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QUARTERLY ESSAY 66 The Long Goodbye

 

Correspondence

Richard Denniss

I first heard of the Adani coalmine, and the Galilee Basin in which it sits, back in 2011, when a supporter of the Australia Institute, Paola Cassoni, emailed to tell me about plans to build a 400-kilometre railway line through the beautiful Bimblebox Nature Reserve. “Why the fuck would anyone want to build a railway line out there?” I asked a friend. I’ll tell you his answer a little later.

Anna Krien’s essay is a powerful and timely reality check. Although the last five Australian prime ministers have stated that they accept the science of climate change and the need to burn less fossil fuels (albeit with significantly differing degrees of consistency), Australia’s production of coal has grown by a third since Kevin Rudd declared that climate change was our greatest moral and economic challenge. And as The Long Goodbye highlights, the current Australian and Queensland governments hope to double our coal exports in the coming decades in part by giving subsidies to the enormous Adani mine – and up to nine other coalmines – in the Galilee Basin.

In the words of the former Minister for Resources Senator Matt Canavan, “This project will open up the Galilee Basin. It will be the first mine in that area. There are enormous amounts of good quality thermal coal in the region.”

Krien’s juxtaposition of the underwater world of the Great Barrier Reef and the coal buried deep underground that the Turnbull and Palaszczuk governments are keen to unearth helps to highlight how much effort it takes to cause the climate change that will destroy the largest living organism on the earth. Climate change isn’t an accident. It takes determination, resolve and an enormous amount of government subsidies. Former minister and newly discovered Italian citizen Canavan assures us he is up to the enormous task of heating the world’s oceans. He even mocked those motivated to act in response to the science of climate change recently, tweeting “Instead of trying to save the planet in 2050 the QLD labor should just concentrate on saving jobs today!” 

The Adani mine is big. If you went to the top of the tallest building in Australia and looked to the horizon, you would not be able to see as far as the mine’s 40-kilometre-long pits will stretch. And those pits will be 10 kilometres wide.

Krien’s reportage and analysis does justice to the proposed mine’s size and significance, but in this comment I want to broaden the analysis even further to discuss the question: why are state and federal politicians so keen to build it?

Some say it is because India needs coal, but with world coal production falling for the last three years in a row there are plenty of existing coalmines going for much cheaper than the cost of opening up a brand-new coal basin. Adani could simply buy an existing mine if they wanted cheap access to some coal.

Some say it’s to create jobs, but, as Krien describes, under oath Adani’s own expert told the Queensland Land Court that a much larger mine than the one currently under consideration and the associated railway line would create 1464 jobs. Yes, it’s true that figure ignores the potential port expansion jobs, but a similarly sized port expansion in Newcastle created only about sixty jobs.

And some say it is to fund schools and hospitals with all the taxes that it will generate, but the Adani company is listed in the Cayman Islands, it has extracted a “royalty holiday” from the Queensland Labor government, and it is getting $1 billion upfront from the federal Coalition government. In the words of the Queensland Treasury, “spending on mining-related infrastructure means less infrastructure spending in other areas, including social infrastructure such as hospitals and schools.”

So if it’s not money or jobs or the desire of a federal government to help the poor of India with our subsidised coal (the same government that has cut aid funding), what is going on?

My answer to this question might seem strange coming from an economist. I think it’s about culture. In Australia we love to “develop our wilderness.” We love to think that big foreign companies will come and “create jobs” for us. And we fear that if we don’t offer free coal, free rail and tax breaks, we might “miss out.” We might not be “competitive.” We are insecure. When I say we, I mean our elected representatives. But if our democratically elected representatives are insecure, doesn’t that mean we are?

Maybe. But maybe our rapid population growth and the rapid cultural change that has accompanied it means that our political representatives are lagging well behind the population, not just on demographic diversity, but on self-confidence. While much is said about the impact of job insecurity on the young and the vulnerable in Australia, the fact is that many politicians, particularly in Matt Canavan’s National Party, are increasingly fearful that they will be “left behind” by a populace who are embracing new political parties and independents as fast as they are scoffing halal snack-packs. While a parliamentary pension is far more generous than the dole, being thrown out of office by a rapidly evolving electorate weighs heavily on the minds of many MPs. Just as many factory workers want to slow down the rate at which technology is changing, many politicians want to slow down the rate at which our community and “their” electorates are changing. Propping up old industries, and the old political networks that come with them, is one way of buying themselves some security, albeit with our money.

The subsidies for the Adani mine have become a big issue, but this is by no means the first time taxpayers have been asked to underwrite a major resource development for a multinational company. Indeed, after decades of denial from the mining industry, Senator Canavan recently belled the cat when he defended his determination to subsidise the Adani mine by declaring that every major coal project in Australia had been subsidised by government. He is, of course, right about that. But admitting that our “cheap coal” has for decades been based on expensive government subsidies isn’t really an argument for why, at a time when world coal demand is falling, it makes sense to subsidise a few more mines.

Of course, it isn’t just coal that benefits from taxpayer largesse. Last year the Tasmanian state government lost $30 million of taxpayers’ money selling logs it never bought. That is, although native forests plant themselves, receive free rain water and grow on land owned by state governments, Forestry Tasmania, like native forestry corporations across the country, manages to lose money in the process of chopping down its native forests and selling the logs to paper mills. That’s quite a feat! Despite all the talk of “jobs,” less than 1 per cent of Tasmanians work in native-forest logging, but, like the Adani mine, logging provides a simple way for regional politicians to define themselves as “standing up for our way of life” by fighting “inner-city greens.”

And the Adani mine is by no means the first major resource project to make ridiculous claims about jobs and community benefits that some of our elected representatives take at face value. Back when I first heard about the plan to extract coal from the Galilee Basin, the Adani mine barely rated a mention. The first cab off the rank in the Galilee was expected to be Clive Palmer’s China First mine, a project that he claimed would create 70,000 jobs. Yep, you read that right. The first jobs claims made by the coal industry in the Galilee would make even Matt Canavan blush.

As Krien highlights, exaggerated job claims are central to the political strategy of the resource industry. But while mining companies exaggerating the benefits of their product should be no more surprising than purveyors of sugary breakfast cereal exaggerating the health benefits of their product, what should be surprising and concerning is the willingness of our elected leaders and appointed bureaucrats to accept such absurd claims at face value. They have lapped them up for decades.

Back in 2012 I was asked by the Bulga Milbrodale Progress Association to help stop Rio Tinto destroying the town of Bulga by expanding the Warkworth coalmine well beyond its original boundaries. While Rio didn’t deny that it wanted to destroy the town, it did claim that in doing so it would create 44,000 jobs in the Hunter Valley. I grew up in the Hunter, and I lived through BHP’s closure and the loss of 20,000 jobs. And you didn’t need an economics degree to see how unlikely it was that the expansion of an existing mine would create the equivalent of a 100 per cent increase in Australian coalmining jobs. But the NSW planning department accepted the 44,000 jobs claim without question and used that number in supporting the expansion and opposing the voters of Bulga.

In the NSW Land and Environment Court, I presented my economic and commonsense criticisms of the 44,000 figure. And under oath I said that while I didn’t know exactly how many jobs the Warkworth mine would create, I thought it would be close to zero. Yes, zero. It was an extension of an existing mine at the peak of a mining boom and I argued that as the unemployment rate in nearby Singleton was 1 per cent, the mine would simply cannibalise skilled mining jobs from other projects.

The judge agreed with me and damningly described the kind of economic modelling used to generate the 44,000 jobs claim – known as “input–output modelling” – as “deficient.” It was a big case and a big call, but the judge was merely endorsing a view previously expressed by the Australian Bureau of Statistics, the Productivity Commission and even the NSW Treasury: that input–output models provide an exaggerated sense of the jobs created by major resource projects.

So why did the NSW planning department accept the 44,000 jobs claim uncritically? Why didn’t the government of Campbell Newman howl down Palmer’s absurd claim about creating 70,000 jobs in North Queensland? And why are Matt Canavan, Malcolm Turnbull and Annastacia Palaszczuk so keen to advance claims of “ten thousand jobs” or even “tens of thousands of jobs” that come straight from such a discredited form of economic modelling?

My answer is, again, culture. After the people of Warkworth won their court case, Rio Tinto appealed. And lost. And after that, Rio Tinto’s global head of coal, who is based in London, where there is no coalmining, flew to Sydney to visit the then NSW premier, Barry O’Farrell, who promptly changed the law – and now the Warkworth mine expansion is going ahead. 

So if it’s not about jobs, what’s this all about?

Some politicians simply want to depict themselves as “builders” who “get things done” and “understand the needs of business” and “what it takes to make Australia competitive.” They know that most Australians, and indeed most North Queenslanders, will never visit Warkworth or the Galilee Basin. But they also know that many Australians want the economy to grow. As most people, understandably, prefer the idea of creating jobs to destroying them, it makes sense to depict your political rivals as “job destroyers.” The mines and the logging and the freeway-building and all of the “big projects” are, for the politicians at least, mainly just symbolic battles to help a bored electorate see “what they stand for” and that they “get things done.”

No one was meant to check whether any of the promises made by Rio Tinto or Adani were deliverable. That’s why mining companies and their friends in parliament are so keen to crack down on the use of courts to examine the claimed benefits. Lying to journalists is a lucrative business for the mining companies and their PR firms, but lying to judges is a crime.

At the end of the biggest mining boom in Australia’s history, Indigenous disadvantage in Western Australia remains at appallingly high levels. So what do the Queensland and Northern Territory governments argue that Indigenous people need? New mines to deliver new hope and new jobs. Perhaps they think the WA mining boom wasn’t big enough? Perhaps they think the WA government, a government that collects a mere $4 per tonne for the iron ore that BHP and Rio Tinto sell for $63 per tonne, wasn’t generous enough towards the mining companies?

Like the mining industry as a whole, the Adani mine is not about tax revenue, job creation or energy for poor people. The mining industry is about delivering huge profits to its shareholders and political power to those who support those profits. For decades, politicians have used their willingness to hand over taxpayers’ money as a way to simultaneously bend the knee to the mining companies and stand up to the “greenies” who oppose “development.” As a political strategy it has worked a treat, but as an economic development strategy it is a proven failure.

Yet as the cities expanded and the miners shifted from underground to open-cut, the politics have begun to shift. It’s not just Indigenous Australians, people who have lived on their country for tens of thousands of years, who now suffer from the noise and dust of coalmines; horse studs and wineries have been there for decades. Decades, I tell you! And while mining dust never worried the inner-city voters too much, climate change clearly does.

A growing number of voters, and a growing number of other industries, are now paying close attention to the ridiculous economic claims made by mining companies like Adani and politicians like Matt Canavan. New coalitions like Lock the Gate unite farmers, tourism operators and environmentalists in public campaigns that confound the efforts of conservative politicians to depict all those who oppose them as hippies and freaks. And think-tanks like the Australia Institute have been able to provide those groups with high-quality research that both holds up in court and cuts through in public debate.

Ironically, while conservative commentators rage against the “identity politics” of campaigns to grant equal marriage, they cheer noisily for their favourite minerals, with banal statements like “coal is good for humanity.” But the public can smell the desperation. And the much-derided social media allows them to easily organise and inform themselves about the economic and environmental damage associated with poorly conceived projects like Adani’s.

As the world embraces new ideas and new technologies, it becomes a scarier place for politicians who gained office promising to deliver for those committed to old ideas and old technologies. The reality is that our rapidly growing cities are steadily reducing the electoral significance of regional electorates. And this effect is exacerbated by the flight of tree-changers moving out of the crowded cities and into once-safe National Party seats. The inner-city environmentalists that the Nats have long derided are fast becoming their constituents. It’s scaring the incumbent politicians and mining industry alike.

It is not unusual for people who fear losing power to respond by trying to hold on even tighter to things that they feel in control of. And it is not unusual for those in decision-making positions during periods of rapid change to downplay the rate of that change and overestimate the extent to which they can help keep things the way they were. So we shouldn’t be surprised that those who have represented regional electorates might try to double down, not just on their rhetoric of “development,” but also on the size of the white elephants they are planning.

What we should be surprised by, however, is the willingness of the far more numerous representatives of suburban and inner-city electorates to go along with expensive taxpayer-funded subsidies for regional projects of dubious economic benefit. Polling done by the Australia Institute shows that the clear majority of voters in the blue-ribbon seats of Malcolm Turnbull’s cabinet – not just the prime minister’s seat of Wentworth, but also those of Scott Morrison, Julie Bishop, Peter Dutton, Greg Hunt, Josh Frydenberg and Christopher Pyne – oppose a taxpayer-subsidised loan to help build Adani’s coalmine.

But on closer inspection there is a simple reason why the handful of National Party MPs and senators in Mr Turnbull’s Coalition government can extract so much money to support such an unpopular project: Mr Turnbull formed a government with a majority of just one seat in the lower house. Just as Senator Brian Harradine once extracted hundreds of millions of dollars for his home state of Tasmania from John Howard, the Nationals are determined to exact a high price for their support of the government of Malcolm Turnbull.

As Krien’s essay makes clear, the economic argument for the Adani mine is extremely weak, but it seems many in the environmental movement have fallen into the trap of attacking the enormous coalmine on the wrong front. Canavan, a trained economist and former employee of the Productivity Commission, knows that the economic case for the project is weak, as does the prime minister and Adani. The political boosters of the project are simply looking for a symbol to unite their traditional base and enrage their traditional foes. They want to force voters to choose between those who want to build and those who want to block. As Barnaby Joyce once said, “Are the Queensland government fluffers or doers?” Do they want the “yellow things pushing dirt around” or not? Few graduates of St Ignatius College who went on to become accountants do authentic bush talk better than Barnaby.

So what was it my friend said when I asked him why the fuck anyone would want to build a 400-kilometre railway line to connect a new coal basin to a new coal port on the Great Barrier Reef? “It’s Queensland, mate – we love cutting things down and digging them up.”

Australia enters the twenty-first century doubling down on a nineteenth-century economic development strategy. At a time when the world is reducing its consumption of coal, we plan to double our production. At a time when countries such as the United Kingdom, France and Germany are resolving to ban internal-combustion engines in coming decades, we are planning to drill for oil in the Great Australian Bight. And at a time when tourism is the biggest employer in Tasmania, the state government wants to renege on previous agreements to limit old-growth logging.

As the Saudis have shown, selling natural resources can be highly profitable. But as the WA mining boom shows, in Australia it is never the community that reaps the biggest rewards. For decades our politicians have been more interested in subsidising our resource industry than taxing it. Adani is not the first mining company to promise the world. The question is whether it will be the last to be believed. It’s not too late to stop Adani.

 

Richard Denniss is chief economist of the Australia Institute. He is the author of Econobabble and the forthcoming Curing Affluenza, and writes regularly for the Australian Financial Review, the Canberra Times and the Monthly.

CONTINUE READING

This correspondence discusses Quarterly Essay 66, The Long Goodbye. To read the full essay, subscribe or buy the book.

This correspondence featured in Quarterly Essay 67, Moral Panic 101.


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