Thursday, 5 September 2013

How good is it really?

Tomorrow I will have the chance to vote in my first Australian election as a proud citizen of this country. There are quite a few things worrying me about the progress of the electioneering so far. Normally (at least in the English elections) I have decided well before, the parties have distinct divisions and there is no faux presidential race. As much as I don’t like Cameron, conservative policy is straightforward.

A word of warning, my views are distinctly Keynesian. Australia rode through the last recession on the back of the commodities, although the $900 from Rudd was a nice boost to the pokies and TV sales.

1) All of the economic changes are being proposed for the very near future. As such, a change of government is unlikely to have major implications for the growth, currency or interest rate outlook. A change of government is unlikely to result in a major shift in the regulatory of macroeconomic landscape, with limited implications for the growth outlook.

2) Australia currently has a structural budget deficit that is expected to persist at least until 2017/18. As a result, the next government is likely to face some tough choices on the structure of Australia’s tax system and the sustainability of government expenditure moving beyond the next parliamentary term. A reduction in foreign aid proposed by both parties (note not the actual reduction but a proposed holding back on the total increase this financial year) is not only sensible but also necessary.

3) Marriage policy here is a joke, and this needs to be resolved as soon as possible. Even some of the most conservative countries have moved forward on this.

4) Carbon pricing or tax is really important but a reliable solution needs to be offered. The ALP proposed bringing forward the emissions trading scheme to 1 July 2014 and cutting back Energy Security Fund from $4.3 billion to $2.5 billion.

The Coalition committed to abolish carbon price. Abolish the Climate Change Authority, Climate Commission, and the Energy security fund. Retain the Clean Energy Regulator and the National Greenhouse and Energy Reporting Scheme (NGERS) as part of the administration of the Emissions Reduction Fund.

I don’t believe that sweeping hard-line statements are the way to bring about the correct change here. Rudd's about turn made it clear that no one was really sure what was working. But some policy is better than none at all. 

Europe can claim to be ahead here: since 2005 it has had a cap-and-trade scheme which sets a limit on emissions and allows companies to trade pollution permits up to that level, thus putting a price on carbon. But the scheme is complex and has been undermined by vast exemptions—flaws which apply to China’s new scheme, too. The European Parliament will vote on an emergency fix on July 2nd. Even if a compromise is passed though, it will merely stave off collapse for a year or so.

Right now I don’t think any government or senate offers the right solution to this. I’m torn because my industry depends upon high demand, but I believe a staggered approach to allow some freedom to companies but bringing in a tax over time is the correct way to manage climate change.Corporate governance is becoming more important, over time with combined policy and public accountability I believe the right changes will come. 

Whoever wins the upcoming election; the completion of the election itself could provide a boost to the economy and that is a win for everyone. As I have been reminded many times in the last few weeks, it’s not about voting for who you want to win, it’s about trying to figure out who is telling less lies.