Bases loaded for Frydenberg
Heartfelt efforts to persuade the government’s climate change deniers and coal champions to embrace the National Energy Guarantee (NEG) have failed spectacularly. But you may not have noticed because on the same day former Coalition leaders Tony Abbott and Barnaby Joyce renewed the prospect of crossing the floor to vote the guarantee down, Bill Shorten made a major announcement on repealing business tax.
For Malcolm Turnbull, it was a gift from the gods. It allowed him and his ministers to go on the offensive during the week over business taxes, rather than continue their unconvincing efforts to defend slashing them for the big banks and multinationals. Government members could expend their energies on being champions for their redefinition of small business. Apparently, that’s any enterprise with a turnover between $2 million and $10 million.
Shorten was accused of a “captain’s call”, but recognising the misstep, he reversed the decision on Friday, saying that “that any proposition [to change] already implemented tax rates would create great uncertainty”.
Labor had made no secret of its opposition to the government’s Enterprise Tax Plan, voting against it in parliament and going on the record as supporting relief for the 91 per cent of all businesses with a turnover less than $2 million. Labor had been hedging on whether it would repeal the next legislated tranche from $2 million to $10 million if they win the next election. But evem with Shorten’s change of heart, his curt “yes” on Tuesday to the direct question, “Will you repeal the tax cut between $10 and $50 million?” gave the government the diversion it needed from the spectacle of being at war with itself.
That spectacle was provided by the usual suspects. It started early Tuesday morning when Liberal Craig Kelly – who’s also the chair of the backbench environment and energy committee – went on ABC Radio’s RN Breakfast. There he undermined claims on reliability and price made just an hour earlier by Energy Minister Josh Frydenberg on the same program. Frydenberg was so furious when he learnt the program had also invited Kelly on that he had threatened to pull out. The energy minister slept on it overnight, though, perhaps realising now was not the time to vacate the field to the government’s internal naysayers.
Frydenberg had organised for the country’s biggest energy users to visit Parliament House this week to address Kelly’s committee and any other backbenchers who wanted to attend. Their message was ominously simple: if politicians rejected the energy guarantee they would unleash a “wrecking ball on the economy”. The Business Council’s Jennifer Westacott said the NEG was the “most workable scheme we’ve seen for a long time”. She warned that if it failed there would be an investment shift offshore and a return to “ground zero” because there was nothing else on offer.
Frydenberg pleaded in his Radio National interview: “If we can’t listen to these representatives now, after more than a decade of missteps in energy policy, my question is, when can we?” The answer seems to be when he capitulates to the coal lobby in his midst. Frydenberg is aware of this and went out of his way to keep the coal option alive. Turnbull did the same in parliament, giving coal the prospect of an indefinite future. The NEG is technology neutral they argue – any energy source can be used provided it meets reliability, affordability and emission targets.
Completely unconvinced was Tony Abbott. He emerged from the business briefing and fronted the cameras to confirm he was committed to crossing the floor if he didn’t like what Frydenberg brought back from his meeting with the states and territories in August. “I think that I have an obligation to keep faith with the position that the government took to the people in 2013. My anxiety about the National Energy Guarantee is that it’s more about reducing emissions than it is about reducing prices,” he said.
Barnaby Joyce went on ABC Radio and kept his own floor-crossing options open. “If a member of parliament wants to cross the floor because they believe that’s the right thing to do, then that’s their choice,” he said. Joyce’s Nationals party room is also demanding that room be made for coal-fired power. Like Kelly, they keep peddling the view that coal-fired power is the cheapest and most reliable option. Except there is overwhelming evidence that this is increasingly not the case.
Dr Kerry Schott, chair of the Energy Security Board, is on the record saying “there would be absolutely no way that anybody would be financing a new coal-fired generation plant”. This view is supported by the Australian Energy Council, which says new coal is “uninvestable” and “the industry has no plans to start building new coal-fired power stations”.
Frydenberg is now talking of coming up with some mechanism, outside of the NEG, to overcome this market resistance. Something like a government fund to encourage private investors into the game. Labor’s Mark Butler says the only businessperson who has flagged any interest is the colourful Clive Palmer. Whether this will satisfy the Nationals and rebel Liberals is highly doubtful. They have been joined by Pauline Hanson, who’s let it be known that any future support the government may want from her could come at the cost of building a new coal-fired generator in north Queensland.
On Wednesday, the government parties in the Senate voted with a Hanson motion calling for the building of new coal-fired power stations and the retrofitting of existing base-load power stations. It failed 34–32, but proved a revealing insight on where the whole energy debate could be heading.
Frydenberg, though, has managed to mobilise considerable support for the NEG in the Liberal party room. Several spoke up during the debate, including marginal seat holders Ann Sudmalis and Julia Banks, who warned they could be in electoral jeopardy unless the energy wars are ended. Trent Zimmerman drew attention to the strong support for renewables in the community – a wise admonition in light of the Lowy Institute’s annual poll of Australian attitudes which found that almost 84 per cent agree the government should focus on renewables. Only 14 per cent believed the federal government should focus on other sources such as coal and gas.
There is considerable optimism that the NEG will win majority party room support in the end. But there is a long way to go. The brawl over coal has alarmed the Australian Capital Territory’s minister for climate change and sustainability, Shane Rattenbury. The Greens minister has the capacity to sink the entire NEG as the federal government needs all the states and territories on the east coast to endorse its delivery.
Victoria’s Labor premier, Daniel Andrews, may also have problems accepting an NEG that is hostile to renewables, especially as he is facing an election later in the year. What may swing the deal is the realisation in all governments that it’s in no one’s interests for the energy impasse to continue. Mark Butler, who is looking to a framework that can survive a change of government, says his challenge could well be what emerges from the Coalition party room after the states’ meeting. A compromise, one that could win over Abbott and Joyce, is something the shadow energy minister would be loath to support. But the likelihood of winning over the coal champions is very moot. In his Radio National interview, Kelly was clearly looking for reasons not to back it.
If six or seven Liberal and National MPs abstain or cross the floor, Turnbull would need the Opposition to help save the day. But the prime minister has been unwilling to date to risk his government facing any defeat on the floor of the House of Representatives – he pulled the live sheep export bill to avoid such a possibility.
Is it any wonder Turnbull seized on Shorten’s ill-timed answer on repealing some business tax cuts? Although Shorten’s slip on company tax was completely in line with Labor’s thinking over the past two years, and has been hinted at on multiple occasions by him and his Treasury spokesman, Chris Bowen, he was forced to defuse the situation with a retraction.
If he had his time again, Shorten would surely have been more circumspect. Those close to Shorten say he is furious with himself for an unguarded moment just at the time when the government was struggling to get the last $35 billion of its corporate tax cuts through the Senate.
Nonetheless, one of the strongest defences of Shorten earlier in the week came from Anthony Albanese on Adelaide radio. “Bill Shorten has the right to announce Labor policy,” he said. “He did that consistent with the way that Labor had voted in the parliament.”
It was interesting as Albanese had drawn intense criticism inside the caucus for his speech last Friday night arguing for Labor to be more business friendly. The speech was widely seen in leadership aspiration terms, differentiating himself from Shorten, itself very unhelpful in the context of the looming byelections.
It’s a toss-up where the real sparks were flying this week, in the government or Opposition. Shorten is confident of regrouping. Turnbull has one mighty fight on his hands.
This article was first published in the print edition of The Saturday Paper on Jun 30, 2018 as "Bases loaded for Frydenberg".
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