Thu Jun 16

Everything, it seems, is conspiring to test the Albanese government

Written by Michelle Grattan, Professorial Fellow, University of Canberra

On Thursday Anthony Albanese and Energy Minister Chris Bowen formally updated Australia’s international commitment for its proposed climate change action. It’s now a 43% reduction in emissions by 2030, in line with the policy Labor took to the election.

They were watched by representatives of the business sector, relieved at the prospect of greater policy certainty, which will in turn pave the way for more confidence for investment in energy.

At a news conference later, Bowen declared forcefully: “Today, Australia turns the climate corner.”

Well, yes and no. The Albanese government promises a more progressive climate and energy policy, in tune with the needs of the inevitable transition to a decarbonised economy.

But at this precise moment, it might seem less like we’re around the corner than that getting off the old road is looking even more complicated than imagined.

The Albanese government is blaming the energy crisis engulfing eastern Australia on the Coalition’s failure to put in place policy to ensure adequate and timely investment in renewables.

That’s correct, but it’s not the whole story. The energy system has been recently hit by some unforeseen challenges, including the Ukraine war.

Then, as regulators tried to deal with the situation with a price cap, the power producers acted to advance or maintain their commercial interests. All this led to the Australian Energy Market Operator taking over the system on Wednesday.

The Albanese government is doing what it can, by working with the states and by backing AEMO.

But regardless of having a more rational policy than existed before, the government is still sounding rather betwixt and between about the role of gas and coal in the next few years of the transition.

Any notion the “climate wars” are over is misplaced optimism – the opposition will exploit the immediate problems to ensure they are kept ablaze.

Long-term policy thinking is vital. But, politically, the public very often think short-term, and their thinking can change on a dime.

Looking at its political position this week, the government would be delighted.

The Essential poll published this week had approval for the job Albanese is doing leaping 17 percentage points between May and June, to 59%. His disapproval declined 23 points to 18%.

When people were asked whether Australia was headed in the right direction or was on the wrong track, 48% thought it was going in the right direction (up 8 points) and only 27% said the wrong track (down 15 points).

These results partly reflect the sheer relief at the dispatch of the Morrison government and in particular Scott Morrison himself. But whatever the mix of drivers, the big question is how strong a political shield the Albanese government will have as it faces a huge buffeting in coming months.

Reserve Bank Governor Philip Lowe doesn’t often emerge into the TV lights. When he appeared on the ABC on Tuesday night, it was to predict Australia’s inflation rate would hit 7% by year’s end. Lowe also repeated he expected the official interest rate would rise to 2.5%.

A day later the government had some welcome news when the Fair Work Commission handed down its 5.2% increase in the minimum wage, marginally above the latest 5.1% inflation figure. The increase, however, was smaller for awards, and inflation is already running ahead. While the commission didn’t think the rise a risk for the economy, critics claimed it will hit small businesses as well as feed into inflation.

Meanwhile, there were signs of storm clouds abroad. In the United States the Federal Reserve raised its benchmark interest rates by 75 basis points, in a major hit against an inflation rate of 8.6%. Fears are mounting of a US recession, with severe consequences for other countries.

Internationally, the weekend meeting between Defence Minister Richard Marles and his Chinese counterpart was a welcome sign that, after the change of government, China is interested in a thaw in a relationship that’s been dysfunctional for years.

But the Chinese are adept at games and Albanese’s response – essentially saying, show us you’re serious by taking off trade restrictions on our exports – was exactly right.

A less welcome sign was that the people smugglers are testing the new government, with several boats from Sri Lanka intercepted since the election.

There’s no doubt about the government’s determination to prevent boat arrivals. But it also has to be careful about signals.

It did absolutely the right thing in allowing the “Biloela” Sri Lanka family to return to their Queensland town. And in due course they should be given permanent residency.

But for Albanese to be photographed with them was more problematic. It seems a nice, harmless gesture, reinforcing the contrast with the Morrison government’s heartless treatment of the family. But the picture is fodder for the people smugglers’ advertising.

Former Labor operative Cameron Milner, writing in The Australian this week, pointed to optics on another front, with a warning to Albanese – whose trips so far have been fully justified – about the need to stay at home.

A few weeks ago it would have seemed an excessively long bow to suggest the situation the government faces has parallels with that confronting the Whitlam government in the wake of the international oil shock. But while the particulars are different, the magnitudes can be compared.

Mega crises require flexibility. But be too flexible and that can came back to bite.

For example, as the budget approaches there’ll be more calls for the government to scrap the Coalition’s highly expensive stage three tax cuts, now estimated to cost the budget more than $200 billion between 2024-25 and 2031-32. They were legislated years ago, when the budgetary situation was benign rather than in deep deficit.

But Albanese will turn a deaf ear, because he knows that to break his word would create more problems than delivering the tax cuts will. It would trash trust in his word, and that would undermine his government.

This can be cast as a choice between best-practice policy and “safe” politics. Usually, a leader should opt for good policy, even if it involves a U-turn. But in this instance Albanese would be wise to stick with his political lens, given a U-turn would drive a hole in his credibility.