Saturday, July 16, 2011

A burnt offering: Carbon Pricing doesn't have to be like this

Australian politics has done something over the last couple of weeks that I had thought impossible: it's taken a turn for the worse!
Before we get down to the specifics of that malaise, let's just look at the environment. The US is critically close to a situation where it won't be able to meet its obligations. That's an amazing and frightening situation. Unless Obama reaches agreement with the Republicans to increase the debt ceiling and unless he does it in the next few days we are faced with the very real spectre that the lurching situation in the US could get a lot worse. Ben Bernanke, Chairman of the Fed, took the most unusual step of warning Congress that if they didn't act then the resulting default would be catastrophic. I find it amazing that he even felt it necessary to state the bleeding obvious to Congress. Make no mistake that if the US enters a crisis of default then we, along with the rest of the world will catch a mighty chill.
Meanwhile in Europe, one economy after another finds itself in strife, Ireland, Greece, Italy, Spain, Portugal, with the UK not much better. A default in any of those economies will set off ripples that will be uncontrollable and unpredictable.
So back home to our hopeless government. Throughout the Howard years, with the dubious exception of the GST, the march of economic reform ceased. Howard fooled around at the edges, Reith ran little hate campaigns on the docks but little changed and the regressive and draconian Work Choices has been rightfully wound back. So the momentum of the Hawke/Keating years was lost.
Rudd made no headway and thence to Gillard. She has had 3 opportunities for major reform, each dragged through the Rudd period and each a failure. The Henry review gave her and Swan an ideal opportunity to really make some much needed changes to a complex, unwieldy and counterproductive tax system. Score on that to date? A dismal failure.
Next, and as a subset of the Henry review a more effective way of sharing the wealth from mining with the broader community - the so called mining super profits tax. Well there's the first mistake, why choose an emotive title like that? We're merrily mining Australia into becoming a great big, bankrupt, hole in the ground. Miners' shareholders are getting rich, countries receiving our mineral wealth are getting rich, but an insufficient share of that wealth is being invested in the future of Australia. What was required was a simple, broad based tax that equitably shared the spoils of mining between the miners and the owners of the resource - the Australian people. The outcome was an example of how to completely fuck up a reasonably minor piece of economic reform. An example of how to become hostage to a bunch of loud-mouthed doomsayers - the miners. What we are therefore getting is a narrow and insufficient tax and a failed opportunity for the future of Australia.
Finally we come to the carbon tax - again wrong with the name. We now have a repeat performance, an imperfect tax, a failed sales effort and a deeply sceptical and divided community. Australia has a unique opportunity to be ahead of the curve on this. The world, whether it likes it or not, will have to come to terms with these reforms, and more quickly than it expects. To be early on this curve, to get the structural changes through our economy before others, will leave us in a highly competitive position. Instead we have a tax that is insufficiently broad, and too gradual and because of that it will have insufficient impact on the economy, will drive insufficient change. We need this carbon pricing arrangement for two reasons: firstly we don't want to have to deal with the real costs of global warming when they reach catastrophe point and secondly we would prefer to lead the world than to follow in a way, not of our own choosing.
Gillard and Swan have failed completely to sell this much needed reform. Meanwhile Abbott is a national disgrace. He roams the country stirring up fear uncertainty and doubt, all for only one reason: his own perceived political advantage. He is creating deep social division, all for nothing. What Abbott must realise, and what Australia must hold him to account for is that his behaviour is having a very, very serious effect on confidence - consumer and business confidence. It doesn't need to be like that, the carbon price is a good thing, it's insufficient but nevertheless it's a good thing. It will have only a minor impact on the economy. Abbott and business need to stop whinging and start being the market driven capitalists they claim to be. This carbon price will give gentle and long term market signals and we need to get on and respond to those signals in a timely and effective way.
It's about time that Australians started to judge Abbott for what he is: a wrecker. When you feel economic pain over the next few months, as the Australian economy worsens - as it will on the back of failed confidence - remember that Abbott had a hand in destroying consumer and business confidence with his senseless and inane yelling about this sensible reform.
We are entitled to better than the current mob we have on both sides of parliament. The only man or woman who impresses me is Tony Windsor. We'll have lots more of him please.