The drift to protectionism in Australia continues, with the Turnbull government lining up to breach its election promise and prop up the Carmichael coal mine project with a concessional loan from its Northern Australia Infrastructure Fund.
Despite saying during the election campaign that there was no public funding in the project, run by corrupt Indian company and Australian political donor Adani, the path is being cleared for a concessional loan for half the cost of the rail link that is critical to the white elephant project (that the rail line isn’t the mine itself is a distinction without a difference — especially any financial difference for Adani). Prime Minister Malcolm Turnbull, who has already met with Adani owner Gautam Adani to discuss special legal protection for the project, is meeting with the billionaire again today. The company has had difficulty raising finance for the project, but many of its capital problems would be solved by a government loan at below-market rates for part of a $2 billion (at least) rail line that the market sees no viability in.
Meantime a number of coal mines remain on sale in eastern Australia, with Wesfarmers only the latest to put its coal mines on the block.
Trying to lure a multinational company to operate an unviable project with a concessional loan is straight from the protectionism playbook — as is the tiny number of jobs that a $1 billion loan would support: the company itself has been forced to admit it would create just 1460 jobs — so the loan would mean around $680,000 per job. Admittedly that’s a figure dwarfed by the staggering expenditure of millions per job in the submarine project, and the ostensible loss to taxpayers would simply be the difference between the loan rate and the market rate. But what happens when the mine becomes unviable and is shuttered or sold — does responsibility for repaying the loan fall to the new owner or stay with Adani? Or will it be written off by the Commonwealth?
The Palaszczuk government, it should be noted, is also an enthusiastic, though non-financial, supporter, of the mine, having cleared the way for the project through planning and environmental processes.
To add insult to policy injury, the government will be committing $1 billion on a rail line for a white elephant at a time when there are regular calls for greater government investment in genuine infrastructure projects that would generate economic benefits well in excess of their cost. Given the alarming fall in public infrastructure spending under the Abbott government, misallocating $1 billion to a rail line to a large hole in the ground is a particular waste — even the “rail line to nowhere” Inland Rail project will at least benefit some agricultural producers.
Adani’s donations to and dealings with the government smack of the crony capitalism that has been such a hallmark of this government and is effectively a business version of the union-driven manufacturing protectionism of Labor, in which the key sectors of party allies receive favoured treatment unjustified by any rational policy analysis. As Australia retreats into handout-based protectionism, the cronies from all sides will be queueing up for their piece of the action.