Monday, 25 June 2012
Clean Energy Finance Corporation Bill 2012; Second Reading
At the risk of upsetting the Governor of the Reserve Bank and others, I am afraid I must share Senator Gary Humphries's view that we have here yet another Labor-generated recipe for disaster. I know that Mr Glenn Stevens urges us to see the glass as half full. In fact, in different circumstances with a different government that might be possible. But with this government it is not possible. What we have here with the Clean Energy Finance Corporation Bill 2012 is yet another attempt to legislate a fiscal disaster.
What is it with Labor governments and the need to have the federal government, or any government, get its grubby little paws involved in private enterprise, picking winners and deciding where to invest money? What is it about Labor governments? How long has the record got to go on and on, starting with WA Inc., going through John Cain in Victoria, going through the South Australian situation where, going back to the eighties, the state government was the first state government that was obliged to sell its government-owned bank? They could not do innovation; they could not pick winners; they ended up in such debt because of the way they went about it.
For example, let us look at the renewable energy area. Has anyone been to Cloncurry lately to see the Bligh and federal government solar energy project? You can still see it—it just does not work. It never did work. It is just rusting away. But yes, that was going to be the brave new world of Ms Bligh and Mr Rudd, where they would power the town of Cloncurry with solar energy. But of course they picked the wrong product to use. It was explained to me that the product they chose would never have meet their needs. You only have to look at some of the bizarre and simple little things that this government have done wrong to appreciate that you have to have an understanding of private business before you can run any sort of an investment body. This government do not have it.
Mr Acting Deputy President Furner, you may have also been present at the Aboriginal community of Lake Nash near the border with Queensland in the Northern Territory. The temperature there is 36 degrees in the middle of the day and FaHCSIA installed, at a cost of $12,000, a steel skateboard ramp, without any cover over it. It was very useful at midday for frying eggs. The local skateboarders said they could perhaps use it at night when it got cool enough, but there was no lighting. So you could use it at night in the dark without burning yourself or use it as a giant and expensive frypan. Those are the sorts of things that happen when you have a government that does not have a clue about the environment in which it is operating, whether it be the physical environment or the financial environment. It is the sort of thing that we expect from this government.
I would be interested to know what input Treasurer Swan might have with Mr Combet on the structure of the Clean Energy Finance Corporation, because we notice that it is supposed to be self-sustaining once it is mature and that the funds returned for the CEFC for its investments would be available for reinvestment. That of course is not what the budget figures tell us, but that is what they are saying. It tells us that the investment mandate may include but not be limited to directions on matters of risk and return, eligibility criteria of investments in renewable energy technologies, low-emission technologies and energy efficiency projects, allocation of investment, limits on concessional investments, types of financial instruments in which the corporation may invest and broad operational matters. The bill sets out that the minister will set this investment mandate with those guidelines—the matters of risk and return; eligibility as to whether something is a renewable energy technology, a low-emission technology or an energy efficient project; how much of the investment is allocated where; what sorts of concessional investments there will be; what sorts of financial instruments they can invest in; and broad operational matters. What on earth does 'broad operational matters' mean? Does this mean that the minister will tell them what size paper clips to use, but they can decide for themselves what brand to buy? Is that as far as it will go with this corporation?
To have Minister Combet, and perhaps even with advice from Treasurer Swan, actually selecting investments and selecting the nature of investments to be undertaken by the Clean Energy Finance Corporation is just mind-boggling. I just cannot believe this. It is laughable to suggest that the $10 billion over five years that the government will fish out will be matched by five times that investment—$50 billion—from the private sector. That is just a bizarre wish by this government. The Treasurer and the minister spend half their lives criticising people for being financially successful—criticising Ms Rinehart, Mr Forrest, Mr Palmer, banks and anybody else who is financially successful. If you are financially successful, this government hate you, this government are out to get you and this government will try to find a way to tax you. But, at the same time, they are trying to tell us that we can trust them with $10 billion for an investment corporation and that private enterprise will be similarly attracted to their investment corporation. Yes, I would be really keen to get involved in something like that! I can look at the papers any day and see what this government think about people who have been financially successful. I would really want to do business with this government! It is just bizarre and ridiculous of this government to think that they can get into this sector and that they know what they are doing. They do not know what they are doing in this space. They never have and they never will. It is not an area for a government to pretend to know what it is doing. You would think that the past history of Labor governments at both state and federal level in this space would demonstrate that this is not the way to go about it.
Who exactly is going to use the funds developed here? They do not have to use the same criteria as private investment organisations. They can be somewhat more generous about the terms of investment. They can even be more generous, although the minister gets to tell them how, about the business case they develop. Do we have the makings of a new WA Inc. at the federal level, a new Fed Inc., with Minister Combet and Treasurer Swan doing the 'nudge nudge, wink wink' on investments that no bank or organisation in their right mind would support? But we will have a Labor government trying their best to pick winners in an area where they do not have the competence. I just do not know what the competence level would compare with. It is non-existent competence in this area.
It is even interesting to look at the results for Australia's banks, which were published today. Our banks were amongst the most profitable in the world, but their pre-tax profits were equal to 1.19 per cent of their assets in 2011. This is hardly 'wow' territory. There may be lots of zeros on the end, but a pre-tax profit of 1.19 per cent of assets is scarcely something that we should get very excited about when you look at it as a percentage. I know that this government, in their attempts to fudge the figures and play the politics of envy, would never think to use a percentage figure. They would always go for the actual profit figure, trying to suggest that someone who makes a billion dollars on $100 billion is somehow ripping off the public, ripping off the taxpayer. In fact that is not true. As the article I am looking at points out, the country whose banks did second best was Canada, the other country that was least scathed by the global financial crisis. I am sure that Labor would like to think that this was just a coincidence, but in fact it is not. You need profitable institutions to provide investment; you need profitable companies borrowing money and making decisions to use their own money, where they put their own money—their own assets—at risk to grow any sector in this economy.
The case is the same with the renewable energy sector. We also have the somewhat bizarre situation where you would have thought that, at least, if the government wanted to pick winners in this sector, they would have put a few carrots and sticks out there. But, no, they could not even manage to do that. They have left the renewable energy target at 20 per cent. There is nothing that says, 'You get your finance from the Clean Energy Finance Corporation and you can be a concessional contributor to something at a greater and higher level than the 20 per cent.' Why would I be out there using my own money and paying bank interest rates to develop a renewable energy product if I can be getting that money at concessional rates and at far less risk to me from the government to meet exactly the same targets? They are not even using the current renewable energy targets to try and drive private investment, to try and drive what is the efficient market, the efficient way of going about building a new industry in Australia.
It is very certain that we need this industry and we need it to grow, but we do not need the knowledge that, within five years, at least an extra $10 billion needs to be found to be repaid. Given that this is supposed to be self-sustaining and given that they are talking about re-investing, the odds that the debt will be only $10 billion are quite low. It is quite likely to be a lot higher. As I said before, we have this bizarre situation where, from July next year, $2 billion a year will be invested, apparently, by the government in new energy technologies—some low emissions and some new green energy technologies. Yet the bill actually envisages that there will be a loss to the taxpayer through operating costs and write-downs, which are set out in the fiscal impacts.
As other speakers have pointed out, this legislation is part of a pay-off to the Greens, who, of course, have never been quite the most robust analysts of private enterprise or of profit. When the Multi-Party Climate Change Committee developed this view, Senator Milne said:
Securing a guarantee of 50% of the Clean Energy Finance Corporation fund for renewable energy, with the opportunity to bid into the rest, is the biggest single investment in renewable energy Australia has ever made.
Yep, right, great—that is true. She said:
With a legislatively guaranteed stream of funding outside the budget, no future government will be able to undermine it without changing legislation.
Senator Milne might find that a really positive thing to be able to say. From the point of view of someone who has actually operated in the for-profit world, I find that a very disturbing and distressing thing for a Labor-Green coalition government to be able to say. Senator Milne goes on to claim:
The CEFC will be able to leverage very significant private funds on top of its own …
I would be fascinated to see where they are going to come from. She continues:
… provide loan guarantees or guaranteed tariffs or whatever other means its expert and independent board deems fit.
Apart from that little pixiesque world—which is not true—we know that Senator Milne is wrong in talking about an expert and independent board, because the legislation itself says that the minister can pretty much tell the board anything he wants about how it will operate. The investment mandate, as I said earlier, goes down to which sort of paper clips and biros you buy. There is bipartisan support for 20 per cent of Australia's electricity supply to come from renewable resources by 2020. We absolutely agree on that; we agree that that needs to happen. But 20 per cent by 2020 is the target that will drive the changes, the investment and the technology. In Australia we are not bad at commercialising innovation. We could be much better, but we are not bad at it. But the last people we need sticking their sticky little fingers and their beaks into this exercise are the federal Labor government. The outcome will be just the same as it has been on every occasion that Labor governments have gotten involved in the area.
If there are newcomers to the sector who have been lucky enough to get picked—or should I say unlucky enough; perhaps it will be the kiss of death—by the CEFC, they will have the benefit of a direct subsidy through the CEFC, which will of course mean that anybody who has been stupid enough to invest their own money and their own time right now in trying to develop and commercialise new technologies in the energy field will be discriminated against and potentially compromised by the little government favourites coming in over the top. The CEFC is not even expected to invest in the lowest cost technologies or to come up with the cheapest way of reducing carbon emissions; it is just whatever the minister happens to have in mind on the day.
In our view, the remit of the CEFC should be to look for genuine, commercially acceptable projects. It should not be markets that are unproven or too speculative or too risky for any investor to touch with a 40-foot barge pole. Yet that is pretty much where we will end up. So it will be interesting to see for how long this organisation will be able to obfuscate before we start seeing the losses that are inevitable with a Labor-Green scheme such as this.