Central banks could learn more from experience

My column from last week’s Fin, over the fold

Central banks could learn more from experience

The Reserve Bank of Australia is fifty years old, having been separated from the old Commonwealth Bank in 1960. The anniversary has been a happy event, given the Bank’s success in managing the Australian economy, at least since the ‘recession we had to have’. Through the Asian financial crisis, the dotcom boom and bust and the global financial crisis, Australia has enjoyed almost uninterrupted economic growth.

But the world as a whole has not done so well. As Janet Yellen of the Federal Reserve Bank of San Francisco observed at a symposium held in Sydney to mark the anniversary, a few years ago, central bankers in general would have been congratulating themselves on a job well done. Thanks to the adoption, in the mid-1980s, of inflation targets and ‘Taylor rules’ for setting interest rates, the world had entered a ‘Great Moderation’ in which the volatility associated with the business cycle had been tamed.

While few believed that the Australian experience (nearly twenty years without a recession) could be replicated, or sustained indefinitely, there was widespread confidence that the future was one of stability. With the Asian financial crisis and the dotcom boom and bust fading into the rear-vision mirror, calls for a ‘new global financial architecture’ were quietly forgotten. The handful of policy responses to the excesses of the 1990s, such as the Sarbanes–Oxley legislation in the US were derided as unnecessary over-reactions.

There was a similarly benign attitude to global macroeconomic imbalances, and to the massive growth in liquidity that sustained them. The ‘consenting adults’ school of thought held that, as long as growth in international indebtedness was driven

But, as Yellen observed, that was then. Now, with much of the developed world in deep recession, and the global financial system still on life support, the self-congratulation was more muted.

The key ideas that have debated policy debate since the 1970s were found wanting in the global financial crisis. The Great Moderation turned out to be an illusion. The idea that macroeconomic policy could be run on the basis of judicious interest rate adjustments was abandoned as policymakers resorted to massive purchases of fiscal assets and, in Australia and elsewhere, equally massive fiscal stimulus.

The efficient financial markets hypothesis, which provided the theoretical basis for deregulation, has been abandoned by all but its most dogmatic advocates. And the general belief that governments should keep out of the way and let markets do their work has been replaced by the recognition that in a crisis, governments provide the last line of defence against systemic collapse.

In attending the symposium, on the topic ‘What have policymakers learned over recent decades, and what needs to be reconsidered’, therefore, I was rather more interested in the second part of the question than the first. What, I wondered, did central bankers see as the key weaknesses in the theoretical and policy frameworks that led us into the global financial crisis, what policy responses to the crisis had worked well or badly, and what were the most promising new lines of thinking about the future?

On the whole, I was disappointed. The only issue that received serious reconsideration was the question of whether central banks should target asset prices. As RBA governor Glenn Stevens correctly pointed out, it’s misleading to phrase this question, in terms of the desirability of using interest rates to ‘prick asset price bubbles’. By the time an asset price bubble has emerged, policy has already failed and all the options are bad ones.

For a central bank with only one instrument, interest rates, the implication is that rates should be raised early in the business cycle, before asset price inflation has a chance to get going. That’s a reasonable judgement, and Jean- Trichet of the European Central Bank engaged in some justified preening at the expense of critics of the ECB’s similar tightening. There was also some discussion of ‘open mouth’ operations of the type undertaken by former RBA governor Ian Macfarlane in the early 2000s when he warned housing investors not to count on ever-rising prices.

But surely the deepest global recession, since the 1970s, and on some measures since the 1930s, calls for a bit more reconsideration than that. As long as we combine unrestricted financial innovation with an effective guarantee that no systemically important firm will be allowed to fail

On the contrary, the main message from Trichet was ‘…’

The handful of policy responses that might make a serious difference to the operations of the financial system were dismissed the panelists. Proposals for a tax on international financial transactions, first put forward back in the 1970s by Nobel laureate James Tobin, are finally on the global policy agenda, but they got no support at the symposium. Although there was general agreement that financial market outcomes were far away from those predicted by the efficient markets hypothesis, and that huge transaction volumes were part of the problem, the Tobin tax was rejected because ‘it would impede market efficiency’.

Paul Volcker’s proposals to separate the ordinary financing activities of the publicly guaranteed banking system from the speculative ventures of hedge funds and investment banks received similarly short shrift.

Coming out of the symposium, it was clear that the lessons of the 1970s and 1980s had been learned well, perhaps too well. By contrast, it seems that little or nothing has been learned from the failures of the past decade.

John Quiggin is an ARC Federation Fellow in Economics and Political Science at the University of Queensland. His book, Zombie Economics: How Dead Ideas still Walk Among Us will be published by Princeton University Press later this year.

176 thoughts on “Central banks could learn more from experience

  1. @Andrew Reynolds

    The difference would only be that those unable to raise the 20% equity would have no choice but to rent. The pool of renters would therefore expand greatly – raising the returns to those with the funds to cover the 20% hurdle.

    Not necessarily. If the real value of property declined over time, then this would tend to bring people back into the market. It could be that some low density developments were replaced by higher density developments, with housing co-ops springing up to pool funds. Subject to certain conditions (e.g. equity, social mix, rent framework, service guarantee), the state could guarantee funds. Having a strong public housing sector would be part of the plan, although “public” wouldn’t necessarily mean “operated by the state”. The legal title might be held by the state but a co-op might be the state’s “agent” and largely run its own show.

    What one wants to get away from is excessive tranches of investment capital being tied up in housing and in the provision of infrastrucutre to residences and businesses, and excessive amounts of private income in debt service or the purchase of household consumer goods. Neither of these is good public policy and both act as a drag on optimising policy.

    To take an obvious example, if the culture is largely car-based, then any improvment to motor vehicles will have a very long lead time because the change will be costly and slow to wash through the system. If large numbers of people have houses in the outer suburbs then the cost of supplying and then upgrading water, data and power, transport, education and health per person skyrockets.

  2. Again, Fran – I see no mechanism in there to reduce the costs of housing, merely to force some not to buy, moving others with the capital into the purchase and therefore taking the rewards (or losses) of an equity position.
    If you think (as you seem to) that modern housing is too big and should be reduced in size then say that and come up with some ideas on forcing people into smaller homes closer in – where revealed preferences (i.e. what people actually buy given the choice) shows they do not want to live.
    At least make the case for that rather than mucking about with credit laws that are likely to have uncertain and adverse consequences.

  3. I see no mechanism in there to reduce the costs of housing

    Self evidently, higher density development apportions the cost of the land on which the structure stands across a larger user base. If there are more common areas then again, each person costs less to provision. Higher density will result from the desire of people to meet the capital requirements by pooling funds, or from state intervention to create such housing.

    Right now, people move to less convenient locations because the more convenient ones are priced too high, but of course that just results in greater recurrent spending asnd effectively, higher costs of ownership. It also imposes upon the state higher supply costs which could be used to provide the housing and services in places where people prefer to live.

    It’s also clear that if people rent they are more flexible than if they buy, and if they buy into a fairly static market, they are more flexible than if they are worrying about losing on the trade and being locked out of returning. It’s also likely that higher saving and lower expenditure on consumption ought to free up more funds for provision of public facilities.

    Finally, it takes “interest rate scare” out of the serious political variables. That fact alone would make what I’m proposing worthwhile.

  4. “… the case that short term capital liberalization is beneficial is … based more on ideology and argument by axiom than on any empirical evidence.”
    “For what we saw in respect to capital flow liberalization in the 1990s (as in respect to domestic financial liberalization in developed countries) was the assertion of a self-confidence ideology which also happened to be in the direct commercial interest of major financial services firms with powerful political influence in the major and developed economies and in particular in the US.”

    Adair Turner, head of the UK’s Financial Supervisory Authority
    14th Chintaman Deshmukh Memorial Lecture, delivered at the Reserve Bank of India in Mumbai earlier this week

  5. Fran,
    I have no issue with your first three paragraphs – you are right. It is cheaper for the State to supply the necessary infrastructure through high density. I just do not think that monkeying around with prudential ratios is likely to achieve that. The fact that few if any new homes are likely to be built is the problem, not prudential ratios in the banking system.
    If you want to achieve that you need to reduce (or remove) the planning laws that stop much high density living. You would also need to convince people to move into high density housing.
    If you want to increase renting, then adopt tactics that convince people that renting is a good idea. Again, you need to actually try to achieve your objectives (once, obviously, you have a mandate to do that) not through trying to achieve a second or third order effect from stuffing around with credit allocation. Stuffing credit allocation will only cost everyone a lot – and experience shows that this, in practice, mean the poor get stuffed.
    .
    smiths,
    A regulator making a case for more regulation? Surely not.
    Perhaps you should also not get into the habit of selective quotation – the next bit was (IMHO) even more correct:

    It does not necessarily follow that comprehensive capital flow controls are the required answer: there is a reasonable argument that while the theoretical and empirical case against constraints on short-term capital flows is quite poor, the pragmatic case against them (or at least against their comprehensive application) is quite strong, simply because they may be unenforceable and tend to produce other distortions.

    Well said.
    The opening few paragraphs are also very interesting. Lord Turner points out that after each crisis the regulators monkey around with the system again and then get it wrong (yet) again. I have little confidence this time will be any different. In the US for example they can’t even get a new agency, supposedly to monitor the other 55 plus agencies, through Congress.
    Just what we need there.

  6. @Andrew Reynolds

    If you want to increase renting, then adopt tactics that convince people that renting is a good idea. Again, you need to actually try to achieve your objectives (once, obviously, you have a mandate to do that) not through trying to achieve a second or third order effect from stuffing around with credit allocation. Stuffing credit allocation will only cost everyone a lot – and experience shows that this, in practice, mean the poor get stuffed.

    You keep asserting this but I’m still not seeing how the harm you assert will follow. If I can’t buy a house, I will rent. If I am desperate to buy, I will save. I was unable to buy where I wanted in 1991 (and I wasn’t all that poor then) so I rented rather than move somehwere inconvenient. I still couldn’t afford to buy where I would want to live (and indeed it wouldn’t stack up as a proposition even if I could), so I am still renting. But am I worse off? Not really. I am living where I prefer, am comfortable and my debts are quite modest.

    The relatively poor are in practice hurt by the strategies they adopt in trying to own their own homes. This has no doubt contributed to generational poor health, social marginalisation, and a lot of anomie. Undoubtedly, large parts of their lives have been wasted on this project, one way or another. Doubtless kids have grown up in homes where their parents worked too much, commuted too much, ate too much junk food and lived in areas where services were poor.

    Had we junked the idea of buying and instead got people into well-serviced areas where they had manageable debts the cultural and physical health of the populace would have been better by far. Not only that, it’s most likely that differences in wealth and status would have been narrower.

    From his own POV, Menzies was correct. Mortgage belt was conservative bedrock and it almost certainly got Howard back in 2004 and cast its deadening hand over social policy for two generations. If we can break that, this country might eventually become a place where good public policy might get onto the agenda instead of an LCD bidding war for the votes of of anomic outer-urbanite voting hostages.

  7. Fran,
    You misunderstand me. I have nothing whatsoever against people making a choice of their own to buy or to rent or to live in a tent or to walk the earth, never settling down. I see that as a matter completely and utterly up the the individual concerned and how they choose to live their own life.
    What I am saying is (I thought) fairly simple – but perhaps I should rephrase and clarify. Restricting access to credit for buying houses to only those with a relatively large amount of existing wealth will mean only one thing – those with existing wealth (i.e. the rich) will be the ones to capture the gains in equity that will occur given the restricted supply of the housing stock in the face of an increasing population.
    To me, the only real solution to all this is to increase supply – reduce planning restrictions on medium- and high-density living and then allow people to make their own minds up on what is right for them.
    Stuffing about with prudential ratios will merely change the allocation of credit, not (at least not much) the amount of it. All that will happen is that it will get cheaper for those that can afford it and difficult (not impossible – you can always get a personal loan or go to a loan shark to keep it off the record) for everyone else.
    To be blunt, the only people I can see benefitting from your method are the rich (as they have the capital to buy housing), the banks (as they make more personal loans at high interest) and the loan sharks that the poor would have to go to if they wanted to even try to capture the gains of equity in a house if they cannot get a personal loan.

  8. @Fran Barlow

    Fran,

    In have to disagree with yoir comment
    “Had we junked the idea of buying and instead got people into well-serviced areas where they had manageable debts the cultural and physical health of the populace would have been better by far. Not only that, it’s most likely that differences in wealth and status would have been narrower.”

    The reality is – that people who did buy real estate in 1991 (at least in Sydney) are ahead by a long way over people who did not. We had a phenomenal property boom that started in 1996 and those who were not in the property market found it increasingly difficult to get a foothold. This situation has continued in Sydney, at least and there has been no substantial correction.

    I did purchase in 1992 but would not have been able to afford the same purchase by 1996.

  9. I have nothing whatsoever against people making a choice of their own to buy or to rent or to live in a tent or to walk the earth, never settling down. I see that as a matter completely and utterly up the the individual concerned and how they choose to live their own life.

    are there any limits to this that you would consider?

  10. incredible how well it works out though eh?

    most people in full time work, even though they do wildly different jobs some how magically all have 40 hours work to do each week, and 48 weeks of it each year,
    and those people, mostly when they get together in two’s can just about afford to buy a house and spend, coincidentally, their entire working life span to pay off that one house,

    very few have the time or money to pursue extra activities like further education or involvement in civil organizations,

    amazing isnt it?

  11. @smiths
    It wasnt always that way Smiths…that it took Mum, Dad and the dog walking the treadmill to pay off a house…but somehow this is overlooked when talking about growth in real earnings (and in may well be overlooked because growth in real outgoings needs to be mentioned along the way…after all, if growth in housing costs exceeds growth in real earnings… the majority are left behind).

    No use talking about renting Sydney in areas you like…the average Joe certainly cant afford rent in those areas, the way they are right now. Owning? renting? Its a choice. a lot of youth who do want to buy …now buy elsewhere (like in some distant city and share in the unnaffordable city – like Sydeny).
    Smartest thing to do in my books, rather tha rent (which is strangling people).
    Renting is often not a personal “choice” as some here would have us believe.

  12. We bought our first house in 1998 (the same year I got my first car) and took about five years to pay it off. Probably not the norm but it happens.

  13. smiths,
    As long as it does not interfere in other’s ability to make similar choices based on their own preferences and abilities, none that spring to mind – although perhaps you have a scenario that might limit that.
    Perhaps if there was not a large amount of our income forcibly taken off us we may be able to make better decision for ourselves than the ones that are made for us.
    .
    Alice,
    Renting, like other economic and lifestyle choices, are always constrained by your own abilities – whether than is your ability to pay, your ability to choose or your ability to pay off the right corrupt official as the rules make any other course impossible. Every choice involves opportunity cost as well. That would be a fact of life under whatever system you might wish to live under. The question is just down to how that choice is made – off your own bat or if it is made for you by that corrupt official.

  14. “We bought our first house in 1998 (the same year I got my first car) and took about five years to pay it off. Probably not the norm but it happens.”

    You just got the timing right. None of us could have predicted how inflationary the banks were going to be after that. You got lucky with it.

  15. Its not about choice Andrew. Its about your industry debasing the currency for your own enrichment. Ripping us off and throwing us on a treadmill. Have some sort of responsibility man. In 1970 a fellow on an entry-level job could support a wife, a growing family and be paying off a house. Your crowd has come along and jacked up the price of the dirt underneath our feet, you’ve hollowed out our manufacturing, and left the nation in terrible debt.

  16. Graeme,
    A guy on an entry level job can still do it – if he is prepared to live the same way we did in the 1970s.
    Personally, I am not. I like computers, big TVs, microwaves, safe cars, houses with more than three bedrooms and one bathroom, a telephone that is not tethered to the wall etc. etc. etc. Most of the rest of us make similar choices.

  17. “In 1970 a fellow on an entry-level job could support a wife, a growing family and be paying off a house.”

    Not true.

    While we have seen a big reduction in plentiful well-paying blue-collar jobs – a much-studied phenomenon with various plausible non-sinister explanations – there is a tendency for people to romanticise that post-war norm. One way is to claim that “entry level” incomes were sufficient to provide for a family and a mortgage. In fact you’d have to have at least 3-6 years, after training/apprenticeship, to reach a wage that could do that. Plus you’d have to save a large deposit (ie 20%) to get the mortgage. Which is no bad thing, given what has happened with modern 95%-105% mortgages, but puts Bird’s claim into perspective.

  18. Anyone seen Elizabeth Warrens talk “The Coming Collapse of the Middle Class”? She has a good comparison of a typical 1970’s US family with a 2007 family (I can’t remember the exact range). Well worth a look if you are interested in the changes in housing affordability and household debt.

  19. When I was looking for a house I noticed land in the area I was looking at went up sharply with proximity to schools, transport and shops all located in a town centre. The difference in price was about $100,000 for every 500m. Curious indeed. Transport doesn’t cost that much over short distances so things like school zones and socio economic factors also play a big part in the land values.

  20. We do live pretty frugal. We have three kids in one bedroom and a small old TV. For the time being it is novel.

    Graeme – I agree we bought at a good time and this was mostly down to luck. However I still think if people live within their means and borrow modestly it isn’t hard to have a good live. Big TVs are nice but far from essential.

    Materialism is limited in the joy it can bring. Having a cup of tea with the neighbours and going for walk can just as readily make you happy. I do however think goals and challenges are important. For many people acquiring things provides a framework for creating a good life. In the old days before governments did everything for us there was even more scope for community engagement but there is still plenty of meaningful things to do in life.

  21. The issue of there being a lack of genuine desire for exploration, or reflection, on topics such as “what needs to be reconsidered” – especially from stakeholders who come from a position of power – is both predictable and problematic.

    Views such as “we know what caused the problem” and “we know what the solutions are” are, obviously, common from people in these positions – the lack of humility in approach to understanding is a benefit for creating timely certainty and emotional optimism, not so good for assisting with current and future bushfires.

  22. Iain – a lack of humility isn’t such a problem if you actually are right. Obviously if you’re wrong it is a problem.

  23. @Andrew Reynolds
    Andy – its entirely unrealistic to say that a guy on an entry level salary cant buy his house because he would have to go without all the things he likes and live like someone in the 1970s. The things you like “big screen TVS and computers and microwaves and safe cars etc” are a pittance relative to what has really become inflated…the earth and the house itself. That is what is unaffordable, not the big screen TVs and the junk inside. Relative to the 1970s appliances are cheaper in real terms.
    Im partially with Graeme when he says “your industry…has come along and jacked up the price of dirt under our feet, hollowed out our manufacturing and left the nation in debt”

    By your industry I suspect Graeme means the financial sector which has grown bloated relative to all other sectors,…yes debased the value of the currency, has gambled with people’s enforced savings, encouraged slash and burn mentalities in firms for short term share gains, de-incentivised real producers and encouraged fly by nighters floats as long as the spin is good enough for a couple of months, rewarded themselves and their employees handsomely with their gambling proceeds and this has enabled many to play pass the parcel with real estate for speculative capital gains.

    There isnt any room for entry level salaried Joe in the property market when quite a large tribe are accummulating multiple property holdings, from the commissions and rewards of pushing everyone else into shares.

  24. A guy on an entry level job can still do it

    an entry level job is $30,000 p/a, $25,000 after tax
    the median house price in perth is nearly $500,000
    so if in magical fantasy land the person bought the median house from someone who was prepared to have the money in yearly installments with no interest,
    ad if in magical fantasy land the person ate no food and spent no money on anything, ever,
    it would still take 20 years to pay off the house,
    in a ridiculously generous scenario

    what the hell planet are you two living on Terje and Andrew Reynolds?

    and terje, with complex problems being right about something is conditional and temporary,
    genuine humility is always worth having, and it is something this current scrofulous culture really lacks

  25. Smiths – I never said a guy on an entry level income could pay of a median priced house in less than 20 years. You must be confused.

  26. Back to central banks, it seems the RBA’s plan for Australia is to ride the resources boom forever, and profit enormously from coal exports:

    Stevens and assistant governor Philip Lowe see the future as a resources boom. Lowe, head of the bank’s economic team, told MPs that in the next five years we will see ”very significant increases in resource exports … very, very high rates of investment which are going to deliver quite high (growth in) coal exports” – and ”very high rates of return” on investments.

    Clearly, substantive global action on climate change isn’t even on their radar screens. I wonder if there is a Plan B in the event of a China bust?

  27. To even imply that there is nothing grossly dysfunctional about this highly artificial financial situation, is to engage in mindless happy-talk. Like that fat guy in the beginning of the movie 1984, who believed all the government headlines he was reading. Its a terrible terrible tragedy, the growing dead weight loss of the financial sector. Its gobbling more and more resources as it performs a progressively more inept job of resource allocation.

    For one thing its hardly the free market. For another thing the happy-talk is not some sort of understanding of, and support for, them market. Rather this is coming from a reification of the market. Reification and the advocates reaffirmation for his tribal loyalties. But our financial system is in no way market-based. Its cartelised, subsidised, wrapped in cotton wool and has special privileges.

    The state of our capital markets is an embarrassment. Its a highly destructive setup. In fact it will be the ruination of us. We are subjected to an endless prosperity delusion and we act accordingly. By making dysfunctional decisions on every level, that will end with the destruction of this nation.

  28. carbonsink :
    Back to central banks, it seems the RBA’s plan for Australia is to ride the resources boom forever, and profit enormously from coal exports:
    Stevens and assistant governor Philip Lowe see the future as a resources boom. Lowe, head of the bank’s economic team, told MPs that in the next five years we will see ”very significant increases in resource exports … very, very high rates of investment which are going to deliver quite high (growth in) coal exports” – and ”very high rates of return” on investments.

    This is exactly the problem. Rightwing labor, sending out kow-towing politicians like Wong, expressing all the concern and spin they can foist onto the media and public, while in the financial backrooms of Treasury and Finance and the halls of the Reserve Bank, the opposite line is rolled out.

    Rudd (for the sake of electoral appeal) – we gotta cut the worlds reliance on fossil fuels.
    Rudd (for the sake of capitalism) – we gotta multiply our production of fossil fuels.

    The Rudd government only cares for the future to the extent it matters to the electorate and if deniers can create enough doubt in the polls, Rudd will forget all about it.

  29. Chris Warren,

    Rudd calls himself a Social democrat. You imply he is a closet capitalist. I think neither description defines the man. Mr Rudd is a politician and will feather his nest (the state) first on the basis of the most relevant ideology. I will call him a nihilist. He only courts the corporations because they pay the governments bills. Its a symbiotic relationship that is easier to maintain then the democratic one he has with the majority of voters. Trying to convince the people a tax is good for them is a tough call. Besides the voter is rational so far as their personal interests are concerned, but generally irrational outside their on interests out of ignorance and comradere and easily swayed my Mocktonesque type arguments.

  30. This is exactly the problem. Rightwing labor … expressing all the concern and spin they can foist onto the media and public, while in the financial backrooms of Treasury and Finance and the halls of the Reserve Bank, the opposite line is rolled out.

    Clearly the Treasury and RBA don’t take the idea of a carbon-constrained future seriously. My take on Lowe’s comments is that he believes a coal-export bonanza is ahead for Australia and we should be investing now to take maximum advantage. That (IMO) is the true position of the RBA, Treasury and governments state and federal. I note that Anna Bligh didn’t waste anytime supporting Clive Palmer’s $60 billion coal deal with China last week.

    The entire climate change debate is this country is a joke while we continue to invest in ever greater coal-mining and coal-exporting capacity. The government is distracting the public with the CPRS, wind farms and solar schools while continuing support for much larger investments in coal.

    At least Abbott’s position is (more) honest.

  31. @carbonsink
    Carbonsink – couldnt agree more – the pandering that goes on to big Coal in this country (and every other big somethin) – while small business is left to sink or swim and manufacturing is all but dead – and people have way too much private debt – which suggests something is badly amiss …. is enough to make you ill. I mean Mining only employ around 46,000 people (when I last looked – subject to contradictions from anyone in here).

    Big woop. What percentage of the population is that? Small relatively. How much of the profits of big coal are actually injected back in to this country once you subtract the subsidies and benefits and the tax havens. All I can say is that the campaign donations from mining and coal must be pretty healthy because nothing else is about the symbiotic relationship this industry has with governments of both persuasions, is.

    Time to kill the political donations lobbying industries once and for all, before they kill the rest of us.

  32. its not Treasury and RBA’s job to define the big picture vision for this country,
    rudd is a two-faced egghead, that was obvious before he won power,
    and penny wong is clearly just trying demonstrate she is tougher and cleverer than any man could be
    abbotts in opposition, its easy to say things and appear to stick to them, theres no real test,
    thats why this whole conversation about who the left and right wing are is so silly,
    both parties are beholden to financial and business interests primarily,
    and business will never be happy however far they go
    the greens are clearly the only party who actually care about the environment

  33. Manufacturing employs 1.12 million and mining employs 129,000. Of course, coal is our biggest export earner, and company tax receipts from coal mining companies are quite, er, lucrative.

    Its so unbelievably two-faced. Treasury has one group of boffins modelling the CPRS (and tearing shreds of Abbott’s policy) while another group of boffins forecasts a resources boom and massive surge in coal exports.

    As always, if you want the real policy, follow the money.

  34. Alice – the coal is in general owned by state governments and mined under license. The various layers of government have a financial interest in the extraction of the coal. The industry is reliant on transport infastructure that is government owned and / or regulated. Coal Mining companies have no choice but to talk to government. And government needs to talk to the coal mining industry until such time that it decides to leave the coal in the ground. I’m not sure that the term “pandering” provides a balanced picture. Perhaps you have some specific examples you can share.

  35. greens are clearly the only party who actually care about the environment

    So why are they opposed to me shooting feral pigs in national parks?

  36. carbonsink,
    Those numbers might be right, but if you look a little closer you would find that as lot of those manufacturing jobs are manufacturing things for the mining industry.
    .
    Alice,
    Pandering does not normally involve increasing taxation and regulation. If you want to see real pandering, look at Conroy and the TV networks. That’s pandering.

  37. wow, great point terje, you really are all over these issues,
    what sort of a carzy person would want to restrict gun nuts walking around national parks shooting pigs,

    come on andrew reynolds, you dont get much more pandering than the invention and spruiking of a technology that does not and never will exist commercially,
    rudd has gone round the world talking about clean coal for the coal industry,
    he has crapped it repeatedly onto the australian public for the coal industry,
    it will never work, it is a PR scam,
    i bet you believe in it though eh?

  38. smiths,
    You lost that bet.
    I will see your CCS media coverage and research funding and raise you $250 million in straight cash handouts to the TV networks early in an election year.
    Personally, I would think this is probably better than discussions about new taxes on the mining industry in the next budget.

  39. what sort of a carzy person would want to restrict gun nuts walking around national parks shooting pigs

    A crazy anti-environment Green.

  40. Talking about bets – I’m willing to bet that coal exports from Australia come close to doubling in the next 10 years – particularly coking coal from Qld. Which is not a climate change problem – coking coal is used in the production of steel – the carbon is locked up in steel with iron. China became a net importer of coking coal last year after a decade of being a net exporter – that’s a huge opportunity for Australia. Perhaps one big constraint will be infrastructure – rail and ports. The upcoming privatisation of QR will be a good thing – I suspect the coal related rail infrastrcuture will end up being bought by BHP who will be able to expand the capacity in line with demand – rather than being constrained by a government run enterprise that’s always a bit late on capacity requirements.

  41. Andrew – I’m no expert on steel making but this is what I understand. High quality coal is turned into coke by driving of impurities such as sulphur. The coke is then burnt in an oven with iron ore. Some of the carbon is locked up in the final iron product but much of it turns into CO2 during combustion. As such most of the coke is used up as a fuel. When iron is converted to steel in a blast furnace oxygen is used to reduce the amount of carbon in the metal. A byproduct is more CO2. Yes some carbon is locked up in the final steel product but I think you will find that the vast majority ends up in the atmosphere just as with thermal coal.

  42. @Chris Warren
    Chris – Im agree… I think it would be far better to put up with feral pigs and a periodic government organised cull if the pigs are doing environmental damage because their numbers get too large…..

    Much safer than letting feral pig shooters run around the national parks when they feel like a bit of sport.

    Thats the sensible approach…its not a crazy “anti environment green” approach as Terje is suggesting.

  43. @TerjeP (say tay-a)
    Terje, I’m no expert on steel making either, but that’s pretty much my understanding. Digging around I found this document from 2001 that says that 12% of China’s CO2 emissions are from steel making. Given the huge runup in steel making capacity since then, I’d suggest that number has increased.

    Clearly steel-making and the burning of coking coal is a climate change problem.

  44. Alice, NPWS rangers aka arkies are to a man and woman totally not keen either in being accidentally shot by crazed pig shooters let loose in our national parks because the NSW ALP sees a political advantage in playing footsie with the trogs from the Shooters Party.

  45. @Andrew Reynolds
    says “If you want to see real pandering, look at Conroy and the TV networks. That’s pandering.”
    So is the pandering to big Coal Andy but on this comment I agree..Conroys pandering to the commercial networks for nothing in return is inexplicable to me also…any one checked the campaign donations? Another case of follow the money….you too can buy your very own government, if you have enough $$ that is… (who cares whats right or wrong here…its every man for themselves).

    Just look at Roozendahl…he is lining himself up a nice job in the private sector later by being a diehard fiscal scrooge…by the time he ingratiates himself enough with his private sector overlords, they wont be able to get their goods to market on the woeful roads or their employees to work on the dismal public transport…

    Oh the sweet irony of it all….

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