Home > Economics - General > Unmasking Austerity

Unmasking Austerity

February 16th, 2014

I’ll be at Unmasking Austerity in Adelaide on Tuesday. I’m going to talk about Commissions of Audit and the following question occurred to me.

Have such Commissions ever achieved anything of the kind you might expect from auditors, that is, detecting and fixing Fraud, Inefficiency and Waste? In this context, I’m not interested in proposals to kill government programs the Commissioners don’t like, privatise public assets, contract out public sector work and so on. I am interested in work showing that public programs are being defrauded and proposing checks that would fix the problem, cases of duplication between agencies and levels of government that can be fixed with substantial savings, cases where governments are wasting money by paying obviously excessive prices for services etc.

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  1. Kerry List
    February 16th, 2014 at 17:30 | #1

    Why is it that austerity (reducing costs) increases profitability, for businesses, and families, but the opposite is true for governments?

    Why is that, (for one side of politics) a balanced budget is considered a harm?

  2. J-D
    February 16th, 2014 at 18:24 | #2

    If I cut costs in my personal household budget, that can help me save up for something I want to do in the future. But if I am never going to splurge, then what am I saving for? To leave a bigger inheritance to the next generation? So they can save up even more to leave to the next generation, a continuous accumulation that nobody is ever going to expend? What is the sense in that?Austerity may make sense as a strategy for particular circumstances, but not as a universal recommendation regardless of circumstances.

    I suspect, from past reading, that what is being suggested specifically in this instance is that the particular circumstances for which governmental austerity is an appropriate response do not include circumstances of economic downturn; rather the reverse.

  3. bjb
    February 16th, 2014 at 18:41 | #3

    You mean the kind of auditors who audited Enron and Worldcom ? Uncovering fraud ? LOL.

  4. Megan
    February 16th, 2014 at 19:15 | #4

    The citizens of Montenegro don’t think much of austerity:

    A protest rally in Montenegro against the government’s tough austerity measures and high unemployment has turned violent after police clash with demonstrators.

    On Saturday, police fired tear gas and stun grenades to disperse stone-throwing protesters in the capital Podgorica who blamed the European country’s government for their economic problems.

    I’ve taken to using the terms “neo-liberal” and “fascist” interchangeably.

  5. Megan
    February 16th, 2014 at 19:20 | #5

    That was from a story on ‘PressTV’ and 2 of the comments are interesting:

    “Saraj: before so called democracy came to Bosnia we had over 1.000 companies and was employed over 500.000 people.In 1991 Bosnia had $500.000.000 surplus and GDP in 1991 was $2.400 and was in middle develop countries in the world. Nowww thanks to democracy and EU lies we are bankrupt. This happened to all states in the region.”

    “jim: …Only when Montenegro can manufacture a surplus of something that can be traded, will there be a recovery. But, a rump state like Montenegro has very little industrial capacity. Yugoslavia will have to be restored somehow. True, it was an artificial creation to start with and had to be held together by a strongman like Tito. But, such as it was, Yugoslavia was better than all these ineffective rump states that came about after Tito’s death.”

  6. Crocodile
    February 16th, 2014 at 21:14 | #6

    Kerry List :Why is it that austerity (reducing costs) increases profitability, for businesses, and families, but the opposite is true for governments?
    Why is that, (for one side of politics) a balanced budget is considered a harm?

    Not sure about that Kerry. Perhaps in the short term. There is nothing unusual about businesses using debt financing to upgrade facilities. Usually to improve productivity or economies of scale.

    I am not aware of any particular side of politics that considers a balanced budget as ‘harmful’.

  7. Alan
    February 16th, 2014 at 23:07 | #7

    @Crocodile

    On the other hand, there is definitely a side of politics which wants very hard, because they have no other economic argument, to have us believe governments, enterprises and households all have exactly the same fiscal constraints and objectives. That way you can rant about waste and never say anything about service delivery or inequality.

  8. Jordan
    February 17th, 2014 at 06:12 | #8

    @Kerry
    It is so simple. State is only accounting entity and all money comes from state or licensed out by state.
    State is counterpart to its citizens in money transactions. If state is to have a surplus, from where it can get it?
    Only from its people. Surplus means that state is making a profit from its own people. Why would state need a profit if all money comes from it?
    How poor do you want people to be in order to enrich state accounts? And for what purpose? So you can enrich people later on???
    State debts is only accounting meassure, there is no price onto people for that.

    If state is in deficit that means that people got more money then they paid in taxes to the state. So, people are richer if state account shows deficit. Otherwise, in surplus state, people have to go into debt so they can pay more in taxes then state spends.
    It is very simple.
    State and its people are counter party in money transactions. Who do you want to be wealthier?

  9. Jordan
    February 17th, 2014 at 06:45 | #9

    @Megan
    I am from Croatia, a former Yugoslavian republic and am very familiar with states those countries are in.
    Montenegro adopted euro as its currency. That feels good when money is pouring in from outside, but when it starts to move out, governments have no means to help the economy. There is nothing that governments can do to reduce overinflated housing prices once the sources of credit dry up. They can not do nothing since it is not their currency.
    Montenegro is one of 4 non EU countries that adopted the euro.
    Their only choice is to tax wealthy, but such idea is impssible to adopt in corrupted government.

    Bosnia is another case of international community giving up on its protectorate. Dayton agreement stopped the war, but also created two states within one with a single currency. Most of it is under single united control but not Supreme court. Bosnia has two Supreme courts. While third part is always angling for creation of the third court system and refuses to accept any court supremacy.
    Coruption under UN and after grew to unimaginable scale. There is nothing that can be done without bribing politicians, and all three sides.

    Transition into “free market” economy is painfully slow and everyone is abusing half finished laws. What crime was done yestrday will have no reprecutions tomorow when laws change.

    Their currency is fixed to euro so they also can not do nothing unless that fix is broken. State is not allowed to print money. When the world got into Great Depression, it had to get off the Gold Standard in order to employ people. Fixed exchange currency is the equivalent to Gold Standard. EZ is also under GS condition with single currency and no state can print it when needed.
    EZ iz under the conditions as in Montenegro.

  10. Ikonoclast
    February 17th, 2014 at 07:54 | #10

    In the current context “austerity” is a code word. It means transferring wealth and income from the 99% to the 1%. In the current system, “austerity” as a proposal suffers from the fallacy of composition. One person saving is good therefore all persons saving is better? No! All persons saving equals a decline in aggregate demand equals a recession… or worse.

    However, globally we are in a bind. Our system needs high aggregate demand to function but the resources limits are being reached. Soon faux austerity will be replaced be real material austerity i.e. shortages.

  11. peter
    February 17th, 2014 at 08:41 | #11

    Interesting to peruse the cabinet listings for a recent O’Farrell government community meeting in Maitland NSW. Deputy premier Andrew Stoner is also minister for regional infrastructure & services, not to be confused with Mr Hazzard, (Planning & Infrastructure) also assisting the premier on Infrastructure NSW.
    Roads, ports, transport, resources, energy all have separate ministers in charge and all would seem to have a finger on the infrastructure button. Then there are also ministers responsible for regions and small business….22 in all.
    A ministerial army of minders all keen to ensure their boss, and themselves, have a foot in the door. Plenty of scope for duplication, bullying and wounded pride.
    Beginning to sound like a plot line in …

  12. jungney
    February 17th, 2014 at 09:24 | #12

    About a decade ago I conducted a thorough search of all tertiary politics and sociology courses and found not one course solely focused on the issue of corruption and the state. Now, in NSW, given that it hasn’t really changed since the days of the Rum Corps, that is an alarming lack. News in this am is of a senior Rail Corp administrator being investigated for ‘soliciting’ money for contracts; apparently his sister, employed by FACS (child protection, NSW) is also under investigation for similar. I’ll be watching that investigation closely.

    Locally, parish pump corruption continues to amaze as the local council, widely acknowledge to be the most broke in NSW, continues to purchase land from local business people for no apparent reason and without public explanation. Most amazingly it recently purchased a flood plain on the local river with the apparent purpose of opening a caravan park in dry weather and an olympic scale whitewater course in flood times. Purchased at a good price, too.

  13. Neil Hanrahan
    February 17th, 2014 at 10:02 | #13

    JQ – Try the audit commission, originally chaired by Sir Rod Carnegie (no conservative partisan and a vocal opponent of Malcolm Fraser’s 1975 coup) and run throughout (as director) by Saul Eslake which showed how much reform had to be undertaken by the Kennett government. Of course Stockdale, the Treasurer, had spent years doing his own homework so was ready to go on the initial spectacularly successful electricity privatisations which got prices unumagineable 10 years later. Can’t be sure but the audit commission probably was the first body to come clean about the world’s worst practice public sector superannuation that Victoria was home to because previous fitful and flawed attempts at reform were only finally capped with the necessary end of defined benefit pension only schemes in 1993.

    @ Ikonoclast
    I’m not sure what “context” you live in “current(ly)” but it must be a microcosm which ignores the EU and its imposition of “austerity” on the PIGS – unfortunately perhaps not the PIIGS as Italy seems unrepentant. It is a curiously hairy-chested way of expressing the requirements in a misbegotten currency union dominated by the skilled, industrious and disciplined which benefits (or so it thinks) by a currency which is undervalued for its products. Those requirements, “in the current context”, are to achieve the equivalent of internal valuation for those countries which can’t do what they used to do, namely devalue their currencies. Obviously that entails, logically and mathematically, reducing people’s incomes and prices to fit a situation where they can’t sustain existing Euro denomated incomes and prices. And its v. difficult, as Keynes knew very well – hence his and most subsequent government and central bank economists’ indulgence of some inflationary policies.

    @ Megan

    You must be very young: too young really to have the time you spend on blogging. How else could you bandy about so fiercely the jargon beloved of Kevin Rudd (when backing down from being a “fiscal conservative”) the fashionable “neo-liberal”. Back when it was finally dawning, even on practical politicians that the social democrat (that’s the polite term) buying of votes since 1945 using Keynesianism of a kind that Keynes would not have countenanced as an excuse had finally run its course and landed in Stagflation. Thanks to the heroic efforts of Paul Volcker and a few others – though mostly entrepreneurs and the East Asian Tigers, including China eventually, – we got another remission (unless you are Argentinian when you might say it was too short to be called a remission). You and JQ should never lose sight of the implacable realities of human nature, both in voters and in those seeking their votes, the distribution of moneymaking ability (whether some power law or a Normal curve) and the inevitable return of the difficulty of every democracy (eventually whatever South Korea and Singapore may look like now) that vote-seeking politicians know that our collective sense of entitlement (and indeed desserts for our great abilities and hard work) inflates to maybe double what is realistically available. Oz is better placed than most to improvise and keep the show running – while all peddle harder and harder (including by extension serious work as tax accountants sharing a bit of tax avoidance all round). Thanks to China and geology we should be able to learn from others misfortunes without failing into major tyrannical demagogy (cf Turkey or Morsi’s Egypt) or inflationary fraud. Still, one has to ask, what the trick is when our benevolent side rejoices in the great advance of the welfare state that is going to provide serious help for the disabled and their families and vastly greater sums are to be poured into education which has proven for 20 years that it is remarkably unresponsive to increases in funding. The trick of course is to actually keep up the contentment level (if they can ever be contented) of the “middle class” even if it means, as it surely will, that very comfortably off 70 year olds will get the pension and health benefits while the disability scheme will, except to the extent that it acquires a middle class constituency, suffer attenuation and delay. More money promised to do more of the same things in education which are hardly even producing marginal gains these last 20 years or so is easily shuffled – witness what Gillard was trying to do by taking from universities…. Curiously, the union apparatchiks who are now the most blatant, and effective, careerist politicians, oligarchs in Robert Michel’s terminology, are, as their kind always have been, the most realistic, not to say cynical, about human reality, and they understand “moral hazard” very well. Does that naughty term “TurkCare” (for the Transport Accident scheme) come to mind? We hardly need to wait to see how the National Disability Scheme turns out, we know how the attraction of the Disability Pension creates “disability” very quickly and on a large scale. The speed of such disasters (as they would be if Australian miners weren’t so successful, allowing us to pay for our follies) is not something that one should be complacent about. Even California, together with most other US states, and, not least, their municipalities, have gone from robust economic health a few decades ago to near public bankruptcy through the quite predictable results of people’s self-interest being allowed to run wild. In California’s case above all the public sector union capture administered largely through the Democrats in the state legislature and in local government. So, please, Megan, and Ikonclast, fewer simple answers….

    Back to Keynes. One of the few things on which he was quite wrong – unimportantly fortunately – was his 1929 or 1930 dream of what productivity could do to allow “our grandchildren” to lead the leisured civilised life (the great man having apparently got over his Malthusian glooms during the 20s) which, of course, they (we) have proved not to want – or at least not want as much as status, novelty, increasing our share of the pie, etc. And, while he was right of course about the problems of excess saving in the sense of people who could fire up the economy by investing (or just spending anyhow) sitting on their savings he surely was over sceptical about the desirability of people saving so they could invest and provide for their old age and grandchildren. The reason is that, just as people over estimate their own worth and contribution and entitlements and are not looking to be Bloomsbury Set civilised aesthetes they can’t be trusted to do or require government to do even the minimum needed saving, unless they have the German folk memory of 1923, and one of the blessings of the last few hundred years is low interest rates which has provided the capital for innovators and entrepreneurs. Quantitative easing may be a bit of a con job but it is certain that a whole lot of bright innovators are getting a chance because of cheap money though the pay off is uncertain and may take quite a long time. None of that is to deny that the big US failure right now, and to some extent the Austalian one too, is the dogmatic refusal to borrow cheaply to build infrastructure which is properly costed to produce future real gains on sensible assumptions. The US case of course it 5 times as bad as ours. And Japan’s huge waste on infrastructure raises a different problem for consideration…..

  14. Neil Hanrahan
    February 17th, 2014 at 10:11 | #14

    Oh yes, Ikonclast, there may be incidental effects which allow the very rich to get more benefit than most from recent measures, not so much of austerity, but cheap money, particularly by way of QE. It simply couldn’t be central to politicians’ policy making at least in our country because we are as near to being a real democracy as one could find anywhere and nothing like the kleptocracies pretending to be democracies.

    Anyway you ignore the reality that another incidental effect is for some of the very rich to get wiped out by the policies of recent times you seem to think are all about benefitting the very rich. Think the owners of Peloton Partners, London’s most successful hedge fund – until it wasn’t. Its principal put his £150 million bonus back into the business and lost the lot….. That 1 per cent aren’t a class which co-ordinates all its actions to their common benefit. More like dog eat dog as in the Rinehart family. Bear Stearns and Lehmann’s misfortunes: too bad, but of course it will be very smart very rich people who most often survive and do well in any circumstances. That’s just another human reality, nothing sinister needed such as in your fevered imagination.

  15. Fran Barlow
    February 17th, 2014 at 11:49 | #15

    Neil H

    Its principal put his £150 million bonus back into the business and lost the lot

    Wow … it’s amazing that more people don’t make mistakes like that. Imagine how badly off the poor would be if they tried taking risks like that!

    One benefit of our current arrangements is that the poor are shielded from losing sums on this scale, which is I suppose the argument for gross inequality and grinding life-altering poverty and exploitation … Sure they’ll live in misery and indignity and watch your shildren do likewise if they don’t die of some preventable disease, but at least they won’t lose their fortune.

    If only they knew of the tribulations of the folks at Peloton, surely they’d shed a tear … Doubtless, the folks at Peloton have done likewise.

  16. zoot
    February 17th, 2014 at 12:18 | #16

    So the principal of Peloton Partners put his bonus back into the company.
    So what?
    If he was “wiped out” he must have risked much more than his bonus.

  17. Tim Macknay
    February 17th, 2014 at 12:31 | #17

    Arse-terity (n.): the practice of economising on toilet paper by defecating at one’s workplace.

  18. bjb
    February 17th, 2014 at 12:54 | #18

    Does anyone know where the meme of “surplus good, deficit bad” came from ?

    If my memory is correct, Ming was never troubled with running a deficit, and despite all the predictions of doom and gloom because of the deficit from the Whitlam years, I doubt there is a person alive that can say they have suffered in any way from the deficit left by Whitlam – but there are many, many people (myself included) have very greatly benefited from the programs of Whitlam.

    Surely there are people in the LNP (notably Turnbull and Sinodinos) who are well aware that a Nation’s budget is not comparable to a household budget, but they continue to act like Wilkins Micawber from Dickens. Prof Q in his Zombie book pretty thoroughly puts the sword to most of this thinking.

  19. paul walter
    February 17th, 2014 at 13:23 | #19

    As usual, Ikonoclast nails it.

    I’d go one step further and wonder whether, if global economic activity is increasingly tailored to a sense of self preservation within a defensive elite, we are not really
    undergoing a return to a form of feudalism?

  20. rog
    February 17th, 2014 at 13:46 | #20

    In NSW the Lib govt is balking at flogging off the power generators despite rumors that LNP MP’s are for it. The argument for has various points; govt are not in the business of running a business, govts should not be ripping into customers to make a profit to reap dividends and the sale would free up capital for much needed infrastructure works.

    This argument has various failings; govts are in the business of gathering revenue, private companies are in the business of maximizing profits and the much needed capital could be borrowed supported by dividends from power generators.

    The govts dependency on gambling for revenue, a symbiotic relationship where host and parasite are mutually dependent, just shows how frightened they are of debt.

  21. David
    February 17th, 2014 at 14:02 | #21

    @bjb
    Very good point. One government is elected and spends. Another is elected and saves. The world keeps on turning around and in 30 years no one remembers anyway. Call it Austerity if you like, but wouldnt part of the responsible management of government finances involve an audit of these finances to look for improvements? Maybe if Ikonoclasts predictions come true there will be a mighty reckoning, in which case it wont matter one way or the other.

  22. Megan
    February 17th, 2014 at 14:04 | #22

    @bjb

    I don’t have a simple answer, but I looked up “austerity” on Wikipedia and there is a lot of interesting stuff there.

    I didn’t know it was so well-planned to deliberately cause misery and suffering for the poor, obscene wealth for the 1% and simultaneously introduce a form of martial law. I’d always thought it was bloody-minded stupidity but it is actually calculated evil.

  23. Tim Macknay
    February 17th, 2014 at 14:33 | #23

    There will shortly be “austerity” for the renewable energy industry, it seems. The government has just announced a review of the MRET, and pre-empted the result by claiming that there is an “oversupply” of renewable energy.

    Sorry if this is OT, BTW – the most recent Monday Message Board doesn’t have an operating comments facility.

  24. Megan
    February 17th, 2014 at 15:42 | #24

    One of Australia’s best journalists (from a small field who can actually claim to be real journalists), Neil Chenoweth, has a very interesting piece in today’s AFR:

    The single largest factor in the underlying deterioration of the federal budget announced by Treasurer Joe Hockey in December was a cash payout of almost $900 million to Rupert Murdoch’s News Corporation.

    The massive windfall, revealed in the US group’s accounts a week ago in New York, was at a time when News Corp newspapers were highly critical of the budget and called for deep cuts.

    Austerity for us and tax-free yippee for the propagandists of austerity.

  25. Uncle Milton
    February 17th, 2014 at 16:00 | #25

    @Megan

    This was because News Corp won a court case against the ATO in July.

  26. Megan
    February 17th, 2014 at 16:27 | #26

    @Uncle Milton

    Well, it was that and the decision of the ATO not to appeal the judgment.

    Apart from the criminal activities of his many companies and staff, Murdoch is famous for his tax arrangements and we need tax laws that prevent stuff like this:

    The galling feature for the Tax Office is that the original deals that cost taxpayers $882 million cost News nothing.

    In a 1989 meeting, four News Corp Australia executives exchanged cheques and share transfers between local and overseas subsidiaries that moved through several currencies.

    They were paper transactions; no funds actually moved. In 2000 and 2001 the loans were unwound. With the Australian dollar riding high, News Corp’s Australian subsidiaries recorded a $2 billion loss, while other subsidiaries in tax havens recorded a $2 billion gain.

    By last July that paper “loss”, booked against News Corp’s Australian newspaper operations, had become an $882 million cash payout.

  27. Crocodile
    February 17th, 2014 at 17:48 | #27

    bjb :Does anyone know where the meme of “surplus good, deficit bad” came from ?
    If my memory is correct, Ming was never troubled with running a deficit, and despite all the predictions of doom and gloom because of the deficit from the Whitlam years, I doubt there is a person alive that can say they have suffered in any way from the deficit left by Whitlam – but there are many, many people (myself included) have very greatly benefited from the programs of Whitlam.
    Surely there are people in the LNP (notably Turnbull and Sinodinos) who are well aware that a Nation’s budget is not comparable to a household budget, but they continue to act like Wilkins Micawber from Dickens. Prof Q in his Zombie book pretty thoroughly puts the sword to most of this thinking.

    Whitlam’s budgets were all in surplus.

  28. bjb
    February 17th, 2014 at 18:25 | #28

    @Crocodile

    I stand corrected ! Why then does everyone (or everyone on the right), say Whitlam wrecked the economy ?

  29. Crocodile
    February 17th, 2014 at 18:38 | #29

    bjb :@Crocodile
    I stand corrected ! Why then does everyone (or everyone on the right), say Whitlam wrecked the economy ?

    He had substantial other administrative problems. On top of that a five seat majority was also a bit too thin.

  30. Fran Barlow
    February 17th, 2014 at 18:40 | #30

    @bjb

    Part self-serving bluster, part price shock inflation following the world surge in oil prices after 1973.

  31. Fran Barlow
    February 17th, 2014 at 18:41 | #31

    @Tim Macknay

    Have you seen whom they’ve put in charge of the RET review?

  32. Tim Macknay
    February 17th, 2014 at 19:30 | #32

    @Fran Barlow
    I have. It’s not uncommon for government reviews to be initiated with a pre-determined outcome in mind, but I’m hard=pressed to recall one quite as un-subtle as this.

  33. Megan
    February 17th, 2014 at 20:59 | #33

    @Tim Macknay

    I wonder if the pre-determined findings will go so far as to actually tax domestic solar panel electricity generation as the Czechs and Spanish have done. You know, to level the playing field and keep all electricity costs equally high so as to avoid unfair competition from cheap/free renewables.

    In Spain you can be fined up to 30million euros for generating PV electricity.

  34. may
    February 17th, 2014 at 21:11 | #34

    idiot here can’t help wondering why government is considered to be just another aspect of “the market”.

    government does business within “the market” only.

    government is separate and apart from “the market”,with the power to impose conditions on “the market”.

    government should not be in business?

    so what the hell is business doing in government?

    in the west the state car licencing dept has started to include advertising for insurance companies and such in it’s official mail.
    i’m gobsmacked!
    commercial advertising in official policing business.
    i didn’t realise how far the rot had set in.

    the “outsourcing” of government functions like prisons and refugee processing ( and what else we don’t know of) using public funds to the profit of commercial business can only be cheaper by reducing the quality of the service.

    using austerity as an excuse to commercialise public services?
    it comes back to the old “user pays” mantra to “extract value” and “monetise” services we have already paid for via the contribution we all make to the public purse.

    austerity looks like an excuse for “the market” to try,yet again,the “get out of our way,making money is more important than people”way.

  35. Fran Barlow
    February 17th, 2014 at 21:11 | #35

    @Megan

    In Spain, industrial-scale renewables are still pushing coal and gas off the block.

  36. Tim Macknay
    February 17th, 2014 at 21:11 | #36

    @Megan
    It’s possible. The electricity generators have been throwing around ideas like that recently.

  37. Ikonoclast
    February 17th, 2014 at 21:28 | #37

    I think the knives are out to destroy renewable power development in this country.

    http://reneweconomy.com.au/2014/minerals-council-57246?utm_source=rss&utm_medium=rss&utm_campaign=minerals-council-57246

    In the short to mid term, they will be successful. Renewable power development will be set back another 10 years at least on where we could have been heading. This will seriously damage Australia’s international standing as more and more countries realise climate change risks are now of major significance. Witness John Kerry’s recent statement that climate change is a ‘weapon of mass destruction’. Imagine how Australia will look at the G20 it hosts, promoting something even the US now sees officially as a ‘weapon of mass destruction’.

    Mind you, the US lecturing about climate change and weapons of mass destruction is a bit rich given they are the alpha gorilla in both categories.

  38. bjb
    February 17th, 2014 at 21:34 | #38

    @Ikonoclast

    But we will likely get a delicious serving of shaudenfruede come G20 time after the LNP has tried everything to deny climate change, renewables etc, and the 800lb gorilla bounds into the room saying it’s all true. I’m looking forward to TA and Hunt talking their way out of it.

  39. Megan
    February 17th, 2014 at 21:48 | #39

    @Fran Barlow

    As I understood it that was the whole point of the tax – to “level” the playing field. Spain was producing 60% more than its ‘base-load’ requirements at peak PV output and that was not “fair”, apparently.

    In anticipation of the arrival of the trolls – the usual arguments include: ‘they use the grid and put it under pressure and should pay extra for that’, ‘they were ridiculously over-subsidised to start with so its all their own fault’, ‘the sun doesn’t shine at night’, ‘a rising tide lifts all boats’ and ‘look over there – a baby rabbit!’

  40. Megan
    February 17th, 2014 at 21:57 | #40

    As usual, the alleged opposition can only bleat about some vaguely broken election promise rather than summon real righteous outrage (because they are paid-up subscribers to the same ideology, maybe in a different shade of brown but that is the extent of the difference).

    It will be interesting though how Abbott undertakes the dismantling of solar power. Howard cut off wind at the knees having set it up to fail. Rudd cut of insulation at the knees having set it up to fail. But Abbott will be upsetting an awful lot of his “base” if he takes away their feed-in-tariffs and PV subsidies.

    I’ll put a bet on him going all the way and actually taxing PV like the Spanish. He might be ‘savvy’ enough to just pull back far enough to reach the actual goal (ie: make renewable just a little more expensive than FF), but I just think he’s too much of an ideologue for that.

  41. Ikonoclast
    February 17th, 2014 at 22:03 | #41

    @Megan

    A rising tide might lift all boats but a rising sea level will drown a third of Florida.

  42. Megan
    February 17th, 2014 at 22:27 | #42

    @Ikonoclast

    And it doesn’t lift boats with buoyancy problems, heavy anchors on short chains or those tied to the lowest rungs of the jetty ladder!

  43. February 17th, 2014 at 22:31 | #43

    The review of the MRET will be interesting. A lot of moderately wealthy middle class people have invested in solar panels. Any winding back will be very unpopular with them. It will also upset them, because many did it for the “feel good” value of helping the environment as well as for the money.

    There is no doubt that the MRET has caused electricity prices to rise. But you can really only justify abandoning renewables if you don’t accept that climate change is real/dangerous.

  44. Fran Barlow
    February 17th, 2014 at 23:25 | #44

    @John Brookes

    I’d be surprised if in practice the MRET did cause prices to rise. Extra supplies of power during peaks ought to constrain prices, and of course, as we know, people respond to price rises by using a commodity more sparingly. To the extent that they do, this seems to have predisposed delay of some system upgrades that would certainly have forced price rises.

  45. Megan
    February 18th, 2014 at 00:27 | #45

    @Fran Barlow

    But of course the “market” isn’t real.

    If it were then people would be able to shift their demand – using their free will – to optimize free or cheaper PV rather than FF.

    FF has the “market” by the short and curlies and isn’t going to let go.

    A “free market” (ie. neo-liberal/fascist) economy is completely incompatible with renewable energy. They simply cannot work together because the “free market” is based on lies and distortions and is owned by FF.

  46. Hermit
    February 18th, 2014 at 07:56 | #46

    @John Brookes
    Those who already have PV or solar water heaters should retain an advantage if the RET goes. The electricity retailer will no longer collect nearly 4c per kwh from all all customers for the amount of solar generated by a subset of customers. The press release from the Clean Energy Regulator said that nearly 1.2m homes had PV, 0.7m had solar water heaters and the balance to make up 2m or so were from heat pump water heaters. The latter could be powered by coal fired electricity so I’m not sure what the renewables connection is.

    I think the major incentives to solar uptake have been general electricity price rises, feed in tariffs (now declining) ordered by state governments, purchase rebates and the reduced cost of panels, seemingly now flattened out. Whether this means Australia will not now exceed 2m solar roofs is not clear. The main beneficiaries of a continued RET would be commercial solar like that proposed for Moree and for wind farms. Both builds may stop if the
    RET goes then again the gas price is rising so they might turn out to be cost savers even without subsidies. It would be a brave soul to predict the future.

  47. Ikonoclast
    February 18th, 2014 at 08:47 | #47

    Virtually all economists still believe that we can grow our way out of trouble. Austerity advocates believe that inefficient government spending crowds out efficient private enterprise. Leave the field to private enterprise and we will grow again or so they say. The evidence of stagnation in the austerity zones does not bear out their theory. Conversely, stoking aggregate demand with government spending can reinvigorate the economy. So Keynesians of almost any stripe along with MMT proponents advocate stimulus and consequent growth.

    However, we have now reached the limits to growth or will be doing so relatively soon in historical terms. Therefore growing our way out of trouble is not an option. Denying the near limits to growth is equivalent to denying human-induced climate change (AGW), sea level rise, species extinctions, key resource exhaustion, the declining quality of remaining ore bodies and the laws of thermodynamics.

    The real challenge is how to stabilise the economy and achieve a steady state plateau at the current level or a controlled descent to a realistically sustainable level. In other words, one real challenge is to employ more people while using less resources (and at the same time stablise population).

    Employing more people with less resources will entail the following;

    (a) less overall waste of resources (especially but not only water and energy);
    (b) more mass public solutions, less private solutions (eg. mass transit vs private cars);
    (c) more government planning (dirigisme) and less corporate planning of the economy;*
    (d) removal of the incentivisation of waste (advertising, over-consumption, fashion);
    (e) increase in labour intensity of the economy to achieve full employment (deliberate reduction of labour saving automation in targetted cases.)**
    (f) increase in human services (being labour intensive).

    *Note: Those who reject a significant proportion of democratic, government-led central planning (dirigisme) do, by default, leave the central planning of our society to corporations. It was essentially corporate central planning that destroyed most of Los Angeles’ mass transit and made LA hostage to the freeway and the IC engined automobile.

    ** Note: For example, ticket sellers and conducters are preferable to automated ticketing systems if we wish to improve employment rates.

  48. Hermit
    February 18th, 2014 at 11:53 | #48

    The energy demand picture is changing rapidly with the looming closure of a major electricity user in Victoria. If their 180,000 tonnes of annual product each uses 15 Mwh of electricity and that electricity is mainly from burning brown coal that is well over 3m tonnes a year of coal. At this rate Australia will have surplus generating capacity, albeit carbon heavy. Without CO2 constraints it will be hard for other new forms of generation to compete.

    The flip side is people losing their jobs and the fact we may have to import the same product with similar emissions made overseas (using some of our ingredients) but conveniently off our books. Less domestic emissions but not achieved in a happy way.

  49. rog
    February 18th, 2014 at 14:30 | #49

    @Hermit The flip side is that the govt will use the reduction in power usage resulting from the closure of Alcoa as evidence of emission reduction. Those that point to US emissions fail to allow for losses arising from the off shoring of manufacturing.

  50. Tim Macknay
    February 18th, 2014 at 14:42 | #50

    In other news, the Court of Disputed Returns has effectively ruled out all options other than a new WA Senate election.

  51. Fran Barlow
    February 18th, 2014 at 14:54 | #51

    @Tim Macknay

    It’s the right decision, whoever gets the most out of it.

  52. Tim Macknay
    February 18th, 2014 at 15:05 | #52

    @Fran Barlow
    I agree. It’s an issue that should be resolved by the voters. Personally, I hope the result leads to a Senate less likely to support the abolition of the carbon price, the watering down of the RET, and other retrograde policies. But time will tell.

  53. Fran Barlow
    February 18th, 2014 at 15:46 | #53

    @Tim Macknay

    I’m not going to argue with that. If some “buyers’ remorse” creeps in, then that’s a good thing.

  54. Tim Macknay
    February 18th, 2014 at 16:06 | #54

    The Court’s reasoning is here. Money quote: “The only relief appropriate is for the election to be declared void.”

  55. paul walter
    February 18th, 2014 at 19:41 | #55

    Changing the subject, I hope the Dunstan Foundation’s promise of an upcoming video come s off better than the streaming thing.

  56. Tim Macknay
    February 20th, 2014 at 11:54 | #56

    Sorry Paul – just coming back to the Court of Disputed Returns again – the WA Senate election results have been declared void. There will be a new WA Senate election.

  57. Michael Lanky
    February 21st, 2014 at 14:26 | #57

    John, re your question on paying excessive prices, I wonder if it’s more an issue of measuring the cost of probity to public organisations?
    When I make purchases, I can’t go out and find the best price easily. I either need to purchase from a list of authorised suppliers or go to tender. The tendering process is slow and only allows you to select from those that apply for the tender. I think that purchasing from a list of approved suppliers also prevents me from certain avenues for finding the best price.

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