25 thoughts on “Monday message board”

  2. The AFR article today on the federal budget and inflation has finance minister Mitchin opposing measures that would speed up economic output. Infastructure investment and tax cuts both seem to be off the agenda.

    What is the point of RBA independence if the federal treasury thinks fiscal policy causes inflation? And more to the point why would you constrain economic output if it appears that there is too much money slushing around. The correct remedy to inflation is to have greater output of goods and services or else less money chasing what output there is. Putting speed limits on the economy as suggested in the article is either lousy policy, lousy rhetoric or both.

  5. Gandhi has already raised the ISG on this thread, but what the hell…

    The Iraq Study Group report includes the following (from Recommendation 63):

    “The United States should encourage investment in Iraq’s oil sector by the international community and by international energy companies.

    “The United States should assist Iraqi leaders to reorganize the national oil industry as a commercial enterprise, in order to enhance efficiency, transparency, and accountability”.

    Commenting on the Report,Antonia Juhasz says:”The report calls for the United States to assist in privatizing Iraq’s national oil industry, opening Iraq to private foreign oil and energy companies, providing direct technical assistance for the “drafting” of a new national oil law for Iraq, and assuring that all of Iraq’s oil revenues accrue to the central government…”

    Obviously the $64,000 (and much more) question is to what extent the Iraqi oil industry is to be privatised. Will the US attempt to reintroduce a system of “concessions” whereby oil companies can claim ownership of oil still under the ground?

  6. John Howard’s rhetoric to support his position on climate change is shifting from denial to protection of our natural advantage in fossil fuels.

    How will this argument sit with his liberal party colleagues, esp those interested in free trade? If you accept that climate change is a problem, isn’t this kind of protectionist rhetoric not in keeping with economic rationalism?

    And is any failure by his colleagues to object to this approach just a sign that the Liberal Party sees action on climate change as a political move rather than an environmental necessity, ie they are not fair dinkum? or else they are not so economically rational as they make out?

  9. John:

    There’s been an interesting story about water today.

    The papers ran an AAP story based on a press release from Malcolm Turnbull. For example, the Sydney Morning Herald version:

    Sydney’s untapped water stash

    Tapping into an under-utilised groundwater source under Sydney could help solve the city’s water crisis, a new report revealed today.

    Research suggests the Botany Aquifer, located between Centennial Park and Botany Bay, could could provide more than two per cent of Sydney’s water needs.

    Conservative estimates are that an extra 12 million litres of water a day – four billion litres a year – could be extracted from the aquifer as it stands.

    Sounds good, doesn’t it? Why hasn’t anyone thought of this before?

    Surely it’s nothing to do with the water quality? Turnbull’s press release says:

    The Report shows that while there is a good understanding of water quality in the aquifer, more work is needed to better understand the scale of the resource. [emphasis added]

    What exactly might be that “good understanding” of water quality in the report (warning, 4.6 MB .PDF):

    Classed as a highly vulnerable aquifer, groundwater abstraction in the southern aquifer is embargoed due to contaminant plumes (Zones 1-4, Figure 7). However, excellent groundwater resources are available in the north-east of the aquifer in the suburbs of Randwick, Kensington, East Lakes and Maroubra.

    Available data indicates that groundwater quality in this area generally complies with drinking water standards with the exception of iron and bacterial indicators, except[!] in locations near leaking sewers and landfills. [emphasis added]

    What was that? Highly vulnerable? Generally complies? Groundwater extraction is banned in most of the area:

    Botany and its surrounding suburbs have been heavily used by industry for at least 100 years. This was largely before any environmental controls were in place and basic measures to prevent pollution were not considered. This legacy is what we are now dealing with, in Australia and around the world.

    A range of industries operated in the Botany area such as tanneries, metal platers, service stations and depots, landfills, dry cleaners and wool scourers. As a result, chemicals such as chlorinated hydrocarbons and other solvents, petroleum hydrocarbons (such as petrol and diesel), and some heavy metals such as chromium, nickel, lead and arsenic, may have contaminated the aquifer…

    # Zone 1 (red)
    This zone is the existing Groundwater Extraction Exclusion Area around the Orica site. Management for this zone has not changed and the use of groundwater remains banned.
    # Zones 2-4 (yellow)
    Residents in these new zones are advised that groundwater use is now banned, especially for drinking water, watering gardens, washing windows and cars, bathing, or to fill swimming pools.

    But wait, it gets better. The SMH story says:

    Mr Turnbull has discussed the report with NSW Premier Morris Iemma, but he said the state government was “reluctant to embrace ideas that come from outside”.

    “But I think they are warming to the idea and we are determined to press ahead with it,” he added.

    The Botany sands extraction idea was actually raised by the NSW government in its Metropolitan Water Plan 2004 (warning, big .PDF):

    Reserves of groundwater are located in many parts of greater Sydney such as the Botany sand beds where the water is close to the surface.

    So Malcolm Turnbull is “determined to press ahead with” the extraction of contaminated groundwater? Good luck with that.

  10. Howard’s hand picked carbon trading study group will be like a conference of clerics discussing the finer points of atheism. Obviously they are not going to recommend any curtailment of their respective industries. On the other hand the public wants action. Therefore I’d expect findings along the lines of ‘needs more research’ or ‘create interdisciplinary review panels’. That should buy a few more years of unchecked if not increasing emissions. The example of the aluminium industry is a good one; it may well be a sound study shows it to be a net negative. However the idea of putting an iconic industry at risk is probably incomprehensible to most conservatives.

  13. The ISG makes it plain the media reporting has actually been correct whilst those lambasting them like Tim Blair just plain wrong.

    Will there be an acknowledgment of this?

  15. Gandhi’s Oil Update (free to non-subscribers): the draft Iraqi oil law (as leaked by Dow Jones)firmly embraces the concept of production sharing agreements (PSAs), which will lock any future Iraq governments into punitive deals with Big Oil.

    Meanwhile the ISG Report simultaneously implored Bush to champion such deals and loudly delcare that the USA has no interest in Iraq’s oil.

    Well, of course, it is not about oil, it is? We all know that. It’s about… um…

  16. Terje said:

    “The AFR article today on the federal budget and inflation has finance minister Mitchin opposing measures that would speed up economic output. Infastructure investment and tax cuts both seem to be off the agenda.

    What is the point of RBA independence if the federal treasury thinks fiscal policy causes inflation?”

    I think what is being opposed is any fiscal measure that adds to DEMAND by more than its contribution to OUTPUT (tax cuts) or leads to further demand for labour in an already very tight labour market (infrastructure spending). This could lead to the RBA expecting further price or wage increases, resulting in further increases in official interest rates.

  17. On another topic, Australia is planning to spend $12 billion on the F-35 joint strike fighters, which are being made in the US.

    Twelve. Billion. Dollars.

    $12,000,000,000.00.

  18. Mark, this line gets used alot and has always seemed illogical to me. I have to agree with Terje in this case. What is the difference if I spend my tax cut or the government keeps it and then spends it for me. Tax cuts cause no net change to the size of the money supply by themselves so how can they be inflationary. Why don’t governments advocate tax increases to fight inflation.

  19. Can someone explain how comments can be on any thread, suddenly taken off LP like and then just as suddenly back on.

    If I am going to be paranoid then I would like it to be the full Monty!

  20. Hi folks, I have added JQ to my list of regularly visited blogs to balance my usual diet of righties.

    One of the good things in my life was discovering there are more voices than the conventional story-framers of the news industry.

    Cheers!

  22. Gandhi, thanks for the links. One doubts that Iraq will be able to exert the same kind of pressure on US oil companies operating in Iraq under PSAs as the Russian govt. has recently been exerting on Shell in Sakhalin. Talking about the Shell / Sakhalin debacle, The Independent (12/12/06) comments: “In the frequently anarchic 1990s, lower oil prices, post-Soviet chaos and a weak central government meant foreign companies were able to take controlling shares in such projects on extremely favourable terms”. Sound familiar? The same article goes on: “Shell has been under serious pressure to partially sell up in Sakhalin-2 ever since it disclosed that costs on the project in Russia’s Far East have doubled from $10bn to $21bn. Under the terms of a 1993 production sharing agreement, such a severe cost-overrun would hit the Kremlin where it hurts: in its pocket”.

  23. Gordon,

    Good comparison article, thanks.

    It’s hard to see the violence in Iraq ever abating while US soldiers help Big Oil pilfer their resources. Even if you cut the political heat by using foreign security contractors as mercenary pawns to guard the pipelines, the costs remain severe and the global PR is horrific.

    And then there is that thorny little issue of looking at yourself in the mirror every morning.

  25. Crocodile, the official view of your point – post-Keynes – is that you don’t spend 100% of your tax cut, but the government always spends 100% of its tax. Me, I think there’s a lot more going on to muddy the waters than that.

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