The Prime Minister’s comment yesterday extolling the “various elements of the Carbon Pollution Reduction Scheme” when asked about handouts to industries under a carbon price demonstrates that Labor remains committed to a political solution to climate change, not an economic one.
Only a few seconds earlier in that interview (on what is consistently the most substantial political interview program, Meet The Press), Gillard had referred, as she frequently does, to the reform courage of the Hawke and Keating Governments on floating the dollar and tariff cuts.
So let’s call the PM on that and do a comparison.
The Hawke government’s Building a Competitive Australia package, which slashed tariffs across manufacturing, would have to be one of the gutsiest reform decisions ever made by a federal government (even braver, for example, than John Howard’s finest moment, the gun laws). While union opposition mainly came from the Left in Labor (Andrew Leigh wrote a good account a while back) and the corporate sector was divided on protectionism, it was while a savage recession as still unfolding. When Hawke rose to deliver the package in Parliament in March 1991, unemployment was nearly 9% and rising.
Like carbon pricing, much of the debate over how far Australia should go in reducing tariffs was couched in terms of how our trade-exposed industries would fare when we started reducing protection and other countries did not. But the Hawke Government, recognizing the need to complete the opening of the Australian economy they had commenced in the 1980s, decided, on the advice of figures like Ross Garnaut, to adopt a unilateral approach to reform.
What “industry adjustment” assistance did our trade-exposed industries receive as part of the Building a Competitive Australia package? They got nothing. Hawke, Button and Keating put $90 million into a package for displaced workers to help retrain them and move them to other industries. There was also a rural adjustment package and increased services and loans for exporters. Otherwise, the big manufacturers got nothing.
And of course they got nothing. That was the very point of the reform.
The CPRS, in which the Prime Minister says “a lot of good work was done, contained so much industry assistance – –$20 billion over a decade — that it initially cost the Budget money. Far from being any sort of “great big new tax”, for the first five years of operation the CPRS would have cost the Budget a total of $4 billion. The CPRS wouldn’t have provided a net return to the Budget — ie: been any sort of tax, great, bit, new or otherwise, until the 2020s.
Most of the recipients of the industry assistance would have been foreign multinationals. Rio Tinto was largest, followed by Alcoa. BP, Shell, Norsk Hydro, Chevron, Mobil were all big recipients of free permits. Only local steel makers Bluescope and OneSteel and CSR figured among the top ten beneficiaries. None are major employers.
As the Grattan Institute subsequently showed, the exorbitant levels of assistance were far in excess of the actual level of actual impact of the CPRS on the most trade-exposed companies.
It’s appalling that the CPRS provided massive handouts to a number of the world’s biggest companies. It was indeed “good work” if you were a shareholder in Alcoa or Shell. But that’s a moral issue, not a policy issue. If the exorbitant handouts had no impact on the goals of the CPRS, or even facilitated them, there would have been a case for the CPRS.
Instead, by muting nearly the entire carbon price signal for our biggest polluters, the CPRS would have created an incentive for them to maintain business-as-usual at least until the 2020s, when the handouts were scheduled to start winding down — assuming the then-government was prepared to let them do so. It would have transferred the task of reducing emissions to the domestic economy and the power sector, which had its own set of less generous handouts.
Labor figures acknowledge the CPRS turned into a rentseekers’ frolic, with each government backdown encouraging more executives to book a flight to Canberra to wave rubbish modeling and warn of massive job losses, production cuts and the four horsemen of the Apocalypse. Australian innovation at its finest.
Nonetheless, despite the campaign waged by it all sides, Labor’s CPRS remained popular with voters right up until its axing last May. As far as voters were concerned, they wanted action on climate change, and the CPRS, which they didn’t have the faintest understanding of, ticked the box. After all, if Malcolm Turnbull was prepared to sacrifice his leadership for it, it must be OK.
Labor’s primary goal remains to convince voters it is taking action on climate change. Whether that action is effective is less important. That’s why they want to keep the handouts, and why there is going to be a fight with the Greens over them.
Thank goodness Hawke, Keating and Button were smarter than this lot.
Can we at least wait until the policy is fully formulated and proposed before we start finding fault with it. With the Greens and independents in a strong negotiating position, already playing the role of of an influential minority, there is much less scope for “rent seekers” this time around.
I thought Howard’s gun laws would have had to have gone down as one of his most populist moments. Certainly not his finest moment, which was the GST.
@JIMMY
Appreciate your optimism, but I don’t see the point of waiting, myself. Labor itself has form on its lack of commitment to this issue. Their strategy is already clear; they want to hold out some distant hope of a genuinely transformative carbon market, while running an inadequate tax policy, festooned by subsidies, compensations and rorts, in the meantime. So we might as well start campaigning now – as loudly as we can – that this won’t be enough, because we can be sure it’s all they want to offer. For the Greens to have any effect on this, they will need to be very sure they are ready to bring about the fall of this Government, with whatever collateral damage that does to them as well. Of course that brings with it the dreadful implication of an Abbott government, but at this stage we would be better off having our failure hung out for all to see, than having a pretend carbon pricing scheme to wave around in front of the rest of the world, so that we can go on doing nothing for a few years longer.
We might as well have this unpleasant little conversation now. The denialist donkeys will be all over this comment space minutes from now, attempting to drag the conversation away from the central realities to whatever nonsense they have for today’s rant. It would be niceto be ableto have a sensible little talk about this before they show up.
Sooner or later, Gillard et al have to get a genuinely transformative grown-up policy into law: the law of averages surely has to come into play eventually. Why can’t it be this one?
Jimmy agreed but I would like to go even further. How about the media actually do some factual unbiased analysis this time around? How about they keep an open mind and let the actual debate develop voter’s opinions? How about they write articles which requires readers to focus on the facts contained in the story instead of ensuring everyone focuses on their over inflated, ignorant, self serving, “it’s all about me” personality I suspect that I am merely p1ssing in the wind which such requests considering this piece written by Mike O’Conner at the Crapier Mail.
http://www.couriermail.com.au/news/performance-during-disasters-far-from-premier-anna-blighs-finest-hour/story-e6freon6-1226001366000
Even by News Ltd standards this is pretty poor and it’s nice to see most people saw it for what it is.
BTW has anyone seen on any News Ltd site the reporting of Cuddly Joe’s admission that the Tony Abbott’s “Flood Levy is Bad” appeal email was wrong? I would have thought it would be big news. Maybe Piers, Janet and Bolty are on their lunch breaks and haven’t got around to writing it yet.
Jimd – Completely agree about the denialists.
For the Govt to even get this policy through the lower house let alone the senate they will have to get the Greens on side, last time around even if they got the Greens on side it wouldn’t of got past Steve Fielding so they had to go with trying to drag to Libs across (and very nearly got there) with a watered down policy, the thinking being get the mechanism in place and then tighten the screws later.
As for Gillards comments, there is no advantage for her in flagging a tougher line on the “trade exposed” insdustries this far out from introducing the policy, she already has enough fights going on why start another just when she is about to have a win on the flood levy and possibly start gettng some traction.
The Greens and the independents can negotiate strongly and in fact reject a carbon pricing policy and still keep the ALP in power for another 30 months, the fact that it is mutually beneficial to negotiate in good faith should result in a good policy outcome, even if this means that both the green groups and industry dislike the policy.