tag:theconversation.com,2011:/us/topics/ross-garnaut-3318/articlesRoss Garnaut – The Conversation2024-02-16T03:07:23Ztag:theconversation.com,2011:article/2237222024-02-16T03:07:23Z2024-02-16T03:07:23ZRoss Garnaut and Rod Sims have proposed a $100 billion-a-year fossil fuel tax – and it’s a debate Australia should embrace<figure><img src="https://images.theconversation.com/files/576107/original/file-20240216-28-n2qwvj.jpeg?ixlib=rb-1.1.0&rect=0%2C0%2C3842%2C2557&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Leading Australian economists Ross Garnaut and Rod Sims this week sought to shake up the carbon policy debate in Australia, by <a href="https://www.theguardian.com/australia-news/2024/feb/14/fossil-fuel-tax-australia-revenue-economists-ross-garnaut-rod-sims">proposing</a> a tax on the nation’s fossil fuel production. They claim it could raise A$100 billion in its first year and position Australia at the forefront of the low-carbon revolution.</p>
<p>The proposal has been rejected by the federal government and the Nationals, as well as business groups and the fossil fuel industry. The Greens have thrown their support behind the idea.</p>
<p>Garnaut and Sims have characterised their proposal as a “levy”. But it’s essentially a tax, applied to one sector of the economy: exporters of fossil fuels such as coal and gas, as well as importers of oil and diesel.</p>
<p>Australia’s recent political history tells us the road to a carbon tax is not smooth. However, as other nations race to restructure their economies in line with a low-carbon future, Australia risks being left behind. Whether to introduce a major, economy-shaping tax on fossil fuels is a conversation Australia must have. </p>
<h2>How would the plan work?</h2>
<p>The respected economists presented <a href="https://cdn.sanity.io/files/1pv5uha8/production/acd64198bc1248006ac829e4852c0c72b9e120e6.pdf">the plan</a> to the National Press Club this week. It involves a “carbon solutions levy” applied to all fossil fuel extraction sites in Australia (around 105 sites), and on all fossil fuel imports to Australia. The tax would presumably be calculated according to the emissions generated when the fuels are burned.</p>
<p>Garnaut and Sims say proceeds in the first year of the levy would be well over A$100 billion. They say the money should be spent on a rapid acceleration of Australia’s renewable energy expansion, as well as subsidising the development of low-carbon manufacturing for products such as steel and aluminium. </p>
<p>The proceeds would also be spent on cost-of-living relief for consumers, such as energy bill relief and scrapping the current excise on petrol and diesel fuel.</p>
<p>Garnaut told the National Press Club the global transition to net-zero represents a huge opportunity Australia must seize:</p>
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<p>We can use it to raise productivity and living standards after the decade of stagnation. Other countries do not share our natural endowments of wind and solar energy resources, land to deploy them, as well as land to grow biomass sustainably as an alternative to petroleum and coal for chemical manufacture. </p>
<p>In the zero-carbon economy, Australia is the economically natural location to produce a substantial proportion of the products currently made with large carbon emissions in Northeast Asia and Europe.</p>
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<p>And as Garnaut also outlined in his speech, climate change threatens Australia’s economy, which remains heavily dependent on exporting fossil fuels. </p>
<h2>Is the levy a good idea?</h2>
<p>Carbon dioxide emissions cause global warming, which damages the planet and its people. The purpose of a carbon tax, or levy, is to ensure polluting companies pay for the damage they cause. In theory, the taxes make polluting production processes more expensive than the alternatives, reducing demand for those products.</p>
<p>The world, including Australia, has committed to reaching net-zero emissions by 2050. It’s a big task and we need to act fast. Economists <a href="https://link.springer.com/article/10.1007/s10640-020-00436-x">broadly agree</a> carbon taxes are the most efficient, lowest-cost way to reduce greenhouse gas emissions. So the proposal makes good policy sense.</p>
<p>Australia had a carbon price, or tax, from 2012 until 2014. It was introduced by Labor but repealed by the Abbott Coalition government. The policy was working: <a href="https://theconversation.com/despite-its-imminent-demise-the-carbon-price-has-cut-emissions-29199">analysis</a> showed emissions in Australia’s national electricity market would have been 11 million to 17 million tonnes higher without the measure.</p>
<p>Of course, sound policy ideas do not always come to fruition. After more than a decade of the so-called “climate wars” in Australia, the term “carbon tax” remains politically unpalatable.</p>
<p>Unsurprisingly, the plan proposed this week was <a href="https://www.theaustralian.com.au/business/chris-bowen-and-david-littleproud-reject-carbon-solutions-levy-proposed-by-rod-sims-and-ross-garnaut/news-story/a28f15c7588a8b18845198d1162b4a5a">immediately rejected</a> by Labor and the Nationals. Even less surprising was the strong rebuff from business groups such as the Australian Chamber of Commerce and Industry, and the fossil fuel lobby. </p>
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<h2>The rest of the world got the memo</h2>
<p>Putting a price on carbon is not groundbreaking policy. <a href="https://unfccc.int/about-us/regional-collaboration-centres/the-ciaca/about-carbon-pricing">Many countries</a> do it – either as direct taxes or <a href="https://www.journals.uchicago.edu/doi/10.1086/717898">emissions trading schemes</a>.</p>
<p>Notably, from 2026 a European Union <a href="https://www.reuters.com/business/environment/eu-launches-first-phase-worlds-first-carbon-border-tariff-2023-09-30/#:%7E:text=Importers%20will%20from%202026%20need,carbon%20market%20when%20they%20pollute.">tariff on carbon-intensive imports</a> will come into effect. Known as the “carbon border adjustment mechanism”, it means importers will have to report on – and pay for – the emissions created when producing goods such as iron and steel. </p>
<p>The policy is designed to level the playing field for EU manufacturers that must pay a penalty for their own pollution. Imports from countries where a carbon price applies would be exempt from the tariff. </p>
<p>In coming years, we can expect other jurisdictions to implement similar policies to guard their domestic industries. Australia must protect its export revenue by expanding its production of low-carbon goods, or else find itself stuck with expensive, emissions-intensive products that no-one wants to buy.</p>
<p>It’s also important to remember Australia is a relatively small economy with little clout in global trade. To remain serious trading partners, we must come to the table with adequate climate policies.</p>
<p>And finally, imposing a carbon levy in Australia would ensure we get to keep the revenue for ourselves. The potential proceeds are enormous, and could be spent raising the living standard for all Australians.</p>
<p>My only real quibble with the plan is the proposal to set the levy at the level of the EU’s five-year average carbon price, currently around $90 a tonne. This puts Australia at the mercy of economic conditions in Europe. We’d be far wiser to determine the price ourselves.</p>
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<a href="https://theconversation.com/carbon-pricing-works-the-largest-ever-study-puts-it-beyond-doubt-142034">Carbon pricing works: the largest-ever study puts it beyond doubt</a>
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<h2>Will such a levy ever happen?</h2>
<p>Garnaut and Sims know their policy is a bold one – and will have its detractors. But as the world comes to terms with the economic reality of climate change, Australia risks being left behind. </p>
<p>As Garnaut told the ABC, everyone is a winner under the plan, except fossil fuel companies which, <a href="https://www.abc.net.au/news/2024-02-14/economists-call-for-carbon-levy/103461496">he conceded</a>, “will hate it”. That may be true. But climate change is wreaking havoc on human communities, on natural systems, and on the global economy. It’s only fair that those responsible pay for the damage.</p>
<p>The political hurdles are high, but not insurmountable. Australia already penalises polluting companies via the <a href="https://theconversation.com/australias-safeguard-mechanism-deal-is-only-a-half-win-for-the-greens-and-for-the-climate-202612">safeguard mechanism</a>, which imposes a hard cap on industrial emissions. Ten years ago, such a policy seemed highly unlikely, but we got there.</p>
<p>A carbon levy of the type proposed is an eminently sensible approach to get to net zero. This is a policy debate whose time has come. Let’s bring it on.</p>
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<img src="https://counter.theconversation.com/content/223722/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ian A. MacKenzie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As other nations race to restructure their economies in line with a low-carbon future, Australia risks being left behind. An economy-shaping tax on fossil fuels is a conversation we must have.Ian A. MacKenzie, Professor of Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1893922022-08-25T11:24:30Z2022-08-25T11:24:30ZGrattan on Friday: Can Albanese government wring consensus from union-business impasse over industrial relations?<p>The escalating cost of living is your ally when you’re an opposition seeking election, but when you’re in office, it’s a rampaging beast to manage, economically and politically. </p>
<p>Labor railed about real wages stagnating under the Coalition. Now grappling with rising inflation, the Albanese government has had to tell people to brace for even higher prices and mortgage costs before their real wages start to improve (hopefully) in 2024. </p>
<p>That’s the grim background to next Thursday-Friday’s jobs and skills summit, from which Prime Minister Anthony Albanese and Treasurer Jim Chalmers will be trying to extract a story line of common purpose, even if not unity, from stakeholders with disparate and conflicting interests.</p>
<p>Calling this a “jobs” summit is, incidentally, somewhat of a misnomer. For the first time in records going back four decades, we currently have more job vacancies than we have people who are unemployed. The problems are other than a shortage of jobs.</p>
<p>Albanese makes much of wanting to emulate Bob Hawke’s consensus style and this summit, like that of 1983, is at core a gesture of inclusion, while grappling with very different economic conditions. </p>
<p>Preparing for the day-and-a-half gathering – in parliament house’s Great Hall – of more than 100 participants from business, unions and civil society, ministers had by Thursday this week conducted over 65 meetings with a wide range of groups around the country. </p>
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<p>The summit itself will be carefully choreographed. Given its relative brevity, the formal time devoted to particular issues is short. For instance “sustainable wage growth and the future of bargaining” gets an hour on Thursday morning, while migration, divided into two sessions, runs from 8.50 to 10.30 on Friday morning. </p>
<p>Obviously there’ll be much informal discussion outside the conference room. Tea breaks, a dinner on Thursday night, and the availability of “light breakfasts” provide plenty of opportunities for networking, as well as for participants to rub shoulders with (and lobby) ministers and each other. </p>
<p>Among the minglers will be Nationals leader David Littleproud. When opposition leader Peter Dutton declined an invitation, Littleproud quickly sought one. </p>
<p>Distinguished economist Ross Garnaut, economic adviser to Bob Hawke and climate change adviser to the Rudd government, will speak at Thursday’s dinner. </p>
<p>The summit is a forum for the airing of ideas and wish lists. Centrally, it is a platform for the government to set its narrative as it looks to the October budget and beyond. </p>
<p>But the narrative needs to be underpinned by some broad agreements. The government can’t afford the commentary afterwards to conclude it was primarily a hot air occasion. </p>
<p>Hence there’ll be a desperate scrabbling by the government to land agreement in key areas which, despite the extensive agenda, boil down to the interrelated issues of industrial relations, immigration, and skills.</p>
<p>As of now, unions and employers are miles apart on workplace relations reform despite their common view that the present system is unfit for purpose and must be changed. </p>
<p>The ACTU this week flagged it is seeking a return to sector-wide bargaining – partially reversing the 1990s move to enterprise bargaining – which would strengthen the hand of workers in pursuing pay rises. </p>
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<p>ACTU secretary Sally McManus said on Wednesday that in our service-based care economy “it makes sense to have multi-employer bargaining – that both the workers’ representatives and the employers sit down and negotiate across their sector”. </p>
<p>Asked on the ABC whether she had any reason to think the government was ready to embrace the ACTU’s ideas for big reforms in industrial relations, McManus replied bluntly: “I’d say this: they were elected on a mandate to get wages moving”.</p>
<p>The ACTU proposal has encountered immediate push-back from employers, with the Australian Industry Group’s chief executive Innes Willox describing the call as “a throwback to the 70s”. </p>
<p>Willox argued: “The cornerstone of our workplace relations system is the objective of achieving productivity and fairness through an emphasis on enterprise-level collective bargaining”. The Business Council of Australia was also critical of the ACTU proposal.</p>
<p>Chalmers on Thursday danced around when questioned on this gulf. But Workplace Relations Minister Tony Burke, who is doing the detailed wrangling on industrial relations, made it clear he was open to the ACTU proposal, telling the ABC he was “very interested” in it and that the “destination” he was aiming for was to “get wages moving”.</p>
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<p>Where the government ends up on the ACTU demand will be an early test of its relationship with the union movement, to which it has already thrown a bone by emasculating the Australian Building and Construction Commission ahead of its scrapping. </p>
<p>If the employers are to give some (unspecified) ground on industrial relations, the unions will be expected to be flexible about a higher immigration level. </p>
<p>Businesses facing acute labour shortages are desperate for more migrants, and there has been speculation about the present cap of 160,000 being raised to about 180,000-200,000. </p>
<p>Immigration is good for the economy. Apart from filling labour shortages, migrants spend their money, creating demand and therefore further jobs. </p>
<p>But boosting migration is not without short-term problems. Migrants put strains on housing (at a time of high rents), the health system (already stretched) and other services. And bringing in more skilled migrants doesn’t necessarily address acute shortages such as in the aged care industry. </p>
<p>Traditionally unions are wary of too many migrants. In the current context, they are demanding that a rise in immigration should be tied to conditions, including training measures for locals. To the extent businesses are asked to do this, there will be some complaints. </p>
<p>One thing that desperately needs fixing is the slow processing of visas for immigrants. The government says it is working on the backlog, but unblocking the system will take a while. </p>
<p>The supply of local workers could also be increased in the short term by, for example, allowing older people to earn more before they lose some of their pension, and bringing forward the start date for Labor’s more generous financial arrangements for child care. But these moves impose budget costs. </p>
<p>It’s all a matter of trade offs.</p><img src="https://counter.theconversation.com/content/189392/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The escalating cost of living is your ally when you’re an opposition seeking election, but when you’re in office, it’s a rampaging beast to manage, economically and politically.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1555652021-02-19T07:31:42Z2021-02-19T07:31:42ZThe reset to lift us out of the COVID recession has to be bold: returning to where we were is nowhere near good enough<figure><img src="https://images.theconversation.com/files/385237/original/file-20210219-18-104gdg1.jpg?ixlib=rb-1.1.0&rect=95%2C269%2C3538%2C1652&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Dmytro Larin/Shutterstock</span></span></figcaption></figure><p>Talk about returning the economy to normal after the crisis is misguided. Before the crisis, normal was nowhere near good enough.</p>
<p>Australia did indeed manage to go 28 years without a commonly-defined recession. But the expansion had three distinct stages.</p>
<p>The first, from the end of the early 1990s recession to the early 2000s, saw dramatic economic growth fuelled by dramatic productivity growth. In fact, Australia led the developed world in productivity growth — a remarkable development given that it had spent most of the twentieth century at the bottom of the developed country league table. Much of it was driven by the Hawke government’s economic reforms in the 1980s. </p>
<p>I call this first decade of the long expansion the productivity boom.</p>
<p>Australia continued to experience rapid growth in incomes for another decade, until 2013, this time driven by extraordinarily high export prices for metals and energy and the resources industries investment booms that followed. </p>
<h2>First Hawke’s boom, then China’s boom</h2>
<p>I call this second boom the China resources boom. It drew its strength from the world’s most populous country experiencing the strongest, longest and most resource-intensive economic growth of any developed country, ever. </p>
<p>During the China resources boom, as the world fell into the global financial crisis and bold fiscal and monetary stimulus in Australia and China made Australia one of only two developed countries to avoid recession.</p>
<p>Throughout these first two decades of the long boom, from 1992 to 2012, average Australian incomes, measured in international currency, rose from the bottom half of the developed country league table to the top-most tier. By 2013 Australian incomes were one-quarter higher than in the United States. </p>
<h2>Then the dog days</h2>
<p>Economic growth continued after 2013, but much more slowly, with stagnant output per person and decline in the typical household’s real wages and income. I call this third period the <a href="https://www.blackincbooks.com.au/books/dog-days">dog days</a>. In the seven years from 2013 to 2019, while the whole developed world experienced slow and grumpy times, Australia drifted to the back of the slow-moving pack. </p>
<p>Unemployment has never again fallen to anywhere near the 4% it reached on the eve of the global financial crisis. Underemployment has grown and grown. Average household disposable income per person ended the seven lean years where it began — a period of income stagnation for ordinary Australians unprecedented since (and starting to challenge in longevity) the Great Depression.</p>
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<p>By 2019, average Australian incomes, again measured in international currency, were one-quarter below those of the US.</p>
<p>Many Australians are accustomed to thinking of Japan as something of an economic basket case. They might be surprised to learn that from 2013 to 2019 Australia underperformed Japan on the most important indicator of economic performance: output per person. If Japan is a basket case, on this measure Australia has been a worse one since the dog days began.</p>
<h2>We need to lift our ambition higher</h2>
<p>Returning to those dog days is deeply unattractive, but it is what is almost certain to happen if the treasurer and Reserve Bank are as good as their words.</p>
<p>Josh Frydenberg has said he will maintain an expanded budget only until unemployment “is on a clear path back to pre-crisis levels”. He defines pre-crisis levels as “<a href="https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/speeches/speech-australian-chamber-commerce-and-industry-canberra">comfortably back under six per cent</a>”.</p>
<p>That is nowhere near what Australia is capable of. </p>
<p>The truth is we won’t know what Australia is capable of until we run the economy strongly enough for long enough to see the emergence of market pressure for substantial wage increases. That might happen at an unemployment rate of 3.5%, or it might happen at an unemployment rate even lower. </p>
<h2>Our bank should buy our bonds</h2>
<p>Creating money to allow government spending to achieve early full employment comes with strings attached. So we should move as quickly as possible to full employment, while keeping debt to the lowest levels consistent with full employment on the earliest possible timetable. </p>
<p>Oddly, to not run the budget as hard as we can until we are at full employment could condemn us to endless increases in our public debt to GDP ratio because we wouldn’t be producing the GDP we were capable of. And it could damage our commitment to a liberal democratic political system.</p>
<p>The extra bonds needed to finance ramped up Commonwealth and state government spending should be bought by the Reserve Bank through <a href="https://www.rba.gov.au/education/resources/explainers/unconventional-monetary-policy.html">expanding its balance sheet</a> (creating money) rather than bought on the private market where they are likely to unhelpfully push up the value of the Australian dollar.</p>
<h2>It should not be afraid to push rates negative</h2>
<p>The Reserve Bank’s holdings of Australian government bonds are low by international standards, and they should be expanded. We should avoid running higher interest rates than other developed countries unless our economy is clearly stronger — even if that means negative short term interest rates. </p>
<p>Much contemporary economics presumes that negative or near-interest rates are impossible, or short-lived if they ever appear. The Reserve Bank treats them as anathema, to be avoided at all costs. </p>
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<p>That view has been challenged by the twenty-first-century reality of very high savings and low investment on a global scale. There is no reason to expect a return to “normal” higher interest rates soon, or, with certainty, ever.</p>
<p>Low rates make the interest costs of debt small. At current interest rates, a debt of about a trillion dollars — half of annual GDP and the highest contemplated so far — would incur interest costs of about 0.5% GDP. In Japan, with public debt heading towards two times GDP and with even lower interest rates, the budget cost is currently about zero.</p>
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<span class="caption">Reset, by Ross Garnaut, to be released Monday.</span>
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<p>Some (most likely new) businesses will do well in an ultra-low interest rates environment. Other more-established businesses will cling to guarantees of old rates of return and withhold investment, eventually being weeded out by Darwinian processes. </p>
<p>In my new book <a href="https://www.blackincbooks.com.au/books/reset">Reset: Restoring Australia after the Pandemic Recession</a>, to be released on Monday I outline plans for a <a href="https://theconversation.com/heres-a-long-term-budget-fix-that-would-boost-investment-replace-company-tax-with-cashflow-tax-108347">new business tax system</a> that would reward businesses that invested and penalise those that lived off “economic rents” — over-high profits maintained by lobbying and barriers to competition.</p>
<p>Australians with established wealth have done extraordinarily well out of the low interest rates, rising asset values and high profit shares in the twenty-first century.</p>
<p>We are kidding ourselves if we think an extreme and growing divergence of fortune with less well off Australians is consistent with social cohesion and effective democratic government as we deal with intractable domestic and international problems.</p>
<h2>And we should pay near-everyone a basic income</h2>
<p>In my book I propose a form of basic income, I call it Australian Income Security, that would help stimulate the economy until full employment was achieved. My calculations suggest it is economically realistic.</p>
<p>Nearly all resident adult Australians would receive an unconditional fortnightly payment at the JobSeeker rate (about $15,000 per annum), indexed to the consumer price index. Extra would be paid to people who currently qualify for payments in excess of JobSeeker. The payment would attract no tax.</p>
<p>Beyond that payment, every dollar of Australians’ personal income would be taxed at 37% up to $180,000 and 45% after that.</p>
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<a href="https://theconversation.com/whatever-it-takes-should-now-include-a-universal-basic-income-134405">'Whatever it takes' should now include a universal basic income</a>
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<p>Receipt of the basic payment would not depend on passing a bureaucratic test of whether the recipient had put sufficient effort into the search for a job.</p>
<p>Recipients could choose to look for a job in the knowledge they would keep 63% of every dollar of income from employment. </p>
<p>It would create a much stronger incentive to find work than the high effective marginal tax imposed by the present system as benefits are withdrawn.</p>
<h2>Immigration should restart more slowly</h2>
<p>Non-Australians and Australians who had not been resident for at least half a year would be excluded, as would people with taxable income above $250,000 or with
net assets including super and a house of $2 million.</p>
<p>We will make earlier and stronger progress towards full employment and boosting living standards if we restrict our immigration program and refocus it on valuable skills.</p>
<p>Here I am not referring to the humanitarian component of our immigration program which is too small to be of much economic significance.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/with-our-borders-shut-this-is-the-ideal-time-to-overhaul-our-asylum-seeker-policies-146016">With our borders shut, this is the ideal time to overhaul our asylum seeker policies</a>
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<hr>
<p>Immigration increases both the number of people available to work and the demand for workers. Nevertheless, economic prudence argues for holding net immigration in the decade ahead to about the level in the first stage of Australia’s three-stage recession-free expansion – the productivity boom phase.</p>
<p>Immigration was then about 0.5% of the population per year, half what it was in the dog days that preceded the COVID recession.</p>
<p>Our reset should do much better than return us to the economy we left, but there’s no need to turn our backs on the best of our past. We have faced difficult challenges before and shown we are more than capable of meeting them, often by doing more than we have done before. This is one of those times.</p><img src="https://counter.theconversation.com/content/155565/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ross Garnaut does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Ross Garnaut’s new book Reset argues for much bolder approach to employment, debt, interest rates and basic income than is widely envisaged.Ross Garnaut, Professorial Research Fellow in Economics, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1263412019-11-05T18:59:05Z2019-11-05T18:59:05ZAustralia is in the box seat to power the world<figure><img src="https://images.theconversation.com/files/300007/original/file-20191104-88419-lnffxw.jpg?ixlib=rb-1.1.0&rect=7%2C0%2C2488%2C1661&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Iron ore piles at Dampier, Western Australia. Australia could convert iron oxide to metal for export, producing it with no emissions.</span> <span class="attribution"><span class="source">CHRISTIAN SPROGOE/ Rio Tinto</span></span></figcaption></figure><p>Four years ago in December 2015, every member of the United Nations met in Paris and agreed to hold global temperature increases to 2°C, and as close as possible to 1.5°C. </p>
<p>The bad news is that four years on the best that we can hope for is holding global increases to around 1.75°C. We can only do that if the world moves decisively towards zero net emissions by the middle of the century.</p>
<p>A failure to act here, accompanied by similar paralysis in other countries, would see our grandchildren living with temperature increases of <a href="https://www.theguardian.com/environment/2019/may/18/climate-crisis-heat-is-on-global-heating-four-degrees-2100-change-way-we-live">around 4°C this century</a>, and more beyond. </p>
<p>I have spent my life on the positive end of discussion of Australian domestic and international policy questions. But if effective global action on climate change fails, I fear the challenge would be beyond contemporary Australia. I fear that things would fall apart. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/300006/original/file-20191104-88368-nlzoz0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/300006/original/file-20191104-88368-nlzoz0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/300006/original/file-20191104-88368-nlzoz0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/300006/original/file-20191104-88368-nlzoz0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/300006/original/file-20191104-88368-nlzoz0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/300006/original/file-20191104-88368-nlzoz0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/300006/original/file-20191104-88368-nlzoz0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The Yallourn coal-fired power station in the Latrobe Valley, Victoria.</span>
<span class="attribution"><span class="source">David Crosling/AAP</span></span>
</figcaption>
</figure>
<h2>There is reason to hope</h2>
<p>It’s not all bad news. </p>
<p>What we know today about the effect of increased concentrations of greenhouse gases broadly confirms the conclusions I drew from available research in previous climate change reviews <a href="https://webarchive.nla.gov.au/awa/20190509030954/http://www.garnautreview.org.au/2008-review.html">in 2008</a> and <a href="https://webarchive.nla.gov.au/awa/20190509030847/http://www.garnautreview.org.au/update-2011/garnaut-review-2011.html">2011</a>. I conducted these for, respectively, state and Commonwealth governments, and a federal cross-parliamentary committee. </p>
<p>But these reviews greatly overestimated the cost of meeting ambitious reduction targets. </p>
<p>There has been an extraordinary <a href="https://www.csiro.au/en/News/News-releases/2018/Annual-update-finds-renewables-are-cheapest-new-build-power">fall in the cost of equipment</a> for solar and wind energy, and of technologies to store renewable energy to even out supply. Per person, Australia has natural resources for renewable energy superior to any other developed country and far superior to our customers in northeast Asia. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australias-hidden-opportunity-to-cut-carbon-emissions-and-make-money-in-the-process-124095">Australia's hidden opportunity to cut carbon emissions, and make money in the process</a>
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<hr>
<p>Australia is by far the world’s largest exporter of iron ore and aluminium ores. In the main they are processed overseas, but in the post-carbon world we will be best positioned to turn them into zero-emission iron and aluminium.</p>
<p>In such a world, there will be no economic sense in any aluminium or iron smelting in Japan or Korea, not much in Indonesia, and enough to cover only a modest part of domestic demand in China and India. The European commitment to early achievement of net-zero emissions opens a large opportunity there as well. </p>
<p>Converting one quarter of Australian iron oxide and half of aluminium oxide exports to metal would add more value and jobs than current coal and gas combined. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/300005/original/file-20191104-88428-37vk3q.jpg?ixlib=rb-1.1.0&rect=15%2C7%2C5145%2C3437&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/300005/original/file-20191104-88428-37vk3q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/300005/original/file-20191104-88428-37vk3q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/300005/original/file-20191104-88428-37vk3q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/300005/original/file-20191104-88428-37vk3q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/300005/original/file-20191104-88428-37vk3q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/300005/original/file-20191104-88428-37vk3q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Australia’s vast wind and solar energy resources mean it is well-placed to export industrial products in a low-carbon global economy.</span>
<span class="attribution"><span class="source">Flickr</span></span>
</figcaption>
</figure>
<h2>A natural supplier to the world’s industry</h2>
<p>With abundant low-cost electricity, Australia could grow into a major global producer of minerals needed in the post-carbon world such as lithium, titanium, vanadium, nickel, cobalt and copper. It could also become the natural supplier of pure silicon, produced from sand or quartz, for which there is fast-increasing global demand.</p>
<p>Other new zero-emissions industrial products will require little more than globally competitive electricity to create. These include ammonia, <a href="https://www.ceda.com.au/Digital-hub/Blogs/CEDA-Blog/August-2019/Unlocking-the-hydrogen-future">exportable hydrogen</a> and electricity transmitted by high-voltage cables to and through Indonesia and Singapore to the Asian mainland.</p>
<p>Australia’s exceptional endowment of forests and woodlands gives it an advantage in biological raw materials for industrial processes. And there’s an immense opportunity for capturing and sequestering, at relatively low cost, atmospheric carbon in soils, pastures, woodlands, forests and plantations. </p>
<p>Modelling conducted for my first report suggested that Australia would import emissions reduction credits, however today I expect Australia to cut domestic emissions to the point that it <a href="https://unfccc.int/international-emissions-trading">sells excess credits to other nations.</a></p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/300009/original/file-20191104-88382-eftevp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/300009/original/file-20191104-88382-eftevp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/300009/original/file-20191104-88382-eftevp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/300009/original/file-20191104-88382-eftevp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/300009/original/file-20191104-88382-eftevp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/300009/original/file-20191104-88382-eftevp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/300009/original/file-20191104-88382-eftevp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Tall white gum trees in northern Tasmania. Australia has huge potential to store more carbon in forests and woodlands.</span>
<span class="attribution"><span class="source">BARBARA WALTON/EPA</span></span>
</figcaption>
</figure>
<h2>The transition is an economic winner</h2>
<p>Technologies to produce and store zero-emissions energy and sequester carbon in the landscape are highly capital-intensive. They have therefore benefited exceptionally from the historic fall in global interest rates over the past decade. This has reduced the cost of transition to zero emissions, accentuating Australia’s advantage. </p>
<p>In 2008 the comprehensive modelling undertaken for the Garnaut Review suggested the transition would entail a noticeable (but manageable) sacrifice of Australian income in the first half of this century, followed by gains that would grow late into the second half of this century and beyond.</p>
<p>Today, calculations using similar techniques would give different results. Australia playing its full part in effective global efforts to hold warming to 2°C or lower would show economic gains instead of losses in early decades, followed by much bigger gains later on. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-science-of-drought-is-complex-but-the-message-on-climate-change-is-clear-125941">The science of drought is complex but the message on climate change is clear</a>
</strong>
</em>
</p>
<hr>
<p>If Australia is to realise its immense opportunity in a zero-carbon world, it will need a different policy framework. But we can make a strong start even with the incomplete and weak policies and commitments we have. Policies to help complete the transition can be built in a political environment that has been changed by early success. </p>
<h2>Three crucial steps</h2>
<p>Three early policy developments are needed. None contradicts established federal government policy. </p>
<p>First, the regulatory system has to focus strongly on the <a href="https://www.aemc.gov.au/energy-system/electricity/electricity-system/reliability">security and reliability</a> of electricity supplies, as it comes to be drawn almost exclusively from intermittent renewable sources. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/300010/original/file-20191104-88378-kx0r2f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/300010/original/file-20191104-88378-kx0r2f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/300010/original/file-20191104-88378-kx0r2f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/300010/original/file-20191104-88378-kx0r2f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/300010/original/file-20191104-88378-kx0r2f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/300010/original/file-20191104-88378-kx0r2f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/300010/original/file-20191104-88378-kx0r2f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A high-voltage electricity transmission tower in the Brisbane central business district.</span>
<span class="attribution"><span class="source">Darren England/AAP</span></span>
</figcaption>
</figure>
<p>Second, the government must support transformation of the <a href="https://www.aemo.com.au/Electricity/National-Electricity-Market-NEM/Planning-and-forecasting/National-Transmission-Network-Development-Plan">power transmission system</a> to allow a huge expansion of supply from regions with high-quality renewable energy resources not near existing transmission cables. This is likely to require new mechanisms to support private initiatives. </p>
<p>Third, the Commonwealth could secure a globally competitive cost of capital by underwriting new investment in reliable (or “firmed”) renewable electricity. This was a recommendation by the Australian Competition and Consumer Commission’s <a href="https://www.accc.gov.au/media-release/more-work-needed-to-make-electricity-prices-affordable">retail electricity price inquiry</a>, and has been adopted by the Morrison government.</p>
<h2>We must get with the Paris program</h2>
<p>For other countries to import large volumes of low-emission products from us, we will have to accept and be seen as delivering on emissions reduction targets consistent with the Paris objectives. </p>
<p>Paris requires net-zero emissions by mid-century. Developed countries have to reach zero emissions before then, so their interim targets have to represent credible steps towards that conclusion. </p>
<p>Japan, Korea, the European Union and the United Kingdom are the natural early markets for zero-emissions steel, aluminum and other products. China will be critically important. Indonesia and India and their neighbours in southeast and south Asia will sustain Australian exports of low-emissions products deep into the future. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/300011/original/file-20191104-88387-16b3t9k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/300011/original/file-20191104-88387-16b3t9k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=441&fit=crop&dpr=1 600w, https://images.theconversation.com/files/300011/original/file-20191104-88387-16b3t9k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=441&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/300011/original/file-20191104-88387-16b3t9k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=441&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/300011/original/file-20191104-88387-16b3t9k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=554&fit=crop&dpr=1 754w, https://images.theconversation.com/files/300011/original/file-20191104-88387-16b3t9k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=554&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/300011/original/file-20191104-88387-16b3t9k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=554&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">An electric car being charged. Australia has good supplies of lithium, used in electric vehicle batteries.</span>
<span class="attribution"><span class="source">Ian Langsdon/EPA</span></span>
</figcaption>
</figure>
<p>For the European Union, reliance on Australian exports of zero-emissions products would only follow assessments that we were making acceptable contributions to the global mitigation effort. </p>
<p>We will not get to that place in one step, or soon. But likely European restrictions on imports of high-carbon products, which will exempt those made with low emissions, will allow us a good shot. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/labors-reset-on-climate-and-jobs-is-a-political-mirage-126013">Labor's reset on climate and jobs is a political mirage</a>
</strong>
</em>
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<hr>
<p>Movement will come gradually, initially with public support for innovation; then suddenly, as business and government leaders realise the magnitude of the Australian opportunity, and as humanity enters the last rush to avoid being overwhelmed by the rising costs of climate change. </p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/300033/original/file-20191104-88419-ca9gci.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/300033/original/file-20191104-88419-ca9gci.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/300033/original/file-20191104-88419-ca9gci.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=918&fit=crop&dpr=1 600w, https://images.theconversation.com/files/300033/original/file-20191104-88419-ca9gci.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=918&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/300033/original/file-20191104-88419-ca9gci.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=918&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/300033/original/file-20191104-88419-ca9gci.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1154&fit=crop&dpr=1 754w, https://images.theconversation.com/files/300033/original/file-20191104-88419-ca9gci.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1154&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/300033/original/file-20191104-88419-ca9gci.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1154&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The cover of ‘Superpower’ by Ross Garnaut.</span>
<span class="attribution"><span class="source">Supplied</span></span>
</figcaption>
</figure>
<p>The pace will be governed by progress in decarbonisation globally. That will suit us, as our new strengths in the zero-carbon world grow with the retreat of the old. We have an unparalleled opportunity. We are more than capable of grabbing it.</p>
<p><em>Ross Garnaut conducted the 2008 and 2011 climate reviews for the Rudd and Gillard governments. His book <a href="https://www.blackincbooks.com.au/books/superpower">Superpower – Australia’s Low-Carbon Opportunity</a>, is published today by BlackInc with La Trobe University Press.</em></p><img src="https://counter.theconversation.com/content/126341/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ross Garnaut chairs the international advisory board of the Australian German Energy Transition Hub and is a Distinguished Fellow of the Melbourne Energy Institute. He is chairman of, and a shareholder in, Sunshot Energy and a shareholder in SIMEC ZEN Energy, both of which are engaged in the development and trade of energy.
</span></em></p>Eminent economist Ross Garnaut says if climate action fails, he fears the consequences ‘would be beyond contemporary Australia’. But zero-emissions iron and aluminium could be the way forward.Ross Garnaut, Professorial Research Fellow in Economics, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/406432015-05-12T01:07:00Z2015-05-12T01:07:00ZExplainer: the greater good and why it matters more than ever<figure><img src="https://images.theconversation.com/files/80772/original/image-20150507-19454-15l8a4d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">'What's in it for me?' is a common question today, but not one that necessarily produces the best answers for collective wellbeing.</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-83735947/stock-photo-pick-or-choose-me-is-the-hope-of-many-people-standing-together-in-the-hope-of-getting-your.html?src=csl_recent_image-2">Shutterstock/iQoncept</a></span></figcaption></figure><p>Although the term <a href="https://books.google.com/ngrams/graph?content=civilization%2Ccivilisation&year_start=1800&year_end=2015&corpus=15&smoothing=3&share=&direct_url=t1%3B%2Ccivilization%3B%2Cc0%3B.t1%3B%2Ccivilisation%3B%2Cc0">civilisation</a> has less currency today than it once did, most of us see ourselves as living in a civilisation. And, as posited by <a href="http://www.johnralstonsaul.com">John Ralston Saul</a>, our understanding of civilisation tends to be centred on a sense of shared destiny; on shared interests, collective purpose and a common future.</p>
<p>Seemingly abstract, the idea of shared destiny is actually very familiar. Colloquially, we know this as the <em>greater good</em> or its synonyms: the <em>public good</em> or <em>common good</em>. </p>
<p>It is currently unfashionable to think about ourselves as having shared interests, collective purpose and a common future. A corollary of this is that it is unfashionable to think and talk seriously about the greater good.</p>
<p>As <a href="http://www.theaustralian.com.au/business/opinion/collective-cheers-as-age-of-entitlement-nears-end/story-e6frg9jx-1227113952538">Bernard Salt</a> recently noted, the power of the collective has subsided. Yet this has not always been the case and may not remain so for much longer. Indeed, it is important to remember, as the late <a href="http://www.abc.net.au/radionational/programs/bigideas/what-is-living-and-what-is-dead-in-social-democracy/3105140">Tony Judt</a> reminded us, that our current condition is an acquired, not a natural, one. </p>
<p>Given this, it is salutary to reflect on the meaning of the greater good. After all, fortune favours the prepared mind.</p>
<h2><strong>An idea with a long pedigree</strong></h2>
<p>The idea of the greater good has a long yet punctuated history, replete with diverging meanings. </p>
<p>To illustrate, Plato imagined an ideal state in which private goods and nuclear families would be relinquished for the sake of the greater good of a harmonious society. Aristotle defined it in terms of a communally shared happiness, whose key constituents were wisdom, virtue and pleasure.</p>
<p>More sustained engagement with the concept occurred in the 17th century with the rise of <a href="http://www.iep.utm.edu/soc-cont/">social contract theory</a>. This was a school of thought that we ought to forfeit our absolute freedom to live as we wish for the greater good of the security of shared life in a community. </p>
<p>Subsequently, 18th- and 19th-century thinkers such as John Stuart Mill argued that the right course of action is that which creates the greatest “utility” for society — with utility defined as experiencing pleasure and avoiding pain.</p>
<p>In the 20th century, the greater good received renewed impetus with the work of John Rawls. And in the 21st century, intellectuals such as <a href="http://www.chomsky.info/">Noam Chomsky</a> and <a href="http://www.iep.utm.edu/zizek/">Slavoj Žižek</a> are readdressing the concept in affirmative and critical ways, respectively.</p>
<h2><strong>An evolving concept</strong></h2>
<p>The most serious limitation of most historical ideas about the greater good is that they are silent on the greater good <a href="https://theconversation.com/anthropocene-raises-risks-of-earth-without-democracy-and-without-us-38911">as it relates to non-humans</a> and other natural systems. </p>
<p>At minimum, construing the natural systems in which we are nested as the <a href="http://www.iisd.org/pdf/s_ind_2.pdf">ultimate means</a> upon which all else depends admits the current and future state of the environmental “commons” into our understanding of the greater good.</p>
<p>Of course, the idea of the commons — <a href="http://www.psychologicalscience.org/index.php/publications/journals/pspi/public-goods.html">collective goods</a> to which all group members have free access — is an old one. Common goods (e.g. clean water, air) are clearly a vital, if no longer inevitable, part of the greater good. </p>
<p>Existing and <a href="http://www.abc.net.au/radionational/programs/ockhamsrazor/public-private-and-good-for-everyone/5760126">emergent</a> public goods, which include tangible (e.g. roads) and intangible (e.g. democracy) goods, are another indispensable category of collective goods. They reflect our ideals of what a “good society” looks like. </p>
<h2><strong>A once and future idea</strong></h2>
<p>Australians are endowed with quantities of superb collective goods. By and large, we enjoy equitable access to these goods. However, with the possible exception of those who witnessed their introduction in the post-war years, most of us accept their existence and provision as an unanalysed fact of life. </p>
<p>Too few of us are alive to the meaning of the greater good, its vulnerability – despite its apparent solidity – and its reliance on our collective short-term sacrifice of time, money and effort to confer it equitably in the present and future.</p>
<p>Nevertheless, as <a href="http://www.swinburne.edu.au/leadership-institute/our-research/docs/Swinburne-leadership-survey.pdf">new research</a> indicates, we are deeply concerned about the state of the collective goods that our grandchildren will inherit. We are also alarmed by political leaders’ stewardship of these collective goods.</p>
<p>As we grapple with complex challenges, it is crucial that we understand how these challenges, and our responses to them, affect the greater good of the present and that which will be bequeathed to future generations.</p>
<p>Crucially, even if there was agreement about the meaning of the greater good in the groves of academe (there isn’t), we, as citizens, must possess a working understanding of the greater good that is peculiar to us and alive to our challenges. </p>
<p>A grasp of the meaning of the greater good – the idea that we possess, as we have always possessed, shared interests and a common future – is vital. This is because it improves the odds that we will <em>choose</em> what <a href="https://www.vu.edu.au/sites/default/files/wfg/pdfs/ross-garnaut-speech-and-slides2.pdf">Ross Garnaut</a> calls the “public interest” approach to our challenges rather than persevere with “politics as usual” and “business as usual”. </p>
<p>It is time to think seriously again about this once and future idea.</p><img src="https://counter.theconversation.com/content/40643/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The concept of the greater good has made a comeback in Europe in an era of budget austerity, but in Australia too few of us are alive to its meaning – and to its vulnerability.Samuel Wilson, Research Fellow, Swinburne Leadership Institute, Swinburne University of TechnologyMark Manolopoulos, Research Fellow, Swinburne Leadership Institute, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/306712014-08-21T20:17:40Z2014-08-21T20:17:40ZWeighing the risks for Australia as China rebalances<figure><img src="https://images.theconversation.com/files/57012/original/gmp46my3-1408592093.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Fears Australia may be hammered in China's attempts to rebalance its economy, might be overstated.</span> <span class="attribution"><span class="source">Image sourced from www.shutterstock.com</span></span></figcaption></figure><p>China’s leaders have been vocal in their support of a new growth model, one where consumption leads the way. Economic commentators fret about what this means for Australia. </p>
<p>One view is that economic pain lies ahead. As the rate of resources and energy-hungry investment in China falls, commodities such as iron ore and coal will not fetch anything like the prices they did a few years ago. Investment in the natural resources sector will dry up. </p>
<p>As a result, in <a href="http://www.rossgarnaut.com.au/AustralianEconomy.html">Dog Days: Australia after the boom</a>, Ross Garnaut warned that without urgent policy attention Australia faced the prospect of a prolonged period of declining real wages and living standards. </p>
<p>Similar fears have since been expressed in Andrew Charlton’s Quarterly Essay, <a href="http://www.quarterlyessay.com/issue/dragons-tail-lucky-country-after-china-boom">Dragon’s Tail: the lucky country after the China boom</a>. </p>
<p>For good measure, <a href="http://www.economist.com/news/finance-and-economics/21608749-slowing-investment-and-resilient-consumption-china-are-changing-asias-economic">The Economist</a> picked up on the same theme and said that we are the country in Asia most exposed to the risks.</p>
<p>Australia has a clear stake in China’s economic rebalancing: the latest trade data reveal the annual value of our merchandise exports to China now exceeds $100 billion. This is more than double the value to our next most important customer, Japan. </p>
<p>But are the risks of China shifting towards consumption-led growth really so dire? </p>
<p>Sometimes even serious commentators can discount substantial bodies of research. In fact, other data suggests that any negative implications of rebalancing in China will be modest, and overall it is likely to be distinctly positive. </p>
<p>In 2011 and 2012, economists at the International Monetary Fund (IMF) <a href="https://www.imf.org/external/pubs/ft/wp/2012/wp12267.pdf">modelled the international impact</a> of Chinese rebalancing. They found the consequences for Australia would be <a href="http://www.imf.org/external/pubs/ft/scr/2011/cr11301.pdf">negligible</a>. Once again, it was our flexible exchange rate, the standout reform from the 1980s, that would buffer the Australian economy.</p>
<p>On the key point of commodities prices, <a href="http://www.imf.org/external/np/res/commod/index.aspx">the IMF</a> and our own <a href="http://www.bree.gov.au/sites/bree.gov.au/files/files//publications/req/REQ-2014-03.pdf">Bureau of Resources and Energy Economics (BREE)</a> are in agreement: while prices may come off the boil, there is no bust in sight. </p>
<p>Consider iron ore, our largest export earner. Both expect prices out to 2019 will remain stable at around $90-$100 a tonne. Remember, the historical average is $20-$30.</p>
<p>In May, a <a href="http://www.treasury.gov.au/PublicationsAndMedia/Publications/2014/Long-run-forecasts-of-Australias-terms-of-trade">detailed analysis by Treasury</a> concluded our overall terms of trade (the ratio of export to import prices) will decline by 16% between 2012-13 and 2017-18, and then stabilise. Bad news at first blush, but factor in the exceptional increase of 80% in the previous decade and things don’t look drastic. </p>
<p>Investment in the resources and energy sector will fall as current projects are completed – <a href="http://www.bree.gov.au/sites/bree.gov.au/files/files//publications/remp/remp-2014-04.pdf">BREE notes</a> that committed project investment is already down from a peak of $268 billion in April 2013 to $229 billion a year on. </p>
<p>Yet these falls are going to be offset by the extra output that new mines have made possible. BREE forecasts that in 2018-19 the value of our resources and energy exports will be up $108.4 billion. They add that while the investment phase of the commodities boom lasted for roughly five years, the output and export phase will last decades. </p>
<p>And there’s a bonus argument. China’s rate of investment is only one factor that determines its demand for resources and energy.</p>
<p>Another is its growth rate. Andrew Charlton raised concerns about it falling away but the <a href="http://www.worldbank.org/content/dam/Worldbank/document/China-2030-complete.pdf">best estimate of the World Bank</a> continues to be that growth will remain solid at around 7% until 2020 and 5-6% in the decade after. </p>
<p>The 300 million new residents arriving in cities over the next 15 years will underpin it. </p>
<p>This feeds directly into demand for iron ore, coal and LNG.</p>
<p>Despite some commentary suggesting otherwise, rebalancing in China is unlikely to be sharp or sudden.</p>
<p>In each of the last five years, the rate of investment has been stuck at the the same level. There was some excitement in the first quarter of this year when consumption made almost double the contribution to growth that investment did. But by the end of the second quarter the two were again close to level pegging.</p>
<p>Any trend to greater consumption will accelerate the rise of China’s middle class.</p>
<p><a href="http://www.brookings.edu/%7E/media/research/files/papers/2010/3/china%20middle%20class%20kharas/03_china_middle_class_kharas.pdf">Research by the Brookings Institution</a> indicates the middle class will grow from 10% of the population in 2009 to more than 70% in 2030. That is, an increase of around 850 million people. This is six and half times the entire population of Japan, our second most important export destination. In a scenario where the rate of consumption is higher, the forecast rises by a further 100 million.</p>
<p>The opportunities for Australia will be golden - as nearly one billion new middle class Chinese demand their share of our non-resources sectors: agriculture, high-end manufacturing and services.</p>
<p>The real worry for Australia is that China will fail to rebalance. The dangers of a continuation of investment-led growth have been on <a href="http://www.afr.com/p/special_reports/opportunityasia/china_economic_outlook_threatened_oDodTIBprPO43xPhM34MVK">ample show this week</a>. After embracing the concept of consumption-led growth for a decade, let’s hope China’s leaders are finally up to the task.</p><img src="https://counter.theconversation.com/content/30671/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>James Laurenceson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>China’s leaders have been vocal in their support of a new growth model, one where consumption leads the way. Economic commentators fret about what this means for Australia. One view is that economic pain…James Laurenceson, Deputy Director and Professor, Australia-China Relations Institute (ACRI), University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/280932014-06-17T20:41:02Z2014-06-17T20:41:02ZAustralia’s economy will suffer if we fall behind on climate action<figure><img src="https://images.theconversation.com/files/51324/original/6gj6v3kj-1402987796.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Global action to reduce emissions could threaten Australia's coal exports. </span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/lockthegatealliance/13512404513">Lock the Gate Alliance/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Australia’s economy faces grave threats from climate change, but the greatest threat is if we do not make a serious effort to reduce greenhouse gas emissions. </p>
<p>It’s not just the <a href="http://www.climateinstitute.org.au/verve/_resources/BakerandMcKenzie_SuperannuationTrusteesandClimateChangeReport_October2012.pdf">physical impacts</a> of climate change that will hurt Australia’s economy. In a <a href="http://www.ceda.com.au/research-and-policy/research/2014/06/climatechangeeconomics">new report</a> released today by the <a href="http://www.ceda.com.au/">Committee for Economic Development of Australia</a>, I and others argue that falling behind on reducing greenhouse gas emissions leaves Australia’s economy vulnerable to global efforts to tackle climate change. </p>
<p>But so far Australian government and business has focused on the cost of reducing emissions, despite evidence that it will be far more costly to do nothing. </p>
<h2>Counting the costs of climate action</h2>
<p>In Australia it has long been the view that limiting emissions through carbon pricing will directly <a href="http://www.theaustralian.com.au/national-affairs/policy/no-nation-will-clobber-its-economy-for-climate-says-tony-abbott/story-e6frg6xf-1226952432703#mm-premium">limit economic growth</a>. This is despite industry being largely protected from the costs of efforts to reduce emissions through the <a href="http://www.comlaw.gov.au/Details/C2011A00131">Clean Energy Act</a> through free emissions permits and compensation. </p>
<p>More recently we have seen growing business support for the repeal of the Clean Energy Act (including carbon pricing). There is now clear intent from government and business to remove emissions regulation, and currently the government’s proposed <a href="https://theconversation.com/three-major-loopholes-in-the-direct-action-climate-plan-21838">Direct Action plan</a> has no immediate alternative regulatory cap to reduce greenhouse gas emissions.</p>
<p>This fragmented and inconsistent political approach to reducing greenhouse gas emissions is likely contributing to the inaction and attitude of Australian business, which is a long way behind the rest of the world. </p>
<p>According to the <a href="http://www.climateinstitute.org.au/verve/_resources/TCI_ComingReadyorNot_ClimateRiskstoInfrastructure_October2012.pdf">Climate Institute</a> (as quoted in our report):</p>
<blockquote>
<p>the proportion of organisations reporting that they had carried out a vulnerability assessment for climate impacts fell from a majority (nearly 60 per cent) in 2008 to less than half (47%) two years later, and those that had taken action or made plans for adaptation in response to the findings of the vulnerability assessments were even fewer – just over a third.</p>
</blockquote>
<h2>Australia isn’t going alone</h2>
<p>The current government has for some considerable time, both now and while in opposition, <a href="http://www.greghunt.com.au/Media/Speeches/tabid/87/articleType/ArticleView/articleId/2520/Speech-to-the-ANU-Direct-Action-Plan-on-Environment-and-Climate-Change.aspx">argued</a> that Australia should not adopt any emissions regulation while other countries fail to do the same, and while global climate talks have stalled. </p>
<p>It argues that Australia’s emissions trading scheme under the <a href="http://www.comlaw.gov.au/Details/C2011A00131">Clean Energy Act</a> places Australia at a competitive disadvantage. But the evidence shows that Australia is not going it alone on reducing greenhouse gas emissions through carbon pricing. </p>
<p>Growing concern over rising levels of greenhouse gases around the world has seen governments develop law and policy to directly address climate change. The emerging global network of regulatory limits to control and regulate emissions now covers most major emitters. The figure below shows the current stage of development of carbon pricing regimes around the world.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/51280/original/8tqk6xjn-1402973242.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/51280/original/8tqk6xjn-1402973242.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/51280/original/8tqk6xjn-1402973242.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=354&fit=crop&dpr=1 600w, https://images.theconversation.com/files/51280/original/8tqk6xjn-1402973242.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=354&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/51280/original/8tqk6xjn-1402973242.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=354&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/51280/original/8tqk6xjn-1402973242.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=445&fit=crop&dpr=1 754w, https://images.theconversation.com/files/51280/original/8tqk6xjn-1402973242.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=445&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/51280/original/8tqk6xjn-1402973242.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=445&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p>While Europe has had an emissions trading scheme in place since 2005, China and the US are now progressing quickly. Our other trading partners are also developing long-term climate policies. </p>
<p>The world’s largest emitter China is pursuing an aggressive approach to investment in and <a href="http://theenergycollective.com/lucas-bifera/366391/carbon-trading-china-short-term-experience-long-term-wisdom">support for renewable energy</a> and the implementation of provincial and regional emissions trading schemes.</p>
<p>The six (and soon to be seven) provincial and regional emissions trading schemes now cover an estimated one billion metric tons of carbon dioxide, making the evolving market second only to the EU emissions trading scheme in size.</p>
<p>More recently, China has taken more direct action to tackle emissions, including <a href="http://www.bloomberg.com/news/2014-01-24/china-to-cut-dependence-on-coal-for-energy-as-smog-chokes-cities.html">measures to limit coal</a> to 65% of primary domestic energy consumption by 2015, and <a href="http://www.bloomberg.com/news/2014-01-24/china-to-cut-dependence-on-coal-for-energy-as-smog-chokes-cities.html">banning new coal generation</a> in Beijing, Shanghai and Guangzhou.</p>
<p>These measures directly impact on demand from the largest importers of Australian coal and therefore the value of major mining and export infrastructure assets across Australia.</p>
<h2>Moving in the opposite direction</h2>
<p>There is also increasing momentum to more carefully assess investments in carbon intensive industries or <a href="https://theconversation.com/fossil-fuel-campaigners-win-support-from-unexpected-places-19394">divest altogether</a>. </p>
<p>For example, concerns with environmental and economic risks associated with carbon intensive investments have directly influenced the strategies of major international lending institutions. </p>
<p>At this year’s World Economic Forum, the President of the World Bank, Jim Yong Kim, <a href="http://www.worldbank.org/en/news/speech/2014/01/23/world-bank-group-president-jim-yong-kim-remarks-at-davos-press-conference">publicly supported</a> divestment from carbon intensive assets. </p>
<p>The World Bank has also modified its energy lending strategy to limit financing of coal-fired power plants to “<a href="http://www.reuters.com/article/2013/07/16/us-worldbank-climate-coal-idUSBRE96F19U20130716">rare circumstances”</a> and only in countries that have “no feasible alternative” and the world’s largest public financial institution, the European Investment Bank, has also <a href="http://www.euractiv.com/energy/fundraising-europe-fossil-fuel-p-news-529565%5D%20on%20financing%20for%20new%20fossil%20fuel%20projects">implemented restrictions</a>.</p>
<p>Increasingly international pension funds, with more than US$30 trillion under management, are also heading in this direction and changes are also increasingly occurring in the financing sector. For example, Deutsche Bank’s <a href="http://www.abc.net.au/news/2014-05-23/deutsche-bank-abbot-point-coal-terminal/5473614">recent statement</a> that it would not consider financing the expansion of the Abbot Point Coal Facility. </p>
<p>Australian business and investors operate in a global business environment. While our current political and business leaders pursue an approach of not regulating the greenhouse emissions of Australian industry, the global economy is rapidly moving in the opposite direction. </p>
<p><em>The CEDA report <a href="http://www.ceda.com.au/research-and-policy/research/2014/06/climatechangeeconomics">The Economics of Climate Change</a> will be launched by Ross Garnaut, Quentin Grafton and Martijn Wilder today in Melbourne.</em></p><img src="https://counter.theconversation.com/content/28093/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Martijn Wilder AM heads Baker & McKenzie's Global Environmental Markets practice. He is Chairman of Low Carbon Australia, a Board Member of the Clean Energy Finance Corporation, Chair of the NSW Climate Change Council, on the governing board of the Renewable Energy and Energy Efficiency Partnership (REEEP) and a Director and Governor of WWF and a Director of the Climate Council. He is a Professor of Climate Change Law at the Australian National University and an Affiliate, Cambridge Centre for Climate Change Mitigation Research Department of Land Economy University of Cambridge.</span></em></p>Australia’s economy faces grave threats from climate change, but the greatest threat is if we do not make a serious effort to reduce greenhouse gas emissions. It’s not just the physical impacts of climate…Martijn Wilder, Professor, Climate Change Law, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/251312014-04-02T02:00:47Z2014-04-02T02:00:47ZWhy the world has reason to watch the WA Senate election<figure><img src="https://images.theconversation.com/files/45341/original/jzhprf38-1396393921.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Leading economist Ross Garnaut has weighed in on the WA Senate re-election and the importance of keeping the carbon tax.</span> <span class="attribution"><span class="source">AAP/Julian Smith</span></span></figcaption></figure><p>There’s been a lot of international focus on Western Australia in recent weeks. The search for the lost Malaysian Airlines flight MH370 is being <a href="http://blogs.crikey.com.au/planetalking/2014/03/30/mh370-australia-sets-up-top-level-perth-command-post/">led from Perth</a>. But it also turns out that Western Australia is garnering international attention as a result of this Saturday’s <a href="https://theconversation.com/explainer-the-wa-senate-re-election-25074">Senate re-election</a>.</p>
<p>Economist <a href="https://theconversation.com/profiles/ross-garnaut-237/profile_bio">Ross Garnaut’s</a> sobering presentation at a CEDA lunch in Perth, entitled <a href="http://www.ceda.com.au/events/eventdetails/2014/04/w140401?EventCode=W140401">The case for conserving the carbon laws</a>, brought home the fact that in a globalised world, Western Australia is no longer as isolated as it once was.</p>
<p>Garnaut recounted a recent meeting with British economist Lord Nicholas Stern, author of a influential 2006 paper on the economics of climate change. Stern thought the outcome of the Western Australian Senate re-election could have a global influence.</p>
<p>Garnaut noted that the Senate election, which the Abbott government has been fighting as a referendum on repealing the <a href="https://www.pm.gov.au/media/2014-04-01/joint-remarks-wa-senate-candidates-perth">carbon tax</a> (among other issues), has raised the interest of Europeans. They are curious about Australia’s response to the challenges of climate change and the government’s attempt to repeal a number of initiatives while attempting to jettison the so-called “carbon tax”. </p>
<p>Along with <a href="http://www.smh.com.au/federal-politics/political-news/tony-abbott-rejects-commonwealth-climate-change-risk-fund-20131118-2xplc.html">Canada</a>, Australia has become an outlier in the developed world when it comes to policies for reducing greenhouse gas emissions.</p>
<p>Garnaut claimed that Australia is complicating the politics of climate change in other countries. While Europe, the United States, Japan and China are starting to ramp up their efforts to battle climate change, Australia is now seen internationally as a drag - to the point that there has been diplomatic feedback outlining the concerns of other nations about the Abbott government’s climate policies.</p>
<p>Garnaut argued that, in the longer term, the government should be grateful to the current Senate for blocking the repeal package. He noted that the outcome of Saturday’s poll could make it more difficult for the government to pass its repeal bills through the Senate after July 1 if the mix of senators saw the left-leaning parties gain a third seat in Western Australia.</p>
<p>Garnaut argued strongly against the government’s <a href="http://www.liberal.org.au/our-plan/environment">direct action plan</a>, claiming it was likely to be far more costly in the long run. He noted that if the government was to repeal the carbon tax, it would face a A$7 billion hole in the next budget.</p>
<p>Scientists have long argued that the southwest of Western Australia will be one of the hardest-hit areas on the planet as a result of climate change. Garnaut pointed out that Perth is already experiencing reduced average rainfalls and becoming increasingly reliant on two desalination plants. He argued that Western Australians should be aware of the increasing climate changes the state was likely to experience in the future.</p>
<p>Garnaut concluded his speech by saying:</p>
<blockquote>
<p>True Australian conservatives would be barracking for votes against repeal in WA’s Senate election on Saturday.</p>
</blockquote>
<h2>Meanwhile, on the hustings…</h2>
<p>Federal cabinet, opposition leader Bill Shorten and Palmer United Party leader Clive Palmer were all in Perth on Tuesday campaigning.</p>
<p>Proving this really is a second-order election, the government had been, to this point, revisiting the promises made at the last election. Meanwhile, the opposition keeps suggesting the poll will be a referendum on the Abbott government’s performance. </p>
<p>Prime Minister Tony Abbott announced that the government will provide $50 million for regional health funding in Western Australia. Another $10 million over four years will be provided to establish a strike team to battle bikie gangs.</p>
<p>While Cabinet was meeting, opposition leader Bill Shorten <a href="http://www.skynews.com.au/topstories/article.aspx?id=963351&vId=4392802&cId=Top%20Stories">addressed a rally</a> of around 20,000 striking public school teachers and teaching assistants as well as disgruntled parents. </p>
<p>The rally was protesting the WA state government’s cuts to education. This is actually a long-running dispute with the Barnett government, even though the strike has been accused of being <a href="http://www.perthnow.com.au/news/western-australia/thousands-of-teachers-strike-march-on-parliament-103-schools-closed/story-fnhocxo3-1226870863268">politically motived</a>, having taken place in the lead-up to Saturday’s election.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/45342/original/hfxq2j7t-1396395233.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/45342/original/hfxq2j7t-1396395233.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=420&fit=crop&dpr=1 600w, https://images.theconversation.com/files/45342/original/hfxq2j7t-1396395233.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=420&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/45342/original/hfxq2j7t-1396395233.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=420&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/45342/original/hfxq2j7t-1396395233.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=528&fit=crop&dpr=1 754w, https://images.theconversation.com/files/45342/original/hfxq2j7t-1396395233.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=528&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/45342/original/hfxq2j7t-1396395233.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=528&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Opposition leader Bill Shorten addressed a rally of striking public school teachers in Perth.</span>
<span class="attribution"><span class="source">AAP/Tim Clarke</span></span>
</figcaption>
</figure>
<p>Greens leader Christine Milne <a href="http://www.sbs.com.au/news/article/2014/04/01/historic-wa-senate-vote-approaches">addressed WA</a> from the National Press Club in Canberra, encouraging Western Australians to:</p>
<blockquote>
<p>…bring home the vibe to the heart of the parliament, to the Senate.</p>
</blockquote>
<p>Clive Palmer was front and centre at his press conference in Perth, making <a href="http://www.theguardian.com/world/2014/apr/01/clive-palmer-splashes-out-with-dollars-but-not-policies-in-wa-campaign">impossible promises</a> to increase WA’s share of the goods and services tax. Meanwhile, his party’s lead Senate candidate, Dio Wang, <a href="http://www.perthnow.com.au/news/western-australia/clive-palmer-denies-hiding-his-partys-lead-candidate-dio-wang-for-wa-senate-poll-rerun/story-fnhocxo3-1226871121681">couldn’t be found</a>.</p>
<p>However, the big political news of the day was that former state treasurer Troy Buswell has been charged with <a href="http://au.news.yahoo.com/thewest/latest/a/22305452/buswell-charged-over-subiaco-crashes/">11 driving offences</a> as a result of his early morning drive on February 23 that led to his resignation from state cabinet.</p>
<p>Finally, two political hoaxes fought for line honours in Western Australia on April Fool’s Day. Shorten gets an honourable mention for these Twitter pranks:</p>
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<p>But the winner has to be the gentlemen who <a href="http://media.theage.com.au/news/national-news/missing-wa-senate-ballots-found-5312090.html">“found”</a> the <a href="https://theconversation.com/missing-ballots-might-lead-to-fresh-wa-senate-poll-19736">missing WA Senate ballots</a> in a laundry bag.</p>
<p>And by the way, it’s not too late for WA voters to fill in the University of Western Australia’s <a href="http://wasenatesurvey.csp.uwa.edu.au/">survey of the WA electorate</a>.</p><img src="https://counter.theconversation.com/content/25131/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Natalie Mast does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations. She represents the University of Western Australia on The Conversation's Editorial Board.</span></em></p>There’s been a lot of international focus on Western Australia in recent weeks. The search for the lost Malaysian Airlines flight MH370 is being led from Perth. But it also turns out that Western Australia…Natalie Mast, Associate Director, Research Data & Strategy, The University of Western AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/163952013-12-04T19:42:21Z2013-12-04T19:42:21ZGarnaut’s Dog Days<figure><img src="https://images.theconversation.com/files/36911/original/yrrxjnzn-1386133829.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Ross Garnaut's Dog Days confronts the issues of productivity and tax reform, but is short on solutions.</span> <span class="attribution"><span class="source">Lukas Coch/AAP</span></span></figcaption></figure><p>In 1991, Michael Pusey unleashed <a href="http://www.cambridge.org/us/academic/subjects/sociology/sociology-general-interest/economic-rationalism-canberra-nation-building-state-changes-its-mind">Economic Rationalism in Canberra: A Nation-building state changes its mind</a>. In his book, Pusey took aim at the Canberra econocrats who ruled the key federal government ministries and forced out the “consensus” mandarins of the Menzies, Whitlam and Fraser governments. The economic rationalists were all roughly the same age, had the same educational background and were reared on Friedman’s supply-side economics, rather than the traditional Keynesian demand-management prescriptions of their predecessors.</p>
<p>Ross Garnaut was one of them.</p>
<p>Under Hawke and Keating, the “statists” lost the debate and the “econocrats” won. Australia became a corporate state, with Canberra mediating between business and labour. Ultimately, corporate interests won out, as Hawke and Keating floated the dollar, undertook financial deregulation, privatised government enterprises, reduced tariffs and introduced labour market deregulation, a pattern that continued under the Howard Coalition government. Federal governments also reduced real wages, providing a social welfare net instead (Medicare, superannuation, tertiary education).</p>
<p>Garnaut is one of the advocates of the strong link between microeconomic reform and productivity growth. However, as The Age’s Ross Gittins argued recently: </p>
<blockquote>
<p>“Economists have no evidence to support their fond belief that the burst of productivity improvement in the second half of the 1990s was caused by micro-economic reform…it’s a dismal record if you undertake sweeping reform of almost every facet of the economy then, 10–15 years later, you get no more than five years of above-average improvement.”</p>
</blockquote>
<h2>The boom has left the building</h2>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/36910/original/y4f5ykdd-1386133602.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/36910/original/y4f5ykdd-1386133602.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=869&fit=crop&dpr=1 600w, https://images.theconversation.com/files/36910/original/y4f5ykdd-1386133602.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=869&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/36910/original/y4f5ykdd-1386133602.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=869&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/36910/original/y4f5ykdd-1386133602.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1092&fit=crop&dpr=1 754w, https://images.theconversation.com/files/36910/original/y4f5ykdd-1386133602.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1092&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/36910/original/y4f5ykdd-1386133602.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1092&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Garnaut.</span>
<span class="attribution"><span class="source">Julian Smith/AAP</span></span>
</figcaption>
</figure>
<p>Garnaut’s Dog Days really confronts two issues: boosting productivity to increase exports [p. 10] and getting the tax mix right. The first policy challenge may be beyond our control; the second relates largely to royalties and rents extracted from the resources industry.</p>
<p>Pessimism is the currency of economists, and Garnaut is no exception. In the wake of the China-fuelled Australian resources boom, the future looks less rosy. Chinese growth is plateauing; the investment phase of the mining boom, that injected A$102 billion into the sector in 2011–12, is ramping down. </p>
<p>That has been the prescription for the last two decades. These are what Garnaut labels Australia’s “salad days”, epitomised by the ramping-up of the Chinese-fuelled mining investment and export boom in the early 2000s, and characterised by the LNP and ALP governments’ seemingly endless trough of middle-class welfare. Between 1998–99 and 2008-09, the terms of trade rose an unprecedented 75%. </p>
<p>This means jobs for the professions. McJobs for Generations Y and Z (the 1.2 million in retail).</p>
<p>All good. As long as it lasts.</p>
<p>But the fact is resources industries ultimately deliver diminishing returns to scale, compared with manufacturing, which produces increasing returns to scale. The message in Dog Days is we cannot rely upon rising resources revenues in perpetuity. </p>
<p>In summary, the China boom produced a positive terms-of-trade shock; but slower Chinese growth could induce a terms-of-trade crash. How could Australia deal with that? By getting the exchange rate down.</p>
<h2>Productivity: meet exchange-rate reality</h2>
<p>The centrepiece of Garnaut’s “blueprint” is an Australian-US dollar exchange rate of around 63 cents. “The only way that we can bridge the huge gap between us and our international competitors,” Garnaut writes, “is through a large fall in the real value of our dollar”.</p>
<p>Following a sharp depreciation in 2009, the Australian dollar climbed above US dollar parity in 2010. This, Garnaut, argues, decimated productivity gains and destroyed export competitiveness. True, but there were other factors at work beyond the control of Australian governments. For example, the US Treasury and Federal Reserve’s third round of quantitative easing has injected US$85 billion per month into the economy in an effort to boost US consumption, growth and jobs. Indeed, RBA Governor Stevens has noted that the “‘extraordinary’ monetary policies of the US, Japan and euro zone…are ‘outside’ any historical experience”.</p>
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<img alt="" src="https://images.theconversation.com/files/36913/original/c8cb922y-1386134853.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/36913/original/c8cb922y-1386134853.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=409&fit=crop&dpr=1 600w, https://images.theconversation.com/files/36913/original/c8cb922y-1386134853.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=409&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/36913/original/c8cb922y-1386134853.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=409&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/36913/original/c8cb922y-1386134853.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=514&fit=crop&dpr=1 754w, https://images.theconversation.com/files/36913/original/c8cb922y-1386134853.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=514&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/36913/original/c8cb922y-1386134853.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=514&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The legacy of Hawke and Keating was a corporate state.</span>
<span class="attribution"><span class="source">Paul Miller/AAP</span></span>
</figcaption>
</figure>
<p>Australian exchange-rate depreciation would need to be matched by productivity increases, wage restraint and government cost cutting. A lower Australian dollar would also mean higher prices. This, for Garnaut, would be a “soft landing”; exchange-rate adjustment would be less painful than the significant falls in living standards that would be the consequence of a persistently-strong dollar. There cannot be a painless readjustment in a globalised economy. As Garnaut admits, “Australians on average will have to accept some reduction in real incomes”. </p>
<p>How could a lower dollar be achieved? Garnaut argues there is still room to reduce interest rates, as long as the Commonwealth maintains tight fiscal discipline. That, he reasons, will reduce pressure on the terms of trade as the China boom eases.</p>
<p>But this is indolent economic policy. Depreciated exchange rates require no boost to productivity; zero innovation; and absolutely no increase in competitiveness. The reason governments cheat and manipulate currencies is to make instant gains in inward foreign portfolio investment (cheaper stocks and bonds) and direct investment (cheaper plant, land and labour). Pain free. Adjustment free. </p>
<p>Well. Almost.</p>
<p>With currency depreciation, not only do consumer imports become more expensive, but essential imports cost more as well. Inelastics, like oil, shoot up in price, thus placing an impost upon everyone who uses oil. Which is everyone.</p>
<p>Garnaut also ignores the costs of essential capital equipment that is critical to Australia’s industrial infrastructure, competitiveness and productivity: imported German and Japanese machine tools, robots, farm machinery and, yes, even vineyard tractors. Shrewd capital investment in plant and equipment leads to productivity and efficiency gains. </p>
<p>Being able to depreciate the exchange rate is, for the US, EU and Japan, a negative externality that can be offloaded on to the rest of the world (in the form of importing inflation). But even that master currency-manipulator China is beginning to resist further yuan depreciation.</p>
<p>One also finds Garnaut’s claim that lower interest rates (which would assist dollar depreciation) and tighter budgets less than plausible. Since Hawke, Keating and Howard, federal governments have progressively reduced federal debt:GDP ratios, while Commonwealth fiscal outlays since the recession years (1992–94) have not exceeded 26% of GDP. The bottom line? There is little scope for Abbott and Hockey to move, particularly as the fiscal revenue base dries up.</p>
<h2>Innovate or die</h2>
<p>Economists like Dani Rodrik and the late Susan Strange have understood economic globalisation is the game changer. In <a href="http://www.amazon.com/The-Retreat-State-Diffusion-International/dp/0521564409/ref=sr_1_1?ie=UTF8&qid=1386155911&sr=8-1&keywords=strange+the+retreat+of+the+state">The Retreat of the State</a> (1996), Strange argued the state was through as an economic unit, and its future lay in beating an orderly, strategic retreat. This means accommodating and harnessing the transformative capacity of global capital, rather than trying to fight it. It means investing in high-tech infrastructure, high-quality health and world-class financial and education systems to make your country an attractive investment proposition for capital directed at high-tech, value-added, competitive industries.</p>
<p>Britain now exports more cars by value than Germany. Sure, Germany produces cars in North America, South Africa, Thailand (and Britain) as well, but remember the beleaguered, nationalised, strike-ridden British Leyland of 1975? Now the industry is no longer domestically-owned. But its quality and workforce are world class. Japanese plants in Britain produce some of the best-quality cars in the entire Japanese industry – equal or superior to Japan’s own plants. Fiat Industrial is moving its global tax residency to the UK, as its corporate taxes are much lower than Italy’s.</p>
<p>Irrespective of what anyone thinks of City bankers, London is the world’s financial headquarters for a reason: it welcomes foreign capital; it brokers deals in the world’s two biggest reserve currencies (the US dollar and the euro); it is global in scope, develops innovative financial products and contracts are written in English (the langue de preference of most of the world’s business community).</p>
<p>The financial services sector, with A$2 trillion under management, is the largest sector of the Australian economy, employing 200,000 more people than mining, accounting for 10% of GDP, and value-adding A$139 billion in 2011–12. But it lives off the fat of the domestic economy, with A$1.6 trillion in funds deriving from superannuation, while only A$77 billion is foreign capital under management. To become truly globally competitive, Australian fund managers must wrest business from Singapore, Hong Kong, New York and London. That’s where government policy can make a difference, by making Australia a genuinely competitive host of offshore funds.</p>
<p>World-class industry. Quality workforce. Competitive tax regime. This is what Susan Strange meant.</p>
<p>Or, as Dani Rodrik puts it, more succinctly, “It is not <strong>whether</strong> you globalize that matters, it is <strong>how</strong> you globalize.” </p>
<h2>Very courageous, Minister</h2>
<p>Australia’s political class will need to be courageous – not a quality it’s renowned for – to deal with the dual challenges of falling revenues and living standards. But squabbling between the Commonwealth and state governments on petroleum and mining revenues, together with the GST, will likely lead to lowest common denominator bargaining.</p>
<p>Garnaut is right to assert that the Great Australian Complacency has led governments to substitute fiscal handouts for effective public policy. Without naming them, the villains are clearly Howard, Costello, Rudd and Gillard, who pandered shamelessly to middle-class welfare, which produced serious structural fiscal deficits from 2008.</p>
<p>But Garnaut’s political partisanship damages his objectivity; the Magic Pudding thieves are clearly the mining industry, the saboteurs of the mining tax in 2010; the Abbott opposition “bitterly attacked” the Rudd government’s carbon scheme [p. 253]; while Gillard’s leadership is described, gushingly, as “firm and agile”. </p>
<p>There is much in Garnaut’s book with which economists will agree: what Garnaut terms the “Great Australian Complacency” is what is more accurately described as a Dutch-diseased, China-fuelled, resources-driven, Ponzi-schemed middle-classed welfared property binge. It really took off around 2003, collided with terra firma in 2008, and re-emerged, undaunted, in 2011. </p>
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</figure>
<p>But where are the innovative ideas and future industries, advanced by forward-thinking analysts, such as Joel Kotkins in <a href="http://www.manhattan-institute.org/html/cr_75.htm">America’s Growth Corridors</a>? America’s new “real economy”, comprises energy, manufacturing, high-tech and aerospace industries. Australia can – and should – compete in many of these industries. But Israel and Brazil do innovation and entrepreneurship better than Australia. Even New Zealand beats us in innovation in global rankings.</p>
<p>Dog Days raises the multifarious challenges Australia faces, but it does not provide the solutions. Economic rationalists need to confront the reality: macro and microeconomic reform, wealth redistribution and regulatory frameworks on their own deliver only a “supply-side shock”. But Australia needs to produce innovation and entrepreneurship to escape the iron cage of Dutch disease when the China boom ends.</p>
<p>Globalisation is unlikely be so forgiving next time.</p>
<p><em><a href="http://www.blackincbooks.com/books/dog-days">Dog Days: Australia after the boom</a>
by Ross Garnaut (Black Inc., $19.99).</em></p><img src="https://counter.theconversation.com/content/16395/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Remy Davison's Chair is funded by the EU Commission</span></em></p>In 1991, Michael Pusey unleashed Economic Rationalism in Canberra: A Nation-building state changes its mind. In his book, Pusey took aim at the Canberra econocrats who ruled the key federal government…Remy Davison, School of Social Sciences, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/117312013-01-23T19:33:32Z2013-01-23T19:33:32ZDespite tough lessons for Australian miners, transparency should still be a goal<figure><img src="https://images.theconversation.com/files/19499/original/25v9kp5w-1358906676.jpg?ixlib=rb-1.1.0&rect=20%2C10%2C970%2C558&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The replacement of Tom Albanese by Sam Walsh as Rio Tinto chief following write-downs on Riversdale Mining in Mozambique indicates some of the continuing difficulties of working in developing countries.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Two recent events have highlighted the potential pitfalls of miners doing business in developing states.</p>
<p>The first was the departure of Tom Albanese as Rio Tinto’s Chief Executive following a $13.3 billion write-down that included $3 billion impairment charges on its Mozambique coal investment, Riversdale Mining. The other was the resignation of Professor Ross Garnaut (discussed in detail <a href="http://www.radioaustralia.net.au/international/radio/program/pacific-beat/extended-interview-ross-garnaut-former-png-development-fund-chair/1076028">here</a>) as Chair of the PNG Development Fund after a public disagreement with Prime Minister Peter O'Neill. </p>
<p>Mining companies, including those based in Australia, have long been attracted to developing states, and as a result face problems unique to an industry in which the most lucrative finds are often found in the most risky operating regions. These firms, driven by the necessity to add new and proven and probable reserves to their balance sheets, will continue to face significant levels of sovereign risk.</p>
<p>In addition to the risk-reward payoff for firms, growth in the mining sector presents both positives and negatives for developing states. Multinational mining firms such as Rio Tinto bring with them a level of legitimacy and authority over areas such as environmental practices and development of local communities. </p>
<p>An emerging area of scholarship highlights the role firms play in setting the rules and regulations within developing states. Known as private governance, this area of research suggests that firms will self-regulate, often going above and beyond what is required by the state. Furthermore, these regulations may positively influence other firms operating in similar areas, or may even be adopted by host governments. </p>
<p>The idea of promoting regulation appears incongruent with the aims of mineral extractive firms who, like all corporations have a responsibility to shareholders to maximise profits. However, the evolution of the <a href="http://eiti.org/">Extractive Industries Transparency Initiative</a> (EITI) shows us that firms can indeed be dually motivated by profit and an acceptance of the norm of transparency. </p>
<p>The initiative is entirely voluntary and yet it currently has 70 corporate supporters, all of whom support the initiative’s core goals of disclosure and improved governance of mining industries in developing states. However, it should be noted that there is no requirement for these firms to disclose payments to governments, with this only occurring when the state is an EITI Compliant Country.</p>
<p>While the EITI is not perfect – its reliance on transparency as a norm results in several weaknesses – it is a way in which firms can contribute positively to the development goals of host states. Mozambique is a Compliant Country within the EITI, meaning the country’s ability to reconcile taxation from its emerging mining industry revenues has been deemed to be adequate. </p>
<p>In addition the country ranks 123rd of 176 countries included in <a href="http://www.transparency.org/cpi2012/results">Transparency International’s 2012 Corruption Perception Index</a>. This ranking places the country on par with Vietnam and Sierra Leone, and suggests that while taxation from the country’s mining industry can be accounted for, there remains a distinct lack of transparency elsewhere in the economy. </p>
<p>Rio Tinto participated in the most recent EITI reporting round in Mozambique, released in 2012, with the discrepancy between taxation declared as paid by Rio Tinto, and what was received by the government lower than the 3% threshold set by the EITI. </p>
<p>Overall, the Mozambique EITI team found that taxation payments from all companies largely reconciled, finding only minor discrepancies. As a leading multinational company operating in Mozambique, Rio Tinto’s support for the initiative is important in affirming the initiative’s legitimacy.</p>
<p>While Rio Tinto’s experience participating in reconciliation process was a positive one, it unfortunately did not reflect a strong relationship with the Mozambique government. Upon the announcement of Albanese’s departure, it was revealed that a disagreement with the government over plans to barge coal down the Zambezi (contrary to the government’s wish that it be transported by rail) and a lack of Portuguese speakers amongst Rio’s in-country staff had strained relations with the government, contributing to the firm’s huge writedowns.</p>
<p>Conversely, Papua New Guinea is yet to join the EITI. As recently as September last year the government showed interest in applying for membership and appeared openly committed to transparency in its mine licensing process. Unfortunately the implementation of any transparency measure in Papua New Guinea - including the EITI - would be hampered by pervasive corruption which sees Papua New Guinea ranked 150th on Transparency International’s Corruption Index.</p>
<p>The recent departure of Professor Ross Garnaut, a long-time Papua New Guinea watcher, as head of the PNG development fund was a result of the decision by PNG Prime Minister Peter O’Neill to effectively ban Professor Garnaut from entering PNG. </p>
<p>At the time, Professor Garnaut was Chair of the $1.4 billion PNG Sustainable Development Program, a development fund established by BHP as a response to the Ok Tedi environmental disaster. The dispute arose from comments by Professor Garnaut, which were interpreted as offensive by Mr O’Neill and resulted in a travel ban and eventual resignation. </p>
<p>This reminder of the sovereign risk that Australian mining companies face in return for lucrative mineral deposits should, however, not overshadow the ability Australian firms have to lead the way in contributing to improved mining industry governance in our nearest neighbour. </p>
<p>Australia has signed a memorandum of understanding with the Papua New Guinea government supporting its aims to eventually join the EITI. This is an important step, but also needs to be accompanied by pressure on Australian mining firms to exercise private governance and lead on the issue of transparency and disclosure – as well as on important environmental considerations arising from mineral extraction. </p>
<p>While it’s been a tough week for Australian mineral extractive firms operating overseas, we should not lose sight of the benefits these firms can bring to host states. Research on private governance tells us that firms can both increase profitability and contribute to positive development outcomes – often through voluntary membership of initiatives such as the EITI. </p>
<p>The promotion of transparency and a focus on disclosure can not only assist citizens of developing states in holding their governments to account, it can also benefit the firms involved. Firms operating in EITI countries are likely to engage in less corruption and graft as well as meeting shareholder expectations of best-practice social responsibility. </p>
<p>As Rio Tinto’s experience in Mozambique shows us, while private governance is not a panacea for the potential downside risks of mining in the developing world, it remains one important piece of the puzzle. </p><img src="https://counter.theconversation.com/content/11731/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ainsley Elbra does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Two recent events have highlighted the potential pitfalls of miners doing business in developing states. The first was the departure of Tom Albanese as Rio Tinto’s Chief Executive following a $13.3 billion…Ainsley Elbra, PhD candidate, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/97292012-09-21T05:54:22Z2012-09-21T05:54:22ZImproving public policy advice is a debate we have to have<figure><img src="https://images.theconversation.com/files/15742/original/z85h9bcg-1348204543.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Business Council of Australia's Jennifer Westacott has called for a debate over the role of Australia's public service.</span> </figcaption></figure><p>The provocative <a href="http://www.bca.com.au/Content/102030.aspx">address</a> by Business Council of Australia chief Jennifer Westacott to the Institute of Public Administration Australia (IPAA) International Congress in Melbourne yesterday achieved something almost unprecedented in contemporary Australian politics. </p>
<p>It focused debate squarely on the quality of debate, analysis and advice that informs decision-making about public policy issues that are of vital importance to Australia’s prosperity, competitiveness and the living standards of its citizens.</p>
<p>Westacott’s was a serious and important critique by an individual who has significant experience of policy processes both within and outside of government, at state and federal levels. </p>
<p>She has held a variety of senior roles in the NSW and Victorian governments, as a lead partner with consulting firm KPMG and now as head of the BCA. Reaction has been mostly supportive, including from the retired former Secretary of the Department of the Prime Minister and Cabinet Terry Moran, and Roger Beale, a respected PWC consultant and former Secretary of the Department of the Environment and Heritage.</p>
<p>Her comments have clearly resonated with people concerned that populism and adversarial politics is undermining Australia’s ability to address the problems identified in her first major address in the BCA Chief Executive role. </p>
<p>These include: the high costs of doing business in Australia; poor productivity; and the need to embrace reforms the BCA believes will enable Australia to weather continuing global economic weakness and position itself for future opportunities.</p>
<p>It is not the first time Australian business leaders have drawn attention to the need to strengthen the public service; to streamline regulation, overhaul the tax system; and to fix a federation that many believe is “broken”. </p>
<p>These issues were key recommendations from Kevin Rudd’s Australia 2020 Summit in April 2008, which reminds us such criticisms precede the Rudd and Gillard governments, although some commentators have been all too quick to interpret Westacott’s remarks (and Terry Moran’s endorsement of them) as a comment on the quality and performance of Julia Gillard’s Prime Minister’s Office (PMO).</p>
<p>Most analysts cite 2001 as the end of the reform era which began with Hawke and Keating. Since then governments have been increasingly criticised for seeking to “buy” political support with electoral bribes and seemingly feeling obliged to compensate any individual or group that stands to lose or be affected by policy change (see Quarterly Essay contributions from <a href="http://ebooks.readings.com.au/product/9781921866531">George Megalogenis</a> in 2010 and <a href="http://www.penguin.com.au/products/9781863955645/quarterly-essay-46-great-expectations-government-entitlement">Laura Tingle</a> in 2012). </p>
<p>Former Treasury Secretary Ken Henry has lamented with increasing intensity on the quality of policy debate and the ability of our political system to deal with long-term challenges. He <a href="http://afr.com/p/national/henry_slams_quality_of_public_policy_mCvbwRGFiU5kr4fxFCRv5O">told a forum</a> at the Australian National University recently that he could not recall a time in the past 25 years when the quality of public policy debate had been so poor.</p>
<p>Analysts and commentators including former prime ministerial adviser Ross Garnaut and journalist Paul Kelly in his 2009 book, March of the Patriots, have questioned whether Australia any longer is capable of designing and implementing the kinds of reforms that underpinned sustained economic growth over the past two decades, including during the global financial crisis, or whether a “great complacency” has become the dominant posture.</p>
<p>It is interesting then that Westacott cites the loss of public service authority and legitimacy as a key driver of the malaise afflicting contemporary policy-making, rather than attributing it to, for example, the nature of democratic politics, greater complexity, voter disenchantment, electoral volatility, a hung parliament, or the demands of the 24 hour news media. </p>
<p>Among her recommendations are proposals “to halve the allocation of personal staff in ministerial offices and establish a mandatory code that prohibits them from directing public servants” and to “reinstate the tenure of departmental secretaries”.</p>
<p>It is worth remembering that Malcolm Fraser’s frustration with the intransigence of the Commonwealth Treasury was why he overcame his initial skepticism of the Whitlam government’s experiment with ministerial staff and developed serious policy expertise within his PMO. </p>
<p>From the late 1960s, Ministers became increasingly unwilling to tolerate a lack of responsiveness from some public service departments and sought support to bolster their capacity to drive policy and ensure responsiveness from their officials.</p>
<p>The Hawke and Keating governments implemented many of the reforms that Ms Westacott has now criticised: formalising the role of ministerial staff through the passage of the Members of Parliament (Staff) Act 1984 and, later, removing tenure for “Permanent Heads” and placing Departmental Secretaries on contracts. </p>
<p>It is generally agreed the partnership that developed between ministers, their staff and the public service in this era drove wide-ranging and bi-partisan reforms that have underpinned our relative prosperity and competitiveness.</p>
<p>It is worth noting too that ministerial staff, in particular policy experts like John Rose, John Hewson, Ross Garnaut, Don Russell, Jenny Macklin and others, made important intellectual contributions to the economic and social reforms of the 1980s, breaking the public service’s virtual monopoly over policy advising. They are credited with introducing new ideas and greater contestability that many argue has improved the quality of advice.</p>
<p>But the provisions that allowed the engagement of policy specialists fell into disuse under the Howard government and have not been revived. The MOP(S) Act, which governs the engagement of ministerial staff, also enables public servants to be seconded to the minister’s staff and – recognising that offices are partisan - relieves them of their obligation to be impartial for the duration of their appointment. </p>
<p>Through the Hawke and Keating years, this was seen as a critical opportunity to expose officials to the pressures on ministers and the politics of policy processes.</p>
<p>Public service leaders like Graham Evans, Sandy Hollway, Dennis Richardson, Stephen Sedgwick, Ken Henry, Andrew Metcalfe and others followed this pathway, with benefits flowing both ways.</p>
<p>Again, this fell by the wayside as a more partisan approach took hold – it was seen as risky to align oneself with the political party in government by taking a role in a minister’s office. Ministerial staff roles became part of the trajectory of career politics – an essential (and publicly funded) training ground for professional politics. </p>
<p>While under Hawke and Keating up to 70% of staffers were seconded from the APS, from Howard onwards those numbers fell dramatically, with obvious consequences for knowledge of government processes and content expertise.</p>
<p>My book <a href="http://www.newsouthbooks.com.au/isbn/0868409812.htm">Power without Responsibility: Ministerial Staffers in Australian Governments from Whitlam to Howard</a> advocated addressing issues of staff accountability, conduct and behaviour, management and “fit” within a Westminster-style system of government.</p>
<p>Many of these reforms became election commitments of Labor in Opposition and were later adopted by the Rudd government.</p>
<p>But I rejected then, as I do now, the argument that problems in the interface between ministerial staff and public servants are a question of numbers. There are complex reasons why Australian ministers have the largest number of personal staff in any Westminster-style political system – mostly to do with the demands on ministers from a more complex and uncertain political environment, the expectations of citizens, the demands of the media and for federal Labor, its status as a minority government. </p>
<p>We know from experience that cutting ministerial numbers is rarely sustainable – deeper structures condition the size and organisation of offices. But we should aim to ensure the system operates on the principle of complementarity, where there is mutual respect for the professional skills that staffers and officials each bring to their shared task of supporting ministers.</p>
<p>My research, which now includes a forthcoming study of Prime Ministers’ Chiefs of Staff and <a href="http://books.google.com.au/books/about/Learning_to_Be_a_Minister.html?id=L2A7lhHAmp0C">other work</a> examining the support needs of ministers, leads me to conclude instead that the reactive policy-making that Jennifer Westacott rightly criticises is attributable to the nature of politics and it is there we must look for solutions.</p>
<p>I concur we should value and invest in a professional, impartial public service. But I would argue we need also to be attentive to the organisational skills and capacities of our leaders: their ability to select a quality team (official and partisan) and get the most out of it; to create effective arrangements for priority-setting, deliberation and decision-making (in Cabinet, policy committees etc); and ensure as decision-makers they can get the advice they need (as well as advice they want to hear); and to maintain effective relationships with key stakeholders within and outside of government. It seems to me this, as much as anything else, could address the concerns that have been expressed.</p>
<p>I welcome Jennifer Westacott’s contribution to what I hope will be a spirited debate about the advisory systems that enable decision-makers to make informed policy choices in Australia’s long-term interests.</p><img src="https://counter.theconversation.com/content/9729/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anne Tiernan receives funding from the Australian Research Council and the Australia and New Zealand School of Government.</span></em></p>The provocative address by Business Council of Australia chief Jennifer Westacott to the Institute of Public Administration Australia (IPAA) International Congress in Melbourne yesterday achieved something…Anne Tiernan, Associate Professor in the School of Government & International Relations, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.