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Dr Muriel Newman

Putting the Public Interest First

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With the economic crisis delivering more bad news each day, we must keep reminding ourselves that change brings opportunity. The return of frugality and thrift is good for discount businesses, the slump in the New Zealand dollar is giving exporters a real boost, low interest rates are assisting those with debt to repay their loans, and global uncertainties are encouraging New Zealanders overseas to return home.

But as we look to the future, it is vital that we don’t lose sight of the factors that were responsible for bringing the economic woes to New Zealand almost a year ahead of most other countries. In effect, it was the Labour Government’s obsession with tax and spend – over-taxing wealth creators and “pork-barrelling” their money – that saw New Zealand lead the world into the recession. Labour’s nine-year spending spree pushed up inflation, causing the Reserve Bank to lift interest rates to the highest in the developed world. The dual effect of the long-term upward pressure on the Kiwi dollar along with an increasing regulatory burden, served to undermine competitiveness preventing New Zealand businesses from optimising the opportunities available in the global marketplace.

The OECD projected the New Zealand Government’s spending at central and local level to be a high 45 percent of Gross Domestic Product, compared to the Australian Government’s ratio of 35 percent of GDP. High performing countries like Singapore and Honk Kong have ratios below 20 percent.[1]

This makes it imperative that the new National Government does not lose sight of the fact that the imposition of socialist political agendas have exacerbated the problems that New Zealand faces, and that the answer to stimulating the economy is less government not more.

Sir Roger Douglas MP in an article published in the NZCPR’s Mid Week Politics questions the logic of government job creation schemes: “There is a fraudulent notion to the job summit’s focus on artificial job-creation. The reality is, every dollar taken out of the private sector to finance the debt of the proposed ‘fiscal stimulus’ merely takes job opportunities away from where they exist in the private sector, and allocates them across a politicised area of the economy. If you take into account the secondary effects, not one single extra job is created.”

The reality is that it is the private sector that creates jobs and growth, not the government, and the sooner the government gets the regulators and “clip-boards” out of the way the better!

The real test for the new government over their commitment to jobs and growth is going to be their response to the Emissions Trading Scheme (ETS). The NZIER estimated that by 2012, the economic impact of an emissions trading scheme will be to lower GDP growth by $900 million and reduce average household spending by $600 – at a cost of 22,000 jobs. The report explains that an ETS will impose major costs on business and cause a contraction in the domestic economy, a loss of competitiveness internationally, a reduction in wages, a contraction in household spending, and an increase in prices. It further identifies export industries, especially the agricultural sector as being the most affected, noting that no other emissions trading scheme in the world currently includes agriculture: “We are internationally recognised as one of the most efficient agricultural producers in the world but New Zealand is contemplating penalising our farmers while allowing other, inefficient farming systems overseas to continue unchecked. That doesn’t make sense”.[2]

A 2007 survey of 41 firms by the Greenhouse Policy Coalition found that some 3,000 jobs were at risk of being lost as a result of an estimated $250 million increase in operating costs that would be imposed by the introduction of an ETS.[3] The Otago District Health Board faces an estimated $1.3 million in increased energy costs if the ETS goes ahead.[4]

The Epoch Times reports that Rio Tinto, owner of the Tiwai Point aluminium smelter plant near Invercargill has stated that an ETS could put thousands of jobs at risk in the region: “The company provides employment for 4000 people and contributes $3.7 billion to the New Zealand economy each year. It is the ‘cleanest and greenest’ of the 200 aluminium smelters worldwide and Rio Tinto said that they will take jobs with them if they are forced to relocate overseas”.[5]

The newspaper further reports then National Party, spokesperson for climate change, Nick Smith as saying, “There is no gain for the climate if Rio Tinto departs New Zealand and manufactures its aluminium in the Philippines, or if Holcim Cement closes its works and imports cement from China to New Zealand.”

Nor is the talk of “green jobs” being created credible, since these make-work jobs rely on heavily government subsidised “green energy”. For example, it would not only take 1,000 wind turbines occupying tens of thousands of acres to produce as much electricity as one medium-sized coal-fired power station, but, with a traditional power generator needing to be on stand-by for the times when the wind doesn’t blow, wind energy is an incredibly expensive and unreliable energy source.[6] That means that green jobs in heavily subsidised inefficient industries come at the expense of real jobs in efficient industries.

Ultimately, one way or another, it is the New Zealand public who will bear the cost of an ETS, either directly through an increase in the cost of household power, or indirectly through the increased costs of goods and services – as well as increases in the costs of unemployment benefits. However, because the government has been trying to rush through the ETS review, none of the details of the costs associated with an ETS (or a carbon tax) have been spelt out. In other words, their failure to prepare a comprehensive regulatory impact analysis means that the public have no idea whether the cost of their proposed scheme will be in the region of $10 million a year, $100 million a year or $1 billion a year!

This week’s NZCPR Guest Commentator, Dr Ron Smith, the Director of International Relations and Security Studies at the University of Waikato, raises some very important questions about the quality of research that the Government might rely on, as they asses the scientific basis of an ETS. In his article Climate and politics: advice for the committee, he explains that policy makers should be able to depend on the scientific establishment such as the Royal Society, NIWA, or the United Nations Intergovernmental Panel on Climate Change for their information, but in the case of Anthropogenic Global Warming theory, he believes “the Committee cannot simply accept the authority of prominent elements of the scientific establishment. There are too many gaps in the data and too many uncertainties in the theory and these won’t be resolved easily”.

Dr Smith explains, “The other thing that absolutely must be done is to take steps to broaden the sources of scientific advice available both to the Government and to the public. This will not be easy. The global warming faction is substantially institutionalised, not only in such bodies as NIWA and the Royal Society, but in the universities. This arises not simply because these organisations wish to please their political masters but also because of a fundamental shift in the way research is funded. We no longer fund (or indeed value) speculative, critical, open-ended investigation but rather permit a system in which interested parties pay for ‘research’ for their purposes. Of course, it is not being argued that there should be no applied research; merely that this ought not to be the dominant, or indeed exclusive mode of research activity in our universities.

“As far as the science underlying climate change is concerned, expectations of commercial advantage from the public support of mitigation measures have given rise to a range of ‘derivative’ industries which hope to profit from trading in ‘credits’, or supplying subsidised products (‘bio-fuels’, or windmills). They have money to spend on ‘research’ but they are not interested in any activity that does not support the particular world view that is conducive to their advantage. This, together with an unwillingness on the part of public agencies, to support or consult anybody who is not committed to the cause, has given a highly misleading impression of the degree of consensus behind anthropogenic warming theory.”

The point is, whether the advocates of global warming want to hear it or not, the science surrounding global warming theory is not settled and global temperatures continue to trend in a way that validates claims that it is nature, not man, that rules the climate. This means that any ETS imposed on an economy will have an enormous detrimental effect on jobs and growth but will do nothing for the climate.

Not only that, but if every country did go ahead and fully implement their Kyoto Protocol obligations, world temperatures are predicted to reduce by an insignificant 0.06 degrees by 2050. In other words, whichever way it is viewed, any emissions trading scheme New Zealand might introduce will add massive costs onto households and the economy, as well as destroying jobs, without having any appreciable impact on the climate.

There is no doubt that vested interests will vocally resist any moves to abandon an Emissions Trading Scheme, but the government must be prepared to stand up to them if it really is committed to putting jobs and growth – and the public interest – first.

1.Roger Kerr, Like throwing petrol on fire
2.NZIER, The impact of the proposed Emissions Trading Scheme on New Zealand’s economy 
3.Greenhouse Policy Coalition, Jobs At Risk With Emissions Trading Scheme 
4.Greenhouse Policy CoalitionOtago DHB facing over $1 million in increased energy costs 
5.Epoch Times, Emissions Trading Threatens Jobs, Economy, Say Experts 
6.Keith Lockitch, The Green Energy Fantasy