Morrison's government is spinning its wheels
by Ebony Bennett
[Originally published in the Canberra Times, 21 October 2019]
As the black sheep in a family of car enthusiasts, I know that if you brake and put your foot on the accelerator at the same time there’s a lot of noise and smoke, but you end up spinning your wheels.
For some time now, the Coalition government has been spinning its wheels on drought, climate & energy policy and economic management. After six years in office, the Coalition has presided over private dams built with taxpayers’ money that do nothing for drought-stricken communities, farmers or the health of the river; perpetual investment uncertainty that has contributed to both rising electricity prices and rising emissions; and an economy with weak economic growth, the lowest wages growth since World War II and a social safety net that drags people into poverty.
Let’s start with drought.
Things are bleak. Cattle prices are dropping as farmers sell off livestock. Fruit growers on the Lower Darling are turning off the water to their permanent plantings, killing off the citrus crop in that area for good. The NSW government began a fish rescue operation of individual fish to avoid a "fish Armageddon", a repeat of what we saw last summer. And at least ten towns are at high risk of running out of water within months if it doesn't rain soon.
Prayers for rain have so far gone unanswered. The Water Minister says the problem is that “bugger all” is being done to build dams and water infrastructure.
But that’s not true. Australia Institute research shows the Commonwealth Government is building dams. It’s just that the 20-30 dams it has partially funded are on private land and are for the exclusive use of corporate agribusiness—they do nothing for struggling farmers, the health of the river or drought-stricken communities.
On one hand, under a water ‘efficiency’ program the government is decommissioning the Menindee Lakes because they are relatively shallow and located in a hot dry landscape, so have high evaporation rates. But at the same time, taxpayers are subsidising private dams that are relatively shallow, in a hot dry landscape and have high evaporation rates—but don’t benefit struggling farmers or drought-stricken communities. So the Coalition government, with its feet on both the accelerator and the brake, is spending taxpayers’ money on dams that are actually making the problems of the Murray Darling Basin worse.
The federal government isn’t the only culprit. The NSW government now looks to be abandoning the Murray-Darling Basin Plan altogether. In 2014, then NSW Water Minister Kevin Humphries introduced legislation that meant more water came out of dams for irrigation—water which would otherwise have been available for towns through the drought. Now, the NSW government is using the drought emergency it helped cause as an excuse to give the Nationals Party Water Minister powers to turn off the Water Management Act, remove requirements for comprehensive environmental assessment and proper cost-benefit analysis for water infrastructure, and override the requirements under the Murray Darling Basin Plan. What could go wrong?
When it comes to climate change and energy policy, the Coalition has been spinning its wheels for at least a decade. The internal dynamics of the Coalition are so intractable, former Prime Minister Malcolm Turnbull says, ‘the Liberal Party and the Coalition is not capable of dealing with climate change’. No amount of spin can conceal the fact that Australia’s emissions have risen every year since Tony Abbott’s government abolished the carbon price in 2014.
The Coalition has little enthusiasm for reducing pollution, but it has staked its reputation on reducing electricity prices. The problem for the Coalition is that investing in renewable energy is one of the cheapest and fastest ways to put downwards pressure on electricity prices. But the same people within its ranks who think climate change is a fraud also loathe renewable energy.
It’s an inconvenient truth for the Coalition that renewable energy is the cheapest form of new generation to build and the cheapest to run. Because while the cost of gas has skyrocketed and coal-fired power stations must pay for every tonne of coal that is mined, transported and burned to make electricity, the ongoing cost of producing electricity from wind and sunshine is effectively zero. In economic terms, that’s a no brainer.
So, while renewables have been reducing wholesale electricity prices (by an average of about 30 per cent in 2017–18), successive Coalition governments have tried their best to strangle the renewable energy industry, sending conflicting messages to investors and creating uncertainty that has delayed investment. The Coalition has effectively applied a brake to the industry that is helping to reduce electricity prices and emissions.
Lastly, the economy.
The Reserve Bank and the International Monetary Fund could not be more clear: monetary policy has reached the limits of its effectiveness, and the government should be using the fiscal policy tools available to it to stimulate growth.
Yet the government is determined to produce a surplus, irrespective of the economic situation, which is simply irresponsible. While the RBA is cutting rates to boost growth, the government is aiming to deliver a surplus which is, by its nature, contractionary. It makes no economic sense.
The weakening economy is already taking a devastating toll. Newstart is supposed to be the social safety net we have in place for people who lose their jobs and can’t find another one immediately. The government argues it’s a transitional payment, but Australia Institute research shows it is neither sufficient nor transitional.
A family of four on Newstart is now forced to live around 20% below the poverty line. The single rate of Newstart would need to be increased by more than $180 a week to reach the Henderson poverty line. And because there aren’t enough jobs for everyone looking for work, people are on Newstart for an average of 159 weeks, or about three years.
Raising the rate of Newstart would be an effective way to boost growth. Not only will it help lift people out of poverty, which is in itself a good a reason to do it, but that money would be ploughed straight back into the local economy through spending on things like groceries, rent, getting the car repaired, or buying new shoes for the kids.
ACOSS surveyed Newstart and Youth Allowance recipients and found that more than 80 per cent of respondents skip meals to save money, of those, nearly half (44 per cent) skipped at least five meals a week. And it’s getting worse, in the past 12 months there’s been a 22% increase in individuals, not just those on Newstart, seeking food relief. The majority of charities were not able to meet the full needs of all the people they assist.
There’s no reason this should be happening in Australia after 27 years of uninterrupted economic growth. But it’s no accident either, it’s a result of policy choices.
What exactly is the use of a surplus if Australians are going hungry?
The IMF has repeatedly shown that greater rates of inequality mean worse economic performance in terms of growth and living standards. The government says it cares about the drought, reducing electricity prices and strengthening the economy. But its actions say otherwise.
As the government keeps spinning its wheels, we should all pray Australia isn’t headed towards a burnout.
Ebony Bennett is the deputy director at independent think-tank the Australia Institute @ebony_bennett