No nuclear reactor for South Australia

That, for me at any rate, is the crucial element of the Tentative Findings of the South Australian Royal Commission into the Nuclear Fuel Cycle (here. The media releasee summarises

aking account of future demand and anticipated costs of nuclear power under the existing electricity market structure, it would not be commercially viable to generate electricity from a nuclear power plant in South Australia in the foreseeable future.

However, Australia’s electricity system will require low-carbon generation sources to meet future global emissions reduction targets. Nuclear power may be necessary, along with other low carbon generation technologies. It would be wise to plan now to ensure that nuclear power would be available should it be required.

The detailed findings are sensible (that is to say, largely in line with my submission and evidence. A crucial para:

If nuclear power were to be developed in South Australia, a proven design should be used that has been constructed elsewhere, preferably on multiple occasions, and should incorporate the most advanced active and passive safety features. This is likely to include consideration of small modular reactor (SMR) designs, but exclude for the foreseeable future fast reactors

Given that Barry Brook, a leading enthusiast for fast reactors was part of the Commission’s Expert Advisory Panel, this finding should make it clear that fast reactors are an option for the distant (beyond foreseeable) future.

The finding is striking because South Australia is, or ought to be a test case for those arguing that a carbon-free electricity system must rely on “baseload” nuclear. South Australia has high and increasing reliance on renewables, is close to phasing out coal, and has limited interconnection capacity. It’s exactly the modle that anti-renewable sites like Brave New Climate have “proved” time after time can’t possibly work without nuclear power. Yet, it seems, even a sympathetic inquiry finds nuclear power to be an option for the distant future, if that.

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Shorten wins the tax debate

Bill Shorten doesn’t have a lot of public support, a fact that reflects his background as a machine politician with a penchant for self-promotion. For a long time he has been accused of pursuing a “small target strategy”, hoping to win by default against Tony Abbott.

The latest developments in tax policy ought to prompt ] a reassessment. The nature of policy debates like this is that the government holds all the cards: control of the political agenda, expert Treasury advice, and the capacity to manage the media with judicious leaks.

Despite all of this, Shorten has left Malcolm Turnbull and Scott Morrison looking flat-footed. Their preferred option of raising the GST rate and expanding its base is dead in the water, but not yet formally disavowed. Opposing it was an easy choice for Shorten, but still one that required him to override some supporters within the ALP.

The general assumption was that the government would soon announce Plan B. But Shorten has now beaten them to the punch. His proposals to limit negative gearing and scale back the concessional treatment of capital gains are more substantial than anything they are likely to contemplate in relation to property taxation. And Labor has already signalled willingness to limit tax concessions for superannuation.

So, unless the government is willing to do something really radical, involving an explicit break with the Abbott era, anything announced in the Budget will look like “me too”.

Update Immediately after posting this, I found this piece by Laurie Oakes, arbiter of the Australian political zeitgeist, making an almost identical argument.

Waist deep in the Big Muddy

The sudden collapse of four for-profit vocational education enterprises including Aspire college is the latest in a string of scandals, failures and license revocations in the sector.

Meanwhile, in the US, the Apollo Education Group, owner of the “University” of Phoenix, has been taken private for $1 billion, a fraction of its peak market value. UoP pioneered the model of providing a bogus education to publicly funded students, ripping off both the students and the public purse. As the US has cleaned up the worst abuses, UoP and others have seen their profits shrink, to the point of bankruptcy in some cases.

The provision of public funds to for-profit operators has been a predictable, and predicted disaster. Of all the disasters perpetrated under the banner of microeconomic reform, education reform has probably been the worst.

In these circumstances, it would make sense for the national government, which has borne much of the cost, to take over the vocational education sector, properly fund the public TAFE system, and close down the for-profit sector, as was recently done in Chile.

The idea of a national takeover is, indeed, on the cards. But far from closing down the for-profit sector, it appears the Turnbull government plans to push the reform agenda even further.

Waist deep in the Big Muddy, and the big fool said, Carry On.

The patrimonial society comes to Australia

Forbes just released its annual list of the ten richest Australians. Of the top eight, four inherited their wealth. The other four range in age from 75 to 85, suggesting that new heirs are likely to be joining the rich list before too long.

This pattern isn’t yet representative of the Australian wealth distribution as a whole, but it is becoming more so. Piketty’s patrimonial society is not far away.

There are a lot of things we can do to promote a more equal distribution of opportunity and outcomes, but a return to taxes on inheritance (preferably levied on the recipient rather than the estate) would be a good start.

Increasing GST: not worth the effort. How about inheritance taxes?

I posted this analysis in December, suggesting that, once the necessary compensation is paid for, an increase in GST wouldn’t be worth the effort. Apparently Treasury modelling (which I haven’t yet located) produces the same conclusion. Given that everything is supposedly on the table, maybe it’s time to look at some new options. An obvious example is inheritance taxes, which raised a fair bit of money before being scrapped in the late 20th century. As the inequality of wealth increases, the case for such taxes becomes every stronger.

Repost

The Grattan Institute has just released a report suggesting that the government should get more revenue from the GST, either by broadening the base to include food, health and education (yielding an extra $17 billion) or by raising the rate to 15 per cent (yielding an extra $27 billion). As you’d expect from Grattan, the analysis is sound and careful. As long as you accept the standard framing of the tax reform debate, in terms of the need to shift from direct to indirect taxation, it is reasonably convincing.

Grattan suggest using 30 per cent of the extra revenue to increase welfare payments and 30 per cent in cutting the bottom two tax rates, thereby compensating low income earners. The overview concludes:

Around 40 per cent of the additional revenue from a higher GST would be left over after welfare increases and tax cuts. At least some will need to go to state governments to help them address their looming hospital funding gap, as the price for their support of the change. This would leave a little – but not much – to reduce the Commonwealth’s budget deficit, or to pay for other tax cuts that promote economic growth.

(emphasis added).

Is that enough to sell the package? I can’t imagine the states going along with a deal like this for less than 20 per cent of the total extra revenue, which implies the Feds are left with 20 per cent, somewhere between $3.5 and $5.5 billion. From a political viewpoint, it’s hard to see this being worth the effort for the Turnbull government, especially with no guarantee of success.

As a comparison, the FBT concession for motor vehicles, reinstated by Tony Abbott costs the budget around $1.5 billion. Exemptions for non-profits, which have been comprehensively rorted, cost at least as much. Add in a few ‘rats and mice” concessions, and the Federal government would have as much as it could get, in net terms, from the Grattan package (Getting rid of the non-profit concession would probably require some compensating expenditure, but the same is true of the health and education concessions under the GST.)

That’s before we get to the elephants: superannuation concessions (also supported by the Grattan report), corporate tax avoidance, land tax and higher income taxes for (say) the top 5 per cent of income earners (reflecting elite opinion, the Grattan report suggests cutting these rates). All of these are hard, but not obviously harder than the GST.

So, why is GST reform at the top of the government’s list? The answer is simple enough. The advocates of reform haven’t had a new idea, on taxation or anything else, in 30 years. They didn’t get the GST out of Keating’s Tax Summit in 1984 and they didn’t get the version they wanted from Howard and Costello in 2000. So, the same old idea keeps on coming up.

Abbott without the attitude

Nearly five months after Malcolm Turnbull became PM, it’s finally possible to get a clear view on the big question of what the change means. Has the shift from Tony Abbott has led to a real change in policy approach, centred on growth and innovation? Or is it merely cosmetic, amounting to the end of the tribalist rhetoric and gesture politics that eventually cost Abbott his job.

Based on recent developments, the case for “merely cosmetic” seems overwhelming. Turnbull’s rhetoric about innovation is starkly at odds with the reality of:

* massive job cuts in CSIRO, focused on climate change. The fact that the new entrepreneurial CEO is flogging the dead horse of coal to diesel adds insult to injury; and

* the $5 billion Northern Australia infrastructure fund, a boondoggle based on mid-20th century rhetoric about “unlocking the North”. It was pushed by Abbott as a sop to the Institute of Public Affairs, who underwent a sudden conversion to the cause of publicly subsidised dam projects a little while ago. The political imperative has gone but the money still flows, it seems.

The picture is just as bad on other issues. Turnbull is going ahead with the $160 millikon plebiscite on equal marriage, even though its leading backers, who only pushed it as a delaying tactic, have announced they won’t be bound by the result. Turnbull should have taken these statements as releasing him from any commitments to the anti-equality right, and allowed a free (in both senses of the word) vote in Parliament instead.

On climate change, the rhetoric in Paris sounded OK, but there has been no action to speak of. Turnbull hasn’t even committed to maintaining the Renewable Energy Target, let alone increasing it as he will need to do in the absence of an effective carbon price.

I imagine the appearance of improvement will last long enough to secure an election win for Turnbull. But, unless he starts delivering some change, the reality will become evident before long.