Reef saved?

John Quiggin29 Comments

Following a similar announcement last week by Lend Lease, and earlier announcements by BHP Billiton annd Rio Tinto, mining company Anglo American has withdrawn its proposal to take part in the expansion of the Abbot Point coal terminal. That leaves only two proposals, both from Indian companies owned by billionaire entrepreneurs reminiscent of Bond, Skase and other Australian heroes of the 1980s. Both Adani and GVK are heavily indebted conglomerates of the type that invariably emerge when money is cheap, and mostly collapse when the tap is turned off.

It’s not surprising that these companies have not yet abandoned their bids. Doing so would involve booking huge losses on their mining prospects in the Galilee Basin. But, it’s hard to believe anyone is going to lend them the billions required, not just for the port expansion, but for a 500km rail line and the mine itself. The price of coal is well below the level required to cover the costs of extraction and transport, let alone to provide a return on capital. And if Adani and GKV don’t build the rail lines, the development of the entire Basin will grind to a halt.

The end of the Abbot Point expansion and the proposals to mine the Galilee Basin would be a huge win for the Barrier Reef and the entire planet. The port expansion will involve the dredging of millions of tonnes of waste, to be dumped in the Great Barrier Reef Marine Park. But far more dangerous is the Galilee Basin itself, containing at least 25 billion tonnes of coal. That would produce around 50 times as much CO2 as Australia currently generates every year.

And, unsurprisingly, both Gina Rinehart and Clive Palmer hold big stakes (though Rinehart wisely offloaded much of hers). So, as well as saving the Reef and the planet from some imminent threats, the abandonment of the Abbot port expansion and rail line will clip the wings of some very unappealing billionaires. Here’s hoping.

Don’t blame me: I voted for Kodos

John Quiggin55 Comments

Former Queensland Transport Minister Rachel Nolan (whose argument for privatisation I discussed here) has a piece in the Brisbane Times attacking the Electrical Trades Union (disclosure: I produced a report on electricity privatisation for the Victorian branch of the union). The headline is “The ETU is nobody’s friend“, and that pretty much sums up the article – Nolan’s complaint is that the ETU has had the temerity to attack both the previous Labor government and the current LNP government over the same issues, broken promises and support for asset sales.

As Nolan admits, Labor suffered from a

a widely perceived breach of trust – the fact that Labor went to the 2009 election on a slogan of “Jobs, not cuts” and then announced a program of asset sales seemingly as soon as the result was declared

With the exception of the weasel words “widely perceived” and “seemingly”, this is spot on. And the voters reacted long before the ETU had a chance to mount a campaign. Labor’s support plummeted in the polls and, with the exception of a brief blip after the 2011 floods, never recovered.

Now, Nolan complains, the ETU is doing the same thing to the LNP government whose victory they assisted by campaigning against the asset sales. Why? Well,

LNP members’ willingness to stand by the ETU[1], hands on hearts telling us they didn’t believe in Labor’s asset sales, is an act of breathtaking hypocrisy – perhaps bettered only by the pre-election reassurances they gave public servants – with which they now have to live.

So, the crime of the ETU is not to criticise asset sales or dishonesty. It would be fine, according to Nolan, if they made these criticisms of one side (preferably the LNP) and ignored similar actions by the other. But to attack both sides indiscriminately is to undermine the very foundations of the two-party system.

All of this makes sense in Nolan’s world view. As she says in her Monthly article “ Australians have little philosophical grasp of the (rightful) diminution of governmental power which deregulation has brought”. Hence, it is necessary for the two major political parties to lie at election time, in order to secure office and implement the policies on which they both agree. A good friend, in Nolan’s world is a person who picks one of the interchangeable teams, and sticks to it.

And finally, there’s this little gem where Nolan (Ipswich Girls Grammar and UQ alumna) makes clear her contempt for ordinary workers, and for hard-won working conditions, abundantly clear

It might be fun for the bruvvers to chant on their RDO before heading off for a few beers but most people aren’t just troglodytes who are opposed to everything – they do not share the distorted world view of the ETU.

Perhaps if she rechecked the results of the last election, she might conclude that “most people” with whom she mixes are not a particularly representative sample of the Queensland public, and that the “bruvvers” are actually a bit closer.

fn1. As far as I can tell, the claim of “standing by the ETU” is bogus. To the best of my knowledge, the ETU never gave the LNP any support or expressed any faith in their promises. But, thanks to the two-party system, attacking one party is seen as equivalent to supporting the other.

fn2. Thanks for alerts on this from my wife Nancy and from commenter Megan.

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Identity Crisis

John Quiggin32 Comments

In the latest issue of Gerard Henderson’s Sydney Institute Quarterly, Adam Creighton, economics correspondent at the Oz, “explains why most Australians pay no net tax”. That’s a striking conclusion, so I checked it out. Creighton has discovered that most Australians get about as much back in transfer payments and public services as they pay in taxation. The poor get a bit more, and the rich a bit less.

To save Creighton some work in future, can I suggest he consider the budget identity constraint “Expenditure = Income”. Since the government spends on services and transfer payments roughly the same amount as it raises in tax revenue[1], it’s obvious that, for the average Australian the same identity must hold, with income renamed as “tax paid” and expenditure as “transfer payments and public services”.

Next up: Why there is no net travel into the CBD

fn1. Taking account of the seignorage from inflation, returns on assets, intertemporal transfers through debt etc, this rough equality becomes an identity. Please, no arguments about deficits, and especially about MMT. The point of this post is a really simple, and doesn’t need this kind of complication.

Bolt: Every word he says is a lie, including “and” and “the”

John Quiggin38 Comments

Andrew Bolt (no link) has repeated the lie that I drastically overestimated the impact of a carbon tax on global warming. In fact, it was Bolt who was out by a factor of 100 (Full details here). Rather than rehash this dispute, I’d thought I’d list some of Bolt’s greatest hits, or rather misses.

* Here he is, confusing the stratosphere and the troposphere, and claiming to have disproved climate science as a result

* Here, being fooled by a David Rose claim so absurd that even the Mail on Sunday had to retract it

* Here, denying the fact that Arctic ice is disappearing fast, a fact that is now regularly proved by sailing through the previously impassable Northwest Passage, and by the intense international negotiations about sovereignty over the newly opened waterways

* Here, claiming the carbon tax would be “ruinous”

* Here, claiming that radioactivity is good for you

* Here, unable to understand the meaning of the word “average”

* Here, defaming the Bureau of Meteorology, and lying about it

* Here, being fooled by a LaRouchite conspiracy theory on DDT

That’s just from my blog and just for the last five years. I haven’t even got to the Iraq war, where he combined credulous faith in repeated announcements of victory with vicious denunciations of all who predicted, correctly, that the war would be disaster, and documented that disaster as it unfolded.

Anyone who believes anything Bolt says is a fool. But I suspect that, like Bolt himself, most of his fans know he is talking nonsense and don’t care. He’s a tribal ally, and he’s good with snark and slander, and that’s good enough for them.

Quiggin and Catallaxy vs Newman and Bligh

John Quiggin25 Comments

I’ve had a few responses to my recent report on the history of electricity privatisation and market reform in Australia. There’s one here from Lynnette Molyneux, who’s with another research group in my own school, and one from the Electricity Supply Association (doesn’t seem to be online, I’ll post a link shortly). Most interestingly, one from Sinclair Davidson at Catallaxy[1] who starts with a couple of points of agreement.

A couple of thing where we agree:

Economists, at least when they were thinking clearly and speaking honestly, were as one in rejecting the most popular political reasons for privatisation: as source of cash for governments or a way of financing desired public investments without incurring public debt.

I made a similar argument recently in New Zealand.

Then he is critical of Public-Private Partnerships. I am too – albeit for different reasons. All too often, I suspect, they are financing mechanisms looking for infrastructure to finance, as opposed to being a positive NPV infrastructure project looking for financing.

before going on to quibbles and more substantive criticism.

I’ll try to present a proper rejoinder to the criticisms later, but for now I want to observe the striking fact that the point on which Davidson and I, and (AFAICT) all Australian economists, agree is also the focus of agreement between Campbell Newman and his predecessor, Anna Bligh, along with Peter Costello, Barry O’Farrell, and the great majority of Australian politicians[2]. The only problem is that the politicians agree on a view exactly opposite to that of the economists

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Toxic projects

John Quiggin10 Comments

The announcement that Lend Lease is pulling out of a joint venture bid with Aurizon (the former Queensland Rail freight arm) to participate in the expansion of the Abbot Point coal terminal comes shortly after the Great Barrier Reef Marine Park Authority has approved a proposal to dump dredge spoil from the Abbot Point coal terminal expansion in the marine park area. (The government’s go-to guy for “independent” ethical clearances, Robert Cornall[1], assures us that there were no conflicts of interest arising from the presence of coal companies executives and employees on the Board. Then he had to rush off to whitewash investigate the conduct of the government and its agents on Manus Island).

On normal commercial calculations, this decision ought to have made the project more appealing. But the Lend Lease statement withdrawing from the project included the slightly gnomic observation that “Lend Lease remained committed to applying “rigorous due diligence” and considering the environmental impacts of all it projects,” it’s reasonable to infer that the decision made the project more toxic rather than less. The obvious reasons
* Coal projects are attracting more and more opposition, but it’s always possible for the proponents of one project to say that if theirs didn’t go ahead, another, possibly worse one, would. By contrast, when a government that’s busy revoking World Heritage Status announces that the project will involve dumping waste in a sensitive marine park, any company that cares about its public image is going to run a mile
* Given the obvious PR costs, the fact that the proponents went for this, rather than looking for a more expensive but less politically toxic approach to waste disposal suggests that the project is economically marginal, an inference supported by the earlier abandoment of a more ambitious version involving Rio Tinto and BHP.

An obvious follow-on project is: who is financing these projects. It looks as if all the major Australian banks are involved to some extent. Westpac is already running into trouble in New Zealand for financing coal mines in sensitive areas. As major international banks, particularly development banks, start dumping toxic projects like this, the Oz banks are likely to find themselves with a lot of undiversifiable risk.

”

fn1. Breaking usual protocols, I’ve linked to the Oz. When the Murdoch press calls someons a “Howard defender” and strongly implies that he’s stooge, I think it’s safe to say that the appearance of independence is compromised.

The uselessness of privatisation “safeguards”

John Quiggin16 Comments

Telstra is lining up behind Qantas for the removal of restrictions on foreign ownership. It’s worth mention that these annoying “restrictions” were marketed to the public as “safeguards” when these enterprises were privatised in the 1990s. As I said at the time

Based on past experience, it seems unlikely that restrictions on foreign ownership will ultimately be effective. The effect of the ‘safeguards’ in the Telstra (Dilution of Ownership) Bill will be to reduce the sale price obtained by taxpayers while obscuring the fact that the ultimate outcome of privatisation will probably be either a foreign-controlled monopoly in telecommunications or a duopoly consisting of two foreign-owned firms.

Current and recent proposals for the sale of state-owned electricity assets have been pushed with safeguards of this kind, which achieve nothing. If it’s OK to privatise a business, it’s OK, and indeed obligatory, to sell it to the highest bidder. For obvious reasons, this will usually a foreign multinational in the same line of business.