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A Recipe for Chaos and Fatalism

The Prime Minister paid a visit to the Governor-General today for the swearing-in ceremony of her latest ministry. This is the second visit to Yarralumla in as many months for Julia Gillard and it comes just a matter of days after the ALP again found themselves facing a leadership spill, which this time did not happen. The election date was obviously firmly in mind in the ministerial considerations the Prime Minister again had to make ahead of the May budget session. The result – the continued perpetuation of some of the same issues which have plagued the Gillard Government.

Perhaps the most striking think about today’s announcement is the decision made by Julia Gillard to create multiple ‘ministers for everything’. Five existing ministers in the Gillard ministry now have extra portfolios.

Anthony Albanese has had Regional Development and Local Government added to his title, Attorney-General Mark Dreyfus takes on the dual role of Special Minister of State and Minister for Public Service and Integrity and Craig Emerson snares Chris Bowen’s former role in Tertiary Education, Skills, Science and Research. Finally, Greg Combet becomes Minister for Climate Change, Industry and Innovation and Tony Burke adds Minister for the Arts to his already lengthy ministerial title.

Gillard backers have clearly been rewarded with the exception of Anthony Albanese, the conciliatory Rudd backer who has received the key portfolio of Regional Development which is a very neat fit with his existing responsibilities in Infrastructure and Transport.

There are just six months until the election. Obviously that has had a major impact on the distinct lack of change and renewal in the changes announced today at Government House. It would have been wise to promote existing talent, despite the electoral prospects of the ALP at the September 14 election. Some would consider that a waste of good people, but the best team should always be made available regardless of the state of play.

There were a number of new additions to the ministry, but for the most part they were underwhelming choices. Andrew Leigh and Gary Gray were the best appointments in the new ministry. Others elevated were Sharon Bird, Don Farrell, Catherine King, Michael Danby, Senator Jan McLucas, Senator Matt Thistlethwaite, Amanda Rishworth and Shayne Neumann.

If the Prime Minister was looking for a way to continue to foment chaos within her government, today she found it. Having so many ministers, already struggling with burdensome portfolios is not a smart political move at all. Yes, there is only six months to go until the polls and there will not be much more legislative work undertaken, but the policy effort must continue and will be stifled by the mega portfolios created today.

If ever you wanted a glimpse at the thinking of our leaders, without actually needing to hear an answer, you got it. Far from the bloated portfolios simply making policy work more difficult, the ministerial announcements also portray a fatalism within the Labor Party. That fatalism is obviously at the forefront of the Prime Minister’s mind, the reshuffle was designed by her.

If there was one strong positive about the announcement it is that there will apparently be a decrease in the size of government, or at least a bit of a streamlining of it. The Department of Climate Change will now merge with the Department of Industry and Innovation.

Like many problems, the solution to the personnel issue was rushed and ill-considered. There was a small amount of good done in the selections made, but it was cancelled out by the poor decisions.

Chaos will continue to reign and now the government quite clearly looks to have given up all electoral hope.

Government Still Emitting Mixed Messages and Potentially Leaking Revenue

Carbon pricing is happening, it’s been legislated and that legislation has commenced. The fixed price period began almost two months ago now, on July the 1st. But today things have moved forward as far as the floating price, the emissions trading scheme which will commence in just under 3 years time after the fixed price period ends. The Australian Government has today announced that they’ve reached an agreement with the European Union to link their respective schemes which means Australia joins with 30 other nations in a common market for carbon credits.

But there’s also been a step backwards from existing Labor Party carbon pricing policy, there will no longer be a floor price, that’s gone as part of the pact with the EU linking Australia and European Union countries. This new market, though heavily regulated, will be the largest carbon market in the world, but by no means does it cover anywhere near the majority of the globe and its population. The European ETS covers ┬ájust over 500 million people and Australia will add a further 22 million people living under the carbon market.

For the first 3 years of the emissions trading scheme, Australians will have access to European carbon credits but not vice versa. European businesses being able to purchase carbon credits in Australia will be allowed to occur from 2018.

Aside from the broken promise over the carbon price, the biggest point of contention since the decision was made in minority government to pursue the carbon price was over the floor price.

The floor price was instituted by the government supposedly to provide certainty to business and to avoid the price of emissions becoming too low. This price was to be set at $15 per tonne from 2015 when the market-based trading scheme will start. We were told, just as recently as last week that the floor price would happen, though reports had surfaced that the ALP were considering backing away from this element of their climate change policy.

Essentially now, the common market with the European Union will determine the price, any price it likes, and if the EU example is an indication, that price has the potential to go quite low, well and truly under the $29 per tonne that the Treasury modelling banks on for the year 2015-16. This means the revenue projections are surely under serious threat.

But Greg Combet doesn’t think so. The Climate Change Minister today said that the long-term average over the past 4 years of the European ETS has been $23 per tonne of carbon emissions. But whether that’s enough to achieve an effective price of $29 in 2015-16 alone is fanciful. This is especially so with a European economic community in chaos financially, a common market that has seen their permits go as low as single digits per tonne of carbon emissions.

Worse still, this backdown on the floor price is in effect an admission that the Gillard Government was wrong with its legislated policy direction. Rightly or wrongly, it will be construed as the government admitting that a floor price would have hurt Australia and our competitiveness and the people dealing with the flow-on costs of the scheme and that could easily have further negative implications at least temporarily for the struggling ALP.

For an administration struggling with expectations, the mixed messaging and second backflip this month doesn’t bode well in trying to run consistent messaging in areas of public policy and that just makes the government look confused and scared.

By far the biggest damage will be to revenue and that will in turn make promises much harder to deliver, though maybe they’re not too worried about that given the chances that they’ll hold the purse-strings at the start of the floating price are slim. Oh, and the fact that the trading scheme might well not be there under a Liberal Government. But who knows, it’s certainly much, much harder to repeal now.

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