All of a sudden, without many people realising it was happening, Ross Garnaut has become one of the most powerful people in the country.
The ANU professor and mining corporation chairman is now also the key advisor to the State and Commonwealth Governments on climate change. Garnaut chairs the Climate Change and Policy Response to Climate Change Review for the Premiers of the Australian States – which, after November last year, expanded to include Kevin Rudd’s new Federal Government.
The Review was set up by Rudd and the State Premiers last year to act as a kind of Australian Stern Report on the likely economic impacts of climate change, and the costs and benefits of mitigation strategies.
So important has the Review now become, and so sensitive, that Climate Change Minister Penny Wong has been forced to back-pedal on its influence. Trying to hose down the alarm after Garnaut summarised the dramatic recent developments in climate science, she told a Senate committee that "you don’t contract out decisions as significant to the Australian environment, community and economy to a single individual." Note to Penny Wong: don’t mention the elephant! For this is exactly what Kevin Rudd has done.
But just who is Ross Garnaut, and how did he get to have the PM’s ear on this most important of issues?
Garnaut’s glittering career spans nearly all dimensions of Australia’s elite, from economics and business to diplomacy and high-level government policy making. Currently Professor of Economics at ANU, he sits on the board of nearly a dozen different companies, organisations and academic journals and is Chairman of four of them – including Lihir Gold Limited, a gold mine in PNG whose environmental record is, as we shall see, far from spotless.
Garnaut has always been a high-achiever. Graduating as School Captain of Perth Modern School, he studied economics at ANU, where he completed his PhD on liberalising Australian trade with South East Asia in 1972.
Garnaut’s academic expertise in Asian and Pacific economic development soon saw him drafted as a key Finance Ministry advisor to the fledgling PNG Government. Garnaut built a team of local and expatriate bureaucrats who put PNG’s finances on a firm early footing, particularly through a mineral royalty tax which became the basis of the PNG Government’s revenues. While the experience led to a book for Garnaut, this reliance on commodity taxes was to prove highly destablising for PNG in the 1990s.
By the late 1970s, Garnaut had moved into trade negotiations for Prime Minister Malcolm Fraser. In 1979, he was deeply engaged in talks with other economists and finance officials from ASEAN member countries, which led to his appointment as Deputy Chair of the first Pacific Economic Conference in 1980 (the fore-runner to APEC).
This work on Asia Pacific trade led to Garnaut’s first really big break: his appointment as one of Bob Hawke’s most trusted economic advisors in 1983. Garnaut had a seat at the table during the historic liberalisation decisions of the early Hawke-Keating administration – floating the currency, removing trade barriers, liberalising banking regulations and embarking on the Cairns Group of trade negotiations that would eventually become the Uruguay Round of the WTO.
Garnaut’s influence in the early Hawke Government should not be under-estimated. In The End of Certainty, veteran Canberra bureau journalist Paul Kelly quotes Hawke’s senior mandarin at the Department of Prime Minister and Cabinet, Ed Visbord, as saying "Hawke never took my advice on a single economic issue unless it coincided with that of Ross Garnaut."
In 1985, Garnaut got his reward: the plum posting as Ambassador to China. Here he worked to set up some of the first Chinese direct investments abroad – an iron ore mine and an aluminium smelter in Australia. Although only small steps, they proved to be the shape of things to come, as Chinese corporation Chinalco’s massive recent investment in Rio Tinto demonstrates.
Garnaut returned to Australia in 1988 with all the right connections. He got appointed Chairman of the Board of the Bank of Western Australia (now BankWest) in the dying days of the Downing Government, and managed to avoid both the financial meltdown of other State banks as well as the stain of WA Inc, remaining Chair of BankWest until 1995. Right through this time he was still publishing prolifically in the economics literature, being made a Professor at ANU in 1989 and penning an influential paper, Australia and the Northeast Asian Ascendancy, for Gareth Evans and Hawke in 1989, which predicted the Chinese boom (although not the Japanese bust).
In 1995, Garnaut was offered the Chairmanship of a new PNG mining company, Lihir Gold Limited. The company’s main mine is on the island of Lihir, 700 kilometres north east of Port Moresby. This large open-cut gold mine generates huge taxes and export revenues for PNG. It is also a serious polluter of the coral reefs and ocean floor around Lihir Island, as mine tailings which contain traces of cyanide and heavy metals are loaded on barges and dumped on the nearby ocean floor. Meanwhile, post-processing waste is discharged by pipeline 1.5 kilometres out to sea. In June 2000 there was a cyanide spill at the mine.
Lihir was financed by an Australian Government loan by the Export Finance and Insurance Company, which provided hundreds of millions in finance guarantees. The guarantees were provided after the US Government export credit agency, OPIC, rejected the Lihir project on environmental grounds.
In 1995 Garnaut told the ABC’s Karen Snowdon that the environmental impacts had been "very carefully studied, and the studies have concluded that there won’t be detrimental effects on fish life. It’s highly technical stuff, and I myself have to rely on expert opinion on that. But the expert opinion is reassuring." But what Garnaut didn’t tell ABC listeners was that PNG’s environmental standards were far lower than those expected of an Australian mine. This issue was graphically demonstrated soon afterwards at BHP’s Ok Tedi mine on the Fly River – a mine so environmentally damaging that BHP was eventually forced to divest itself of the polluter.
Garnaut remains the Chair of Lihir Gold, which is now in the top 100 companies by market capitalisation on the Australian Stock Exchange.
Garnaut’s experience and connections at the intersection of government, trade and mining have proved lucrative beyond the wildest dreams of other academics. By 2000 he was advising global oil giant Exxon on "fiscal arrangements in the petroleum industry" and sitting on the PNG Sustainable Development Program – the PNG Government body that ended up owning the Ok Tedi mine after BHP washed its hands of it.
So it was not surprising when Kevin Rudd turned to Garnaut in 2007 to head up the Australian version of the Stern Report. Garnaut had the academic clout, the business credentials and the political nous to navigate perhaps the single trickiest policy problem in all of Australian government. What is perhaps surprising is that Garnaut’s commitment to the facts of climate change has his colleagues in the mining and energy sectors worried. His interim report on climate change policy, released last week to the State Premiers, demonstrated that he is at least keeping up with many of the most alarming scientific developments – including the looming irrelevance of Rudd and Penny Wong’s target of a 60 per cent reduction in carbon emissions by 2050. As Garnaut rightly observes, this isn’t going to be enough.
But are Rudd and Wong listening? Wong has already stated that Labor will be sticking with the 60 per cent target. And the chorus of nay-sayers in the fossil fuel lobby has started up again, noisily clamouring for government relief. It’s now obvious that climate change is going to be one of the real tests of Kevin Rudd’s first term of government – and it will be an examination set by Professor Ross Garnaut, who will clearly be driving the Australian climate change policy agenda.
Right now, that makes him one of the most powerful men in the country.
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