Thursday, September 29, 2016

Super funds under pressure to end executive bonuses linked to more fossil fuel projects

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Source: "Digging Deeping" from Market Forces

Australia's big superannuation funds are under pressure to veto bonuses to energy company executives who are rewarded for expanding traditional fossil fuel or carbon emitting projects.

A report from the environmental advisory firm Market Forces says super funds are "hoodwinking" investors by voting for multi-million dollars bonuses despite committing themselves to climate friendly policies.

Market Forces executive director Julien Vincent says superannuation funds are being hypocritical in approving bonuses for energy executives whose remuneration is explicitly linked to pursuing and establishing new fossil fuel exploration projects.

"It's an absolute hypocrisy for funds to be saying they are helping to steer the economy in a direction that's compatible with limiting global warming and the incentivise more fossil fuel exploration on behalf of their members," Mr Vincent told The World Today.

"Super funds love to tell their members that they're engaged on climate change and they're working with companies to get results and transform companies and transform the economy.

"But what we've found is that they're actually voting for the executives of fossil fuel companies to get fat bonuses to go and explore for more fossil fuel reserves when we've got far more than we can actually burn for a safe climate."

The report identifies seven ASX-listed energy companies that have awarded bonuses relating to new fossil fuel projects including Santos, Oil Search and Karoon Gas Australia.

The report titled "Digging Deeper" urges superannuation funds to use their voting power at Annual General Meetings to vote against bonus deals.

"Super funds actually this money on behalf of millions of Australians so this is actually our money being used to vote for fossil fuel executives getting bonuses to damage the environment and worsen climate change," Mr Vincent said.

"It's the old adage - money talks. And we're talking about assets worth about 20 percent of the ASX. That's a huge chunk of change there and that's very influential.

"Many investors have started writing to companies saying you either need to change your business model or do the decent thing and start returning capital to shareholders."

The Australian Council of Superannuation Investors has rejected the claims of hypocrisy contained in the report.

An ACSI spokeswoman told the ABC the council is "is engaging with resources companies on behalf of its members on the transition to a low carbon economy."

ACSI is also calling on companies "to provide greater levels of transparency around the way bonuses are calculated to enable an informed assessment to be made."

Wednesday, September 28, 2016

China trade deal allowing dumping of cheap steel on Australia needs to go, report urges

The federal government is facing calls to remove a special trading deal that allows China to dump cheap steel and aluminium on the Australia market.

A study by the McKell Institute released today says Australia's decision in 2004 to award China "market economy" status has backfired and Australian companies are being damaged by the predatory dumping of products at below market cost.

The call to review World Trade Organisation (WTO) rules on China's access to Australia's market comes as big steel producers like Bluescope and Arrium struggle to complete in a world of too much cheap steel.

Source: McKell Institute report on Australias' anti-dumping framework
Australian Workers Union national secretary Scott McDine seized on the McKell study and pointed to major construction in central Sydney as evidence to the damage caused by steel and aluminium dumping.

"We've got Darling Harbour and the convention centre. There is not one scrap in that whole contruction of Australian steel. That is Chinese and Korean steel," Mr McDine told the ABC's AM program.

"There is not one bit of steel out of the Port Kembla steelworks and not one bit of steel out of the Arrium steelworks in Whyalla in there."

Mr McDine said Australia needs to act on parts of the "China accession protocol" under WTO rules which will expire at the end of the year to prevent China's ability to dump products without paying appropriate duties.

"It seriously needs to be debated by Australia as an absolute necessity and it needs to be done by the end of this year," Mr McDine said.

"The rest of the OECD nations around the world have not given China market status. It is now becoming increasingly apparent that will not be the case at the end of 2016."

Predatory dumping from China hurts businesses of all sizes including the Australian company Capral which manufactures aluminium products like windows and doors to industrial customers.

Managing director Tony Dragicevich told AM that over the past decade China has flooded 40 percent of the local market.

"It's made life extremely difficult. We've had to lay off a number of people over the years, we've had to close a factory and our employee numbers have reduced significantly," Mr Dragicevich said.

"Our business has not been able to pay a dividend to shareholders for the past 13 years and that's made it difficult to raise capital and to continue to invest.

"Australia is currently one of only three developed countries which consider China as a market economy  and that means Australia is a reasonably easy target."

The Australian government recognised China as a "market economy" in the leadup to the China-Australia Free Trade Agreement which came into effect last December.

However the Department of Foreign Affairs & Trade says the recognition "has not prevented Australia from remedying injurious dumping of products from China."

"The Australian Government is committed to a strong anti-dumping regime to ensure our manufacturers and producers can compete against imports on a level playing field".

The spokesman said investigations into alleged dumped products from China are treated on a case by case basis by the Anti-Dumping Commission.

Monday, September 19, 2016

Trade Minister signals new foreign investment rules after China rebuff

The Trade Minister Steve Ciobo has signalled the federal government is preparing to update its foreign investment guidelines to appease disgruntled or confused Chinese investors.

Mr Ciobo is visiting Hong Kong where he reassuring Chinese investors that Australia is open for business, despite the Treasurer's decision last month to block the sale of the New South Wales electricity provider Ausgrid.

The rule changes are likely to provide clarity to proposals relating to critical infrastructure to ensure all investors have clear guidelines when they tender for assets up for sale in Australia.

Mr Ciobo told The World Today that while the government is not signalling that investment in Australia infrastructure is off the table, it is moving to provide great certainty for investors after the Ausgrid rejection.

"The Treasurer is working through a number of proposals in respect to critical infrastructure," Mr Ciobo said.

"It's not about putting forward a prescriptive of assets they can or cannot bid for."

Mr Ciobo, who is attending an investment conference in Hong Kong, confirmed he would be meeting with Cheung Kong Infrastructure, one of the unsuccessful bidders for Ausgrid to discuss proposed and current investments in Australia.

Mr Ciobo said he wanted to send the message that Australia has a non-discriminatory approach to foreign investment while retaining the power to veto proposals that could be in conflict with the national interest.

"Provided it's communicated well to to investors it means they can have certainty about investment proposals in Australia," Mr Ciobo said.

"But at the same time, Australians can have certainty that investment into Australia is going to be good for our country."

In a speech to be delivered later today in Hong Kong, Mr Ciobo is expected to single out the "critical power and communications services" that Ausgrid provides to Australian business and government.

But Mr Ciobo will stress the Treasurer's rejection of the Ausgrid proposal related to the "nature of the assets - not to any particular investor".

Friday, September 16, 2016

Coal moratorium would be blip for economy, modelling suggests

New research out today says Australia's economy would not be hurt by a gradual phasing out of coal production in Australia.

Modelling from the Centre of Policy Studies at Victoria University commissioned by the Australia Institute says there would be minimal economic impact if the government imposed a moratorium on new coal mines or the expansion of existing ones.

The study says the managed winding back of coal production as existing mines are depleted would be an economic blip given the industry’s share of employment which represents 0.04 percent of the Australian workforce.

It says the economy would grow regardless of a phasing out with a difference of 0.06 percent in 2040.

Professor Philip Adams who led the research told the ABC's AM program that environmental policies to put a tax on carbon was effectively a tax on the use of coal.
"The world outlook for coal is fairly bleak. We don't see much likelihood of strong market conditions for coal  over the longer term," Professor Adams said.

"Our modelling suggests that the impacts will not start for ten to 15 years. There is enough coal in mines that are operating or will be operating to continue the level of exports that we see now.

"But thereafter coal production will slow as new mines which otherwise would come on are not allowed to come on.

"Is this a bad thing for Australia? The answer is no."

However, the study commissioned by the Australia Institute concedes that while the national economic impact would be minimal, the phasing out from coal would be painful for regional areas relying on the industry.
"The Fitzroy area in Queensland, the Hunter Valley in New South Wales will be significantly affected adversely by the slowing down in both demand and supply of coal production.

Australia Institute chief economist Richard Dennis says the research is a wakeup call for the coal industry and the federal government.

"Look the end of coal is nigh. The question is whether it's nigh enough," Mr Denniss told AM.

"The effect is a rounding error - it's trivial. The Australian economy will still double in size in the coming decades.

"Literally when you graph the economy with a moratorium and without a moratorium, you need a microscope to find the difference."

The coal industry has rejected the calls for a coal moratorium and says energy generated from coal remained critical to Australia's economy.

Benjamin Sporton, chief executive of the World Coal Association, says coal currently provides 41 percent of the world's electricity and 90 percent on Australia's eastern seaboard.

"To try and say we're going to move away from a fuel that provides that much of the world's electricity, I just don't think is realistic," Mr Sporton said.

"Coal is going to play a big role in the world's economy and the world's electricity mix for decades to come and it's incredibly important that we focus on a role for low emission coal technology."

While Richard Denniss doesn't see the government imposing a coal moratorium, he says market forces will apply and that history provides some good lessons.

"The government's decision to abandon the car industry has hurt in Victoria. The Kennett government's decision to privatise electricity saw ten thousand jobs go back in the 1990s.

"Imagine if you heard someone say in the 90s they want to build a big new video cassette recorder factory?"

Wednesday, August 10, 2016

Glenn Stevens lauded for preserving RBA independence from government

When it comes to legacies, the outgoing Reserve Bank governor Glenn Stevens will be remembered for guiding Australia through the global financial crisis and marring his record with a the burden of a recession.

Mr Stevens - who makes his final public speech in Sydney today - also navigated Australia through a once in a century mining boom but also the unwanted legacy of a real estate bubble fuelled by cutting interest rates to a record low of 1.5 percent.

While the jury is out on the full Glenn Stevens time in the RBA hot seat, one respected economist has lauded Mr Stevens for preserving the independence of the Reserve Bank by raising interest rates a week before the 2007 election.

John Howard’s Coalition was swept from office, heralding the ascension of Labor’s Kevin Rudd as Prime Minister.

Saul Eslake, a former bank chief economist now vice chancellor’s  fellow at the University of Tasmania, said Mr Stevens came under immense political pressure from the Liberal Party after raising the cash rate by 0.25 percent to 6.75 percent.

"I think Glenn Stevens' courage in these circumstances is another key achievement of his time during the decade at the helm of the Reserve Bank," Mr Eslake told The World Today.

"There are many in the Coalition who never forgave Glenn Stevens for that even though I doubt that his decision to lift interest rates had any impact on the outcome of the 2007 election.

"There were a number of Coalition members who from time to time would surreptitiously briefed the (Canberra) Press Gallery against Glenn Stevens."

Mr Eslake also cited media pressure with The Daily Telegraph in Sydney describing Mr Stevens as "the most useless banker in Australia" because of his strategy of hiking interest rates.

Glenn Stevens' preservation of the Reserve Bank independence of government was most recently demonstrated when the RBA board cut the cash rate on May 3, overshadowing the Federal Budget.

Despite the plaudits as Mr Stevens prepares to retire on September 17, there is mounting criticism that continuous rate cuts since November 2011 have fuelled an investment housing bubble in the eastern seaboard, in particular in Sydney and Melbourne.

"That's something that critics of Glenn Stevens' time in office - and of Ian Macfarlane before him - will probably point to as an arguable blemishes on their records," Saul Eslake says.

"But I doubt that anyone could really say that Australia's economy would have been materially better of as a whole if the Reserve Bank had maintained higher interest rates."

Mr Eslake agrees however the younger Australians have been locked out of the main markets and live in the hope of receiving an inheritance or winning Lotto.

"Yes. Those are regrettable trends. And I think Glenn Stevens would be at one with in saying that the trend has been regrettable."

Glenn Stevens will deliver his final speech titled "An Accounting" when he speaks in Sydney at an event hosted by the Anika Foundation and Australian Business Economists