Abbott’s rules of distraction on lawfare and ChAFTA
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Like the desperate gambler he has become, Prime Minister Tony Abbott was betting big on a long-odds quinella when he spoke to The Australian last week.
Abbott nominated two initiatives – just two – as being the pre-eminent concerns for Australia’s economic future. They were the ratification of the contentious free trade deal his government has made with China, and the development of the giant Carmichael coalmine proposed by the Indian company Adani in Queensland’s Galilee Basin. He called on Australian business leaders to publicly agitate in support of both.
“The test for everyone ... is, are they prepared to get out there and back the FTA now?’’ he said. “Are they prepared to stand up and say, ‘We need the Adani mine and there should be no further obstacles placed in its way’? Are they prepared to do that?
“If they are not prepared to do that, they are playing games with our economic future.’’
The over-the-top rhetoric is hardly surprising, coming from a leader who has trailed in 160-plus consecutive opinion polls, who is presiding over a tanking economy, and who faces a career-defining byelection in a couple of weeks.
This is a man, a government, in dire need of a couple of winning issues. In the FTA and the mine, Abbott apparently thinks he has them.
He may even be right about one of them. The China–Australia Free Trade Agreement has clearly driven a wedge into the ranks of the Labor opposition. The other half of the quinella, though, is a long-odds shot, and is looking longer by the day.
Before it can go ahead, the Adani mine needs two things – finance to build it, and customers for its coal. And this week the mine proponents suffered major setbacks on both those fronts.
Late on Wednesday, just six months after Adani executives boasted of having reached an agreement with the Korean electronics maker LG to take four million tonnes of their coal, LG issued a statement saying the deal was off.
“The LOI [letter of intent] concluded by and between LG International Corp and Adani Mining Pty Ltd was non-binding and is invalid as of July 21, 2015 in accordance with the expiration of the LOI.”
Worse was to come the next day. One of Australia’s big banks, NAB, released a statement saying it would not provide any finance for the Adani project.
In one way, this was not so surprising. NAB was just the latest in a long list of major banks to have declared they would not fund the mine: among them Citigroup, Deutsche Bank, Morgan Stanley, Royal Bank of Scotland, Crédit Agricole, BNP Paribas, Barclays, Goldman Sachs, JPMorgan, Société Générale and HSBC.
In another way, though, it is very significant. NAB is the first of the big four Australian banks to declare it wants no part of the $16 billion project. So far the other big banks have been neutral. They have neither committed themselves to funding the controversial project nor explicitly ruled it out, although early last month Commonwealth Bank, which had been acting in an advisory role to the project, announced its “financial advisory mandate” had lapsed.
Finance industry sources say the government has been leaning hard on the banks not to disavow Adani. The NAB is the first to defy this pressure, and run the risk of being accused, in Abbott’s words, of “playing games with our economic future”.
Unsurprisingly, conservation groups have been calling for the others to follow suit. The question now is whether the other banks, motivated by environmental conscience or PR considerations – for there are growing indications that the public mood is turning against fossil fuel developments – will do so.
It’s been a long time since any development project was as politicised as this one.
The backstory to it is this: the Galilee Basin is a huge coal resource, covering an area of some 247,000 square kilometres, and containing reserves estimated at 20 billion tonnes. But largely for logistical reasons it had been deemed not commercially viable.
The economic equation changed, however, during the resources boom. At the peak of the boom nine separate development proposals were mooted, producing 300 million tonnes a year, about 1.5 times the total amount of thermal coal exported by all Australia’s existing mines. Then came the bust and coal prices fell dramatically, from more than $110 a tonne in 2011 to about $50 today. The Adani mine is left as the last best hope of those who would see the Galilee resource exploited.
Market analysts are in little doubt that the Adani project is unviable, unless it gets help by way of subsidies from government. And the Abbott government has been signalling it may come to the party. The 2015 budget included $5 billion for a concessional loans scheme for developments in northern Australia, and the government has hinted Adani could get a share of this money to help with infrastructure associated with the mine – a rail line to get to the coast, and a port facility at Abbot Point near Mackay.
Immediately after the budget, Treasurer Joe Hockey’s office told The Sydney Morning Herald: “If the Galilee Basin coal projects would not be commercially viable without government assistance they may be eligible.”
Given the outlook for coal, this is an extraordinary suggestion. The two biggest potential markets, China and India, are rapidly reducing their imports. Alternative energy sources are fast becoming more cost-competitive. Countries all around the world are getting serious about cutting their use of fossil fuels to limit global warming. It would be a brave person – or government – who bet on coal ever booming again or the Adani mine becoming viable.
So why is Abbott running so hard on the issue?
For one, it’s part of a bigger assault on the environment movement. The government has cut all funding to Environmental Defenders Offices. It is currently running an inquiry through a house of representatives committee with a view to removing the tax deductibility of donations to green groups that engage in advocacy or protest.
But the more important reason, says Ben Oquist, executive director of the progressive think tank The Australia Institute, and a long-time Canberra political strategist, is that the government is setting up an excuse for itself.
“The reason Abbott has gone there relates to his ‘jobs and growth’ mantra,” Oquist says. “He repeats it endlessly, but jobs and growth are weak. Unemployment is 103,000 more than when he came to office. The government needs someone to blame other than themselves.”
According to Oquist, the plan is: “Blame the unions over jobs because they are not supporting the China FTA, and blame greenies for conducting ‘lawfare’ against the coal industry and because they can’t get anti-environment legislation through the senate.
“The argument will be: ‘We’d create more jobs if only these people would let us get on with it.’ ”
There is a lot to his analysis. The economic indicators are undeniable, for a start. Unemployment is proving intractably high, particularly among the young and long-term jobless. Wages growth – the key measure of the economy for most people – has been negligible for the past couple of years, barely above the rate of inflation. This week’s figures on economic growth from the Bureau of Statistics showed gross domestic product growth of just 0.2 per cent for the most recent three months. Australians’ net disposable income per head – the best measure of living standards – was down 1.2 per cent for the quarter and 5 per cent since the peak of the mining boom.
This is the context for the sloganeering of Abbott and his ministers about green groups engaging in “lawfare” and “vigilantism” in their opposition to coal development in general and the Adani project in particular.
The focus of their attacks has been the setting aside of the government’s approval of the Carmichael mine after a challenge in the Federal Court by the Mackay Conservation Group. The reason: federal Environment Minister Greg Hunt had not properly considered advice about the yakka skink and the ornamental snake.
The first important point to make is that Hunt himself conceded there had been a mistake, and withdrew the approval. The second is that the relevant law under which the court challenge was mounted was introduced by a previous conservative government, the Howard government, and has since been endorsed as a worthy reform by the Productivity Commission and by the New South Wales Independent Commission Against Corruption, which saw the existence of a third-party appeal process as an important bulwark against corruption of the process of development approvals.
Geoffrey Cousins, businessman and president of the Australian Conservation Foundation, employs an old adman’s capacity for pithy brevity when he says the appeal regime is “not a matter of lawfare but of fair law”.
It’s not as though the existing laws are having a big impact on development, as the Australia Institute showed when it did the numbers.
“Out of 5500 projects, only 22 have been subject to a third-party challenge and that has resulted in only six adverse rulings and two projects being stopped,” says Oquist.
Nonetheless, the Abbott government has proposed changing the relevant section – s487(2) – of the Environment Protection and Biodiversity Conservation Act to limit such appeals and so cut environment organisations out of the process.
The proposal is listed to come up in parliament this week, as is another long-dormant measure, which would hand back responsibility for environmental approvals to the states.
The chances of either getting through the senate are remote, but that appears not to be the point. The point is to pick a fight in the hope of gaining political advantage.
It’s a big gamble, though, that it will not simply encourage the growing view that the Abbott government is deep in the pocket of a dirty and declining industry that poses a threat to the planet.
This article was first published in the print edition of The Saturday Paper on Sep 5, 2015 as "Rules of distraction". Subscribe here.