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Enjoy the sugar hit as we flirt with economic ruin

By Alan Moran - posted Wednesday, 19 May 2021


The government does, however, understand the importance of lower energy costs to business and consumers, and claims its policies have brought lower prices. Yet here the government does not even fool itself since, while claiming success, it is providing stopgap subsidies for energy-intensive aluminium smelters and for gas plants to cushion the impact of coal plant closures. Those closures of low-cost, reliable plant result from discriminatory government policies favouring high-cost, poor-reliability wind and solar.

Instead of addressing these adverse effects, the government celebrates the billions of dollars spent on renewable energy and the consequent billions spent on augmenting networks, refashioning electricity markets and transforming hydro facilities into services to accommodate the intermittency of wind and solar. In fact, that expenditure detracts from rather than supports the productivity growth on which higher incomes depend.

Hence, not only is business investment languishing but its potency is being blunted by various forms of political intervention.

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In addition to energy, this is evident in environment policies that force the dilution of productivity-oriented expenditure into costly time-consuming studies to justify firms' planned expenditures.

And some measures subsidise the transformation of agricultural land into carbon storage venues, while others support the diversion of agricultural water into outlets that supposedly promote environmental values.

Apologists for the budget correctly claim Labor would be even worse. But this confirms how politicians have seized the nation's finances and armed themselves with economic levers to keep themselves in power.

In undermining enterprise, the upshot will bring about either the slow economic decline seen in many Latin American countries or an abrupt economic crash. Australia's Constitution is based on that of the US, which sought to prevent the outcome of Benjamin Franklin's description of democracy as, "two wolves and a lamb voting on what to have for lunch". Such aphorisms by the American founding fathers were based on their studies of the Ancient World. They again seem prescient.

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This article was first published in The Australian.



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Alan Moran is the principle of Regulatory Economics.

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