By prolonging uncertainty around investment in energy generation, the government gives itself scope to keep blaming Labor and renewables for blackouts -- at least until voters wake up to it.
As Crikey fearlessly predicted last week, the government is now backing away from a bipartisan Clean Energy Target to provide certainty for energy investors, in favour of a more coal-centric policy. The goal is to portray Labor as the party of letting the lights go out, complete with clunky nicknames such as “Blackout Bill” and “Brownout Butler” (sadly, we’ve had “No Coal Joel”, not the more obvious “Flickering Lights Fitzgibbon”). Shorten and Butler, apparently, were in charge of Australian energy policy until a few months ago, so deserve the blame.
A deliberate attempt to avoid bipartisanship on energy will prolong exactly the uncertainty that has curbed investment in power generation capacity, exacerbating the growing under-supply of power. But, judge the government how you want, it’s looking at a persistent six-point polling gap that would see it tossed out of office in a flash if it were forced to an election; desperate times call for desperate measures.
As former Clean Energy Finance Corporation head Oliver Yates noted this morning, that the Prime Minister and his Energy Minister are trying to force AGL to keep open a power plant scheduled for closure in 2022 further adds to the uncertainty of companies considering investing in the new capacity that would replace Liddell. Indeed, perhaps AGL should have followed the prescription of the Finkel Review, endorsed by the government, and stayed silent until three years out from closure — 2019 — to reveal its plans for Liddell. Giving the market a generous seven years to prepare for closure has brought AGL nothing but trouble.
The government is thus undermining investment both at a macro and a micro level. Its refusal to agree to an overall energy policy, and the likelihood it will embrace one that, intentionally, Labor can’t accept, will deter all energy investment. Its thugging of AGL to keep Liddell open will deter investment in replacement capacity for that.
Politically, the perpetuation of under-investment in power generation will increase the risk of blackouts, which can then be blamed on renewable energy and Labor. Theoretically, this is a political gift that will keep on giving — you perpetuate the problem that you can blame on your opponents. But it only works until the media and voters work out that it’s your politicking that is causing the problem. Meantime, we’re stuck with the world’s dumbest energy policy, which gives us high prices, poor reliability and rising carbon emissions.
Sep 11, 2017
As interventionism becomes fashionable again, governments will do what they've always done -- play favourites and go after enemies. Bernard Keane and Glenn Dyer report.
AGL CEO Andrew Vesey
Now that we’re all ex-neoliberals — and not a moment too soon — watch for some of the bad aspects of pre-Hawke-Keating era economic policy to reassert themselves. One of which is that, now that government intervention is becoming fashionable again, it’s much easier for governments to play favourites.
In sectors like media, of course, government have never stopped playing favourites, but by and large it’s harder to do so when your primary economic setting is to keep governments out of markets. That’s now coming to an end, at least in some areas — don’t expect too much interventionism from the government on wage stagnation, for example — it’ll be limited to the rather pathetic sight of Scott Morrison yesterday suggesting, ever so politely, that wouldn’t it be nice if corporate Australia were to share a little of its profits with workers.
But in energy, there’s none of that hands-off echo of the neoliberal era, when governments slunk around obsequiously asking companies what they could do for them (we exaggerate… a little). And especially not if you’re AGL and you’ve incurred the wrath of the Coalition for not expertly matching the many policy twists and turns of a government that is conflicted on power that on the weekend its energy minister bagging his erstwhile Cabinet colleague, the former and perhaps future resources minister, for calling renewables a “short term sugar hit” (whatever that actually means).
So AGL’s Andy Vesey travels to Canberra today to be hectored about Liddell power station, despite — as Crikey reported last week — the Australian Energy Market Operator making clear that any drop in supply from the closure of Liddell would be nearly entirely addressed by greater renewables capacity. The company has been the subjected to orchestrated attacks by the government in coordination with News Corp’s papers, all of which have been entirely political in purpose, and not least because AGL has the unmitigated gall to employ the partner of a Labor politician.
Now, markets are starting to be spooked by the government’s energy politicking. In its weekly global credit review, Moody’s pointed out that the actions of the Turnbull government had increased “the risk of an introduction of more intrusive regulation to curb retail prices in Australia.” Moody’s said:
“We estimate that AGL’s and Origin’s earnings will decline by as much as the mid-single-digit percent range, assuming that all of their consumers currently on standard contracts switch to discounted contracts. Such declines will increase their financial leverage ratio, as measured by funds from operations/debt, by 1.0-1.5 percentage points. A lot will rest on how many retail customers choose the discounted contracts, and whether other retailers will actively compete for these customers by offering their own discounted products.”
Moody’s was relaxed about the overall long-term impact on energy companies, noting “more than half their earnings derive from activities not affected by the discounting, including wholesale power generation, gas retail and liquefied natural gas exporting. Over time, AGL and Origin may also recover some of the lost revenue by paring back their average discounts, if competition from smaller second-tier retailers declines …”
But it shows how quickly the policy environment has changed that such a warning from Moody’s garners little or no attention in a country where, until recently, if a politician merely looked askance at a business leader there’d be op-eds about “sovereign risk”, and prominent companies can be publicly thugged by the government with nary a word from the Business Council or some other assembly of the corporate great and good.
In the new era of government interventionism that we’re all now signed up for, it pays to remember that it’s not just governments intervening, but politicians. And politicians rarely do anything without some political calculation involved.
Sep 8, 2017
While everyone has assumed the Prime Minister wants to get a Clean Energy Target through his partyroom, what if his goal is actually to demonise Labor instead?
Earlier this week, I wondered if the government’s recent strange behaviour presaged that, no matter how much Labor offered to compromise on energy and climate policy, the government will never agree to bipartisanship.
After all, Malcolm Turnbull had decided to use reports from the Australian Energy Market Operator to demand that the Liddell coal-fired power station be kept open, even though those reports explicitly and clearly showed that the risk of unserved power demand in NSW — following this long-forecast closure of Liddell — would be kept to a negligible level if there were greater investment in renewable power. The owner of Liddell, AGL, was repeatedly verballed by the Prime Minister and others and then, when it objected to being lied about, attacked by the government and by News Corp, which in league with the government has now begun one of its periodic culture wars against the company. And it’s a campaign that uses the sort of language that if Labor used it about major corporate players would be condemned with froth-mouthed fury as “class warfare” by the Coalition and the Murdoch press. Now, hilariously, the Coalition and The Australian have combined to demand that Labor “state its position” on Liddell, which will remain operational for another five years.
Since energy policy is one of the few areas where, at least in the government’s own eyes, it has an edge over Labor, Malcolm Turnbull seems to have made a decision that he wants to keep the issue running for as long as possible in order to damage Labor. Concluding a bipartisan agreement on a Clean Energy Target that allows high-efficiency, coal-fired power to be built (which it never will be) would remove, at a stroke, the government’s capacity to paint Labor as the party of higher power prices, because both sides would support the same policy framework.
Most of the media coverage of the debate over a Clean Energy Target has centred on whether Turnbull can get a CET through his party room. But what if he doesn’t want to? What it he wants to keep using the issue to attack Labor instead, even if it means continuing uncertainty for investors and a continuation of the same shambolic energy market situation as now? Political survival is the first order for any government — longer-term issues such as the closure of ageing coal-fired power plants can be dealt with after the next election is won.
It’s thus interesting that, today, Fairfax reported that Coalition backbenchers were now demanding not merely a CET that allowed coal, but some kind of “baseload investment scheme” that would fund coal-fired power as well.
This would be a significant movement of the goalposts by the Coalition: no longer would a “dirty” CET be required, but taxpayers would be required to waste billions on coal-fired power plants as well — the only thing that will ensure a coal-fired power plant is ever built in Australia ever again. Labor is unlikely to come at wasting money like that.
Remember that Labor has moved a long way on this — it rather courageously took a policy for two carbon pricing schemes to the last election (one for electricity, and a wider one). It then considered an emissions intensity scheme, which had strong business support. Then it shifted to endorse a Clean Energy Target following the Finkel Review. More recently, it has left the door open to CET that allowed coal-fired power, acknowledging that it might be necessary in order to accommodate Turnbull’s problems with his party room and a bipartisan policy is crucial to get energy infrastructure investment going again.
Along the way, Labor has copped abuse both from the Greens, who insist it is selling out the planet, and the government, which insists it is being ideological.
But it may well be that any offer of compromise by Labor is met by the Coalition simply moving the goalposts ever closer to coal-fired power, with the goal of portraying Labor as committed to plunging the entire country into darkness. After this week, it may well be the case that that is exactly what Turnbull wants to do. And the consumers and businesses of the 2020s be damned.
Sep 7, 2017
Let free markets and private capital operate unencumbered by regulation, the right demands. Until, um, free markets produce results they have an ideological problem with.
A recurring theme of the 30-year reign of neoliberalism is the gross inconsistency of many of its advocates. Socially conservative economic liberals live this inconsistency every moment of their lives: they’re all for letting corporations and investors do what they like, unburdened by the dead hand of government, untaxed and unregulated to the extent that democratic politics will allow, but very keen to use government to control individuals. Companies should be able to do as they please, but anyone not a heterosexual white Christian male is to be tightly regulated in their reproductive, relationship and social behaviours. It’s the sort of mentality that leads to occupational health and safety rules that protect employees from dying in their workplaces as annoying red tape, but also pushes to ban abortion and prevent euthanasia.
But even many economic liberals who consistently apply their liberalism when it comes to social issues are also prone to another inconsistency. They’re all for letting the market, as the repository of all wisdom, operate unencumbered — until it produces outcomes they don’t like. At that point, the cry goes up for regulation. We saw this spectacularly during the mining investment boom when some of the world’s biggest companies poured billions into the construction of new mining and extraction projects all at once, bidding against each other to pick up engineering and construction talent from around the country. Strangely enough, this surge in demand for workers prompted the price of labour to rise significantly — just as the surge in Chinese steel manufacturing had prompted a surge in the price of iron ore. But the surge in wages was apparently an outrage that required government intervention, as mining companies and their industry peak bodies demanded government intervention against greedy unions trying to inflate the price of mining projects. “Australia is a high cost place to do business,” they moaned as one, along with their cheerleaders in the national newspapers. “Industrial relations deregulation is needed urgently.”
Ditto when Australian National University decided to divest itself of some fossil fuel companies. Investors, surely, can make their own decisions about where they wish to invest? Isn’t it a free market in which investors pick and choose what they want to fund? Apparently not: Tony Abbott and his ministers lined up to give ANU a kicking for divesting in Santos, labelling the ANU decision “stupid”. That was about a month before the Santos share price fell of a cliff, at the bottom of which it has remained ever since.
Now AGL is copping the same treatment. AGL owns Liddell power station, an ancient and nearly dead coal-fired plant that the company intends to close in 2022. Conservatives are normally the most solid supporters of private property, and look aghast at any unmerited policy that in any way, shape or form could be construed as infringing on the rights of a property owner to use their property as they see fit.
But AGL is being savaged by conservatives for planning to close a power station at the end of its life. David Leyonhjelm, usually to be found enthusiastically supporting freedom, deregulation and allowing people to do what they bloody well like, took to Sky News yesterday to condemn AGL. “I’ll be closing my AGL account and going elsewhere,” he piously intoned, before moving out of the Sky studio to give a media conference to reannounce his boycott (alas, no one showed up because he’d called it at the same time as Scott Morrison was holding a presser, but never mind). Leyonhjelm is normally the type to mock consumer boycotts as the antics of childish twitterati. Suddenly he’s gung-ho for them. Ditto Cory Bernardi, that paragon of conservatism who suddenly has as much of a problem with a company taking a commercial decision as he does with LGBTI Australians taking relationship decisions. Australia’s least-trusted newspaper, The Daily Telegraph, joined in to attack AGL, but we don’t expect consistency from News Corp’s junior journalists even within the same article, let alone as a company philosophy.
Guess it just goes to show that neoliberalism really is dead when even its stoutest defenders are calling for some good old-fashioned economic Stalinism.
Jun 21, 2017
The Turnbull government is chucking neoliberal dogma overboard as fast as it can to try to keep up with a deeply sceptical electorate.
To grasp what’s happening in politics this week, think about pretty much every eternal verity about economic rationalism that Australian policymakers have adhered to now for a generation and imagine the Coalition chucking them out the window. Not all at once, and not all ministers. But a deeply worried government is abandoning shibboleths around market economics at a rate of knots.
It’s worried not just about its political future, vividly demonstrated by the long line of polls that have shown it trailing Labor, but worried that the entire ideological landscape in politics, not just in Australia but across the West, is changing rapidly.
Yesterday, faced with the need to be seen to be doing something, anything, about the big rises in power bills that will soon roll out across eastern Australia, PM Malcolm Turnbull, his Energy Minister Josh Frydenberg and Minister for Digging Stuff Up Matt Canavan, announced that new export controls would be placed on gas, that the ability of energy companies to appeal against regulator decisions on pricing would be ended, and the government would establish how to replace the coal-fired power capacity that would be taken out of the grid in coming years. If necessary, the government would also fund replacement projects, up to and including clean coal.
In one announcement, the government unveiled even greater interference in companies and their property rights, cut off access to the legal system for companies, and flagged it was ready to get into the business of owning power stations that the market refused to fund because they made no commercial sense. Small government? Avoidance of sovereign risk? Investor certainty? Rule of law? Letting markets solve problems? Pfffft.
And it was happening at the same time as the government was desperate to find the votes to support a big increase in public schools funding at the expense of private schools.
Welcome to 2017, when Donald Trump is in the White House, Jeremy Corbyn looks twice the leader as any Tory does, wages have been stagnant for several years and consumers are sick and tired of paying ever-higher electricity prices for less reliable service. All governments of one kind or another are forced to abandon some point of ideology for electoral considerations. But the wholesale jettisoning of neoliberal truisms like so much unwanted weight from a sinking life raft is unprecedented in recent decades. What appeared nonsensical drivel from the likes of George Christensen a few days ago — the government should build coal-fired power stations — is now being seriously countenanced.
Not all ministers have worked it out yet. Take Treasurer Scott Morrison, who yesterday in effect contradicted Reserve Bank governor Phillip Lowe’s suggestion that higher wages would be a good thing. Wages rises would come when companies grew, Morrison said. And Michaelia Cash’s legislation to target systematic underpayment of workers has just been delayed following lobbying by — you guessed it — business.
This sort of thing won’t cut it any more. Morrison’s language would have been unexceptionable even just a year ago. Now it sounds like a “bugger you” to households.
If Labor had done any of these things — especially around domestic gas reservation — the screams from the Liberals about sovereign risk and the impact on investment would have been deafening. But the Liberals are learning they need to adjust to an electoral atmosphere in which neoliberal dogma is increasingly toxic.
If business has a complaint about the direction of the government, there plenty of people it can take the matter up with. Tony Abbott and co, who ensured years of investment uncertainty in the electricity market. The Business Council and other big business lobbyists who incessantly demand wage cuts and lower company taxes. Energy companies that have relentlessly gamed the byzantine National Electricity Market. Gas companies that invested billions without having the gas to process in their LNG trains. Pipeline owners who behave like something out of the American Gilded Age. They thought they were being clever, maximising shareholder value and charging what the market would bear. All they did was end up provoking a backlash, and it has a long way to go yet.
Jun 15, 2017
The only way back for coal-fired power is via government ownership -- and Soviet-style command economics.
At least one climate denialist is prepared to admit the truth of their position on electricity. Far-right Queensland MP George Christensen wants governments to return to the power-generation industry and build coal-fired power plants.
We knew they hated market-based policies and preferred big government — thus the loathing of a carbon price, and its replacement with Direct Action, under which bureaucrats picked winners to get handouts. But Christensen has gone the full socialist, with governments building and owning industry.
That’s where you end up when you back coal-fired power, but investors are not prepared to do the same. Investors won’t put their money into coal, but Christensen et al will happily put your money into coal.
How much would it cost? New ultra-supercritical “clean coal” plants cost a couple of billion dollars a go, at least. But you’d need a lot of them, especially if you wanted to meet the carbon emissions abatement goal to which Tony Abbott committed Australia when prime minister, because no matter how many prefixes like super, ultra, advanced, hyper and mega you put in front of these plants, they still produce a lot of emissions, meaning there are only limited net reductions from taking existing coal-fired plants offline and replacing them with new ones.
How much would taxpayers be up for? Earlier this year, Dylan McConnell of the Melbourne Energy Institute had a crack at estimating the cost of achieving the kinds of emissions reductions claimed for clean coal by Coalition coal spruikers like Matt Canavan, which are around 27%. In McConnell’s estimate, you won’t get any change from $60 billion.
And that wouldn’t come from the capital account of the budget — it would go straight onto the budget deficit bottom line. Unless the coal spruikers decided that consumers and business must pay high enough prices to recover the full cost of all those billions, plus a small return on the investment — which would entail dramatically higher prices than available from renewable energy sources.
And the costs of coal-fired power would be even higher than that because it is an inflexible power source, unable to ramp up when energy from renewable sources drops at night or when there’s no wind. Leaving these new plants not running part of the time would drive prices up even more. Which Green MP or radical sandal-wearing leftist claims that? Erm, the employer peak body Australian Industry Group’s Principal National Adviser.
Of course, that problem could be addressed by taking renewable sources of power offline so that coal-fired power could operate continuously without needing interruptions for intermittent sources. That would bring the per MW/h cost down a little. But then you’d have to replace all that renewable capacity you’ve removed with still more new coal-fired stations. More cash please, taxpayers! Plus a few billion in compensation for the operators of renewable energy sources whose plants you disconnected.
You’d also have to ban renewables altogether. After all, they’ll be cheaper — probably significantly cheaper — than coal-fired power and businesses and consumers might prefer to use them. But then they’d compete with the government’s new coal-fired power supplies and recreate the ramp-up problem you had before you took all the renewable sources out of the grid. So best just to ban all non-coal-fired power.
That’s the proper Soviet way, of course: government controls everything, private enterprise not allowed.
Or you can build the things and run them at a loss, pumping out carbon emissions when no one needs their power, watching them become ever more obsolete as other energy technologies get cheaper and cheaper, a vast dead weight on the budget papers.
If Christensen and Co. really want to go down the Soviet path, they can do it far more efficiently and effectively: simply force LNG exporters to provide enough gas to the east coast energy market to drive gas-fired power prices down to an affordable level. Gas-fired power is far more flexible than coal, has much lower emissions, and — best of all — it’s a fossil fuel as well, so there’s no concern about those filthy renewables. And you don’t have to ban anything except LNG exporters selling gas at an international price.
Apr 5, 2017
The proposed "5-minute settlement rule" has the potential to simultaneously address the cause of price spikes and the reliability of the grid, and it would reduce emissions.
Blaming renewables and state governments for all that is wrong with our electricity market might look like good political strategy, but it is not going to fix the underlying problems that caused last summer’s blackouts or the rising price of energy.
An open letter from energy and industry experts to the Prime Minister, published today in The Australian Financial Review, has called for practical solutions that can be implemented this year to drive new market rules and energy efficiency policies that could achieve results — on price and reliability — before next summer.
The “rules” that govern Australia’s electricity markets were written last century to regulate power stations using technology from the century before that. Fixing these rules so that they accommodate new ways of generating and storing electricity would unleash innovation in demand management, battery storage and new consumer services that will disrupt incumbent coal and gas players and deliver cheaper more reliable and clean power. It’s why the owners of the old technologies — coal and gas — like the old rules.
But the times, they are a changing. In the last month we have seen Elon Musk and Mike Cannon-Brookes attempt to reshape the SA energy market by Twitter, we have seen the SA Premier and the federal Energy Minister hold the most remarkable press conference in living memory, and we’ve seen the Prime Minister pivot from “coal is great” to proposing Snowy Hydro 2.0 without skipping a beat.
But regardless of who wins the next election, or which storage technology winds up the cheapest, the one thing we can say with certainty is that a 21st century electricity market needs 21st century market rules. And one of the first rules we need to change is the speed at which the market price is allowed to move.
The so-called proposed “5-minute settlement rule” has the potential to simultaneously address the cause of price spikes and the reliability of the grid, and it would reduce emissions. And it could do all of this without a budget allocation or even passing legislation through Parliament. It could be in place well before next summer’s peak demand arrives just by changing how we “settle” electricity contracts.
Like when you sell something — whether it is shares or a house — the moment of sale in the electricity market is called a “settlement”. If you own some shares in a company, or a house, and you see that the price of your asset has gone up, you “settle on a price” and proceed with the exchange. But that’s not how it works for electricity in Australia.
While electricity is supplied in five-minute blocks, the price is “settled” in half-hour blocks based on the average price of electricity over half an hour. If you were selling shares on the ASX it would be like instead of getting the price of the moment, waiting to find out what the average price for those shares was over the day before you knew how much money you would get. For coal-fired power stations that pump out the same amount of electricity all day it does not matter much if they get paid in five-minute or 30-minute blocks, but for batteries that can respond instantly to peaks in demand it would make a huge difference. That is why the fossil fuel generators are opposed to any change.
We already know batteries soak up excess energy when it is cheap, or even free, and send it back into the grid when it is needed. Hooked up to solar panels, batteries allow consumers and communities to meet peak demand locally. They can be used also reduce the scale and cost of required “poles and wires” in new and growing areas.
Critically, batteries are also uniquely well suited to jumping into the market on a short-term basis, smoothing price spikes and reducing the capacity of incumbents to use strategic bidding to push up prices.
Faster trading of wholesale electricity would also bring new competition from new entrants such as energy conservation technology, which can respond very quickly to short term changes in the market, if there is a price signal. In turn that would smooth out volatility, undercut ‘Enron’ style strategic bidding to push up prices, and deliver security in a renewable-powered grid.
An Australian invention also means that air conditioners and other consumer devices can be remotely controlled to reduce their load for a few minutes just before a demand peak hits.
Despite all these possibilities our regulators, cheered on by the old incumbent coal and gas generators, refuse to act. The Australian Energy Market Commission, which sets the rules, has repeatedly delayed making a decision. And energy companies are busy lobbying — directly or through their lobby group, the Australian Energy Council– to prevent the five-minute rule change going through.
The Australian Energy Council actually submits as an argument against competition: that it would “change the economic sustainability of some generators”. In other words: the rule change would be effective.
All of the loud voices with all of their solutions to the “energy crisis” have agreed on one thing. The energy market is not working in the national interest. A five-minute rule might not compete with the Punch and Judy show that makes up so much of the energy debate. But it is a straightforward regulatory change can than improve the energy market. If we cannot even do that then we really are in trouble.
* Ben Oquist is the executive director of The Australia Institute
Thank goodness a solution to eastern Australia’s emerging energy supply problems is at hand. Courtesy of the Australian Financial Review today, we got the perspective of BlueScope Steel on matters electrical, and the need for “a steady and affordable supply of power for big industrial users”. Presumably speaking ex cathedra, BlueScope CEO Paul O’Malley handed down a “three-step plan” which, reduced to basics, involves keeping coal-fired power and getting rid of state renewable energy targets. Power costs in the US, O’Malley lamented, were five to 10 times lower than here and businesses were set to flee in droves.
Which is a bit odd given that less than a year ago the Australian Energy Council found that power prices for industrial users were, um, lower in Australia than in the US. Must’ve been a big drop in the US in recent months, eh?
More to the point, we evidently missed the memo about BlueScope being a credible outfit to be talking about business costs, because BlueScope is the source of a serious cost impost on Australian businesses. It’s because of anti-dumping measures designed to prop up the otherwise globally uncompetitive BlueScope that the Australian construction sector faces nearly $2 billion a year in additional costs — derived from punitive tariffs aimed at keeping out cheaper, allegedly “dumped” foreign steel.
Construction companies, property owners and the businesses and consumers that rent and buy properties all face higher costs because of BlueScope and our perverse national obsession with the idea that only manufacturing jobs are real jobs. But O’Malley has the front to complain about costs being too high.
It gets better. In late 2015, BlueScope threatened to close the Port Kembla steel works (that’s in NSW, which relies heavily on coal-fired power, not renewables, but yeah whatever, Paul) and won a wage freeze and the loss of 500 jobs (all up around $180 million in concessions from unions over three years) and wrung a $60 million payroll tax cut over three years from the NSW government. BlueScope promised to repay the handout from 2020 to 2029 — a trifling $6 million a year.
Well, yesterday BlueScope announced a nice gift for shareholders: a $150 million share buyback, and a lift in its interim dividend from 3 to 4 cents a share. Shares rose 4% to $12.68 in yesterday’s weak market, more than three times the level (just over $4) in October 2015 when the concessions were negotiated. In the same month, the company took the risky move to buy its partner out of a steel making joint venture in the US. Within months the upturn in global steel demand and prices emerged and the company’s fortunes improved dramatically.
Yesterday indicated it is on track for an underlying pretax profit to top $1.1 billion for the year to June. That was after directors said the second half yearly underlying pre-tax profit would be about 50% higher than the $340 million earned in the second half a year ago. In the December half, the underlying pre-tax profit was $603.6 million. December half yearly net profit jumped 79.5% to $359.1 million.
Now, admittedly, in October of last year the company did the right thing and paid a bonus to workers at the Port Kembla steelworks to reward them for their sacrifice. But NSW taxpayers? Rather than stringing out repayments to 2029, the company should hop to it and repay the NSW government — the money could even be reinvested in the Port Kembla area if the government wants to address the high level of unemployment in the region.
And one more thing. Every time a business leader like O’Malley complains that energy supply problems are the result of both sides playing politics on energy for a decade and refusing to make tough decisions and they just need to “fix it”, remember this. We had a highly effective energy policy from the Gillard government, a low-cost carbon pricing scheme that succeeded in reducing Australia’s carbon emissions with little impact on households or businesses — and a pro-business market mechanism endorsed by economists. Julia Gillard — partly because she needed Greens support — took a huge risk to implement such a scheme, and was smashed by a cynical opposition for it, under the banner of lower power prices. And it even included a massive handout for BlueScope as part of a $300 million “Steel Transformation Plan”.
Well, Energy Minister (and, hilariously, alleged Environment Minister) Josh Frydenberg has admitted that the entire rationale for the Abbott government’s carbon price repeal — cutting power prices for households — lasted five minutes before prices resumed their upward march under the Coalition. That comes on top of Peta Credlin’s admission that the Gillard government had never introduced a carbon tax, despite that claim being central to Tony Abbott’s campaign against it.
And where were all these business leaders when Abbott was campaigning against a fictional “carbon tax”? Did they speak up in defence of a market mechanism and investor certainty? Did they welcome some political bravery on energy policy? Did they condemn the Coalition for a cynical campaign against good policy? Nope, not a word — although BlueScope was happy to take the government’s money. And many businesses backed Abbott with big donations. If they now want to complain about poor energy policy, they don’t have a skerrick of credibility.
Feb 10, 2017
While the word to get the most attention this was “sycophant”, Malcolm Turnbull spent a lot more time talking about electricity during the first week of Parliament. A survey of h
While the word to get the most attention this was “sycophant”, Malcolm Turnbull spent a lot more time talking about electricity during the first week of Parliament. A survey of his media appearances, speeches and answers in question time over Parliament’s first week back shows he used the word sycophant a mere five times (to be fair, it was loudly, and in the space of roughly a minute).
But because of the government’s focus on Labor’s “ideological” preference for renewable energy he mentioned energy 55 times (if you take out the obvious stuff like “Australian” and “Labor”, it was his most-used word). But the real fixation was with electricity. The Prime Minister raised electricity 34 times over the week. No other common cost of living issues — housing, water, food — cracked 20 mentions. Childcare was a distant second to electricity, rating 14 mentions (which was five fewer than “business”).
Incidentally, while Labor was No. 2, with 61 mentions, Liberal and Coalition collectively passed his lips a mere six times.
Malcolm’s Top 10 words for the week:
The epic fight over the greyhound racing ban will mar departing New South Wales Premier Mike Baird’s legacy, but one of his greatest triumphs was turning one of the most controversial issues in NSW politics for more than a decade into a nonevent. When Baird sold off another significant chunk of the NSW electricity network at the end of last year, this time to industry super funds, it drew barely a comment from either NSW Labor or the Electrical Trades Union — despite being the issue Labor tore itself apart over, and lost party leaders for, at various points since the Bob Carr era.
It’s quite a contrast from the hysterical, racist campaign Labor and the unions waged against privatisation before the 2015 election, with the CFMEU complaining about selling “our” electricity network to China and Labor telling blatant lies about the impact of privatisation on electricity prices. This was far from being an irrational resistance to privatisation: Labor and the unions were out to protect union jobs in the industry, putting the benefits to consumers of privatisation in a distant second place. The CFMEU is a major donor to NSW Labor, and so, too, is the Electrical Trades Union, which gave over $81,000 to Labor in the lead-up to the 2015 election.
But in responding to the Ausgrid sale by the Baird government, Labor leader and nonentity Luke Foley could only bring himself to complain that the government could have got a better deal if it had waited longer and shopped the assets around more. At least that time Foley offered a coherent response; his response to Baird’s previous sale, of Transgrid (to foreign investors), was to tenuously link it to the WestConnex project so disliked by some of Sydney’s inner-city types. More interesting was the response from the ETU, which declared “as private owners go — we could do worse than an Australian Super fund.”
The non-reaction illustrates that governments looking to sell assets are often taking on two political problems, not just one: selling assets is disliked by the electorate, and foreign ownership is also regarded with hostility. The Keating and Howard government dealt with this by putting in place foreign ownership limits of one kind or another for Qantas, the CBA and Telstra. Scott Morrison’s ham-fisted intervention in the Ausgrid sale to block Asian investors accomplished something similar.
But that it wasn’t just Australian super funds but industry super funds that ended up purchasing the half-stake in Augrid appears to have also been important. Neither foreign nor, strictly, private sector, industry super funds are ostensibly a more benign entity to take control of a piece of infrastructure and its employees. It’s an illusion, of course; super funds of any stripe will seek managers who will run assets as efficiently and cheaply as possible and extract maximum revenue, just like a private corporation. And most super funds — industry, retail and corporate — invest in privatised entities like Telstra, Qantas and the Commonwealth Bank. Most Australian workers, therefore, have a long-term stake in privatised companies, but don’t necessarily associate themselves with the “shareholders” that they perceive as benefiting from the misdeeds of such companies.
The ideal way forward would be for politicians and business leaders to explain to voters the benefits of foreign investment and of properly regulated privatisation (where governments don’t structure the sale to minimise competition for the asset and thus maximise their return). But with no one either willing or, it seems, capable of doing that, super funds seem to offer an effective political cheat code for politicians dealing with truculent, privatisation-averse electorates.