Regular readers will know that I am no fan of the Gillard government. It was an abomination from birth, conceived in a deal with miners that was a breathtaking betrayal of the Australian public. But that does not mean that all of its policies are bad and should be scrapped.
On the contrary, its two best policies are visionary in an economic and nation-building sense, these are the carbon price and the NBN.
Yet the Opposition, which is going to win the election in a doddle (if Newspoll has anything to say about it), has committed to dismantling both despite being in clear practical and philosophical agreement with the principles that drive the two policies. The idiocy of this is on display in several stories this morning that should make the blood boil for anyone committed to efficiency in public spending.
Let us be clear. Nobody in Canberra any longer disputes the balance of probabilities argument about human-induced climate change. Both parties are committed to addressing this issue. The only debate is about how to do so. The Labor government has installed a carbon price. It is not a tax. It is a relative pricing mechanism that makes greenhouse gas intensive energy more expensive and less-polluting energy less expensive. That is all it is.
In creating it, the Labor government had to ensure that those legacy industries that were most effected by the price changes were compensated. These industries – power and manufacturing mostly – were gifted free permits and rebates. This was a direct cost to the people of Australia to guarantee smooth implementation of the price. In my view they went so far as to actually compromise the efficiency of the price effects but that’s a matter of opinion.
In the end some form of compensation was necessary to prevent a destabilsing pace of change.
Now, as the Opposition prepares to take government, Shadow Treasurer Joe Hockey admits he is planning to compensate renewable energy firms for scrapping the carbon price:
Shadow treasurer Joe Hockey has said a coalition government would compensate businesses affected by the abolition of the carbon tax on a case-by-case basis.
Many Australian businesses involved in clean energy and other sectors are benefiting from the price on carbon dioxide emissions, which will move to an emissions trading scheme in 2015.
However, Mr Hockey told reporters in Launceston on Monday the cost of the carbon tax on households and business was “far greater than any money that is coming out of Canberra to compensate individual businesses”.
He said the best way to improve the bottom line of all businesses was to get rid of the carbon tax.
This is manifestly wrong. Benign CPI figures and the lack of complaint about the price show a remarkable lack of impact on costs. Suddenly some of the most ardent moaners about the tax, Bluescope Steel for instance, are on fire on the stock market and are forecasting a rebuild in profits.
By the time of the election and the subsequent double-dissolution election (another $160 million or so down the gurgler) the carbon price will have been operative for two years. Firms will have been well on their way to adapting. China will have joined or be about to join us by then with its own planned carbon price on top of that already operating in the EU, meaning about a third of the world’s population had priced carbon. Yet we’re going to remove it, and pay another round of compensation to those firms that benefited from it. And we’re going to do this despite a carbon price being in complete philosophical sympatico with the Liberal Party’s belief in markets and private enterprise as a solution to a problem that they accept needs remedy. What’s more, they are going to go ahead with a an alternative solution based upon the dead hand of government choosing winners and losers, which is in total contradiction to their own tenets.
And then there’s the NBN. It is true that there has been limited cost-benefit analysis on the project. But given both parties now also agree that is should be built, the only question is again what sort of NBN do we want? Do we want a genuinely new broadband network that can set up super-fast communications for a country dogged by the tyranny of distance for the next century or so? Or, we want a half-arsed NBN that relies upon copper-wiring to deliver from the node to households and doesn’t work so well?
I’m of the view that the NBN is a magnificent piece of infrastructure that ticks every box on good rationales for big-ticket government spending. It is not about pork; is fantastically equipped to deliver productivity gains; is forward looking in the way a ten lane Sydney Harbour Bridge was when everyone rode horses, and it is a piece of infrastructure that only government could finance and build that sets a framework for any number of new industries to spring up and expand.
It is, in short, a Bobby Dazzler.
Yet what is the new government going to do with this? From the AFR today:
The Coalition will use a parliamentary report to demand that NBN Co prepares plans for a change of government, as senior telecommunications executives labelled Mike Quigley’s call for a consultation into different rollout methods as a bizarre backflip.
According to a draft dissenting report seen exclusively by The Australian Financial Review, the Coalition will make a series of recommendations aimed at preparing the national broadband network for a Labor loss.
It said NBN Co and its board should be “clearly mindful” of a possible change of government after September 14 and the need to alter contracts.
The draft report goes on to call for NBN Co to detail the potential benefits of changing contract conditions before the next election. It also recommends that all future contracts have clauses written in that allow NBN Co to change the contracts as required as a result of a change in government.
So, the incoming government, which quite clearly has no idea what kind of technology the NBN should be based upon (remember last week it was still tossing around using the existing cable TV network) is going to screw every contract the NBN writes while it tries to figure out what it has so far failed to conclude in three years of trying. Is it any wonder that the NBN CEO is suddenly all over the place:
“None of this is too late to talk about [and] it’s definitely not too late to do [fibre-to-the-basement] if you chose to do it. Likewise you can deploy tens of thousands of cabinets and deploy FTTN, that’s not out of the question either.”
…On Monday AAPT chief executive David Yuile told the Financial Review that NBN Co had only raised the issue a week before Mr Quigley went public, and described the move as “bizarre”.
…“You run the risk of ending up with another endless academic debate,” he said.
Let’s not let efficiency of government spending get in the way of that!
So far as I can tell, there are only explanations for these two bizarre examples of big government imbroglio orchestrated by our ‘small government’ political party. The first and better of the two is that the Liberal Party’s belief in small government is so extreme that it is quite happy to stuff-up well-executed and visionary policies so long as short-run costs are reduced.
The second explanation is that the Liberal Party is well aware that these polices are very good and consistent with its own principles but owing to Tony Abbott’s political strategy of objecting to everything for its own sake, they must be trashed irrespective of the national interest. If this is the case, and I suspect it is, then the Liberal Party now sees politics as a game, with no genuine civil service sentiment left.
Take your pick.