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policy contradictions « Previous | |Next »
February 14, 2012

In his Labor's Policy Confusion in the Australian Financial Review Luke Malpass argues that the current situation of Alcoa (reviewing the viability of its Point Henry smelter) highlights the divisions within the Labor Government.

Last week the plight of Alcoa highlighted the mutual incompatibility of new Labor and old Labor. One Labor Party is trying to save jobs and manufacturing in Australia, and the other is enacting a carbon tax that is designed, over time, to destroy many of these jobs ... Prime Minister Julia Gillard’s “new economy” of green jobs will supersede the “old economy” of presumably dirty jobs.

His argument is that over the medium term, the two policy objectives – loosely defined as jobs and carbon reduction – are fundamentally in conflict. Whilst the government claims it is in the Hawke/Keating tradition of reform, trade policy aside, its policy settings look like a mixture of 1970s fortress Australia remedies at one end, and postmodern green fixes at the other, with Hawke and Keating nowhere to be seen.

RoweDAlcoa.jpg

Malpass, who is a Policy Analyst with the New Zealand policy unit at The Centre for Independent Studies, interprets this to be a confusion about ends and means. The government has conflicting objectives, and employs means that work against each other. The so-called new economy cannot work without an artificial price to see out the old, and the old economy is being propped up and encouraged through subsidies and “transitional assistance”.

Malpass is not a free market economist who denies the existence of market failure. He is opposed to Australia's emissions trading scheme--Australia should reconsider its ill-fated scheme--- because he judges it to be poor policy. He is in favour of an emissions tax that could be linked to corporate tax cuts.

What he overlooks with Alcoa's current situation is that the Point Henry operations is caused by a high dollar and falling prices for aluminum. He also ignores the corporate welfare--the huge subsidies--- given to this multinational firm by state and federal government have been there from the beginning. It is estimated that Alcoa Australia has received a total of $4.5 billion in subsidies for its plants at Point Henry and Portland.

The old economy has been propped up from the very beginning--and not just by Labor Governments. The industrial policy of the newly federated nation state was to use the protectionist recipes of the mercantilists to industrialize and to defend its defend the nascent manufacturing industries against British and American predominance.

Manufacturing is now in long term decline as Australia goes through long term structural change driven by the global economy. It is an economy in transition. The current electricity subsidy arrangements are coming to an end in 2014. There are no reasons why aluminium smelting should continue in Victoria. It is not part of the new economy and it is definitely not clean and green. The workers in the old smelter plant---the 30 year old Point Henry smelter is out of date and inefficient---should be assisted in the processes of retraining and job search.

| Posted by Gary Sauer-Thompson at 7:22 AM | | Comments (9)
Comments

Comments

The Liberal Party is running the line that Alcoa's Point Henry smelter becoming unprofitable is caused by the carbon tax, even though the Point Henry smelter is already losing money ie., unprofitable.

Alcoa says that:

"a combination of factors, including metal prices, input costs and exchange rates, have resulted in the Point Henry smelter becoming unprofitable...Our goal is for Point Henry to continue operating and meet its profitability targets. However one possible outcome of the review is that production at Point Henry may be curtailed.

It is the smelter’s future that is now under review. The associated aluminium rolling mill at Point Henry and the Alcoa owned Anglesea power station are not included in the review.

"He also ignores the corporate welfare--the huge subsidies given to this multinational firm by state and federal government have been there from the beginning."

Josh Gordon in The Age says:

The exact size of public subsidies that have been provided to Alcoa for decades as an inducement have been notoriously complex and difficult to track. The Age reported in 2009 that they are likely to cost Victorians as much as $4.5 billion by the time the government's Point Henry contract expires in 2014 and the Portland contract expires in 2016.

Under the terms of the contracts, electricity costs faced by Alcoa fluctuate with world aluminium price, with taxpayers paying more when prices are low...now aluminium prices are low and the dollar is soaring and unlikely to fall in the near future, leaving the smelter in a precarious financial position.

So pressure for more compensation from the Federal Government is coming from the Baillieu government----eg., the compensation for the carbon tax in regard to aluminium smelting is not adequate.

When a business fails or closes down it is very similar to a small dingy sinking.
Each bucket load of water which equates to a reason the business isn't working. Eg high running costs = a bucket load, high cost of materials = a bucket load, poor exchange rates = a bucket load and so on. Eventually one factor which may only equates to a cup full will sink the boat.
What my point is that the carbon pricing is only a cup full of water and will only sink boats that are near sinking anyway and were most likely going to sink.

It cannot be the carbon tax that has caused the Alcoa Point Henry aluminium smelter to become unprofitable now (hence the review) because the carbon tax doesn't exist in Australia. It will be introduced in June 2012.

The Liberal party is using the Alcoa situation to continue their campaign to demonize carbon pricing as laying waste to manufacturing and destroying the economy.

It looks as if Alcoa is not willing to reform its power base--its Anglesea Power Station. That brown coal-fired Power Station now supplies more than 40 per cent of the power required by Alcoa's Point Henry aluminium smelter. ·

Reform means that, rather than spewing greenhouse gas emissions into the atmosphere, Alcoa would capture and bury them using carbon capture and storage technology. The Anglesea Power station is even 'dirtier' than Hazelwood.

Alcoa has had its lease to mine the Anglesea coalfield for another 50 years. At the same time the Victorian state government has close off the surrounding area to wind energy developments. Another indication of the Baillieu government siding with dirty coal over renewable sources of energy.

The local citizens are not happy

"The Liberal Party is running the line that Alcoa's Point Henry smelter becoming unprofitable is caused by the carbon tax, even though the Point Henry smelter is already losing money ie., unprofitable."

Australian conservatism is ending up detached from, indeed at odds with, facts and rationality.The Coalition politician's cynical game of blaming everything on the carbon tax is creating, has created, a base that actually believes all the hocus pocus.

Why didn't he write on the real conflicts within the coalition, eg libertarianism versus religious conservatism, rather than an imagined one in the ALP.
I know, its getting closer to an election; CIS is high Tory country. Let's only dump on the ALP.
Ok. So the ALP has trouble between its neolibs and older genuine working class labor, representative of the 99% against the one percent.
But some thing like the CIS would only keep the neolibs.
Lefties, small l liberals and small c conservatives alike would have no place in the Murdoch CIS corporatist world of the future..

Malpass says:

Whilst the government claims it is in the Hawke/Keating tradition of reform, trade policy aside, its policy settings look like a mixture of 1970s fortress Australia remedies at one end, and postmodern green fixes at the other, with Hawke and Keating nowhere to be seen.

The early years of the Hawke government marked the end of Labor as the party of class struggle and its reinvention as the party of market-based economic modernisation. The policies were deregulation, privatisation, competition policy, increased productivity.

The worst possible outcome with carbon pricing across the economy is ongoing public subsidies to technological dinosaurs in the aluminium and electricity generation industries.