Gillard Needs A Will Of Steel


I recently re-read a New Matilda article I wrote in January 2009. I’ll spare you the details, but what really struck me was how different the political landscape was just 27 months ago. 

The Rudd Labor government was riding high in the polls and Malcolm Turnbull was the leader of a party deeply divided on the issue of climate change. Not only was there huge discord in the ranks of the Liberal Party (the Nationals were of course united in their climate scepticism), Kevin Rudd had signed Kyoto, appointed Garnaut and was frenetically consolidating what looked to be an unstoppable electoral juggernaut. The main question appeared to be whether the government would press for a double-dissolution election on climate change, or use the issue to slowly and methodically destroy Malcolm Turnbull’s leadership in the same way it had skewed the hapless Brendan Nelson.

This is all history now. But we can’t understand the current politics of climate change if we don’t understand that history. The last three years of climate change policy in Australia is a remarkable story of squandered political opportunity by the government and the environment movement — and of ruthless campaigning by the opposition and conservative business interests.

Once upon a time, climate change had real political momentum in this country.

Climate change was a significant issue in the 2007 election campaign. The issue featured prominently in the leaders’ debates as well as in several important developments during the campaign, such as the reports that Malcolm Turnbull had urged the Howard cabinet to ratify the Kyoto Protocol. Labor campaign ads proclaiming that John Howard had dozed off on climate change policy had a real impact.

The Australian Election Study exit polls recorded that the environment and global warming were rated as highly important by 59 per cent and 51 per cent of voters. Labor beat the Coalition on climate change by a whopping 37 points (56 per cent to 19 per cent). Also in 2007, the Lowy Institute found Australians ranked climate change as the equal most important foreign policy and national security issue that year, it also ranked equal with education as the important domestic policy issue. The author of the Institute’s report on the poll that year, Allan Gyngell, was moved to remark that "we found that the threat from climate change is now lodged deep in the national psyche: tackling climate change ranks equally with improving education as Australia’s most important domestic challenge."

Last year’s election was a different story. The 2010 Australian Election Study found that those rating the environment and global warming as highly important had dropped to 42 per cent and 30 per cent. The 2010 edition of the Lowy Poll also picked up climate fatigue. 25 per cent of the Lowy respondents were not prepared to pay more than $10 per month on their electricity bill to help solve climate change, while 33 per cent were not prepared to pay anything at all.

In the space of one electoral cycle, the party political significance of climate change has been flipped. At the 2007 election and well into 2009, climate change was an issue that divided conservative politicians and on which Labor enjoyed a strong polling advantage. Now climate change unites conservatives and the issue has forced Labor into humiliating back-flips and broken election promises.

Carbon is no longer the winning card in the hand of a dominant government.

Climate change is still an important issue with voters, as recent polls continue to demonstrate. But the carbon tax is becoming quite unpopular. This week’s Nielsen poll says 59 per cent of voters oppose it, up from 44 per cent in February. Indeed, given the polarising effect of the tax — most Liberal and National voters are strongly opposed to a price on carbon — it’s beginning to seem like the mirror-image of its 2007 configuration.

Therefore, at least some of the government’s current polling woes are the result of a medium-term trend by voters away from Labor’s climate change policies. The reasons why are not hard to fathom: Tony Abbott has rallied the conservative base around the issue of climate change. Meanwhile, the science of climate change has been effectively traduced by partisan disinformation from important sections of the media. As a result, many voters don’t believe climate change policy is required.

Of course, if Labor only had to combat the opposition in parliament and dispel the lies of shock-jocks on AM radio, it might be doing better. But the government is fighting on multiple fronts: pubs and clubs, the defence lobby, big business — even its own union base.

It’s not quite correct to say that Australia’s business lobby has turned against the Gillard Government. They never supported this Labor government in the first place. This week’s announcement by the Australian Food and Grocery Council that it was sending a letter to Gillard opposing the carbon tax was par for the course for Australia’s big corporations. They have shown a breathtaking hypocrisy in their arguments. The Food and Grocery Council letter, for instance, claims that "we agree that effective action to tackle climate change requires comprehensive and sustained action by all major global emitting nations, and that Australia must play its part" but then goes on to argue that "in the absence of concerted international action to address climate change, an Australian carbon pricing scheme must not impose costs on Australia’s export and import-competing industries."

As we’ve established in detail here at New Matilda, the arguments that a carbon price will lead to so-called "carbon leakage" are spurious. Indeed, few of the businesses claiming they are at risk from the carbon tax have put forward credible evidence — or even warned their own investors — about the effects of, say, a $20-30 a ton carbon price. The figures that are available are from the government, and they suggest the costs and job losses will be negligible. For instance, according to Greg Combet’s speech last week at the National Press Club, the price for a ton of steel under a carbon price with 94.5 per cent compensation will be "around $2.60 per ton of steel, out of a price per ton of steel of around $800".

Business appears to have learnt from the mining tax controversy that vicious opposition will probably not receive any real scrutiny in the media, and that it can reap big rewards in lower taxes and higher profits. So this time round, business lobbyists and CEOs like Bluescope Steel’s Paul O’Malley have simply asserted that the tax will "cost jobs".

In an amazing act of betrayal, many of Labor’s right-wing manufacturing unions appear to agree. As a result, the Australian Workers Union’s Machiavellian national secretary Paul Howes has issued a strident attack on Julia Gillard’s carbon tax, arguing there should be "100 per cent compensation" for the steel sector.

Australia’s steel industry certainly faces challenges, but they’ve got nothing to do with a possible carbon price. The real problem is China. As this late 2010 Reserve Bank briefing observes, the Middle Kingdom has developed a vast steel industry in the last decade, and as a result, can comfortably out-compete Australia’s relatively small-scale steel-makers in most product categories. As the RBA notes, China has been a net exporter of steel products since 2006.

But what’s bad for Australia’s steel industry is very, very good for the mining sector. Those Chinese steel-makers need iron ore, and they buy a lot of it from Australia. This has pushed up the price of iron ore, driven the resources boom, and thrust the Aussie dollar higher. The high Aussie dollar is the real cause of our manufacturer’s woes, but the high dollar is simply the consequence of the massive resources boom. Hence, Australian steel is increasingly uncompetitive. In comparison to the massive fluctuations in the Australian dollar in recent years, the impacts of a carbon price below $30 is likely to be almost negligible.

If you want proof, look to Europe. The European emissions trading scheme is the world’s largest and has been running since 2005. Europe’s steel industry is thriving. According to the European steel association Eurofer, "the European steel industry is a world leader in its sector with a turnover of EUR 190 billion and direct employment of 420,000 highly skilled people, producing 200 million tons of steel per year". ArcelorMittal, headquartered in Luxembourg, is the world’s largest steel-maker. Late last year it reported (pdf) a $17 billion increase in sales and a 52 per cent increase in earnings before tax compared with its 2009 results. That’s not exactly de-industrialisation.

Guess what else happened in Europe? In the run-up to the 2005 scheme, industry there also claimed it would shut down or go out of business unless given lots of free permits. Lots and lots of free permits to pollute were duly handed out. As a result, many companies made windfall gains by selling extra permits they didn’t need in the first place.

If Julia Gillard, Labor and the Greens can manage to shepherd carbon pricing through this Parliament — and who could feel confident that they can? — then in all likelihood there won’t be an economic apocalypse; in fact, the economy will almost certainly go on growing strongly. But there must be a lot of nervous figures in the government just now.

At similarly difficult moments in Kevin Rudd’s administration, the government often buckled. No wonder Bob Brown is calling for the current government to "hold its nerve".


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Ben Eltham is New Matilda's National Affairs Correspondent.