The Australia Institute Feed Items

In recent years, insurance costs facing Australian households have surged much faster than inflation, driven by a string of natural disasters, like the 2022 floods in northern New South Wales.

Natural disasters are leaving vulnerable areas virtually uninsurable – or making insurance coverage unaffordable.

Global ratings agency, Moody’s, has found that global insured losses from natural disasters have averaged about US $100 billion over the past five years. FitchRatings reports that insured natural catastrophe costs were “47% above the 20-year average” in the first half of 2023.

The Insurance Council of Australia’s Catastrophe Resilience Report 2022-23 concludes that “global events have cost impacts in Australia, too. The impact of Hurricane Ian in Florida made last year the third-costliest hurricane season on record, contributing to global pressures in the reinsurance market.”

The Wrap with Amy Remeikis

It says something about these mnemonic political times how noteworthy it is when a politician tells the truth.

Which is why it’s usually left to former politicians.

Christopher Pyne did exactly that when he belled the cat about what the Coalition’s nuclear plan is actually about in a recent opinion piece published in the Sydney Morning Herald.

During his 26 years in parliament, Pyne was a master at obfuscation. He would deploy it with charm, but one of his main strengths, at least for his political allies, was muddying the waters. Give someone a line, repeat it with confidence and before you knew it, the conversation was over what Pyne actually meant, rather than the policy itself.

Here’s a classic example:

But freed from the shackles of politics, and more obviously in the business of lobbying, Pyne is now free to pull back the curtain and gleefully point at the distractions behind it.

In his column, written at a time when most people are still attempting to shut out politics and enjoy life, Pyne spells out what he considers the genius of Peter Dutton’s nuclear ‘policy’.

In a coalition government, parties make a formal agreement to share power.

In a minority government, the government relies on the ongoing support of crossbenchers.

A hung parliament is where no party or coalition has a majority of seats in the lower house (the House of Representatives)

Power sharing is common

Minority and coalition governments reflect the will of voters, are usually stable and constructive and are commonplace – including the very first Australian Government.

Minority and coalition governments make the conditions under which power is shared particularly visible and accessible. These forms of power-sharing government occur when a government must negotiate with MPs on the “crossbench” between the Government and the Opposition.

Australians have not given one party or coalition a majority of the vote in a federal election since 1975. All Australian states and territories have had minority/coalition governments in the last 20 years, and three have them now. After the last Tasmanian election, then Opposition Leader Rebecca White predicted,

It is very likely that Tasmania will continue to elect minority governments.

Power-sharing parliaments are also common internationally: New Zealand has not had a single-party government since 1994; Canada, Croatia, France, Portugal, Spain, Taiwan and the Nordic
countries, among others, currently have power-sharing governments.

Greg and guest host Adam Gottschalk discuss the media panic over the falling Aussie dollar, what it means for Greg’s Vegas blackjack losses, and how markets are responding to the incoming Trump administration.

This discussion was recorded on Thursday 9 January 2025 and things may have changed since recording.

Host: Greg Jericho, Chief Economist, the Australia Institute and Centre for Future Work // @grogsgamut

Host: Adam Gottschalk, Anne Kantor Fellow, the Australia Institute // @adamchalksitup

Show notes:

‘Don’t panic – despite the headlines, the Aussie dollar isn’t crashing’ by Greg Jericho, Guardian Australia (January 2025)

Image: Gage Skidmore/Flickr (CC BY-SA 2.0)

Theme music: Blue Dot Sessions

On this Summer Book Club episode of Follow the Money, Lech Blaine joins Ebony Bennett to discuss the rise of Peter Dutton, the evolution of the Liberal Party, and his Quarterly Essay, ‘Bad Cop: Peter Dutton’s Strongman Politics’.

This discussion was recorded on Friday 12 April 2024 and things may have changed since recording.

To join our free Australia’s Biggest Book Club webinars live, register via our website.

Order What’s the Big Idea? 32 Big Ideas for a Better Australia now, via the Australia Institute website.

Guest: Lech Blaine, author of Australian Gospel, Top Blokes and Car Crash // @lechblaine

Host: Ebony Bennett, Deputy Director, The Australia Institute // @ebonybennett

Show notes:

‘Bad Cop: Peter Dutton’s Strongman Politics’ by Lech Blaine, Quarterly Essay 93 (March 2024)

Theme music: Pulse and Thrum; additional music by Blue Dot Sessions

On this Summer Book Club episode of Follow the Money, climate scientist and author Dr Joëlle Gergis joins The Australia Institute’s Polly Hemming to discuss Australia’s climate policy inertia and the impact of rising temperatures.

This discussion was recorded on Friday 28 June 2024 and things may have changed since recording.

To join our free Australia’s Biggest Book Club webinars live, register via our website.

Order What’s the Big Idea? 32 Big Ideas for a Better Australia now, via the Australia Institute website.

Guest: Dr Joëlle Gergis, climate scientist and author // @joellegergis

Host: Polly Hemming, Climate & Energy Director, The Australia Institute // @pollyjhemming

Show notes:

‘Highway to Hell: Climate change and Australia’s future’ by Joëlle Gergis, Quarterly Essay 94 (June 2024)

Theme music: Pulse and Thrum; additional music by Blue Dot Sessions

Taxes and royalties

Mining company tax payments make up less than three cents in every dollar of government revenue on average. Over the last decade the mining industry paid $254 billion in tax, while total
government revenue reached almost $6.8 trillion.

The mining industry often conflates tax payments and mining royalties in its public relations materials. Royalties are not a tax; they are essentially a payment for the use of mineral resources that belong to the public. Describing royalties as a tax is like a builder describing the cost of the bricks they use as a tax.

It should also be noted that even if royalties are included, the mining industry’s contribution to Australia’s finances remains relatively small, comprising just 6% of total government revenue.

In 2023–24, Australian governments provided $14.5 billion in subsidies to coal mines, oil and gas operations and major fossil fuel users. This is equal to $27,581 for every minute of every day of the year, more than is spent on the army or the air force.

Economists and scientists have long called for fossil fuel subsidies to be stopped, as have international forums like the International Energy Agency, the G20 and the Organisation for Economic  Cooperation and Development (OECD).

Examples of fossil fuel subsidies

There are a range of different fossil fuel subsidies in Australia. These are provided in different ways—some are direct payments, some involve governments building infrastructure for coal and gas companies, and others take the form of tax breaks.

Direct payments

Examples of payments made to fossil fuel companies include:

Santos pleaded guilty in the Karratha Magistrates Court over a spill off the Pilbara coastline which saw around 25,000 litres of oil released into the Indian Ocean.

It was fined $10,000 and ordered to pay $9,700 in court costs.

This fine is an insult to all Australians struggling through a long-running cost-of-living crisis.

“The average Australian household paid more income tax last year than Santos had to pay for a massive oil spill, one which it allegedly covered up,” said Mark Ogge, Principal Advisor at The Australia Institute.

“Meaningless fines for serious offences aren’t the only way Santos gets a great deal operating in Australia. According to ATO Company Tax Transparency data, Santos LTD has paid no company income tax from 2015 to 2023, despite declaring $38 billion of income.

“The fine was less than the average Australian household paid for groceries in 2024, and around one-third of the average HECs debt for young people in their twenties.

“This is a serious oil spill. Dead dolphins were found within 200 metres of the slick 17 hours after the leak, according to WA government regulators. Allegations of a cover-up by Santos by an anonymous whistleblower were tabled in Federal Parliament.

“The message Santos gets from this is that there are no real consequences for harming our environment. But there are potentially devastating consequences for Australians, as oil spills can devastate fishing, tourism and local communities.

While the proposal for the enormous Adani coal mine had been around for a few years, it was in 2015 that the mine’s federal approval was overturned because of the little-known yakka skink.

The small reptile’s court victory, assisted by humans at the Mackay Conservation Group and the Environmental Defenders Office, not only propelled the skink into the headlines and political cartoons but also sent the Abbott government berserk, from the PM down.

The Australian government proceeded to not only work around the court loss but, in treasurer Joe Hockey’s words, to do “everything we can to help get the Adani mine open”. The mine produced its first coal in late 2021.

As 2024 drew to a close, the name Adani was back in Australian headlines, this time because authorities in the United States issued an arrest warrant for company founder Gautam Adani, accusing him of bribing Indian government officials with hundreds of millions of dollars. The US accusations come on the back of major allegations of fraud and stock market manipulation, not to mention a long history of environmental, human rights and tax scandals.

Over the past decade, successive governments swept Adani’s record of scandals under the carpet. But with the FBI now involved, it seems like a good time to look back at 10 years of powerful Australians doing favours for a company accused of some very serious offences.

This month, the Australian economic debate was hijacked by a report from the world’s most powerful consulting firm: McKinsey & Co. The consulting firm apparently found that declining living standards represent a “national emergency” – and the care economy, regulations and Australia’s corporate tax rate are to blame for low productivity growth.

The only problem? The report is secret; McKinsey has only shared it with a select group. This is a well-known tactic used by consulting firms to keep their assumptions and conclusions from being scrutinised and criticised.

Not that you would know it from the uncritical reception the report has received from some politicians and journalists, particularly the Australian Financial Review which used the report to attack the government and advocate for its own policy wish list: to cut corporate taxes, encourage industrial relations ‘flexibility’ (in other words, wind back worker and union rights), and cut public spending. The report has been similarly used by the Shadow Treasurer Angus Taylor, to criticise the government.

The approvals were made on 19 December, just before Australia shuts down for the Christmas break.

The three mines are already so large that they would almost cover greater Sydney, or most Australian cities.

“Today’s approval is yet another example of the Australian Government deciding to create more climate change rather than less. Another time that Minister Plibersek was on the side of coal companies, not the environment,” said Rod Campbell, Research Director at The Australia Institute.

“Putting this out just before Christmas is a classic ‘taking out the trash’ tactic. While Australians are trying to enjoy the end of the year, the Minister is doing the bidding of multinational coal companies.

“With every heatwave and every bushfire this summer, Australians should remember that their government is making this problem worse, not better.”

The post Minister’s early Christmas gift to coal companies appeared first on The Australia Institute.

Vulnerable people include those living below the poverty line, who also have at least one long-term health issue, and/or who are 65 years and older.

Our report finds that vulnerability to heat is unevenly distributed across Australia.

In most states and territories, coastal areas tend to be cooler and have lower concentrations of vulnerable people than inland and rural areas.

This means that extreme heat poses a greater threat to outer-urban and rural areas than inner-urban areas, especially those near the sea.

The states and territories most vulnerable to extreme heat are the Northern Territory, South Australia and Western Australia.

Her claim that more gas is needed to help with climate change is contradicted by reports from the International Energy Agency, the CSIRO and the Australian Energy Market Operator.

Key facts:

• Foreign-owned gas companies export 80% of Australia’s gas
• Nurses and teachers pay more tax than the gas industry
• To date, not a single LNG project has paid a cent in Petroleum Resource Rent Tax

“With Christmas here and a cost-of-living crisis on, Minister King decided to write a piece supporting multinational gas companies,” said Rod Campbell, Research Director at The Australia Institute.

“Oddly for a Christmas piece, Minister King makes no mention of the gift that Australians give to gas companies, year in, year out – free gas.

“Australia got literally nothing for the gas that companies like Chevron, Exxon and Inpex sold for $149 billion over the last four years.

“Gas companies have tripled prices for Australians in recent years, by exporting the majority of the country’s gas. This has contributed directly to the tough Christmas many Australians are about to have.

“It is strange that while Australians are paying more money for their own gas, the Minister wants to write about gas somehow being good for the climate.

“More gas is bad for the climate. More gas exports are bad for Australian gas prices. Australians are being ripped off by the gas industry and they know it.

After acknowledging that economic growth is at its lowest level since the 1990s, the RBA chose not to cut rates in December, leaving Australians to wait months for a potential rate cut.

“Economic management is a full-time job yet the RBA is taking a two-month summer holiday,” said Greg Jericho, The Australia Institute’s Chief Economist.

“Michele Bullock and Jim Chalmers constantly tell us they’re ‘fine tuning’ the economy. That can’t be done with the RBA board all at the cricket.

“With so many Australians suffering, the RBA should cut short its holiday and come back to work in January.”

“The board is currently scheduled to meet on February 17 and 18. It should meet on January 20 and 21,” said Matt Grudnoff, Senior Economist at The Australia Institute.

“If it’s good enough for most Australians to be back at work by then, it’s good enough for the RBA.

“Christmas is a busy time for the economy. Its certainly a difficult, expensive time for consumers. There would be plenty to discuss in January.

“Mortgage holders shouldn’t have to wait one day longer than necessary for an interest rate cut which, let’s face it, is already long overdue.”

The post Rate cut already overdue: RBA should meet in January appeared first on The Australia Institute.

It’s official: the Reserve Bank of Australia will have its board split in two, and two new appointees will join the reconfigured monetary policy board, whose job it is to make decisions on interest rates. The move was recommended by an independent review panel in 2023. The new members of the monetary policy board, one a former top banker and the other a senior academic economist, were chosen after bipartisan consultation.

In making his announcement, the treasurer Jim Chalmers said that Marnie Baker and Renee Fry-McKibbin would balance the experience of existing members with “fresh perspectives”. That the RBA needs fresh perspectives is surely not in doubt.

The Wrap with Amy Remeikis

We have made it to the time of year when we all think that if we can just get to the end, that things are going to be better.

It makes sense – we turn over calendars, set resolutions and embrace the potential of a new year.

It’s almost like an extreme, universal experience of the doorway effect, the psychological phenomenon of short term memory loss while crossing from one boundary to another (if you have ever walked into a room to get something and then immediately forgotten why you were there, you have experienced the doorway effect).

But just as we eventually remember what we wanted from the other room, so too do we remember the unfinished business of the year before.

Opening up a new calendar is just the turning of a page. Nothing has fundamentally changed before or after that moment beyond being faced with a blank sheet. And no matter how much we may wish it, the turning of one year to another does not put a full stop on the issues we experienced in the year before.

The world is going to continue to be a complicated, sometimes horrifying, often confounding place. But with that comes the beauty and the simple moments of joy and delight, pleasant surprises and everything in between. Changing the calendar doesn’t change the world. But you, working to bring about change, does.

And so why this time of year would often mean we reflect on the wins – and there have been those – it can be more productive to look at what still needs to be done.

On this Summer Book Club episode of Follow the Money, journalist and author George Megalogenis joins Alice Grundy to discuss the rise of independents and minor parties, Australia’s changing political landscape, and his latest Quarterly Essay, ‘Minority Report: The new shape of Australian politics’.

This discussion was recorded on Friday 6 December 2024 and things may have changed since recording.

To join our free Australia’s Biggest Book Club webinars live, register via our website.

Order What’s the Big Idea? 32 Big Ideas for a Better Australia now, via the Australia Institute website.

Guest: George Megalogenis, author and journalist // @GMegalogenis

Host: Alice Grundy, Managing Editor, Australia Institute Press // @alicektg

Show notes:

‘Minority Report: The new shape of Australian politics’ by George Megalogenis, Quarterly Essay 96 (November 2024)

Theme music: Pulse and Thrum; additional music by Blue Dot Sessions

Remember when BHP threatened that Queensland was going to “rue the day” that coal royalties were changed to get more money for Queenslanders? How mining companies were going to desert the state?

New data from the Queensland Government shows that there are more coal mines in the state now than ever before, with 58 operating in 2024. Production is also up – 224 million tonnes this year compared to 218 million in 2022, although down from the record of 249 million in 2018.

This is obviously terrible news for the world’s climate, the Great Barrier Reef and most life forms on earth.

It also demonstrates that BHP and other mining companies will blatantly lie in their attempts to pay less to governments and communities.

The post Queensland has more coal mines than ever before appeared first on The Australia Institute.

Key points:

• 80% of gas produced in Australia is exported, mainly by multinational corporations, mostly royalty-free and paying zero Petroleum Resource Rent Tax.
• The Coalition’s policy appears to place no limits on exports, no gas reservation policy and may even “de-fang the Australian Domestic Gas Security Mechanism”.
• Without addressing exports, or how to reduce household gas use, there will be no reduction energy bills.

“It beggars’ belief that the Coalition would propose cutting energy bills by making Australians more dependent on gas and the multinational gas companies that dominate the Australian gas market”, said Mark Ogge, Principal Adviser at The Australia Institute.

“If the Coalition is elected and revives the Morrison Government’s Gas Fired Recovery, Australians will be even more exposed to global gas prices, which will lead to higher energy bills in the midst of a cost-of-living crisis.

“Gas is already a far more expensive way of producing electricity than renewable energy. Making Australians even more dependent on gas will drive up energy bills for Australian households and businesses.

The letter – published in Australian newspapers today – points out the hypocrisy of successive Australian leaders, who have made promises about climate action to the faces of Pacific leaders but do the opposite when they return to Australia.

The letter points out some stark facts about how Australia is a terrible neighbour to its Pacific family.

Key points of the open letter:

• Australia’s fossil fuel project approvals undermine the survival and security of Pacific Island communities.
• In September, Australia approved three coal mines which will create 1.4 billion tonnes of emissions, equivalent to the combined emissions from 12 Pacific Island nations for over 250 years.
• In December, Australia refused to reconsider three more coal mines, paving the way for their approval, which could add a further 850 million tonnes of emissions.
• Australia’s actions do not match its commitments to its Pacific neighbours and are contrary to its support as signatory to various Pacific Island Forum Leaders’ communiques.

“Pacific Island nations are already feeling the impact of climate change, with rising sea levels threatening their very existence,” said Leanne Minshull, Strategic Director at The Australia Institute.

“Intense cyclones, king tides and droughts are putting their coast lines, food chains and water supplies in danger.

“Prime Minister Albanese constantly refers to our ‘Pacific family’, travelling the Pacific and ensuring leaders he’s committed to climate change action.

The people of Australia collectively own all the resources under the ground. This means that the coal in NSW is the property of the Australian people too.

Because of this, mining companies have to pay the NSW Government a “royalty” if they want to dig up and sell coal.

Royalties are not taxes. They are a payment for a resource. Just like a builder has to pay for the bricks used to make a house and pay tax when they sell the house, mining companies have to pay royalties for coal and then pay tax once they sell it.

If NSW were a country, it would be the third-largest exporter of coal in the world, smaller only than Queensland and Indonesia. With all that coal production, the mining industry and politicians frequently claim that coal royalties are large enough pay for services like schools, hospitals, teachers and nurses.

Here’s one quote from former NSW Deputy Premier John Barilaro:

“[Coal] is the state’s largest export commodity, and is a major source of revenue, which the NSW Government uses to help fund essential services and infrastructure such as schools, hospitals, roads and transport.”

But do royalties really fund all these things?

The short answer is no.

Japan and Australia enjoy a long-standing relationship when it comes to energy trade. According to Japan, “(t)he energy and resources sector is the bedrock of the Japan-Australia economic partnership”. But the two countries’ efforts to decarbonise their economies to reach their respective emissions reduction targets have been threatening to jeopardise this gas-fuelled obsession. Japan has been lobbying hard against any change to fossil fuel regulation in Australia. Now, under the guise of Japan’s Asia Zero Emission Community (AZEC), Japan and Australia have found a new way to keep the relationship going.

On paper, AZEC serves as a platform to support achieving net-zero emissions across the Asia-Pacific region. AZEC allows its 11 partner countries to benefit from Japanese funding for energy projects. Through AZEC, Japan aims to lead the energy transition across Asia. Research by Zero Carbon Analytics shows that, since AZEC was launched in March 2023, 158 project agreements have been signed across the Asia Pacific. Prime Minister Albanese took part via video message in the inaugural AZEC leaders’ summit in December 2023.

In late November, at the start of Parliament’s last – and busiest – sitting week, the Australia Institute and community organisation Grow it Local launched a report showing that Australians simply love growing food.

Our organisations partnered to conduct a national survey on Australians’ food growing habits and attitudes towards food waste. The results show that a whopping 45% of Australians—around 9 million people—are growing food at home, and even more are interested in starting edible gardening. And it’s not just a passing trend: a decade ago, the Australia Institute conducted a similar survey which found that one in two Australian households were growing food – to produce healthier food, to save money, and simply because they enjoy it. These results show that growing food is a lifestyle choice driven by the desire for healthier food, to save money, and to live more sustainably.

The Albanese government’s attempt to rush through major changes to Australian elections has been delayed in the Senate – at least until February, perhaps forever.

As Australia Institute research identified serious flaws, risks and loopholes in the legislation, delay is welcome – but bittersweet, because electoral reform is needed to increase confidence in politics and democracy.

Good electoral reform would include transparency around political contributions, especially “cash- for-access” payments from vested interests to get exclusive access to politicians; truth-in-political-advertising laws to prevent political players from misleading the public; and upper limits on billionaire and corporate spending on political campaigns.

But the government proposed changes that are flawed in process and substance. Though Special Minister of State Don Farrell has had almost three years to prepare the bill, the 200-plus page behemoth was presented to Parliament with just days for consideration.

The research will be sent to the NSW Treasury, as a pre-budget submission ahead of the 2025-2026 state budget. Submissions close today.

Key points:

• Coal royalties have averaged only 2.4% of NSW Government revenue over the last decade.
• In 2023–24, coal royalties were 4.2% of total NSW Government revenue, with global coal prices pushed up by Russia’s invasion of Ukraine.
• All coal resources in NSW are publicly owned, and royalties are the price that mining companies pay the public to extract the resource.
• Royalties do not fund specific programs — they are grouped with the rest of government revenue. This means that over the last decade, coal royalties have funded only 2.4% of every teacher or nurse.
• No money has yet been spent from the Royalties for Rejuvenation Fund, the NSW Government program which theoretically redirects royalties back to coal-producing regions.

“Coal companies and politicians keep telling us that coal royalties are huge, and that they fund schools, hospitals, and regional communities all across the state. This report shows that these claims simply aren’t true,” said Rod Campbell, Research Director at The Australia Institute.

“Coal royalties fund a tiny proportion of every school, hospital or regional community. They are not propping up the economy.

“The NSW public owns coal resources, but they aren’t getting their fair share of coal mining revenue. The real money is flowing into the pockets of big corporations.

How is Australia’s system unfair?

If you get caught speeding in Australia, you will be fined with a flat-rate traffic fine. Exceeding the speed limit by 12km/h in New South Wales earns you a $361 fine, whether you are on government benefits or a billionaire. This is not a fair system.

What about the principle: same offence, same price?

If you earn $50,000 a year, a $361 fine is equal to more than a third of your weekly salary. If you earn $200,000, it is less than 1% of your weekly salary.

So, while a speeding fine is nothing more than annoying to a wealthier person, someone on a low-income might have to choose between paying the fine and a medical bill or food.

A minor fine left unpaid can lead to a vicious circle of accrued debts, leading to a loss of licence and further loss of income. In some cases, it can even lead to jail time. Unpaid fines are in fact one of the top concerns for people seeking legal aid.

Australia Institute research shows that a proportional traffic fine system, as is in place in Finland, would be much fairer. In practice, the Finnish system calculates a fine based on the driver’s disposable income and whether they have dependents. Same offence, same proportion of income.

It comes just one day after the approval of a 50 year extension to Australia’s largest fossil gas export plant – Woodside’s North West Shelf facility.

“These are fake numbers so the major parties can have a fake fight about fake climate policies,” said Rod Campbell, Research Director at The Australia Institute.

“The modelling released includes zero discussion of nuclear waste or the costs of decommissioning nuclear generation.

“Nuclear energy is not suitable for Australia’s energy market because it is expensive to build, can’t turn up or down quickly and the obvious nuclear waste problems.

“These issues are why no energy companies want to build nuclear in Australia, and key customers like aluminium smelters don’t want nuclear to be built for them.

“This is all a distraction to prolong fossil fuel use and exports.

“Just yesterday, a 50 year extension to Woodside’s enormous gas export facility was approved but it is barely covered because political leaders would rather talk about reactors that will never be built.

“Australia needs to get on with the job of cleaning up our industries using technologies that work – renewable energy.”

The post Nuclear costings are a distraction appeared first on The Australia Institute.

The NT’s Great Give-Away

Gas exports worth $37 billion went out of Darwin over the last four years. $0 was paid to NT or Australian public, who owned most of this gas. The Commonwealth’s Petroleum Resource Rent Tax (PRRT) raises $0 tax yearly from NT gas exporters, due to its widely acknowledged flaws.

All the gas exported from NT was given away for free as the Commonwealth Government did not charge royalties or PRRT on it. It’s time for the community interest to be put ahead of gas companies.

Territorians get virtually no revenue from gas. In fact, NT drivers pay 32 times more in vehicle registration than the gas industry pays in royalties.

Four things you need to know

1. The gas industry are ‘systemic non-payers of tax

The ATO has gone as far as describing the gas industry as “systemic nonpayers of tax“. Ordinary Australian workers including teachers, nurses and retail workers all pay more tax than the gas industry. Young Australians pay more in HECS than the oil and gas industry pays in PRRT.

Why are economists are so bad at predicting what’ll happen in the economy? Why is HECS indexed? And why do we measure labour as a cost but profit as a universal good? On the final episode of Dollars & Sense for the year, Greg and Elinor answer your questions about the economy.

This discussion was recorded on Thursday 12 December 2024 and things may have changed since recording.

Order What’s the Big Idea? 32 Big Ideas for a Better Australia now, via the Australia Institute website.

Host: Greg Jericho, Chief Economist, the Australia Institute and Centre for Future Work // @grogsgamut

Host: Elinor Johnston-Leek, Senior Content Producer, the Australia Institute // @elinorjohnstonleek

Show notes:

‘Politicians love talking about ‘middle Australia’. But beware of this misleading metric’ by Greg Jericho, Guardian Australia (December 2024)

WA’s Great Gas Giveaway

Gas companies made $56 billion in 2022-23 exporting liquified natural gas out of WA. They paid $0 in Petroleum Resource Rent Tax (PRRT). And most of the companies paid $0 in royalties.

How can WA be running short of gas? 90% of the gas produced in WA is either exported or used by the LNG industry itself to process gas.

The LNG export industry consumes:

• 32x more gas than WA’s electricity generators.
• 30x more gas than WA’s mining industry.
• 8x more gas than the rest of the WA economy and community combined.

Four things you need to know

1. Royalties – most of the gas industry in WA pays no royalties

The LNG industry is 83% foreign owned, so most profits go overseas. Royalties from the gas industry are not significant in WA. Unlike the mining industry, most of the gas industry in WA pays no royalties at all. WA drivers pay more in vehicle registration than the gas industry pays in royalties.

This is because most gas is extracted from Commonwealth waters and the Commonwealth Government chooses not to charge royalties. Australia Institute research shows that $111 billion worth of LNG was produced from royalty-free gas and exported out of WA over the last four years. This gas was effectively given to multinational companies for free.

The best story of the economy over the past 3 years has been the resilience of the labour market – and with it the total destruction of the view that unemployment below 4.5% is unstainable.

We really need to just stop and marvel at the current situation. For most people, an unemployment rate with a 3 in front during their working life was akin to a sighting of the Yeti. In the past 600 months since December 1974, Australia’s unemployment rate has been below 4% only 24 times – and every month has been in the past 3 years.

This was not expected.

Coming out to the pandemic and the enforced lockdowns both within Australia and of migration from overseas, a common belief was that Australia’s low unemployment was due to a lack of labour supply, and thus in effect the rate was artificially low. And yet despite strong migration growth over the past 18 months, unemployment has remained low – surely delivering a massive body blow to those who espouse the lump of labour fallacy that somehow a job gained by a migrant is one taken from a local worker.

But more surprising is that despite the Reserve Bank raising interest rates 13 times since May 2022, the unemployment rate in that time has risen only from 3.6% to the current rate in November of 3.9%.

The Reserve Bank has been trying to raise unemployment to a level of around 4.5% because it believes that is the level at which unemployment needs to be to keep wage growth steady and inflation below 3%.

The Western Australian government has approved a 46-year extension of Woodside’s vintage North West Shelf gas export terminal despite its disastrous impacts on the world’s climate, energy prices for WA households and businesses and the priceless Murujuga cultural heritage site.

Key impacts:

• 4.3 billion tonnes of emissions, the equivalent of 24 coal power stations with equivalent annual emissions of WA’s largest coal power station, Muja.
• Ongoing corrosion of the priceless petroglyphs at the World Heritage nominated Murujuga rock art site from acid gas emissions.
• Drive up energy prices for Western Australian households and businesses.

Woodside’s North West Shelf exports more than twice the amount of gas used by Western Australians, and is increasingly turning to WA’s domestic gas reserves to feed it as its offshore fields run out, with serious consequences for WA’s gas supply and energy prices.

Recently published Australia Institute analysis shows Woodside’s exports of WA’s domestic gas reserves have already led to a tripling of wholesale gas and electricity prices, and the extension will lock in those increases for decades.

How much is the current payment?

Payments depend on factors such as age, income, and family situation. A single person with no children is paid around $389 per week, which is less than $56 per day. Some supplementary payments are available including for renters and parents.

How is Jobseeker inadequate?

A huge number of individuals and families receiving Jobseeker experience poverty. Poverty can be measured in different ways, but all poverty metrics consistently show Jobseeker’s inadequacy. According to one analysis, three in five households relying on Jobseeker are in poverty.

Exports and prices

Gas production in Australia has tripled since 2010, but domestic consumption has barely changed. This means that around 80% of gas produced in Australia is exported.

Gas export terminals opened at Gladstone in Queensland in late 2014. This meant that for the first time, gas could be exported from Australia’s east coast, giving gas companies the option to sell Australian gas into higher-priced Asian markets. This, in turn, meant that Australians suddenly had to pay world prices for domestically-produced gas.

Suddenly, Australian wholesale prices tripled from $3 per gigajoule (GJ) to $10 per GJ, and often rose even higher.

Tax is good

This graph shows the 38 economies in the Organisation for Economic Cooperation and Development (OECD) in order of tax revenues as a percentage of their economy (GDP). Only eight have lower tax to GDP ratios than Australia, and these include relatively low-income countries like Türkiye and Mexico, as well as tax havens like Switzerland and Ireland.

If Australia were to increase the level of revenue it collects from taxation to the OECD average—a level similar to that collected by Canada or New Zealand—the Commonwealth would have had an extra $140bn in revenue in 2023–24.

This figure is 20% of the Federal Budget. It is also equivalent to the combined cost of the Aged Pension, the NDIS, Jobseeker, and Child Care Subsidy, along with the total government spending on housing, vocational education, and both the ABC and SBS.

Less tax means less social services…

Because of its low revenue, Australia spends less on social services than most OECD countries.

What are the current rules on truth in political advertising?

Pharmaceutical companies cannot claim to have the cure for cancer. Food companies cannot claim that sugary foods are good for kids. Lawyers cannot say that they will win every case. But under the Electoral Act, politicians can lie about their opponents’ policies—or about their own.

For decades, politicians have argued that it is too difficult to regulate political communication—and, admittedly, some attempts have failed. But a model that has been working quietly in South Australia for almost four decades provides a way forward.

If the Government and Parliament are serious about addressing misinformation and improving debate, they could pass truth in political ad laws in time for the next election.

Truth in political advertising laws work in South Australia and the ACT

South Australia has had truth in political advertising laws for almost forty years. The ACT has had similar laws since 2020; the first election with those laws in effect will occur in late 2024.

How do these laws work?

Section 113 of SA’s Electoral Act 1985 makes it an offence to authorise or cause to be published electoral advertisements that are materially inaccurate and misleading, with similar wording in the ACT. These laws are overseen by the relevant electoral commission. The Electoral Commission of South Australia only needs about five staff to handle all election complaints. This is a tiny fraction of the thousands of people needed to run an election.

How do profits drive inflation?

From December 2019 to June 2023, inflation in Australia rose faster than it has in 30 years. Over this time, the share of national income going to corporate profits also increased substantially.

At the same time, the share going to wages and small businesses declined.

The profits made by large corporations during this time are huge: some $100 billion over and above their pre-pandemic profit margins.

According to Australia Institute research, these rising profits made up more than half of the inflation above the Reserve Bank of Australia (RBA)’s target range of 2% to 3%.

The link between profits and inflation in Australia was replicated in research by the Organisation for Economic Cooperation and Development (OECD), headed by former Liberal Finance Minister Mathias Cormann.

On this episode of Follow the Money, acclaimed financial journalist Alan Kohler joins Ebony Bennett to discuss the policies that created Australia’s housing crisis and what governments can do to fix it.

This discussion was recorded on Tuesday 10 December 2024 and things may have changed since recording.

Order What’s the Big Idea? 32 Big Ideas for a Better Australia now, via the Australia Institute website.

Guest: Alan Kohler, author and journalist // @AlanKohler

Host: Ebony Bennett, Deputy Director, the Australia Institute // @ebonybennett

Show notes:

The Great Divide: Australia’s Housing Mess and How to Fix It by Alan Kohler (October 2024)

Theme music: Pulse and Thrum; additional music by Blue Dot Sessions

The declining major party vote

Fewer Australians give their first preference to a major party. The 2007 federal election is the last at which both Labor and the Liberal-National Coalition won more than 40% of the national vote; the 2022 election was the first time that neither cracked 40%.

The share of Australians voting outside of the major parties has increased from single digits in the 1970s to 31% at the most recent election in 2022, almost as many as the 36% who voted for the Coalition and 33% who voted for Labor. Not since the Great Depression has the combined vote for the two largest parties been so low.

The effect of a lower primary vote for major parties is that minor parties and independents have a better chance of winning seats.

“An Albanese Labor government will restore Australia’s climate leadership, and listen and act on Pacific island warnings of the existential threat of climate change.”

Despite a clear election campaign commitment to listen to Pacific Island nations and act on climate change, the Australian government continues to enable and encourage new and expanded fossil fuel projects.

When it comes to climate change, Australia’s actions matter. Accelerated by Australia’s continued supply of fossil fuels, climate change poses a serious, direct and immediate threat to human and environmental security.

In the Pacific and the Torres Strait, rising sea levels caused by climate change threaten to inundate entire islands.
Australia has a long and shared history with Pacific island countries and has co-signed legally binding international treaties and agreements, such as the Paris Agreement and the Boe Declaration, pledging action on climate change.

The Labor Party’s election campaign in 2022 boasted climate commitments and intentions to restore Australia’s relationships and reputation with our Pacific “brothers and sisters”.

The extraordinary analysis reveals more than a third of what Australians hand over to energy giants AGL and Origin for electricity is pure profit for the companies.

The research – which crunches the companies’ own data – reveals $755 of what an average AGL electricity customer forks out each year goes directly to profit for the company, which made more than a billion dollars last year.

Origin electricity customers pump $595 a year into the company’s annual profit, which was more than $2 billion last year.

It’s a similar story with gas. The average Origin customer pours $417.57 into the company’s annual profit. $414.04 of what an average AGL gas customer hands over each year is pure profit for the company.

The discussion paper, by The Australia Institute’s Senior Research Fellow David Richardson, also reveals that households are massively subsidising the bills of big businesses, with consumers paying more than double what businesses pay for a megawatt hour of electricity or gigajoule of gas.

Key findings:

The Reserve Bank of Australia had a great opportunity to give Australians – and the nation’s sluggish economy – something both desperately needed before Christmas.

But, once again, the RBA has failed.

By leaving interest rates on hold at 4.35%, the Reserve Bank has failed to do what is right for Australians.

It has failed to do what is right for the economy.

And it has failed to learn from its own mistakes.

Australians have suffered unnecessarily for too long. Cutting interest rates would have eased that suffering. Cutting interest rates would have provided some sensible stimulus to an economy which has almost ground to a halt.

“The RBA’s interest rate settings have smashed households and smashed businesses,” said Greg Jericho, Chief Economist at The Australia Institute.

“Headline inflation is within the bank’s target band. What is it waiting for?

“Last year’s review of the Reserve Bank criticised it for keeping rates on hold for 30 meetings in a row, when a rate cut would have stimulated a stagnating economy. It’s happening again.

“An interest rate cut today would not have been an act of Christmas goodwill. It would have been an act of common sense.

“Now, thanks to the RBA, many Australian families face an unnecessarily bleak Christmas.”

Author and former speechwriter Don Watson joins Dr Emma Shortis on After America to discuss what Trump’s re-emergence reveals about the United States and how Australia might respond differently to a second Trump administration.

This discussion was recorded on Monday 9 December 2024 and things may have changed since recording.

Order What’s the Big Idea? 32 Big Ideas for a Better Australia now, via the Australia Institute website.

Guest: Don Watson, author of ‘High Noon: Trump, Harris and America on the Brink’

Host: Emma Shortis, Director, International & Security Affairs, the Australia Institute // @EmmaShortis

Show notes:

Donald Trump’s Meet the Press interview (December 2024)

‘High Noon: Trump, Harris and America on the Brink’ by Don Watson, Quarterly Essay (September 2024)

‘The Second Coming’ by Fintan O’Toole, NY Review of Books (December 2024)

Theme music: Blue Dot Sessions

Last year, scientists warned that the Maugean skate – a stingray-like marine animal dating back to the dinosaur era – was heading for extinction.

The Minister is now considering two separate reviews which will decide whether the skate survives – or becomes extinct.

The reason the skate is facing extinction is because, in 2012, the salmon industry was allowed to undertake a massive expansion of fish farms in Macquarie Harbour, the Maugean skate’s only habitat. One third of the Harbour is part of the Tasmania’s Wilderness World Heritage Area and the skate is one of its natural values.

Pollution from these large, foreign-owned fish farms has led to severely depleted oxygen levels in the harbour’s waters.

Now, the powerful salmon lobby – grossly exaggerating its importance to the local economy – wants to be exempt from environmental laws.

A newspaper advertisement promoting the petition states: “The salmon industry in Tasmania is owned by three foreign corporations, including JBS, which has been convicted of corruption. None of their salmon farms have paid company tax in Australia since 2019 according to Australian Tax Office data.”

“Australians are not stupid. They are starting to see through the lies and spin of these powerful multinational corporations,” said Eloise Carr, Director, The Australia Institute Tasmania.

“Now we need Australians to ensure their politicians don’t fall for the misinformation being spread by these corporations pillaging Australian waters.

This week, Environment Minister Tanya Plibersek decided not to reconsider the environmental impacts of three coal mines, mines that are almost big enough to swallow Sydney whole.

Owned by BHP, Mitsubishi and other multinational corporations, these mines will impact koalas, gliders and many other threatened species.

Minister Plibersek’s decision was not surprising.

The Environment Council of Central Queensland had previously asked her to reconsider other coal mines. She reconsidered … and then approved the mines anyway.

That decision set up the embarrassing situation of Australia’s Environment Minister fighting in court to approve coal mines, alongside mining companies against environment groups.

To be clear, when the Environment Minister had to choose a side – coal companies or the environment – she chose coal companies.

And there’s plenty more in the coal companies’ stockings.

Research out this week from The Australia Institute shows that the NSW government spends five times more money promoting coal than it has budgeted for helping mining communities’ transition away from coal.

The state’s four regional “Future Jobs and Investment Authorities” are supposed to “support communities reliant on the coal industry to secure their long-term economic future as the global demand for coal declines over time”.

These authorities have a combined initial budget of just $5.2 million and a promise of more money in 2028.

Instead of learning from the review they seem determined to repeat it. Meanwhile Australians suffer from an economy with higher interest payments, higher unemployment and more people struggling.

Before they make their decision on interest rates on Tuesday, the Reserve Bank board should read the RBA review, particularly where it criticised them for not reducing interest rates from 2016 to 2019. Back then, inflation was outside the RBA’s target band of 2% to 3% but, unlike today, it was not too high but too low. Inflation was less than 2% for almost that entire period.

Given the high rates of inflation over the last two and half years you might think, what’s the problem with low inflation? Isn’t inflation bad?

While high inflation can cause problems, so does low inflation. Low inflation means the economy is stagnating. It is a sign that it is not growing as fast as it could and because of that unemployment is higher than it needs to be. The correct monetary policy response to inflation being below the target band is to cut interest rates and stimulate the economy.

But back in 2016, rather than cut, the RBA kept rates on hold for a record 30 consecutive meetings. The longest period in RBA history. The review was scathing, saying this was responsible for approximately 270,000 additional people being out of work for a year.

So why didn’t the RBA cut rates?

It’s because they keep getting the link between unemployment and inflation wrong.

New polling from The Australia Institute reveals that although Aussies love giving gifts, much of what we buy will spend years in the back of a cupboard and, ultimately, end up in landfill.

So, while it might be a season of joy, it’s also the season of waste, which is bad for the environment and bad for the hip pocket.

The Australia Institute surveyed 1,009 Australians between 13 and 15 November 2024 on issues relating to gift giving, consumption and spending habits during Christmas time. The margin of error is ±3%.

Key Findings:

Australians waste more than $1 billion on buying Christmas gifts for people that don’t get used.

Nearly one in two Australians (47%) do not think about how the gifts they buy for others will eventually be disposed of.

Over three in four Australians (77%) like buying gifts for people at Christmas, but over half of Australians (52%) would prefer it if people did not buy them gifts at Christmas.

A greater number of Australians buy gift wrapping paper (69%) than gift bags (52%). However, gift bags are more likely to be reused (65% of those who use gift bags reuse them) than wrapping paper (24% of those who use wrapping paper reuse it).

Nearly two in three Australians (64%) agree that it is better for the economy when people buy fewer things that don’t get used.

Salmon companies are ripping off Tasmania and trying to pass it off as yet another ‘jobs vs environment’ fight. This is the kind of fight that Tasmanian politicians love to have, and like performing seals, the Tasmanian government and opposition have lined up to bark and do their tricks.

But the fight over salmon farming is different. All three major companies are owned by multinational corporations. Tassal is owned by a major Canadian company and Petuna is owned by a Japanese-New Zealand corporation. The third main salmon company in Tasmania, Huon, is owned by JBS. JBS is a Brazilian corporation infamous for corruption. JBS’s bribery of Brazilian politicians played a big part in its expansion and its arrival in Tasmania.

These corporations literally want Tasmanians to accept their crap.

To be more precise, the poo and other discharge from salmon farms in Macquarie Harbour generates the same amount of nitrogen pollution as sewage discharged by a city of half a million people – that’s more than double Hobart’s.

Dumping the equivalent of two Hobart’s worth of sewage in a World Heritage-listed harbour has consequences. And the best-known is the impact on the Maugean skate, a stingray-like creature that has been around since the dinosaurs and lives nowhere else in the world.

Extinction bells have been tolling for some time for the skate. Scientific advice to the Australian Government is unequivocal that salmon farming is the key threat to its survival.

The representative of the three large, foreign-owned salmon farmers in the Apple Isle has made many claims about the economic impact of moving fish farms out of Macquarie Harbour. The research behind those claims remains secret.

The Australia Institute challenges those making unsubstantiated claims to a debate about what needs to be done in Macquarie Harbour.

“It’s time to start calling out the lies, exaggeration and misinformation,” said Eloise Carr, Director, Australia Institute Tasmania.

“It’s factually incorrect to describe the industry in Macquarie Harbour as ‘small.’ Currently, 9,500 tonnes of salmon and trout come out of the harbour annually. The amount of nitrogen pollution this contribute to the harbour is the same as the sewage discharged from a city the size of Hobart.

“Dumping the equivalent of Hobart’s worth of sewage in a World Heritage-listed harbour has consequences. And the best-known is the impact on the endangered Maugean skate, a stingray-like creature that has been around since the dinosaurs and lives nowhere else in the world.

“The science could not be clearer: fish farming is the primary threat to the skate. That’s what Australia’s top scientists are telling us.