Category: ECONOMICS

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SMH Opinion: Carbon tax has a lot to do with the price of eggs

Let me reveal one of the most confusing things about climate policy. There are actually two totally separate things going on. One is the policy to try and clean up the economy. In Australia I call this the ‘Clean Up Australia’ campaign. It’s the attempt to remove carbon from the Australian energy sector. The other is the investment agenda. It is the attempt to make the world’s leading clean tech companies have a ‘Made in Australia’ sticker on them. Politicians try to conflate these two policies. The truth is that the two are totally separate.

I wrote a piece in the SMH last week which tries to shed a bit of light on the first of these issues. How much will it actually cost to clean up Australia? The truth is that this is a notoriously hard question to answer. Why? Because it is hard to predict just our competitive Australia’s energy sector really is. Until a price is introduced into the economy, it’s a mug’s game trying to model how it will work.

There is, of course, an a-priori question here. It is this: do you really want to clean up the Australian economy? Phil Coorey on ABC Insiders earlier this year acknowledged what few on the left may concede – decarbonizing the Australian economy will not do an enormous amount to solve climate change. There might be other reasons you want to do it – ethical responsibility, civic virtue, political necessity. But preventing climate change is probably not your strong hard.

Where Australia may punch above it’s weight in decarbonizing the global economy is with technology. We can build the companies and incorporate the technologies which can sell energy into the global market. I have an essay in The Monthly which will come out shortly on this topic. Stay tuned. For now, enjoy this piece in last week’s SMH.

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ABC The Drum Opinion: The recipe for brain food

Sit at a kid’s birthday party and it doesn’t take long to work out what parents worry about. Leaving aside good looks and charm, all parents want their kids to be smart. That’s easy to work out. What’s harder is working out how to get there.
 
Statistics on schooling hardly make weekend reading. But the My School website has drawn a wide readership. The website should be applauded for trying to give power back to parents and principals in how their schools are managed. But it doesn’t necessarily provide the information we all need. Knowing how much money is going into public schools is one thing. Far more important is finding out whether teachers in our public schools are any good.
 
There’s no easy answer to this question. To start unwrapping the hidden dimensions I have written a piece for ABC Unleashed. We all want better education for our kids. I want to know how we achieve it. If you’ve got the answers, then please comment away. It’s over to you…

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ABC The Drum Opinion: What’s in a green job?

While in England I worked for  a little while in a venture capital firm. It was an enlightening experience. Not only did I learn how to read the minutiae of balance sheets, I also got a glimpse of companies on the edge of capitalism. Venture capitalists put money into companies which sit somewhere between tin pot ideas and the next big thing.

I mention this because, in my own small way, I helped create a few jobs. There were a some health care jobs, the odd IT job, and then a few green jobs. What’s a green job you ask? Good question. Politicians throw the term around like confetti. I can assure you they are very hard to create.

That’s why I wrote a piece in today’s ABC Unleashed. For my take on the real story behind green jobs, green business, and the industrial base of the Australian economy click here.

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Making kids smarter

Standing on a street corner last Saturday I was approached by a distressed middle-aged lady. Her distress, she revealed, came from the state of public education in NSW. The Sydney Morning Herald carried a story of data released by the My Schools Website. Public funding was flowing in droves to the cloistered courtyards of private schools. At heart, her concern was an honest one: how would the state of public education be revived if there were a change of government in New South Wales?

I can hardly pretend to have the answer to this question. But my thinking was significantly influenced by my friend, Prashan, who has just set up his own website called the Australian Education Report.

One of the most intriguing and counter-intuitive things I have come to appreciate is that good education is not all about money. Getting sufficient money into public schools is vitally important. But after a certain point, what becomes more important than how much money you get is how you choose to spend it.

The OECD has recently done a study to show that cutting the data to examine teacher retention rates, quality of teachers, and the socio-economic background of students is meaningful. Improving these drivers in our public education system may do more to produce smarter students than pushing up bottom line spending. This is an emotive area of policy for good reason. We all want better-educated children. How we get there deserves some careful thinking.

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The bigger elephant

Gillard’s decision to introduce a carbon tax deserves credit. It is a brave move and it is the right idea, poorly executed. I say this as someone partial to a carbon tax over emissions trading. A carbon tax is a more direct economic strategy in the early stages of energy market transformation. To explain why, I need to give a bit of background. Forgive me if I put you to sleep.

Carbon trading works by putting environmental standards front and centre and letting the carbon price bob like a volley ball around it. This is potentially dangerous as it can create an enormous amount of instability in investment decisions. (When things are unstable, people tend to do nothing.) It only works when you have a flurry of commercially viable low carbon energy technologies at hand. In these cases, it only takes a slim carbon price to change energy behavior at the margins.

A carbon tax, by contrast, is geared directly at investment decisions. You can slowly and steadily increase the tax until the floodgates for technology are unleashed.

So what? Gillard would have been better off sticking to a carbon tax instead of locking in an ETS in 3-5 years time. Nonetheless there is a bigger elephant in the room: nuclear technology. Labour’s decision to embargo nuclear is like trying to solve a problem while hiding the answer. Technologies take decades to mature and nuclear is far more technically and commercially mature as a technology than wind or solar.

In my opinion, it is no longer credible in the modern age to be serious about de-risking climate change and be against nuclear energy in this country or anywhere else.

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Ad hockery

Hockey is right. The problem with the flood levy is that it is ad hoc.

Let’s start with what is good about the levy. It is good that we are helping Queensland in their time of need. (The State of Origin has not yet crushed our soul). It’s good that the economy is good enough that we can raise A$ 5.7 billion without too much sweat . And it is good that the money will be spent on infrastructure and essential services.

The problem with the proposal is with the way these things will be achieved. Levies are not economists’ favourite tools. The reason is simple. A stable economy is one where all participants have a clear vision of what the future holds. The difference between a levy and a tax is that a tax is permament and a levy is fickle. The Medicare Levy is called a levy but it is really a tax.

Levies create apprehensiveness about the future. That’s a great recipe if you’re writing a thriller but it is not the best way to manage national finances. Admittedly the flood levy is small but it’s not the sort of precedent you want to be setting. It would be much more stablising to pay for the floods out of the national budget and delay the date by which it comes into surplus.

Why then the levy? Well, it’s politics I suppose. Gillard and Swan have committed to bring the budget to surplus just in time for the next election. Break that promise and their image of economic credibility is diminished. The irony is that they have attracted a lot more attention doing it this way than if they had kept their faith in voters’ common sense.

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Starting out

Tom Spencer’s nickname is Spanner. It’s well-deserved. Not only is Spanner a good bloke and a great friend. He is also good for a bit of computer coding. This website is evidence of that fact.

To be fair to Spanner, we did receive some help from WordPress and a software designer called Chris who is by all reputes a perfectionist when it comes to matters of design. Spanner and I both agreed that being a perfectionist in design is like being a perfectionist in building sandcastles. It is traumatic trying to keep up with changing tastes.

Taste is of no importance on this website. It’s all about outlandish opinion. After three years of dithering, this website has finally arrived. Apologies for the delay. It took me longer than expected to come up with something to say. Now the time has come to step out.