The current special interest push for gas and fuel infrastructure defies common sense, and is directly against our national interests.
There have been recent media reports that the commission advising the Morrison government on its COVID recovery strategy has recommended that taxpayers provide massive support to build gas and fuel infrastructure.
However, Australia is possibly suffering something of a “resource curse”, as capital markets increasingly won’t invest in – nor insure – new coal and gas projects.
With the world seeking to accelerate the transition to low-carbon economies and societies, this would see the Australian people being asked to invest in old-world industries and technologies, rather than new, emerging industries. Or in assisting some key industries that have been severely damaged by COVID-19 to reset.
It is not unfair to claim that Australia has never really had an effective industry policy.
Sure, we have often ridden on the backs of sheep and minerals booms, and enjoyed them while they lasted.
Sure, governments have also pumped billions in assistance into key sectors but more as political favours than sensible strategic investing.
Car Industry No Driver
For example, the car industry, which was only ever going to end in tears, as we will never be competitive in large volume manufacturing – especially when the product is globally sourced and assembled in the lowest cost regions of the world, such as a car.
While our governments have generally claimed that they don’t try to pick winners, they mostly have, and often quite unsuccessfully, and with a negative impact on other industries where we have more of a comparative advantage.
It is to the detriment of other major export/employment sectors – such as education (especially universities) and international tourism – that have been severely impacted by the COVID-19 pandemic but are not being supported by government assistance.
Coal and gas are facing declining global demand; they are hardly “infant industries” the longer-term future of which could justify investment to assist them to grow up.
These projects just wouldn’t stack up as feasible, when full account is taken of their economic/commercial, social, and environmental costs and benefits.
Investors are also reassessing their climate risks and moving out of climate exposed investments, forcing many of the big oil, gas and coal companies to make significant write downs of the values of their assets.
Renewables The Way To Go
By comparison, investments in renewable energy (including recognising its significant potential as an export, especially to Asia), as well as in the transition business opportunities as transport is decarbonised, in regenerative agriculture, and in a host of bioenergy/circular economy projects dealing with waste and fuel security will probably stack up on such a cost/benefit assessment.
If the mining sector wants to attract new investment, it should consider diversification to other ores such as lithium and graphite. Australia is almost unique in having significant identified reserves of both these ores.
They not only offer very real mining opportunities but, as the two key elements in a lithium-ion battery, there are real opportunities for vertical integration to develop a domestic battery industry, with considerable export potential given global projections of the roll-out of electric vehicles, and in the further development of grid-scale electricity storage.
Unfortunately, the Morrison government has demonstrated little imagination in developing its recovery strategy.
So far, it has been sticking with its old way of thinking. It is likely to just bring forward the already legislated personal tax cuts, some gas and other infrastructure projects and seek further flexibility in industrial relations and further cuts in regulation – all in the hope that they will provide a sustainable restoration of economic growth and jobs.
Even if all these work as the government hopes, they won’t be enough to give our economy/society the reset it desperately needs coming out of the worst economic decline since the Great Depression.
The tragedy is that the Morrison government gives priority to its mates.
I recall from my days as an advisor to Howard and Fraser in the late 70s/early 80s how conspicuously the heavily tariff protected industries (textiles, clothing and footwear) bullied the government to maintain/increase their protection, threatening to cut off their financial support.
Today, it’s more the mining industries and banks – and now the specific influence of some on the COVID Commission with gas and related interests.
It’s time for our government to think beyond the square, and in our national interest.
John Hewson is a professor at the Crawford School of Public Policy, ANU, and a former Liberal opposition leader.