The federal opposition’s self-appointed role under Tony Abbott as a sovereign risk machine is, at least politically, well understood. Not merely content with forecasting a looming apocalypse as a consequence of the carbon pricing package, Abbott has deliberately embraced the tactic of adding to business uncertainty with a cross-my-heart-and-hope-to-die promise that he would repeal the package.
With any luck, that will discourage business investment in renewables, undermine the trading period of the scheme, which is likely to start before he can pass legislation to repeal it, and continue to place some upward pressure on electricity prices by reducing certainty for big generators looking to roll over debt.
Not so good for either the economy or the task of decarbonising it, but eminently sensible from the point of view of an opposition that has embraced a wrecking strategy to undermine a weakened government. This is a longer-term strategy by Abbott, by the way — one of his first acts as leader was the appointment of Barnaby Joyce as shadow finance minister, from which vantage point Joyce proceeded to campaign against foreign investment (particularly Chinese foreign investment, a particular obsession of Joyce’s) and predict Australia was at risk of default.
Joyce these days likes to claim that somehow he accurately predicted the risk of debt ceiling debacle in the US, but he insisted Australia, too, would be unable to pay its debts. The Abbott opposition embraced sovereign risk as a political tactic right from the outset.
The two significant problems for the strategy are the issue of compensation for carbon permits and one of the direct action components of the package, the Clean Energy Finance Corporation. The latter is problematic because, even if Abbott’s warnings about repeal deter private investment in renewables, there’ll still be billions available via the corporation, to be overseen by Jillian Broadbent, who graced many a Coalition-appointed board with her presence in the Howard years.
The idea of taxpayers funding a vast renewables investment portfolio intended to produce a commercial return is the worst component of the carbon pricing package (of which, more later this week), combining the winner-picking of the Coalition’s risible direct action plan with significant risk for taxpayers (c.f. Barack Obama’s current problems with the Solyndra solar panels company). But that isn’t what concerns the Coalition, instead it’s the capacity of the corporation to drive renewables investment even after an Abbott-induced flight of investors.
That’s the basis for the remarks by Joe Hockey, as reported by Lenore Taylor today, to warn business off from even accepting investment from the CEFC. Hockey made the explicit point that loans could be “revokable at any time”, in essence suggesting that if any business should be foolish enough to accept investment from the corporation, it could be immediately ripped out by an incoming Abbott government regardless of the impact on jobs or the companies involved.
There’s a slight problem with that plan, in the melodramatic “at any time” bit. The CFEC governance structure, while still being designed by a panel of experts for the government, is intended to be independent of government, for obvious reasons. Hockey, in whose portfolio the corporation would be, would thus have to remove Broadbent and, presumably, most of the rest of the board and install some compliant directors who would oversee the withdrawal of existing investments, based on a new ministerial “statement of expectations”.
But standard practice for independent boards is that directors are only removable if they engage in criminal or wildly inappropriate behaviour, so Hockey would presumably have to wait until the Labor-appointed directors’ terms expired — a bit like the Howard government had to wait to for Justice Fisher’s term at CASA to expire when he and his fellow board members declined John Sharp’s demand that they quit en masse for the crime of being appointed by the Keating government.
Still, that’s a small detail for Canberra insiders that most investors are unlikely to be aware of.
And while the opposition likes to gloss over the issue of compensation for permits, preferring simply to demand that business not buy any (which may well be a subtle admission that, yes, they would indeed be property and require compensation), there was a most unusual intervention today on the issue from David Murray of the Future Fund, who proposed the genuinely bizarre idea to The Australian of two types of publicly created property rights — those created within three years, and those older than three years, so that governments couldn’t commit future governments.
Core and non-core property rights, perhaps.
Murray’s intervention in the debate is motivated by a simple fact: he’s a scientific illiterate and climate denialist and under him the Future Fund has tried its best to ignore climate change as a significant investment issue. Thus the phrasing of his remark to The Australian about “whether you believe in this stuff or not” — Murray definitely does not believe in “this stuff”.
Murray also opposes the carbon pricing package because “it’s very bad time given what’s happening in the global economy”. It’s a curious view for Murray to express, given that in August he was calling for massive budget cuts to “stabilise debt levels”. By that logic, Murray thinks prudent fiscal policy would be to rip the floor from under demand at the moment when the global economy is facing problems so bad as to undermine the rationale for carbon pricing.
Then again, we had years of strong economic growth before the GFC, and it was always apparently a “very bad time” to take action on climate change back then, too. People such as Murray will always find reasons to delay reform, like they always find reasons to dispute climate change.
His over-long term at the Future Fund finally ends on April 3 next year. Labor, oddly, reappointed him. Judging by Hockey’s remarks, that’s not a fate to which Jillian Broadbent can look forward.
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