts in expressing their concerns that Australia’s development of nuclear-powered submarines (with American and British help) would undermine the Nuclear Non-Proliferation Treaty and “speed up an arms race” in the region.

They suggested the construction of the nuclear submarine fleet would need to be overseen by the International Atomic Energy Agency — a proposition unlikely to be acceptable to Canberra.

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‘Prototype of an Asian NATO’

As more became known about the new security pact, the rhetoric of Kremlin officials began to shift.

For instance, former Australian ambassador to the US, Joe Hockey, boldly declared AUKUS was intended to counter not only China’s power in the Indo-Pacific region, but Russia’s, too.

Soon after, the secretary of Russia’s Security Council, Nikolai Patrushev, was calling the pact a “prototype of an Asian NATO”. He added,

Washington will try to involve other countries in this organisation, chiefly in order to pursue anti-China and anti-Russia policies

This change of rhetoric should not come as a surprise to Canberra. Russia has long considered any change to regional security — the creation of new alliances, for instance, or the deployment of new weapons systems — a military risk that would require a response.

Marketing its own nuclear submarines

So, what possible options could Russia entertain as part of its response?

Since Moscow’s view of AUKUS is more of a political and military risk, but not yet a threat, its immediate responses are likely to be limited to political manoeuvring and opportunity grabbing.

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Perhaps most notably, Russia may see the AUKUS submarine deal as setting a precedent, allowing it to promote its own nuclear-submarine technology to interested parties in the region. This is not merely hypothetical — it has been suggested by defence experts with close links to Russia’s Ministry of Defence.

Historically, Russia has held back from sharing its nuclear submarine technology, which is considered among the best in the world, certainly superior to China’s nascent capabilities.

Thus far, Moscow has only entered into leasing arrangements with India, allowing its navy to operate Soviet- and Russian-made nuclear-powered attack submarines since 1987. But this has not entailed the transfer of technology to India.

Should Russia decide to market its nuclear-powered submarines to other nations, it would have no shortage of interested buyers. As one military expert suggested, Vietnam or Algeria are potential markets — but there could be others. As he put it,

Literally before our eyes, a new market for nuclear powered submarines is being created. […] Now we can safely offer a number of our strategic partners.

Expanding its submarine force in the Pacific

In the longer run, Russia will also not disregard the obvious: the new pact unites two nuclear-armed nations (the US and UK) and a soon-to-be-nuclear-capable Australia.

The expanded endurance and range of Australia’s future submarines could see them operating in the western and northwestern Pacific, areas of regular activity for Russia’s naval force.

A Russian Navy destroyer visiting the Philippines in 2019.
Bullit Marquez/AP

Should the strike systems on board these submarines have the Russian far east or parts of Siberia within their range, it would be a game-changer for Moscow.

As a nuclear superpower, Russia will need to factor this into its strategic planning. And this means Australia must keep a close watch on Russia’s military activities in the Pacific in the coming years.

Over the next 12 months, for instance, the Russian Pacific Fleet is expected to receive at least three nuclear-powered submarines.

Two of these fourth-generation submarines (the Yasen-M class) are technologically superior to similar vessels currently being built by the Chinese and are believed to be almost comparable to the American nuclear submarines being considered an option for Australia.

The third is a 30,000-tonne, modified Oscar II class Belgorod submarine converted to carry several nuclear super-torpedos capable of destroying major naval bases.

By 2028, I estimate Russia’s navy will have a force of at least 14 nuclear-powered submarines and six conventional attack submarines in the Pacific.

Should Russia start considering AUKUS a military threat, we could expect more to arrive. Their area of operations could also be expanded to the South China Sea, and beyond.

Deepening naval ties with China

In the most dramatic scenario, Russia and China could form a loose maritime coalition to counter the combined military power of the AUKUS pact.

Given the deepening state of Russia-China defence relations, particularly in the naval sphere, this does not seem unrealistic.

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This possible coalition is unlikely to become an actual maritime alliance, let alone the basis for larger bloc involving other countries. Still, if Russia and China were to coordinate their naval activities, that would be bad news for the AUKUS.

Should tensions escalate, Moscow and Beijing could see Australia as the weakest link of the pact. In its typical bombastic language, China’s Global Times newspaper has already referred to Australia as a “potential target for a nuclear strike”.

This might be a far-fetched scenario, but by entering the nuclear submarine race in the Indo-Pacific, Australia would become part of an elite club, some of whom would be adversaries. And there is the potential for this to lead to a naval Cold War of sorts in the Indo-Pacific.

Sceptics may say Moscow is likely to be all talk but no action and the risks posed by Russia to Australia are minimal. Let’s hope this is correct.

Alexey D Muraviev, Associate Professor of National Security and Strategic Studies, Curtin University

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

Coronavirus is killing Australia’s lobster export market

Shutterstock

Eva Plaganyi, CSIRO; Nicole Murphy, CSIRO; Roy Aijun Deng, CSIRO; Sean Pascoe, CSIRO, and Trevor Hutton, CSIRO

Currents are strong around the Torres Strait Islands, lying between Australia’s northern-most tip and Papua New Guinea.

When the tidal conditions are right and the waters relatively still, though, up to 230 islanders – a sizeable percentage of the islands’ roughly 4,000 indigenous inhabitants – will board small boats and head out to the surrounding reefs. There they will dive down and search the underwater outcrops for lobsters, grabbing the crustaceans by hand.

It’s laborious work compared with lobster fishing in other parts of Australia, where fishers bait “pots”, then simply pull up the pots with lobsters inside. The tropical rock lobsters of the Torres Strait, however, are sensitive creatures and generally won’t crawl into a trap. By hand is the only sure way to catch them.

But, until a few weeks ago, it has been worth it.

A fisher can sell a live lobster from these waters for $65-95 a kilogram. That makes it worth holding them in water-filled crates and then flying them to wholesalers in Cairns. There they are processed and transported to domestic and international markets.

Tropical lobsters caught in Torres Strait.
Eva Plaganyi-Lloyd, Author provided

The most lucrative market is China. Its appetite for live rock lobster makes up about half the value of Australia’s seafood exports (A$660 million of A$1.4 billion).

Now, though, lobster fishers are staying home. There hasn’t been a regular lobster shipment to China since January 26.

With the Wuhan coronavirus suspected to have originated from wild animals in the city’s Huanan Seafood Wholesale Market, Chinese authorities have temporarily banned all wild animal trade. Lobster and other wild-caught aquatic products are exempt from the ban, but demand has plummeted due to people staying home and avoiding both markets and restaurants.

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This collapse has come at a time that would normally be one of peak demand, and peak prices, due to Chinese New Year festivities. Our industry sources report prices for live lobsters are down 50% to 80%.

An advertisement for rock lobsters in the Queensland Asian Business Weekly on January 31 2020, shows drastically reduced prices, from A$258 a kilogram to A$148 a kilogram, for large lobsters.
Author supplied, Author provided

It’s a huge blow to the economy of Torres Strait, along with the rest of Australia’s live seafood export industry.

Loss of livelihoods

Lobster fishing is among the highest-value economic activities in the strait. Indigenous islanders have limited alternatives to make money, given their geographical isolation.

As scientists fortunate to work closely with traditional owners in the Torres Strait over the past decade, we’re saddened to see this devastating impact on livelihoods.

Author Eva Plaganyi-Lloyd with a tropical rock lobster.
Eva Plaganyi-Lloyd, Author provided

CSIRO researchers have worked in the strait for more than three decades to help local people sustain their traditional way of life and conserve the marine environment for future generations.

This is no easy feat, considering the resources are also shared with an Australian non-Islander sector and traditional owners from Papua New Guinea.

The region’s wild marine fisheries have been thriving thanks to good management and a strong sense of custodianship by the Islanders.

CSIRO scientists doing a survey of tropical lobster numbers. These annual surveys are used with fishery data to calculate the season quotas for the fishery.
CSIRO, Author provided

New harvest strategies for fishing lobster and bêche-de-mer (sea cucumbers) were implemented in December 2019. These took years of research and consultation. This included augmenting scientific surveys with information from fishers to work out sustainable catches.

The new strategies followed a disastrous lobster-fishing year in 2018, when our scientific surveys suggested the lobster population was in trouble due to conditions created by extreme El Niño events. The fishery had to be closed two months early, with substantial economic impact. It was nonetheless an example of Torres Strait Islanders putting sustainability before short-term gain.

No offsets

Now they have the coronavirus to contend with.

The loss of income from those in the fishing business affects other small businesses and ripples throughout the local community.

Selling to the frozen seafood market is an option, but prices are much lower, and there’s a point at which the time, effort and cost of catching a tropical rock lobster make it uneconomical. Boat fuel, for one thing, is expensive. Sales of frozen seafood to China have also taken a dive.

For some Australian fisheries it’s possible taking fewer fish this season will mean a larger fish population next year. So next year’s catch quotas could be adjusted up without jeopardising the marine population. This could partially offset losses this year.

But that’s not an option for the Torres Strait lobster fishery. That’s because by the time a lobster is big enough to catch, usually in its third year of life, it is also ready to migrate, walking several hundred kilometres to the east of the fishery area. So catching fewer lobsters this year won’t mean they are around to catch next year. It is a unique fishery in this regard.

Planning sustainable exports

This impact of the coronavirus on Torres Strait Islanders shows how connected global trade now is.

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What it also demonstrates is the importance of deliberate and distributed growth in export markets for them to be sustainable.

Heavy dependence on a single market carries a big risk. As things stand, we can expect demand for seafood in China will remain low for some time to come.

This is an opportune time to rethink sustainable export growth strategies.

Eva Plaganyi, Principal Research Scientist, CSIRO; Nicole Murphy, Experimental Scientist, CSIRO; Roy Aijun Deng, Senior experimental scientist, CSIRO; Sean Pascoe, Fisheries Economist, Oceans and Atmosphere, CSIRO, and Trevor Hutton, Senior Research Scientist, CSIRO

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

India’s not joining the latest free-trade deal which limits Australia’s market access

Pat Ranald, University of Sydney

Australian prime minister Scott Morrison and other leaders involved in the Regional Comprehensive Economic Partnership (RCEP) announced late yesterday that 15 of the 16 countries have finalised the text, and are prepared to sign the trade deal in early 2020.

India is the only one not to join, a joint leaders’ statement saying the country had “significant outstanding issues”. Negotiations will continue in the hope it may join later.

The RCEP now involves Australia, New Zealand, China, Japan, South Korea and the 10 Association of Southeast Asian Nations (ASEAN) countries, covering 2.5 billion people.

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A lost Indian market, for now, and concerns about corporate power

India’s absence severely diminishes the market access Australia hoped to gain. Australia already has a free trade agreement with ASEAN, and has bilateral free trade agreements with all of the other countries.

India would have been the main area of additional market access for Australian agricultural and other exports.

RCEP negotiations have dragged on since 2012. Much attention has focused on India’s resistance to lower tariffs and emphasised the importance of concluding a major trade deal in the face of US president Donald Trump’s America-first protectionism.

But there is a hidden contentious agenda of non-tariff issues that has influenced India’s decision and could restrict future government regulation by giving more rights to global corporations.

These deserve more public discussion in Australia, and reflect the widely divergent levels of economic development of RECP countries.

A secret deal

As usual, the wording of the RECP deal is secret. The final text will not be revealed until after it is signed.

It’s a process widely criticised by both civil society groups and the Productivity Commission.

This secrecy favours corporate players, which have the most resources to lobby governments.

Leaked documents reveal the industrialised countries, including Japan, South Korea and Australia, have been pushing non-tariff rules that suit their major corporations, similar to those in the controversial Trans-Pacific Partnership (TPP).

These have been resisted by developing countries, which have more vulnerable populations, and wish to preserve regulatory space to develop local industries.

Concern over foreign investor rights

The contested proposals include foreign investor rights to bypass national courts and sue governments for millions of dollars in international tribunals if they can argue a change in law or policy will harm their investment. This is known as Investor-State Dispute Settlement or ISDS.

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Suddenly, the world’s biggest trade agreement won’t allow corporations to sue governments

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Tobacco company Philip Morris used ISDS to sue our government for compensation over our plain packaging law, a public health measure designed to discourage young smokers. Australia won in the end, but at a cost to taxpayers of $12 million.

Most of the 983 known ISDS cases have been taken against developing countries, with increasing numbers against health, environment, indigenous land rights, labour laws and other public interest regulation in both developing and industrialised countries.

RCEP members India and Indonesia have policies to exclude or severely restrict investor rights in new agreements.

ISDS has been reportedly excluded from the RCEP text. India was one of the main opponents of ISDS. We won’t know for sure whether ISDS is still excluded until the text is released after signing.

Other concerns over patents and e-commerce

Even more contentious are proposals that pharmaceutical companies should be given longer patent monopolies on medicines than the current 20 years. This would delay the availability of cheaper medicines, at greatest cost to developing countries.

There are also proposals to extend to developing countries’ rules on patenting of seeds and plants that apply to industrialised countries. This would make it more difficult for millions of small-scale farmers in developing countries to save and exchange seeds with each other as they have done for centuries. They lack the capacity to use the legal system to obtain patent rights and lack the funds to buy patented seeds.

The RCEP also includes an e-commerce chapter that mandates free cross-border data flows for global corporations such as Google and Facebook. This makes it more difficult for governments to regulate them.

For example, if trade rules forbid requirements to store data locally, then national privacy laws and other consumer protections cannot be applied to data stored in other countries.

The recent Digital Platforms report of the Australian Consumer and Competition Commission recommended more, not less regulation of these corporations. That was in the face of scandals about violations of consumer privacy, misuse of data in elections and tax evasion.

Developing countries are also concerned rules favouring the global tech companies will lock in their market dominance at the expense of local IT industry development.

These conflicts between governments have been deepened by national pressures from civil society groups in RCEP countries including Australia. When RECP negotiations were held in Australia in July this year, 52 community organisations, including public health, union, church, environment and aid groups endorsed a letter to the trade minister Simon Birmingham. They asked him to oppose ISDS and longer medicine monopolies in the RCEP, and to release the text for independent evaluation before it is signed.

Show us the deal

Even without India in the deal, the Australian government says it will boost local jobs and exports.

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But without India, claimed market access gains are marginal for Australia and must be evaluated against the costs of expanded corporate rights and restraints on future government regulation.

That’s why the text of the RCEP deal should be released before it is signed and there should be independent evaluation of its costs and benefits for both Australia and its trading partners.

Pat Ranald, Research fellow, University of Sydney

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

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

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

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

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

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

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

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

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

Modern-day alchemy

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

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

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

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

This is a growing area of research.

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

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

Meeting society’s metal demands

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

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

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

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

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

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

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

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Ethically-sourced jewellery

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

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

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

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

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

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

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

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

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

Medical and industrial applications

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

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

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

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

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

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

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

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

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

ABC and SBS are not distorting media market, government inquiry finds

Michelle Grattan, University of Canberra

The government’s inquiry into whether the ABC and SBS are competing
fairly with the private sector’s media operators has given a tick to
the public broadcasters.

The report concluded: “Given their market shares, and other factors, this inquiry considers the National Broadcasters are not causing significant competitive distortions beyond the public interest”. But it did see the need for greater transparency from them.

The review arose from a 2017 deal between the government and Pauline
Hanson to get One Nation support for media law changes which
liberalised ownership rules. It has been chaired by Robert Kerr,
formerly from the Productivity Commission. The report was released by
Communications Minister Mitch Fifield on Wednesday.

The outcome will be disappointing to News Corp in particular which has
been highly critical of the ABC’s expansion in online publishing. The
former Fairfax organisation, now taken over by Nine, also complained
about the competition eating into the market of commercial media
groups.

The report said: “Competitive neutrality seeks to ensure that
competition is not distorted by public entities taking inappropriate
advantage of government ownership.

“It is not intended to prevent public entities from competing, nor to
relieve discomfort from competitive processes which are bringing
benefits to consumers as they rapidly adopt and enjoy new services”.

The inquiry found the broadcasters’ business activities in order; they
were “abiding by a best endeavours approach to competitive
neutrality.” It suggested there should be some improvements in
transparency and internal procedures.

Beyond that, “the question arises as to how competitive neutrality
principles about competing fairly without distortion might apply to
the free services delivered by the ABC and SBS.

“Free ABC and SBS services are having some competitive impact.
Submissions included complaints about the ABC’s online news service
and SBS’ multi-channel and streaming services. But the National
Broadcasters are established and funded to provide free services. So
long as they operate within their statutory Charters they are
operating in the public interest”.

The report said submissions questioned whether the broadcasters were
operating within their charters. But, it said, these charters were
very broad, and reporting against them “is not detailed or robust
enough to settle doubts”.

“Accountability is difficult, especially as there is no opportunity
for Charter complaints to be addressed”.

The broadcasters should improve their reporting of charter performance
in the context of competitive neutrality. “If this enhanced reporting
does not occur, the government should consider a way of managing
complaints about Charter performance in this area,” the report said.

“While the National Broadcasters are not prohibited from competing,
some improvements in the way they interact with markets should be
contemplated”.

The report also said the government should consider options for a
longer term funding framework for the national broadcasters,
accompanied by increased transparency and accountability.

Fifield said he recognised the broadcasters’ charters were broad and
allowed flexibility in how their boards implemented them.
“It is now up to the national broadcasters to act on these
recommendations,” he said.

Labor’s communications spokeswoman Michelle Rowland said the
government’s “fishing expedition” had spent half a million dollars to
establish what the public broadcasters had said all along – that they
“are operating in a manner consistent with the general principles of
competitive neutrality.

“Australians trust and value the ABC and SBS and should not have to
foot the bill for Mitch Fifield and Pauline Hanson’s vendetta against
public broadcasting,” she said.

Also in return for Hanson’s support the government agreed to bring in
legislation to require the ABC to be “fair” and “balanced” in its
coverage.

Under the legislation, the board would be required “to ensure that the
gathering and presentation by the Corporation of news and information
is fair, balanced, accurate and impartial according to the recognised
standards of objective journalism.”

But the legislation is bogged down, with no chance of being passed
before the election.

The government has yet to appoint a new ABC chair, after the implosion
within the organisation involving the board sacking managing
director Michelle Guthrie and the resignation of Justin Milne as chair
amid a row over editorial interference.

Michelle Grattan, Professorial Fellow, University of Canberra

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

Consumers let down badly by electricity market: ACCC report

Michelle Grattan, University of Canberra

The Australian Competition and Consumer Commission has called for sweeping reform of the national electricity market to lower power prices and restore consumer confidence.

In its damning report, to be released on Wednesday, the ACCC says consumers face a confusing and unfair market. Discounts are misleading and need to be made fairer; customers should be able to compare these against a benchmark rate set by the Australian Energy Regulator.

The ACCC backs the Turnbull government’s push for its National Energy Guarantee (NEG), calling on other governments to commit to it. The federal government is presently trying to bed down the NEG with states and territories, against a distracting background of criticism from former prime minister Tony Abbott.

Prime Minister Malcolm Turnbull will deliver a consumer-focused speech on energy and power prices to the Queensland Media Club on Wednesday.

The ACCC’s recommendations would require action by federal and state governments.

The ACCC says the electricity market is facing its most challenging time, with the present situation being unacceptable and unsustainable. But it holds out the prospect of “significant gains” for consumers and businesses if the changes it recommends are made.

Urging a reset, it says reform can “bring down prices and restore consumer confidence and Australia’s competitive advantage”. Unnecessary costs need to be got out of the system to save consumers hundreds of dollars annually.

The ACCC urges changes to get greater competition among wholesalers and retailers, and says network charges must fall.

Tougher powers should be given to the Australian Energy Regulator to deal with “market manipulation”.

The customer transfer process needs to be speeded up, enabling people to move to new offers quickly. Special conditions like pay-on-time discounts should not operate in a harsh punitive manner.

The ACCC says small businesses should get access to the same improved rules as households.

Third-party sites showing comparisons in prices should state their commissions, it says.

The ACCC says there is a case for government support to underpin long-term contracts for large commercial and industrial users that brings on new dispatchable generation from operators that do not currently have a large market share.

It says big generators and retailers (“gentailers”) have market strength and often charge a large premium when selling wholesale electricity to their own retail operations.

It recommends a cap on any further merger or acquisition by a company with more than 20% generation market share – although such a company would be permitted to build new generation capacity.

Michelle Grattan, Professorial Fellow, University of Canberra

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

Vital Signs: Interest only loans are an economic debacle that could bust the property market

Richard Holden, UNSW

Vital Signs is a regular 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: This risks of interest only loans that the RBA is ignoring and more revenue for the government ahead of the budget.

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Australian taxpayers won’t face a rise in taxes now that Treasurer Scott Morrison announced the government will not increase the Medicare Levy by 0.5% as planned. This was to originally fully fund the National Disability Insurance Scheme (NDIS).

This is on the back of strong company tax receipts stemming from companies using up carry-forward losses accumulated in the wake of the financial crisis.

Australian Bureau of Statistics data for 2016/17, released this week, showed tax revenue for the federal government (including taxes received from other levels of government and public corporations) increased A$19.4 billion (5.2%).

The averted tax rise will be welcome news for Australian taxpayers. It also wedges the Labor opposition.

They have said that the NDIS was fully funded on their watch. So now they are proposing a 0.5% tax rise on all incomes over A$87,000. That’s pretty close to full-time male average weekly earnings and comes close to capturing half of Australian households.

The federal budget on May 8 will no doubt have further goodies for voters in the run-up to the net election, which will be either this year or relatively early next year. As usual, we will be reporting directly from the budget lockup.

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One of the central economic puzzles of the last several years has been persistently low inflation in all advanced economies, despite general economic recovery and falling unemployment.

This week’s Australian consumer price inflation figures revealed a 0.4% increase for the March quarter, and 1.9% for the last 12 months. The March quarter figure was below market expectations of 0.5%, and also the previous (December quarter) figure of 0.6%. Education prices were up 2.6% on the quarter, and health prices up 2.2% (or 4.2% for the year to March 2018).

This puts inflation still below the Reserve Bank of Australia’s (RBA) target band of 2-3%. That band, of course, has been in place since the early 1990s – beginning with this speech by then governor Bernie Fraser.

Numerous central banks around the world have a similar approach. The basic idea is that a central bank can build a reputation over time to commit to monetary policy such that inflation lies in the band.

Now there are pros and cons to this approach to monetary policy, and it has its critics. But that is another tale for another day.

Just assuming that inflation targeting is the correct objective, how is the RBA doing? Well, one small hitch in the plan is that inflation has been outside the band for a long time now (basically since 2014), as the RBA’s own figures show.

Given the level of unemployment in Australia, low wages growth, and stubbornly low inflation, the RBA probably should have cut rates further a fair while back. But they seem, probably rightly, terrified of further fuelling a potential housing bubble.

Meanwhile, the credibility of their commitment to the inflation target withers. If only the regulation of our banking and finance sector had been better for the last, say, decade or two.

Speaking of such regulation, RBA assistant governor Chris Kent gave a speech Tuesday about the important issue of interest-only loans. Kent’s speech was significant because it followed up on remarks in the RBA minutes about the same issue that I discussed in this column last week.

It seems that the RBA “house view” on interest only loans is as follows. There could be a problem but the Australian Prudential Regulation Authority (APRA) stepped in and the banks have voluntarily tightened lending standards recently. Also because the average household with an interest only loan has a buffer of savings, everything will be fine. Nothing to see here.

I hope the RBA’s conclusion is right, but I know for sure that the reasoning is not. It’s actually the marginal household’s financial position and behaviour that matters, not the average household.

The average United States borrower with an adjustable-rate mortgage did not default in 2007, 2008 or 2009. But these mortgages were a huge contributor to the financial crisis, along with subprime mortgages.

Kent dutifully laid out the risks from interest only loans, saying:

Because there’s no need to pay down principal initially, the required payments are lower during the interest-only period. But when that ends, there is a significant step-up in required payments (unless the interest-only loans are rolled over).

Indeed, unless they can be rolled over. Which they can’t now because of APRA and the banks finally doing something.

Now, prices (interest rates) on interest only loans have gone up as part of the bank response. This has led a bunch of folks to shift to amortising loans, where the principal of the loan is paid down over the life of the loan. So those borrowers who haven’t shifted to these loans already, really don’t want to.

Maybe they can’t afford to because of the increased repayments, that can jump 30% or more per month.

So what does happen? First Kent says many borrowers save ahead of time, expecting a rise in repayments. Yes, the prudent ones.

But how many non-prudent borrowers have there been in the Australian property market in recent years? Hint: a lot.

Kent also points to borrowers who seek to refinance their interest only loan. But banks don’t really want to, and APRA doesn’t want to let them. And who is going to be able to? The safer borrowers who did save and so don’t really need to avoid amortisation. The risky borrowers can’t refinance.

Kent says some borrowers will have to cut their spending. Chuckle, chuckle. And the final option is to sell their house.

Sure, no problem, unless lots of folks want to do that all at once. Then it’s a fire sale that detonates the housing market.

I really do hope we escape the interest only debacle unscathed. But if we do it will be pure, dumb luck, not a consequence of good design or sound regulation.

It definitely doesn’t justify the RBA’s house view in Kent’s concluding remarks that:

The substantial transition away from interest-only loans over the past year has been relatively smooth overall, and is likely to remain so. Nevertheless, it is something that we will continue to monitor closely.

Perhaps a there should have been a little more monitoring before interest only loans got to be 40% of all loans and more than half of the loan book of one of our biggest banks.

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

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

Politicians: please ease off on ‘announceables’ until after the electricity market review

Current political intervention in the energy market is haphazard and disconnected.
chriscrowder_4/Flickr, CC BY-NC-SA

David Blowers, Grattan Institute and Kate Griffiths, Grattan Institute

A series of dramatic events over the past year, most notably the September statewide blackout in South Australia, have revealed an electricity system under strain, and left many Australians worried about the reliability of their power supply.

In response, state and federal politicians have announced a series of uncoordinated and potentially expensive interventions, most notably the Turnbull government’s Snowy Hydro 2.0 proposal and the South Australian government’s go-it-alone power plan.

Yet all of these plans pre-empt the Finkel Review, to be released early next month. Commissioned by state and federal governments and led by Australia’s chief scientist Alan Finkel, the review is expected to provide a new blueprint for the National Electricity Market (NEM).

Clearly, Australia is struggling to manage the transition to a zero- or low-emission electricity grid, and some commentators have concluded that the NEM is broken.

In our report Powering Through, released today, we argue that it is too early to give up on the market. But what we really need is substantial market reforms, rather than piecemeal government investments in various energy projects.

Australia’s troubled transition

The problems are everywhere. Consumers have been hit with a 70% hike in real-terms electricity bills over the past decade, and there is more to come. Wholesale prices for electricity in most eastern states were twice as high last summer as the one before.

New vulnerabilities continue to emerge. The headline-grabber was South Australia’s blackout – the first statewide blackout since the NEM was formed in 1998 – but there have been other smaller blackouts and incidents too.

Poisonous politics means Australia is also failing to stay on track to hit its 2030 climate targets. The mixed messages on climate policy; the seemingly ad hoc public investment announcements; the threat of direct intervention in the activities of the market operator – all of this has created enormous uncertainty for private investors.

Meanwhile, the clock is ticking: Australia has enough electricity generation capacity for now, but more will be needed in the decade ahead.

The energy market is in a difficult transition.
georg_neu/Flickr, CC BY-NC

First, do no harm

There is currently an acute danger of politicians panicking and rushing into decisions that will only push electricity prices higher, and make the task of reducing Australia’s emissions harder.

Already, federal and state governments are committing taxpayers’ money to new energy investments. This is premature, with the Finkel Review’s recommendations not yet released. Stampeding white elephants loom ominously on the horizon.

Given the current uncertainties, it is vital not to grasp for expensive “solutions” or to lock in plans too soon. We do not yet know what technology mix will be needed in the future. Maintaining flexibility through the transition will ensure we can take advantage of the best solutions as they emerge.

‘No regrets’ short-term reforms

There are some “no regrets” moves that can and should be made, to address the short-term risks to the electricity system and buy time to resolve the longer-term ones. Australia should build on existing low-cost mechanisms before making major capital investments or redesigning the market.

The immediate challenge is to reduce the risk of blackouts next summer, in South Australia and Victoria especially. Most blackouts happen because something in the system breaks. Some simple changes to the market rules, like the recent AEMO and ARENA announcement to pay consumers to cut their electricity use, would make a big difference to managing equipment failures when they inevitably arise.

To ensure reserves are on hand, some mothballed generators should be recalled to service. Pleasingly, Origin Energy and Engie have already struck a deal to enable the restart of the second turbine of the Pelican Point generator in South Australia.

The longer-term task

The cheapest and most effective way to reduce long-term risks is to rebuild investor confidence. That requires Australia to agree, finally, on a credible climate policy. A carbon price is the best such policy, but any bipartisan policy that works with the electricity market and is capable of hitting Australia’s emissions targets will be a vast improvement on what we have now.

The transition to a zero-emissions electricity sector will be difficult. Even given a credible climate policy, there are still questions as to whether the current electricity market will be able to meet our future needs. And that’s without even mentioning the gas market, which is frankly a mess.

Politicians should begin by adopting pragmatic market reforms and giving clear direction on climate and energy policy. At the very least, they should wait until Finkel delivers his recommendations.

Hopefully the Finkel Review will define Australia’s energy security and emissions reduction needs, and provide a strong platform for politicians to work from. If so, a competitive market will find the cheapest path to a reliable and low-emissions electricity future.

The danger is that partisan politics will make the best policies untenable. If that happens, we can expect the blame to be shifted onto the market, which will be described as having “failed” – but the truth is that it will have been systematically (if not quite intentionally) destroyed.

More likely still is that governments give up on the market without giving it a chance. Scott Morrison’s budget promise of new federally owned power generation set a worrying precedent. If recent announcements deter private investors, still more government investment will be needed, which will shift yet more risk and cost onto taxpayers.

There’s a real danger of politicians focusing on “announceables” and shying away from the market reforms that will make the biggest difference to the affordability, reliability and sustainability of our electricity supply.

David Blowers, Energy Fellow, Grattan Institute and Kate Griffiths, Associate, Grattan Institute

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

Three charts on: the incredible shrinking renewable energy job market

Paul Burke, Australian National University

This is the first piece in our new Three Charts series, in which we aim to highlight interesting trends in three simple charts.

Australia is embarking on a transition from an electricity system that relies largely on coal to one that may one day be 100% renewable. Last week’s closure of the Hazelwood coal-fired generator was an important milestone on this path.

The development of the renewables sector has not, however, been a smooth ride.

Estimates released by the Australian Bureau of Statistics suggest that the number of direct full-time equivalent jobs in renewable energy activities has continued to fall from its 2011-12 peak. Over a period in which the Australian economy saw around 600,000 additional people get jobs, employment in the renewables sector has been going backwards.

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A small employer

The renewables sector is estimated to have directly provided only 11,150 full-time equivalent jobs in 2015-16. The Australian labour force exceeds 12.6 million people. The sector thus makes a small contribution to national employment, although one that is quite important in some local economies.

Around half of the jobs in renewables in 2015-16 were in installing (and maintaining) rooftop solar systems. Hydroelectricity generation provides 1,840 full-time equivalent jobs, a number that is likely to increase if pumped storage is to make a larger contribution to smoothing Australia’s electricity supply. Biomass provides 1,430 full-time jobs, and the wind industry around 620.

The fact that renewables is a small employer – especially once installations are up and running – is not a bad thing. If renewables were labour-intensive, they would be expensive.

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Up then down

The rise and then fall in renewables jobs is primarily a result of what has happened to installations of rooftop solar. The annual number of small-scale solar installations (PV and solar water heaters) skyrocketed over the four years to 2011. This rapid growth was spurred by generous feed-in-tariffs, rebates, and rules for federal government solar credits. There was also a national program to install solar panels on schools.

When these arrangements were curtailed, uptake fell. Annual installations of small-scale solar PV and water heaters are down by more than 60% from their peak. We are still installing a lot of new systems (more than 183,000 in 2016), but fewer than before. Employment estimates for small-scale solar closely track installation rates. The decline in employment in the wind energy sector is also worth noting.

The largest fall in renewables jobs has been in Queensland, a state that substantially tightened its feed-in-tariff scheme for rooftop solar in several steps from 2011 on. Queensland also holds the title of having Australia’s highest residential rooftop solar PV penetration rate (32%). South Australia is not far behind, at 31%.

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Ramping up large-scale renewables

Recent years of policy uncertainty and backtracking have not helped the rollout of large-scale renewables. The termination of Australia’s carbon price and downwards renegotiation of the Renewable Energy Target had chilling effects on investment.

Those events are now behind us. With continued reductions in the cost of renewables, brighter days for the sector appear to be ahead, especially if our governments get policy settings right.

We can expect particularly rapid growth in jobs installing large-scale solar PV. Just last week, for example, it was announced that South Australia is to have a large new solar farm.

Paul Burke, Fellow, Crawford School, Australian National University

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

Muslims in Bangladesh Beat, Deprive Christians of Work

Refusing to recant Christianity, victims are attacked on rumors of disrespecting Islam.

LOS ANGELES, November 2 (CDN) — Muslim villagers last month beat a 63-year-old Christian convert and his youngest son because they refused to return to Islam, the father told Compass.

The next day, another Christian in a nearby village was beaten and robbed in related violence in southwestern Bangladesh.

Aynal Haque, 63, a volunteer for Christian organization Way of Life Trust, told Compass that his brothers and relatives along with Muslim villagers beat him and his son, 22-year-old Lal Miah, on Oct. 9 when they refused to recant Christianity. The family lives at Sadhu Hati Panta Para village in Jhenaidah district, some 250 kilometers (155 miles) southwest of the capital city, Dhaka. It is in the jurisdiction of Sadar police station.

Haque’s relatives and villagers said that he had become Christian by eating pork and by disrespecting the Quran, he said.

“I embraced Christianity by my own will and understanding, but I have due respect for other religions,” Haque said. “How can I be a righteous man by disrespecting other religions? Whatever rumors the villagers are spreading are false.”

At a meeting to which Haque was summoned on Oct. 9, about 500 men and women from several villages gathered, including local and Maoist party leaders.

“They tried to force me and my son to admit that we had eaten pork and trampled on the Quran to become Christian,” Haque said. “They tried to force us to be apologetic for our blunder of accepting Christianity and also tried to compel us to go back to Islam. I told them, ‘While there is breath left in our bodies, we will not reject Christianity.’

“When we denied their allegation and demand, they beat us severely. They ordered us not to mix with other Muslim villagers. They confined us in our house for five days.”

Haque has worked on his neighbors’ land for survival to supplement the meager income he earns selling seeds in local markets, but the villagers have now refused to give him work, he said.

“Every day I earn around 50 taka to 100 taka [70 cents to US$1.40] from the seed business,” he said. “Some days I cannot earn any money. So, I need to work villagers’ land for extra money to maintain my family.”

His youngest son also worked in neighbors’ fields as a day-laborer, besides attending school.

“We cannot live if we do not get farming work on other people’s land,” Haque said.

Haque, his wife and youngest son received Christ three years ago, and since then they have faced harassment and threats from Muslim neighbors. His other grown son and two daughters, as well as a son-in-law, also follow Christ but have yet to be baptized. There are around 25 people in his village who came to Christ under Haque’s influence; most of them remain low-profile to avoid harassment from the villagers, he said.

The weekly worship service in Haque’s shanty house has been hampered as some have been too fearful to attend, and the 25 members of the church fear the consequences of continuing to meet, Haque said.

Officials of Way of Life Trust tried to visit the area to investigate the beating of Haque and his son but were unable due to security risks, said Jatish Biswas, the organization’s executive director. They informed the district police chief, who instantly sent forces to provide safety for the Christians, Biswas said.

Villagers thought that if they were able to get Haque to renounce Christianity, then the other Christians would quickly return to Islam, according to Biswas.

 

Reverberation

Hearing of the incident in Sadhu Hati Panta Para the next day (Oct. 10), Muslims in Kola village about five kilometers (nearly three miles) away beat a Christian friend of Haque’s and robbed his seed shop.

Tokkel Ali, 40, an evangelist in one of the house churches that Way of Life Trust has established, told Compass that around 20 people arrived at his shop at about 11 a.m. and told him to go with them to Haque’s house.

“The presence of so many people, most of whom I did not know, and the way they were talking, seemed ominous to me, and I refused to go with them,” Ali said. “I said, ‘If he wants me to go to his house, he could call me on my mobile.’”

One person in the crowd pointed toward Ali, saying that he was a Christian and had made otherwise innocent people Christians by them feeding pork and letting them disrespect the Quran, said Ali. Islam strictly prohibits eating pork.

“That rumor spread like wildfire among other Muslims,” Ali said. “All of a sudden, a huge crowd overran me and started beating me, throwing my seeds here and there.”

Ali said he lost consciousness, and someone took him to a nearby three-storey house. When he came to, he scrambled back to his shop to find his seeds scattered, and 24,580 taka (US$342) for buying seed had been stolen, along with his bicycle.

Accustomed to earning just enough each day to survive, Ali said it would be impossible for him to recover and rebuild his business. He had received loans of 20,000 taka (US$278) from Grameen Bank (Nobel Peach Prize laureate Muhammad Yunus’ micro-finance entity), 15,000 taka (US$209) from the Bangladesh Rural Advancement Committee and 11,000 taka (US$153) from Way of Life Trust to establish the business. Ali ran a similar seed business in Dakbangla market in Kola village.

“How can I pay back a weekly installment of 1,150 taka [US$160] to the micro-credit lending NGOs [Non-Governmental Organizations]?” he said. “I have already become delinquent in paying back some installments after the looting of my money and shop. I’ve ended up in deep debt, which has become a noose around my neck.”

Ali said he has not dared filed any charges.

“If I file any case or complain against them, they will kill me, as this area is very dangerous because of the Maoists,” he said, referring to a banned group of armed rebels with whom the villagers have links. “Even the local administration and the law enforcement agencies are afraid of them.”

Ali has planted 25 house churches under Way of Life Trust serving 144 people in weekly worship. Baptized in 2007, he has been following Christ for more than 10 years.

“Whenever I go to bazaar, people fling insults at me about that beating,” he said. “Everyone says that nothing would have happened if I had not accepted Christianity, an abhorrent religion to them. People also say that I should hang myself with a rope for renouncing Islam.”

Since the beating, he has become an alien in his own village, he said.

“Whatever insinuation and rumors they spout against me and other believers, there is no language to squash it,” he said. “I have to remain tight-lipped, otherwise they will kill me.”

He can no longer cross the land of one of his neighbors in order to bathe in a nearby river, he said.

“After that incident, my neighbor warned me not to go through his land,” he said. “Now I take a bath in my home from an old and dysfunctional tube-well. My neighbors say, ‘Christians are the enemy of Muslims, so don’t go through my land.’ It seems that I am nobody in this village.”

Biswas of Way of Life Trust told Compass that Christians in remote villages lack the freedoms guaranteed in the Bangladeshi constitution to practice their faith without any interference.

“Where is religious liberty for Haque and Ali?” Biswas said. “Like them, many Christians in remote villages are in the throes of persecution, though our constitution enshrined full liberty for religious minorities.”

Way of Life Trust has aided in the establishment of some 500 house churches in Bangladesh, which is nearly 90 percent Muslim. Hinduism is the second largest religion at 9.2 percent of the 153.5 million people, and Buddhists and Christians make up less than 1 percent of the population.

Report from Compass Direct News