Twitter

Okay guys, I've just signed up for a Twitter account.  The ID is "Peter_Deane" - not bad that it was available, eh? Might be a good sign.

Problem is, what the HELL does one do with a twitter account.  I'm following a few political tweeters such as Malcolm Turnbull, Kevin Rudd, Latika Burke and so on.  I went to follow the ABC's QandA, or course.  I'm still not real familiar with how it all works, and the 140 character limit is (as you'd be aware, dear readers) not something I'm going to be enamoured with.   Let's see what goes on, however.

What we really can't afford

Again we hear the empty rhetoric.  Barnaby Joyce on the carbon tax: "we can't afford this toxic tax".  "Australia cannot afford this tax right now".

Here's what we cannot afford, people:

We can't afford extra energy in weather events leading to the largest cyclone to ever hit Queensland

We can't afford an increase in temperature leading to more frequent bushfires

We can't afford extreme weather events leading to 150mm of rain in an hour (unprecedented in Australia)

We can't afford more frequent wild weather events such as the tornadoes in Joplin, Missouri

We can't afford to have the sea levels rise - just ask anyone in Kiribati!

This is the gravity of the situation.  Do nothing now, and in fifty years it will cost so much more to act urgently.  We are merely complaining about a tax we don't like.  Consider the alternatives above.  THAT is the real cost.



Carbon lies - this is getting sickening

I've really started to get fed up on the misinformation spewing forth from the Coalition on the Carbon Tax.  Greg Hunt went on 7.30 on Tuesday (24 April) with news about the "Direct Action" plan.

This is fair enough.  It seems the coalition have been quite keen to step forward and label the government's plan as a "Toxic Tax" that will cause the end of the world and businesses to go broke.  Have you noticed that this is Tony Abbott's strategy - "The Unnecessary Carbon Tax".  "This Toxic Tax".  "This will impose more strains on everyone's cost of living".  At least he keeps it simple...

It's high time some of the alternative plans were looked at.  "Direct Action" is nothing more than subsidising certain companies to do very little.  As Greg Hunt contends, a reduction by 5% of 2000 CO2 emission levels (our completely arbitrary target set a few years ago after Kyoto) could be achieved by "... storing carbon, it could be [by] capturing waste coalmine gas, it could be [by] cleaning up landfills. Whatever is lowest cost, we'll do that".

Nice to see such a simple solution.  Pity the Grattan Institue have completely debunked these so-called solutions as being totally innefectual.  What it means is that there are vested interests who will be the beneficiaries of these subsidies who are keen to see the Abbott side of politics instilled in power!   If that happens they will benefit from billions of dollars in free money handed out by the government, and WILL KEEP POLLUTING with very little change to our total CO2 emissions.

Greg Hunt then went on to say "we will, over four years, for example, spend $3.2 billion on our approach. That's offset by $50 billion of savings."  This is the cost of "Direct Action" over the forward estimates (budget preditions for the next four complete financial years) as stated by Greg Hunt.  However less than a minute later, he is asked by Chris Uhlmann: "and $3.2 billion you are saying now will cover the cost of that increased gas price - for how long?"  (I yell at the screen - "he's already answered that, four years") but Greg Hunt has the audacity to answer thus: "We were looking at a period out to 2020..."

Greg, I make that nine years, and about sixty seconds earlier, mate, you were saying four years.  

The Carbon Tax is a response to a problem.  Okay, governments can do nothing, bury their heads in the sand and pretend everything is okay.  The UK government has not decided on this course of action.  Germany plans to be the biggest renewable energy user in the world by the end of the decade.  What are we going to do in Australia?  If we follow the ALP's stance we will have a tax on pollution shifting the cost on to the polluters themselves, and this will then transition to a cap-and-trade system in three to five years.  If we follow the coalition's stance then very little will happen, except that quite a few very large polluters will be subsidised by the government to keep polluting, and the tab to clean up that mess will be picked up by the government from a revenue stream that doesn't exist.

(If you listen to Greg Hunt (see his 7.30 interview) the funding will come from budget savings (savings=cuts) so what that means is you'll get less services from the government, and in return, the savings (cuts) will be transferred to the polluters, instead of the people that probably needed the government services in the first place).

Again, Liberal policy is to give government assistance to people who do not need government assitance.  As if big power generators, steel-makers and aluminium smelters cannot pay their own way.   They will close down and sack staff based on purely financial grounds, the impost of a carbon tax isn't going to make one iota of difference because of the materiality of the changes.

Speaking of materiality, on Monday, Tony Abbott went to a welding company in Queanbeyan.  Here he was describing the impact of the "Toxic Tax" as "the firm will pay an extra $4,000 in power [bills per year] ... ".  (It is clear he's using the annual figure because he also mentions "$1,000 a quarter" in the press conference).

Let's do the maths.  The owner of the welding firm also spoke and said they employ forty people.  Let's do some approximations here and estimate the annual wages bill at say $1,000 a week for 40 employees for 50 weeks a year and you're looking at $2,000,000 a year in wages alone.  Plus naturally there are other expenses.  This company must be paying out close to $10 million a year in total expenses, and a $4,000 increase in electricity prices is going to send them to the wall or at least put jobs at risk??   This is what Tony Abbott is seriously contending!

To look at it another way, if this business decided to give a $10 a week pay rise to TEN of its employees (cost: $5,200 annually) this would send them to the wall or they'd have to sack other staff.  This is greater than the $4,000 increase in electricity costs.  These contentions are just scare tactics, and if you are being suckered in by them it's only because Tony can keep a straight face as he contends absolute baloney so well.

No mention is made of the fact that with the Australian dollar sitting up at $US1.05, the cost of fuel for this company is about 30% cheaper than it otherwise would have been six months ago.   Nah, you can't mention that, because that might just indicate that the government is managing the country well enough that other people are now prepared to pay a premium for the Aussie dollar.

And yes, a high Aussie dollar means our exports are less competitive, 'tis true.  However since Australia has always had a balance of payments deficit (throughout our entire history) this means we import more than we export, so overall a higher Aussie dollar is better for the country than a lower Aussie dollar, plain and simple.

Nah, this incompetent government is bringing in an unnecessary toxic tax that will put jobs at risk and impose costs on us all that we can't afford.

The cost of climate change is borne by our children and grand-children.  They will view us with absolute contempt and disdain if we can't solve the problem now and leave it all up to them.  But perhaps maybe they'll be a less selfish generation - they'll HAVE to be in order to survive.

Numeracy

I just remind all readers to be aware of the numbers game and how easily it is to lose track of the real issues when people are quoting figures at you.

Remember back in 2000 when the GST was introduced?  The pollies were going out and buying baskets of groceries and comparing prices before and after the GST.  Yes, at that time some things were taxed at the 22-1/2% wholesale sales tax, 12-1/2% and 32-1/2%.

Go buy a basket of dog food, and lo and behold, under a GST that 32-1/2% wholesale sales tax rate gives you an actual saving!  Go buy fruit and vegetables and you're paying 10% more.  (Well Meg Lees got her way and the GST stayed off Fruit and Veg - so what I ask).

All these comparisons were done and a whole lot made of the findings.  But people were not really taking the right information into account.  Okay, you can muck around by comparing taxes at different rates and on wholesale and retail prices and you get different numerical outcomes.

The one thing that wasn't being discussed at the time was the most important thing, and the NAME of the tax gave it away.  "Goods and SERVICES tax".  Okay, there'd be a change to the tax rates on goods, but on SERVICES, the current rate was zero, and ten per sent of the retail was going to be added to all services.

Now you'd be taxed on getting your hair cut, buying movie tickets, getting the car serviced, paying for the services of a professional person (lawyer, accountant, etc), taxi fares, plumbing services, electricity supplies, petrol (in addition to all other taxes), and so on and so on ad infinitum.

Never mind the goods side of things - mathematically they will vary a little.  Worry about the services side of things, where everyone is worse off.   And all income the tax cuts promised simply never eventuated.  Bracket creep was given back, but essentially income tax revenue remained almost the same!

This is just a reminder to worry about materiality.  You may hear incredible stories about how power bills will increase under a carbon tax, and this is usually because they will include an actual quantum (eg electricity bills will increase by $50,000 a year for this particular business).  Ask instead what PERCENTAGE increase is this going to be (and according to Treasury it's around 15% for electricity.  For food it's estimated at a 1.2% increase).

The figures are then easy to work out.  Say your business currently spends $80,000 a year on electricity.  This means it will cost an extra $12,000 a year for power.   Don't mention the existing $80,000 and a $12,000 increase sounds massive, doesn't it?   Honest reporting would say the bills will rise from $80,000 to $92,000 per year.  (Power is probably the highest increase of all commodities, because it emits a massive amount of carbon in its production).

This is, of course, assuming you still use coal to make the electricity...  Generate your electricity from gas, and already the carbon cost is halved.  Generate it using hydro, wind or solar and you pay virtually NO carbon tax at all (which is the whole point of the exercise)!

Long Term Unemployed

After the budget last night you can definitely see none of the pollies have been unemployed for any great length of time.

I want to impress on them the depression involved in long term unemployment.  It's not as simple as "get a job" in many cases.  I've been looking for work in the past and applying for jobs willy nilly.  Over a six month period in 2001, I applied for about 140 jobs.  I got about 35 no-thank-you replies from the employers, and the rest were just ignored.  I'm not sure what's worst.  An employer taking out a classified ad in the employment columns is sometimes subjected to over a hundred applications, and some small employers simply don't have the resources to reply.  But then again, each of those applications has been the result of an investment of maybe a couple of hours time from the applicants, so they probably do at least deserve acknowledgement.

What IS bad, however is the arrival of a no-thank-you letter, as it's a constant reminder that you are not wanted by that particular employer.  A few letters are fair enough, but when they keep going for month after month, it certainly leads to depression.  All you can do is pick yourself up off the ground and keep applying for more jobs, but that's something that's often easier said than done.

Worse, I suppose is when you happen to actually land an interview.  The hopes rise, and you get yourself in to the employer on time and with a shiny face.  This often involves quite a few hours of your time, plus the cost of travel to and from the workplace.  In many cases, unfortunately, the employers didn't even have the manners to call back and say I was unsuccesful after an interview.  I can live with ignoring an unsuccesful written application, but after an unsuccesful interview, where you've gotten yourself along to the employer's place of business at your expense and on your own time, a reply is definitely warranted.  How many people are they interviewing, for goodness sake?

To impose on the long term unemployed the requirement to apply for ten jobs a fortnight is crazy.  For a start, I'd doubt there'd be ten jobs a fortnight I'd have any prospect of applying for in the first place.  This means you'd have to be applying for jobs that you've got no hope of getting.  Crazy for the employer who has to deal with the applications (shred them?) and crazy for the applicant who is going to be constantly reminded of his or her unemployability.

As I mentioned, each no-thank-you letter can be taken as a personal slight.  That's yet another employer who doesn't want to employ me.  Assuming about a 30% reply rate, that's three letters a fortnight arriving in the mailbox reminding you of yet another employer who doesn't want to give you a job.  That might be all right for a month or two, but it'd be downright demoralising after a year.

What would the pollies know about this, however?  Well, they could ask us.

The future

Again I keep hearing all the "problems" of imposing a carbon tax: jobs will be lost, our exports will be less competitive, electricity prices will rise, etc, etc.

How short sighted these are!

All these criticisms fail to look much further than a few years into the future.  These criticisms are probably true within the short-ish term  However look a bit further ahead and what have you got?

Firstly, carbon-intensive industries will become more expensive.  What does that mean?  Well non-carbon-intensive industries will become far more competitive!  Whilst solar panels are not the cheapest things around now, if they are competing with free carbon emissions, they'll stay that way.  But if carbon emissions have a price, they will be comparatively cheaper, there'll be greater production of them, and eventually due to economies of scale they'll get a lot cheaper.  Look at the price of DVD players when first released - somewhere around $500.  Now they're $39.95 for quite a decent unit.   Look at the price of cars when the Model T came out - a car today is cheaper in real dollar terms than back in the days of Henry Ford.

Eventually industries will adapt to the new paradigm, and it'll become second nature to look at how to produce things without spewing carbon into the atmosphere.  The earth's atmosphere is comparatively small.  In fact it is an interesting phenomenon that the oceans are far bigger than the atmosphere, and if you're really going to pollute something there's much less effect by dumping stuff in the sea than in the air!  Not that I'm advocating either - just presenting the comparison.

The one thing we do know, however, is if we look further into the future, if we continue to pollute the air for free, we'll have a much hotter world (I hate the heat!) lose species, have more intense weather systems, lose Pacific islands, lose coastal land, and a myriad of other undesirable effects.  Where's the economics in that?

It's time to bite the bullet and do what's right for the world.  Yes, it will have short-term economic effects.  But the longer term results will be a cleaner atmosphere, and saving us from inevitable destruction.  The cost of cyclones and severe weather storms is never brought up, but only in January we saw a taste of the consequences.  The residents of Toowoomba and the Lockyer Valley must surely be able to attest to this!

Cost Shifting

Some classic examples of cost-shifting occur in some of the so-called "sin-stocks".  Probably the best example is that of the cigarette companies.  Their product, which costs about 50-60 cents to produce retails at around $15; so no doubt there's a strong desire to produce it - there's a lot of profit there.  Naturally the government is keen to also put their hands in the pot and adds excise and tax along the way.  But is it enough?  Clearly not.

The costs that are shifted include the littering problem, the smoke that is annoying for non-smokers, plus of course, the health issue.  Here's where the cigarette companies cost-shift.  They sell their product with the full knowledge of these other social costs, but don't contribute to them at all.  It all goes to their bottom line, and the health system and other government agencies are reduced to paying for these external costs.

The alcohol industry also does similar things.  The consequences of alcohol consumption are immense.  We have assaults, vandalism, broken marriages, massive car accidents, health issues, not to mention the simple task of cleaning up vomit!  All these are costs of consuming alcohol that the alcohol industry does NOT pay for.  Someone else picks up the tab for these "incidental" expenses, and the alcohol industry does not include them within their accounting bottom line.   It all stays there in the alcohol industry's books as profit, and is a massive expense for the governments who have to provide police, paramedics, counsellors, doctors, nurses and the like to clean up the mess.

With these issues, it's not difficult to get support from people about the cost-shifting.  People tend to agree that the industries need to fully pay for their impact on society.  For example, we now pay a levy to dump used car tyres when we buy new ones.  We pay an environmental levy when we get our oil changed in the car.  TV manufacturers are finally being forced to provide mechanisms for taking back their TV sets when they are no longer in use.

It's the same situation with carbon disposal.  Up until now it has been completely free to discharge Carbon Dioxide into the atmosphere.  This massive cost shifting has meant industries have been able to shift the cost of disposal of their pollutants on to other areas of the economy, and have the resultant profits in their own P&L statements.  The carbon tax is a fantastic way of pulling the costs into the existing accounting system without too much reliance on regulation or other cumbersome methods.  If it costs money to pollute, then it is in the interests of the company to reduce that cost, pure and simple.  Any reduction in costs in the accounts will result in an increase in profit.  And maximising profit is one of the most important aims of being in business.  It's listed right up there at the top of any company's aims!

These arguments need to be made and explained to the Australian people.  It's a pity the Federal Government is failing in its attempts to do so!

Why Tax Carbon

I am constantly dismayed at this common argument about the carbon tax:  we impose a tax, then we just go and compensate people for the tax, what's the point of imposing the tax in the first place?

The ALP has a lot to answer for for allowing this argument to run.  It's been used by a number of Liberal politicians lately, Christopher Pyne used it on Q&A last night, and it was never answered correctly.

The reason for the carbon tax is where it's applied and where it is felt.  The tax is going to be imposed on industries for emitting CO2.  They will then pass it on to customers by increasing their prices.  So as a Labor government, the policy is that the people being ultimately affected by the tax are going to be compensated.

Now, what this means is that an industry can either pay the tax for emitting CO2 and pass it on, OR they can find ways of not emitting the CO2 (by using green technology) and then their products become comparatively cheaper as their carbon tax outlay will be less.  They get a leg-up on reducing their expenses.  If their competitors increase their prices because of the tax, then the non-emitters can either keep their prices low and thus become far more competitive, or not increase their prices as much and improve their profitability.

What this does is assist low-emitting industries, and penalise high emitters.  After a while, industries will be encouraged to find ways of reducing their carbon emissions.  Either that, or they'll find their prices are not as competitive because they'll now be having to pay extra carbon tax.

It was said that to reduce smoking, tax on cigarettes is increased.  You don't then go and compensate smokers for the increase in cigarette prices.  But this ignores a very important economic concept: substitution.  A smoker really can't substitute other products - you either smoke tobacco or give up.  (There are probably a few substitutes, but not of high importance in our condierations here).

Whereas with energy there ARE many substitutions.  Already we can buy Green Power generated from wind turbines, hydro-electric schemes and the like.  It's more expensive than coal generated power, and therefore it's not really all that popular.  But if you tax carbon emissions, you make Green Power relatively cheaper, and thus increase demand for it.   People will be queueing up to tick the box on the Green Power option if it's not as expensive as coal-generated power; just as most people now take the cheapest power option on their bills (which just happens to be coal-fired stuff).

So the reason why the compensation IS different and the reason why we need to tax the emitters is simply to differentiate the products.  Don't forget if you don't generate CO2, you won't pay any carbon tax.  And if you do (which is regarded as the undesirable outcome) your emissions will make your products more expensive.

For too long industries have had a free run.  They have been allowed to emit CO2 into the atmosphere for free.  It's called cost-shifting.  You do something that costs someone something, but if you're not paying for it, then that cost is not in your accounts, it's in someone elses, therefore the profit is yours.  And some other poor guy (usually the government) has to pay to fix things up.  The government gets its funding from taxpayers, so that cost avoided is paid for by all of us.

I can't see why a government needs to pay for the expenses racked up by companies.  Consider a petrol station now being closed down.  The land needs to be remediated from the chemicals.  No-one would argue that the petrol station itself needs to pay for that remediation work.  But let's say they get away with it by becoming bankrupt.  The land still needs remediation, and now the government (ie us taxpayers) has to pay for it.  That cost has been shifted on to someone else.  And the saving in cost goes straight to the bottom line of the company avoiding it.  In other words taxpayers are subsidising the industries.

This is what has been happening for too long with carbon dioxide.  Emitters have been emitting it for free until now, whereas it's long been regarded as a cost.  Not a financial cost, but an environmental cost.  With a carbon tax, you immediately transfer that environmental cost into a financial cost.  It will appear on the business's bottom line, and they'll be doing something about it - mark my words.  With carbon emissions free there is simply no incentive at all to do anything about it.  Why bother?

We need a carbon tax, plain and simple.  Carbon emissions are NOT free to the world, why should they be free to businesses who actually emit them?  Cost-shifting is so frequently used by big business, and I'll blog more about it later this month as it's a fascinating concept that is, fortunately, being phased out gradually.  One of the biggest cost-shifting phenomena is that of free carbon emissions.

The things they say

Hi guys, I'm back again.  I'm participating in an interesting project at the moment, and that is campaigning on behalf of the ALP candidate for the state seat of The Entrance, David Mehan.

What I'm doing is "doorknocking by telephone".  Our current state member, Grant McBride (ALP), is retiring at this election, and David is the replacement candidate.

My telephone campaign has started very interestingly.  Most people are quite happy to talk about the upcoming election.  I have spoken to a number of traditional ALP supporters, many of whom ARE intending to vote Labor on March 26.  However there are also a number of traditional ALP supporters who are either still undecided, or are not going to be voting Labor on 26 March.  There are also a number of Liberal voters who are not going to be voting Labor, however there are NO Liberal supporters who are thinking of voting for the ALP!

It is interesting how a few of the people I'm calling have (how shall I put this) very little interest in politics.  I have even spoken to people who are not aware that an election is being held in this state on March 26.  I suppose not everyone watches the news.

I keep wondering what the situation would be if we had voluntary voting in this country.  After all, at the moment, many people vote who have no idea of the issues involved, and simply regardit as a burden imposed on them by the faceless ones.  If the decision was left to people who WANT to vote then perhaps a more informed decision could be made on who gets in, and those who don't care can just accept what those who bothered to show up and vote decided.  This is why I was heartened when Tony Windsor, Bob Katter, Rob Oakeshot and Andrew Wilkie were the ones deciding who would be the next Federal government back in September last year.  After all, THEY were interested, informed and had a stake in the issue, unlike so many of the electors out there who couldn't really care less.

Incidentally, one question I ask many people when on the phones is just out of interest, are they able to name the Liberal candidate for The Entrance.  Not a single person has been able to answer this as yet.  (To save you from the suspense, his name is Chris Spence.