When the Prime Minister is forced to spend his own political capital fixing the mistakes of the former head of Origin Energy, is it any wonder the Coalition is ignoring that same man’s policy advice now that he heads up the Business Council of Australia?
[This op ed was first published in the Australian Financial Review – here]
Despite being the peak body for some of the biggest businesses that operate in Australia, the BCA’s agenda is being ignored and rightly so.
As CEO of Origin Grant King sank billions of other people’s dollars into a gas export plant in Gladstone that has since been written down by billions, driven up the price of gas for manufacturers and increased the price of electricity for everyone.
That’s quite a feat. Indeed, the decision-making process of the Australian gas industry has been so bad that it led the Coalition government to retreat from supporting free markets to spruiking the benefits of regulation and protectionism.
It is another embarrassing backdown for Mr Turnbull. After Donald Trump’s election, the Prime Minister told the Australian public that he was taking responsibility for advocating free trade.
In criticising Pauline Hanson he said: “There’s no doubt protectionism has popular appeal with many people, but it is demonstrably a road to poverty. We are an open economy. We are massive beneficiaries from trade.”
Then he announced export controls on gas. Apparently, while we need to export coal to help the world’s poor we need to keep the gas at home to help Australia’s poor. Figure that one out if you can.
Retreat from the market
It gets worse. Last week the Prime Minister conceded that the deregulated and privatised electricity market – which promised so much for Australian electricity consumers but delivered so much to shareholders – was failing.
The oligopolists in the energy retail space were, we were told, gouging their consumers and they would all be forced to write letters to their customers alerting them to the fact that they are likely paying more for their electricity than they need to.
Gone are the days when politicians blithely declare that rational consumers will run a mile from any greedy providers who try to charge them too much.
But where will it end? In an admission that competition and regulation alone were insufficient to rein in the profit margins of the big banks, the Coalition hit the five biggest banks with what is, in effect, a super profits tax in this year’s budget. It will transfer around $1.5 billion per year from the owners of those banks back to the community.
Just as the electricity companies charge different customers different prices for the same electrons, the big banks charge different customers different interest rates for the same kind of loans.
Now that the government accepts the need to intervene to rein in the pricing practices of the electricity industry, what is to stop them forcing the banks to write to everyone with a high-interest rate credit card or an expensive mortgage deal to “remind” them that they might want to switch to a much better deal?
Imagine if those letters included information on the best rates on offer from the smaller building societies and credit unions?
Which brings me back to the BCA. When Australian gas and electricity customers are paying for the poor decision making of the gas industry and when the customers of the big banks are paying well over the odds to institutions that are embroiled in scandal after scandal, you might expect some humility and contrition from their peak body. But, like a property developer at the peak of a boom, the BCA leadership has decided to double down.
At a time of record profit share of GDP they are demanding a cut in the corporate tax rate. At a time of rising inequality, they want penalty rates cut. And at a time of unprecedented awareness of failings in the financial system, they are determined to resist a royal commission into the big banks. What could go wrong?
If the BCA was a political party it would be in deep trouble. Its leader is dogged by past failures. Its policy agenda is toxically unpopular and its membership is divided on where to go from here.
In turn, it is of little surprise that no serious political party is taking the BCA’s agenda, or its demands, too seriously. If the BCA doesn’t change tack soon it will become as irrelevant as the 1980s reform agenda it is still pushing; an agenda not even the Coalition cares about anymore.
Richard Denniss is chief economist at The Australia Institute @RDNS_TAI
Luciana Lawe Davies Media Adviser