Kevin Rudd not for the UN

The Prime Minister has taken the correct decision to not nominate Kevin Rudd to be UN Secretary-General. This is a principled and balanced decision and reflects the fact – recognised by all sides of politics – that Rudd lacks the experience and skills to perform the job. The fact that he is an Australian is irrelevant. The Government should always and everywhere nominate people who are qualified for a job. Otherwise it is like providing a reference for a person who one knows is unqualified – an unethical if common practice.

It has taken a very long time to reach this decision. Perhaps that shows that Malcolm Turnbull will ultimately reach the right decision after exhausting all others.

Oh – and for those who say it doesn’t matter, he would never win but we should still nominate an Australian. What a pathetic argument. If you really believe that Rudd has no chance then why waste a cent of taxpayers’ money in the nomination?

Meanwhile, Kevin Rudd can continue saving the planet but as an ex-PM rather than UNSG.

Posted in Uncategorized | Leave a comment

Tom Valentine 1942 – 2016

Today we received the news that Tom Valentine (Cat lurker and occasional threadster) had passed away. From the AFR obituary:

During the Fraser years, Tom was a key adviser to the Campbell Committee Inquiry into the Australian financial system from 1979 to 1981. This committee was instrumental to the foreseeable evolution of the Australian financial system including the deregulation of the Australian foreign exchange market. Eventually, in 1983, the Australian dollar was floated and the Reserve Bank of Australia highlights that: “in the five years following the appointment of [the Campbell] inquiry … the Australian financial landscape was transformed to a virtually fully deregulated system”.

Over a 20-year period from 1985 to 2005, Tom served as a consultant to a range of Royal Commissions and inquiries not limited to: the Study of New South Wales Taxes on Financial Transactions; Law Reform Commission Referral on Bankruptcy and Managed Investments; Royal Commission into NSW Electricity Commission; Royal Commission into the State Bank of South Australia; the Australian Competition and Consumer Commission Enquiry into Credit Cards; and the Productivity Commission on Banking. He was a member of many high-profile Australian Government Boards including the Australian Financial Institutions Commission – one of three regulatory bodies that existed prior to the formal establishment of the Australian Prudential Regulation Authority. Tom also served as a frequent expert witness in many publicly known financial cases.

Tom will be remembered as an intellectual giant – a legend in the economics and finance community. An empirically driven academic, a brilliant lecturer, and a thoughtful supervisor. Above all Tom will be remembered as a great friend to those who knew him best.

 

Posted in Australian Story, Education | 7 Comments

Experience beats independence

Last month we had a cross-post authored by Peter Swan on the difference between independent directors and shareholders as directors.

A longer, more detailed version of that post has been published in the CIS Policy magazine (subscribe here).

From 2003 onwards the ASX CGC has preferred a class of ‘independent’ directors so-called because they had no significant shareholding in the company and no association with management (and thus no company specific information base). In short, the ASX CGC  requirements favoured an anodyne professional class of director at the expense of directors with significant  shareholdings and directors formerly  associated with management. A problem with delegating corporate governance standards to outside organisations is that many representatives and members of these organisations may themselves be aspiring directors with neither significant
shareholdings nor firm or even industry-specific knowledge or background. It comes as no surprise that the ASX CGC recommendations would potentially benefit such aspiring directors at the expense of significant shareholders and  knowledgeable former CEOs.

In conclusion, my research shows that one reason the performance of many large Australian companies with informative stock prices in the recent decade has been so lacklustre is because they have dispensed with most of their former ‘non-independent’ informed and incentivised
directors, as well as many of their executive directors
and dual role CEO-chairs.
There is practically no area of company performance that has not deteriorated in response to these regulatory-induced departures. Losses are more severe the more informative is the stock price and hence they tend to affect larger, more liquid stocks such as Woolworths and BHP Billiton more severely. This is not so much a problem for small companies experiencing thin trading on the ASX. Such companies are under less pressure from the media and proxy advisors and hence are less likely to adopt wealth-destroying ASX CGC
recommendations in the first place.
Informed and incentivised directors have been replaced by ‘independent’ directors with negligible skin in the game and very little direct knowledge or experience of the firm on their appointment. By the very nature of the ‘independence’ criterion, they lack firm-specific knowledge and background
on their appointment, with their career prospects appearing to be too dependent on retaining the goodwill of the CEO. Unlike fellow executive directors, these directors do not monitor the CEOs pay or recognise when greater effort on
the CEO’s part requires higher compensation.

Posted in Economics and economy | 8 Comments

Investment is not always good

danish-wind-turbines-flickr-cpg-greySince the return of the Labor-lite Turnbull government – or should that just be Labor – the rent-seekers in the renewable energy space have been out and about.

No doubt, the South Australian debacle has thrown a spanner in the works, but the latest propaganda from the renewable energy is that the price spike and the high forward electricity prices in SA are not the fault of over-investment in renewables – blame gas and the lack of interconnection with other states.

If only the interconnectors with the other states were there and/or bigger, then the problem would never have arisen.  The fact that the rent-seekers don’t see the hypocrisy of this statement is staggering: after all, what the interconnectors do is to deliver reliable, low cost electricity sourced from coal.

And by the way, these interconnectors don’t come cheap and take some time to construct (more expensive and more delayed because of the trade unions).  Ultimately, the consumer pays for them as well as high cost intermittent renewable energy.

But what the rent-seekers in the renewable space (including the spivvy financiers) try to push is the size of the new investment and that such and such wind farm will deliver enough power for 15,000 households (which it won’t because it is intermittent).  We are supposed to think Gee Whiz.

Here’s the thing: investment is good for the economy when it is delivered on the basis of financial calculations in the context of competitive markets.  Investments that come about because of distorting government policy – the RET, for example – deliver high cost outputs that are only sustainable because of subsidisation.  This is bad investment.

It is made even worse because this bad investment makes unprofitable perfectly adequate generating capacity that has to be written off well before its natural economic and physical life.  In other words, the cost of waste need to be added in to the misallocation of resources.

Our only hope is that the government refuses to extend the RET beyond 2020 – I would be using the infant industry argument – and to adopt a technology neutral approach beyond that date.  And ignore the rent-seekers.

Let’s not forget that we have reached Peak Renewables in Denmark, Spain, the UK and Germany.  We are behind the curve as always.

Here’s a piece from the Fin on the rent-seeking activities by GE:

As the head of a renewable energy business with $US9 billion in revenue and 30,000 wind turbines operating globally, Anne McEntee is well placed to advise Australia on the transition to a world of diversified and distributed energy generation.

Energy and Environment Minister Josh Frydenberg would have heard McEntee, a global president of GE Renewable Energy, speak in Sydney this week, so there is hope that some wisdom from the private sector will filter through to the next meeting of the Council of Australian Governments.

That is not to say that Frydenberg needs to have wayward views corrected. He is one of the few political leaders who understands the complexity of managing a system with intermittent sources of power.

One telling quote from Frydenberg at this week’s Clean Energy Summit in Sydney dealt directly with the recent price spikes in South Australia. “People have to understand that this volatility is not a new thing. It was back there in 2008 … so to say that is the fault of renewables is not an accurate assessment,” he said.

McEntee agrees with Frydenberg that the transition to a new era of generation with a growing proportion of renewables requires considerable planning and “getting out in front” of the problem of intermittency.

But her most telling advice is in relation to policy certainty beyond 2020, which is the deadline for the current renewable energy target. “If you bring it back to Australia I think it is that clarity of policy that is so important,” she says.

“Investors are waiting on the sidelines right now to see how the off-takes are established. I think that’s really the big challenge. Around the world investors have many options to invest in renewable energy with long-term PPAs [power purchase agreements], so it comes down to a risk profile – the risk versus the reward.”

McEntee says in many countries developers of renewable projects are signing 15- and 20-year PPAs. These are in line with the life cycles of the equipment.

“It’s a much lower risk for investors to guarantee the returns,” she says. “So as we think about the future of Australia, I applaud the government for the renewable energy target, but how far out is that going to go?

“Are people going to see a long-term stable position? And how the ‘gentailers’ decide to procure that renewable energy is extremely important, because it is going to take more innovative financial structures to get the financial community to come in and actually commit.”

McEntee says the move by AGL Energy to partner with QIC and the Future Fund in a new renewable energy fund is a great example of innovation in finance and more of this will be needed.

In GE’s case its innovative finance package in Australia was for the Ararat wind farm in Victoria, which was the first major wind farm contract to be signed following restored bipartisan support for the RET.

GE said the 240MW Ararat Wind Farm  would be the third-largest wind farm in Australia and had attracted almost $500 million of direct international investment into Victoria.

McEntee said the Ararat wind farm included a creative financial structure with a mix of contracted power and merchant power. She says GE will be able to use that in other projects in Australia.

An estimated $10 billion of investment in renewables will occur over the next five to six years.

“As the generating companies decide on how they are going to remix their portfolios, I think there is opportunity in this country and that is why we are here this week,” she says.

Posted in Uncategorized | 17 Comments

The sad saga of self-harm from renewable energy continues

I have this piece in this morning’s AFR  which develops the theme about the poisonous economic effects of renewable energy.  The $40 billion in capital expenditure that windfarms/large scale solar will require is nothing more than a requirement for electricity consumers to finance the creation of incendiaries that will bomb the productive coal and gas electricity generators which provide low cost electricity both to the direct benefit of households and to the productive sector’s competitiveness.

In the process it takes a swipe at the gross misinformation of some of the renewable lobby – in particular the absurdities of the Australia Institute’s Richard Denniss who tried to claim that renewables had reduced prices in Australia by focusing on one outlier year (South Australia prices have actually risen by 30 per cent and the forward price for next year is up 50 per cent).

The article also addresses the self-serving proposal by AGL to transform the existing energy-only electricity market with one that has capacity payments.  Angela Macdonald-Smith, drawing from the market manager, John Pierce, completely demolishes this cost imposing monstrosity of a proposal.

Elsewhere, the Minerals Council’s Brendan Pearson has an understated attack on the renewable agenda

Josh Frydenberg clearly had to swear fealty to the Turnbull-Martin Parkinson protectors of greenhouse orthodoxy as a condition of getting the Energy and Environment portfolio.  He has declared the current renewable policy, under which 23 per cent of electricity must by 2020 be from exotic renewables that cost three times electricity from coal, set in stone (I have a bit of fun in showing recalling how an earlier Joshua dismantled stone walls).  I finish up with the best hope for Australia namely

In escaping the self harm of renewable energy regulations, Australia’s salvation may come from an unlikely direction. The current basis of climate change policy is the UN agreement established in Paris in December last year. Under this Australia pledged to reduce its carbon dioxide emissions by 26-28 per cent. The renewable energy policy is the cornerstone of this.

But the policy’s architects were the EU and the Obama administration. China, the largest emitter of carbon dioxide, and India, the fourth largest, are taking no meaningful abatement measures. As President, Donald Trump would dump the US participation in the Paris agreement. That would leave as its sole promoter the economically moribund EU, responsible for only one tenth of the world’s emissions. Moreover, Britain’s departure from the EU may presage a European rethink.

Without developing-country participation the Paris accord was always an empty gesture to decarbonising the world economy. Future developments would make any Australian obligations even more purposeless. There are many negatives associated with both candidates for the US presidency. But a Republican victory in November would offer one silver lining for Australia in the provision of an escape hatch for a deleterious policy seemingly set in stone.

Posted in Uncategorized | 54 Comments

Climate Hustle – the movie

climate hustle

You can see the trailers here. Opening across the US next week but when we will see it I cannot say. But for now, go to the trailers. More of the story found at Powerline.

Posted in Global warming and climate change policy | 1 Comment

ABC brings down a (Country) Liberal government

On Monday a disturbing picture appeared on my Facebook page. So my first question was why was the person restrained – the answer came back that he had threatened self-harm. My next question was why the hood – the answer came back it was to stop spitting. At that point I had no sympathy. A convicted criminal was being restrained from further poor behaviour. I’m pleased to see that my view isn’t outlandish.

The ABC “Four Corners” program a few nights ago showed just a few seconds of edited footage which has now resulted in politicians from all over the country jumping on the bandwagon and declaring years of torture and cover-up in the management of juveniles offenders in the NT.

As evidence of this “torture” the ABC presented an image of a detainee in a chair with a hood over his head and proclaimed this is the way prisoners of war are treated, not kids.

I’m sorry, but through my experienced eyes I see a juvenile offender, who has obviously been acting out, being provided time out, restrained in an approved chair, with an approved “spit hood” covering his head.

Niki Savva describes what happened next:

At a time when he needs to rebuild his credibility as well as assert his authority, it was an important moment in his leadership. He did not miss it. Ultimately his fate will be determined by his performance.

I think Malcolm Turnbull over-reacted – and has done so for personal political reasons. At the same time he has thrown the Northern Territory government under a bus.

Look at the broader issue – the ABC has televised inflammatory images accusing the Northern Territory government of torturing “kids”* just weeks before an election. This is the same organisation that shut down the live-trade export business, and previously accused Australian Navy personal of torturing so-called asylum seekers.

* This person now being described as a “child” or “boy” in the media committed the following crimes:

Voller’s spree began in Alice Spring’s iconic Todd Street, where he and the two other young men tried to rob a man walking to work.

A court later heard that Voller, then a slightly built teen, ran bare-chested at the man, yelling “you fat white racist dog. You yelled at us”.

The three teens took the man’s wallet, knocked him to the pavement and kicked him in the ribs.

Still high on drugs the following day, the boys ambushed Luke McIntyre near a store where the 17-year-old was trying to buy cigarettes.

Voller struck him with a mop handle, punched him in the face and stole his wallet. Mr McIntyre was bashed unconscious, then his three assailants fled in a Holden Commodore.

Voller was behind the wheel and tried to run down a “terrified” Constable Gerard Reardon who had ordered the trio to stop.

I understand that boys will be boys and it’s all good fun etc. etc. etc. Yet those crimes could be described as two counts of assault and battery, robbery, and attempted murder of a policeman.

Posted in Media, Shut it down. Fire them all., Tough on Crime, tough on criminals | 116 Comments

Free Riders.

download

I wish I could find the data that shows how much GST, per capita, is collected by the States and remitted back to the States.  It would be interesting to compare with the information generously provided by the ABS – TAXATION PER CAPITA, By Level of Government.

According to the ABS, it appears that per capital state and local taxes in NSW and Victoria (the states that recieve LESS back in GST than paid by their citizens) are much higher than those in South Australia and Tasmania (the states that recieve MORE back in GST than paid by their citizens).

Presentation1

Talk about moral hazard.  If you are South Australia or Tasmania, cut your state based taxes, invest in crazy schemes and then cry poor.  It’s no wonder Premier Wetherall always has his hands out.

But why is this so?  Why do the citizens of NSW and Victoria have to pay higher taxes so that the citizens of South Australia and Tasmania don’t?  Can someone please explain?

Posted in Uncategorized | 39 Comments

Actually, we have the right balance

Here we go again, another piece from Fairfax Media telling people how they should lead their lives.

This particular commentator is outraged at the fact that there are not more women with children out there in the full-time workforce paying copious taxes to the government and making sense of their education.  It is only in this way that we can get rid of the dreaded relic: the male breadwinner.

Oh please.  Did it ever occur to this male commentator that very many women – yes, the majority – are very pleased with the family arrangement of full-time male worker, part-time female worker and children that need care, love, nurturing, supervision and lots of other child rearing responsibilities that vary with the age of the child.  (Parenting doesn’t stop when the child turns one, two, ten, thirteen or eighteen.)

And indeed if the chap had looked into the HILDA data he cites, he would have found that the work/life satisfaction of the part-time working mother is very high.  So much for feeling oppressed by the male breadwinner in her life.

In fact, Australia has the balance about as right as it can be.  Part-time employment in the US, for instance, is hard to come by and for many mothers it is a choice of working full-time or not at all.

Two or three days a week of work suits very many women, particularly those with small children.

Our chap seems to think that having children in full-time long daycare is somehow costless (forget the cash outlay for the parents and taxpayer) Ron the child and the parent.  Just wack in the baby at three to six months from 7 am to 6 pm, five days a week and the relic of male breadwinner can finally slip away.

Quite naturally, many parents baulk at this prospect for their babies and simply opt for more flexible arrangements.  The percentage of mothers with children aged under one working full-time is very small and a good thing too.

Read the evanglelising here:

It is time to dispense with a relic lingering at the core of our economy: the male breadwinner.

He’s been surprisingly resilient in the face of sweeping change. Even though women have marched boldly into the paid workforce over the past four decades, fathers still tend to be primary breadwinners and mothers secondary earners.

What does the HILDA survey say about us?

The annual ‘Household, Income and Labour Dynamics in Australia (HILDA)’ survey has landed.

Australia has very high ratio of part-time work compared with its peers and women hold nearly three-quarters of all those jobs. That’s helped create the 1.5 worker household – with a full-time dad and part-time mum – which has become one of the bedrocks of modern Australia.

There’s evidence the Aussie version is more potent than in similar economies, where a dual-earner model is becoming the norm. A recent study led by the University of Queensland’s Professor Janeen Baxter concluded Australia has a “much stronger” male breadwinner culture than many other comparable nations, including the US.

Our industrial heritage has probably contributed. For much of the first half of last century, the idea that the man brought home the bacon was enshrined in Australia’s highly regulated wage fixing system – the basic wage for males was set at roughly twice the female rate on the premise that men were responsible for families’ finances.

But the male breadwinner model no longer makes much economic sense.

Young women have been investing heavily in higher education as they prepare for long, well-paid careers. Female graduates have outnumbered their male counterparts for many years – 60 per cent of Australians who completed a university course in 2014 were women.

Even so, the enduring strength of our male breadwinner model means many of those well educated, highly productive workers are relegated to secondary earners when they have children. Some quit the workforce altogether. Meanwhile, an army of less well-trained males keeps soldiering on full-time.

A man’s world: Men still tend to be primary breadwinners in the family. Photo: Louise Kennerley

Only 57 per cent of mothers whose youngest child is aged under five participate in the labour force (mostly part-time) compared with 94 per cent of fathers in that category. The gender gap is even wider among full-timers with small children. Analysis by Macquarie University’s Professor Gabrielle Meagher found that in 2012 about 85 per cent of all fathers with a youngest child under the age of five worked full-time but for mothers in that category, the rate was only 19 per cent.

The long-run increase in female workforce participation has stalled for women aged between 25 and 55 years – in that well-educated cohort participation has been relatively static for more than a decade.

It’s surprising women’s workforce participation, and the work and family policies that underpin it, figured so little in the recent election campaign.

There may be no better way for Malcolm Turnbull to deliver on his vision for growth, innovation and budget repair than by increasing the involvement of women in the labour market. It promises to simultaneously lift productivity and bolster the federal coffers. A higher rate of female workforce participation, especially full-time, would also help redress an enduring economic challenge – the enormous gap between male and female superannuation balances.

Traditional views on gender roles, especially in child rearing, have helped preserve the status quo.

The University of Queensland’s Dr Francisco Perales, who researches attitudes to gender, says adherence to traditional gender roles is relatively strong in Australia compared to other developed nations. Things are changing, but slowly.

“While it is still quite prevalent for people to think women should fulfil a traditional homemaker role and be the secondary earner and so on, our research shows a modest trend towards more gender egalitarianism since 2001,” he said.

But it’s not just community attitudes that discouraging women from working more.

Experts warn government policies to help parents balance work and family have been going backwards.

The high “effective marginal tax rates” on women returning to work after having children – a feature of Australia’s tax and welfare system – have helped entrench mothers as secondary earners.

Then there’s our broken childcare system. The Household, Income and Labour Dynamics in Australia Survey, released last week, underscored the need for change when it revealed the average family spend on childcare each week has been growing much faster than household incomes, despite costly government subsidies.

Childcare reforms unveiled in the 2015 budget have been postponed because savings to offset the cost of the new scheme were blocked in the Senate. Some of the proposed changes are positive and long overdue but they are unlikely to deliver a major boost to female workforce participation. To do that, Australia’s childcare system will require a complete overhaul, not more tinkering.

Patricia Apps, professor of public economics at the University of Sydney, argues that if childcare worked more like the school system – where admission is universal and inexpensive for parents – women’s workforce participation would surge, savings would improve, the tax base would grow and the fertility rate would rise.

She estimates the costs of a universal childcare system would be far outweighed by the economic gains.

“What the government doesn’t seem to recognise is if they increased female labour force participation they would make billions,” she said.

Without sweeping change to the childcare regime the male breadwinner model is likely to linger for some time yet.

 

Posted in Uncategorized | 35 Comments

Hillary’s America – it’s closer than you think

At Rotten Tomatoes Hillary’s America is 5% among the critics and 82% among the audience. Here is a link to the only positive review listed. It begins:

Hillary’s America: The Secret History of the Democratic Party is a searing, powerful and persuasive exposé on the Democratic Party and Hillary Clinton. Just like in America: Imagine the World Without Her, director Dinesh D’Souza re-examines American history and highlights the facts that should make you horrified and alarmed if you’re a critically-thinking individual. Yes, you might find yourself in denial at first, but denial is a crucial and natural step in the process of coming to terms with a harsh truth. D’Souza includes some re-enactments and archival footage which help to enliven the film so that it’s not just a bunch of talking heads. The fact that D’Souza remains calm and collected, unlike Michael Moore, throughout the film, is a testament to his strengths as a documentarian and investigator. Did you know that it was actually the Democratic Party was racist the Civil War? Or that the “hood” or “ghettos” are essentially the modern versions of plantations? In other words, the Democratic Party is still just as racist now as it was back in the Civil War, but Democrats, will, of course, deny their racism. Did you know that the KKK originated from the Democratic Party and its members were Democrats themselves? Or how about that Planned Parenthood is mostly found in areas where minorities can be found is a form of eugenics started by Margaret Sanger, the founder of Planned Parenthood? Hillary Clinton just so happens to consider Margaret Sanger to be a role model. D’Souza explains something that you ought to know about Hillary: her mentor was writer Saul Alinksy who began scamming people early on in his college days by ripping off his school’s cafeteria while convincing others to take part in the scams as well. That scam serves as a microcosm of what Hillary Clinton plans to do in our country.

And on it goes. The 95% who hate this film are Democrat Operatives with Bylines, and these are merely film critics. The political commentators are worse. Whether we end up seeing it in Australia, it is worth noting that Box Office: Dinesh D’Souza’s ‘Hillary’s America’ Becomes Top Grossing Doc of 2016. Fighting the left is a continuous ongoing uphill battle.

Posted in American politics, Media, Politics of the Left | 10 Comments