Jim’s Gospel: A shiny new plan with net zero merit

Future Made in Australia Battery, Ed Husic and Anthony Albanese. Illustration: Emilia Tortorella

Undeterred by the universal criticism its Future Made in Australia policy has received among economists, the Albanese government has introduced legislation to put it into effect.

Treasurer Jim Chalmers’ latest pitch for this departure from economic rationality is both deeply unconvincing and occasionally revealing (“Our Future Made in Australia seizes net zero opportunity”, 4/7).

His piece in these pages last week did not start well. We need to act, he tells us, because “the world is changing”. On the one hand, he insists the world is marching in unison toward the goal of net zero carbon dioxide emissions. But in the very next breath, he argues that “geostrategic competition is growing” and the international rules-based order is breaking down.

How can these two contradictory statements be true? Which is right? The one-world climate utopianism of net zero, in which the US, the EU, China, India and Russia – in the spirit of John Lennon’s Imagine – join hands to save the planet? Or the Hobbesian spectre of persistent and potentially lethal international conflict and competition?

Chalmers cannot have it both ways.

There is no doubt the world’s major economic powers are not on the same page on net zero. Electoral support for green austerity is falling away across Europe. If elected in November, Donald Trump will pull the US out of the Paris climate change agreement. Moreover, China and India have never been on board, putting economic growth and poverty reduction before green utopianism.

Treasurer Jim Chalmers during Question Time at Parliament House. Picture: NewsWire / Martin Ollman

The net zero pillar of A Future Made in Australia is not only based on a false premise but an outright economic chimera; the fantasy that it would deliver an economic El Dorado.

Every step we take towards net zero is a negative supply shock for the economy, a creeping regressive tax slowing growth and forcing power prices ever higher, but with no discernible effect on the global climate. The Australian public are starting to realise this.

What about the government’s Future Made in Australia legislative package? As Chalmers explains, it has three elements. First, a national interest framework under which bureaucrats identify sectors where we have a “sustainable comparative advantage” in the net zero economy or “an economic resilience and security imperative” to invest in; second, public sector assessments undertaken by Treasury to identify “barriers to private investment” in these parts of the economy, and; third, a set of community benefit principles.

Commentators will no doubt dissect this corpus of rules and processes, but let’s not forget the fundamental point. If a project is fundamentally ill-conceived, it does not matter how you choose to implement it. If someone is determined to drive off a cliff, there is no point in checking that the car’s brakes are in order or making sure they have a driver’s licence.

Nonetheless the framework is cause for alarm. We know what sectors we have a comparative advantage in. Just look at what we export to the world, including coal and natural gas. As we know, it is explicit government policy to undermine these. When Chalmers talks about comparative advantage, he is referring to sectors that net zero dreamers and public servants think will dominate in the next 50 to 100 years. Given we cannot accurately forecast next quarter’s inflation result, that seems a stretch.

Then there is national security. I suspect even national security apparatchiks would fear this framework would be ripe for abuse. In a deeply interconnected economy, a security threat in any part of it poses potential risks for all. Where do you draw the line? The notions of resilience and security are easy to invoke, but they are inherently subjective.

Those looking for clarity on these matters from the draft legislation will be disappointed.

The government’s shanghaiing of Treasury to conduct sector assessments is particularly unfortunate. As a central agency – and the government’s chief economic adviser – it should be at arm’s length from this program, not an enabler. That said, I suspect Treasury, ever on the lookout for departmental funding, has jumped at the opportunity this initiative presents to shore up its internal budget.

Don’t underestimate for a moment how much this consideration influences – and compromises – the advice departments give to governments with dumb ideas.

Most concerning of all are the ominously named community benefit principles. Subsidised projects, we are told, will have to “promote safe and secure jobs that are well-paid and have good conditions”, a recipe for union-sponsored featherbedding. Investment in training and skills will be required, presumably regardless of whether this makes commercial sense. And, of course, First Nations communities will have to be consulted.

Call me a cynic, but I can picture the electorate-by-electorate spreadsheets now, dictating where the pork will go.

For all Chalmers’ breathless rhetoric, A Future Made in Australia is exactly what it seems. A promise of free taxpayer money for projects that cannot find funding elsewhere – a kind of corporate Centrelink for investors looking for stress-free, guaranteed returns.

Indeed, A Future Made in Australia will just add further cost, distortion and inefficiency to our already chronically supply-constrained, inflation-prone economy. Working Australians, as always, will pay the price. Jim Chalmers can try all he likes to put lipstick on the pig, but A Future Made in Australia is a plan with “net zero” economic merit.

David Pearl is a former Treasury assistant secretary.