Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.
A new sandpit for long side discussions, idees fixes and so on. Discussions about climate policy and related issues can be posted here, along with the usual things.
In keeping with his commitment to do exactly what Tony Abbott would have done, but with more style, Malcolm Turnbull has just announced that we are to spend a trillion dollars on fighter plans and submarines. Apparently, there are lots of problems with the hugely expensive F-35 Joint Strike Fighter, which Australia has on order. Rather than look at the details, it’s worth asking we are, yet again, arming ourselves to refight World War II.
World War II was fought on land, sea and air. Submarines and fighter planes played a crucial role. But since 1945, things have changed. The 70 years since 1945 have been marked by near-continuous land warfare in various parts of the world [1]. On the other hand, there has been essentially no naval warfare, in the sense of battles between ships or carrier based aircraft, with the exception of the absurd and unnecessary Falklands conflict. Air combat between fighter planes lasted a bit longer after 1945, playing a big role in the Korean War, but has been pretty much non-existent since the 1980s. All warplanes, these days, are effectively bombers, usually hitting targets that have previously been rendered defenceless by missile attack. Yet the problems of the F-35 stem, in large measure, from its capacity to engage in hypothetical dogfights.
Fighter planes and their pilots still attract most of the attention, and nearly all the glory, in air warfare. But the real work is increasingly done by drone operators, commuting from the suburbs to undertake their task of destruction in air conditioned offices: since they see exactly what they have done, the job is apparently much more stressful than that of a fighter pilot. So far, only the US is using military drones on a large scale, but it’s obvious that this is the way of future wars. The specific problems of the F-35 are irrelevant in this context: it will in any case be obsolete by the time it’s delivered.
As for submarines, Wikipedia gives a list of submarine actions since 1945. There have been six of them, three involving the sinking of surface ships, and three involving the firing of cruise missiles, something that can be done from craft as small as corvettes.
Submarines have been much more notable for sinking themselves. Wikipedia lists four US submarines sunk at sea since 1945, two with all hands. The Russians have done far worse, losing 18 subs, most notably the Kursk, lost with all hands in 2000.
Submarines aren’t obsolete in all their possible uses. If the world ends in a nuclear holocaust, the final missiles will probably be fired from nuclear-armed submarines. But the revival of old-style submarine warfare, using our subs to sink (say) Chinese naval vessels seems remote: the increasing power and range land based anti-ship missiles will soon make naval power obsolete. Even more remote (thankfully) is the use of submarines to attack merchant ships without warning, as was done in both World Wars.
Of course, no one can be certain that seemingly obsolete modes of warfare won’t be revived: For example, there was a cavalry charge during the Afghan war. But spending a trillion dollars on weapons systems that haven’t been used anywhere in the world for decades does not seem like a sensible use of public money.
Having posted this, I’m fully prepared to get a hammering from military buffs who will point out that I have got this or that detail of air and naval warfare wrong. But the idea that detailed knowledge of tech specs or the minor points of military history constitutes expertise is, in this context, quite wrong. In the absence of any significant air or naval warfare within living memory, supposed expertise is about as useful as Scott Morrison’s knowledge of unicorns. The only important thing to know is that, like nearly all military expenditure and nearly all wars, these proposed purchases haven’t been subject to a cost-benefit test and would fail it if they were.
fn1. There’s a case that land warfare has become less frequent, or at least less bloody over time. But it’s hard to tell.
I’ve recently published a piece in Aeon, looking at the peak in global paper use, which occurred a couple of years ago, and arguing that this is an indication of a less resource-intensive future. Over the fold, a longer draft, with some links.
Read more…
Responding to Labor’s proposals on negative gearing and capital gains tax, Malcolm Turnbull has warned that property values will fall as a result. He is surely correct. To put the same point in different words, Turnbull agrees that Labor policy will make housing more affordable and thinks that this is a bad thing.
There are some obvious electoral advantages in Turnbull’s scare campaign. As I observed when this topic came up during Abbott’s Prime Ministership, most voters own houses and therefore benefit from making housing less affordable. For this reason, Australian public policy has long been to make housing as unaffordable as possible.
The difficulty for Turnbull arises from precisely this point. He has more or less promised to do something about the tax treatment of property. But, from our current starting point, almost any change must make existing owners worse off. So, when and if he does anything, he will be hoist on his own petard.
Labor’s response to Turnbull has been interesting and, I suspect, effective. The line has been to accuse him of a dishonest scare campaign, without explicitly denying that property values will decline with the removal of unjustified tax concessions.
While this is an example of a non-denial denial, it is I think, defensible. Turnbull is mounting a scare campaign, and doing so dishonestly, attacking policies he might otherwise embrace. This is a much fairer use of the term than when it was used to apply to Labor’s reiteration of its longstanding opposition to expansion of the GST at a time when the government was clearly floating the idea. Pointing out that it was never formal government policy is a silly evasion – it wasn’t as though Labor was inventing the idea.
As longterm readers know, my record on political and other predictions is mixed, not as bad as some have made out, but by no means uniformly accurate. Still, I’m going to venture my most fearless prediction in some time.
Bill Shorten will be Prime Minister after the next election.
Like most Australian voters, I have no great enthusiasm for Shorten. But, I’ve come to the view that Turnbull is, as the Fin remarked recently, “all hat and no cattle”, and the same can be said of most of his ministry. In particular, Scott Morrison is the most striking instance of the Peter Principle I’ve seen in some time. Brutally effective as Immigration Minister, he handled the Social Services portfolio quite deftly, but has floundered as Treasurer.
Turning from personality to policy, Labor certainly deserves a win. They have stuck to their guns on issues like carbon pricing, and advanced serious and credible policies on tax and public expenditure, something that hasn’t been attempted since John Hewson’s Fightback! disaster in 1993.
By contrast, the Turnbull government is an enigma. Will it go to the election with the policies Turnbull inherited from Abbott? Or will be asked to “let Malcolm be Malcolm”? Or will we see a continuation of the studied ambiguity of the last five months? No one seems to know.
For the moment, Turnbull’s popularity looks like the trump card. The experience of his last stint as leader suggests that this is a fairly weak reed.
The best hope for the government is that the post-Turnbull surge was not so much driven by support for Turnbull as by an underlying LNP majority, submerged by Abbott’s absurdities.
The papers are abuzz with speculation about an early election. This is one of the favorite games of the political punditariat, and it usually comes to nothing, but the story this time seems to make even less sense than usual. Part of the problem is that there are three different ways an early election could be held, and the proponents seem to be assuming a “unicorn” or “Pixie horse” (to use Scott Morrison’s evocative terminology) that combines the best of all three from the government’s position.
First, we could have an immediate dissolution of the House of Representatives. This would have a chance of achieving the biggest selling point of the early election idea, cashing in on Malcolm Turnbull’s popularity while it lasts. But such obviously cynical moves have failed in the past, as Campbell Newman could tell you. Also, it would (as I understand it) necessitate a separate half-Senate election in the second half of the year. The political class, with the exception of minority and micro-parties, really hates this idea.
Second, we could have a double dissolution, based on the Senate’s failure to pass anti-union laws, and held under the existing rules. Apparently, the election would have to be called the day after Budget Day (11 May), and couldn’t be held until July. So, it would only be a few months early, invalidating the whole idea. And, of course, it would guarantee a Senate with lots of micro and minor party members.
The third idea, is the second, plus a deal with the Greens to reform the Senate voting rules to allow preferential above the line voting. This would kill off the “preference whisperer” deals that have allowed the election of candidates with almost no votes. The reform makes sense, but why on earth would the Greens rush it through to make life easy for the government? All they have to do is hold off until the Budget session and they can get the reform with no possibility of a double dissolution.
Also, the idea that the reform will kill micro parties seems to be oversold. Automatic preference exchange might be gone, but there will still be “how to vote” cards. With a DD quota of about 7.5 per cent, a candidate with a 4 per cent primary vote, or even less, could easily get in on preferences.
However, no one seems to be making any of these points. Have I misunderstood the arcana of our system, or just got the strategy wrong? Over to you.
Update In comments, Lt Fred makes a convincing case that the Greens want and would benefit from a Double Dissolution. They did much better in 2010 than in 2013, so a DD would be good for them.
I’ve recently published a piece in Aeon, looking at the peak in global paper use, which occurred a couple of years ago, and arguing that this is an indication of a less resource-intensive future. Over the fold, a longer draft – I’ll add hyperlinks back in if I get a free moment.
Read more…
That, for me at any rate, is the crucial element of the Tentative Findings of the South Australian Royal Commission into the Nuclear Fuel Cycle (here. The media releasee summarises
aking account of future demand and anticipated costs of nuclear power under the existing electricity market structure, it would not be commercially viable to generate electricity from a nuclear power plant in South Australia in the foreseeable future.
However, Australia’s electricity system will require low-carbon generation sources to meet future global emissions reduction targets. Nuclear power may be necessary, along with other low carbon generation technologies. It would be wise to plan now to ensure that nuclear power would be available should it be required.
The detailed findings are sensible (that is to say, largely in line with my submission and evidence. A crucial para:
If nuclear power were to be developed in South Australia, a proven design should be used that has been constructed elsewhere, preferably on multiple occasions, and should incorporate the most advanced active and passive safety features. This is likely to include consideration of small modular reactor (SMR) designs, but exclude for the foreseeable future fast reactors
Given that Barry Brook, a leading enthusiast for fast reactors was part of the Commission’s Expert Advisory Panel, this finding should make it clear that fast reactors are an option for the distant (beyond foreseeable) future.
The finding is striking because South Australia is, or ought to be a test case for those arguing that a carbon-free electricity system must rely on “baseload” nuclear. South Australia has high and increasing reliance on renewables, is close to phasing out coal, and has limited interconnection capacity. It’s exactly the modle that anti-renewable sites like Brave New Climate have “proved” time after time can’t possibly work without nuclear power. Yet, it seems, even a sympathetic inquiry finds nuclear power to be an option for the distant future, if that.
Bill Shorten doesn’t have a lot of public support, a fact that reflects his background as a machine politician with a penchant for self-promotion. For a long time he has been accused of pursuing a “small target strategy”, hoping to win by default against Tony Abbott.
The latest developments in tax policy ought to prompt ] a reassessment. The nature of policy debates like this is that the government holds all the cards: control of the political agenda, expert Treasury advice, and the capacity to manage the media with judicious leaks.
Despite all of this, Shorten has left Malcolm Turnbull and Scott Morrison looking flat-footed. Their preferred option of raising the GST rate and expanding its base is dead in the water, but not yet formally disavowed. Opposing it was an easy choice for Shorten, but still one that required him to override some supporters within the ALP.
The general assumption was that the government would soon announce Plan B. But Shorten has now beaten them to the punch. His proposals to limit negative gearing and scale back the concessional treatment of capital gains are more substantial than anything they are likely to contemplate in relation to property taxation. And Labor has already signalled willingness to limit tax concessions for superannuation.
So, unless the government is willing to do something really radical, involving an explicit break with the Abbott era, anything announced in the Budget will look like “me too”.
Update Immediately after posting this, I found this piece by Laurie Oakes, arbiter of the Australian political zeitgeist, making an almost identical argument.
The sudden collapse of four for-profit vocational education enterprises including Aspire college is the latest in a string of scandals, failures and license revocations in the sector.
Meanwhile, in the US, the Apollo Education Group, owner of the “University” of Phoenix, has been taken private for $1 billion, a fraction of its peak market value. UoP pioneered the model of providing a bogus education to publicly funded students, ripping off both the students and the public purse. As the US has cleaned up the worst abuses, UoP and others have seen their profits shrink, to the point of bankruptcy in some cases.
The provision of public funds to for-profit operators has been a predictable, and predicted disaster. Of all the disasters perpetrated under the banner of microeconomic reform, education reform has probably been the worst.
In these circumstances, it would make sense for the national government, which has borne much of the cost, to take over the vocational education sector, properly fund the public TAFE system, and close down the for-profit sector, as was recently done in Chile.
The idea of a national takeover is, indeed, on the cards. But far from closing down the for-profit sector, it appears the Turnbull government plans to push the reform agenda even further.
Waist deep in the Big Muddy, and the big fool said, Carry On.
Forbes just released its annual list of the ten richest Australians. Of the top eight, four inherited their wealth. The other four range in age from 75 to 85, suggesting that new heirs are likely to be joining the rich list before too long.
This pattern isn’t yet representative of the Australian wealth distribution as a whole, but it is becoming more so. Piketty’s patrimonial society is not far away.
There are a lot of things we can do to promote a more equal distribution of opportunity and outcomes, but a return to taxes on inheritance (preferably levied on the recipient rather than the estate) would be a good start.
I posted this analysis in December, suggesting that, once the necessary compensation is paid for, an increase in GST wouldn’t be worth the effort. Apparently Treasury modelling (which I haven’t yet located) produces the same conclusion. Given that everything is supposedly on the table, maybe it’s time to look at some new options. An obvious example is inheritance taxes, which raised a fair bit of money before being scrapped in the late 20th century. As the inequality of wealth increases, the case for such taxes becomes every stronger.
Repost
The Grattan Institute has just released a report suggesting that the government should get more revenue from the GST, either by broadening the base to include food, health and education (yielding an extra $17 billion) or by raising the rate to 15 per cent (yielding an extra $27 billion). As you’d expect from Grattan, the analysis is sound and careful. As long as you accept the standard framing of the tax reform debate, in terms of the need to shift from direct to indirect taxation, it is reasonably convincing.
Grattan suggest using 30 per cent of the extra revenue to increase welfare payments and 30 per cent in cutting the bottom two tax rates, thereby compensating low income earners. The overview concludes:
Around 40 per cent of the additional revenue from a higher GST would be left over after welfare increases and tax cuts. At least some will need to go to state governments to help them address their looming hospital funding gap, as the price for their support of the change. This would leave a little – but not much – to reduce the Commonwealth’s budget deficit, or to pay for other tax cuts that promote economic growth.
(emphasis added).
Is that enough to sell the package? I can’t imagine the states going along with a deal like this for less than 20 per cent of the total extra revenue, which implies the Feds are left with 20 per cent, somewhere between $3.5 and $5.5 billion. From a political viewpoint, it’s hard to see this being worth the effort for the Turnbull government, especially with no guarantee of success.
As a comparison, the FBT concession for motor vehicles, reinstated by Tony Abbott costs the budget around $1.5 billion. Exemptions for non-profits, which have been comprehensively rorted, cost at least as much. Add in a few ‘rats and mice” concessions, and the Federal government would have as much as it could get, in net terms, from the Grattan package (Getting rid of the non-profit concession would probably require some compensating expenditure, but the same is true of the health and education concessions under the GST.)
That’s before we get to the elephants: superannuation concessions (also supported by the Grattan report), corporate tax avoidance, land tax and higher income taxes for (say) the top 5 per cent of income earners (reflecting elite opinion, the Grattan report suggests cutting these rates). All of these are hard, but not obviously harder than the GST.
So, why is GST reform at the top of the government’s list? The answer is simple enough. The advocates of reform haven’t had a new idea, on taxation or anything else, in 30 years. They didn’t get the GST out of Keating’s Tax Summit in 1984 and they didn’t get the version they wanted from Howard and Costello in 2000. So, the same old idea keeps on coming up.
Nearly five months after Malcolm Turnbull became PM, it’s finally possible to get a clear view on the big question of what the change means. Has the shift from Tony Abbott has led to a real change in policy approach, centred on growth and innovation? Or is it merely cosmetic, amounting to the end of the tribalist rhetoric and gesture politics that eventually cost Abbott his job.
Based on recent developments, the case for “merely cosmetic” seems overwhelming. Turnbull’s rhetoric about innovation is starkly at odds with the reality of:
* massive job cuts in CSIRO, focused on climate change. The fact that the new entrepreneurial CEO is flogging the dead horse of coal to diesel adds insult to injury; and
* the $5 billion Northern Australia infrastructure fund, a boondoggle based on mid-20th century rhetoric about “unlocking the North”. It was pushed by Abbott as a sop to the Institute of Public Affairs, who underwent a sudden conversion to the cause of publicly subsidised dam projects a little while ago. The political imperative has gone but the money still flows, it seems.
The picture is just as bad on other issues. Turnbull is going ahead with the $160 millikon plebiscite on equal marriage, even though its leading backers, who only pushed it as a delaying tactic, have announced they won’t be bound by the result. Turnbull should have taken these statements as releasing him from any commitments to the anti-equality right, and allowed a free (in both senses of the word) vote in Parliament instead.
On climate change, the rhetoric in Paris sounded OK, but there has been no action to speak of. Turnbull hasn’t even committed to maintaining the Renewable Energy Target, let alone increasing it as he will need to do in the absence of an effective carbon price.
I imagine the appearance of improvement will last long enough to secure an election win for Turnbull. But, unless he starts delivering some change, the reality will become evident before long.
Adani has finally received environmental approval from the Queensland government for its proposed Carmichael mine in the Galilee Basin. At this point, in a standard news story about a multi-billion project, we’d be reading about the domestic and global banks that were competing to be the lead financiers for the project, and those who would have to content with the crumbs. Along with that, there would stories about the partners and subcontractors who would get the lucrative work of construction.
Instead, we have a long list of banks and other funding sources that have announced that they won’t finance the project, or have pulled out of announced and existing finance arrangements. The list includes the Commonwealth (formerly a big lender to Adani), NAB, the Queensland Treasury, the State Bank of India, and global banks including Standard Chartered (another former big lender), Citigroup, JP Morgan Chase, Goldman Sachs, Deutsche Bank, Royal Bank of Scotland, HSBC, Barclays, BNP Paribas, Credit Agrilcole and Societe Generale. The US and Korean Export-Import banks have been touted as possible sources, but appear to have backed away. Even the Abbott-Turnbull $5 billion slush fund for Northern Australian boondoggles, seen when it was announced as a rescuer for Adani, now appears unlikely. At the recent Northern Australia Investment Forum, the fund was the centre of attention, but Adani apparently didn’t get a mention, unless it was implicit in Frydenberg’s claim that the government wouldn’t be investing in “white elephants”.
The situation with suppliers is just as bad. Adani sacked the engineering team from Worsley Parsons and the construction group from Posco (also a supposed equity partner) last year. A $2 billion announcement of work for Downer EDI seems to have vanished into thin air. And at Abbot Point, Adani, as owner, is engaged in a nasty brawl with Glencore, the current operator.
In summary, we appear likely to find out what happens when a dog catches the car it has been chasing. Adani and its backers have been denouncing green tape and “lawfare” as the only obstacles to the bonanza they have on offer. Now, the legal and administrative obstacles are gone, so they have only to line up the money, rehire the contractors and announce the starting date. My guess is that this will never happen.
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