Knowing RET from wrong

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Knowing RET from wrong

The debate over the Renewable Energy Target (RET) has continued with the government facing up to the reality that its scare campaign on electricity prices is in tatters. With the government’s own handpicked review showing that the RET has almost no impact on retail electricity prices, the government’s ramp up about a fight over cost of living pressures and the RET has melted away.

The government has been left with three very weak arguments. Firstly, that the RET is an $11 billion cross subsidy, secondly that the RET is causing an oversupply of electricity and finally the RET needs bipartisan support for certainty.

The $9.1 billion cross subsidy is difficult to argue since the subsidy is not coming from tax payers or electricity consumers. The subsidy is being paid by fossil fuel generators. The fossil fuel industry is already heavily subsidised and with the repeal of the carbon price have again been given free waste disposal. People are also not particularly unhappy to see this industry struggle. Australia Institute polling has found that 68 per cent of people want to see less electricity generated from coal.

The second argument that the government and its supporters have pushed is the idea that the RET is creating an oversupply of electricity in the network. From a technical standpoint this is clearly not happening. The electricity network is always in balance. If there was an oversupply of electricity then fuses would be popping all over the country as the voltage of the system went up.

Even from an economic standpoint an oversupply of electricity makes no sense. You could just as easily say we have an oversupply of cafes in our major cities. Cafes are not full all the time and new cafes are opening up. Oversupply in a market simply means greater choice and lower prices. While this might be bad news for the firms in the market it is good news for consumers.

It also gets to the point of the RET. The RET was set up to transition the Australian electricity market from fossil fuel generation to renewable generation. You can’t do that unless you have more renewable generation and less fossil fuel generation. People who are concerned that coal fired power stations might shut down miss the point of the policy completely.

Finally, the government has argued that the opposition parties need to negotiate on the RET to give the renewable industry certainty. In the lead up to the 2013 federal election most people thought that there was bipartisan support for the RET and so there was certainty in the industry. It was only post-election that the government revealed it wanted to change the RET and introduced all the uncertainty.

These weak arguments and a hostile senate have forced the government to seek negotiations with the Labor opposition. Let’s hope the Labor party stands firm and protects a spectacularly successful policy.

Big business, little tax

High tech American companies have received a good deal of publicity recently for their ability to avoid tax in Australia and elsewhere by shifting profit to tax havens. We recently heard about the “double Irish, Dutch sandwich” used by Google and others. All this is very complex and it is these sorts of arrangements that the G20 group of countries is trying to crack down on.

OK, Australia is being ripped off by American multinationals using sophisticated international arrangements. But it is not only multinationals doing this. The recent report by the Tax Justice Network shows that Australian companies are also very adept at avoiding tax in Australia.

This report examines the books of the companies in the Australian stock exchange top 200—a list that goes from BHP Billiton to Telstra to Qantas. Some of these companies are not paying any tax. For example, Westfield shopping centres manage to get away with a zero effective tax rate, despite their monopoly power and huge profits.  Collectively the top 200 companies are avoiding $8.4 billion a year in corporate tax.

Most of these companies use a number of subsidiaries in tax haven countries and many have debt structures that look like contrived avoidance mechanisms.

We should keep in mind that the $8.4 billion in lost tax refers to the top 200 companies listed on the Australian stock exchange and does not include Apple, Amazon, Ebay and the like. Nor does it include the foreign mining companies such as Glencore, Shell, Chevron to name a few. In fact examination of ABS figures suggests that 44 per cent of all the shares in the listed and unlisted Australian companies are owned by foreign interests which are probably in a better position to avoid Australian tax than our own companies are. This means the $8.4 billion could be the tip of the iceberg.

Joe Hockey would love to have some of this tax avoidance to reduce his budget balance. The $8.4 billion is much bigger than, for example, the $1.25 billion the government will save by increasing the waiting period for the under 30s applying for Newstart. But then again the government seems to show more zeal attacking the poor than the corporate sector. 

Gas campaign takes a blow

The coal seam gas (CSG) industry’s campaign to blame rising gas prices on a lack of CSG in NSW has taken a couple of serious blows in the last week.

The AWU released a BIS/Shrapnel report on the effect of rising gas prices. The AWU cut through the gas industry’s spin on higher prices;

Gas exporters and politicians have argued recently that Australia could fight against rising gas prices by ramping up the production of coal seam gas. However, no matter how much coal seam gas is identified and exploited in Australia, it could not significantly influence the global price. The problem of rising gas prices due to linkages with export markets would remain.

We couldn’t agree more.  In fact, we’ve been saying the exact same thing since July 2013.  Our paper, Cooking up a price rise, detailed the issue of gas price rises and their cause.  We’re proud at TAI to have been the first ones to point out the gas industry’s con. And we are equally grateful to the supporters who make our research possible.

While giving free reign to frack all over NSW will certainly increase the profits of the mostly foreign-owned gas companies, it will make no material difference to the price of gas. This point has been made by others but it doesn’t stop the gas industry continuing to pedal the line.

The second blow to the gas industry last week, was the NSW government extension of the freeze on new CSG exploration licences for another year.

The NSW government has been very reluctant to allow any kind of expansion of CSG. There is real concern about the possible health and water effects. This is particularly the case in farming communities where contamination of water resources could ruin livelihoods.

While the gas industry is on the back foot, they will no doubt pour more money into a fresh campaign. The Australia Institute will be there to cut through the spin and point out the facts.

Politics in the pub

If you’re in Canberra next week come along to a special Politics in the Pub. Come and hear two of Australia’s leading political journalists, Steve Lewis and Chris Uhlmann, discuss their latest book ‘The Mandarin Code’.

Date: Wednesday 8th October

Time: 6.30pm-7.30pm

Place: Lounge Bar, Level 3, Uni Pub, 17 London Cct

TAI in the media

Minerals Council and Australia Institute debate NSW mining and environment
OECD figures show public benefits more than individuals from tertiary education
Coalmining industry misleads on jobs, tax, says Australia Institute
Minerals Council should try fighting with facts, not abuse


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