Posted by Paul Howes has been howling about the RBA’s decision to leave their policy rate at 4.25% in February – saying it’s the death of Manufacturing.
Why not campaign on something he can control – like the carbon tax?
Media reports that Alcoa is closing their Port Henry (Geelong) smelter, and has shelved a $3 billion expansion of its Wagerup alumina refinery in Western Australia for up to five years. These are manufacturing jobs that the AWU could (and should) save.
Aluminium is highly energy intensive, and production will go to where the cheap power is. That used to be Geelong – but if they cannot burn the brown coal, they won’t have cheap power.
And where will the production go? Africa? Does anyone think that will be cleaner?
These are manufacturing jobs that could easily be saved.
How? By junking the carbon tax, of course…
ricardian ambivalence 
This is not like you.
The problem that Alcoa had was the high currency and the highly subsidised price its gets for electricity.
The ETS, not carbon tax, is not behind the original decision.
Given it hasn’t started this is not surprising
Don’t be ridiculous. Even Alcoa isn’t blaming the carbon tax for this.
actually, they are:
As I said before, don’t be ridiculous. The reality is that Alcoa gets massive subsidies from the Victorian government in the form of lower prices for power than almost anyone else anywhere in the state. These subsidies are due for assessment. It’s the second part of that last sentence that matters, not the first.
No there not yet but they and companies like them will after it starts.
I think Ricardo makes a valid point. If Paul Howes was consistent about his defense of manufacturing he would pipe up about it. Yes the carbon tax / ets hasn’t started yet, but it will soon and should be (if you are being a responsible buisness owner) taken into consideration when planning future works. Yes the dollar is probably weighing more on these decisions but to dismiss the carbon tax / ets as not having any impact is silly. It is by design meant to reduce carbon emissions being produced in australia and this is just the sort of thing that might happen more and more when it takes affect.
Don’t Alcoa get 95% of their emissions in permits! How much less could the carbon tax apply and still be a tax?
If the carbon tax / ets does what it is supposed to do then buisnesses LIKE Alcoa (not necessarily Alcoa) should find it tougher to produe the same output for the same input in the medium to longer term…i think we should be able to agree on this point as its pretty fundamental to the whole carbon tax debate. Oherwise the carbon tax / ets is just a big waste of money for no real gain, as the whole point is to reduce emissions produced in australia. It therefore follows if it is cheaper or easier to produce the same product elsewhere then buisnesses will. Which goes to ricardo’s point that if Paul Howes is sincere about defending manufacturing jobs he should be as outraged at the ets / carbon tax as he is with the RBA.
Its a very simple argument, if the carbon tax does what it is supposed to do then Industries that are emissions intensive should be forced to change or go elsewhere. If its cheaper to go elsewhere then they will if it is cheaper to stay here and change then they will…very simple.
The dollar changing from 50c US to $1.07 US in the last 3 years and they haven’t moved, but 5% of f*all will make them move? Or was it the vast expansion in capacity in the last few years, and subsequent fall in price that makes 40% of world production unprofitable?
If an argument is very simple, why does it take you two paragraphs and not two lines?
the AUD bottomed at 0.6122 on 28 Oct 2008, and spent little time at that level. Exporters are typically hedgers, and a better gauge of their FX exposure is some moving average of the currency over some period.
anyhow, that’s got nothing to do with my argument – that’s your argument.
My argument is this – if you make something less profitable, folks will do less of it.
The carbon tax will reduce manufacturing employment in energy intensive industries, as it makes them less profitable. It is designed to do this. It increases firm input costs, as it charges firms (appropriately, some argue) for the right to pollute the environment.
I think you are making a claim about relative elasticities – or perhaps you are making a marginal v. average claim?
a 25bps cut would have only the smallest impact on the AUD and manufacturing activity. I don’t have access to the carbon modelling elasticities, but i’d be willing to bet a lot of money that the tax has more impact than a 100bps shock to the cash rate.
Ok oliver i’ll keep it real simple for you.
Ets / carbon tax = costs more to produce same product as buisness has to pay for pollution.
2 choices
1. Go somewhere else to produce same product because it costs less becase of new tax
2. Make efficiencies to reduce cost because of new tax (aim of carbon tax).
Simple enough.
Which means Paul Howes if he is genuinely concerned about manufacturing jobs should real have concerns about the carbon tax ets.
Get it?
bingo
Also Oliver, if you read what I had written I explicitly stated that Alcoa was probably more impact by the dollar than the propect of the ets/carbon tax. I’m just pointing out that if the ets is to work, buisnesses will face the 2 choices (move or become more efficient).
I’m not 100% across the strings attached to the permit grants, but if there is a secondary market for permits – and there will be – the economic impact of the new relative price should be the same as the no compensation case, as the permits are a lump sum transfer.
So the permits have a value today, which accrues to those who receive it? They could distribute that to their shareholders, or even use it to move shop. I wonder if the AWU will let them, if they sought to take credit for grant?
Sorry, a lot of you are just swallowing the government’s spin. I know for a fact that the aluminium industry will not be making any investments while the threat of a carbon tax is present.
Of course, they won’t go public, they are holding the government to ransom for more money. Worked for Bluescope.
One of the worst things this government has done is open the door again to rent-seekers.
In any case, word is Kevin Rudd will defer the carbon tax. Sweet irony there given that that’s what Julia advised him to do almost 2 years ago to the day.
do not be stupid.
do the sums. the $A is much much more important than the ETS.
They get subsidised electriciticity. why?
So whats the point of the ets if it doesnt increase the cost of pollution and effect behaviour change i.e. efficiencies.
Fair enough. Lets take away all their electricity subsidies instead of an ETS. That would be a free market, and probably close them down anyway. What would Paul Howes say then?
i would say bravo!
Well that aint gonna happen is it…but a carbon tax / ets is
Sure, the full impact of the AUD is probably larger than the impact of the ETS.
What i’m getting at is that Howes can influence government policy, but he has little influence over the RBA’s policy rate, and even less over the level of the AUD.
i’m confident of the sign of the marginal impact of the ETS on aluminium activity / employment.
Surely we can all agree on that?
Agreed
I take the 95% emission permit grant as a sign that Howes did have an effect. Whether it works is a different thing. He knows he’s not going to get any more (in the short term), so he has to look like he’s doing something in the meantime.
In any case they would hardly move their operations, they either leave it open or close it. Opening a new plant elsewhere would be subject to the economics of the new location, which might include long term world-wide carbon pricing considerations. The question is whether they can run here at a profit or not, and can continue to receive government largesse in that endeavour, which would appear to be the case.
I agree with this – i think the global aluminium industry is on edge over the global emissions framework.
My prediction – nothing meaningful will happen this decade.
Sent from my iPad
It appears you think the Howes can’t advocate for the carbon tax (on the basis that it will benefit the membership as well as the wider community) and at the same time complain that other measures that may assist manufacturing haven’t been taken. I’d say that you need to step back from your prejudice and think a bit more creatively. Generally business accepts that they may be negatively impacted by a govt. policy but rather than wining about it someone usually comes up with an innovation that allows the enterprise to continue with the minimum of change.
I think you are saying that the AWU accepts the carbon tax for the ‘greater good’? I am sure the RBA feels the same way about monetary policy – it creates winners and losers, but they act with the greater good in mind.
For what it is worth, i doubt anything meaningful will occur on global climate change policy, so our economic loss will have purchased basically no environmental improvement.
I do not see how that is in anyone’s interest.
If you pollute, you pay for it. If you don’t, you don’t and so you get an economic advantage. It’s a way to motivate businesses towards cleaner technologies. Very simple. Yes, it’s going to have an economic impact for the polluters. That is what it is designed to do. But somewhere it had to start…. And why not in the best , super mega strong Australian economy, which is also one of the biggest polluters in the world (per capita) and one of the biggest exporters of coal?
In principle i agree with the idea, but we are not going to get any environmental uplift for our economic cost, so it cannot pass any reasonable cost-benefit test.
Sent from my iPad
Yes, I agree, to have any real impact this effort should be coordinated at world level.
But somewhere we had to start… let’s not forget we are in one of the richest countries in the world and also one of the biggest polluters (I repeat).
We can afford it, and actually have a responsibility to.
Then we will be in a much better position when we talk to Brazil about the Amazon rain forest, to China, the US and everyone else. Our words will be backed by facts.
Before carbon tax….
BlueScope posts huge H1 loss
————————————–
BlueScope Steel Ltd expects to record a slightly improved performance in the second half of the year despite widening its loss by a huge amount in the first half.
For the six months to December 31, the steel manufacturer posted a net loss of $530 million, 864 per cent worse than the previous corresponding period.
Sales revenue from continuing operations fell two per cent to $4.53 billion, hurt by the strong Australian dollar and lower steel volumes.
…………………
http://www.businessspectator.com.au/bs.nsf/Article/BlueScope-posts-huge-H1-loss-pd20120220-RMS29?OpenDocument&src=hp6
By this logic, he should be lobbying for tariffs.
having had some involvement in the tariff debate is why i am so pessimistic – it is in every nation’s own self interest to reduce their tariff barriers, regardless of what their trading partners do. And we still cannot get the doha round done.
With global warming, it is in everyone’s self interest to free ride.
So nothing meaningful is going to happen.
Sent from my iPad
I see the quality of debate here has declined dramatically. Bolt would be proud of that post.
What is the definition of short-sighted policy in Australia? Abandoning carbon pricing and allowing our entire trade-exposed sector to be wiped out by a Chinese construction bubble and competitive devaluations by northern hemisphere central banks.
Its temporary people! I’m guessing we’ll still be talking about climate change long after the Chinese bubble has burst and monetary policy has returned to normal.
Bit confused by your reply Lorax. So by your logic we should impose a measure that would make buisnesses less competitive internationally (carbon tax / ets), especially in the short term. While intervening in monterary policy to make them more competitive.
I didn’t say we should intervene in monetary policy, but clearly its the strength of the currency that is causing 95% of the pain in trade exposed sectors. Its not the yet-to-be-introduced carbon tax.
Delaying or cancelling a vastly more important long-term policy goal (like pricing carbon) when it will make very little difference to difference to Alcoa or others would be short-sighted in the extreme.
China’s construction sector has clearly over-borrowed and over-built, but we are busily restructuring our economy so it becomes completely dependent on this one sector of one country. I think this is unwise. Am I the only one here who thinks that?
The currency and commodity markets are driving this restructuring, but in the post-financial crisis period there are plenty of reasons to believe these markets are fundamentally broken: Quantitative easing, currency pegs, and massive post-crisis fiscal stimulus to name just a few.
And yet we persist with this faith that the currency markets are telling us something real about the fundamentals, without acknowledging how completely distorted these markets have become. We show a similar faith the Chinese Communist Party’s ability to deflate the construction bubble, without acknowledging that Chinese construction is one of the most manipulated sectors in one of the most manipulated economies.
Honestly, I’ve never seen so many laissez faire types show so much faith in communists. Its bizarre.
Hold on a second. In the same argument your suggesting that the ets / carbon tax is vitally important to implement and yet it wont hurt carbon intensive industries like Allcoa. It has to doesn’t it, otherwise it just wont work. Yeah the dollar is probably hurting more but why introduce more stress on the same industries. Your own argument supports this. If the high dollar is temporary then why not just wait before introducing a carbon tax / ets. The carbon tax might make more sense in a few years when and if there is a global agreement, and if your right the temp high dollar will be back to ‘normal’.
The argument here is more about the hypocrisy of Howes then it is about the currency. You can’t argue against a high dollar or blame the RBA for killing an industry and at the same time support or ignore that the carbon tax will, or at least should, stress the very same industries he is trying to defend against the high dollar. It doesn’t make any sense, surely you can see that.
Hold on a second. In the same argument your suggesting that the ets / carbon tax is vitally important to implement and yet it wont hurt carbon intensive industries like Allcoa. It has to doesn’t it, otherwise it just wont work. Yeah the dollar is probably hurting more but why introduce more stress on the same industries. Your own argument supports this. If the high dollar is temporary then why not just wait before introducing a carbon tax / ets. The carbon tax might make more sense in a few years when and if there is a global agreement, and if your right the temp high dollar will be back to ‘normal’.
The argument here is more about the hypocrisy of Howes then it is about the currency. You can’t argue against a high dollar or blame the RBA for killing an industry and at the same time support or ignore that the carbon tax will, or at least should, stress the very same industries he is trying to defend against the high dollar. It doesn’t make any sense, surely you can see that.