Recently in Business and Commerce Category

I couple of years ago I wrote about (arguably) the worst ever example of a Private / Public infrastructure project, Sydney's Airport Rail Link. The only positive thing I can say about the debacle is that it was signed off by a Conservative government.

A quick recap ... the government built a railway from the city to the airport, and contracted a private consortium build the airport stations, to be paid for by adding a surcharge on top of the price of the ticket. Our great conservative economic managers wrote into the contract that if passenger numbers didn't allow the consortium to make a profit, the government would stump up millions to pay them out.

With the surcharge at a level that made a taxi fare competitive, it wasn't surprising that passenger numbers never approached the predicted levels. The consortium collapsed, leaving the government holding the debt.

The government recently sold the stations to a new consortium for an unknown amount. Where it was expected that the new owners would reduce the fares to increase patronage, they've done the opposite.

You can only assume that the new owners bought the asset for a song. They know that the core users are mainly wealthy or expense subsidised individuals who don't care about the cost, and will keep using it regardless of the price.

By not taking control of the facility, the government has ensured that motor vehicles will remain the primary method of traveling to the airport, and that an expensive public transport asset will remain under utilised.

Total stupidity.

I caught this interview on Radio National a couple of weeks ago while driving to work. Normally, I would have missed most of it due to arriving at my workplace well before it concluded, but I was so taken with what this guy was saying, I stayed in the car to listen to the whole thing. I found it fascinating.

The transcripts and audio mp3 can be obtained from here.

The Doctor puts the finger squarely on the food industry as one reason why so many more people are fat today than was the case 20 years ago.

A few extracts follow, with my emphasis, but I recommend you read, or preferably, listen to, the whole thing.

"You've thrown technology down the drain which Australia could have used," he said.

"As an Australian I feel very sad that that thing goes on, not because the technology wasn't good enough, or anything but for political reasons, ideological reasons."

The statement above could be about a number of technologies invented in Australia over the past 60 years. In this case, the quote is from nuclear scientist Don Mercer, lamenting that the Hawke government shut down research on uranium enrichment during the mid 1980s, leaving the process to be perfected by others.

It's ironic, because that's exactly what the present government is doing to research for renewable energy. Forcing it offshore through a lack of funds and commitment. Purely for ideological and political reasons.

Like the uranium enrichment technology of 20 years ago, renewable energy research will be a lost opportunity if the technology is perfected offshore.

Dr Clarence Hardy worked for 20 years at Lucas Heights and says Australia was at the forefront of nuclear technology.

"I don't think anyone at the really high level in the Government understood what we were trying to do, to preserve this technology for the good of the country," he said.

Dr Hardy is now a director of the company Nuclear Fuel Australia and is planning to put a proposal to the Federal Government to build an enrichment plan in Australia.

Yes, planning to put a proposal for technology developed and imported from overseas.

I wouldn't be surprised in another 20 years or so, Australian scientists will be lamenting lost opportunities as we cough up large amounts of money to import renewable energy technologies that could have been perfected here.

Update: Ken L has a different slant on the same thing here.

Petrol excise, Medicare safety-net, David Hicks, now Work Choices. John Howard is a master at successfully defusing unpopular election year issues. This particular example demolishes his "I make tough choices even if they're unpopular" persona (more here about that), but the real question is whether the new measures will make a difference when the weakest in society apply for a job.

The "Safety Net" is more about perceptions than substance. There's three aspects of the new regulations that fall short in providing any long term protection.

The first is the arbitrary wage / salary level under which the new laws become effective. At $75k, the new regulations cover a large section of the workforce. Without indexation, this amount will erode over time, and more employees in the middle income bracket will find themselves outside "the net." This government is reluctant to alter threshold levels once set, as shown by the Medicare surcharge example.

Secondly, the "no disadvantage" test allows non-monitory offsets to compensate for lost conditions. A particular "offset" will have differing values to different employees. Unless the value of the offset can be easily calculated, I can see employees being coerced to accept dubious "benefits" in lieu of cash.

Thirdly, the "no disadvantage test" doesn't apply to companies that are under financial difficulties. Some clever accounting may be all that's needed to prevent the application of the "no disadvantage test" for new employees.

The changes will take the heat off the government and stymie Labor when it comes to IR. Combined with a giveaway budget, it may be all that's needed to give the government momentum during the run up to the election.

However, there's one last, important issue.

The new regulations aren't retrospective. If you've already been sold a dud AWA, bad luck! Don't be surprised if the government's taken to task on this and there's yet another change to Work Choices in the next few weeks.

It was inevitable that the industry lobby would start loudly complaining about Labor's IR policy once details started to emerge. After all, the government's revamped AWA framework under Work Choices put all the power in the employers' hands when dealing with unskilled and disadvantaged workers. They were never going to let that go without a fight.

Perhaps Labor would have been better not to state they'd abolish AWAs. As suggested elsewhere, it may have been more sensible to just reintroduce the 'no disadvantage' test, as was the situation before Work Choices. Labor could have developed an even handed policy that allowed employees to decide which type of agreement they want and whether unions should be involved. The days of the old IR system have gone forever, for better or for worse.

That being said, the arguments put forward by the mining industry for the retention of AWAs is nonsense. Labor's proposed changes to the IR system is not a threat to the rampent mining boom. There's a labour shortage, the mining companies need employees and are willing to pay high wages and provide good working conditions to get them. This hasn't changed through mining booms over the past 30 years, regardless of whether the workers were under collective agreements or individual contracts.

Employer criticisms are not going to end soon, and Labor needs to fight hard to sell their policy. For a start, they should emphasise that employers organise themselves into associations to strengthen their bargaining position, while pointing out the same group's hypocritical stance of preventing employees from doing the same thing.

They should emphasise the difference between in demand workers in boom industries and those with less saleable skills who are the real victims of "Work Choices."

They should remind the electorate that good times don't last forever, and that employees working under AWAs have most to lose in a downturn.

They need to keep hammering the government about their refusal to release any information about the makeup of new AWA agreements.

Finally, they'll have to hope that the hostility regarding Work Choices in the eastern states more than offsets votes lost in Western Australia. It could be a close run thing.

Governments love industries like coal mining. They're low tech and profitable. They don't need an educated work force, (at the blunt end, at least), sophisticated infrastructure or investment in R & D. You simply dig the stuff up and load it onto a ship, then sit back and watch the royalties roll in.

The public's concern regarding climate change is a headache for governments of both persuasions. How do they mitigate the environmental damage, while protecting the vested interests?

The latest setback for those vested interests (government, mining companies and unions) is the recent court decision that stipulates that Environmental Impact Studies for new mines must take into account the environmental damage from the burnt coal's emissions.

The argument that it's the importing country's problem obviously doesn't wash as the CO2 won't stay within national boundaries.

So we have the federal government pushing the hope of viable carbon capture technology to argue that mining should go on unabated ...

"The solution to greenhouse gases is to stop carbon going into the atmosphere from burning coal, not stopping coal mines.

"What we need to do as a world is keep mining coal.

Pity that the technology is decades away, can't be easily bolted on to old power stations, will severely effect the station's generating efficiency and that carbon capture can only be done in certain geological areas, which doesn't include the NSW Hunter Valley.

In the mean time, scientists are warning that the rise in CO2 concentration is accelerating.

The situation reminds me of tobacco companies that knew of the health risks of smoking when marketing their product, and asbestos miners who likewise put their workers at risk well after the link between breathing asbestos fibres and cancer was established.

Unfortunately, I won't be alive in 40 years to see the victims of climate change take the energy companies to court.

Mike Carlton in today's SMH sums it up nicely ...

So, would you buy the remains of a used telco from this man [the Prime Minister]? Not bleedin' likely. It is a dead dog. Once bitten, your mums and dads won't now touch the corpse with a barge pole. It will end up, mostly likely, buried in the Future Fund, its inevitably shrinking dividends paying off public service superannuation commitments.

For all its vaunted financial and economic expertise, the Government's incompetence has turned the T3 sale into a fiasco, a textbook exercise in how not to privatise a public asset.

IT NEED not have come to this. The sensible thing would have been to split Telstra in two. [my emphasis]

The company's hardware, all the wires and widgets that deliver telecommunications, should have been kept in public ownership, a national network available to any privately owned telco that wanted to pay to use it.

The Telstra retail business - marketing telephones and internet connections and so on - could then have been privatised to buy those hardware services, competing for them on an equal footing with the likes of Optus. Throw in some legislated safeguards to keep the bush connected to developing technology, and away you go.

My thoughts exactly.

In an example of ideology over common sense, the government has decided to sell $8 billion worth of Telstra stock.

The shares are trading at a historic low. Dumping the shares on the market at this time is hardly likely to improve the company's value.

I'm keen to see how they're going to promote this to the public, some of whom have seen the value of their shares fall from $7 to around $3.50 each this week. A sweetener for those who hold T2 stock is a strong possibility.

Mr Howard says the Government's shares would have been sold earlier at a higher price if opposition parties had not blocked the legislation.

Yes, and ripped off a greater number of the gullible public. Let's be thankful that the Senators held off the sale for as long as they did.

It doesn't take much imagination to guess the outcome of the Nuclear Power enquiry announced by the Prime Minister this afternoon.

The former Telstra chief Ziggy Switkowski will head the enquiry into the future of nuclear energy and uranium mining.

Dr Switkowski will be backed by a panel of five experts, and Australia's Chief Scientist Jim Peacock will assist with the review.

Yes, the guy who's heading the enquiry is a member of an organisation that has a vested interest in the nuclear industry.

Dr Switkowski is a nuclear physicist, and also sits on the board of ANSTO, the nuclear agency which released a report this week saying nuclear power is a cost effective option.

Not everyone thinks ANSTO's report was valid, though. From last night's 7.30 Report ...

DR MARK DIESENDORF, INSTITUTE OF ENVIRONMENTAL STUDIES, UNSW: It's a complete rubbish and if one of my students produced something like that, they would fail.

MATT PEACOCK: According to environmental scientist Mark Diesendorf of the University of NSW, the ANSTO study assumes Government subsidies. He believes that nuclear will cost almost three times as much as coal.

DR MARK DIESENDORF: The study does not reveal the most fundamental, basic parameters of the problem; it doesn't tell us the basic capital cost of the nuclear power station; and it doesn't tell us the interest rates used on the capital, in order to calculate the cost of electricity. All it does is present us with a bottom line that suggests that given some subsidies from the Federal Government, nuclear power might become competitive.

But why pick one tainted member when you can pick two?

Another member of the Prime Minister's Task Force, Professor George Dracoulis, is also a nuclear physicist. He works at the Australian National University in Canberra.

The setting up of this enquiry could have been taken from an episode of "Yes Minister." Devotees of the show would remember Sir Humphrey lecturing Jim Hacker that the key to obtain a wanted outcome was to appoint the correct personnel.

The third member of the enquiry panel is Professor Warwick McKibben from the Reserve Bank Board. As RBB members are government appointees, we can safely guess his views on the subject will be 'sound.'

More members of the enquiry are to be announced tomorrow. Don't be surprised if they have connections with the mining industry.

'The Pigs' has argued for some time that the full privatisation of Telstra was fraught for the simple reason that the company controls the 'local loop,' ie, the last few kilometres of copper cable that connects customers to the exchange. Telstra has fought competition by restricting access to the local loop, usually by charging high prices for the privilege.

The competition regulators are kept busy trying to keep tabs on Telstra's wholesale pricing, with some success. It is now possible for competitors to 'uncouple' the local loop by connecting the copper directly to their network, but Telstra will always have a measure of control while the local loop is connected through their exchanges.

In my opinion, a better idea would have been to keep the local loop and the exchanges' back ends in government control, and privatised the service component of the telco.

Anyway, this is all history as the government is pushing ahead with the full privatisation, and the measures to control Telstra's pricing seem to be working. Telstra is having difficulty in maintaining income at past levels. The market value of Telstra has fallen significantly.

Recently, Telstra proposed an upgrade of the local loop using optical fibre technology. This is a positive step as it will allow far larger data throughput to customers. However, it's an expensive exercise and the catch is that Telstra proposes to maintain control over the network with regards to pricing and access. In other words, reinforcing its monopoly.

Telstra's proposal is a cynical move to influence the government.