Tag Archives: Australia

The roadmap to nowhere

The Morrison Government’s internal wrangling over its net zero carbon emissions target (or is it a goal?) is not only exasperating. It is depressingly familiar.

For over a decade now the Federal Government has, with a few exceptions, shown itself to be incapable of providing leadership on issues that really matter.

The list of significant challenges facing the country is substantial – climate change, the pandemic, geopolitical uncertainty, entrenched inequality, population ageing, environmental degradation, cybersecurity, family and sexual violence, disability care.

In traditional and social media and across the airwaves these and many other important issues are the subject of vigorous (and at times rancorous) discussion and debate. People are deeply concerned about what is happening to them and around them.

Morrison Government ministers have sound bites at the ready on each of these issues. But that’s pretty much all they have.

After eight years in office, it is all they can do to express a commitment to net zero carbon emissions by 2050. That is where most of the world was at in 2015. Six years ago.

Internationally, the conversation has well and truly moved on.

Nations, local and regional governments, companies and industries are now announcing ambitious plans to slash emissions by 2030.

As befits a global problem, the proposed solutions to climate change are global in their impact too. Australia will be affected.

Countries and groups of countries are talking about tariffs on goods and services adjusted according to their carbon intensity.

Investors are directing their dollars to renewable energy and energy-efficient production and away from fossil fuels. Insurance premiums on coal mines and gas plants are soaring. Coal mines (and to a lesser extent gas operations) are at risk of becoming stranded assets.

Where is Australia in any of these international discussions and debates? Our obdurate federal government has essentially cut our nation out of these conversations. It means our lives will be directly affected by decisions and actions made by others without our input.

Australia will pay three times over for the Coalition government’s sustained failure to be part of the international discussion around climate change solution. Not only will we suffer the consequences of global warming like everyone else (who knew that the effects of climate change could cross borders?)

 We will also be hit with any trade-related charges and penalties that are introduced, without a chance to have a say.

And, instead of being at the cutting edge of clean technology industry for the last few years – as we could easily have been – Australia is playing catchup.

As in so many issues in need of urgent attention and leadership, Australia’s national government is missing or, even worse, a handbrake on action.

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The Europeans get a jump on the Poms

WHILE the Brits turn themselves inside-out trying to work out if they should go for a hard, soft or slightly runny Brexit, the EU is keeping its trade negotiation machine running at high gear.

In recent years the Europeans have been busy stitching together a web of regional and bilateral trade deals that span the globe. Of the 164 countries that are members of the World Trade Organisation, just six do not have preferential access to the EU.

Currently, Australia is one of them. But that could soon change after the European Parliament on 26 October authorised the EU to begin talks on a Europe-Australia Free Trade Agreement (FTA).

This authorisation comes at the end of a long process of sounding each other out and assessing whether such a deal is desirable and worth the effort, so it is a big deal.

It means that a Europe-Australia FTA of some kind is virtually inevitable.

Politically, this is soc in the eye for Theresa May’s Government.

One of the conceits of Brexiteers is that, freed from the shackles of the EU, Britain may once again rise to global eminence as a champion of free trade. Some even hope that the Commonwealth can be transformed into a sort of ‘Empire 2.0’. In their imaginings they hope/believe that former colonies like Australia, New Zealand, Canada and India will fall over themselves at the opportunity to resume the trade links that were severed or downgraded when Britain joined the Common Market in the early 1970s.

Put aside the fact that the days of Empire are remembered far from fondly in much of the Commonwealth, the idea has little grounding in the economic reality of today.

In the days of Empire, Britain was a major manufacturer with a huge appetite for raw materials it was an obvious market for commodities produced by its colonies.

But after 40 years of integration with the EU, the British economy is vastly different. Most of its manufactures are intermediate goods that are part of supply chains that crisscross Europe like a web, and services like finance, education and tourism support much of its wealth.

Meanwhile, the former colonies have well and truly moved on.

Canada is closely dies in economically with its giant US neighbour, Australia and New Zealand look much more to China and Asia for their markets, India is developing into a major economic power in its own right and the former African colonies have more extensive trade arrangements with Europe than Britain.

Europe, the land of opportunity?

It is fair to ask whether Australia needs a trade deal with Europe, given that the EU is already our third largest trading partner (bilateral trade was worth A$68.7 billion in 2015), and a major source of foreign investment (worth A$220.3 billion in 2015).

But there are frictions in the trade relationship.

European agricultural markets such as beef, sugar, dairy and cereals remain heavily protected from Australian exports, contributing to a lopsided trade flow.

In 2015, the EU sold almost A$30 billion more of goods and services to us than we did to them.

The question is whether the Europeans will be able to offer better access to their markets for Australian farmers.

In its statement on the negotiating mandate, the EU has stressed that “the European agricultural sector and certain agricultural products, such as beef, lamb, dairy products, cereals and sugar…are particularly sensitive issues in these negotiations”.

Given that Australia is the world’s third largest beef and sugar producer, and is a major player on global cereal and dairy product markets, Europe’s notoriously bolshie farmers are unlikely to meekly accept increased market access for their Australian competitors without a fight.

The EU trading mandate also calls for meaningful commitments from both parties to protect fisheries against illegal and unregulated fishing, which is significant given concerns about the rapacious fishing practices of fishing fleets operating out of Spain, France and other EU countries.

It appears this might be a fight the EU does not have the stomach for in the current fractious political climate prevailing in Europe, where populist and nationalist movements command significant electoral support.

In careful language, the EU negotiating mandate stipulates that a “balanced and ambitious outcome” on agriculture and fisheries is only feasible if it “gives due consideration to the interests of all European producers and consumers”.

Tellingly, this “consideration” includes the possibility of tariff-rate quotas or unspecified “transition periods”, and even holds out the possibility of so-called safeguard clauses to allow preferences to be suspended temporarily, or even excluding the most sensitive sectors (beef, sugar, cereals, dairy) from negotiations altogether.

Australian negotiators might talk tough if the EU tried to block improved access for farm products altogether, but the Europeans would remember how Australia caved to the US when it refused to include sugar as part of the Australia-US Free Trade Agreement.

Whatever happens on agriculture, the EU wants the FTA with Australia to include “significant concessions on public procurement at all levels of government, including state-owned enterprises”, and is also looking for commitments on anti-dumping and countervailing measures that go beyond WTO rules.

Other provisions the EU is seeking include:

  • a “robust and ambitious” chapter on sustainable development;
  • a requirement to promote corporate social responsibility;
  • comprehensive provision to liberalise investment; and
  • strong and enforceable intellectual property protections.

Brexit dangles like an unanswered question over the Australia-EU trade talks.

The final terms of Britain’s exit from the EU will resound globally. But by pushing ahead with its trade negotiation agenda, the EU is staying faithful to its ambition as the world’s foremost transnational economic community.

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ANZAC spirit fails drug test

It can be surprisingly difficult to get along with your neighbours, even when you frequently play sport together and have a lot more in common, besides.
The unheralded decision of the Australian and New Zealand governments to abandon 11 years of work on a joint regulatory regime for medicines, to be overseen by a single trans-Tasman watchdog, is a reminder of how hard it can be to achieve a level of harmony even between two seemingly similar countries.
Earlier this afternoon, Australian Health Minister Peter Dutton and his New Zealand counterpart Dr Jonathan Coleman jointly announced agreement to “cease efforts” to establish a joint therapeutic products regulator.
Aside from what this means for hopes of cheaper and more readily available medicines in the two countries, and a smaller regulatory burden for business, it is a significant blow – at least symbolically – to aspirations for much greater economic co-operation between the two countries.
When plans for the Australia New Zealand Therapeutic Products Agency were first hatched in 2003, it was amid a swirl of trans-Tasman bonhomie.
The agency was to have been the first fully joint trans-Tasman regulator, and the harbinger of much more to come.
The creation of the ANZTPA was seen as a relatively straightforward task that would embody the ambition of much more intimate trans-Tasman relations expressed in the Closer Economic Relations pact between the two countries, and blaze the trail of increased co-operation.
The unspoken ambition of some has been for the creation of a single ANZAC market.
But if the two countries can’t even agree on something as seemingly relatively straightforward and mundane as the regulation of drugs and medical devices, what hope for other areas of activity?
In their joint announcement, Mr Dutton and Dr Coleman said that the decision to abandon the project was taken “following a comprehensive review of progress and assessment of the costs and benefits to each country of proceeding”.
The collapse of this particular project hardly means the idea of closer Australia-New Zealand economic integration is dead.
But it does yet again call into questions the idea that closer economic ties will inevitably resolve political differences between countries and make national boundaries increasingly invisible.
Even a brief contemplation of the internecine conflicts and testy relationships that bubble beneath the surface between the members states of the European Union or the United States should be evidence enough of the fallacy of that.

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G20’s shaky growth base

For the sake of global prosperity, you have to hope that the pro-growth commitments made by the visiting national leaders at Brisbane’s G20 are of a higher quality that those proposed by the host.
Laudable as the G20 goal is to boost collective growth among member countries by 2.1 per cent by 2018, it comes with a big asterix attached. There are measures whose benefits are difficult to quantify. There are measures that are contingent on the actions of others to come to fruition. There are measures whose prospects are definitely cloudy.
And then there are measures for which any claim of benefit is dubious, at best.
In this category belongs two measures the Australian Government has included in its contribution to the G20 growth goal – the introduction of a $7 co-payment for GP, pathology and diagnostic imaging services, and the deregulation of university fees. (Note of disclosure: I am currently employed by the Australian Medical Association, which is campaigning against the Government’s co-payment proposal).
It is hard to see how it can be argued that either, particularly the co-payment, will enhance growth.
Both are essentially exercises in cost-shifting – removing a liability from the Commonwealth’s books and putting it on to individuals.
In the case of the co-payment, patients face an extra $7 for each visit to their GP, while doctors are set to lose $5 from each Medicare rebate and incur extra practice costs arising from increased red tape and more patient bad debts.
In the case of university fee deregulation, an increased proportion of education costs are dumped onto students as a liability against future earnings – in effect, an increase in the tax on higher education.
Leaving aside arguments about the equity or economic efficiency of these policies, the grounds on which either could be said to contribute to growth appear weak.
It has been demonstrated that cost is a consideration for some when seeking health care, so upfront charges will discourage a proportion from seeing their GP – in fact, this was one of the Government’s explicit aims when announcing the policy.
Furthermore, though some patients might be going to see their doctor for what the Government considers to be frivolous reasons, most have legitimate health concerns.
Some of these might resolve themselves. But deterring people from seeking timely care raises the risk their health will deteriorate further and their problems become more complex, raising the likelihood of more dramatic and costlier care later on. Care in hospitals in multiple more times expensive than in a family doctor’s surgery.
Regarding university fees, it defies all that we know about price signals and human behaviour to suggest that ratcheting up university course fees will have no effect on demand.
Sure, university degrees are a sound investment in enhanced future earning capacity, so the incentive for individuals to incur larger debts for the lifelong advantage a degree confers is strong.
But as the cost of education goes up and wages growth slows, the cost-benefit equation because more finely balanced, and the weight given to other options increases – particularly from the viewpoint of someone with limited financial resources.
The Government argues that students won’t be required to begin repaying their debts until they start earning reasonable money, so any deterrence is overstated.
But even if higher fees don’t discourage many, the debts students will carry through much of their adulthood will have other significant economy-wide effects, including delaying the age at which they might begin a family or buy a house. These are major drivers of consumer spending, and by delaying or diminishing these activities, university fee deregulation will help undermine the strength of a major component of growth.
(The policy is also likely to turbocharge the brain drain, and heavily-indebted graduates increasingly look for better-paid opportunities offshore).
Prime Minister Tony Abbott said the fact that the OECD and the IMF will audit the progress of G20 countries in fulfilling their growth commitments will provide robust reassurance that the growth goal will be met.
But don’t expect the umpires to red card countries not seen to be pulling their weight.
Realpolitik means it is highly unlikely any G20 member will be marked down, especially when there are so many plausible get-out clauses and other excuses that countries can invoke.
Let’s face it, if the Australian Government can get away with calling a GP co-payment a growth measure, it is a pretty low base from which to start.

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