Climate triggers and green tape won’t fix our productivity mess

The kinds of ideas that Dr Ken Henry is now proposing as a solution to Australia’s productivity problem are the very ones that got us into this mess in the first place, writes Saxon Davidson.

For a tax expert, Dr Ken Henry sure has a lot to say about the kinds of environmental laws the government should impose.

Dr Henry’s recent speech at the National Press Club on Australia’s economic and productivity woes should have been an opportunity to bring his experience as a Treasury Secretary to the national debate.

Instead, Dr Henry used it as a platform to promote his own personal political preferences for greater environmental regulation, stating that we as a nation should “develop a sophisticated, more diverse economy” and that “environmental laws should help, not hinder” that goal.

Dr Henry’s ideas include deregulating approval processes for projects aligned with Australia’s Net Zero emissions target, the implementation of an expensive and duplicative federal EPA, and even flirt with the possibility of including a ‘climate trigger’ in the Environment Protection and Biodiversity Conservation Act 1999.

The need for reform in Australia’s economy is urgent. However, the kinds of ideas that Dr Henry is now proposing as a solution to Australia’s productivity problem are the very ones that got us into this mess in the first place.

Ken Henry at the National Press Club in Canberra.

The collapse in productivity in recent years is the product of a more prolonged decline in Australia’s economic competitiveness. According to the International Institute for Management Development, Australia’s ranking for economic competitiveness was consistently among the best globally in the 2000s, but has since dropped off due to declining entrepreneurship, energy infrastructure, and record red and green tape.

In other words, the kinds of ideas that Ken Henry is now proposing as a solution to Australia’s productivity problem.

Clouds can be seen above power-generating wind turbines at the Capital Wind Farm, located at Lake George, near the town of Bungendore.

Increasing green tape burden on businesses to improve productivity is only slightly less self-contradictory than Dr Henry’s suggestion we create approval carve-outs for renewable projects in the EPBC Act, considering Dr Henry complained about the “raft of exemptions and carve-outs that, collectively, make nonsense of its claims to environmental protection” in the exact same speech.

However, what is most worrying is his openness to the adoption of a climate trigger, stating that in the absence of a Gillard-esque emissions trading scheme, “a climate trigger on major developments should be something which is open for discussion, something we need to think about.”

The climate trigger is a hardline Greens’ policy that would require any project expected to emit certain levels of annual carbon emissions to be subject to additional approval processes under the EPBC Act. Ironically, it is also the type of process that Dr Henry admits is a drag on productivity.

Previous research from the Institute of Public Affairs found that a climate trigger would put $227 billion of investment in Australia at risk of cancellation.

Adding yet more regulation to much needed gas, coal, and iron ore projects will not lift our economic performance. Instead, it will act as a drag on the resources sector, which will slip back to the lacklustre performance of the rest of the economy.

Not only does the resources sector provide hundreds of thousands of high paying jobs, the taxes and royalties that these projects generate fund the roads, schools and hospitals that every single Australian relies on.

Ken Henry may well be a tax expert, but his speech makes clear he is blinded by the kind of public sector ideology that sees government and regulation as the solution to, rather than the cause of, plummeting productivity.

If there are wiser heads in the Albanese government, they should ignore Dr Henry’s call for a climate trigger, just as they did when The Greens last proposed it.

Saxon Davidson is a Research Fellow at the Institute of Public Affairs