But for most Australians, the most visible impact of this crisis has been their ever-increasing electricity bills. Electricity prices have become a political hot potato, and the blame game has been running unchecked for more than a year.
Electricity retailers find fault with governments, and renewable energy advocates point the finger at the nasty old fossil-fuel generators. The right-wing commentariat blames renewables, while the federal government blames everyone but itself.
The truth is there is no silver bullet. No single factor or decision is responsible for the electricity prices we endure today. Rather, it is the confluence of many different policies and pressures at every step of the electricity supply chain.
Four components make up your electricity bill. Each has contributed to this increase.
The biggest culprit has been the network component – the cost of transporting the electricity. Next comes the retail component – the cost of billing and servicing the customer. Then there is the wholesale component – the cost of generating the electricity. And finally, the government policy component – the cost of environmental schemes that we pay for through our electricity bills.
Each component has a different tale, told differently in every state. But ultimately, this is a story about a decade of policy failure.
Network costs form the biggest part of your electricity bill. Australia is a big country, and moving electricity around it is expensive. As the graph above shows, network costs have contributed 40% of the total price increase over the past decade.
The reason we now pay so much for the network is simply that we have built an awful lot more stuff over the past decade. It’s also because it was agreed – through the industry regulator – that network businesses could build more network infrastructure and that we all have to pay for it, regardless of whether it is really needed.
Network businesses are heavily regulated. Their costs, charges and profits all have to be ticked off. This is supposed to keep costs down and prevent consumers being charged too much.
That’s the theory. But the fact is costs have spiralled. Between 2005 and 2016 the total value of the National Electricity Market (NEM) distribution network increased from A$42 billion to A$72 billion – a whopping 70%. During that time there has been little change in the number of customers using the network or the amount of electricity they used. The result: every unit of electricity we consume costs much more than it used to.
There are several reasons for this expensive overbuild. First, forecasts of electricity demand were wrong – badly wrong. Instead of ever-increasing consumption, the amount of electricity we used started to decline in 2009. A whole lot of network infrastructure was built to meet demand that never eventuated.
Second, governments in New South Wales and Queensland imposed strict reliability settings – designed to avoid blackouts – on the networks in the mid-2000s. To meet these reliability settings, the network businesses had to spend a lot more money reinforcing their networks than they otherwise would have.
Third, the way in which network businesses are regulated encourages extra spending on infrastructure. In an industry where you are guaranteed a 10% return on investment, virtually risk-free – as network businesses were between 2009 and 2014 – you are inclined to build, build, build.
The blame for this “gold-plating” of network assets is spread widely. Governments have been accused of panicking and setting reliability standards too high. The regulator has copped its share for allowing businesses too much capital spend and too high a return. Privatisation has also been criticised, which is slightly bizarre given that the worst offenders have been state-owned businesses.
The second biggest increase in your bill has been the amount we pay for the services provided to us by retailers. Across the NEM, 26% of the price increase over the past decade has been due to retail margins.
This increase in the retail component was never supposed to happen. To understand why, you must go back to the rationale for opening the retail sector to competition. Back in the 1990s, it was felt that retail energy was ripe for competition, which would deliver lower prices and more innovative products for consumers.
In theory, where competition exists, firms seek to reduce their costs to maximise their profits, in turn allowing them to reduce prices so as to grab as many customers as possible. The more they cut their costs, the more they can cut prices. Theoretically, costs are minimised and profits are squeezed. If competition works as it’s supposed to, the retail component should go down, not up.
But the exact opposite has happened in the electricity sector. In Victoria, the state that in 2009 became the first to completely deregulate its retail electricity market, the retail component of the bill has contributed to 36% of the price increase over the past decade.
On average, Victorians pay almost A$400 a year to retailers, more than any other mainland state in the NEM. This is consistent with the Grattan Institute’s Price Shock report, which showed that rising profits are causing pain for Victorian electricity consumers. Many customers remain on expensive deals, and do not switch to cheaper offers because the market is so complicated. These “sticky” customers have been cited as the cause of “excessive” profits to retailers.
But the new figures provided by the ACCC, which come directly from retailers, paint a different picture. The ACCC finds that the increase in margins in Victoria is wholly down to the increasing costs of retailers doing business.
There are reasons why competition might drive prices up, not down. Retailers now spend money on marketing to recruit and retain customers. And the existence of multiple retailers leads to duplications in costs that would not exist if a single retailer ran the market.
But these increases should be offset by retailers finding savings elsewhere, and this doesn’t seem to have happened. History may judge the introduction of competition to the retail electricity market as an expensive mistake.
So far, we have accounted for 65% of the bill increase of the past decade, and neither renewables nor coal have been mentioned once. Nor were they ever likely to be. The actual generation of electricity has only ever formed a minor portion of your electricity bill – the ACCC report shows that in 2015-16 the wholesale component constituted only 22% of the typical bill.
In the past year, however, wholesale prices have really increased. In 2015-16, households paid on average A$341 a year for the generation of electricity – far less than they were paying in 2006-07. But in the past year, that is estimated to have increased to A$530 a year.
Generators, particularly in Queensland, have been engaging in questionable behaviour, but it is the fundamental change in the supply and demand balance that means higher prices are here to stay for at least the next few years.
The truth is the cost of generating electricity has been exceptionally low in most parts of Australia for most of the past two decades. When the NEM was created in 1998, there was arguably more generation capacity in the system than was needed to meet demand. And in economics, more supply than demand equals low prices.
Over the years our politicians have been particularly good at ensuring overcapacity in the system. Most of the investment in generation in the NEM since its creation has been driven by either taxpayers’ money, or government schemes and incentives – not by market forces. The result has been oversupply.
Up until the late 2000s the market kept chugging along. Then two things happened. First, consumers started using less electricity. And second, the Renewable Energy Target (RET) was ramped up, pushing more supply into the market.
Demand down and supply up meant even more oversupply, and continued low prices. But the combination of low prices and low demand put pressure on the finances of existing fossil fuel generators. Old generators were being asked to produce less electricity than before, for lower prices. Smaller power stations began to be mothballed or retired.
Something had to give, and it did when both Alinta and Engie decided it was no longer financially viable to keep their power stations running. Far from being oversupplied, the market is now struggling to meet demand on hot days when people use the most electricity. The result is very high prices.
A tight demand and supply balance with less coal-fired generation has meant that Australia increasingly relies on gas-fired generation, at a time when gas prices are astronomical, leading to accusations of price-gouging.
Put simply, Australia has failed to build enough new generation over recent years to reliably replace ageing coal plants when they leave the market.
Is it renewable energy’s fault that coal-fired power stations have closed? Yes, but this is what needs to happen if we are to reduce greenhouse emissions. Is it renewables’ fault that replacement generation has not been built? No. It’s the government’s fault for failing to provide the right environment for new investment.
The current predicament could have been avoided if we had a credible and comprehensive emissions reduction policy to drive investment in the sector. Such a policy would give investors the confidence to build generation with the knowledge about what carbon liabilities they may face in the future. But the carbon price was repealed in 2014 and replaced with nothing.
We’re still waiting for an alternative policy. We’re still waiting for enough generation capacity to be built. And we’re still paying sky-high wholesale prices for electricity.
Green and gold
Finally, we have the direct cost of government green schemes over the past decade: the RET; the household solar panel subsidies; and the energy-efficiency incentives for homes and businesses.
They represent 16% of the price increase over the past 10 years – but they are still only 6% of the average bill.
If the aim of these schemes has been to reduce emissions, they have not done a very good job. Rooftop solar panel subsidies have been expensive and inequitable. The RET is more effective as an industry subsidy than an emissions reduction or energy transition policy. And energy efficiency schemes have produced questionable results.
It hasn’t been a total waste of money, but far deeper emissions cuts could have been delivered if those funds had been channelled into a coherent policy.
The story of Australia’s high electricity prices is not really one of private companies ripping off consumers. Nor is it a tale about the privatisation of an essential service. Rather, this is the story of a decade of policy drift and political failure.
Governments have been repeatedly warned about the need to tackle these problems, but have done very little.
Instead they have focused their energy on squabbling over climate policy. State governments have introduced inefficient schemes, scrapped them, and then introduced them again, while the federal government has discardedpolicies without even trying them.
There is a huge void where our sensible energy policy should be. Network overbuild and ballooning retailer margins both dwarf the impact of the carbon price, yet if you listen only to our politicians you’d be forgiven for thinking the opposite.
And still it goes on. The underlying causes of Australia’s electricity price headaches – the regulation of networks, ineffective retail market competition, and our barely coping generators – need immediate attention. But still the petty politicking prevails.
The Coalition has rejected the Clean Energy Target recommended by Chief Scientist Alan Finkel. Labor will give no guarantee of support for the government’s alternative policy, the National Energy Guarantee. Some politicians doubt the very idea that we need to act on climate change. Some states have given up on Canberra and are going it alone.
We’ve been here before and we know how this story ends. Crisis wasted.
As we approach the end of the year, it’s useful to look back and forward. Now is an auspicious time, as two major energy-related reports have been released this week: the federal government’s review of their climate change policies, and a discussion paper from the Australian Energy Market Operator (AEMO) on future energy paths.
The difference between the two is striking. The AEMO paper is practical, direct and realistic. On the other hand, the climate policy review relies essentially on Australia buying lots of international carbon permits to meet our Paris target (and, implicitly, on state governments taking up the challenge their Canberra colleagues have largely abanondoned).
It’s amusing to read a document that plays with numbers in such creative ways. But it is a fairy story, and it’s no way to drive national climate policy.
But things have in fact shifted a long way – the revolution is accelerating and unstoppable. The federal government is almost irrelevant; the public statements and policies it presents are simply aimed at getting “something” through the Coalition party room, or trying to throw blame on others. It’s very sad.
The real games are being played out within state governments; in battles between energy policy agencies and regulators; by emerging industry players who do not even have formal roles in energy legisation; and by business and the community as they defend themselves from the failures around them by implementing “behind the meter” solutions and working together.
The real heavy lifters
Medals of Valour should be awarded to Chief Scientist Alan Finkel, AEMO chief executive Audrey Zibelman, and South Australian Premier Jay Weatherill.
The government’s response to this year’s Finkel Review showed that no amount of compromise would allow a sensible energy and climate policy to pass through the minefield of the Coalition party room. Prime Minister Malcolm Turnbull and Environment and Energy Minister Josh Frydenberg, both of whom know what they need to do, simply have too little political capital within that place to drive realistic energy policy.
But the Finkel Review also successfully recommended many changes that will help to fix the physical operation of the grid. Innovation and the laws of physics have finally begun to triumph over market politics and ideology.
AEMO worked out a way to get around the glacial and obstructive tactics of the Australian Energy Market Commission on demand-side action by setting up a “pilot project” to drive demand response. It has been clear for decades that this is a very cost-effective tool. Zibelman has been a voice of practical reality and clear understanding of the future of energy, including the demand side, and AEMO’s future energy paths reflects that.
Weatherill has weathered a storm of abuse over his state’s innovative energy strategy. His government has shown how a diversified approach can transform an energy system in little more than a year. But he needs to put more effort into long term energy efficiency and energy productivity improvement measures integrated with renewables and storage, to reduce pressure on electricity systems over time. For example, home cooling comprises a third of South Australia’s peak electricity demand, but could be slashed by efficient buildings and cooling equipment.
What lies ahead
Looking forward, the coming year will be shaped by some key issues, some of which are already playing out at a frenetic pace. Consider a small sample of many recent events:
As mentioned, AEMO has released a discussion paper framing a very different electricity future, and including a low-carbon scenario.
The Victorian Essential Services Commission has proposed a new “time of day” feed-in price for rooftop solar that reaches 29 cents per kilowatt-hour in afternoons and evenings. If approved, this will be a game-changer, as adding battery storage to rooftop solar will become far more attractive.
Meanwhile the federal government has released energy modelling to underpin ongoing negotiation on the National Energy Guarantee (NEG) that is simply irrelevant and embarrassing. The Energy Security Board’s involvement in this has undermined perceptions of its independence, especially when it is contrasted with the vision AEMO is discussing in its paper.
While the states have agreed to continue discussion on the NEG in April, there are some major hurdles. Primarily, states must be allowed to set and achieve their own energy targets: the federal energy minister has put the blame for problems on the states, and they now have to be seen by their voters to act.
Second, the design must ensure it does not give the dominant energy companies even more power to distort markets. Some members of the Energy Security Board seem to understand the challenges, and are optimistic they can be overcome. Time will tell.
The 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.
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.
But if there is an impasse with the states and the plan is poorly received by the public, the “climate wars” could become hotter.
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.
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.
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.
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.
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.
It 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.
There was a brief period of consensus ushered in by John Howard’s belated realisation in 2006 that a price had to be put on carbon dioxide emissions. But by December 2009 the Nationals, and enough Liberals, had decided that this was a mistake, and have opposed explicit carbon pricing ever since.
But the Liberal Party’s tussles over climate and energy policy (as distinct from denying the science itself) go back even further – some 30 years.
Early days and ‘early’ action
It’s hard to believe it now, but the Liberal Party took a stronger emissions target than Labor to the 1990 Federal election. Yet green-minded voters were not persuaded, and Labor squeaked home with their support. After that episode the Liberals largely gave on courting green voters, and under new leader John Hewson the party tacked right. Ironically, considering Hewson’s climate advocacy today, back then his Fightback! policy was as silent on climate change as it was on the price of birthday cakes.
In his excellent 2007 book High and Dry, former Liberal speech writer Guy Pearse recounts how in the mid-1990s he contacted the Australian Conservation Foundation, offering to to canvass Coalition MPs to “find the most promising areas of common ground” on which to work when the party returned to government. The ACF was “enthusiastic, if a little bemused at the novelty of a Liberal wanting to work with them”. Most Liberal MPs – including future environment minister Robert Hill and future prime minister Tony Abbott – were “strongly supportive” of the idea. But others (Pearse names Eric Abetz and Peter McGauran) were “paranoid that some kind of trap was being laid”. Nothing came of it.
Elected in 1996, Howard continued the staunch hostility to the United Nations climate negotiations that his Labor predecessor Paul Keating had begun. Not all businessmen were happy. Leading up to the crucial Kyoto summit in 1997, the Sydney Morning Herald reported how a “delegation of scientists and financiers” led by Howard’s local party branch manager Robert Vincin and Liberal Party grandee Sir John Carrick lobbied the prime minister to take a more progressive approach. Howard did not bend.
Howard stayed unmoved until 2006 when, facing a perfect storm of rising public climate awareness and spiralling poll numbers, he finally relented. Earlier that year a group of businesses convened by the Australian Conservation Foundation produced a report titled The Early Case for Business Action. “Early” is debatable, given that climate change had already been a political issue since 1988, but more saliently the report tentatively suggested introducing a carbon price. And Howard finally relented.
The carbon wars
The ensuing ten years after Kevin Rudd’s defeat of Howard don’t need much recapping here (go here for all the details). But one interesting phenomenon that has emerged from the policy wreckage is the emergence of some very unusual coalitions to beg for certainty.
Then, after the seminal South Australia blackout last September, a surprisingly diverse group of industry and consumer bodies – the Australian Energy Council, Australian Industry Group, Business Council of Australia, Clean Energy Council, Energy Users Association, Energy Consumers Australia, Energy Networks Association and Energy Efficiency Council – called on federal and state energy ministers to “work together to craft a cooperative and strategic response to the transformation underway in Australia’s energy system”.
It’s in this light that the new Conseratives for Conservation lobbying effort should be seen. Its spearhead Kristina Photios surely knows she has no chance of converting the committed denialists, but she can chip away at the waverers currently giving them comfort and power.
Questions on notice
Of course, there are always cultural (or even psychological) issues, but you’d think that conservation would be a no-brainer for conservatives (the clue should be in the name).
There are a few questions, of course (with my answers in brackets).
Where were all the people who are now calling for policy certainty back in 2011 when Tony Abbott was declaring his oath to kill off the carbon tax? (They were AWOL.)
Will any business show any interest in building a new coal-fired power station? (No.)
Is renewable energy technology now advanced enough for them to make serious money? (We shall see.)
Can we make up for lost time in our emissions reductions? (No, and we have already ensured more climate misery than there would have been with genuinely early climate action.)
Will the Liberals further water down the Clean Energy Target proposal? (Probably.)
What will Tony Abbott say to UK climate sceptic think tank the Global Warming Policy Foundation when he gives a speech on October 6? (Who knows –
grab your popcorn!).
What will happen to the Liberals in the medium term? (Who knows, but Michelle Grattan of this parish has some intriguing ideas.)
Are there reasons to be cheerful? (Renewable energy journalist Ketan Joshi thinks so.)
Perhaps the last word on this issue should go to John Hewson, who noted last year:
The “right” love to speak of the debt and deficit problem as a form of “intergenerational theft”, yet they fail to see the climate challenge in the same terms, even though the consequences of failing to address it substantively, and as a matter of urgency, would dwarf that of the debt problem. The “right” is simply “wrong”. It’s political opportunism of the worst sort, and their children and grandchildren will pay the price.
When Prime Minister Malcolm Turnbull announced the establishment of a Home Affairs portfolio this week, he described it as “similar to the Home Office of the United Kingdom”. Drawing inspiration from this British model is worrisome for the immigration portfolio.
Planning immigration has never been a core task of Britain’s Home Office. As political scientist Randall Hansen has described, the UK in the 20th century has long managed immigration using its nationality legislation.
In practice, the Home Office did not anticipate the large inflow of citizens from new members of the European Union in the 2000s. This fuelled public concerns that eventually played a crucial role in Brexit.
Immigration-related Home Office activities have been mired in enforcement issues. From the 1980s to the 2000s, asylum applications took years to process.
More recently, European citizens aiming to apply for residency in the post-Brexit UK have faced a bureaucratic nightmare. This has been criticised by the EU.
What’s in a name?
The Home Office was originally established to protect British citizens, with a focus on Britain’s infrastructure and customs, and on the prevention of entry by “undesirable aliens”. It has historically been inward-looking.
This has also been the case of Australia’s Department of Home Affairs, established at Federation in 1901. After the second world war, a distinct Department of Immigration was established to plan and oversee the expansion of the country’s population. This was a major strategic and economic goal at the time.
In Australia, both the Department of Home Affairs and the Department of Immigration have co-existed over the years, with two exceptions. From the late 1980s to 2007, the former disappeared as its portfolio was handed to the Department of Justice and Customs. Then, in the early 1970s, the Whitlam government abolished the Department of Immigration, because its administrative culture was considered to still reflect the White Australia policy, which had been effectively scrapped in 1966.
The Fraser government reinstated the Department of Immigration in 1976, this time with a strong multicultural rationale. Home Affairs disappeared again in 2013, while Immigration expanded to become the Department of Immigration and Border Protection.
The 2013 name change already meant the department’s focus on immigration became narrower than before. It was now mainly concerned with the admission (or refusal) of immigrants. Settlement and multicultural affairs were transferred to the Department of Human Services.
The newest name change, and its close association with the British model by Turnbull, appears as a symbolic marginalisation of the immigration portfolio. It is not clear yet whether an agency under a Home Affairs “super-ministry” will carry “immigration” in its name.
In Britain, the corresponding agency under the purview of the Home Office is called “UK Visas and Immigration”. Yet it existed for several years as the UK Border Agency (UKBA), with no reference to immigration. The then home secretary, Theresa May, eventually split UKBA in two following the revelation that hundreds of thousands of people had entered the UK without the appropriate checks.
The creeping invisibility of the immigration portfolio comes as the government is overseeing major changes to immigration policy, and is increasingly using the rhetoric of putting Australians first.
In April, the admission of skilled migrants was overhauled with the abolition of the 457 visa. The government shortened the list of professions for which skilled foreign workers would be eligible for a four-year visa to Australia, and subsequently for permanent residence.
A citizenship reform is before parliament. It significantly extends the time permanent residents must live in Australia before they can apply for citizenship. It also introduces more stringent English-language proficiency requirements.
The legislation would require citizenship applicants to demonstrate their allegiance to Australia more strongly, with a pledge to Australian values and proof of integration.
It has been written that, rather than encouraging integration, these changes could result in newcomers feeling more distanced from Australia. The disappearance of “immigration” from the department name may contribute to this uneasiness.
And prospective immigrants to Australia may justifiably fear the changes will cause confusion about division of responsibilities, or a further delay in processing times.
Turnbull has promised the reform will involve strong oversight mechanisms. He noted that such mechanisms were essential to respect the rights and liberties of “all Australians”.
As Amy Maguire noted, Turnbull did not make any specific reference to the rights and liberties of non-citizens living in Australia. One can thus worry to what extent Australia’s “Home Office” will better protect them.
Population growth has profound impacts on Australian life, and sorting myths from facts can be difficult. This is the first article in our series, Is Australia Full?, which aims to help inform a wide-ranging and often emotive debate.
Australia lacks an overarching population policy or strategy. Over the years, multiple inquiries have recommended such a policy. Population policies the world over typically focus on births and migration.
As part of post-war reconstruction, Australia adopted a 2% population growth target. Mass immigration was a defining feature, and couples were called on to populate or perish. Immigration was successful, but women were big losers in the push for births.
The 1975 National Population Inquiry proved a significant moment in Australian demography. The inquiry found that Australia should not seek to influence population, but should anticipate and respond.
Population policy was revisited in the 1990s with the National Population Council. Its 1994 report found no optimal population size for Australia, but again called for a responsive population policy of preparedness.
Despite such inquiries and recommendations to adopt a population policy, governments have so far resisted. Unsuccessful attempts at population policy can be understood in terms of difficulties in gaining political support and concerns about coercion.
But national population policy need not be coercive – unlike, for example, in India or China. Instead, it can be a series of targets and connected policy domains with oversight.
Presently, the policy landscape is disjointed. Parenting leave, family and childcare payments, and immigration are each somewhat responsive to population changes, but not prepared. Family payments have been shown not to increase birth rates.
What we know is that Australia’s population continues to age, so among the nation’s pressing issues is fewer taxpayers. The total age-related dependency ratio, of people aged over and under working age relative to the working-aged population, was 52 per 100 people in 2016.
While the child-dependency rate (0-14 year olds) is higher than the aged-dependency rate (people 65 and over), the rate of people aged less than 15 has steadily declined as the population aged 65 and over has driven increases in the so-called dependency burden.
The relative increase in people older than working age is increasing pressure on the economy and government budgets. While government spending on young people is substantial, the highest per person spending is among people aged 65 and over.
A robust workforce contributing income tax and services is essential to ensure current lifestyles are afforded to the young while also sustaining the public spending necessary for people over 65 years who have over their lives contributed to the nation.
In a 2013 United Nations survey, the Australian government reported concerns about population ageing, a desire to increase the “too low” birth rate, but satisfaction with the level of net overseas migration. Interestingly, a preference for migration away from cities was also cited.
From current policy and discourse, you would not know these views were held. Most Australians also report a preference for the level of immigration to remain the same or be increased, contrary to sentiments we often hear.
Australia has time to prepare for, and make opportunities of, the challenges of an ageing population. Some countries are facing tough decisions now and it is interesting to watch the politics play out. What Japan, China and Germany show is that we need to take action now.
Insightful guides are in place already. South Australia has had a population strategy since 2004. Tasmania recently adopted one.
These state strategies focus on growth to curb economic downturn. What is important in these two cases is that both emphasise policy portfolio linkages, as well as evidence and reporting against targets without coercive measures.
What is a sensible approach to population policy?
A renewed, earnest and transparent population conversation is needed. With ever more reliance on immigration, we must go beyond the unhelpful pro-immigration versus pro-nationalism debate to consider our population prospects.
The key question is: how can Australia make opportunities of its demographic challenges?
Australia has the potential to be a global leader in innovative markets and research and development. An ageing population provides an interesting market opening; we just need to be smart about it. Without careful consideration, Australia will be merely a bystander in the increasingly competitive global market.
Policy connectedness should exist between portfolios. These include: health; housing; education, skills and training; employment; infrastructure; regional development; water and energy; environment; and migrant settlement.
We can invest more effectively in young people – our future workforce and economic lifeblood – if we consider a life-course approach to population dynamics. Family friendly, gender-equal workplaces will go a long way to ease the pressures of having children. Integral to this is affordable and accessible child care.
And establishing a ministerial portfolio overseeing population strategy would be a good start.
Retired United States general David Petraeus was a commander of international forces in Iraq and Afghanistan. Later he headed the CIA, before resigning amid a scandal involving his affair with his biographer.
At a Liberal Party gala dinner in Sydney on Friday, Petraeus was interviewed by Brendan Nicholson from the Australian Strategic Policy Institute.
Petraeus argued there was more continuity than change in American foreign policy under the Trump presidency; warned the “generational” fight against Islamist terrorism would last far beyond its defeat on the military battleground; and declared China’s activities in the South China Sea should be dealt with firmly.
Below is an edited transcript of their discussion.
David Petraeus: I am here, frankly, because of the fondness, the affection, the admiration that I have for, first and foremost those who have worn your uniform – especially in combat in Iraq and Afghanistan where I was privileged to command diggers and developed extraordinary respect for them – but also for the time I have spent with your diplomats, with your development workers, with your intelligence officers.
There are lifetime friendships there that are founded on periods of real adversity. When I most needed help I knew that I could call, for example, Air Chief Marshal Angus Houston and [get it] even more rapidly than I could get forces from my own country.
Although we have vast forces and they would respond after you submitted the request for forces and it went through the chain of command, the services fought over who would do it and it went to the secretary of defence the one day a week that he signed these things if he was there and then they gave him an order to deploy and then they had to prepare for deployment, Angus Houston had 60 Aussies in Baghdad within a week of my calling him.
And it was that kind of relationship that we enjoyed and [with] many, many other individuals over the years.
You heard [tonight] from one of my wartime prime ministers, for whom I had enormous respect and still do, [former] prime minister Howard.
I should note that it was a prime minister of the other party, Julia Gillard, who made the first commitment of any national leader to extend the mandate of the international security force in Afghanistan and that really opened the floodgate to something that was enormously important, which is making sure the mandate literally did not run out and it was affirmed at the summit in Lisbon that year, and her leadership was also very, very important in that.
So, this is an extraordinary relationship between our two countries.
By the way, could I offer one quick anecdote? One of the times I was here, I remember [I] was hosted for lunch by your then minister of communications at his lovely place overlooking the water outside Sydney. And we had a great conversation and at a certain point I said, now minister – you ask these things when you’re trying to make conversation – so I said: where do you see yourself five or ten years from now?
This is a little less than two years ago and he said, well let me put it into military terms for you, and he looked and he got quite serious and he said, I may be approaching the up or out moment of my career.
He flew back to Canberra that night and was prime minister two or three days later.
Brendan Nicholson: You obviously gave him some good advice.
DP: Only in Australia.
BN: General Petraeus, as many of you would know, is an example of a class of very highly educated soldier scholars with a deep knowledge of history in an understanding of the role and responsibility of the military in a democratic society.
In 1987 while he was studying at Princeton University, he produced a thesis on the American military and the lessons of the Vietnam, a study of military influence and the use of force in the post-Vietnam era.
One of your conclusions was that the Vietnam experience … had led to a pattern of caution in the US military leadership when it came to advising the government of the day whether it should use armed force to deal with situations abroad.
The second concern you raised was a lack of focus on counterinsurgency training, which you went on to rectify.
But you’ve had four decades, an extremely crowded military career – much of that time in command in both Iraq and Afghanistan. If you had the chance, how would you mark that thesis now and would you have written it differently with all the experience you’ve had since?
DP: It’s a wonderful question. Another one of the conclusions was that in crisis decision-making … what tends to weigh on you most heavily are experiences you had personally and particularly those that were most visceral.
And I think I would actually use recent events to really affirm that further, because I think what’s happened in the United States and arguably in other, particularly democratic, countries in the world is that after a frustrating, tough, difficult experience like more recently Iraq or Afghanistan, there’s an understandable aversion to this and there’s a tendency to swing and [the] pendulum goes back and forth.
Arguably after 9/11, one could say we got perhaps a bit more, I don’t know if the term would be adventurous, but more willing to intervene and then it swung with the next administration I’d argue a bit too far the other way and it has come back somewhat to what I think is actually a reasonable balance.
I’ll tick off five lessons that I think we should have learnt from the past 15 years, particularly in the Middle East, but elsewhere as well.
The first is that ungoverned or even inadequately governed spaces in the Islamic world will be exploited by extremists. It’s not a question of if, it’s a question of when and how big will it be.
The second is that unfortunately Las Vegas rules do not apply in these areas: what happens there does not stay there.
Rather, they tend to spew violence, instability, extremism and a tsunami of refugees, not just into neighbouring countries, but in the case of Syria, a geopolitical Chernobyl meltdown of a country that has actually spewed them into Europe causing the biggest challenges domestically for our allies there.
The third is, by the way, you have to do something. You can’t do what we tried to do in Washington. I’m sure it would never be done in Canberra, but that is to admire a problem until it goes away. These problems aren’t going away. So you have to do something.
And the third is, that in doing something in most cases, not all, but in most cases the US is going to have to lead – and that is because [of] the way that we’ve learned how to do this now, where we are enabling others, they’re doing the fighting on the frontlines.
That’s hugely significant because of when I get to the fifth lesson – that these have to be sustainable.
The US has more of those enablers, more of the intelligent surveillance reconnaissance assets, the unmanned aerial vehicles and other systems, the precision strike, and the industrial strength ability to fuse intelligence. If you total up all of the drones in these platforms, of all the other possible allies and partners and multiply times six, you might get to what the US can bring to the fight and these are all integrated and connected with a global satellite communication system.
So, the US is going to have to do this but we’ve got to have a coalition. Coalitions do matter. I’ve long believed in the validity of what Churchill observed that the only thing worse than fighting with allies is fighting without them.
And allies like Australia – particularly important countries that punch way above their weight class and shoulder far more of the burdens of ensuring freedom, prosperity and this rules-based international order than others.
We also, by the way, need Muslim partners. This is more of a struggle within the Islamic world – within the Muslim civilisation. It’s an existential threat to them, so more of that than it is actually a clash between civilisations – to harken back to Sam Huntington and his book.
The fourth is that in responding you have to have a comprehensive approach. You cannot counter terrorist forces like the Islamic State and al-Qaeda with just counter terrorist force operations. You’re not going to just drone strike or Delta Force raid your way out of this problem. You’re going to have to have armed forces on the ground. You’re going to have all of the elements of the civil military campaign plan that we had, frankly, in Iraq, but we don’t want to be doing all of them and we’re able now to do that in places like Iraq and in Syria and some others.
The reason that we don’t want to do that is because again it has to be sustainable – lesson number five is we are engaged in a generational struggle. And I know the leaders in here recognise that and it’s really important that that be communicated to populations, but they understand that we can carry out this generational struggle in a manner that is sustainable and sustainability is measured in the expenditure of blood and treasure.
So, you have to have a sustainable, sustained commitment. That is not easy, but we’re showing how that can be done now in these places that I’ve listed and also in others. Now there will be some, like in the Philippines, let’s say, where Australia will either lead or play a very significant role; Mali, where the French took the lead. But you will still even there find very substantial contributions from the United States.
So, those five lessons I think provide the intellectual foundation on which you will build policies and again if you come back to this, I think we’ve shifted back and forth arguably too much because of the influence of these very visceral experiences.
Vietnam weighed on that generation of officers inordinately. And I think you can be overly cautious, actually, and miss an opportunity when you should have intervened and then you have to come in later when it’s a much worse situation. But that’s the challenge and that’s the challenge that a wartime prime minister like Prime Minister [Malcolm] Turnbull bears and has to grapple with.
BN: From halfway around the world we watched with some astonishment for the best part of two years, while Americans fought this incredibly ferocious election campaign. There was dire warnings in Australia about the possible consequences, the possible return of a sense of isolationism in the United States and then the election of Mr Trump appeared to herald a more isolationist US policy.
With the benefits of several months of hindsight, do you believe that its allies in Europe and in this region can rely on America?
DP: I do. Look, I think what you have to do is jettison the campaign rhetoric or at the very least contrast it very considerably with what has actually taken place.
In some cases, it is taking a little while to get to a certain location like the presidential declaration of the Article 5 commitment in the NATO alliance that an attack on one is an attack on all. And ironically that opportunity to do that was not taken at the NATO Summit …
And then if you follow the money and follow the troops, don’t follow the tweets, follow what’s going on the ground, you’ll see the NATO forces are moving into the Baltic states and into eastern Poland.
There’s more resources from United States being provided to a European support initiative that will restore actually some of the capabilities that we took down after the Cold War now that there is a resurgence of an aggressive, adventurous Russia led by President [Vladimir] Putin.
If you look at China – most important relationship in the world – lots of accusations about China. A lot of trepidation. A phone call from the Taiwanese president was accepted without some sense of perhaps the historic nature of this and then a tweet followed that added a little bit of insult to injury.
Ultimately, there is a phone call between the president and President Xi [Jinping]. Then there’s the Mar-a-Lago summit. There’s the embrace of the One China policy and just this week, the first of four different groups that were charted by the Mar-a-Lago summit met.
This was between the secretaries of state and defence of the United States and their counterparts from China to start grappling with the really serious issues – the most prominent of which is North Korea and the desire to see China do more to squeeze, if you will, crimp down on this umbilical cord that basically keeps the lights on in Pyongyang.
You can work your way through a whole host of these different issues. The Iran nuclear deal that was going to be torn up on day one, we’re not walking away from. And it’s very pragmatic.
Unless there is really sufficient cause and a violation of that agreement, abrogating it would isolate us more than it would isolate Iran. We will counter malign Iranian influence more sufficiently and I applaud that. The America First does not turn out at all to have been America alone.
Frankly, I think the overall way to characterise American foreign policy that’s emerging is that there is more continuity than change and that even a lot of that continuity I see is improving. You see a commander-in-chief devolving authority down to the Pentagon or the battlefield commanders for decisions that I think should appropriately be made at those levels.
Now don’t get me wrong and by the way, again I remind you I’m non-partisan. I don’t vote. I don’t register. I don’t endorse. I don’t contribute. There was an op-ed that did appear in the Daily Arizonan that talked about saluting an American patriot – senator John McCain – two weeks before his election. But you know, you have to do these kinds of things for truly extraordinary people every now and then.
But so to show that, there are three areas that I do have concerns about and then one major issue that a lot of you have touched on.
Those would be climate … we’re again pledging to come out of the Paris Accord in 2020. Look, the US is going to meet its obligations anyway because of market forces, states, corporations and municipalities, but it does have enormous symbolic value and it is not something that I would have welcomed or advised.
Immigration policy – we’ve still got to work our way through that. You don’t see the wall going up yet between Mexico and I think there will be some wall.
I was asked actually when I had my audition, I guess you’d call it – my reality-TV show moment – with President-elect Trump to discuss the secretary of state job and he asked me, should we build a wall General?
And I said: sure we should build a wall, Mr President where we don’t already have a wall – you know, we’ve got hundreds of miles of wall – where it would actually do some good and in the context of a comprehensive approach that would include a variety of other elements that would actually improve security on our southern border, noting that the flow of people between Mexico and the United States has actually been from the United States to Mexico slightly, rather than the other way around in each of the last three years.
I did not note that perhaps therefore Mexico should demand that we pay for the wall. I thought that might be a bit untoward.
And then the other issue is trade and this is a very serious issue. This affects you very much. TPP, now it’s the TPP 11 – Trans-Pacific Partnership – because the 12th, the US has pulled out.
We’re going to have to see how that can go forward. We obviously have bilateral trade agreements with many of the countries … but this would be hugely significant for Vietnam and for some others. It would be enormous advantageous. Our labour movement should want to see labour treated better in some of these different countries, as would have been required.
And then the last issue is one that I think that is a still very much a legitimate issue for discussion and that is the occasional ambivalence of the United States to continue to lead the rules-based international order. I truly believe in it.
That was established in the wake of the worst 50 years of world history imaginable: two horrible world wars and the great economic depression. And it has stood the world in quite good stead since. The institutions, the financial structures, the norms, the principles, again, have really done well, but as your great foreign minister observed, [at] no time certainly since the end of the Cold War has there been as much strain, as many stresses, as many challenges to this.
And at such a time I do believe the United States has to continue to exercise its leadership and actually I think that it will.
I think first of all that you have a pragmatic president. He’s somebody who’s showed that he would do what was necessary to get elected and I think he will do what he needs to do to be successful and he will come to define that if he doesn’t already in part in that way.
Beyond that, I think the national security team that has been established is arguably the finest in recent memory: a terrific national security advisor [H. R. McMaster]. He and his deputy both had many tours together on battlefields, battlefields on the Potomac as well. [Defence Secretary] General Mattis, long-time combat comrade, buddy, boss, at one time he replaced me when I went down to Afghanistan; stayed close even after government.
The secretary of state I think is very good, superb. You just have to understand he’s an engineer. He takes things apart painstakingly. He wants to understand how they operate then he puts them back together and he doesn’t necessarily love the press. He’s not, you know, a retired four-star, you know. Never stand between an retired four-star and an open mic. You can do that with Rex Tillerson and not fear for your life.
Our US ambassador to the United Nations, former governor Haley, has proven to be superb. She’s the one who has in the early weeks been the one to go out and clarify what came out of the White House in a previous day, such as when the president said with Bibi Netanyahu there, you know, one state, two state for the Palestinian issue … and she came out the next day and announced that the US policy has been and continues to be support for the two-state solution.
So, again, I think this is a very good team and I think American foreign policy has been reassuringly impressive, actually, in the ways that it has evolved with those caveats that I mentioned.
BN: So, I’ve got ask you what sort of people are crossing the American border into Mexico?
DP: Mexicans going home.
Mexico has a manufacturing miracle underway. Monterrey is the hub of this. Anybody who hasn’t seen Monterrey, you should. This is Detroit on, you know, steroids and anything else you could possibly inject into it. They’ve done extraordinarily well. I think they’re already now the fourth-largest car exporter in the world and obviously, they have ground access to the largest economy in the world.
Now, I should note the problem with that border is that’s where Central American country refugees come through and Guatemala, El Salvador and Honduras have sent various substantial numbers because of the violence, the instability and the lack of rule of law in those countries at various points.
BN: General, some years ago the Berlin Wall came down. The Cold War ended. I think we all thought we were in for decades of peace and harmony and prosperity.
Relatively recently, some smart people have warned that we might be fighting Islamist terrorism for a century, which is a pretty daunting idea. Do you agree that the threat is likely to be that prolonged and what sort of impact is it going to have on our democracies?
DP: Well, as I mentioned earlier, I think this is at least a generational struggle and the impact therefore is that you are going to have to have a sustained commitment against it, but in a way that is sustainable.
I’d offer as an example: I’ve never doubted that Iraqi forces once reconstituted and supported by the US, Australians and the other coalition members would be able to defeat Islamic State.
I think, literally, within weeks if not days the final old city part of Mosul in which they barricaded themselves and [have been] fighting to the death will be cleared and essentially Islamic State by and large will have been cleared at least in its army form.
There would still be terrorist organisations that are carrying out bombings, but that will have been completed. We’ll put a stake through the heart of [Abū Bakr al-] Baghdadi [the leader of Islamic State] at some point in time and they’ll be defeated in Syria.
But there is still even after the ground caliphate is taken in those two countries, they’ll still be pockets of them in a number of others – North Africa, East Africa, now the southern Philippines, some other places out in the far east, Afghanistan.
They have an affinity for eastern Afghanistan where the 9/11 attacks were planned. Let’s not forget that the reason we went to Afghanistan and the reason we have stayed is because that’s where the 9/11 attacks were planned.
That’s where the initial training of the attackers was conducted and we don’t want to ever allow that to be a sanctuary for transnational extremists again so that they can do what al-Qaeda did.
So, this is going to be a long fight and the difficult area in particular is the so-called virtual caliphate. You could eliminate all of the ground vestiges of this and there’s still going to be on the internet this extremist propagation that recruits, that shares lessons on how to make explosives, on tactics, that proselytises, that tries to encourage. One [message] now is to conduct attacks in the United States.
There’s going to be a very small number of a very large population that will unfortunately be attracted by this and carry out what are termed lone-wolf attacks, but typically it turns out the lone wolf got inspiration from the internet or from some other form.
And so I think we do have to get used to this in a sense, while doing everything we can, obviously, to eliminate the risk of this, to mitigate the risk of when it does happen and so forth, but we are going to be seized with this problem for a very long time I fear.
And again, that implies a lot about how it is that we’re going to have to take this on and again it is always going to take a comprehensive approach. There’s no silver bullet that you can shoot that will make this go away.
BN: The citizens of both our countries would be deeply concerned if they felt that their personal information and transactions online – your banking information and everything else – wasn’t fully and effectively encrypted, but at the same time that would be in conflict, would it not, with the need for various agencies to have access to information right across the internet?
How do you deal with that conflict and are those two ideas heading for collision?
DP: They do collide and so my view has been that on the one hand – CIA, NSA and others – I mean, look, we get paid to steal secrets, to recruit sources, to chase bad guys. That’s what our governments pay us to do and you should expect us to do that.
And I think we ought to have the ability to crack anything, anywhere, anytime when the legal circumstances obtain. And I generally think we shouldn’t talk about it too, which is a little more difficult.
The second ,though, is that I don’t believe we should be able to compel Apple or other producers, manufacturers of devices to have a back door, for the simple reason that the criminals will find this very, very quickly.
It’s actually criminals that are finding the so-called zero-day defects and exploiting them before the firms themselves find them. There’s a whole industry of this now and you can go to the dark web and find this kind of stuff.
So, I do think this a bit in conflict. I should also note that the Snowden revelations were enormously damaging to the relationship that we had between the intelligence community and the internet service providers, the social media platforms, the CEOs and all the rest of it.
It used to be that you could go to them quietly and they would help us and we would help them occasionally, that broke down because these revelations cost tens of billions of dollars just for say Google alone. And we’ve got to rebuild that trust and confidence and that’s going to be very important in the way going forward.
There’s also a very significantly debate that has to be had I think, and I’ll be interested in the prime minister’s view on this, and that is on what [British] Prime Minister [Theresa] May has raised: enough is enough, how far will people be allowed to go in the internet? Where does free speech end and incitement to extremist violence begin? And I think that you will see a pendulum moving on this.
The key, of course, is to get it to move far enough, but not too far because then it will, you know, come back the other way. But I think there is going to be a very significant debate on this in the UK in the wake of the attacks that they’ve suffered, which have been linked back to activity on the internet.
And I think that will be instructive for all of us, and you and we and the UK all share not just a common language, but common values, common heritage and a shared future. And I think that debate is going to be one to watch and I assume that there is going to be something like that here in Australia as well.
BN: Australia is in this sort of paradoxical situation that affects many countries in the region of finding itself in a region that is the subject of some aggression from the main trading partner of most of the countries in that region.
What do you think of China’s activities in creating artificial islands, militarising them, the muscular use of its fishing fleet?
DP: Yep, which have the most sophisticated communications we have ever seen on any fishing fleet.
BN: Well, how do we deal with this? And how important are things like freedom-of-navigation exercises?
DP: Hugely important and I think we have to be firm. You know, let’s get the big idea right – better be firm.
And I would acknowledge that I think there have been times in recent years where the rhetoric at the Shangri-La Dialogue … several years ago when I heard for example, [then] secretary of defence Ash Carter, and his inaugural speech there literally pound the podium and say we will sail anywhere and fly anywhere – and it took us eight months to sail through the South China Sea. That’s not firmness.
Teddy Roosevelt did, I think, have it right on this. You know, speak softly and carry a big stick.
We should just state it, we should just do it and frankly there were opportunities when those islands were first being constructed where we could have said, OK fine, you know, and we’ll help the Philippines build there and we’ll help Vietnam here and if Malaysia wants to get into the act. Every single country that has a maritime border with China has a dispute with it.
And the Nine-Dash Line is an outrageous assertion that is completely without foundation in international law, as we found when the Philippines took their case to the World Court if you will and the case was decided in their favour.
But you know as Thucydides or someone or the Melian Dialogue said, the strong do what they will and the weak submit. I think the weak don’t have to submit, we have to collectively be firm in response.
I do think that Australia has done quite an admirable job in acknowledging this curious duality where their number-one trading partner is also, arguably the number one security cause for concern and the number-one security partner is the United States, which again has China as its now number-one trading partner, but also our number-one strategic competitor.
This relationship between the US and China is absolutely crucial. There’s a wonderful new book out again by the professor up at the Belfer Center at Harvard, Graham Allison. It’s titled Destined for War – there’s no question mark.
You know, it’s about can China and the United States avoid the so-called Thucydides Trap, and it’s called that because Thucydides wrote about the Peloponnesian War – Sparta is the established power, Athens is a rising power and Thucydides writes they inevitably went to war.
And so, of course, we don’t want that in this case. He then reviews a number of cases that go back about five centuries – 75% of the time there was war in that situation – and we need to obviously avoid that this time.
So, I think is where the strategic dialogue with China is crucially important and this is where again I think you see heartening development in the relationship between the president of the United States and the president of China, and now these relationships at the levels below and I think that’s very important.
By the way, I’m the one that believes we should have a strategic dialogue with Russia as well. Yes, we have many conflicting interests. Yes, they have been extraordinarily over-aggressive against Georgia, in Crimea, south-eastern Ukraine, flights that come very near to our aircraft, a variety of other actions. But in Syria, the ultimate resolution is going to require Russia to be at that table.
By the way, I think the ultimate resolution is not going to be what is sought through diplomacy, which is a democratically elected multi-ethnic, multi-sectarian government in Damascus for all of Syria.
I think it’s going to be something that basically just tries to stop the bloodshed with a series of local ceasefires around the periphery of a rump Syria. Some will be guaranteed by Turkey, some by the United States, some by Jordan and the US, and so forth. But Russia is going to have to at least tacitly, if not formally accept that.
BN: Do you think countries like Australia should carry out freedom-of-navigation operations within the 12-mile perceived boundaries round those artificial islands?
DP: Look, I do, but these are tough calls for national leaders. The fact is that the islands have been constructed.
I talked to Ash Carter about this. I said don’t use the term “reclamation”. They’re not reclaiming anything. They’re building islands. These are on rocks that were below the level of the sea at high tide, which gives you no justification for anything if you actually had a claim to use them in the first place, which they don’t.
And so, yeah, absolutely, I think that should be the case and again quietly done. We don’t have to have brass bands and fanfare, but it should be done and I think countries of the world should indeed do that, and I again if it can be done as a coalition I think it obviously says much more.
BN: Again on a subject you touched on: the recapture of Mosul and the capture of Raqqa, which appears to be likely, will clearly, significantly reduce the power of the Islamic State terror group in terms of major military operations, but what comes next?
DP: I’ve actually written about this, that the battle that matters most is the battle after the battle.
There’s been no doubt again that we would enable our Iraqi counterparts to defeat the Islamic State on the ground. The question is: after that can the Iraqis achieve governance that is sufficiently representative of all the different groups? And by the way Nineveh Province, of which Mosul’s the capital, is where I spent the first year of the war after the fight to Baghdad and it is the most complex human terrain of all of Iraq.
Can you get adequate representation of all, reasonable responsiveness to all those groups within means and most importantly guarantee minority rights, not just majority rule? That’s a tall order and it will not be easy. But if you don’t get that right, there will be once again fertile fields for the planting of the seeds of extremism and the rise of ISIS 3.0.
BN: You worked closely with Kurdish fighters in your time in Iraq. Now those Kurdish groups are playing a major role in the campaigns to recapture significant parts of Iraq.
They’ve recaptured significant parts of Iraq all by themselves with help from the United States and allies, but also they’re playing a major role in Syria. Is that likely to lead to the creation of a Kurdish state?
DP: No, and that’s a great point. One of the strategic revelations of what’s happened is recognition that the Syrian Kurds do not want to be part of a greater Kurdistan – that is, part of the Iraqi Kurdish regional government.
In fact, the Iraqi Kurdish regional government has significant political disputes ongoing right now. They will have a referendum on independence. Masoud Barzani, the president of the Kurdish regional government, has pledged this.
But I literally don’t think they can afford to be independent. We calculated at one point – the CIA – that they needed to export about 800,000 barrels of oil at US$105 per barrel. They are only producing 800,000 barrels on a really good day and exporting a subset of that now in the forties per barrel. So, they still need some of what they get from Baghdad.
Keep in mind that Iraq for all of the centrifugal forces pulling it apart has a huge centripetal force and that is the central government’s distribution of the oil revenue. That is absolutely crucial and that is keeping that country together.
The Sunni Arabs, for all of the differences they have with Shia-led government in Baghdad have no alternative, but to getting that. So maybe you get a new deal with Baghdad, gets greater devolution of power to the provinces, the Sunni provinces, as they have and some of the others. But I think they stay part of Iraq and I think that the Kurds will stay part of Iraq for some time longer as well.
I think, ultimately, they probably do have a right to an independent state and an independent people, but again they’re going to have to get a good deal. This has to be an amicable divorce with Iraq and a good deal with Turkey before they can risk that.
BN: You were able, I think, in Iraq to negotiate with diverse and opposing tribal factions. Do you believe that after all the violence and bloodshed that we’ve seen in Iraq and Syria that that sort of rehabilitation is possible again?
DP: I do. And look, by the way, when I was negotiating that I had a great position. I was the sheikh of the strongest tribe in Iraq. Having 165,000 American soldiers, sailors, airmen, marines, and then tens of thousands of additional coalition forces and others, was hugely helpful.
But I do actually think the prime minister of Iraq, Haider al-Abadi, knows that there has to be inclusive governance and I think that he is determined to that and I see break-off factions within the Shia, who I think will enable that as well.
Immigration Minister Peter Dutton’s explicit linking of the arrangements to send Australia’s offshore refugees to the US and to accept some from Costa Rica presents not just an immediate credibility problem for Malcolm Turnbull but, potentially, a more serious longer-term one.
It contradicts the prime minister’s flat – if unconvincing – denial of such a link. It also raises the question, why would people believe Turnbull on anything remotely related to this issue in the future?
And that could be important if the Trump administration were to ask Australia to boost its military commitment in the Middle East.
Turnbull says any such request would be considered on its merits.
If there was a request and Australia were to agree, he would deny that the acquiescence had anything to do with his managing to twist Donald Trump’s arm to accept the deal Australia did with the Obama administration to take people from Nauru and Manus Island.
But that denial – always likely to be questioned – would be an even harder sell now.
In September, after the Costa Rica arrangement was announced, Turnbull was asked whether it had any material impact on the government’s ability to find homes for people on Nauru and Manus Island.
“It is not linked to any other resettlement discussions,” he said. “The announcement today is not connected to any other arrangements.”
This became the mantra, including after the deal about Nauru and Manus Island was announced following the presidential election. Dutton said on November 14: “The Costa Rica arrangement had nothing to do with this deal and it’s not a people swap.”
On Tuesday’s Bolt program on Sky, Dutton predicted the first offshore refugees would move in the next couple of months. Asked then when the first people from Costa Rica would arrive, Dutton said: “Well, we wouldn’t take anyone until we had assurances that people were going to go off Nauru and Manus … We want an outcome in relation to Nauru and Manus.”
“One of the lessons we’ve learnt from past arrangements, say the Malaysian deal for example that Julia Gillard entered into, we accepted all the people from Malaysia, not one person went from Australia. So we’re not going to be sucked into that sort of silly outcome.”
It should be said this is more than a bit rich. The people didn’t go because the Coalition opposition blocked the “swap”.
Bolt pressed Dutton on the arrangements with the US. “So it was a deal? It was, we’ll take yours if you take ours.”
Dutton said it wasn’t a “people-swap deal” but added: “I don’t have any problem with that characterisation if people want to put that”.
It’s always defied common sense to think there was no link between the Costa Rica and Nauru/Manus Island deals, and the government was taking the public for mugs to try to argue that. Now it is paying the price.
It remains unclear what the Americans honouring the deal will amount to, given it is up to them how many of the people they finally accept after Trump’s “extreme vetting” process.
Dutton’s proposition that the refugees from Costa Rica can’t come until he’s sure some of the offshore people are going suggests he feels the need to take out insurance.
Foreign Minister Julie Bishop, in Washington for wide-ranging talks with the Trump administration, said on Wednesday: “The agreement is progressing and our officials are working together with United States officials to vet the applicants for settlement in the United States.” She wouldn’t be drawn on detail.
Asked whether she would characterise it as a swap deal, Bishop said: “That’s not the way I would categorise it.”
The government continues to fall victim of its own spin.