Deepwater Horizon event

The Deepwater Horizon burns after the explosion. Photo: US Coast Guard

The Gulf of Mexico oil rig Deepwater Horizon was either a triumph of 21st century human engineering or one of the worst excesses of global capitalism, take your pick. For 13 years the South Korean-built monster rig plied ocean waters finding hard-to-reach oil 10,000m deep in the Gulf of Mexico until its life was ended, as was 11 people aboard, in a spectacular explosion on April 20, 2013. There followed the largest oil spill ever over 87 days until the well was finally capped.

The Hollywood film Deepwater Horizon barely taps at the surface of many of the issues but as disasters action films go, it shines a rare light on corporate excess. The movie partially focuses on the death by a thousand cuts in the lead-up and ignores the destructive aftermath to concentrate on the human element of the disaster on the day, but to that end it does a fine job.

Deepwater Horizon, the rig, had a complicated history the film alludes to in its corporate colour-coded cast. Swiss company Transocean owned the rig and flew it under the Marshall Islands flag of convenience. Almost half the world’s fleet is registered in three countries – Marshall Is, Liberia and Panama – none of which has a large maritime fleet. The flag of convenience is globalism writ large, offering economic and regulatory advantages, and increased freedom in choosing employees from an international labour pool but also anonymity, tax advantages and immunity from prosecution.

The rig had worked in the Gulf of Mexico all its life. In early 2013 the rig was in the Macondo Prospect 40km off Louisiana, a field whose exploration rights were owned by a three-company conglomerate. The majority shareholder (65%) was British multinational oil giant BP. Texan oil company Anadarko owned another quarter, with the remaining 10% with the Japanese keiretsu Mitsui. Transocean and all three field owners would suffer big financial penalties after the event but well-known BP carried the most reputational damage.

Deepwater Horizon’s primary asset was its ability to explore for oil at deeper levels than any other rig in the world. It had a great success rate in finding oil wells and was finishing off at Macondo at the time of the accident. It was considered a “lucky” rig and had a fine safety record. But as the GFC began to bite and the oil price dived, the owners and operators were looking to make cost savings whereever they could. Inevitably, maintenance suffered as the company culture changed. BP was investigated for having a “worse health, environment and safety record than many other major oil companies.”

The problem was exacerbated by a administrative conflict of interest. The US government makes big money from Gulf wells through selling off the exploration rights licences in auctions held by the Minerals Management Service. However that same Minerals Management Service was also in charge of the regulation and inspection of the oil rig. The pro-business George W Bush administration was keen to remove “red tape” from commercial enterprises. But some of that tape was holding things together. According to an Associated Press investigation MMS’s examination was performed with a lack of detail, lax regulations and poor record keeping. During its lifetime, Deepwater Horizon had six citations of non-compliance, five relating to safety and the sixth to electrical equipment.

The safety event covered in the film was the failure to test cement at the well.  The investigation found this would have cost $128,000 and taken 12 hours. BP and Transocean blamed each other for the lack of safety checks and misinterpreting the results of the checks that were performed. Neither admitted cost cutting caused the accident. BP issued a terse statement after the movie’s release to say it was not an accurate portrayal of events and it ignored “multiple errors made by a number of companies”.

Accurate or not, the film’s portrayal of the explosion was spectacular on screen. The proximate cause was a problem with the blowout preventer. Some of the 126 workers on board later testified the electric lights flickered, followed by two strong vibrations. A blowout occurred – a bubble of methane gas escaped from the well and shot up the drill column, expanding quickly as it burst through seals and barriers before exploding.  The explosion caused an uncontrollable fire and after 24 hours, the rig sank. The nearby Tidewater-owned supply boat took 94 workers to safety. Four more made it to another vessel and 17 were rescued by helicopter. Those that died were mostly on the platform floor at the time of incident. The film Deepwater Horizon is dedicated to those 11.

The tragedy did not end there. It took almost three months to cap the oil spill and almost five million barrels of oil spilled into the Gulf of Mexico. There was extensive damage to marine and wildlife habitats in one of the most productive ocean ecosystems of the world. Oil and compounds entered the food chain leading to fish with oozing sores and lesions and pelican eggs with petroleum compounds. Several species were critically endangered and there was a sharp increase in dolphin deaths. There were also human physical and mental health consequences to those living near the Louisiana and Florida Gulf coasts.

In July 2015 BP agreed to pay a fine of $18.7 billion to the US government and five states, the largest in US corporate history. The size of the fine shows that although the regulator was compromised (and eventually split up by the Obama administration), the US court system remains a strong bulwark agains unfettered capitalism. Imagine how little BP would have paid had the accident happened in, say, Mexican waters. The company remains bullish. BP recorded a loss in September 2016 of $1.5b but the net loss includes a $5.5 billion loss for settlement in the gulf of Mexico oil spill, leaving the adjusted net income to be around $1.5 billion in profit. Its dividend is still safe.

Deepwater Horizon, the rig, was a force of nature, that ultimately was unnatural. Deepwater Horizon, the event, was a tragedy with many deep repercussions. Deepwater Horizon, the Hollywood movie plays on that tragedy for emotional reaction. BP might well say that the movie did “not reflect who we are today, the lengths we’ve gone to restore the Gulf, the work we’ve done to become safer, and the trust we’ve earned back around the world”. But the movie forces people to think about chain reactions and human agency in corporate decisions. That’s no bad thing and it deserves a wide audience.





The history of oil: Past, present and future

oil wellOf all the oligopolies that controlled the oil price, the reign of OPEC was the shortest and most anarchic. At peak production OPEC controlled over half the market but by 1975 it was a shrinking market with a surplus of world oil. Only predictions of coming shortages stopped a total price collapse and there was a small but growing spot market where buyers would pay over the OPEC odds to guarantee supply.  Every time the spot market went up, hawkish producers like Iran, Iraq and Libya demanded OPEC hike up its prices. A second oil shock was coming.

The catalyst was the 1978 revolt against the Iranian Shah. Pahlavi’s brutal regime imposed martial law against protesters but that only brought 17 million people out on the street. The dying Shah was convinced his time was up and he left the country in January 1979, sending the oil world into panic over the future of the world’s fourth largest producer. The Three Mile Island nuclear disaster of that year also helped inflate oil prices as Ayatollah Khomeini’s regime inspired Islamic radicals everywhere.

World tensions climaxed with the Soviet invasion of Afghanistan at the end of 1979 causing the US president to issue the Carter Doctrine: “Any attempt by outside forces to gain control of the Persian Gulf would be regarded as an assault on the vital interests of the US”. The US would use military force to defend those interests. Yet Carter was powerless to end the US embassy siege in Tehran as scientists predicted peak oil was coming.

Not for the first or last time, they were wrong. In 1980 world demand dropped abruptly as oil finally proved to be price sensitive. The previous high prices had enabled profitable investment in otherwise hard to reach areas such as the North Sea and Alaska while the USSR also upped its production to become the largest in the world. Saudi Arabia decided to become a swing producer as OPEC slashed production to keep its prices high but Iran, engulfed in war with Iraq, refused to throttle its output. The first West Texas Intermediate oil future market at New York’s Nymex, launched in 1983, served as an objective frame of reference for all oil pricing and unchained from distortive psychology, spot transactions drove prices down.

By 1986 a tidal wave of oil hit the market causing prices to collapse. Free market economics had far-reaching effects on the seven sisters. Thatcher’s public floating of BP saw the Kuwaiti Investment Office buy one fifth of the company while Gulf was taken over by Chevron. Oil became just another commodity, subject to the vagaries of world demand and the iron laws of economics. Saddam Hussein further destroyed OPEC’s credibility with Iraq’s invasion of Kuwait in 1990. After defeat by a US-led coalition in 1991 , Iraq’s production went down to one fifth of its pre-war total until Saddam finally accepted a UN Oil for Food program.

Even the end of the Soviet Union had no effect on oil prices as demand stayed sluggish. It took renewed discipline by OPEC at the end of the 20th century to stabilise supply and finally increase prices. The problems of the Middle East were brought home to Americans with the 9/11 attacks and the failures of the Israel-Palestine peace process. The hawkish Bush administration used 9/11 as an excuse to invade Iraq, though it made the politics of the region – and oil supply – more unpredictable. With no new exploration finds, the price soared after 2003. Once again the prophets of doom spoke of the end of the oil era. Once again they were wrong. Russia and Venezuela stepped up production to meet increased demand.

Outside the Gulf, the story of the 21st century has been the growth of third world consumption, led by China. The price which stayed below $25 a barrel from the 1980s to 2003, began to skyrocket reaching $147 in 2008, with record profits for the oil majors. It took a decision by President Bush to lift the ban on oil drilling to end the rises and the GFC that struck later that year sent prices plummeting again. It rose steadily again as the Arab Spring affected output in the Middle East and a faltering US economy kept the dollar low.

By 2015, the barrel price was one third what it was in 2008 and by the end of the year had slipped from $50 to $38. The low price has acted as a dampener on exploration of shale oil and gas but predictions of peak oil seem as far fetched as ever they were in the last 50 years. The concept of peak oil is based on the scientific model of Marion King Hubbert dating from 1956 (and not invented by the “green left” as ludicrously claimed in today’s Australian by Judith Sloan) from his observations of the production bell curve of known oil provinces. Hubbert correctly predicted peak oil in US fields (which were the most well-researched) around 1970.

Recoverable oil supplies are finite and demand is high. However Hubbert’s models don’t take into account scientific innovations such as fracking, limited knowledge of geology and hydrocarbon exploration or political motivations. When Hubbert tried to apply his model to world supply he predicted peak in the mid 1980s with a massive drop off by the end of the century. Of course that proved hopelessly wrong with over twice as much oil drilled in 2000 as Hubbert predicted. The International Energy Agency says production has ratcheted up from 75 mbd (million barrels a day) then to 97 mbd by end 2015 and a forecast average demand of 96 mbd next year. Indeed Hubbert failed to foresee that the US itself would contribute most of the increases through its shale oil supply which came online in 2008.

Certainly continued low prices will act as a dampener on investment in new oil and LNG fields and the world climate agreement will further reduce incentives. But long term the iron laws of supply and demand will govern the price of crude and China will continue to drive demand. Sometime in the next 10 to 20 years solar and wind power will become cheaper alternatives but until that time oil will remain the black gold driving the world’s ongoing obsession with energy as it has done for the last 150 years.

The Asylum: How a bunch of rogue traders at Nymex took over the world oil market

asylumThe little-known but important story of how a bunch of potato traders at the New York Mercantile Exchange (Nymex) came from nowhere to set the world oil price is told delightfully in the book The Asylum by talented American journalist Leah McGrath Goodman. That no one exactly understood how oil prices are set is demonstrated by the book’s transcript of an extraordinary interview between right-wing Fox News pundit Bill O’Reilly and Nymex executive John D’Agostino in 2008.

At the time, the oil price was skyrocketing towards $150 a barrel and O’Reilly was anxious to blame Venezuelan left-wing president Hugo Chavez and OPEC’s “greedy sheiks” for the high prices. D’Agostino was having none of it. He told O’Reilly high demand and a low US dollar were more to blame. O’Reilly was flabbergasted as the conversation continued. “[OPEC] gave Cheney the middle digit… they can change whatever they want, right?” he says. D’Agostino replied, “No, OPEC only set the oil supply, the price of oil is actually set in New York”.

The rest of the conversation is worth reporting in detail:

O’R: Is there a guy who says $125 a barrel?

D’A: No. There’s a huge market that sets the price.  It’s filled with hedgers. It’s filled with speculators.

O’R: Somebody has to put the $125 on the barrel. Who does it?

D’A: They’re getting it from this market.

O’R: Who is “they”?

D’A: The oil producers…

O’R: The CEO of Shell or ExxonMobil says “We’re going to pay $125 a barrel”. Is that what they say? I thought it was the sheiks and Hugo Chavez.

D’A: No, No. They are all looking to the exchanges, the free markets, to set the price. The markets right now are saying the price of crude is about $120 a barrel. It’s going up and gasoline prices are directly related to crude oil prices.

O’R: But somebody has to make a decision.

D’A: It would be great if there was just one person doing that, because then we could go talk to him.

The exchange ended with an exasperated O’Reilly believing he was being hoodwinked. It was a sentiment shared by Fox News viewers who showered the station with angry emails unable to believe American capitalists were setting the price of oil not greedy Arabs and leftist dictators. But D’Agostino was right. The price of oil set by a bunch of anonymous traders off Wall St who thought nothing of bringing the global economy to its knees.

As Goodman said, traders are yellers. One trader told her they yell because they don’t have time to be polite. “It’s a world of super-assholes,” he said. “They’re all dicks, crude, manly men.” They work on the futures market which is a scarier version of the stock exchange. Energy traders bet on the price of oil in any of the months to follow, to a period of ten years. It is precise. Even if you correctly bet prices will go up in a certain year, if you get the month wrong you could lose millions. Traders not only bet on the future price but also on the difference from month to month in a practice called “spread trading”, which they hedge against the outright future bets.

The market was Darwinian where the strongest and loudest ruled. The trading floor was often violent and nice guys didn’t last. Traders were assisted by runners who wore goggles for protection from the constant shower of trading cards raining down on them. Traders were fined $100 for every card that didn’t reach the pit in one minute of trade and expertly flicked cards which would arch perfectly before landing across the two-storey high room. Position in the trading ring was crucial because if you stood close to a major trader you would have access to all their information.

Nymex was always a down-at-heel exchange compared to the New York Stock Exchange. The guys that bet on the blue chip companies looked down on the shabby traders of minerals and commodities. If NYSE traders took an academic and mathematical approach to the market, Nymex operated more from the gut. Overthinking was bad, trading was “freestyle” and the traders were street smart. Porn was common on the floor, as were drugs. There was reputedly firearms too. The cops left them alone as they contributed large amounts to the Police Foundation. The traders’ word was their bond and behind their bland trading jackets, there were many multi-millionaires. There were 816 seats in the exchange and they sold for $1.6 million a pop or leased out at $10,000 a month.

Nymex hijacked the oil market in the 1980s. Before that it was trading home of the humble Maine potato. For half a century, around 70 traders operated out of a redbrick mansion in downtown New York betting on spuds, unaware their world was crumbling around them. A rival market was emerging in Idaho potatoes while Maine’s annual potato crop was falling. The market was also corrupt with stories of bags filled with potato-shaped stones and spoiled Maine potatoes arriving at markets in the Bronx. Worse still, a national consensus was developing that Idaho potatoes tasted better than Maine ones.

Initially this led to volatile prices which the traders loved. The wilder the swings, the more opportunity for profit. When the supply ran out at the end of spring each year, prices would go crazy, with half the market betting prices would rise and the other half hoping they would fall. The trading pit was full of farmers, politicians, bankers and spectators who came to watch the show each May. Traders were obsessed with Maine gossip, Maine weather, Maine soil. Because future contracts were tied to actual quantities, traders had to get in, make money and get out quickly to avoid a pile of potatoes arriving on their doorstep. Traders skilfully exploited the expiration date right up to the last few seconds to end up “flat” in the market without any bets left on the table.

A futures market has practical value. It made it possible for farmers to lock in future profits at an agreed price. It gave them financial stability to plan their business years ahead with price risks transferred to the speculator who pocketed the resulting profit or loss. This underlying utility still drives the futures markets in commodities like oil.

Incredibly, Maine potatoes were the third most traded commodity in America in 1976. But an enemy at the gates was about to spoil Nymex’s party. JR Simplot was an eccentric Idaho farmer, nicknamed the Potato King. When he died in 2008 aged 99, he was worth $3.6 billion, the oldest person on the Forbes 400 rich list. Starting out as an onion farmer, he branched into potatoes winning the contract to supply US armed forces in the Second World War and then McDonald’s in the 1960s. Simplot was annoyed Nymex would not trade his Idaho potatoes. In the May 1976 rush he played against the Nymex traders selling millions of dollars of potatoes driving the price down. But unlike the traders he did not go “flat” at the close of trade.

Simplot was left with a contract to deliver massive amounts of Maine potatoes which to the consternation of the market, he did not have. However he did have plenty of Idaho potatoes which he offered in compensation.  Nymex refused to accept his Idaho potatoes and the market defaulted. Simplot was fined $50,000 but busted the Maine market.

Nymex lost all legitimacy and most traders resigned. In 1977 they appointed a 27-year-old trader named Michel Marks to be its unpaid chairman. Marks was the son of a former Nymex trader and a young prodigy. Reeling from the loss of potato futures, the exchange scraped by, betting on odd trades like Australian beef cattle (when it was supposedly tainted by kangaroo meat, the price oscillated wildly which traders loved). Rival exchange the Chicago Mercantile Exchange (Comex) overtook it and tried to buy cut-price seats at Nymex. The deal went south when Comex pulled out thinking they had paid too much money.

It left Nymex in a huge hole but in the longer term Comex suffered. Marks worked around the clock in 1978 to understand the business inside out. Some traders wanted to bring back a potato market but the Simplot scars were too deep. In any case the market regulator permanently banned potato trading. There was money in platinum and other metals but these markets were not volatile enough to be super profitable. Looking at what was dormant on the books, Marks hit on heating oil.

A far-seeing energy economist named Arnold Safer convinced Marks the free market would eventually set the price of oil. In the earliest days of oil the price was set by John D. Rockefeller with his “barrels”, before it was taken over by a consortium of the Texas railroad and oil majors. Since the 1973 Oil Crisis, OPEC flexed its muscle but Safer told Marks non-OPEC countries would eventually flood the market with excess oil destroying the Middle East cartel. He also advised Marks to only trade things whose prices weren’t fixed by the government. The opportunity came with the deregulation of the heating oil market in the late 1970s. Mark dusted off an old contract to sell heating oil to the Dutch. In an ingenious move, he scratched out Rotterdam and changed it to New York harbour so they could concentrate on local trade.

The futures market for heating oil opened on November 14, 1978. Volume was low on the opening day which was not a good sign. “Low volumes beget no volumes” was the conventional wisdom in the trading pits. Marks hassled the big traders, energy companies and banks to trade with him but no-one believed OPEC could be challenged. However because Nymex had no history with oil, the industry made the fatal miscalculation of ignoring them.

Heating oil merchants paid vastly inflated for their product while even OPEC struggled to turn a buck when its price for oil did not keep up with the changes to supply and demand. Private oil companies exploited the difference by hoarding oil contracts, locking in higher prices. They charged $10 more a barrel than the OPEC price but Marks decided to do exactly the opposite. His heating oil was 20c a gallon cheaper than Exxon. His customers were initially worried whether Nymex could guarantee continuous supply and they also worried Exxon might find out about the deal and punish them. But cheap oil is cheap oil and enough merchants bidded to give Marks the start he needed. Nymex traders didn’t care about the product or the price, what they needed were sufficient bids and offers to work the gaps.

Word slowly got out about the bargains at Nymex. Serious corporate customers arrived in the form of drillers, refiners and shippers of heating oil. Within months the daily number of bids went from hundreds to many thousands. For the first time, buyers and sellers of heating oil could tell exactly what the price was by looking at the Nymex trading board. It gradually attracted all the US heating oil contracts, turning the exchange into an invaluable source of information. People began to trust the exchange because it was a public market and because, unlike the oil companies, it did not rely on ever-increasing prices to make a profit.

Things took off in 1980 when the Iraq-Iran war broke out. When the news broke, over 50 traders immediately flooded the ring clamouring for heating oil. Within days the Nymex price doubled and would have risen further but for government-imposed price limits. The low and high price were the same as everyone was buying and there were no sellers. There was a vast underground trade into the higher-priced unregulated market controlled by the oil companies, an illegal practice but which flourished without supervision.

New US president Ronald Reagan gradually eased price controls and Marks debuted futures on leaded petrol (gasoline) in 1981. That market was so successful it continued for two years even after leaded petrol was banned in the US. In 1983 Reagan removed the last of the oil price controls and Nymex launched its crowning glory: a futures contract on sweet crude light oil, the bedrock of the industry. Marks opened a specific market to sell West Texas Intermediate light to the largest oil storage facility in the world at Cushing, Oklahoma.

The dots began to join. US oil production was declining and Americans were cutting usage. OPEC jacked up its prices as did the oil companies. But the supply scare had caused non-OPEC companies to increase production flooding the market with oil, plummeting the price. Panicked Wall St traders rushed to Nymex to hedge their expensive contracts. Nymex became a huge liquidation warehouse selling off oil at bargain-basement prices. The traders made a killing on each transaction. Suddenly power was no longer in Houston, Amsterdam or the OPEC HQ at Vienna but at a grimy rat-infested building in lower New York, inhabited as Leah Goodman said by “misfits and pranksters and gun-toting gangsters who had absolutely no knowledge of the oil business”.

Other players muscled in on the market but Nymex’s position was secure. Even the oil companies came cap in hand to the exchange and openly traded on the market. When Nymex moved to the World Trade Centre the market was so intense, it did not notice the smoke pouring into the room after the 1993 bombing and traders refused to evacuate. Nymex moved out of the WTC before 2001 which was prescient. But it was slower to see the oncoming of electronic trading and almost lost the market entirely to the more innovative Intercontinental Exchange (ICE). With Nymex’s power waning they agreed to a merger with its former enemy Comex in 2008 and finally the electronic boards replaced the whirring of paper in the pits.  A handful of traders still ply their wares in a small venue using the old open outcry system of the potato trading days. There are calls for it to be preserved. But Nymex is no museum. Although people like Bill O’Reilly never knew it, its traders still set the price of oil to this day.

The rising price of gas

One of the Santos GLNG  gas compressor plants under construction near Roma.
One of the Santos GLNG gas compressor plants under construction  in the Surat Basin near Roma.

More indications arrived this week 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 will put pressure on manufacturing businesses, mostly in Victoria 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. Geologists always knew about gas in the coal seams of Queensland and NSW but it was too expensive to drill for in comparison to natural gas trapped in conventional chambers. 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 pipelines and the LNG plants for export 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 BG Group’s QCLNG  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 below minus 160 °C so it condenses into liquefied natural gas compressed for shipping.

In Japan customers will pay $15 a gigajoule for LNG. When you take away the $6 a gigilitre cost of liquefaction and transportation, what’s left is 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.

Gas availability is not the issue. The Government’s BREE (Bureau of Resources and Energy Economics) says adjustment would depend on “consumers sensitivity to changes in gas prices.” Origin recently 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. Queensland 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, twice as expensive as the domestic market.

The gas companies admit price rises are coming but try to turn 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 the huge facilities at Gladstone changing the rules of the game. These facilities would not have been built if Queensland didn’t identify CSG as a power source. 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 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 produce 60% of Australia’s gas (twice as much as the 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 more expensive than the eastern seaboard.

The eastern jury is out on the reserve issue. Analysis 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 territories. The NSW Government has recommended one but not actioned on it yet. Queensland is different again. It has a loose reservation clause in law. They could require every tenement holder to set aside 15% for domestic use but no contract has this proviso. Energy Minister Mark McArdle calls it a last resort.

Though not explicitly endorsing it, the Australia Institute sees no reason a reservation price should not happen. It said a reserve would create two markets, one for domestic and one for international. Since producers 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 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 one in WA, the Institute said.

The gas industry is against a reserve, saying the cheaper local price would prevent investment in new supply.  Industry peak body APPEA denounces “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 called him) said rising gas prices were something NSW may have to get used to unless the industry could “get on with developing NSW gas resources”.

The Grattan Institute agrees, 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. 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.

Blaming protesters is designed to turn public support against restrictions and increase pressure on the State Government to remove them. The Gladstone LNG plants will set the price not production flow and only reserve price intervention will change that.

Fifty-five pieces of legislation

THE thing politics has over policy is that it is a sport. When The Age called this out in its editorial asking for the head of Julia Gillard, it was condemned for focusing on palace politics instead of setting the agenda of policy. The Age knows 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 wide-ranging issues of environment, the world economy, employment, education, tax reform and agriculture.

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 people feel more informed for reading them; I did for writing them down.

1. African development bank Bill 2013 

Enables Australia to become a member of the African Development Bank Group by authorising payments 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 has 78 member countries, comprising 54 African and 24 non-African countries. In 2011, the Independent Review of Aid Effectiveness recommended 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.

2. Australian Jobs Bill 2013 

The far-reaching bill would require private and public projects of half a billion dollars or more to develop an Australian Industry Participation plan. The Australian Industry Participation Authority would administer and monitor compliance 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 will cost $1 billion dollars to implement, so I wonder if it will be subject to an Australian Industry Participation plan if it passes.

3 Australian Ownership Bill 2013

This Katter bill wants to limit foreign investment in Australian agribusiness and agricultural land. It would require the Foreign Investment Review Board to take “the national interest” (a contested concept) into account in foreign investment and prevent non-Australians from owing half or more of an agribusiness or land more than four hectares.

4 Aviation Laws Amendment (Australian Ownership and Operation) Bill 2013

Another Katter bill 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.

5.  Broadcasting Services Amendment (Advertising for Sports Betting) Bill 2013 [No. 2]

A Greens bill to amend the 1992 broadcasting act to prohibit ads on odds, restrict betting ads to after 9pm, prohibit “non-ad ads” and freeze betting ads before sports broadcasts. Given the 1992 act is pre-Internet, this seems papering over enormous cracks.

6. Competition and Consumer Amendment (Australian Food Labelling) Bill 2012

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.

8. Customs Amendment (Prohibition of Certain Coal Exports) Bill 2013

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 Wallarah Two underground mine despite no-one 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.”

9 Dairy Industry (Drinking Milk) Bill 2013

Katter’s call to register dairy regional representative bodies and Fair Work Australia to determine a modern award for dairy farmers with farmers and processors to establish enterprise agreements and collective negotiations.

10 Early Years Quality Fund Special Account Bill 2013

Peter Garrett’s bill to establish the Early Years Quality Fund Special Account providing $300m over two years to long day care services to pay employee wages, costs and expenses and is an early pay off for Gonski to make kindy-teaching a better paying job.

11 Environment Protection and Biodiversity Conservation Amendment (Making Marine Parks Accountable) Bill 2012 [No. 2]

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 fishing constituents’ access to marine parks.

12 Environment Protection and Biodiversity Conservation Amendment (Moratorium on Aquifer Drilling Connected with Coal Seam Gas Extraction) Bill 2013

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 contravention. Katter wants to ban CSG mining for 24 months.

13 Fair Indexation of Military Superannuation Entitlements Bill 2012

Katter bill to index military retirement benefits the same way as Australian age and service pensions, based on a higher-end consumer price index.

14 Fair Work (Job Security and Fairer Bargaining) Amendment Bill 2012

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.

15 Fair Work Amendment (Arbitration) Bill 2013

Katter bill 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.

16 Foreign Acquisitions and Takeovers Amendment (Cubbie Station) Bill 2012

Katter bill to stop the foreign takeover of Cubbie cotton station near Dirranbandi, Qld.

17 Grape and Wine Legislation Amendment (Australian Grape and Wine Authority) Bill 2013

Ag Minister Joe Ludwig’s bill to create a new Grape and Wine Authority by merging the Grape and Wine Research and Development Corporation and the Wine Australia Corporation. The merger would align strategy and achieve efficiency gains.

18 Homelessness (Consequential Amendments) Bill 2013

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.

19 Homelessness Bill 2013

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.

20 Imported Food Warning Labels Bill 2013

This Katter bill imposes penalties on those who don’t label imported food properly.

21 Income Tax Rates Amendment (Unlawful Payments from Regulated Superannuation Funds) Bill 2012

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 illegally released early. See also 50.

22 Infrastructure (Priority Funding) Amendment Bill 2013

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 which construction has already begun.

23 Intellectual Property Laws Amendment Bill 2013

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 got little attention in local media. International Business Times said the law would enable Australian companies to respond to future health crises in less developed nations.

24 International Organisations (Privileges and Immunities) Amendment Bill 2013

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.

25 Live Animal Export Restriction and Prohibition Bill 2013

Andrew Wilkie’s bill calls for the end to live animal export by 2017 and in the interim ensure “satisfactory treatment” before slaughter.

26 Malabar Headland Protection Bill 2012

Minister for State Gary Gray’s bill provides for the protection of Malabar Headland following divestment to NSW. 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. The bill ensures Commonwealth oversight of the site.

27 Marine Engineers Qualifications Bill 2013

Wilkie’s bill to amend marine regulations to ensure Australian standards are followed despite the rundown of Australia’s merchant fleet.

28 Marriage Equality Amendment Bill 2012

Greens bill to allow gay marriage. Likely to fail due to Liberal block of conscience vote.

29 Migration Amendment (Reinstatement of Temporary Protection Visas) Bill 2013

The Coalition’s Scott Morrison’s 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 except the person is a non-citizen who transited in a country other than Australia where the person could have sought protection.

30 Migration Amendment (Temporary Sponsored Visas) Bill 2013

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.

31 Military Court of Australia (Transitional Provisions and Consequential Amendments) Bill 2012

and 32 Military Court of Australia Bill 2012

Nicola Roxon’s bill 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. Lane v Morrison 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.

33 Minerals Resource Rent Tax Amendment (Protecting Revenue) Bill 2013

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.

34 National Electricity Bill 2012

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 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.

35 National Health Reform Amendment (Definitions) Bill 2013

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.

36 Native Title Amendment Bill 2012

Nicola Roxon’s bill to amend the Native Title Act 1993 to disregard historical extinguishment of native title and broaden the scope for voluntary indigenous land use agreements. 

37 Paid Parental Leave and Other Legislation Amendment (Consolidation) Bill 2011

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.

38 Pay As You Go Withholding Non-compliance Tax Bill 2011

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.

39 Primary Industries (Customs) Charges Amendment (Australian Grape and Wine Authority) Bill 2013

Joe Ludwig’s bill amends three acts to form the new Australian Grape and Wine Authority (see 17).

40 Primary Industries (Customs) Charges Amendment Bill 2013

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.

41 Primary Industries (Excise) Levies Amendment (Australian Grape and Wine Authority) Bill 2013

Another Ludwig bill changing three acts to form the new Australian Grape and Wine Authority (see 17 and 39).

42 Primary Industries (Excise) Levies Amendment Bill 2013

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.

43 Public Interest Disclosure (Whistleblower Protection) (Consequential Amendments) Bill 2012

Wilkie bill and companion to number 44 with consequential amendments to four acts.

44 Public Interest Disclosure (Whistleblower Protection) Bill 2012

Wilkie’s bill provides a comprehensive definition of public interest disclosure and provides protections to public officials to make such disclosures. 

45 Reducing Supermarket Dominance Bill 2013

Katter bill to reduce market share to 20% by enforced divestiture over six years and establish a Commissioner for Food Retailing.

46 Renewable Fuel Bill 2013

Katter bill to regulate renewable fuel and mandate 5% ethanol by 2017 and 10% by 2020.

47 Reserve Bank Amendment (Australian Reconstruction and Development Board) Bill 2013

Katter bill to establish an Australian Reconstruction and Development Board to fix financial arrangements of stressed agriculture businesses and associated industries.

48 Rural Research and Development Legislation Amendment Bill 2013

Ludwig’s third R&D bill affecting 8 acts. See 40 and 42.

49 Student Identifiers Bill 2013

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.

50 Superannuation Legislation Amendment (Reducing Illegal Early Release and Other Measures) Bill 2012

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.

51 Tax Laws Amendment (Disclosure of MRRT Information) Bill 2013

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.

52 Tax Laws Amendment (Special Conditions for Not-for-profit Concessions) Bill 2012

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.

53 Telecommunications Legislation Amendment (Consumer Protection) Bill 2013

Communications Minister Stephen Conroy’s bill amends the Do Not Call Register Act to clarify who is responsible for telemarketing calls and faxes where third parties are involved, vary industry codes and tighten the ombudsman standards.

54 Veterans’ Entitlements Amendment (Claims for Travel Expenses) Bill 2010

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 three to 12 months and enable further extensions of time in exceptional circumstances.

55 Voice for Animals (Independent Office of Animal Welfare) Bill 2013

Greens bill to establish the Office of Animal Welfare as an independent statutory authority 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.

Shitstorm: The Rudd Government’s response to the Global Financial Crisis

The Germans, in their infinite wisdom, chose the word “shitstorm” as their Anglicism of the Year in 2012. The 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.” The influential urban dictionary has a more pithy definition, 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 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. They team up well to discuss how the GFC shitstorm impacted Australian politics and the economy.

The book takes its name from a quote from then-Prime Minister Kevin Rudd in a television interview. On March 8, 2009, Rudd spoke to a live studio audience on the Seven Network’s Sunday Night program about the government’s response to the GFC. Responding to opposition claims about the debt Labor created to fund its stimulus, Rudd said it was a choice between letting the market fix it up or intervening with temporary borrowings. “People have to understand that,” Rudd said, “because there is going to be the usual political shitstorm – sorry, political storm over that.” The swearword was likely a choreographed error from Rudd who left little to chance.

shitstormDeliberate or not, the choice of words was typical Rudd. The cover of the book Shitstorm shows the four members of the kitchen cabinet: Rudd, Linday Tanner, Wayne Swan and Julia Gillard. Rudd has his back to the camera. He is not interested in us, he is conducting his orchestra. But his players are not in tune. Finance Minister Tanner is looking off right, Treasurer Swan is looking left and only Rudd’s deputy Gillard is looking vaguely in his direction, but with her own agenda. The gang of four of the Strategic Priorities and Budget Committee (SPBC) made most political decisions many of which are still debated. But Australia avoided a recession, when the economies of the world crashed like ninepins around them.

Rudd was right about the shitstorm, but could not see he would be a casualty. His sensational sacking happened after the book was released. Taylor and Uren never saw it coming either. No one did outside a small circle of Labor apparatchiks. 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 their own supporters not yet repaired today.

The Julia Gillard government scraped over the line in the October 2010 election thanks to her negotiating skills. But she had to promise no carbon tax reversing a 2007 election promise. The distant drum of the US sub-prime mortgage crisis had little effect in 2007. In Australia the worry was interest rates which had risen 10 times due to mining growth.

Rudd and Howard knew the crash was coming but kept it out of the election campaign. Rudd couldn’t risk talking about a crisis as it would highlight Labor “inexperience” while it was inconvenient to Howard’s “don’t risk good times” message. When Labor won there was little time to celebrate. The first effect in Australia was the cost of borrowing. The big banks’ short term loans were suddenly exposed as money fled the system. No Australian bank closed 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 Reserve Bank signal. The first bank tipped off Swan in advance but the next one didn’t. The treasurer advised people to switch banks but he could see there was a problem brewing. While on summer holidays 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 knew it was a big if.

It was the first item of business when Rudd returned to work after Christmas. Labor promised a budget surplus of $18 billion (around 1.5% GDP). China continued to eat up Aussie minerals, but elsewhere the news kept getting worse. When Rudd went to Washington in March, he met the IMF’s Dominique Strauss-Kahn who told him the sub-prime lending mess would cost the world a trillion dollars (a figure later upgraded to $3 trillion). Governments ultimately bore much of that cost.

By the May 2008 budget, Swan was under pressure to abandon $47 billion of promised tax cuts. The Government held firm but held back on cuts they hoped would keep the books in the black. Swan couldn’t yet admit the growing crisis for fear of impacting consumer confidence. Matters spiralled out of control in September 2008 when the fourth largest US investment bank, Lehman Brothers went bankrupt with $613 billion owing on uncertain assets. Trillions in securities across the world guaranteed or counter-signed by Lehmans were now at risk. The US’s largest insurer AIG’s shares dipped 70% with $550 billion tied up in sub-prime mortgages. Largest US mortgage-lender Washington Mutual shares nosedived and mutual funds dumped 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, $500 billion short-term subject to constant finance. As America’s financial wobble threatened to tsunami across the Pacific, Swan’s message was simple: “We are not immune but better placed than most to weather the coming storm”. An IMF meeting in Washington in October 2008 told him the storm was worsening: it was enough for a clean bank to have links with a toxic bank to be in trouble. China’s boom would not save Australia.

Swan knew financial stimulus was needed. Rudd quickly warmed to the idea. Over Christmas Rudd had been reading the economic ideas of EG Theodore whose bitter regret was a lack of Australian government action which prolonged the 1930s Great Depression. Rudd was not about to let it happen again. Panicky people salted $5.5 billion out of Australian banks in ten weeks since Lehman went bust, and second tier banks Suncorp and Bankwest were at risk of collapse. Rudd guaranteed all term wholesale bank funding and retail deposits. Smaller mortgagees like Challenger Howard were not protected and in two years the four big banks increased 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 models which was to “go early, 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 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. Shocked Opposition leader Malcolm Turnbull gave immediate bi-partisan support. Labor’s own cabinet was 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.

The IMF predicted the world economy would stagnate in 2009. The stimulus kept Australian tills ringing through Christmas but business confidence was low. The Government pushed hard to strengthen Howard’s G20 as a forum to make global recommendations. They were supported by the US which saw the G8 as too happy to install euro-centric banking controls, anathema to the Bush administration. In November 2008, the IMF told the G20 they needed a stimulus worth 2% of GDP.  This was huge, yet they were underplaying the situation. IMF chief economist Olivier Blanchard knew any higher recommendation would “scare people to death”. Countries took notice. Even mighty China announced a $600b Keynesian spending package on infrastructure projects.

The Rudd Government was in difficult political territory. Spending would ease unemployment but would kill their surplus. Rudd and Swan refused to say the word deficit for months until finally admitting it was temporary. The linguistic games showed frustrated ministers Rudd’s office had centralised decision-making to an unacceptable level.

Rudd plotted a large-scale construction program to keep up employment. 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 supplemented by a $6.6b social housing program and $2.7b on a solar installation package. As a quick sugar hit they gave another $8b cash handout to taxpayers 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 with fatal results.

There was another casualty of the downturn – the ETS, known in Ruddspeak as the Carbon Pollution Reduction Scheme. The CPRS was due in 2010 but the Government delayed it a year to include extra compensation 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 environmental action. Opposition leader Malcolm Turnbull was supportive but undone by deep divisions in his own party. The eventual compromise was torpedoed by Liberal hardliners led by Nick Minchin and a spill led to the surprise election of Tony Abbott as opposition leader in December 2009.

Abbott reneged on the CPRS, leaving Labor stranded. Rudd was so sure the Liberals would support it, he spent no time selling it to the public. It would be impossible to run a double dissolution election on a complicated scheme Abbott was calling 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 the Liberals were neck-and-neck. The media hammered Labor over stimulus plan failures. Rudd axed the installation scheme and made Peter Garrett the scapegoat ministerial scalp. The audit office found colossal 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 spending issues.

To Rudd and Swan’s 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 no-one saw was 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 than Kevin Rudd ever imagined”.

A new news beast: Newsweek goes digital

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 with the company’s new CEO Baba Shetty dissecting the reasons why Newsweek was shedding staff and its print publication.  Brown spoke of the need for protection, 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. To 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.” he said.
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 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.”