Garnaut Gets It

One of Australia’s great strengths has been the quality of senior public servants. Ken Henry as head of Treasury is one example. Below I praise the contribution of Alf Rattigan who in the 60s used his position as Chair of the Tariff Board to initiate reform of Australian protectionism. Ross Garnaut belongs to this category of outstanding public servants.

The most cutting part of his report is his brisk dismissal of the proposition that Australia would somehow be going it alone. Sure, he says, we have just under 1.5 percent of total global emissions, but he points out that the United Kingdom’s share is not much larger – about 1.7 percent, despite it having three times our population – but it hasn’t occurred “to a British Prime Minister from Margaret Thatcher onwards that Britain’s efforts are unimportant.”

Australia announcing that it will move is a signal to the rest of the world that we are with them if there’s a movement to continuing global action. If the global action does not materialise we have not taken a “once-for-all decision.” We can remodulate. In any case there is abundant evidence of other countries moving. Over 70 have carbon trading.

His other powerful contribution is to spell out that a market-based mechanism for moving Australia forward is preferable to the opposition’s direct action approach, saying:

Reliance on regulation, or “direct action”, to reduce our greenhouse gas emissions will cost Australians much more than a carbon pricing scheme. Direct action will still raise costs, but it will not raise any revenue to assist households or emissions-intensive trade-exposed industries in the transition, or to support biosequestration or innovation. [My emphasis]

His recommendation for a disciplined rather than spendthrift approach to government assistance is useful. And he is right about electricity generators not having a powerful case for compensation. It’s a smart suggestion to give them loan guarantees to protect power supplies during the introduction of a carbon price rather than old-fashioned handouts.

Finally, the essence of Garnaut thinking is that this reform is part of that continuum of policy reforms since 1983 from both sides of politics that has liftedAustralia’s growth performance.

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