An honest opinion – Why Electricity Prices are Rising

It started, if one cannot express an honest opinion to one another – than we have no freedom. So why was a recent writer not particularly pleased when we said: “The ‘why’ needs a follow up and maybe a sharper focus on the Institute of Public Affairs motivations”? By this was meant they are an institution that makes a claim as the ‘The Voice of Freedom – Freedom and Optimism” – yet they seem so negative to progress and innovation. So we feel it is fair to say what motivates needs a sharper focus.

What was it all about? It started with the comment: “Good article on the ‘what’ – Elegant, eloquent, easy to read. The ‘why’ needs a follow-up and maybe a sharper focus on the Institute of Public Affairs motivations? That regulators tend to anticipate growth and expenditure from information supplied by the networks. Then there is the ‘how’. How did this happen, or at least more detail on the how! For instance: Is falling demand from energy efficiency, or the commercial sector in decline and/or manufacturing slowdowns/showdowns. Will it happen anyway because to be more effective you need to be more efficient? “ The article being commented on was “Why Electricity Prices are Rising, 27 June 2014” – posted by Turlough Guerin. In the preamble he said “When I worked in the telecommunications sector someone told me that you don’t need a PhD to understand how pricing works – but it sure helps. Perhaps the same holds for electricity. However there is no doubt that power prices are rising across Australia. This is clear not only from federal government statistics, but you need look no further than your power bill with the average household now paying close to $1000 each year.”

But, CO2Land org finds a major issue with the use of past data in determining the facts. – For instance the variable are changing in their focus, the model of the business are changing or at least being forced to change. More importantly the changes are being driven by the need to more efficient. All brought about the world wanting us to be measured on comparative advantage of our products. It you do not believe us: Why is carbon a focus elsewhere in the world? Why is it that penalties are being sought against those that do not seriously consider carbon in the world markets? This is not an argument on the setting of the price, it is about the need to be aware that future predictions from past data is dangerous, and you must consider the circumstances are changing.

In the article above, it was good, but only because it was the first installment in what should be a series of facts being presented. For instance we could write about why Victoria sold it assets and that at that time Victoria had an excessive redundant infrastructure available, and this gave rise to ‘a good buy’ to those that buy the asset with a cash cow potential. Bring that forward to today, and those that own the Victorian Assets have a conundrum; the private owners need to find more money to improve the services in a tight market. Now if we move to NSW, today, we see a very different problem; they are trying to sell a run down network that might not be viable to buy. Queensland has another set of problems and the long runs between population centres and the concentration of the southeast corner make dissimilar circumstances that make it difficult to say a common variable affects the business.

All that said what are the variables? We propose a new model the give weight to:

  • What is the costs to maintain the existing the Poles and Wires (Transmission and Distribution networks)
  • What is the costs of stink of politics – Science v’s Fiction argument
  • The reality of a carbon market and its global significance to our local markets
  • The existing infrastructure – new and aging generation coefficients
  • The existing infrastructure – transmission and distribution future needs
  • The infrastructure – gas system – this is a very complex issue as it is sensitive not just to the environment as it is to world politics. In effect we have very little control of what is happening in that industry. Why because the deals done elsewhere are linking the gas price to movements on peak oil price predictions.
  • The potential of the suite of alternative energy sources. This means the current infrastructure is very likely redundant. The really sensitive fact is that the models of distribution will change because of it.
  • The Electricity Demand. Be it new or additional generation, the transmission and distribution constraints, the regulator findings or simply consumer behaviour (despite climate change); the biggest problem is the supply demand balancing equation. The supply demand balancing equation is persistent is being 20% of the time is setting 80% of the costs. It then follows that of that 20 % of time the larger costs are 80% likely to occur 5% of the time. With this sort of issue it become apparent consumer behaviour set the theme. We should also put out there to you business slowdowns affect consumer behaviour.

That last comment leads us to the question: Is electricity a commodity or a service? It is not a new question, and political ideology will elicit different answers. Our point is no mater what you think the provision of electricity does determine if we are third world or not. In the pure sense price is simply the cost of providing? Ironically, when you crunch the numbers of our Treasury recommendations our ‘budget emergency’ does seem to settle on 17% increases in everything as good. Justifying the need is far more complex.

So while we liked the quoted story, it is only the first part of a big story. If you are looking for a really good read of how it all happened in Australia, read: Booth Robert R (2000) Warring Tribes: the story of power development in Australia, West Perth WA: Bardak Group. Robert is no longer with us, but bet you he would have plenty to say – had he been here.

 

 

 

 

energy efficiency barriers – problem 1,2,3

They are at the end of political and economic capital and old Generation assets have a problem – they are competing with innovation that promotes efficiency. The problem is not new, just reborn ideals that have new tools available. Recently the ACT Energy Minister said it very well (as reported this week in the RENeweconomy ) as the real issue is not that wind, solar and other technologies are added to the grid. It’s that old and inefficient generators are refusing to leave. Therefore new renewables are not the problem.

Looking at the problems of our energy system as a whole CO2Land org sees, just like our bills read – three pricing areas that can be improved. Or should we say need to be addressed.

Problem 1 – the price of energy is set by a market mechanism that in Australia is opportunistic. Old inefficient generators can remain viable by gaming based on availability and triggers to elevate prices. So long as they remain the ‘baseload’ capability and sufficient ‘events’ occur in the market they will remain viable. With or without a renewable target review, the Old King Coal will remain. But we will pay more – not less. Why? Like an old car it needs maintenance and those costs must be passed through. Of course the fuel cost factors in too.

Problem 2 – the Grid system is a capital hungry beast. Both transmission and distribution networks (poles and wires) are encouraged to overinvest. Overinvestment is encouraged in the name of reliability and capability. How can this be necessary? Our regulatory system set the network charges and penalties. When the prices are set for the charges (network tariffs) the weighted cost of capital and the need for maintenance and cash injections need to be reliably for at least 5 years is part of the formulae. Estimated is approximately 10% more is payed than need be – with or without a carbon price – OK!

So what should we do? Agree to keep up prices or encourage a write down of the asset – In 1996 or thereabouts the answer was do no maintenance other than priority works. The system had sufficient redundancy that it could take it. In this way privatisation can look promising. Then some time later the capital injections will be required again and up go costs – it does sound very much like todays 2014 talk too does it not!

Problem 3 – the issue of managing costs to consumers. This is the vexed issue – the supply side believes costs should go up, demand side costs should go down. Therefore you could say energy efficiency means demand decreases and prices will go down. But, think this Problem 2 shows the networks are overinvested and cost will be recovered even if not actually expended – they can be anticipated! Then think Problem 3, the market anticipates events 5% of the time and this accounts for 20% of the costs. A nice little earner lost if you change that!

We know some of you will be saying but a capacity market will fix that, just change the rules will be your cry. The reality those with the courage to change things will have 5 years to bring about the change and then need to predict 2 years in advance. They will need to establish how to impose penalties on the gamers. And, we know the gamers are very good at lobbying for no change. They might even say climate change bah humbug!

But, you know all three problems have another issue: Each problem area participant can be asked what does efficiency mean to you – The answers are very likely to differ and that is an issue for policy makers too. Think this – Federal government will side with security of supply, state with balance of supply and local and consumers with the cost of supply. Makes for interesting responses does it not!

Have a chuckle – without coal we are third world!

We had a chuckle when we were told carbon is killing jobs. If it were not for the coal industry we would be a third world country was said. Then chided in a fellow that looked Greek but claimed he is Irish; I was born and bred in the Albury district, and when I was a boy we were told the Myrtleford area in Victoria would die without the Tobacco industry. Tobacco farms were everywhere it was the lifeblood of the community. Well, Myrtleford has survived and it one of the true natural beautiful places in the world and extremely well sought after and prosperous – and no Tobacco – all gone. Mark my words, we can live without coal too – Australia I mean!

All this kicked off over the words ‘natural resource’ and even if it was harmful it was a natural product and this should be sufficient when combined with the economic benefits of the use of. Therefore it was reasonable to consider the claims to the extent that the economy would suffer without Coal Mines. It was concluded that problems would exist, but it was overblown in the effect. The overblown claims had one purpose – to appeal to public perceptions and gaunter support for its importance – and the industry’s survival. The difficulty for the industry is they want us to completely ignore market realities. For instance the falling off of demand, price, and global imposts on carbon pricing. So much influence has those factors got that a local view has no relevance anyway!

So we must say, for local views to be true they would need to defy what is the evidence for existing National and Global infrastructure and markets. Take for instance this story:

Coal not bedrock of Hunter Valley economy, jobs, By Sophie Vorrath on 13 June 2014: “ A new study has found a huge gap between public perception of the coal industry’s importance to the NSW economy and jobs, and the reality of its contribution to the state’s coffers and its people.

The report, Seeing through the dust: Coal in the Hunter Valley economy, launched by the Australia Institute on Friday, finds that Hunter Valley residents believe the local coal industry employs four times more people than it does, and that coal royalties contribute 10 times more income to the NSW Budget than is the case.

It’s a discrepancy, says the report’s author, Roderick Campbell, that illustrates how successful the industry has been in inflating its importance.”

The story goes on to say:

“The coal industry’s public statements invariably emphasise its apparent economic importance. But when the industry is placed in context we see that coal is not the bedrock of the Hunter economy,” and

“The reality is that 95 per cent of Hunter workers do not work in the coal industry and only 2 per cent of NSW government revenue comes from coal royalties.”

As Co2Land org has already mentioned. It is an issue Australia wide. Actually, it may be better described as a global issue of national importance. When you look strategically, it is seen as a war! The tools used are the spread of ‘misconception’, or distortion of truth.

In the article above and reported elsewhere is that the United States (US) has introduced new Environment Protection Agency (EPA) regulations that outline and describe misconception as a war on American jobs, economic growth, and GDP. The point of these regulations is a focus on CO2 emissions from coal-fired power plants.

In the media US economist and New York Times columnist Paul Krugman recently wrote, “coal mining accounts for only one-sixteenth of 1 percent of overall US employment; shutting down the whole industry would eliminate fewer jobs than America lost in an average week during the Great Recession of 2007-9.” The columnist goes on to say “the so-called war on coal – or on coal workers – this happened a generation ago, waged not by liberal environmentalists but by the coal industry itself,” when it turned to machinery to produce more coal, using far less miners. And coal workers lost”. We need to note here that in Australia our Liberal Party is not liberal, it is better described as Tea Party like. It is confusing, but!

Despite all the grand rhetoric, the bigger issue facing the coal industry is cost, and its cost position as the global shift to low-carbon technologies begins to render the fossil fuel uncompetitive. As an aside all are now called ‘natural fuels’ and it might seem ‘clean’ is gone from the Australian policy.

Back to the Hunter Valley, the Seeing through the dust report is quoted “the a subsidiary of Brazilian mining giant, Vale, sacked 500 workers from the Glennies Creek underground and Camberwell open cut mines near Singleton, blaming poor global coal prices for its decision”.

We can only comment with: The spin is spinning, but in the end it will get down to cost – but we don’t need to pay the earth!

 

Inappropriate electricity tariffs – it will cost you!

Inappropriate electricity tariffs have the potential to cost excessive amounts of money for the unwary. In NSW for instance, the National Electricity Law (NSW) has gaps in it you can drive a truck through. Consider this: Energy Retailers might know you are paying too much for your network charges, and they take no action. The Energy Retailer can request a review of your charges, but apart from a newly introduced mandatory review period, may not provide this service. One retailer even provided proof in saying the do not have the systems in place to be proactive on behalf of the Customer. In other words it may be immoral, but it is not illegal to withhold the service. CO2Land org has written evidence that one NSW small business has claims of having been on an inappropriate network tariff and it costing them as much as 72% more than needed to pay – how much? Almost a quarter of a million dollars ($250,000)!

Another issue is that a deemed contract can exist whether you are aware or not, and it may be a simple communication error that costs you dearly. As a residential customer it may cost you up to $220 because you entered into a new Energy Service Agreement (ESA) and were not aware you were already contracted to another retailer. The charge is a break contract fee. It will not be transparent and a St Vincent De Paul commissioned report suggests it is also unreasonable.

A similar break fee event, that CO2Land org is aware of, involves a Commercial and Industrial (C&I) customer with an annual energy spends of approximately $50,000 pa. This small business was invoiced in excess of $10,000 (including government fees and charges) for breaking a deemed contract. In that invoice no attempt was made to show how the number was arrived at other than the words ‘to cover costs’ and a list of the government charges. The source of these two examples here is Wintelboff – www.wintelboff.com .

Possibly you should contact your favourite energy advisory and have them look at your bills?

Co2Land org is also aware that through the Office of Environment and Heritage (OEH) and in conjunction with Carbon Training International (CTi) ‘Energy Management Basics Training for Business’ is available. The ‘plug’ is because they also offer to review your billing as part of the class exercise, and provide up to 15 hours of technical advice as part of the course.

We are also aware the NSW Business Chamber is offering discounts to its members of up to 19% if they use Energetics to participate in the Business Chamber’s ‘Better Energy Manager Program’.

Which of these groups is better? It really gets down to cost. The benefits are obvious if you are paying too much.

If we go back to the National Electricity Law (NSW) and the way it is framed – sounds like a Roger Rabbit episode! A quick read will make it clear the consumer advocacy part is weak. A large business must engage through a complex process for its matter to be heard. [As an aside a business can be classified as large if it has energy consumption greater than 160MWh pa. However, it may not be large under taxation and corporate laws]. If you need to go to court over your energy bills, the dispute resolution it will be classified along corporate laws. You could be excused for being confused! A course of dispute resolution is to go to the Energy and Water Ombudsman NSW (EWON). What you should know is EWON is not a government-sponsored body – it is industry member sponsored. The body can also make the choice to be involved in disputes? They will make legally binding judgements, but they decide whether to be involved and you must have your wants clearly made and they must be for more than moral issues. They also have guidelines in the use of the body. Currently, you need to have an annual turnover of less than $2million, employ less that 20 people and be a family run business. Some variation to these guidelines are possible, but you might need to contact them if you have questions www.ewon.com.au .

If you did not know there is ‘spin’ that all this be fixed when the assets are sold? As it happens the poles and wires – the network companies in NSW are state government businesses. If the process is flawed you could expect a reasonable person asking why is it not fixed? The answer may be it is an inconvenient truth right now, we are trying to sell the companies!

 

Policy – Position – Agenda – where does it sit?

The President of the Solar Council made the point: The political position of denying does not matter in the end. From that we can conclude that ultimately the posturing will change as the influences around them change and the policy models too will change.

If you have rang a Call Centre recently it is very likely you might have been confronted with ‘its policy of ‘. No longer do they say is ‘the position of ‘. Why is this?

Policy – the business dictionary like to say it is the declared objectives to achieve and preserve – the free dictionary likes to say a plan or course of action intended to influence and determine. Most others say something very similarly, so we can conclude the meaning is a rule or contract when used as a noun. We can say the synonyms can also include a Rule, Strategy, Plan, Procedure, and Dogma, Program. All of which is a Guiding Principle.

Our point. You have every right to question if it is an appropriate course of action. Why because it indicates the decision is primarily based on material interest.

Position – Think the right or appropriate space. Where your point of view could also be described a thesis or the laying down of a proposition.

It also can be characterised by the unsolicited offer to an existing customer with wording such as ‘you do not need to do a thing’. Then some time later you are penalised because you did not object. Do you want an energy use example?

Well think this: Step by step the instructions are tweaking you into being positioned. However, is this an acceptable principle? Maybe, so long as the policy is accountable.

Then there is the issue of what is the purpose of the policy. In the name of justice is often cited. It then must be broken down into for whom? If it is for the workplace, than it is vague. If it is for welfare, it is wide reaching. Here lies a problem, it can be vague and wide reaching and have no other purpose other than to be resisted and discarded. In effect the agenda you did not know about.

Back to the Call Centre: Do they have an agenda? We can assume they want you to accept what they do is the correct position. You will than accept that their view is correct, and they can say we have wide reaching evidence of the acceptance of our policy – you can conclude the agenda was for acceptance of the positioning.

Do you have a position on the renewable energy policy? Talking at – yes there was some disagreement, the Chairperson of the Australian Institute of Energy, on 5 June 2014, it was clear the definition of what was effective as the tools for success was not obvious. What we are saying is that ‘any action’ taken must be clearly a benefit over the established position. For instance: Solar is technologically superior as a generator. Energy Efficiency reduces the need to generate. They both affect the transport needs of the energy. They both can be local fixes in constrained areas of the network, and conversely they can affect negatively in areas of a distribution system that has not any capacity issue. It gets even more perverse when you consider the transmission network – moving from one distribution area to the next. The battle then becomes who can best serve in the supply demand balancing equation! Answer, it can be both. However, we are then talking about energy security. In this aspect the reference is to the balance between sustainability and reliability and cost efficient power. When we do we are speaking in terms of the national security.

For another discussion we might talk about energy conservation verses energy efficiency. Hint – the definitions must be addressed before you can proceed.

 

Lot of M’s – the collective fault within

Billion-dollar investor Warren Buffett is rumoured to be preparing for a US Stock Market crash, as is predicted by a number of pundits. Also expected is that a number of options could be open to investors to either alleviate or survive the down time period. What is predicted is a 50 % reduction or plunge in markets. Having lived the 2008 Global Financial Crisis a number of issues cross our mind. Such as the government policies to handle the situation will they be reactive or proactive? What will happen to the reserve bank policy? Where will you go to protect your wealth position? Will the need for welfare increase substantially?

On the latter the current Australian Government preferred budget policy says we must do it tough to get a surplus. All measure of expenditure will be cut ‘for our own good’. The difficulty here is that the expectation is there is an alternative to welfare. For example: A favourable market. Therefore a 50% plunge in the market will be a crisis with long-term damage to physical and economic circumstances. Ask around now and the evidence is there with small business indicators saying ‘we are stuffed’, ‘do they expect blood from a stone’, and then the irony of comments of we expect you to ‘do more with less’ and policies like the Clean Energy Legislation (Repeal) Bill 2013, also known as the Carbon Tax repeal, will save in the order of 4 to 6% of business costs and be replaced with short term (promised) measures that increases cost through other fees, levies, charges and taxes (even John Howard has said of the current budget before the parliament call it what it is ‘a tax’) increasing costs by around 17%. If you need references to the carbon price repeal go to www.environment.gov.au.

It beggars (pun intended) belief that we will be reduced to just that a nation of begging. Looking for a suitable term – mendicare (a Latin word for to beg). We would evolve the word mendicity to be the practice or habit of begging. Source www.answers.com/topic/mendacity. If you did not know, mendacity is derived as a synonym from Latin mendax and lying, and means habitual lying or deceiving.

On the subject of small business impacts in a recent DOE tender a Multi-use list (MUL) was written as part of the tender documents. Its purpose was said:

“Environment Quality Multi-Use List

1. To promote business opportunities for Small Businesses the Department intends establishing a Environment Quality Multi-Use List (MUL) for service providers that are small businesses. The MUL is expected to be open for registration from 1 July 2014 to coincide with the establishment of the Panel.

2. The MUL will contain the same scope of services as the Environment Quality Panel described in this RFT. Registration under the MUL will be restricted to Small Businesses employing fewer than twenty people. Registrants under the MUL will be required to provide services at rates that do not exceed the Standard Rates described in Part x, Volume x, Section x of this RFT.

3. Small Businesses may tender for this Panel and apply for registration under the Environment Quality MUL. “

Than on 28 May 2014 an Addendum was issued and as part of it said: “In the Request for Tender document under Part 1 – Section A, paragraphs 2.1 to 2.3 must be disregarded by potential tenderers. Any potential tenderer should respond to this RFT as the departments intention to establish an MUL will not go ahead at this time.” A sign of what is to come?

In preparing for the impending 2014 stock market plunge, even as a precautionary step, should our government adopt a better system of indicators – go beyond vitriol with the purpose to spread the blame, and for them to look seriously at the “Warren Buffett Indicator,” also known as the “Total-Market-Cap to GDP Ratio,” to have a tools that is capable of alerting what is breaching sell-alert status and a collapse that may happen at any moment? Source of the indicator story is http://www.moneynews.com/MKTNewsIntl/Stock-market-recession-alert/2014/02/10/id/551985/?promo_code=166D4-1&utm_source=taboola&utm_medium=referral

Being positive we can change our polies policies, what would we recommend?

a) Do what the budget or ideology wants you to do: Sell off all your stocks and assets and stuff the money under the proverbial mattress.

b) Risk everything and ride out the storm.

It is more a case of being sensible – whoops, too obvious!

If we look closely, we ourselves collectively are what are at fault. We allow ourselves to be complacent, and that is why we are allowing ideologues to blind us to the facts. The fact we need a multifaceted recourses and revenue base that involves a multiplicity of product offerings. The US has for instance learn’t that their greatness comes from innovation and small growing to big is part of their happiness index. Universally there are specific sectors of the market that are all but guaranteed to perform well. Some may struggle and it is cyclic. We need to think in 10 year terms and short term solutions that are blinkered could be costly.

Just as important are to accept the indicators over the historic sphere are markets rally to new highs despite any massive write-downs. This has nothing to do with luck. It has everything to do with using the tools correctly. In more correct terms being proactive in predictions and being reactive to the historic needs. Tools like a Crash Alert System, actually!

Problem – Communication Affective not Effective

Did they say that! A common response to what we hear around us. Then on a lifestyle site the problem of miscommunication helps explain why we react and why we might not understand the intended meaning: Michel De Montaigne, one of the most influential writers of the French Renaissance once said, “The greater parts of the world’s troubles are due to questions of grammar.”

More and more we are hearing the term gaffe used. The Prime Minister is often quoted as made a gaffe. How we react to being expected to know everything and know we know so little can be embarrassing. Think of this scenario, a stranger walks up to you asks for your opinion and you immediately try to read the situation before you respond. You notice an odd inflection here and one wrong preposition there, and you cannot find it in yourself to respond appropriately. You are stuck for the right words to respond and might even say something you later regret.

Than again, grammatical bloopers are not uncommon and even the most scrupulous writer will tell you it can happen. After all, with an infinite array of nouns, prepositions, infinitives, gerunds, antonyms, synonyms, homonyms and more, one is sure to ‘stuff up’ at times.  But, why is it more likely or very likely people will be confused in the use of ‘effective’ and ‘affective’? Because sometimes it is a tough decision making out the meaning and usage of these similar sounding yet unlike words – ‘effective’ and ‘affective’.

Look at the difference:

The etymology (meaning useful for determining whether a modern English word is descended from Old English) of these commonplace words empowers you to estimate the difference. The word ‘effective’ is derived from the word ‘effect’, which is used both as a noun and as a verb, while the word ‘affective’ draws its inspiration from the verb ‘affect’. Therefore, the nuance and usage of both ‘effect’ and ‘affect ‘will leave you with a better understanding of ‘effective’ and ‘affective’.

A dictionary might define ‘effect’ as “A phenomenon that follows and is caused by some earlier phenomenon”. Simplified, ‘effect’ is defined as the ending or result of a consequence. When used as a noun, ‘effect’ signifies the change caused by something. For example, in the sentence “The drought had a major effect on the world economy”, a change is followed by a phenomenon or an event. When used as a verb, ‘effective’ usually means producing or capable of producing desired result. For instance, “The new mosquito repellent proved to be very effective against dengue.” This sentence clearly shows the ability of the repellent to produce desired result and is hence effective.

‘Affective’ derives its origin from the word ‘affect’, which means “to have an effect upon”. Usually used as a verb, it often refers to an impact imposed by a person or thing. For example, “The advice of the Governor was affective to change their ways”. The sentence stresses the governor can influence the audience. Therefore, the Governor is an affective person.

Examples:

Effective –

“Effective communication in the workplace is a must for career success”.

“His advice was very effective to our upcoming business proposal?”

“Prolonged research enabled him to find effective treatment for the disease”.

“The pain killer was not so effective against my knee pain!”

Affective –

“The politician was affective enough to win the voter’s confidence”.

“The Treasurer’s speech was so affective that he couldn’t help thinking about it since!”

“The budget speech was affective”.

Just maybe the inability of governments (It was a problem for Labour as it is with the Liberals) to sell important messages could be a simple as the greater parts of their troubles are due to questions of the use of grammar. Did they really say that!

Mendacity – a policy choice, not the economy

Mendacity is an interesting word. “Are you aware, my lord, that mendacity is an organized body, a kind of association of those who have nothing against those who have everything; an association in …” www.thefreedictionary.com .

So what is the agenda for our government practicing mendacity, or at least willingly portraying itself as such? Take for instance being told we are part of a budget emergency, and the sky if falling. Attempting to instil fear into the population. Then outside bodies tell us, in financial terms Australia is reported to be one of only 6 countries in the world with an AAA reporting agency rating. The rating is enduring from the previous Government. What parallels can we make with other countries? Are the same issues facing them and how do or did they handle the financial pressures verses social responsibility?

In wanting to determine our story we only had to look across the ditch – the ditch is a colloquial term used by New Zealand to describe the body of water separating Australia and New Zealand. The recent federal budgets of the two countries draws a line on the difference in government style and puts forward that very similar conditions underline what is facing each country. Yet, the fiscal responses are different for each. It gets even more interesting when you consider the two governments’ are regarded as conservative – it gets truly bazaar.

What is different about New Zealand? Maybe it is all covered in the story “New Zealand forecasts 2014-15 surplus in budget that bears striking difference to Australia’s”. By New Zealand correspondent Dominique Schwartz :

In Australia we have been asked to go through pain. Whereas in New Zealand has been “served up one of the rarest of economic dishes: a forecast budget surplus of $NZ372 million ($340 million) in 2014-15, after a $NZ2.4 billion ($2.2 billion) deficit this financial year. Also on the menu were election year sweeteners including extended parental leave, and free doctor’s visits and prescriptions for children up to 13 years old.

By contrast, Federal Treasurer Joe Hockey delivered a hard-to-swallow $50 billion deficit accompanied by a collection of bitter pills, among them, co-payments for GP visits and cuts to welfare, family benefits and the public service.”

So as to balance the viewpoints, it is worth taking note of PricewaterhouseCoopers (PwC) New Zealand partner and corporate tax leader Geof Nightingale. From the Schwartz story it was said:

“I don’t think it’s a tale of two different economies, I think it’s a tale of two different policy choices,”

“The fundamentals of each country are quite similar. Australia’s forecasting economic growth of 2.5 to 3 per cent. New Zealand is much the same.

“Australia is forecasting to get unemployment down to about 4 per cent, New Zealand’s much the same.

“Australian politicians have ridden the mineral boom and failed to address the country’s deficits. What’s happened is corporate tax revenue has fallen off but structural spending has increased and so the deficit got wider”

Noting what the New Zealand prime minister John Key says: “His government has kept spending at about the same levels for five or six years as the country claws its way back from the global financial crisis and the Christchurch earthquakes.

We’ll be racking up $NZ7.5 billion worth of surpluses in the next three or four years; Australia will have amassed about $100 billion in debt.”

Mr Key continued that “the Australian economy is still reasonably robust and is not in crisis, but he warns the economy could face a crisis of confidence.”

Co2Land Org takes particular note of the issue being described as of a crisis of confidence.

Two important indicators are showing a genuine movement away from Australian:

A growing number of New Zealanders living in Australia are choosing to return to the greener pastures of home, and fewer are crossing the Tasman in the first place. The drift over the ditch has fallen from around 3,000 New Zealanders moving to Australia a few years ago to less than 350 now.

Mr Key says: “So what people are responding to is that they see a strong growing economy in New Zealand.”

According to Johnny Weiss, the founder of the Trans-Tasman Business Circle, reported Business is also making the move:

“We’ve seen quite a bit of relocation of Australian business to New Zealand.

As New Zealand maintains a competitive edge [regarding] pricing, costing and scalability it will be a very attractive place.

Business confidence is much stronger here than in Australia, so companies that want to move quickly find in New Zealand very good talent and quick decision making.”

Another difference is the Key government has not lifted the retirement age, nor are you subject to a means test your pension.

Nor does New Zealand budget to pay down net government debt, which is expected to peak at $NZ66 billion ($57 billion) in 2016-17, or 26 per cent of gross domestic product (GDP). Why do they not worry? Because they understand that: “The net debt gets smaller as a percentage of GDP [only] as the economy grows past it.

Why worry about Australia: Australia is one of New Zealand’s major trading partners, accounting for 40 per cent of all Kiwi exports.

So no matter how much Mr Key enjoys talking up New Zealand’s rockstar economy at the expense of Australia, he knows his nation’s fortunes will rise or fall along with those across the Tasman.

And Mr Key says he sees no storm clouds on the horizon. But we read into this that more confidence in Australia would be helpful for all of us. And, we need to add in New Zealand they raised the GST a few years back without affecting welfare of its citizens. Can we assume the agenda in Australia is to raise the GST to 15%, but they are so addicted to being fear raises they did not know how to be nice!

 

ERF funding – is it a play on words.

The Government is confident it will stem the march of climate change with its $2.55 billion Emissions Reduction Fund and its Green Army of tree-planting enthusiasts. So confident, in fact, that it has commissioned $10 million for a new icebreaker in Antarctica.

At least one problem is solved – broken ice will be served with drinks. It sort of makes sense does it not?

But, where is the money, it was not mentioned at all in the budget speech. Even more interesting is submissions on the draft legislation for the ERF are due to close 23rd May 2014. So how will it be funded if it is to start 1 July 2014? As kids often say, Daddy it will just wish-t-appear – how mature of them to understand the minds of our pollies!

In her coverage of the Federal budget Annabel Crabb makes another point on health – why strip away the ability to service our health in order to fund health research. A similar parody could be said a tipping point is fast approaching that mankind is under threat for its existence – anthropogenic influences of climate change will outpace the ability to research a medical solution. Doesn’t make sense except give the opportunity for a fiddle! On reflection Annabel said something about twiddle – could that be what she meant?

Perhaps the last word should go to the Prime Minister, speaking on August 22, 2011:

“Nothing could be more calculated to bring our democracy into disrepute and alienate the citizenry of Australia from their government than if governments were to establish by precedent that they could say one thing before an election, and do the other afterwards.”

Source – Annabel Crabb is the ABC’s chief online political writer – www.abc.net.au .

Co2land org now asks about the $20 billion to be spent on health research, is that a play on words – a weasel? Another worry is as an Australian entity I am at a disadvantage at influencing the wealth of this country, and it is suggested we should register as an offshore entity and get preferential treatment in Australia? It is not a flippant comment: For example, register in Singapore as a $1 company ($500 setup cost), pass their Directorship rule test and there you go! You can sell back your Australian ideas as a new desirable off-shore package and thumb your nose on paying the correct tax. Albeit the UK now says money shifting will be discouraged via London markets. But I guess that only affects the likes of tech suppliers, mining etc. As they tend to use those markets.

What has this got to do with sustainable futures? Nothing. Even the economics make no sense in terms of society – but maybe a small community might do well from it!

Co2Land org has a theory it reflects in the term ‘hubris’. Hubris: The Inside Story of Spin, Scandal, and the Selling of the Iraq War (9780307346827): Michael Isikoff, David Corn: Books

www.amazon.com/Hubris-Inside-Story-Scandal-Selling/dp/030734682X.

The theory is we are being spun the same text book sell on something of an ideal as opposed to a solution. It is even something tried and failed in other political arenas of the world. As in Lewis Carroll’s Alice in Wonderland – Alice in wonderland grew a mile high after eating one mushroom. She was then subject to rule 42 which says that anyone taller than a mile must leave the court immediately. That thought line then mandates that if you think it is a joke you will be subject to rule 13. And, do not dare to ask what is rule 13. If you paraphrase this you just might understand Joe the Treasurer is a Lewis Carroll fan.

Maybe – yes, we are a fan of the real Malcolm Turnbull. He might just turn bull into hope. For those that did not know, he was a former Environment Minister in the Howard Government and is credited with strongly supporting sustainable solutions.

 

White Paper to Draft Legislation – ERF

In case you have not heard: The Clean Energy Regulator survives – it was an error the government has corrected on 7 May 2014. What was intended was to say the Clean Energy Fund is gone. Thank you Greg Hunt for your courage in having that clarified.

It is also hoped you heard late Friday 9th May 2014 the Federal Government released its exposure draft legislation for the Emissions Reduction Fund. They want you to be quick in responding -Two weeks have been given for the review, with submissions due EST 12 noon, Friday 23 May 2014.

The key matter is the draft legislation rebadges the Carbon Credits (Carbon Farming Initiative) Act. And:

  • A broader range of activities can create “carbon abatement” and include avoidance activities
  • A broader definition of additionality is given
  • A broadening of the authority of the Clean Energy Regulator
  • Establishing the Emissions Reduction Assurance Committee
  • Establishing that a yet to be (re)named CFI audit legislation will carry through the audit and assurance through the existing CFI audit legislation.

Why hoped you heard – well we did not want you going to sleep on us because we are boring!

Those that see opportunity are, for instance:

Currently celebrating their 30th year – Energetics consult and offer fee for service activities, and they say:

  • Immediately assess the abatement opportunities you have to create emission reductions to sell into the ERF
  • Understand your risk profile for future capital investments – has this shifted?
  • Assume you need a shadow carbon price
  • Comment on the draft legislation.

Of course the issue for their advise is for you to work out – www.energetics.com.au.

Those that see tragedy are, for instance:

The Climate Spectator www.businessspectator.com.au say,

“Half-baked outline

The half-baked nature of this scheme is revealed on the very first page of descriptive text within the Explanatory Memorandum, where it states:

The Emissions Reduction Fund … will allow businesses, local governments, community organisations and individuals to undertake approved emissions reduction projects and to seek funding from the government for those projects through a reverse auction or other purchasing process.

Government ignores its own red tape cutting advice

I was shocked to find no regulatory impact statement accompanying the ERF legislation, comparing this scheme against alternatives and why it represented a superior cost-benefit case.

Amidst a bonfire of red tape, the government had assured us that they were going to force public servants to see regulation in a ‘new light’ by following a seven-step guide to evaluating new regulations.”

Then finish off saying “I wonder when we’ll see the detailed cost-benefit analysis for the ERF relative to other regulatory alternatives, such as a simple price on carbon emissions.”

For CO2Land org the ‘scary spice’ is the mechanisms can change at any time at the whim of government – regardless of the pain you the business offered or suffered. Again the need for consistent policy is far greater than the words spoken to date. We also tend to agree with one aspect of Energetics spiel – prepare your alternatives. Just in case. And, you don’t have long to comment.