Olduvaiblog: Musings on the coming collapse

Home » Australasia

Category Archives: Australasia

Great Barrier Reef Faces 'Irreversible' Damage: Report

Great Barrier Reef Faces ‘Irreversible’ Damage: Report.

The Huffington Post  | by  Sara Gates
Posted: 03/06/2014 12:26 pm EST Updated: 03/06/2014 12:59 pm EST


Main Entry Image

The Great Barrier Reef may be in serious trouble.

Unless immediate action is taken, the famous coral reef system will be unable to recover from the “irreversible” damage that climate change will wreak on it by 2030, a new report out of Australia warns.

Published by the World Wildlife Fund-Australia, the University of Queensland reportpaints a bleak picture for the future of the ecosystem.

“If we don’t increase our commitment to solve the burgeoning stress from local and global sources, the reef will disappear,” the report, prepared for Earth Hour’s upcoming annual event, states. “This is not a hunch or alarmist rhetoric by green activists. It is the conclusion of the world’s most qualified coral reef experts.”

The reef has already experienced extensive damage in the past few decades from tropical storms and other harmful events, which can lead to coral bleaching, a condition that occurs when stress from changes causes coral to weaken and turn white. A 2012 report indicated that 50 percent of the Great Barrier Reef has disappeared since 1985.

great barrier reef bleaching

Bleached coral, as seen here at the Great Barrier Reef in Queensland, occurs when extreme temperatures, increased UV rays, disease, chemicals, salinity and exposure to air and rain at extreme low tides occur.

This decline is set to increase in the next 16 years, based on current estimates of carbon dioxide emissions, warn coral reef biologists Dr. Selina Ward and Ove Hoegh-Guldberg.

If things do not drastically change, the condition of the reef in 2030 will be “getting close to what we understand to be some of the limits in terms of rapidly calcifying reefs,” Hoegh-Guldberg, who serves as the director of the university’s Global Change Institute, told The Sydney Morning Herald.

In order to grow and thrive, coral reefs undergo calcification. But with warming waters and increased carbon pollution, the Great Barrier Reef is becoming weaker and less likely to reproduce.

“If we continue as we are, we’ll get more degradation and more bleaching events,” Ward told The Guardian. “If we want to save the Great Barrier Reef we need to act immediately and make dramatic reductions in carbon pollution. We need to move away from fossil fuels.”

Advertisements

Great Barrier Reef Faces ‘Irreversible’ Damage: Report

Great Barrier Reef Faces ‘Irreversible’ Damage: Report.

The Huffington Post  | by  Sara Gates
Posted: 03/06/2014 12:26 pm EST Updated: 03/06/2014 12:59 pm EST


Main Entry Image

The Great Barrier Reef may be in serious trouble.

Unless immediate action is taken, the famous coral reef system will be unable to recover from the “irreversible” damage that climate change will wreak on it by 2030, a new report out of Australia warns.

Published by the World Wildlife Fund-Australia, the University of Queensland reportpaints a bleak picture for the future of the ecosystem.

“If we don’t increase our commitment to solve the burgeoning stress from local and global sources, the reef will disappear,” the report, prepared for Earth Hour’s upcoming annual event, states. “This is not a hunch or alarmist rhetoric by green activists. It is the conclusion of the world’s most qualified coral reef experts.”

The reef has already experienced extensive damage in the past few decades from tropical storms and other harmful events, which can lead to coral bleaching, a condition that occurs when stress from changes causes coral to weaken and turn white. A 2012 report indicated that 50 percent of the Great Barrier Reef has disappeared since 1985.

great barrier reef bleaching

Bleached coral, as seen here at the Great Barrier Reef in Queensland, occurs when extreme temperatures, increased UV rays, disease, chemicals, salinity and exposure to air and rain at extreme low tides occur.

This decline is set to increase in the next 16 years, based on current estimates of carbon dioxide emissions, warn coral reef biologists Dr. Selina Ward and Ove Hoegh-Guldberg.

If things do not drastically change, the condition of the reef in 2030 will be “getting close to what we understand to be some of the limits in terms of rapidly calcifying reefs,” Hoegh-Guldberg, who serves as the director of the university’s Global Change Institute, told The Sydney Morning Herald.

In order to grow and thrive, coral reefs undergo calcification. But with warming waters and increased carbon pollution, the Great Barrier Reef is becoming weaker and less likely to reproduce.

“If we continue as we are, we’ll get more degradation and more bleaching events,” Ward told The Guardian. “If we want to save the Great Barrier Reef we need to act immediately and make dramatic reductions in carbon pollution. We need to move away from fossil fuels.”

Coal Fire Turns Australian Mine Into Mordor’s Mount Doom

Coal Fire Turns Australian Mine Into Mordor’s Mount Doom.

 

fire at the the Hazelwood open-cut coal mine has turned a large swathe of Morwell, Australia into something out of J.R.R. Tolkien’s Mordor.

australia coal mine fire 1

australia coal mine fire 2

The fire at the mine has been blazing for three weeks and is believed to be the result of a bushfire started by an arsonist. The town of Morwell and its 14,000 inhabitants has been blanketed in smoke and authorities fear it could take months to completely extinguish the blaze. The town is about 150 km east of Melbourne.

There is speculation that the government of the province of Victoria may soon order a total evacuationTens of thousands of gas masks have been distributed, according to Vice.

australia coal mine fire 3

australia coal mine fire 5

The blaze poses a difficult challenge for firefighters because even when flames are extinguished the coal continues to smoulder. The fire can reignite at any moment and rages underground. Firefighters are concerned about the danger posed by landslides caused by the huge quantity of water being used on the flames.

australia coal mine fire 7

australia coal mine fire 6

Let’s hope they get things under control soon.

The great Australian electricity rip off – Solar Business Services

The great Australian electricity rip off – Solar Business Services.

The great Australian electricity rip off

20 Feb, 2014

 

Right, now I’m really, really annoyed.

Although I’ve spent more than two decades in the solar and energy field, in the last two years as solar has grown and we have become an intrinsic and material part of  Australia’s energy mix I have come to realize something fundamental.

The Australian public is being duped and constantly lied to on a monumental scale when it come to electricity.

Now I am a fundamentally trusting person; it’s the way I was brought up. I’m not a conspiracy theorist. I always give people, Governments and corporations the benefit of the doubt.

However, the more I read, research and understand about the way our electricity system operates the more alarmed I become. I admit, I am not an expert in the complex and ever changing world of electricity regulation, but a lot of what is happening in the industry is not rocket science. Events of the last few weeks have simply brought it all home for me.

Lets look at a few examples.

The RET

The facts on what the RET does and doesn’t cost are absolutely, 100% clear, ironically thanks to a Government body, The Australian Energy Market Commission. It’s the single smallest component of electricity bills  (bar one) and is already declining in proportional terms.

And yet, from the Prime Minister all the way down to the subtle messages passed on to their very close friends in  media who helped them gain power, time and time again the RET (and the Carbon Price) are made out to be the root of all evil.

This is despite the data, the facts and the truth from their own departments. I am boggled and stunned by the willingness of our leaders to tell blatantly astounding mistruths about this issue and to conveniently overlook the real source of price rises. Even Joe Hockey (who seems like a nice bloke) jumped on the band wagon yesterday suggesting that the RET had something to do with Alcoa’s decision to exit Australia, despite the fact that the company had received hundreds of Millions of dollars in exemptions and grants. The only ones not blaming the RET and the Carbon Price, were Alcoa.

The real source of price rises

When you look at the data, it shows you some staggering facts about what is really going on. Take for example, one of Australia’s largest network owners, NSW Government owned Ausgrid.

Ausgrid has the single largest share of customers in the entire National Electricity Market (around 18%) making them the canary in the coal mine. In their 2013 report, the Australian Energy Regulator had this to say: “There have been many large changes in the relative and overall magnitude of the charging parameters within the period. Of particular note is the 471.14 per cent increase in the fixed charge in 2012–13, 18 per cent decreases in energy charges in 2006–07 and over 200 per cent increases in energy charges in 2009–10.”

Did you get that ? Ausgrid, a Government owned network operator increased fixed charges by 471.14 % to business customers.

If you look at it over the period 2004 to 2013 it is a total increase of 1125%. Peak energy costs increased 600%, shoulder by 649%, Off peak by 1111% and peak capacity by 869%.

And yet, the RET is the problem apparently.

So despite all the bleating about wanting to reduce peak demand, they have in fact increased fixed charges which consumers can have NO IMPACT on, no matter how hard they try.  These  ”price signals”  are counter intuitive to reducing peak demand and in fact utterly dis-empower consumers in a most profound way, a fact that was outlined in a report in 2013 by the Centre for Policy Research. And they are completely Government sanctioned.

If that’s not enough, the same report actually shows that in 44 out of 46 cases across 8 network companies between 2005 and 2011, revenues (that are regulated) were ABOVE expectation. That means they mademore profit and we all paid for it. And guess what; when you look at the AEMC’s data here’s what it shows is going to happen as a proportion of the average National electricity bill between 2014 and 2016:

  • Distribution network charges will RISE by 8.2%
  • Generation costs will RISE by 5.7%
  • Retail Margins will RISE by 6.3%
  • Transmission costs will RISE by 6.7%
  • The RET (Small and Large scale) will REDUCE by 55.6%

Of course, these changes could be somewhat masked by State price settinghours a day.  regimes and the assumed removal of the Carbon Price. How terribly, terribly convenient.

But of course, there are rewards for electricity consumers in some cases. years ago, many tariff structures were revised so that their was an incentive to use less energy and to reward energy efficiency. But the AEMC document demonstrates the inexorable shift away from this and back to rewarding higher consumption. Use more and pay less. This works beautifully if your profit comes from meeting this demand or expanding your network to cope but the impact on the rest of society is that prices rise to fund it all.

Highlighting the case, I spoke to an installer recently who was facing challenges because of this issue. He had stumbled across several large agricultural facilities that were obsessed with ensuring their demand was constantly high enough to get them to the next (lower) tariff rate. The solution? Install a 200kW water pump, suck water out of a dam and pump it back in again. Constantly. 24 hours a day.

Wonderfully efficient.

But lets not forget the retailers because after all “they just pass on the regulated network costs from the distributors” (like Ausgrid). Poor guys. They are scrambling to scrap the RET at a rabid pace, have erroneously called it  middle class welfare and are laying the blame for the countries woes squarely at our mutual, solar panel installing feet. All the while they have Government sanctioned approval to make proportionally MORE profit from you and me and every single Australian business owner (and Alcoa of course, had they stayed).

Meanwhile, the regulators and the Government just keep saying “Don’t worry. its ok, you can just switch providers and save a FORTUNE because switching is really, really easy and the market is in a state of healthy market based competition”. Bullshit.

Firstly, the vast majority of the Australian electricity industry is still Government owned. Not  really renowned for innovation or their creative market based behaviour, the Government.

Secondly, consumers are lazy and switching is a pain in the backside. Most of us are too busy dealing with life to worry about trying to save a few percent here or there. Where’s the reward for loyalty gone in this world, for goodness sake? And you know what? Switching and “customer churn” is on the increase and the poor utilities are facing increased costs because of it which is exactly the reason they are allowed to charge us more. Because we are all switching. Because that’s how we’ll save money. But it puts costs up. So it will cost us money. But we should switch because we’ll save money.

You’re getting this, right?

But hey, if we swallow the assumption (and advice from Government) that we will save money by switching then that’s awesome. You’ll knock 10 0r 15% off my bill? Yes? Awesome, because my last bill was a shocker. Terms and conditions? Yep, read all 279, 621 tiny little words of your terms and conditions after following ten links on your website (lie). Didn’t understand a word of (true). Yes, I’ll sign your contract because I’m Australian, you’re Australian and a deal is a deal. I’d spit and shake on it if you weren’t in Bangalore.

Now as it turns out, the totally awesome discount you just got is actually pretty “fluid”.  Turns out current laws allow the retailers to increase the price they charge you for electricity at any time during a contract.  But I hate switching, it’s a pain, so I’ll just lump it in 6 or 12 months when you hit me with a price rise caused by factors completely outside your control.

Wow, that wasn’t such a good deal after all.

The rules

Then there are the rules. My god, the rules.  Simply trying to understand the rules and regulations that govern the industry, how they translate to your bill and what they can and cant do is like trying to understand what your Optus phone is actually costing you. You have absolutely no hope.

Take business customers for example. I recently analysed 5 business bills, which were from different locations in Australia but all similar costs and by co-incidence, all from the same retailer.

Firstly, there was a a complete lack of consistency which made understanding and comparing them virtually impossible. Different terms for the same thing, slight changes in wording,some charges on energy, some on demand and an utter lack of consistency. In some cases customers paid for simply awesome things like “VIP Metering” and “Consumer advocacy”. Unreal. If I was a business owner, I would be so impressed to know that my retailer is charging me to be an advocate. For me. And then charging me. Now that’s service!

Then there is the complete and total transparency which allows me to compare commercial offerings. Yep, you can go to a web site, look at every offer in the market upload your consumption data and work out which offer is best.  And its easy (switching, remember?). Bullshit.

There is a chasm greater than the Western Australia’s Big Pit here.

First, if you want to know your demand profile, they’ll take weeks and probably charge you. For knowing. Your consumption.

Secondly, if you ask for an offer, they’ll pretty quickly slot you into a demand “band”. No one actually knows what these bands are or what they mean and they vary by region, by offer, by your size and the color of your neighbors hair (god help you if they are a blood-nut). It’s like a mystery flight; just shut up, sit down and hang on. If you don’t know your demand yet, don’t worry because they have a secret formula so they can tell you how much it will cost and what your profile will look like. Without knowing anything about your demand. At all.

But hey, I’m probably being unfairly critical because its complicated; I couldn’t possibly hope to understand. Go right ahead.

Then of course, you might have a relationship going back many, many years with your retailer. You watch the news, you’ve seen the drought, you listened to the issues about peak demand and the greatest moral issue of our time and you decided; Screw it. I’ll stump up hundreds of thousands of dollars of my own money and whack some solar up.

Your retailers reaction? Well at least one I know of said “Awesome!” “We’ll just renegotiate the contract you broke, your energy rate will dramatically reduce from 25c kWh to 5c. Your standing charges (don’t worry about them) will increase form 25c a day to $2  day”. For those unfamiliar, that’s called “the big switcheroo”, formerly the domain of dudes in weird waistcoats with cups and balls, but now a wholly owned subsidiary of electricity retailers.

Oh and because the rules have changed to protect consumers (enter the National Energy Customer Framework) , if you want solar, we will need to come and do a horrendously expensive study because  well, the fact that you have been on our network for thirty years and we approved everything counts for nothing. Because we have to protect you. In one actual case from a network operator one of the reason the gave for delaying a solar installation was, and I quote “The LV OH supply from the Council access track North of premises is quite sneaky visually and very hazardous to the unsuspecting. “

Damn it, sneaky wires. That’s a damn good reason to stop progress and infuriate a 30 year customer who’s (sneaky) installation was approved by you.You’re right. We are busted for excessive sneakiness.

I was also fascinated to see the variation in loss factors that are applied to bills, as  a separate and definable item. They varied between 0.1% and a staggering 15.19%. and are applied as a multiplier to the energy you consume. So in one case, the business bill I looked at was 15.9% higher than their actual consumption because the network is so grossly inefficient at delivering energy to their premises.   That’s akin to a mechanic saying “Sorry mate, I spilled 15.9% of the oil when I was doing your service because my pipe has a leak, but the law says I can charge you for it”. 

Not only are they allowed to do this by law, but they will charge you a huge proportion of your bill for building owning operating and maintaining that same network, then charge you (again) if they happen to do a lousy job of it where you happen to have your business. Really.

Then we can also consider the regulations around the pass through of the costs of RET. In NSW for example, Retailers were allowed (by the State regulator) to pass through the “full cost” of certificates at $40 and recover these costs from consumers and business. The catch here is the real price of certificates has moved from $16-$36 over the last few years and of course, if those same retailers create their own certificates (by selling you a solar system and capturing the STC’s) then they could get prices way down. So we know and it has been ackowledged by IPART that the Retailers stood to gain, potentially substantial sums from this quirk.

So in reality, the RET and the SRES in particular, has contributed to the profits of the Retailers.

I could go on with a myriad of other examples but I suspect you get my point.

The Government owns, regulates and controls the vast majority of the electricity industry in Australia all the way back to the coal reserves in some cases. The make a phenomenal amount of money from it, as do the non Government retailers and they don’t want it to change. The US based Edison Electric Institute (an electricity industry think tank) summed up the substantial concerns of their industry to disruptive challenges in blunt terms in a document released lat year, warning that industry had to adapt or perish. Through their vast media connections they will say what is politically convenient even if it is complete and utter rubbish and we wont even get a return phone call from the same reporters.

It seems to me that they have all got themselves into a corner so dark, they just have to keep rolling out the same rubbish and hope no one notices.

Guess what? We noticed.

Seen On An ATM In Western Australia | Zero Hedge

Seen On An ATM In Western Australia | Zero Hedge.

With iron-ore stockpiles at record highs in China amid the escalating cash-for-steel financing debacles, one can only imagine the squeeze that is about to occur on the banks of a nation that is almost entirely economically dependent on said iron-ore mining production… which made us think when we saw this sign “justifying” holding low cash amounts in an Aussie bank ATM

 

 

So no need for a withdrawal halt per se when you simply make it impossible for customers to get their money out…

Goodbye Dollar, Hello Yuan – FinancialJuice – Live News. Live Discussion.

Goodbye Dollar, Hello Yuan – FinancialJuice – Live News. Live Discussion..

Goodbye Dollar, Hello Yuan


You know what’s it like, the driver stands there in front of the car that has just hit you up the back while looking at something happening down the street rather than checking on you hitting your breaks…and yet, he says “sorry, but you stopped too quickly, it wasn’t my bad driving”. Why is it that people just refuse to admit the truth even where it comes up and slaps them in the face? It’s exactly the same with the Death of the Dollar. Denial is the first stage in the mourning process that people go through when they have lost a loved one. Yes, just the mere fact that there is many an American out there who is actually denying this means that the Dollar is lying feet up on its back, six feet under already today. They are simply, in denying the fact, espousing the 7 stages of bereavement. The Dollar is dead. Today it’s Australia that will be sending flowers to the Americans.

ASX, the Australian Stock-Exchange operator and the Bank of China announced today that they are going to provide a Yuan settlement service between the two countries by the end of the first half-year 2014. China represents the biggest trading partner for the Australian market and trading in Dollars has no sense today. Transactions have been increasingly made in Yuan rather than the Dollar over the past few years. This new agreement comes just after last October’s agreement between the Eurozone and China and the currency-swap deal.

For all of those out there that will be screaming from the rooftops that China is slowing down, that the economy is under-performing (incidentally, they are still performing way better than any of us in the western world) the Chinese currency is one of the top traded currencies today in the world, and Australia has just said they don’t care if the economy is slowing down. The reason why the deal has been struck is because they are looking at China in the long-term view.

Since September 2013, the Yuan has been in the top ten of tradable currencies, according to research carried out by the Bank of International Settlements. The Yuan saw a jump from 17th position in 2010 to 9th place in 2013. There may be a slow-down in the economy and there may be problems with the structural reforms undertaken by the government, but in the long-term the Yuan will be traded more and more. The Australians are proving that today.

The financial market reforms have been centered on liberalization of the capital account and the convertibility of the Yuan. The only countries that offer complete convertibility at the moment are the USA, Japan and Australia.

Certainly the shadow-banking problems are far from over. There will be more that come out of the woodwork in the coming weeks. It is estimated that 40% of the 10 trillion Yuan in trust products that are used in shadow banking will mature in 2014. That means that we could be in for a lot more examples of the $126 million-worth of products issued by Jilin Province Trust that defaulted on the repayment to investors over the past couple of weeks after having made loans to the failing coal company Shanxi Liansheng Energy (at the same time as 6 other trusts also made loans of up to 5 billion Yuan to this company that was already bankrupt and dead). 80% of trust-product principal is going to be repaid to investors between 2014 and 2016. That could spell trouble.

Bailing out trust investors continually will bring about problems of financial stability of the country. But, in the long-term there is the belief that the Yuan will succeed. All of that is true, but the Dollar may well be dead completely, and buried, before the Yuan fails.
In the process of acceptance of bereavement, the next stage after denial will be anger. Then the US will enter the period of bargaining with the rest of the world to try to save its place somehow on the international scene. Once it has been through the penultimate stage of depression (oh, no! Not again!), it will finally accept. But, for the moment, they shall just keep on denying lock, stock and barrel. The rest of the world, like the Australians, are seeing to it that the Dollar dies a quicker death than it would perhaps have normally done.

Remember it’s not the value of the Dollar that is important or whether or not the Yuan can be a valued asset in the world to trade with, it’s the perception that we, as consumers and countries, actually have of that currency. The Australians are showing that the Yuan has just been perceived as possibly of greater value than the Dollar.

Tissue to dry your eyes?

Why Australia’s economic debate doesn’t rate | Business Spectator

Why Australia’s economic debate doesn’t rate | Business Spectator.

10 Feb, 7:09 AM 24

Douglas Adams’ brilliant comic farce The Hitchhiker’s Guide to the Galaxy describes Earth as residing in sector ZZ9 Plural Z Alpha, one of “the uncharted backwaters of the unfashionable end of the Western Spiral Arm of the Galaxy” and being inhabited by “ape-descended life forms” who “are so amazingly primitive that they still think digital watches are a pretty neat idea”.

Sometimes when I return to Australia, I feel that I’ve arrived in the planet’s sector ZZ9 Plural Z Alpha. Here the economic debate is so primitive that people still think the economy can be controlled by tinkering with the rate of interest.

Is inflation rising? Then put the rate of interest up one and a half times as fast as inflation is increasing. Is output falling below trend? Then drop the rate of interest by half as much as output has fallen. Then adjourn for drinks.

This formula, known as the Taylor Rule, was all the rage in Central Banks from the early 1990s until the mid-2000s. Economists were so confident that they had economic management nailed that they invented the phrase “The Great Moderation” to describe the Goldilocks state of the economy, and took credit for bringing it about:

The sources of the Great Moderation remain somewhat controversial, but as I have argued elsewhere, there is evidence for the view that improved control of inflation has contributed in important measure to this welcome change in the economy (Bernanke 2004, emphasis added).

Then in late 2007 the world went to hell in a handbasket when the global financial crisis began. Mainstream economists were forced to abandon the belief that getting the rate of interest right was all that was necessary to keep the economy on an even keel. Instead, the rate was dropped to near-zero to in an attempt to stop the economy sinking below the waves.

The USA? A cash rate of 0.13 per cent. Japan? 0.1 per cent. Europe? 0.25 per cent. The UK? 0.5 per cent. No-one asks what the central bank will do to interest rates at its next meeting at one of those more fashionable sectors of this planet, because the conceit that the central bank can fine-tune the economy by varying its interest rate is long dead.

Figure 1: Cash rates around the world.
[wysiwyg_field contenteditable=”false” wf_deltas=”0″ wf_field=”field_wysiwyg_media” wf_formatter=”aibm_ui_media_output” wf_settings-style=”full_width” wf_cache=”1391976543″ wf_entity_id=”777046″ wf_entity_type=”node”]

But not in Australia. Here, what the Reserve Bank will do to the interest rate at its monthly meeting is big news. And because it’s big news, every month Sky News asks about 20 economists three (and lately four) questions about the RBA rates meeting on the first Tuesday of the month:

1) Do you expect the RBA to move on Tuesday? And if so, in which direction and by how much?

2) Where will the official cash rate likely sit by the end of the calendar year?

3) One thing you’re looking for in the RBA statement?

4) What do you THINK the RBA should do on Tuesday? (we’re asking for your opinion)

The first question I’ve likened to betting on which cockroach will get outside a circle first inChangi prison; it’s just gambling. On the second, I’ve consistently called for rates to be lowered, because in my opinion the main impact of our high cash rate – compared to the USA, Europe, UK and Japan in Figure 1 – has been an overvalued dollar that has decimated Australian manufacturing.

On the third and fourth, since March of last year, I’ve added a call that the RBA to introduce loan to valuation ratio controls to stop a property bubble forming. (Strictly, APRA would make such a call, but if the RBA said jump, APRA would do it.)

My answer to Sky News’ poll in March 2013 was:

1) I think the RBA will hold, but if there is any move it will be down;

2) 2 per cent

3) Realisation that (a) the cash rate is the main factor keeping the Australian dollar overvalued and (b) it has to do something to stop a housing bubble forming if it lowers rates–for example, reintroduce a maximum level for LVRs of say 90%.

But that’s all so yesterday. For last week’s poll, I changed my answers in a rather radical way:

  1. Zero
  2. 3.5 percent [1 per cent higher than today]
  3. Realisation that they are stuck with 4 competing goals: declining employment, rising inflation, a housing bubble and an overvalued dollar, and whatever they do with rates will stuff up at least 3 of those 4 things
  4. Introduce loan to valuation controls like those in NZ (via APRA), persuade the government to introduce limits on non-resident buying of properties, raise rates by half a percent to help burst the property bubble they’ve allowed to develop.

The answers were partly in exasperation, since the whole idea that all the Reserve Bank can and should do to control the economy is vary the interest rate is nonsense. I felt rather likeFord Prefect, livid at the inability of the Golgafrinchans to design the wheel:

‘And the wheel,’ said the captain . ‘What about this wheel thingy? It sounds a terribly interesting project.’ ‘Ah,’ said the marketing girl, ‘well, we’re having a little difficulty there.’ ‘Difficulty?’ exclaimed Ford. ‘Difficulty? What do you mean, difficulty? It’s the single simplest machine in the entire Universe!’ The marketing girl soured him with a look. ‘All right, Mr Wiseguy,’ she said, ‘you’re so clever, you tell us what colour it should be.’

So I answered that the colour should be “square”. And, by analogy, the interest rate decision is about as useful as a square wheel in controlling the economy. There are at least four factors the RBA should care about, and they’re giving conflicting signs:

  1. The economy: this has been heading down for some time, and is still generally heading down—which indicates that rates should be cut. So tick the ‘down’ box.
  2. Housing: We now have a housing bubble because of the RBA rate cuts since 2012—rate cuts that it didn’t expect to make since against its expectations, the economy has been going down (check Figure 1 again: the RBA was alone in raising rates from 2010 since it falsely thought that the economic crisis was over and inflation was about to rise once more). Since the RBA has been and remains too gutless to introduce prudential controls on mortgage lending—unlike the New Zealanders, who did so in August 2013—then it should put interest rates up to prick the housing bubble. So tick the ‘up‘ box.
  3. The currency: this has been overvalued for the last four years, thanks to our high interest rates, and though it’s fallen it is still above the RBA’s comfort level, let alone where the actual economy needs it to be (around 70 cents in my opinion). So tick the ‘down’ box.
  4. Inflation: though this has been consistently lower than the RBA has expected, it is now potentially moving up because the currency has fallen. So tick the ‘up‘ box.

That gives us two “up” signals and two “down” signals. So what to do? Sit on our hands, or stay in a bath for 5 years, like the captain of the Golgafrinchans.

Bugger that, I thought. The one thing the RBA has done courtesy of its primitive belief that interest rates alone can control the economy is allow a housing bubble to form once more. So let’s prick that – hence my call for a 3.5 per cent rate by June 30 (this month’s question asked for the rate by the end of this financial year).

Of course, if the RBA did that – which it won’t – then the currency would fly back over a dollar for sure. There’s no way I actually thought that would be the rate. But please, let’s stop being digital watch fans, and join the rest of the world in realising that there’s more to managing the economy than tinkering with the rate of interest.

Now I think I’ll go have a drink with Marvin

Steve Keen is author of Debunking Economics and the blog Debtwatch and developer of theMinsky software program.

Australian Unemployment Jumps to 10-Year High; Aussie Drops – Bloomberg

Australian Unemployment Jumps to 10-Year High; Aussie Drops – Bloomberg.

By Michael Heath  Feb 12, 2014 11:04 PM ET
Photographer: Brendon Thorne/Bloomberg

Commuters ascend a flight of stairs at Martin Place in the central business district of Sydney.

Related

Australia’s unemployment rate climbed to the highest level in more than 10 years in January, spurring traders to pare bets on an interest-rate increase and sending the Aussie to its biggest drop in almost three weeks.

The jobless rate rose to 6 percent from 5.8 percent, the statistics bureau said in Sydney. The median estimate was an increase to 5.9 percent in a Bloomberg News survey of economists. The number of people employed fell by 3,700.

The softer-than-expected jobs report damped expectations the Reserve Bank of Australia will switch to tighter policy amid surging property prices, rising building approvals and a forecast acceleration in growth and inflation. Toyota Motor Corp., General Motors Co. and Ford Motor Co. have said they’re closing plants and shedding jobs in Australia as high production costs and a strong currency render them uncompetitive.

“While some may argue that employment is a lagging indicator, we would also suggest this print will be a negative for household income, sentiment and thus spending,” said Justin Smirk, a senior economist in Sydney at Westpac Banking Corp., which forecast the 6 percent unemployment rate. “In the details there is no silver lining.”

The Australian dollar fell to 89.43 U.S. cents at 3 p.m. in Sydney from 90.27 cents before the data’s release. Bets on how much the RBA will add to its cash rate in the next 12 months fell to 11 basis points, from 18 basis points yesterday, a Credit Suisse Group AG index based on swaps data showed.

Full-Time Fall

The number of full-time jobs declined by 7,100 in January, and part-time employment rose by 3,400, today’s report showed. Australia’s participation rate, a measure of the labor force in proportion to the population, was unchanged at 64.5 percent in January from a revised figure a month earlier, it showed.

The RBA cut the overnight cash-rate target by 2.25 percentage points between late 2011 and August to a record-low 2.5 percent to help offset the currency and spur industries outside mining, where an investment boom is waning.

Unemployment jumped to 5.1 percent in the resource-rich state of Western Australia, from 4.6 percent a month earlier. It jumped to 6.1 percent from 5.9 percent in Queensland. In the manufacturing hub of Victoria, joblessness climbed to 6.4 percent from 6.2 percent in December.

About 50,000 jobs in Australia’s auto and parts industry are in jeopardy after Toyota on Feb. 10 followed Ford and GM in announcing plans to quit manufacturing in the country.

Abbott’s Challenge

The decisions pose a challenge for Prime Minister Tony Abbott, who won an election last September pledging to restore confidence in the economy. The country’s main car plants are sited in districts where the jobless rate is already on par with the euro zone’s, and a waning mining boom is unlikely to soak up the additional labor.

“Over 60,000 full-time jobs have been lost since the Abbott government was elected,” opposition leader Bill Shorten told reporters in Canberra today. “What is the jobs plan of the Abbott government? What are they doing to stop the tens of thousands of jobs that are either going overseas or just disappearing?”

Consumer confidence fell 3 percent this month to the lowest level since July, a private report showed yesterday.

Unemployment in Melbourne’s Brimbank-Sunshine region adjacent to Toyota’s Altona plant and in the city’s Broadmeadows district that houses Ford’s main production lines was about 12 percent in September, according to government data. In the Adelaide suburb of Elizabeth where GM’s Holden has its main plant, it was 22 percent.

Commodity Currency

Manufacturing in Australia has been hurt by a commodities boom that helped drive the value of the local currency to $1.11 in July 2011, the highest level in the 30 years since exchange controls were dropped. While the Australian currency has since depreciated to about 90 U.S. cents, it’s still higher than at any point in the 18 years running up to 2007.

GM estimates it costs about A$3,750 more to produce a car in Australia than elsewhere. Ford said last May that its costs in the country were double those in Europe and four times those of its Asian divisions. The two carmakers will close their local plants in 2017 and 2016 respectively.

Even so, the RBA last week raised its inflation and growth forecasts, reflecting the currency’s decline from its peak last year, and reiterated its shift to a neutral policy stance. Low interest rates have driven up home prices and spurred a pickup in approvals for residential construction.

Home Prices

Sydney home prices jumped 13.8 percent in the fourth quarter from a year earlier, followed by Perth’s 8.7 percent, government data showed this week.

“For the RBA, these numbers are probably not a surprise,” said Su-Lin Ong, head of Australian economic and fixed-income strategy at Royal Bank of Canada in Sydney. “What it does suggest is that a market that’s starting to think about the possibility that the next move is up, and we may get a lift in cash rates later this year, these numbers argue strongly against that.”

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

Australia to suffer biggest property collapse since Great Depression – Yahoo!7

Australia to suffer biggest property collapse since Great Depression – Yahoo!7.

7NEWSFebruary 7, 2014, 5:57 pm

The expert who predicted the global financial crisis has a dire warning for Australia’s property markets.

Melbourne, Sydney, Brisbane and Perth are on the verge of the most violent property collapse since the great depression, economist guru Harry Dent has said.

Speaking exclusively with 7News, the author, economist and property guru says as an entire country, Australia is the most over-valued real estate in the developed world.

“I think it’s probably going to go down at least 30 percent to kind of take off the bubble, [and] I think 50 percent down the road is even more likely,” Mr Dent said.

After London, Melbourne and Sydney are the most expensive cities in the world when housing prices are compared to earnings.

On average, Australians are shelling out more than ten times their annual income on a home.

“[Over] the next three to six years, we’re going to have a bigger GFC, we’re going to have the next Great Depression,” Mr Dent said.

“I think the most dangerous years are 2014 and 2015,” he said.

The American, who begins his Secure the Future speaking tour this week, was lambasted when he predicted the collapse of the Japanese economy when most economists said it would overtake the US as the biggest economy in the world.

He also accurately predicted the timing and severity of the 2008 Global Financial Crisis.

“An everyday person with a million dollar mortgage is going to go underwater,” Mr Dent said.

A lot of people are going to have a house worth less than their mortgage, and they apparently will not be able to refinance.

Leading analyst from Residex John Edwards disagrees with Harry Dent, and says if anything, our market is getting stronger.

Dent says his predictions are based on long-terms statistics on how Australians live and spend, and data from governments worldwide.

He says the key is to look to China, where almost a quarter of all new properties are sitting empty, and that cities like Shanghai could lose 85 per cent of their value.

“All it takes is something to burst the bubble,” he said.

“If China blows it’s going to have a much bigger impact than the 2008 GFC.”

Australian Report Trumpeted By Coal Bosses Does Not Say What They Want You To Think It Says | DeSmogBlog

Australian Report Trumpeted By Coal Bosses Does Not Say What They Want You To Think It Says | DeSmogBlog.

WHAT follows are some thoughts about coal from a report just published in Australia.

A longer-term concern relates to the environmental impacts of large-scale coal use, especially its climate consequences….

Coal is a carbon-intensive fuel and the environmental consequences of its use can be significant, especially if it is used inefficiently and without effective emissions and waste control technologies. Such environmental consequences include emissions of pollutants such as sulphur and nitrogen oxides, particulates, mercury, and carbon dioxide, the main greenhouse gas. Indeed coal-sourced pollution remains the largest source of greenhouse gas emissions from fossil fuel combustion. Hence most forecasts show a very wide range of future coal demand, based on differing degrees of environmental policy implementation.

Now who might have written that?  An environmental campaigner?  An anti-coal activist in a less bombastic mood? Maybe they’re the words of an advocate for action on climate change?

Actually, these are the views of Ian Cronshaw, a long-standing advisor to the International Energy Agency who was commissioned by the Energy Policy Institute of Australia to write a report about coal and its future economic outlook.

The Energy Policy Institute of Australia’s board includes a number of figures who have spent their careers in and around the fossil fuel industry.

The paper, The Current and Future Importance of Coal in the World Energy Economy, consists of just three pages, as well as a header page and a biography page at the back.

Most of the contents are drawn from the various reports put out by the International Energy Agency.

So how was this pamphlet greeted by Australia’s coal industry?  The only media report of note came from The Australian newspaper, which ran the headline: “Coal will ‘dominate global power sector for decades‘” on its front page.

Here are the first two lines of that story, to give you a flavor.

COAL will dominate the power sector globally for decades to come, according to a paper that miners say undermines campaigns by green activists to “demonise” coal.

The paper – written by an International Energy Agency consultant and to be sent to Industry Minister Ian Macfarlane – says coal will remain the dominant power-sector fuel for at least the next quarter of a century despite efforts to diversify power sources and concerns about slower economic growth.

The report in The Australian does not mention Cronshaw’s observations about coal and climate change.

In fact, the words climate change or global warming don’t appear anywhere in the story, even though it takes up almost a third of the three pages of Cronshaw’s analysis. The Australian also chose to quote two coal industry representatives, who took the report’s publication as an opportunity to criticise environmental campaigners.

Graham Bradley, who amongst other things is the chairman of the advisory board for coal company Anglo American Australian, was reported as saying:

Much of the green polemic is not grounded in the fundamental reality that the world needs the lowest-cost energy and at the end of the day the economics will prevail and investment will follow.

Brendan Pearson, chief executive of the industry lobbyists the Minerals Council of Australia which recently subsumed the lobbying work of the Australian Coal Association, said:

Activist campaigns seeking to demonise Australian coal fail to acknowledge that it will be the principal global energy source for decades – transforming economies and helping eliminate poverty.

Both commentators also touted how the report predicted a rosy future for the coal industry in long term. The report does do this, but with a number of large caveats. It is far from the slam dunk which the media report and the quotes might have you believe. For example, there’s this from the Cronshaw report:

The current economic outlook remains very clouded, with many regions either stagnant or seeing slower economic growth. This will naturally impact heavily on global power use and coal consumption. However, most forecasters remain confident that, over the longer term, energy demand growth in non-OECD countries, the key determinant of coal demand growth, will be strong.

The report does map out the strong growth in the use of coal in non-OECD countries, including India and China, and predicts this is where much of the future demand will come from.

In two sentences, the report also points out the benefits of electricity — which, remember, can and is generated from renewable sources as well as polluting coal. The report says:

Such access to electricity is crucial to economic growth; it means food can be stored in refrigerators, children can do their homework, small businesses can function. And overwhelmingly, this electricity has come from coal.

Cronshaw also makes it clear that under the policies currently in place, coal has a strong future. But this is precisely why climate change campaigners are pushing back hard on the mining and the use of coal, because they see these policies as being far too weak.

One analysis of current climate pledges by governments around the world, released during the recent Warsaw UN climate talks, suggested that pledges on the table will currently deliver about 4C of global warming by the end of the century — a gaping chasm between stated ambitions and reality.

Cronshaw again:

It is worth observing that the IEA’s Current Policies Scenario, essentially a business as usual scenario, has global levels of coal demand more than 20% above the central scenario, in which a range of climate policies are cautiously implemented. The power sector is clearly the key coal market, but this sector must also be the focus of any successful climate change mitigation efforts.

That last line is worth reading twice. The coal sector “must also be the focus of any successful climate change mitigation efforts.”

Cronshaw also says the industry could make early gains in cuts in emissions by improving efficiency, but says that, “In reality, the penetration of the most efficient coal-fired power generation technologies is constrained by technical considerations, additional costs and the absence of a global price on carbon.”

The Australian government is in the process of trying to repeal the country’s carbon price, which would have linked to the European emissions trading scheme.

But again, Cronshaw is clear that coal’s future does depend on environmental policy down the line.

Environmental policy will play a decisive role in future coal consumption. In some countries, coal use may be encouraged for economic, social or energy security reasons. If action were taken to provide electricity access by 2030 to the 1.3 billion people in the world without it today (almost all in non-OECD countries), coal could be expected to account for more than half of the fuel required to provide additional on-grid connections. In other countries, policies may encourage switching away from coal to more environmentally benign or lower carbon sources. While a global agreement on carbon pricing has been elusive, a growing number of countries are taking steps to put a price on carbon emissions, including in China where there are several pilot schemes underway, although current pricing levels seen for example in Europe, are too low to materially affect energy choices.

When Graham Bradley from Anglo American Australia says “at the end of the day the economics will prevail and investment will follow” he seems to be ignoring the view expressed in the report which he lauds, which says that in fact, “Environmental policy will play a decisive role in future coal consumption.”

The paper also has a few words to say about so-called “clean coal” technologies – known as Carbon Capture and Storage.  The paper points out that while some progress has been made “CCS has yet to be demonstrated on a large scale in an integrated fashion in the power and industrial sectors, and so costs remain uncertain.”

Cronshaw adds that:

The success of governments globally in encouraging greater energy diversity, improved efficiency, and the development and deployment of clean coal technologies will have a profound bearing on the role of coal in the longer term.

This is an interesting observation, given that both the former and current Australian governments have continued to slash hundreds of millions of dollars from CCS programs.

Despite what you might read in The Australian or through the mouths of vested interests, the future of coal is far from certain.

Just ask the president of the World Bank, Jim Yong Kim, who earlier this weekencouraged governments and institutional investors to take their money out of fossil fuels. Or maybe try one group of philanthropists with $1.8 billion in their coffers, who also this week pledged to divest from fossil fuels.

Or how about the US Export-Import Bank – a government institution that approved more than $35 billion in investments in 2012 – which has said it won’t invest in coal projects abroad unless they are fitted with CCS (which as yet, doesn’t really exist commercially).

Clearly coal will continue to be burned for energy, but as even this report the industry cites explains, emissions need to come down, environmental policies will dictate how quickly and that carbon pricing will drive early efficiency gains.

You can of course see this report two ways, depending upon which side you butter your bread. One way is that the report shows how the current suite of policies to cut greenhouse gas emissions are either too few or are not up to the job — probably both.

Another option is to use the three-page pamphlet as a way to instill confidence in potential investors in coal and to convince politicians that it’s an industry worth supporting.

That second group of people just have to hope that policymakers either fail to actually read the report, or don’t take the risks of climate change anywhere near seriously enough.

%d bloggers like this: