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After yesterday’s sparse commentary on the IPCC’s report on Impacts, Adaptation and Vulnerability, there has been very little follow-up and no editorials. We have now reached the absurd position that no international agreement is to be reached  until the IPCC has completed and presented the full version of its 5th report in Paris in 2015. So much for the (supposed) need for urgent action.

Wonder of wonders, however, I did manage to get a letter published in The Age, albeit with important deletions by the Ed, including my suggestion for an independent inquiry. But the sensible idea of having an adaptation approach has at least been registered at the central office of green media.

The Age also reported that Shorten did not endorse his environment spokesman’s proposal to lift the emissions target by 2020 from 5 to 20 per cent.

Treasurer Hockey continues to “step up the rhetoric” (as one journalist describes it) on the budget problem the Abbott government faces. The actual outcome in May will need to be one that makes a major reduction in spending for the first year ie 2014-15 and not in the distant 2023-24.

It will also need to do more than it has so far in justifying the reductions to the general public. I was able to get a letter published on this aspect in the AFR, although the Ed omitted an important paragraph referring to the near 20 per cent real increase in average per head incomes over the past 20 years. One hopes the Commission of Audit will include justifications.

Importantly, the CFMEU’s response to the imposition  of large fines seems to have been let’s have another go! The front page lead of the AFR reports that the NSW branch straight away ordered safety audits on 21 of Lend Lease sites. Presumably encouraged by the large fine imposed on the Melbourne branch, the CEO of Lend Lease made a critical response and called for the return of ABCC’s powers. But that institution will need more powers than it had before.



Humans should be able to adapt

Letter by Des Moore published in The Age, April 2, 2014
[square brackets deleted by Editor]

Two first impressions exist from the commentary on the IPCC’s report [on Impacts, Adaptation and Vulnerability (“No part of the planet free from the effects” 1April 2014)]     

First, instead of a confident prediction of disaster unless governments act urgently to reduce CO2 emissions  we have acknowledgements that humans may be able to adapt to certain adverse effects of higher temperatures.

Second, there still appears to be no acknowledgement of the significant overstatements of temperatures increases due to inaccuracies of measurements caused by the (mis) calculations of averages and the failure to take account of urban heat island effects. [Accurate measurements would significantly reduce the supposed increase in temperatures of 0.85C since the 1880s.

An independent inquiry into assessing the warming risk would establish that and likely lead to at least a major reduction in wasteful government spending on policies designed to reduce emissions.]

Des Moore, South Yarra

ALP divided on rate of greenhouse cuts

Article by Lisa Cox, James Massola and Judith Ireland published in The Age, April 2, 2014

Opposition environment spokesman Mark Butler says the case has been made for Australia to make deeper cuts in greenhouse gas emissions by 2020, but Labor leader Bill Shorten has distanced his party from the remarks, warning the ALP would not be announcing a new target this year.

Mr Butler told Fairfax Media the conditions for Australia to lift its emissions target from 5 per cent to 15 per cent by the end of the decade had been met based on an assessment of what other countries were doing to tackle climate change.

Mr Butler's comments came as the UN's Intergovernmental Panel on Climate Change warned of irreversible global warming damage due to the high level of global emissions and followed a Labor-led Senate committee last week calling for deeper cuts.

It demonstrates the Labor Left faction leader's preparedness to take on the hard-heads in the Labor Right over emissions targets.

Australia's current policy is for an unconditional 5 per cent reduction in emissions by 2020 against 2000 levels, but with room to move to a target of 15 per cent to 25 per cent depending on global action.

The independent Climate Change Authority, which the government is abolishing, said in February that Australia should adopt a minimum target of 15 per cent by 2020.

Mr Butler said: ''It [the authority report] does make the point that the conditions for 15 per cent have been met. For example, similar countries have targets of 15 per cent. It's quite clear 20 per cent hasn't been met but it is strongly arguable 15 per cent has been met.''

A spokesman for Mr Shorten said the climate authority had said a 15 per cent reduction in emissions was achievable with the right policy settings. But he added: ''Labor isn't going to be announcing 2020 targets from opposition in 2014. Who knows where we will be come 2016 under an Abbott government, which has no plan to reduce emissions.''

Mr Butler's comments are not a formal shift in the party's policy settings, but demonstrate he intends to fight internally for the party to lock in an emissions reduction target of 15 per cent by 2020.

During last year's leadership contest Labor's Left faction was concerned about now-opposition leader Mr Shorten's commitment to pricing carbon.

A carbon price is an article of faith for the Labor Left, but there are sections of the ALP's Right faction who fear going to the 2016 election promising a price on carbon emissions.

Labor has voted against the Abbott government's carbon tax repeal. Its policy is to move to an emissions trading scheme from July - one year sooner than legislated.

Hockey Unclear

Letter by Des Moore published in the Australian Financial Review, April 2, 2014
[Square brackets deleted by Ed]

You report that Treasurer Joe Hockey has  drawn attention to the prospect that, absent policy changes, spending will outpace tax receipts over the next decade (“Budget policy changes vital, says Hockey”, AFR March 31). But is he talking to himself or to the general public about the need for reductions in spending?

Whether through the Audit Commission or in the budget, a coherent economic and social rationale for making such reductions must be given to the public.

[One part of that must surely be that over the last 20 years real incomes per head have  increased by not far short of 50 per cent. That means that a significantly larger proportion of individuals and families than 20 years ago are capable of taking care of themselves without government assistance or with less of it.]

The main focus should be on those in higher income brackets who pay taxes but receive back a large proportion by way of government assistance in various forms. A major reduction in such “churning” should be an important reform component.

Des Moore
Institute for Private Enterprise,
South Yarra Vic

Joe Hockey faces $60bn budget hole

Article by David Uren published in The Australian, April 2, 2014

SAVINGS of more than $60 billion a year will have to be found by 2023-24 for the Abbott ­government to reach its surplus target, according to the Commission of Audit, which presented a bleaker outlook for tax revenue than was contained in the midyear budget update.

The commission’s pessimism is understood to be based both on a further downgrade in tax revenue growth and on its belief that it is not realistic to assume there will not be any personal income tax cuts over the next 10 years.

The size of the savings task is equivalent to total federal spending on education or defence and will demand the axing of complete government functions and reductions in spending on pensions and allowances. Tony Abbott and Joe Hockey have been stepping up their ­rhetoric on the budget shortfall over the past week, the Treasurer emphasising a blowout in 2017-18 as a result of new programs such as the National Disability Insu­rance Scheme and the Prime Minister telling his backbenchers they must be prepared to sell a tough budget message.

A briefing note distributed by Mr Hockey’s office at the weekend contained long-term projections showing that revenue would rise from this year’s 22.9 per cent of GDP to 26 per cent by 2023-24, mostly as a ­result of inflation pushing an ­increasing share of people’s ­incomes into higher tax brackets, known as bracket creep. The note, which reflected the presentation Mr Hockey made to state treasurers on Friday, was based on figures in the midyear budget update released in December.

It showed that, even with strong revenue growth, the budget would still have a deficit of 0.5 per cent of GDP by 2023-24 which, with the economy ­expected to reach $2.5 trillion by that time, would be equivalent to ­$12.5bn.

The first of the commission’s two reports, which was handed to Mr Hockey on February 14, contains a “base case” for the budget outlook, which assumes revenue reaches no more than 25 per cent of GDP by 2023-24, a full percentage point lower than Mr Hockey’s projection.

The new revenue shortfall would increase the deficit in that year to more than $35bn. Achieving a surplus equivalent to 1 per cent of GDP in that year, as required under the commission’s terms of reference, raises the total savings needed above $60bn.

The Treasurer’s briefing note highlighted the extent to which the budget forecasts depended on “bracket creep”, saying the effect of inflation would be to push the average rate of tax for someone on the average wage up from 23 per cent to 28 per cent.

The second top marginal tax rate of 37 per cent would apply to people earning considerably less than the ­average wage.

“If tax cuts were provided in order to return fiscal drag, and prevent the tax-to-GDP ratio reaching historically high levels, the savings task would be even larger,” it said.

The Commission of Audit does not believe it is realistic to assume there would not be any tax cuts over the next 10 years. The political cost of imposing such a burden on lower -income households would be too great, while it would also lead to lower workforce participation. Its projections reduce the government’s revenue by an allowance for tax cuts, based on the historic trend. The report also contains a further markdown in the underlying trend for revenue growth.

Stephen Anthony, director of consultancy Macroeconomics, said yesterday the budget in the this financial year was broadly in line with the mid-year budget update, which had severely marked down the revenue projections in Treasury’s pre-election budget analysis.

“Our assessment is that the budget position has not worsened significantly in the current year, and, looking forward, things are about at the level in the mid-year budget update,” Dr Anthony said.

He said a revenue downgrade by the Commission of Audit may either reflect a more pessimistic view about Australia’s terms of trade (export prices compared with import prices) or new Treasury estimates of the losses outstanding from the global financial crisis, which have been depressing company and capital gains tax revenue.

Dr Anthony said Treasury was already taking a more conservative approach to the terms of trade than was the case in last year’s budget but it was possible there were further downgrades.

Difficulty in estimating tax losses from the crisis has been one of the main reasons for Treasury’s difficulty in estimating company tax revenue over the past six years.

Dr Anthony said losses were normally equivalent to 8 per cent of GDP, but the latest available estimates from the tax office, which are for 2010-11, show they had reached 25 per cent of GDP.

There are other sources of potential revenue weakness. GST flows directly through to the state governments, but is still registered on the commonwealth’s revenue. It has been depressed both because of much higher savings rates among consumers, and because people are spending more on services like health, education and financial services, which are GST-free.

Mr Hockey’s office declined to comment on the Commission of Audit’s findings yesterday, with the report expected to be released publicly about three weeks before the May budget.

Lend Lease blasts CFMEU’s ‘disgraceful’ safety audits

Article by Mathew Dunckley and Michael Bleby published in the Australian Financial Review, 2 April, 2014

Lend Lease has blasted the construction union’s use of safety rules as a ­cynical attempt to advance its industrial objectives and labelled Australia the worst country for industrial ­relations in the world.

In a rare public condemnation of the union, Lend Lease chief executive Steve McCann called the Construction, ­Forestry, Mining and Energy Union a “disgrace” after it attempted on Tuesday to perform impromptu safety audits on 21 of the builder’s sites.

“The cynical use of safety as a platform by the CFMEU is unacceptable. When it’s used as a tool for other purposes we think that is a disgrace; we will resist that,” he said in an interview.

Mr McCann said that only one site, part of the University of Technology, Sydney, in Ultimo was disrupted. The company called police because a “senior union official” had breached safety rules and attempted to enter the site without signing in.

Lend Lease, one of Australia’s two main construction companies, has on several occasions in recent weeks called the police in response to attempts to access sites, including Headland Park at the Barangaroo ­precinct in Sydney and a Monash ­University project in Melbourne. Lend Lease is pursuing damages over wrongful entry and disruption at the ­Queensland Children’s Hospital.

CFMEU construction division national secretary David Noonan said the inspections were prompted by concerns over Lend Lease’s handling of incidents including fires at Barangaroo.

Many industry observers believe the union was reacting to the record $1.25 million fine and criminal convictions slapped on it Monday in the ­Victorian Supreme Court over ­blockades at Grocon’s Melbourne Emporium site.

Mr McCann said he believed the union targeted Lend Lease partly as a reaction to the court judgment. He said changes were needed immediately to improve the industry including the re-introduction of the Australian Building and Construction Commission.

“There does need to be more reform. We have 500 live sites [around the world] and by far Australia is the worst jurisdiction in which we operate,” he said.

“The US varies state to state; it is more challenging in New York than other cities but even there the regulators have worked very hard to improve that environment.”

Mr McCann said reducing on-site injuries should be a goal for everyone in the industry.

“We are determined to continue to improve the safety of our work environment and this includes . . . bullying, ­harassment, and corruption in our workplace,” he said.

This latest controversy came as the federal government’s royal commission into union corruption served notices on unions, including the CFMEU, demanding they produce documents.

The notices require the production of financial and other records ahead of the commission’s first hearing on April 9. It is understood that the ­commission has sought documents stretching back to 2007 which aligns with a seven-year regulatory document retention requirement.

Grocon executive chairman Daniel Grollo also reacted angrily to the CFMEU’s move on Lend Lease.

“This is the problem. Only yesterday when they were clearly found to be out of step with community standards and judicial standards and they were being held to account, today they go straight away to safety,” he said.

“They go straight to safety to avoid accountability.”

Mr Grollo said he would like to see safety regulators participate in the debate to ensure the facts on workplace accidents were in the public realm.

“I wish we had the regulators more in the marketplace with facts,” he said.

“When falsehoods are being used as propaganda in the industry there is a time when regulators do have to step in and clear the air and talk about what the facts are so that propaganda doesn’t drive perception and rather the facts do.”

Mr Grollo said the company was focusing on its damages lawsuit against the CFMEU and confirmed the estimated claim was about $10 million.

“Now that we are finishing the project we are working through that to work out whether it is more or less. We are focused on trying to bring that to a conclusion as expeditiously as we can,” he said.

Fair Work Building and Construction director Nigel Hadgkiss said his agency was closely monitoring the Lend Lease situation.

“The actions of the CFMEU ­leadership today, the day after it was found guilty of criminal contempt of court, suggest that it is completely unrepentant and will not change its behaviour. Bogus safety claims should have no place in the building ­industry,” Employment Minister Eric Abetz said.

Mr Noonan said it took a long time to account for the safety of workers last month after two fires at Barangaroo.

“We’ve been concerned that at Barangaroo on both occasions where there was a fire, there was a failure by the company to accurately do a head count,” he said.

“On the first fire it was over 2 hours before the safety committee was able to be informed everybody was off the job safely. That’s just unacceptable in any workplace, let alone a high-risk area like construction.”

Mr Noonan cited the case of a crane collapse at the UTS site where he claimed workers were ordered back to the site and told that the fire was not in their vicinity. The action at Lend Lease had nothing to do with the Grocon judgment, he said.

“There is a concerted onslaught against this union from the Commonwealth government and a number of state governments coming up over the next 12 months,” he said.

“That’s not going to deter the union from doing what it needs to do in ­ensuring what it can do to maintain safety at work.”“Simon Crean is as useful to the labour movement as Howes was for the union movement,” he said in a tweet.

Former union and Labor leader Simon Crean said on Monday the union movement needed to control the CFMEU’s ‘rogue elements’.

CFMEU Victorian state secretary John Setka lashed Mr Crean’s intervention and also took aim at outspoken out-going national secretary of the Australian Workers Union Paul Howes.

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