Category: A sustainable economy

Expenses ‘grey area’ need reform: Greens

Expenses ‘grey areas’ need reform: Greens

By Online parliamentary correspondent Emma Rodgers

Posted 22 minutes ago

MPs should be forced to hand back any of their electoral allowance they do not spend instead of absorbing it into their salary, Greens leader Bob Brown says.

Despite a freeze on MPs’ salaries for at least 15 months, the Remuneration Tribunal recently increased their electoral allowances by $90 a week to $32,000.

The allowance is used by MPs to cover electoral expenses but any money they do not spend can be kept as taxable income.

But MPs are not required to keep a record of how the money is spent.

Senator Brown is pushing for several reforms to the rules surrounding the use of the allowance, including having a regulator who would determine what spending is allowable and an auditor to enforce the rules.

He also wants any unspent money to be given back to Treasury.

He says the rules are unclear as to what is legitimate spending and there is no way to check what MPs are using the money for.

“I think in MPs’ defence they need a regulator who can make very clear decisions when asked as to whether or not spending is legitimate,” he told AM.

“There’s a lot of other items, refurbishing offices or decorating offices for example, where it’s a complete grey area, and you don’t know whether or not it’s legitimate electorate expenditure.”

Senator Brown’s call comes in the wake of Britain’s expenses scandal, which revealed the extravagant spending of some MPs on pet food, gardeners and cleaning.

Employment Participation Minister Brendan O’Connor says he spends all of his allowance.

He maintains that MPs are held accountable for their spending through requirements to the Australian Tax Office.

“What each MP and senator must do is acquit themselves of that expenditure properly and I’m sure MPs and senators do just that,” he told Sky News.

Liberal backbencher Bronwyn Bishop has also defended the system which she says is better than the US or British system.

“Quite frankly I think most members of Parliament, me included, earn the money that we are paid,” she told Sky News.

“If you’re not earning the money you shouldn’t be there I guess.”

21 May, 2009
Changing Climate: Carbon tax Gaining Momentum over Cap-and-trade?

And herein lies the big “hairy” problem for proponents of cap-and-trade. If people can’t easily understand or trust something, they aren’t likely to buy into it. That’s been one of my chief complaints against carbon cap-and-trade. It’s simply too complicated for most people, even many experts, to understand.

That’s why I prefer a carbon tax — it’s transparent and simple. And I’m hardly alone. Democrat Al Gore, who put climate change on the social and political map with his book and movie “An Inconvenient Truth,” was an early proponent for a carbon tax. “Democrat turned Republican turned independent” New York Mayor Michael Bloomberg has called for a tax instead of cap-and-trade. Others on both sides of the political spectrum and in between who have voiced support for a carbon tax include New York Times columnist Thomas Friedman; South Carolina Republican Congressman Bob Inglis; NASA Goddard Institute for Space Studies director James Hansen; Exxon Mobil CEO Rex Tillerson; and economist Jeffrey Sachs.

I have good friends who are ardent supporters of cap-and-trade — and they probably won’t like this column. But here’s the rub — in private many of them will admit that in an ideal world a carbon tax would be an easier, efficient and more streamlined mechanism. They just don’t believe it’s politically viable, whereas they think cap and trade is. So they support cap and trade not because it’s better but because they view it as possible.

I was speaking recently with Gregg Small, executive director of non-profit Climate Solutions (our partner in the Carbon Free Prosperity report). He stressed something to me in our conversation that I found very interesting. “Even though we prefer cap and trade, the issue that we’re talking about most is the need for an enforceable cap on emissions. We’re open to many different mechanisms for making the cap work as long as it is fair, well-designed, and achieves the desired emission reductions.”

He’s absolutely right on that point. Setting caps is a great way to guarantee that governments and industries meet critical greenhouse gas reduction goals. Part of the issue of the carbon tax vs. cap-and-trade debate is that it obscures a critical point. You can have a tax and a cap — they’re not mutually exclusive. Connecticut Rep. John B. Larson, chair of the House Democratic Caucus, has introduced a bill that could provide both. The bill, as currently written, would require an annual carbon reduction target (based on meeting an 80 percent reduction from 2005 carbon emission levels by 2050) and a price on carbon to help achieve the reduction targets. The bill proposes starting with a price on carbon of $15/ton, and increases annually at varying rates, depending on if emission reduction targets are met or not.

At the end of the day, I think we need three things in any effective carbon policy: 1) A stable and increasing price on carbon that will account for fossil fuel-based externalities in a transparent and simple way; 2) a cap on emissions that meets critical reduction targets; and 3) a distribution of the tax revenues that reduces other taxes (keeping the plan near revenue-neutral) and distributes a small portion of the revenues (I’d recommend around $15 billion a year for a decade) to clean-tech development and deployment. By making sure a portion of these dollars is spent on technology build out, we can help keep America at the forefront of the emerging global clean-tech economy.

As more and more people speak out in favor of a carbon tax, and momentum builds, I think that a carbon tax could be just as much a political reality as cap-and-trade. The Obama team is clearly serious about advancing clean energy, low-carbon transportation, conservation/efficiency, green buildings, and the smart grid. But as we move forward — I hope the Administration, House, and Senate take another look at the policy toolkit — and don’t dismiss or abandon the concept of a carbon tax. A price on carbon is the signal that will ultimately guarantee a true shift in our economy away from polluting and extractive industries to low carbon, renewable ones. Let’s be sure to design a carbon pricing system that’s fair; that will result in real and measurable greenhouse gas emission reductions; that can be explained readily and easily; and that is transparent to all stakeholders. The way to do that, I believe, is a carbon tax with a set emissions cap.

Ron Pernick is cofounder and managing director of Clean Edge, Inc.; coauthor of The Clean Tech Revolution; and sustainability fellow at Portland State University’s School of Business.

20 May, 2009

Consumer confidence hit by Kevin Rudd’s budget: survey

The grim response to the budget, which forecast a record deficit of $57.6 billion (4.9 per cent of national output) and a contraction of 0.5 per cent in the fiscal year starting July 1, may also dash any hopes Prime Minister Kevin Rudd has of calling an early election.

Mounting constraints on the budget and the dour mood of consumers raises the potential for another interest rate cut by the Reserve Bank of Australia.

RBA governor Glenn Stevens told a business group yesterday confidence measures would feature largely in month-to-month “tactical” decision making by its policy making board.

It was a clear signal the RBA still intends to cut rates if confidence dives again. Economists expect optimism to be tested as unemployment climbs over the next year.

Mr Evans said the RBA has policy firepower left, possibly as much as 100 basis points of more cuts if needed, taking the official cash rate target to 2 per cent.

“I’m pretty sure we’ll be seeing some of those bullets being fired in the second half of this year,” mr Evans said.

Treasury Secretary Ken Henry is also feeling some pressure after three major fiscal stimulus efforts have strained the budget. He also said this week that Australia needs to guard against further erosion of its balance sheet.

Mr Rudd dodged direct questions about the extent of the Government’s remaining fiscal flexibility in an interview on Adelaide radio early today, saying only that spending so far had successfully buoyed retail sales.

Annette Beacher, senior strategist at TD Securities, described the consumer confidence retreat as a disaster given that it followed the release of direct payments of $900 each to a large chunk of the population to boost demand.

Australian financial markets were not fully pricing in the potential for interest rates being “lower for longer,” Ms Beacher said.

Also today, wages growth in Australia showed further signs of moderation in the face of the global economic slowdown.

Australian wages excluding bonuses rose 0.8 per cent in the first quarter of 2009 from the fourth quarter 2008 and rose 4.2 per cent from a year earlier, Australian Bureau of Statistics labour price data issued today showed.

Economists surveyed ahead of the announcement on average forecast a rise of 0.85 per cent over the quarter and 4.2 per cent from a year earlier.

“The recent easing (and expected continued deterioration) in employment conditions suggests that wage inflation should remain on a downtrend,” said Besa Deda, chief economist at St George Bank.

Investors in retreat after schemes fail

As administrators began work with the board on restructuring the business, other players in the MIS sector were quick to distance themselves from investment models pushed by Great Southern.

They fear investors will react to the collapse of the two biggest players by steering clear of sector trusts to seek more secure investment options.

“We’re at pains to differentiate ourselves from those companies that are currently having problems,” Gunns Plantations manager Ian Blanden said yesterday.

“Our model is different in that we have a diverse range of income streams. We are not wholly reliant upon MIS. It would be unfortunate if people believed that all MISs are bad or simply won’t work.”

Mr Blanden said Gunns had not had any fallout from Great Southern’s demise but “any negativity in any industry is not a good thing for that industry”.

“I don’t think it will spell the demise of the MIS industry, at all,” he said.

Based on figures from investment research house Australian Agribusiness Group over the past five years, the MIS industry has raised about $5 billion.

Since the demise of Timbercorp and Great Southern, the remaining key players are Gunns, ITC, Wilmont, Macquarie Bank and Tropical Forestry Services.

Great Southern’s critics say the model was wholly reliant on continuing income from the sales of MIS, in the face of the global financial turmoil, drought and the federal Government’s tax-break changes.

“It’s the business model, not that MIS model that’s the problem,” said an industry source.

“They had few, if any, alternative sources of income streams.”

ITC chief Vince Erasmus cited its “multiple revenue streams” as a key point of difference.

“We don’t rely on the profits we make from MIS alone,” Mr Erasmus said. “Obviously we are worried about investor sentiment … but our model is very different to theirs,” Mr Erasmus added, although highlighting that up to 35 per cent of the harvest came back to ITC, giving it a strong cash-flow position.

He described the MIS model as “sound” but conceded there was an issue around funding MIS growth in the present climate.

ITC has assured clients it has a “healthy balance sheet, strong cash flow and we’re not going to be in trouble”.

A spokesman for Macquarie said the bank still saw MIS as an important investment, but in most of its portfolios MIS was only a small part.

“MIS should only make up a small part of investors portfolios,” the spokesman said.

AAG boss Marcus Elgin expected the MIS industry to undergo a repositioning, with a “a substantial flight to proving its security and stability”, meaning greater connection between the investment and land ownership.

Great Southern administrator Ferrier Hodgson was yesterday still piecing together what went wrong, ahead of the first creditors meeting next week.

Another criticism of the company’s model was that investors had the rights only to the income stream. In other models, such as Macquarie’s, investors own the land and trees, providing greater security.

Federal Agriculture Minister Tony Burke said yesterday: “I remain concerned about the impact on the industry and jobs.

“I met with representatives of the forestry sector this morning and discussed the potential impact on jobs, investment and rural communities.

“I will be seeking a briefing on Great Southern from the administrators.” Mr Burke added.

Great Southern non-executive chairman David Griffins, who described the banks’ reaction as disappointing, said it was hard to say if the MIS model was dead but it was being “severely tested”.

“I guess time will tell whether its got a role to play in future investments,” he said.

In criticising the banks’ reaction, he said Great Southern thought it had the right plan.

“We were hoping and expecting the banks to support that,” Mr Griffins said.

“It’s disappointing that wasn’t the case.

“We thought we were in a position to execute a plan that would have delivered value and I think that value is still there and well handled could still be realised.”

The group’s bank exposure is believed to be about $700 million. It understood it has two banking syndicate facilities, the biggest being a $350 million facility through the Commonwealth Bank, ANZ, Mizuhu Bank and CBA-owned BankWest.

ANZ’s exposure is about $170 million.

Separately, about 7000 small investors in Great Southern managed investment schemes have a separate loan with Bendigo Adelaide Bank of about $500 million.

It is understood obligations of those borrowers remain unchanged by the collapse.

Economy and the environment:growing pains

That is the big and controversial question posed in an excellent new report from one of the government’s own advisory groups, the Sustainable Development Commission. For a bunch of Whitehall insiders even to title a report Prosperity Without Growth? is brave and possibly foolhardy – especially amid a bitter recession when growth is sorely needed. But by the same token, a crash this big must make us reflect on how we ended up in this mess – or else run the risk of repeating it. And in the UK, the obsession with growth shares the blame. As chancellor, Gordon Brown was proud of his economic record. In budget speeches he would rattle off GDP numbers, sounding like a rather smug road drill. Yet the sources of this British growth were dangerously narrow. In the dying days of the great boom, in early 2007, finance and business services accounted for almost half of it. The headline numbers were indeed splendid; but there was to be a terrible twist in the tale.

To be fair, Mr Brown was only giving the voters what they apparently wanted. For decades, GDP growth has been associated with prosperity and national success. Yet GDP is merely a calculation of all the marketable goods and services an economy produces. It takes no account of where the income comes from or how it is shared out, rendering it a flawed yardstick of progress or wellbeing. Cleaning up another Exxon Valdez would increase GDP – but it is a boost we would be better off without.

The environment is often the biggest casualty of our reckless pursuit of growth. Industrialising countries swap agrarian poverty for congestion, pollution and natural degradation so that, as the economist Jayati Ghosh notes, soil quality in India has dropped 30% in the last 10 years. Over in the rich world, we fret over carbon emissions and global warming. The solution, say optimists, is green growth; but that appears ever more optimistic. Rather than use this crisis to shift towards a low-carbon economy, politicians prefer safety-pin solutions: an auto bailout here, a VAT cut there.

In any case, placing all our chips on decarbonisation is risky. To be in with a fighting chance of keeping global warming down to 2C – while still growing both population and GDP at current rates – there would need to be a 21-fold drop in the carbon content of a unit of economic output by 2050. To achieve that at the same time as allowing developing countries to get out of poverty would require a 130-fold improvement in carbon use. Technology and emissions trading on their own cannot pull that off in time.

All of which could leave Europeans and Americans with little option but to ease off the economic accelerator, even while Africans and Asians keep developing. Instead of working feverishly while accumulating and consuming ever more, we could live at a slower pace and have more time for socialising and interests. Economists have touched on these ideas before, but never developed them. When greens talk approvingly about a “steady-state economy” they are swiping a phrase from John Stuart Mill. Even Keynes, back in fashion as the godfather of consumption policies, talked beguilingly of a go-slow future in which “we shall once more value ends above means”. Such debates must be revisited while there is still time; or we may find ourselves staging them in the shadow of an ecological cataclysm.

An Early Double Dissolution?

Turning the ‘Alcopops’ legislation into a trigger for a double dissolution provides the government with an alternative path to pass the legislation after an election. But more importantly it provides the option of a double dissolution at any time.

If the government has key budget measures or the CPRS legislation blocked, the government can use the ‘Alcopops’ double dissolution trigger to frame an early election on the basis of the Senate obstructing other legislation. A double dissolution trigger is a mechanism to achieve an early election, not necessarily the main issue for an early election.

In the current situation, the government’s first option would be to have its ‘Alcopops’ legislation passed into law. Its second choice would be to accept the double dissolution trigger it has been provided with and liberally use it as a threat to get the Senate to pass other government legislation.

Its third option would be to call a double dissolution election, though the current state of opinion polls and the predicted path of the economy must mean that some in the government will see using the double dissolution trigger to call an election is the second rather than the third option.

The mechanics of the constitution on early elections are clear in broad outline. The House of Representatives has variable terms, the Senate fixed staggered terms. Where the two chambers are in conflict, Section 57 of the Constitution is a deadlock resolution provision allowing for a double dissolution of both the House and the full Senate.

The current House was elected on 24 November 2007. Its term is for three years timed from its first sitting after the election, 12 February 2008. So if the government does not call an earlier election, the House of Representatives will expire through the effluxion of time on 11 February 2011. Under the timetable for elections set out in the Constitution and the Electoral Act, the last possible date for a House election is 16 April 2011.

However, the government can request a House election at any time. The government could request an early House election as a way of claiming a new mandate to overcome Senate obstruction. All the Prime Minister would have to do is request an early election stating his reasons, and the Governor-General would almost certainly assent to the election.

But the Governor-General could only issue writs for a House of Representatives election. The Constitution would prevent the issue of writs for a half-Senate election. Section 13 of the Constitution states that writs for a half-Senate election can only be issued in the last year of a Senate’s term. This means that writs for the next half-Senate election cannot be issued before 1 July 2010. The first possible date for a half-Senate election is 7 August 2010. There cannot be a normal election for the House combined with half the Senate before 7 August 2010, only a double dissolution or separate House election.

On a technical note, the fixed Senate terms only apply for the 72 State Senators. The terms of the four Territory Senators are provided for in legislation. Their terms are maximum three years, with the terms tied to the terms of the House of Representatives. An early House election would also be for the four Territory Senators, though it would almost certainly return one Labor and one Coalition Senator for each Territory, the result that has occurred at every election since 1975.

The only way that the government can change the Senate numbers before 1 July 2011 is to call a double dissolution. A double dissolution is a deadlock provision designed to allow the House of Representatives to overcome the blocking power of the Senate. It allows the government to force the whole Senate to the electorate at once, breaking the Senate’s fixed term and changing the Senate numbers.

There is little doubt the government would find this option attractive. The Coalition currently has 37 Senators, Labor 32, with 5 Greens, Senator Xenophon and Family First’s Steve Fielding. On current numbers, the Coalition need to lure only one of the cross-bench Senators across the aisle to block legislation.

A double dissolution would almost certainly reduce the Coalition to 32-34 Senators, even less if current opinion polls are to be believed. Labor would probably gain Senators and stand a strong chance of gaining a majority of seats in conjunction with the Greens. Senator Xenophon would be re-elected, perhaps with a colleague from his ticket, while Senator Fielding would be unlikely to win re-election, ending his term which currently runs until June 2011.

However, by reducing the quota for election from 14.3% to 7.7%, a double dissolution could also bring into the Senate a rag-tag collection of unknown Senators from micro-parties, elected thanks to the vagaries of the Senate’s preferential voting system.

The double dissolution provisions are contained in Section 57 of the Constitution. It states that a bill must first be passed by the House and then be rejected, fail to pass or be unacceptably amended by the Senate. After a period of three months, the same bill must be passed by the House and then again be blocked, fail to pass or be unacceptably amended by the Senate. This provides a trigger which allows the Prime Minister to request a DD. The trigger does not have to be used at once, but must be used before six months from the end of the term of the House. So the announcement of a dissolution for a DD must take place by 11 August 2010, meaning that a double dissolution could take place as late as 16 October 2010.

After a DD, the government must again present the legislation, and if it is again rejected by the Senate, then a joint sitting of the two Houses can be called under Section 57 at which legislation can be passed by both chambers voting together. The only time a joint sitting under this provision has been held was in 1974 when the Whitlam government passed four major pieces of legislation that had previously been blocked by the Senate.

The ‘Alcopops’ legislation passed the first test of the double dissolution mechanism on 18 March when it was defeated in the Senate. By trying to pass the legislation again after 18 June, the government meets the three month delay requirement of Section 57. If the ‘Alcopops’ bill is then defeated in the Senate, the government has a trigger to request the Governor-General to issue writs for a double dissolution. It is a trigger the government does not have to use at once but could put away to be brought out from time to time as a threat to the Opposition in the Senate, or to unveil for real in asking the Governor-General for a double dissolution.

Again it should be stressed that in re-introducing this legislation in a manner that allows it to become a double dissolution trigger does not mean the government is about to call an election. Introducing the ‘Alcopos’ bill in this manner increases the pressure on the Senate to pass the legislation, using the threat of an early election to force a legislative ‘blink’ from the Senate.

Also, if the government does achieve a double dissolution trigger, it does not mean it is about to call an early election. Yes the government is well ahead in the opinion polls. Yes the budget reveals that the economy may be in a worse position in the second half of next year when the government is due to face the electorate. But we have seen in the past that governments that call early elections have seen enormous opinion poll leads disappear as an election forces voters to focus on the real choices at hand.

An additional problem with an early election is the fact that redistributions are currently under way in both New South Wales and Queensland. This does not make an early election impossible, but does make it administratively messy.

Given an election in September/October 2010 has always been the government’s preferred option, having a double dissolution trigger may actually be a useful option for the government. A double dissolution in October 2010 may be a preferable option to a normal House and half-Senate election.

Holding a double dissolution rather than a normal half-Senate election may give the Labor Party a better position in the Senate. No doubt some Labor number-crunchers have already looked at that option. But more importantly, a double dissolution would change the Senate at once, where under a half-Senate election, Labor would still be at the mercies of Senator Fielding and the Opposition through until June 2011.

Category: A sustainable economy

Expenses ‘grey area’ need reform: Greens

Expenses ‘grey areas’ need reform: Greens

Changing Climate: Carbon tax Gaining Momentum over Cap-and-trade?

Consumer confidence hit by Kevin Rudd’s budget: survey

Investors in retreat after schemes fail

Economy and the environment:growing pains

An Early Double Dissolution?