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Federal

Aug 12, 2011

Daring to dream on the Coalition’s costings

The problem with the Coalition needing to find $70 billion in savings is they never found the first $50 billion last year.

What an expensive indulgence Tony Abbott’s unresolved issues about climate change are turning out to be. Doesn’t believe in climate change enough to want to address it properly, doesn’t want to risk looking like a complete denialist by doing nothing.

The result would be costliest policy reversal in Australian history since, well, the last major Defence procurement project. $24.5 billion paid back to industry for carbon permits — no wonder Andrew Robb is trying to convince business not to buy them — on top of the Coalition’s $3.2b direct action plan.

The direct action plan is grossly underfunded if it’s to meet a 5% abatement target by 2020, which will require extensive purchasing of overseas permits. The Department of Climate Change estimated it will cost an additional $20 billion over the period to 2020, in addition to the Coalition’s estimate of $10.5 billion. The Coalition’s response, which at least has the virtue of simplicity, is to say they’ll sack the entire Department of Climate Change.

While Greg Hunt insists that the policy is soundly costed, and denies suggesting anything to the contrary it relies heavily on buying biosequestered carbon for under $10 a tonne, when experts say it will cost a minimum of three times that. Even farmers who enthusiastically endorse soil carbon have said it’s not costed properly.

Most likely this problem won’t be addressed until the Coalition is in government and the penny drops that the policy isn’t delivering as Hunt has claimed to shadow Cabinet, or delivering at such expensive levels as to require additional Budget supplementation. Economic recovery by that stage should have made finding several billion dollars a year much easier than currently; certainly admitting now that the policy can’t work at current levels of funding would be a poor look for the Coalition. Alternatively, the Coalition can just revert to the Howard-era strategy of talking about doing something about climate change while doing exactly nothing of consequence. Hey, it worked for a decade.

By the same token, an ANAO report on the cost of the “direct action” components of Labor’s carbon pricing package — particularly buying dirty coal-fired power generation capacity — should also present some interesting findings.

The problem for the Coalition finding $70 billion in savings is that they still haven’t properly accounted for the savings they claimed to have found last year. When Andrew Probyn and then Peter Martin rose at Joe Hockey’s National Press Club post-Budget appearance to note major problems with the $50 billion savings package eventually compiled by the Coalition between last year’s Budget and the election, Hockey’s only response was to attack them and insist the savings were “right at a point in time.”

In fact the numbers were never right (even putting aside the bizarre goings-on with WHK Howarth), and the $11 billion worth of problems identified by Treasury and the Department of Finance played a major role in cruelling Tony Abbott’s chances of securing the support of Rob Oakeshott and Tony Windsor.

The response of Andrew Robb and Hockey has been to suggest the $11 billion was an honest difference of opinion between themselves and officials. And on some elements of the $11 billion, they had a point. The problem is, the Budget isn’t put together by the Treasurer and Finance Minister, but by Treasury and Finance officials. The Coalition’s persistent tactic of insisting that every expert who disagrees with it – climate scientists, economists, ag scientists, accountants – is simply wrong hits a brick wall on this.

Instead, what if the Coalition decided, driven by the need to find $70 billion, to go looking for some serious savings? That might lead them into transfer payments, grown fat as successive governments have pandered to Australians’ entitlement mentality. Or into business welfare, where billions still flow to multinational companies that employ a diminishing number of Australians in semi-skilled manufacturing jobs. Or into tax concessions, where one set of concessions costing billions are directed at policy outcomes at which another set of concessions worth billions are aimed at stopping. Or even, most iconoclastically, into the Defence budget.

Of they could scrimp together some savings by axing Labor programs, throw in some double-counting and promise to sell Medibank Private for the fourth, or is it the fifth, election in a row and boldly declare they’ve reached $70 billion, complete with “audit” involving someone checking the numbers in the end column add up. They wouldn’t try that again would they?

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25 comments

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25 thoughts on “Daring to dream on the Coalition’s costings

  1. Mark from Melbourne

    What continues to puzzle me is how is it that any semi-economic illiterate can understand that what Joe, Tony and Robb have been trying to sell doesn’t add up, but that they keep shoeing in the “better economic managers” in all the polls. This disconnect is worth some serious study.

  2. michael r james

    @Mark from Melbourne.

    What percentage of the population do you think is either “semi-economic illiterate” or arsed enough to give 5 milliseconds to the subject? They mostly pick up their pre-digested opinions from the front page of News Ltd (and ABC News which is the same thing). Day in, day out, News Ltd repeats the same garbage–even if inside on page 98 you might find occasional articles criticizing the flakey policies of the coalition by Mega/Steketee/van Onselen (who, by definition are only read by the economic literate).
    Admittedly they also have to close their ears and cover their eyes to Malcolm Turnbull, and 100% of foreign economic commentators. It seems like an amazing feat but then I guess that is what illiterate means. (TTH, L, SB & others will be along here soon enough to prove the point).

  3. David Hand

    Memo to Bernard-
    The ALP is in government and the Liberals are not. So Tony Abbott’s “unresolved issues about climate change” are not “an expensive indulgence” and cannot be the “costliest policy reversa”l because they have not, and are unlikely to, cost anything.

    This is bacause in the two years between now and the next election, the policy musings of Abbott and Hockey from opposition will go through significant change.

    If you really want to talk about “expensive indulgencies”, maybe you might comment on the pathetic take up of the NBN service where it has been rolled out and tell us about the real impact of real policy being really enacted by the people really running the country, who, in case it escaped your notice are the ALP (or maybe Bob Brown).

    It would be interesting to see you speculate about when the $40+ billion in the NBN will be transferred into the liability of the downtrodden taxpayer. You can poke at Abbot and Hockey’s flakey numbers but Conroy hasn’t even used the back of a fag packet to calculate the business case of the NBN.

  4. Gavin Moodie

    The Coalition’s policies should be scrutinised if it is to be taken seriously as an alternative government. Furthermore, its criticism of the Government has little force unless it can offer a better alternative.

    I presume that the Coalition would drop any pretence of dealing with global warming should it win government at the next election.

    The low take up of the national broadband network is hardly to the point now, for 2 reasons. The NBN is replacing copper so everyone who has a landline now will be on the NBN when it is rolled out. And service providers will start offering more services that uses the NBN’s capacity once it reaches a reasonable number of people; its audience is far too small so far.

  5. JamesH

    Hey! I’m entitled to my entitlement mentality!

  6. leone

    Ahhh, Tony Abbott, darling of the braindead. Apart from his financial illiteracy, here are some other things you won’t have seen mentioned in the Daily Telegraph or on Their ABC –
    Abbott filmed eating a banana – most Aussie families haven’t ben able to afford bananas for months, yet there he was, shoving one into his cakehole and not sharing.
    Abbott and family jetting off on an overseas holiday just days after he had a go at the Prime Minister for taking a couple of days away from selling the carbon tax so she could catch up on other stuff.
    Abbott taking That Holiday after trying to tell us for a year or so that he was ‘just like us’ and struggled to pay his mortgage. Did he pay for That Holiday with some of the proceeds from his $750,000 loan?
    Abbott giving the finger to Queensland by choosing to holiday overseas. Didn’t he know Queensland has been pleading with us to take our holidays there?

    And still this prancing fool gets favourable news coverage. Why? And why does ‘the media’ keep up this stupid line that only the Libs can manage the economy?

  7. david

    leone perhaps the self titled ‘know all’ here David Hand would like to answer your pertinent questions, he appears to consider he is infallable on all matters. I suspect he probably knows how many times a day Abbott breaks wind!!!

  8. David Hand

    Hmmm. Leone’s pertinent questions.
    Are people on the right side of politics brain dead? No (that answer does not require infallability)
    Should Tony Abbott share his banana? Not if he doeasn’t want to. (hmm. not too much of a challenge to alleged infallability there either)
    Is Tony Abbott allowed to take an overseas holiday? Yes.
    Does Tony’s overseas holiday indicate that he is not like us? No. Accoring to the Australian Bureau of Statistics, 6.8 million overseas trips were made by Australians in the year ended June 2010, of which 82% were for a holiday.
    Did Abbott “give the finger” to Queensland by going overseas? Quite possibly, along with about 5.5 million other Australians, including Queenslanders. Though Queenslanders should not complain, there’s 4 million Kiwis across the Tasman all of whom holiday overseas in Queensland.
    Is Tony a prancing fool? Er, I don’t think so, though I disagree with his politics.
    Do I know how many times a day Tony breaks wind? Sorry, my fallability is exposed as I have no idea.

  9. Hugh (Charlie) McColl

    It’s OK Leone, you can get it off your chest at Crikey. Everyone else does.

  10. zut alors

    It’s an horrendous thought but perhaps the Coalition had more economic nous when Cousin Jethro (aka Barnaby Joyce) was Finance MInister.