Posts tagged ‘economics’
More indications arrived this week is that the price of Australian domestic gas is likely to double or triple after 2014 – though not for the reasons people in the industry are spruiking. Research from the Australia Institute says the current wholesale price of $3 a gigajoule would likely go to $9 in three years. Increases of this magnitude are likely to put pressure on businesses, mostly Victorian, that are dependent on gas. But that is the likely outcome once the eastern seaboard gas market becomes connected with the world.
This is not the only recent research that predicts this. The key is coal seam gas, which has only been serious drilled in the last five years. Geologists always knew about the gas in the seams in Queensland and NSW but it was too expensive to drill for in comparison to the easy prey of natural gas trapped in conventional chambers. However recent higher prices in Asia, suddenly made that CSG more valuable. The three big companies and their backers are spending $60b to extract the gas, and to build the pipelines and the LNG plants for export mostly to Asia.
Those export plants are on Curtis Island off Gladstone where US-construction giant Bechtel is building three massive facilities for Santos GLNG, Origin APLNG and British Gas’ QCLNG all next to each other. Rolling out in 2014, the plants will have a combined capacity of 20 million tonnes of LNG a year. They will take methane gas from the coal seams of the Surat (west of Toowoomba) and Bowen (west of Mackay) Basins and supercool it to below – 160 °C so it condenses into liquid natural gas which can be compressed for shipping to China, Korea and Japan.
In Japan customers will gladly pay $15 a gigajoule for the product. When you take away the $6 a gigilitre cost of liquefaction and transportation, what’s left is called the netback price. Australian producers could charge a netback price of $9 a gigajoule and still find a Japanese buyer. With Gladstone available, why would local producers continue sell to local customers at $3 a gigajoule? The domestic price is bound to find equilibrium with the export netback price as domestic supply drops. Given the size of the world market, the equilibrium will be mostly in the direction of the current world price.
In the setting of that price gas availability is not the issue. Instead as the Government’s BREE (Bureau of Resources and Energy Economics) points out, the process of adjustment would depend on “consumers sensitivity to changes in gas prices.” In a recent deal Origin agreed to supply Santos with 365 petajoules of gas from 2015. This will make it hard for domestic gas buyers on the east coast to secure supplies beyond 2014. In Queensland, home of Gladstone port, buyers will be worst hit. Santos and Origin did not reveal the price but said it was linked to the oil market. At $100 a barrel of oil, that already pushes the gas price up to $7 a gigajoule, over twice as expensive as the domestic market.
The gas companies admit price rises are coming but try to turn around the argument. They say domestic supply problem could be solved by more drilling and blames the campaign waged by the anti-coal seam gas protesters for driving up prices. It ignores however the fact the huge facilities at Gladstone are changing the rules of the game. These facilities would not have been built if Queensland didn’t identify coal seam gas as a power source. This huge new infrastructure will link us to the world market regardless of how much we produce.
There is only way to keep the price down – set a reserve price. That’s exactly what they do in Perth for Western Australia’s offshore industry. WA is behind Queensland in the production of CSG but has huge conventional sources. These produces 60% of Australia’s gas (twice as much as the combined eastern seaboard ). WA’s gas network is not linked to the east but is linked by LNG plants to the world market – with more to come. Yet WA has a gas reserve which insists a quota of 15% is kept for domestic use. It creates a guaranteed market that cushions it from the higher world gas price though it is currently more expensive than the eastern seaboard.
At the moment the eastern jury is out on the reserve issue. Analysis done by law firm Minter Ellison shows, different parliaments have different ideas. The Commonwealth is against but federal Liberal have not revealed their position. Also against are South Australia, Tasmania and the two territories. The NSW Government has recommended one but not actioned on it yet. Queensland is different again. It has actually has a loose reservation clause in law. They could require every tenement holder to set aside 15% for domestic use but no current contract has this proviso. Energy Minister Mark McArdle calls it a last resort.
Though not explicitly endorsing the idea, the Australia Institute sees no reason a reservation price should not happen. It said a reserve would create two separate markets, one for domestic and one for international. Since producers currently extract sufficient gas to supply Australia at a low price, they could still earn healthy profits by selling additional gas at the world netback price. The gas reserve policy would therefore not act as a disincentive to further investment in new gas production. With four states and one territory involved, getting an eastern seaboard reservation price would be more complicated than the current one in WA but still doable, the Institute said.
The gas industry is against a reserve, saying the cheaper local price would prevent investment in new supply. The industry peak body APPEA denounces the “the folly of providing industry-specific assistance and using subsidies to resist structural economic shifts”. APPEA’s eastern region chief operating officer Rick Wilkinson (not Williams as The Australian and other media reports call him) said rising gas prices were something the people of NSW may have to get used to unless the industry could “get on with developing NSW gas resources”.
Think tanks such as the Grattan Institute agree, calling a reserve domestic price protectionism that “inequitably shifts economic benefit from producers to some consumers”. It quotes BREE which says a reserve would lower gas prices. However it would also increase lobbying costs, reduce investments and decrease supply as it lowers the incentive to drill.
Reserve price or not, the introduction of CSG has made gas more profitable. Unsurprisingly then the companies want to drill for more, particularly in NSW where the gas lies in more populated regions. But rather than attack the NSW Government for imposing restrictions, industry advocates like Wilkinson prefer to influence public opinion by blaming the protesters. “For this (rising prices), they have local anti-CSG activists to thank,” Wilkinson told The Australian.
This is simply not true. Blaming protesters for restrictions on CSG serves one purpose. It is designed to turn public support against those restrictions and increase pressure on the NSW state government to remove them. It is the existence of the Gladstone LNG plants that will set the price not the production flow and only large-scale government reserve price intervention will change that.
THE thing politics has over policy is that it is a sport. When The Age tried to call this out in its editorial asking for the head of Julia Gillard, it was roundly condemned for not setting the agenda of policy themselves instead of focussing on palace politics. But would The Age have sold as many copies if it focussed too much on the what when the who is infinitely more interesting?
We all profess to be tired of the Gillard-Rudd business but you can be sure the hashtag spill would go ballistic if and when the long drawn-out battle actually ever takes place. Everyone would want to know the result. The Age know the personal drama is infinitely more interesting than the 55 or so pieces of legislation yet to pass in the final week of the 43rd parliament of Australia.
But here where I don’t have to pander to profit or personal drama, I can take the time to look at all 55 remaining bills, in alphabetical order. They cover a full gamut of legislative issues such as environment, the world economy, employment, education, tax reform and agriculture.
You may or may not find these interesting reading and they are mostly ignored by the media.
But this is what parliament is for: to change and enact law. Each of the 55 bills is important to someone or something; a truth the independent members of parliament (who raised most of them) know all too well. I’m hoping you’ll feel a little more informed if you read them; I did for writing them down.
Enables Australia to become a member of the African Development Bank Group by authorising the payments required to subscribe to membership shares in the African Development Bank and meet membership and ongoing subscriptions to the African Development Fund.
According to Bernie Ripoll (Lab) the bank promotes sustainable economic growth to reduce poverty in Africa. The bank currently has 78 member countries, comprising 54 African and 24 non-African countries. In 2011, the Independent Review of Aid Effectiveness recommended that Australia join the group as it would represent value for money, and be a high-level indication of Australia’s commitment to development in Africa.
The far-reaching bill would require private and public projects of half a billion dollars or more to develop an Australian Industry Participation plan. A new quango, the Australian Industry Participation Authority would be set up to administer and monitor compliance of the plan reporting back to parliament. In the first debate, Liberal backbencher Craig Kelly saw an obvious problem: The measure would see government officers embedded in business, “just like it used to be in the Soviet Union”.
The planning regime itself will cost $1 billion dollars to implement, so I wonder if it will be subject to an Australian Industry Participation plan if it passes.
This Katterbill wants to limit foreign investment in Australian agribusiness and agricultural land. It would do this requiring the Foreign Investment Review Board to take “the national interest” (a contested concept if ever there was one) into account in foreign investment and also prevent non-Australians from owing half or more of an agribusiness or land more than four hectares.
Another Katterbill to amend air acts to ensure Australian international and domestic air services are at least 51% Australian owned and operated, do at least 80% maintenance in Australia and use only Aussie crews.
Greens bill to amend the 1992 broadcasting act to prohibit ads on odds, restrict betting ads to after 9pm, and prohibit “non-ad ads” and freeze betting ads before sports broadcasts. Given the 1992 act is ludicrously pre-Internet, this seems papering over some enormous cracks.
This one from the Greens wants to amend the Competition and Consumer Act 2010 to: specify country of origin on food with labelling based on the weight of the ingredients.
7. Competition and Consumer Amendment (Strengthening Rules About Misuse of Market Power) Bill 2013 is an adjunct of 6 to strengthen the act to protect people in complicated supply chains eg where a $1 litre of milk to the customer is a net cost to the producer.
Amends the Customs Act 1901 to prohibit the export of coal mined in the water catchment valleys and district of Wyong (NSW) and enable the minister to prohibit the export of coal mined “in other areas”. This is Craig Thomson’s attempt to shut down a possible Wallarah Two underground mine despite no politician ruling it in at the moment. “People in electorates trust the laws, they don’t necessarily trust the politicians,” Thomson said. “And that’s why I tabled a bill today that looks to restrict the export licences of miners in the Wyong Shire in particular, but more broadly any other area that the minister by legislative means, deems to be appropriate.”
Katter’s call to register dairy regional representative bodies and Fair Work Australia to determine a modern award for dairy farmers with dairy farmers and processors to establish enterprise agreements and collective negotiations.
This one from Peter Garrett. Establishes the Early Years Quality Fund Special Account to provide $300m over two years to long day care services to pay employees wages, costs and expenses and is an early pay off for Gonski in an attempt to make kindy-teaching a better paying job.
Townsville LNP’s George Christiansen’s “Making Marine Parks Accountable” bill amends the Environment Protection and Biodiversity Conservation Act 1999 to allow Government to set an area of sea, or land and sea, as a Commonwealth reserve with the help of an independent scientific reference panel and a stakeholder advisory group. Christiansen wants to protect his fishing constituents access to marine parks.
Amends the Environment Protection and Biodiversity Conservation Act 1999 to place a two year moratorium on aquifer drilling connected with coal seam gas extraction; and impose penalties for any contravention. Katter wants to ban CSG mining for 24 months.
Katterbill to index military retirement benefits the same way as Australian age and service pensions, currently based on a higher-end consumer price index.
This Greens bill amends the Fair Work Act 2009 to expand enterprise agreements, settle disputes, and make provisions on industrial action. The object is to consider items of job security, full employment and work/life balance when the full bench makes a workplace determination.
Katterbill to remove the restriction of Fair Work Australia dealing with disputes by arbitration, mediation or conciliation, or by making a recommendation or expressing an opinion.
Katterbill to stop the foreign takeover of Cubbie cotton station near Dirranbandi, Qld.
Ag Minister Joe Ludwig’s bill to create a new Grape and Wine Authority by merging Grape and Wine Research and Development Corporation (GWRDC) and the Wine Australia Corporation. The merger would align strategy and achieve efficiency gains.
Social inclusion minister Mark Butler’s bill introduced with the Homelessness Bill 2013, to repeal the Supported Accommodation Assistance Act 1994 and makes an amendment to the Commonwealth Electoral Act 1918. The bill ensures homeless people can still vote in elections.
Butler’s main bill which provides for the recognition of homeless people and those at risk of homelessness. There is a recognition of homelessness and an aspiration everyone should have a home. The aim is to remove barriers in social inclusion and improve service delivery.
This Katterbill imposes penalties on those who don’t label imported food properly.
Bill Shorten’s bill – Combined with the Superannuation Legislation Amendment, the bill amends the Income Tax Rates Act 1986 to impose a 45 per cent tax on superannuation benefits that are illegally released early. See also 50.
Greens bill to amend the Infrastructure Australia Act 2008 to prioritise Commonwealth rail funding over roads, with the exception of road projects designed to fix an urgent road safety issue or on which construction has already begun.
Greg Combet’s bill to tighten IP laws on crown use, implement a TRIPS protocol to supply developing countries with generic versions of patented medicines, protect plant breeder IP and bring in joint patent regime for Australia and New Zealand. Despite its international importance, this huge bill affecting several acts of parliament has got zero attention in local media as far as I can tell. It features in International Business Times which said the law would enable Australian companies to respond to future health crises in less developed nations.
Bob Carr’s bill to amend the International Organisations (Privileges and Immunities) Act 1963 to give privileges and immunities to the International Committee for the Red Cross and the International Criminal Court. The first part is required because Australia has signed an MOU with the Red Cross making it a legal entity while the second provides support for victims in ICC trials and removed a roadblock to Australia’s accession to the ICC Agreement on Privileges and Immunities.
Andrew Wilkie’s bill calls for the end to live animal export by 2017 and in the interim ensure “satisfactory treatment” before slaughter.
Minister for State Gary Gray’s bill provides for the protection of Malabar Headland following divestment to New South Wales. Malabar Headland is in south-east Sydney and was declared a 70 hectare national park in 2010. It was transferred to NSW in 2012 after remediation of the site. The bill ensures Commonwealth oversight of the site.
Andrew Wilkie’s bill to amend marine regulations to ensure Australian standards are followed despite the rundown of Australia’s merchant fleet.
Greens bill to allow gay marriage. Likely to fail due to Liberal block of conscience vote. We may have to wait a few years yet for parliament to catch up with public opinion on this.
The Coalition’s Scott Morrisons’ bill to restore two new temporary protection visa classes lasting three years. One is the offshore entry TPV for refugees entering at an “excised offshore place” (eg Christmas Island) but who meet Australian protection obligations, the other a “secondary movement” offshore visa which is the same as above except the person is a non-citizen who transited in a country other than Australia where the person could have sought protection.
Immigration Minister Brendan O’Connor’s variation on the TPV bill and one of the few bills gathering media attention due to the furore over 457 visas which are a subclass of TPVs. It require sponsors in the TPV program to do Australian labour marketing testing with Fair Work inspectors oversight before employing someone on these visas.
Nicola Roxon’s bill (from her time as A-G) to establish the Military Court of Australia as part of the Federal Court to overcome the High Court challenge to the 2007 Military Court to deal with widespread military abuse. Interestingly, the court case Lane v Morrison that sank the previous court came out of a recruitment drive here in Roma in 2005. After a round of golf and drinks, Lane supposedly ”tea-bagged” an army sergeant but denied the charge before the military court. Lane successfully argued the court was unconstitutional.
Greens amendment to the ill-fated Minerals Resource Rent Tax Act 2012 to disregard increases in state royalties after 1 July 2011 when calculating royalty credits for the tax. Adam Bandt’s objective is to protect tax revenue from being eroded by increased State Government royalties.
Rob Oakeshott’s bill to make the national electricity law a Commonwealth law rather than state law. Oakeshott said the states electricity networks have seen the biggest increases in electricity prices and still have the biggest say in how the pricing rules are set.
“There’s a clear conflict of interest in states owning monopolies and regulating monopolies at the same time,” he said.
Amend definitions in the 2011 National Health Reform Act to allow the new National Health Performance Authority report on the performance of hospitals and primary health care organisations.
Nicola Roxon’s A-G bill to amend the Native Title Act 1993 to disregard some historical extinguishment of native title and broaden the scope for voluntary indigenous land use agreements.
Families Minister Jenny Macklin’s bill to clarify provisions related to ‘keeping in touch’ days. This means that they can come to work for up to 10 days during their parental leave, without it affecting their unpaid parental leave entitlements.
Wayne Swan’s bill imposes a pay as you go (PAYG) withholding non-compliance tax on directors and some associates where their company has a PAYG withholding liability for an income year and the director or associate is entitled to a credit for amounts withheld by the company during the income year. These amendments reduce the scope for companies to engage in fraudulent phoenix activity or escape liabilities and payments of employee entitlements.
Joe Ludwig’s bill amends three acts to form the new Australian Grape and Wine Authority (see 17).
Ludwig’s bill removes product specific maximum rates for R&D charges and marketing charges as changing them is difficult, slow and expensive. See also 42 and 48.
Another Ludwig bill changing three acts to form the new Australian Grape and Wine Authority (see 17 and 39).
Another Ludwig bill to implement the government’s rural R&D policy, to remove product specific maximum levy rates for R&D levies and marketing levies. See 40 and 48.
Wilkie bill and companion to number 44 with consequential amendments to four acts.
Wilkie’s bill provides a comprehensive definition of public interest disclosure and provides protections to public officials to make such disclosures.
Katterbill to reduce market share to 20% by enforced divestiture over six years and establish a Commissioner for Food Retailing.
Katterbill to regulate renewable fuel and mandate 5% ethanol by 2017 and 10% by 2020.
Katterbill to establish an Australian Reconstruction and Development Board to fix financial arrangements of stressed Australian agriculture businesses and associated industries.
Ludwig’s third R&D bill affecting 8 acts. See 40 and 42.
Tertiary Education Minister Chris Bowen’s bill to introduce a national student id from 2014. Needed because there is no single repository of records for vocational education and training.
In conjunction with 21, Bill Shorten’s complex bill to ensure civil and criminal penalties for promoters illegal early release of superannuation benefits, part of his “stronger super” reforms.
Joe Hockey’s bill to provide an exception to the prohibition imposed on taxation officers about the disclosure of information regarding the tax affairs of a taxpayer. Hockey wants to remove doubt tax officers can provide information about the MRRT when the Minister wants to make it publicly available. The intention is to reveal how much the mining tax has raised, without breaching tax privacy laws.
Treasurer Swan’s bill to amend taxation legislation to restate the ‘in Australia’ special conditions for income tax exempt entities. The bill is raised after the High Court found charities are considered to be pursuing their objectives principally ‘in Australia’ if they merely operate to pass funds within Australia to another charity that conducts its activities overseas.
Communications Minister Stephen Conroy’s bill amends the Do Not Call Register Act to clarify who is responsible for making telemarketing calls and faxes where third parties are involved, vary industry codes and tighten the ombudsman standards.
Julia Gillard’s own bill to amend the Veterans’ Entitlements Act 1986 to extend the time period for lodging a claim for non-treatment related travel expenses from 3 to 12 months and enable further extensions of time in exceptional circumstances.
Greens bill to establish the Office of Animal Welfare as an independent statutory authority which was originally planned by Labor. Bandt said the Office would be a centre of excellence for animal welfare science and law and work to harmonise and improve animal welfare laws across the country. He also said it would give animals a voice in parliament, independent of the Agriculture Department and Ministry, to reduce animal cruelty.
The Germans, in their infinite wisdom, chose the word “shitstorm” as their Anglicism of the Year in 2012. Their jury defined shitstorm as a public outcry in which arguments mix with threats and insults to reach a critical mass, forcing a reaction. Shitstorm, they said, filled a gap in German vocabulary “through changes in the culture of public debate.” As ever, the hugely influential urban dictionary has a more pithy explanation calling it a “gigantic cluster fuck”. The 2010 book Shitstorm: Inside Labor’s Darkest Days by Lenore Taylor and David Uren is about the gigantic cluster fuck that was (and remains) the Global Financial Crisis. Taylor is one of the country’s most respected political journalists while Uren has written on economic issues for 35 years so they team up well to discuss how the shitstorm of the GFC impacted Australian politics and the country’s economy.
The book takes its name from a quote then-Prime Minister Kevin Rudd used in a television interview. On March 8, 2009, Rudd appeared in front of a live studio audience on the Seven Network’s Sunday Night program where he about his government’s response to the GFC. Responding to opposition claims about the debt Labor created to fund its stimulus package, Rudd said it came down to a choice between letting the market fix it up or intervening with temporary borrowings. “People have to understand that,” Rudd told the audience, “because there is going to be the usual political shitstorm – sorry, political storm over that.” It seems reasonable to believe it was choreographed error from Rudd who left very little to chance during his tenure as Prime Minister.
Error or not, the choice of words was typical Rudd. The cover of the book Shitstorm shows a picture from that era with the four members of kitchen cabinet: Rudd, Linday Tanner, Wayne Swan and Julia Gillard. In the photo Rudd has his back to the camera. He is not interested in us, he is conducting his orchestra. But his players are not quite in tune. Finance Minister Tanner is looking off to right, Treasurer Swan is looking off the left and only Rudd’s deputy is looking vaguely in his direction, but with her own agenda. The gang of four formed the Strategic Priorities and Budget Committee (SPBC) that made most of the political decisions in the periodm any of which were remarkable and still-debated. It resulted in Australia avoiding a recession, when the economies of the world fell like ninepins around them.
Rudd was spot on about the shitstorm, but could not see he would be one of the casualties. His sensational sacking as Labor leader happened after the book was released. No one, least Taylor and Uren saw it coming. Then again neither did anyone else outside a small circle. The panic-stricken parliamentary putsch in June 2010 that cost Rudd his job as first-term Prime Minister left the Australian polity reeling, locked the nation into costly backflips, and severely damaged the trust between Labor and many of their own supporters that lasts to this day.
The Gillard government scraped over the line in October 2010 thanks to the negotiating skills of the new leader. But to win that election, she had to promise no carbon tax although both parties had agreed to it in 2007. The distant drum of the US sub-prime mortgage crisis had little effect on that election. It wouldn’t affect Australia where interest rates had risen 10 times in a row due to mining growth.
Both leaders knew the crash was coming but Rudd couldn’t risk talking about a crisis as it would highlight their inexperience while it was also inconvenient to Howard’s “don’t risk good times” message. Labor won but there was little time to celebrate. The first effect in Australia was the cost of borrowing money. The big banks who manage lots of short term loans were suddenly exposed as money fled the banking system. No Australian bank had to close its doors but there were times when the queue was down the street (prompting banks to consider how to keep large queues inside).
As the cost of money rose, the Australian banks took the near unprecedented step of rising interest rates without a signal from the Reserve Bank. The first bank tipped off Treasurer Swan in advance but the next one didn’t. So Swan advised people to switch banks but he could well see there was a problem brewing. While n summer holidays at Cotton Tree beach on the Sunshine Coast, he took a call from US Treasury Secretary Hank Paulson that terrified him. Paulson said the US “might be able to see a way” through the crisis if house prices didn’t collapse. Swan could see it was a big if.
It was first items of business when Rudd returned to work after Christmas. Labor (or rather the SPBC) promised a budget surplus of $18 billion (around 1.5% GDP). But although China ate up Aussie minerals elsewhere the news kept getting worse. When Rudd went to Washington in March, he met the IMF’s Dominique Strauss-Kahn who stunned him by saying the sub-prime lending mess would cost a trillion dollars (a figure later upgraded to $3 trillion). Governments would ultimately bear much of that cost.
By May budget in 2008, Swan was under pressure to abandon $47 billion of election promise tax cuts. The Government held firm but had to hold back on cuts they hoped would keep the books in the black. This was a direct result of the growing crisis but Swan couldn’t publicly admit this, for fear of impacting consumer confidence. Matters spiralled out of Swan’s and consumers’ control in September 2008 when the US’s fourth largest investment bank, Lehmann Brothers went bankrupt with $613 billion owing on uncertain assets. Trillions in securities across the world guaranteed or counter-signed by Lehmans were now suddenly at risk. The US’s largest insurer AIG’s shared dipped 70% with $550 billion tied up in sub-prime mortgages . Largest US mortgage-lender Washington Mutual’s shares also nosedived and exposed mutual funds who had to dump securities to meet a run on redemptions. The bond market died as no one would lend for anything longer than one day.
Australia had $800 billion of debt, of which $500 billion was short-term subject to constant finance. As America’s financial wobble threatened to tsunami across the Pacific, Swan’s message to the press was simple: “We were not immune but better placed than most to weather the coming storm”. But an IMF meeting in Washington in October 2008 would tell him the climate was worsening: it was enough for a clean bank to have links with a toxic bank for it to be in trouble. China’s boom would not save Australia from this tempest.
Swan came from the meeting convinced Australia needed financial stimulus. Rudd quickly warmed to the idea too. Over Christmas Rudd had been reading the economic ideas of EG Theodore and his bitter regret over how Australian lack of government action delayed a recovery in the 1930s Great Depression. Rudd was not about to let it happen again. Panicky people had salted $5.5 billion out of Australian banks in ten weeks since Lehman went bust, and second tier banks like Suncorp and Bankwest were at risk of collapse. Rudd guaranteed all term wholesale bank funding and retail deposits. Mortgagees like Challenger Howard were not protected. In two years the four big banks increased their home-lending share from 60 to 85% .
While the SPBC was arguing over the size of a stimulus, it was startled by the news the Reserve bank had dropped interest rates by 1%. This was twice as much as Treasury recommended. Rudd had learned the lesson from Treasury relief package model which was to ‘go hard, go households’. The SPBC would also double Treasury’s recommendation with a $10 billion package – $8.7m in cash handouts and $1.5m was spent on the First Home Owner Grant. There was also $6.2m to build a green car. Rudd’s message was they were ‘deploying the surplus’ to secure the economy. Opposition leader Malcolm Turnbull was so shocked, he gave immediate bi-partisan support. Labor’s own cabinet was equally in the dark about the proposal and unhappy about it. Rudd blamed the need for speed and ‘extreme market sensitivities’ but his downfall can be charted to this decision.
Meanwhile, the IMF predicted the world economy would stagnate in 2009. The stimulus kept Australian tills ringing through Christmas but business confidence was at a record low. The Government pushed hard to strengthen Howard’s G20 as a forum to make global recommendations. They were supported by the Americans who saw the G8 as too happy to install euro-centric banking controls that were anathema to the Bush Administration. In November 2008, the IMF told the G20 they needed to fund a stimulus in the order of 2% of GDP. This was huge, yet they were underplaying the situation. The IMF knew any higher recommendation would ‘scare people to death’ as its chief economist Olivier Blanchard said. Countries took notice and even mighty China announced $600b Keynesian spending on infrastructure projects
Yet it put the Rudd Government in difficult political territory. Spending would ease unemployment but it would kill their promise to fund a surplus. Rudd and Swan refused to say the word deficit for months until they finally admitted it was temporary. The linguistic games showed frustrated ministers that Rudd’s office had centralised decision making to an unacceptable level.
Rudd went on with the spending plotting a large-scale construction program to keep up emplyment. Schools were chosen because they didn’t need much lead time or lengthy council planning approvals. The $16.2b Building the Education Revolution program was soon supplemented by a $6.6b social housing program and $2.7b on a solar installation package. Labor lalso needed a quick ‘sugar hit’ and gave another cash handout of $8b designed to keep money circulating. The total package was 2.4% of GDP in the first year, beyond the IMF measure but reduced to 1.8% in 2010-2011. By the second package in February 2009, Treasury was predicting Australia would avoid a recession. It was a magnificent achievement but there were serious flaws. The solar rebate was so high, it led to huge demand and shonky work practices that had fatal results.
As well as the surplus, there was another major casualty of the downturn – Rudd’s emission trading scheme, in Ruddspeak, the Carbon Pollution Reduction Scheme. It was due for 2010 but Government agreed to delay by a year to include extra compensation Labor called a ‘global recession buffer’. Rudd decided to get his new “browner” plan through the Senate with the help of the Liberals rather than with the Greens who wanted tougher action. Opposition leader Malcolm Turnbull was supportive but undone by deep divisions in his own party. The eventual compromise with Labor was torpedoed by Liberal hardliners led by Nick Minchin and a spill led to the surprise election of Tony Abbott as leader in December 2009.
Abbott immediately turned his back on the CPRS, leaving Labor stranded. Rudd was so sure the Liberals would support it, he had spent no time selling it to the public. It would be impossible to run a double dissolution election on a complicated scheme that to Abbott was a “great new tax on everything” . The failure of the Copenhagen climate change talks in December was the nail in the coffin and Rudd delayed the ‘great moral imperative of our time’ to 2013.
As Taylor and Uren’s book approached deadline, Labor’s three-year-long polling honeymoon was over and they were running neck-and-neck with the Liberals. The media were hammering them over their stimulus plan failures. Rudd axed the installation scheme and Minister Peter Garrett became the scapegoat. Meanwhile the audit office found a colossal amount of waste in BER including substandard work and inflexible design. The budget surplus was a mirage and the Government had troubling selling its economic message for different reasons than before. During the height of the crisis, minister could not be frank for fear of damaging confidence, now they couldn’t sell the recovery because it would draw attention to the spending issues.
To Rudd and Swan’s immense credit, they saw the GFC coming earlier than most. They acted quicker than most and deeper and with the help of the Reserve Bank and China, Australia emerged almost unscathed. Abbott ridiculed 25 months of Whitlamesque spending’ but Rudd saved the country from years of austerity with his infrastructure stimulus. What neither he nor anyone saw was that Australia would recover so quickly. His successor Julia Gillard suffered in the 2010 poll but held on with a debt burden that would cripple Australia’s ability to implement real change in the difficult decades to come. As Taylor and Uren concluded, the political shitstorm would be ‘wilder and more damaging that Kevin Rudd ever imagined’.
In an interview that could easily have passed for Fox talking to Murdoch, the Newsweek Daily Beast Company sat down with its editor-and-chief and founder Tina Brown to discuss the end of print at the venerable magazine Newsweek. Newsweek fell into the hands of Brown and Beast two years ago but have been unable to resist sliding circulation and rising costs. The last print edition will be December 31.
Brown was on “Newsbeast” this week seated next to the company’s new CEO Baba Shetty as they dissected the reasons why Newsweek was shedding staff and its print publication. The theme of Brown’s remarks was the need for protection, both of journalists and content. Senior columnist John Avlon was all suited up as he lollypopped his bosses with the opening question phrased as a statement: “So we are taking the bull by the horns, going all digital…”
“We are,” replied Brown. “We must embrace the future.” Brown said Newsweek was 80 years old and it was time to start looking at the next 80 years.
Brown, like many editors before her, conceded defeat for print. The industry has reached a tipping point and it was no longer a case if but when. And “when” said Brown, might as well be “now”.
“We decided to take away the when and…embrace it, be ready for it.”
Avlon turned the discussion to Shetty with management speak.
“Being proactive not reactive is always a good idea…”
“Yes,” replied Shetty, who unlike Avlon, was dressed down with a jumper and shirt.
The new CEO, a “brand guru”, said Newsweek was a great brand and a powerful media icon but was encumbered by “the form factor” and its economics. Take away issues of physical printing distribution and circulation, Shetty said, by porting the core product to digital would be “incredibly liberating”.
Consumers were moving to digital and advertisers would want to be there to grab these audiences.
Tablet devices, web usage for news, and social news meant it made perfect sense for Newsweek to now go “completely native on digital”.
Brown gave an economic rationale to back it up. She said it cost Newsweek $42m a year to print, manufacture and distribute before you’ve even paid one writer or one intern.
“That’s an enormous albatross,” Brown said.
“We thought it was more important to protect the journalists, the contents, the photographers, the ideas.”
Brown said she wanted a digital Newsweek to focus on the marketplace of ideas.
But how then, would it be different to the Daily Beast, also entirely online, asked Avlon.
Shetty stepped in to say they were “incredibly complementary”.
In four years, the Beast had gone from a start-up to a site with 15 million visitors a month, up a 70 percent since 2011, a huge spike in readership and engagement.
Many were “lean forward, participatory, multiple visits a day,” Shetty said. “The Daily Beast is indispensable many people’s information diet.”
A healthy portion of this traffic was generated each week by Newsweek’s strong original journalism. Newsweek, said Shetty, “a step removed”, offering more considered, thoughtful, long-form journalism.
Brown said the the Daily Beast and Newsweek spoke to “the same reader in different moods”. The Daily Beast offered news that was “hot and happening” while Newsweek appealed to the ipad reader on the train home. But, she said, they offered the same sensibility: reflection, context and “a thorough look at what was happening in the world”.
Avlon steered the conversation to the new brand: Newsweek Global. CEO Shetty called it a terrific new perspective and described who the product would appeal to: “The mobile, highly informed, highly engaged, person very aware of what is happening over the globe.”
He said removing legacy print, meant Newsweek could re-interpret what it could be in pure digital form. Brown said the Daily Beast now appealed to a similar global reader who lived in India, London or Brazil.
Brown said one of the focuses was on “really powerful live events” including ones they had organised like Women in the World. which has an associated foundation which last week launched a campaign for education of girls in Pakistan with Angelina Jolie, hot on the heels of the shooting of 14-year-old education campaigner Malala Yousafzai.
All aspects of the company, said Brown were “now playing together” but print was the anomaly. Getting rid of it went with “enormous regret” as some “incredible brilliant talent” would be leaving the company but it was “the right decision for the company.” Avlon concluded that in terms of content that was “good news for journalists” and an exciting new opportunity” before nodding to the camera to end the interview.
The Daily Beast article that went with the video, gave some statistics to back up the “tipping point” :
There are now 70m tablet users in the US, up from 13m in two years. A further explosion of use is likely, especially as two in five Americans get their news online, a number that is also growing.
“Exiting print is an extremely difficult moment for all of us who love the romance of print and the unique weekly camaraderie of those hectic hours before the close on Friday night,” the article concluded. “But as we head for the 80th anniversary of Newsweek next year we must sustain the journalism that gives the magazine its purpose—and embrace the all-digital future.”
Clive Palmer continues to hold a fascination for Australian politicians and the media alike. Prime Minister Julia Gillard invoked his name in her revenge attack on Campbell Newman’s Queensland LNP Government. Gillard made a long speech to the Queensland ALP conference yesterday but it was the reference to Clive Palmer (curiously left out of the official transcript) that gave the Brisbane Times its lead. “Even Clive Palmer is having doubts,” Gillard said. “You know the ship is going down pretty fast when the bloke who wants to resurrect the Titanic is seen leaving it.”
Forbes estimates Palmer as being worth $795m making him the 29th richest person in Australia. Palmer said his father George, a successful silent movie star of the 1920s and radio pioneer, had the greatest influence on him. “Dad worked with the then Prime Minister Billy Lyons when he was in power, advising him on media stuff. He was probably the first of the spin doctors,” Palmer told the Gold Coast News. “He also set up train and buslines for transportation. He broke that monopoly that the state railways had. He was quite an amazing guy.”
On leaving uni, George’s son got a job in real estate in the Gold Coast. He quickly became their top marketing consultant, before setting up his own company, GSS Property Sales. With the Coast in the middle of a construction boom, Palmer thrived and was worth $40m before the age of 30. In 1986 he set up companies to buy iron ore deposits and trade oil. He became a close confident of Joh Bjelke Petersen and an admirer of the way the Premier turned Queensland into a coal exporter. Palmer was considered the architect of Joh’s final election victory in 1986.
Palmer also met Soviet leader Mikhail Gorbachev and set up joint ventures with Russian companies that persist to this day. Palmer also greased the wheel with Chinese interests and had to be very patient to make the deals work over many years. The lesson was to treat everyone with respect. Palmer said their collective decision-making process often allowed middle management more power than the managing director. But Palmer’s key skill was his sense of timing. As Griffith Uni’s Jason West said, thermal coal prices spiked to unprecedented levels allowing the likes of Palmer, Hancock and Forrest to experience profit margins beyond their wildest expectations. “Instead of earning margins of $2 to $10 a tonne as they had for decades, coal miners were now earning margins of $50 to $100 a tonne which in turn increased asset values to levels rivalling well-established and brand name top 50 firms,” West said.
West said Palmer had one income-earning asset and a whole bunch of tenements offering nothing but promises of future wealth. But some of those promises are extremely lucrative. They include the massive $8 billion Sino Iron Project at Cape Preston, 100 km south west of Karratha, WA expected to deliver before the end of the year. Owned by Hong Kong-based CITIC Pacific, it is on Palmer’s tenements and will be the largest magnetite iron ore mining and processing operation in Australia. The Sydney Morning Herald estimates Palmer will rake in half a billion a year in royalties on Sino Iron.
These are impressive numbers for someone who is still mostly regarded as a joke. Much of this poor public profile is his own fault due to his buffoonish tendency to act as a walking headline. Palmer is not shy about self-promotion and prefers to call himself Professor Palmer, courtesy of an honorarium from Bond University. Somewhat bizarrely, he has also been officially listed as a “national living treasure” though the National Trust of Australia offers no reason for this accolade other than the incorrect statement “Palmer is a self–made billionaire”.
If you are a man, in your early forties and single, then chances are you are more likely to be bankrupt. That’s the finding of the Profile of Debtors 2011 a new report released by Insolvency and Trustee Service Australia. This Government agency would know as anyone who becomes bankrupt must lodge a statement of affairs with ITSA.
The law covers this off under the Bankruptcy Act 1966 which allows for trustees to distribute property fairly among creditors and prosecute dishonest debtors. Bankruptcy lasts three years but can be extended. Since 2003 several patterns among bankrupts have been noticeable: they are mostly male (55:45), they are getting older, and they have less children than before. The primary causes are unemployment and economic conditions affecting their industry (particularly since 2009). The majority of bankrupts earn $30,000 or less and the size of their unsecured debt is increasing.
Despite their low incomes, almost half of them have unsecured debt of more than $50,000 and over a quarter per cent have unsecured debt of more than $100,000.
Over 23,000 Australians went bankrupt in 2011 and ISA constructed a profile of the average bankrupt last year. He was male aged between 35 and 54 years and single without dependants. It was his first time bankrupt. He earned less than $30,000 in the 12 months prior to bankruptcy (well below the $48,000 national average) and owed more than $20,000 mostly to the banks. He had no assets like property that could be used to repay creditors. Tasmania and Queensland had the highest percentage of bankrupts and NT had the lowest. Three percent of bankrupts identified as Indigenous (who comprised 2.5% of the population).
Nearly half of the liabilities is unidentified by the research with the “other” category responsible for 47% of all debt. Of the identified debt, credit cards were highest, responsible for 21 percent of unsecured debt followed by personal loans and house mortgage both on 12 percent. Credit cards also accounted for 18% of personal insolvency agreement debtors’ debt and a record 58% of debt agreement debtors’ unsecured debt.
According to ASIC, Australians have over $36 billion owing on credit cards, an average of $4,700 per card holder. MoneySmart’s Delia Rickard said paying off their credit card debt should be a top priority for millions of Australians. ‘If you have $4,700 credit card debt (the national average) and only make the minimum repayments, it will take 49 years to pay it off and cost you around $14,600 in interest,” Rickard said. “But if you are able to pay off $250 each month, you’d pay off your debt in two years and save $13,700 in interest.”
Despite the RBA keeping interest rates at historical lows, banks still charge astronomical rates for their credit cards. Paul Clitheroe said the average card rate is around 17 per cent but many charge 20 per cent or more. “Monthly interest charges continue to eat away at household budgets making it hard to get ahead with card debt,” he said. “If you’re serious about clearing card debt, one solution is to use a personal loan to pay off the balance.” Clitheroe said this would increase monthly repayments but the debt would be paid off in three to five years depending on the loan term.
There are new rules in place since July 1 which will allow people be better informed against the scams the credit card companies use to fleece their customers. The company must now refrain from offering limit increases on cards, unless agreed, provide monthly statements that show how long it will take to repay the entire balance if you only make minimum repayments and provide clearer details on interest-free periods. All new credit cards must include: facts sheets to make it easier to compare offers, the capacity for consumers to nominate the credit limit, a ban on over-limit fees, notifications if you exceed your credit limit and repayments to the most costly aspect of your credit card debt first (such as cash advances) to reduce debt faster.
So why should anyone care about the future of a company that employs only 50 people with another 120 contractors? It was not a simple case of xenophobia against Chinese investment (though in truth, it would be hard to imagine a similar furore if it were Seattle RuYi buying Cubbie). It is because as Senator Joyce said today it was the loss of “prime agricultural land to an overseas interest.” As well, the sale would involve Australia’s biggest water licence going to an overseas interest and 13 per cent of the nation’s cotton crop.
Opposition leader Tony Abbott is not interested in economics and doesn’t like reading press releases so he may not have read the minutes of the last Reserve Bank meeting. What Abbott would remember from that August 7 meeting was the headline of interest rates kept on hold at 3.50 per cent. The Board said world conditions had declined since February, commodity prices were down and global growth was unspectacular. Australia’s terms of trade (the relative prices of Australia’s exports and imports) peaked nearly a year ago, the Bank said, “though they remain historically high”.
The Board offered its judgement on the world and Australia’s place in it. China was steady, US growth is modest, Asia was recovering from natural disasters. Europe remains the sick man of the world as policymakers juggle sovereign and bank debt with the need for future growth. The share market was volatile, risk aversion was high while interest rates were historically low. Yet the board noted Australian banks have had no difficulty accessing funding, even on an unsecured basis. This was because Australia was a “highly rated sovereign”. Inflation and unemployment are low and not even the carbon price will change it that much.
This is an extraordinary result given Board Governor Glenn Stevens’ statement to the politicians yesterday, we were “not in anything like normal times”. Stevens was speaking at the House of Representatives standing committee on economics and repeated the good news about the local economy. Resource investment might be declining but the export shipments will pick up. The dampening effect of a high dollar was beginning to wane, so other sectors such as construction and tourism may also bounce back.
Liberal member of the committee Steve Ciobo asked if Australia was merely just lucky to near Asia’s boom and far from the toxicity of Europe. Stevens avoided the political connotations of the question but admitted Australia’s geography and resource-rich land was a “blessing”. However he noted there were cultural issues at play too. “We are in the real economy exposed to the strong bit, and our financial economy and our psychology is still quite connected as well to the pessimism from the North Atlantic,” Stevens said.
The Opposition has tapped into this pessimism with great effect since the last election and has taken every opportunity to link bad economic news to the minority government. After two years, Tony Abbott is no longer pretending Australia is in dire straits but still marked Tuesday’s second anniversary of that election with a hope “the Australian people can vote for a better way.” Abbott sought refuge in the past for his promise of renewed hope and a stronger economy. “Sixteen members of my Shadow Cabinet were ministers in the Howard Government,” he said. “We delivered an era of reform and prosperity before, and we are determined to do it again.”
Abbott’s presser makes no mention of the change in global conditions that occurred since Howard lost the November 2007 election. This week, he repeated unsubstantiated claims the carbon and mining taxes were responsible for economic uncertainty in a shambolic performance on ABC’s 7.30. They were among many egregious errors, perhaps chief among them the suggestion Marius Kloppers may have mislead investors if he failed to mention the carbon tax as a reason for BHP Billiton’s Olympic Dam postponement.
It wasn’t just Leigh Sales toughening up on Abbott this week. Many in the media have started to ramp up the scrutiny. Michelle Grattan said his credibility was as big a problem as Prime Minister Gillard’s trust. Grattan noted Abbott’s biggest strength, his absolutism, could become his biggest problem when the facts don’t fit his strategy. He is also in danger of losing the advantage over the Government as more people recognise his “one trick tony” behaviour.
Laurie Oakes openly called out Abbott as a liar in his weekly article for News Ltd today. While most people would not find it surprising a politician is less than scrupulously honest, it is a problem for Abbott because, says Oakes, “the central message from Abbott supporters is that the Prime Minister is the liar – Ju-liar.”
With still a year to go before the next election, the advantage remains with the Opposition. But recent polling has seen a narrowing and even in Queensland where Labor has been battered at the last Federal and State election there is improvement. On figures released this week, Poll Bludger reckons only the marginal seat of Moreton might fall and there is still another year of Campbell Newman government cutbacks to factor in.
While leadership tensions in Labor are still not totally behind them (and won’t while Kevin Rudd remains in parliament), Gillard seems almost certain now to last until the next election. But there is no guarantee she will face Tony Abbott. Opposition members not rusted on to Abbott’s take-no-prisoners style (and there are many in the party, as the leadership ballot in 2009 showed), may get increasingly nervous if Labor continues to chip away at their lead, while their own leader goes missing in action.
The issue of slavery doesn’t seem like an important topic to be discussing the 21st century but it is still a real issue in many parts of the world, including Australia. Attorney-General Nicola Roxon recognised the fact this week when she announced new laws to criminalise forced marriage, forced labour and organ trafficking. Roxon said Australia wasn’t immune from slavery and people trafficking. The new bill tackles worker exploitation, ensures those who help to enslave or traffic can be charged as well as those who keep slaves and allows for reparations with up to 12 years in prison for forced labour charges.
American-based British historian Simon Schama addressed the subject in his blood Rough Crossings: Britain, Slaves and the American Revolution. The book tells the story of black Americans who sided with the British in the War of Independence because King George III embodied the idea of freedom for them better than George Washington. The framers of the new American constitution had a bold plan for taxation and representation but behind the rhetoric of freedom, the reality of slavery was their Achilles heels. Tens of thousands of Black Africans looked to Britain to deliver them from the slavery. When Boston lawyer James Otis called out the contradiction and said slavery diminished the idea of American freedom, Founding Father John Adams could only “shudder at the consequences of such premises.”
The fact was the trade in humans kept the American cotton industry in profit and this was something the southern colonies were not to give away lightly. Slave rebellions in the sugar islands of the Caribbean created a terror the cotton economy was next and thousands of white Americans signed up for the revolt to protect their livelihood.
But Britain was a dubious saviour for the blacks. Slavery was still legal in the British Empire and repeated attempts in parliament to ban it were always rejected on the economic grounds it would give bitter enemy France too much of an advantage in the Caribbean sugar trade. The notorious case of the slave ship the Zong where the captain threw 122 sick slaves overboard to get £30 a head compensation for their loss at sea spurred campaigners such as Granville Sharp (a founding father of Sierra Leone) and Thomas Clarkson to lobby for change. But even when revolutionary France rejected slavery (Napoleon re-established it in 1802), a suspicious British parliament would not immediately follow suit.
It wasn’t until 1807 the slave trade was made illegal in Britain and also in the US. But the economic benefits of the institution of slavery continued in both countries until Britain made it illegal in the Empire in 1834. The internal contradictions of the US system were brilliantly exposed by 28-year-old runaway slave Frederick Douglass who wowed Britain when he toured in 1846. The articulate, witty, handsome and charismatic Douglass gave a dramatic account of cruelty in the plantations and lived constantly under the fear of re-capture. The book on his life was an immediate best seller.