Oct 31, 2016

SA power outage: What’s going on with South Australia’s electricity?

SOUTH Australia has the most expensive electricity in Australia and has been prone to blackouts, what exactly is going on there?
Premier Jay Weatherill was quick to point out that the latest blackout, which saw the entire state plunged into darkness, was a “weather event”, not a “renewable energy event” but it has drawn attention to issues with the state’s electricity network.
The state gets 40 per cent of its electricity from renewable energy but there are now concerns wind and solar will not be enough to provide reliable electricity.
Today, Prime Minister Malcolm Turnbull said several state Labor governments — not just in SA — had set “extremely aggressive, extremely unrealistic” targets for renewable energy use.
“If you are stuck in an elevator, if the lights won’t go on, if your fridge is thawing out, everything in the kitchen is thawing out because the power is gone, you are not going to be concerned about the particular source of that power,” he told reporters in Launceston.
“You want to know that the energy is secure.”
While Federal Energy Minister Josh Frydenberg has acknowledged SA’s blackout was caused by a once-in-a-50-year weather event, he said it still raised broader questions about the future of energy security in Australia.
He said he would will bring the state and territory energy ministers together within weeks to discuss ways of avoiding the cascading effect of power blackouts and how to better manage the shift to renewable energy.
So does South Australia have a problem?
Mr Weatherill says the precise sequence of events was still being worked through but the blackout appears to be related to severe “almost cyclonic force winds” and 80,000 lightning strikes that battered the state about 3.48pm.
The strong winds and lightning strikes look to have damaged power transmission towers, mainly in the mid-north of the state including near Port Augusta and Port Pirie.
This seems to be backed up by photos of a toppled electricity tower near Melrose, north of Adelaide, which have lit up social media.
Electricity transmission towers looked a little worse for wear. Picture: Debbie Prosser/Facebook
Electricity transmission towers looked a little worse for wear. Picture: Debbie Prosser/FacebookSource:Facebook
ElectraNet, which owns the transmission towers, said 23 towers appeared to have been damaged, including three out of the four transmission lines moving power between Adelaide and the north of South Australia.
“We haven’t done a complete assessment yet but there’s a strong suspicions that (the damage) is from wind, some might have been from lightning as well,” a spokeswoman told news.com.au.
In addition to this, the distribution network (which are the electricity poles and wires that deliver lower voltage power to people’s homes and businesses) were also damaged.
The damage triggered an automatic cut at the interconnector, which as the name suggests, links South Australia and Victoria. It allows the states to share electricity, and acts like a large surge protector, which automatically cuts off supply if there is a fault in the system to protect the entire system from being damaged.
South Australia gets its electricity from wind, solar and gas but no longer has coal power after Alinta’s Northern Power Station and Playford A station at Port Augusta closed in May. It followed the closure of the Playford B in 2012.
At the time, Australian Energy Council chief executive Matthew Warren said the closure would leave the state with less back-up energy on days of high demand.
The state would need to rely on renewable energy and the interconnector which provides electricity from Victoria for base-load power.
“The reality for South Australians is that we’re in uncharted waters,” Mr Warren said in May.
“There’s an increased level of risk that we really haven’t seen before anywhere in the world, so it doesn’t mean we’ll have more blackouts, hopefully if we’re smart we can sort out solutions so power supply can be the same as usual, but it’s an increased risk.”
This week’s blackout was not the first time South Australia has felt the impact of losing its supply from Victoria.
The Port Augusta Playford A power station stack being demolished on September 9.
The Port Augusta Playford A power station stack being demolished on September 9.Source:AAP
It also experienced a blackout in some parts of Adelaide, Barossa Valley, Port Pirie and west coast region late last year. That was blamed on the failure of the interconnector.
Electricity supplier ElectraNet said the disruption was caused by an incident at a substation in Mingboll, in the state’s southeast that blocked supply from Victoria. It took about three hours to restore power to about 110,000 customers.
ElectraNet acknowledged South Australia had relied on Victorian power for a long time.
“We always rely to some extent on the Victorian interconnector, it’s been there for some 25-30 years, it is part of our supply mix,” an ElectraNet spokesman Paul Roberts told ABC at the time.
“Many times other supply will kick in and there’s always stuff on standby, but in this case it may well have been the size of the load.”
The South Australian government has already flagged its intention to seek more power from other states, including NSW.
Mr Weatherill announced a $500,000 feasibility study this year into building a new interconnector to link it with other eastern states.
Mr Weatherill said he hoped this would bring down electricity prices in South Australia, which are often the highest in Australia, and would also open up the possibilities for the state’s renewable energy to be shipped to other states.
Electricity prices spiked in South Australia in July costing one cement maker $3 million, according to The Advertiser. Prices reportedly surged to $14,000 a megawatt hour (they are normally below $100) after gas prices jumped while the interconnector in Heywood was undergoing an upgrade.
SA Treasurer Tom Koutsantonis was forced to plead with the Pelican Point gas-fired power station to produce more energy to supply businesses on the verge of shutting down.
The closures of the Port Augusta power stations was partly blamed on the rise of renewable energy sources and an oversupply of power in the National Electricity Market.
At the time, SA Manufacturing Minister Kyam Maher described the market as holding more capacity than was needed to meet demand.
In 2014, South Australia managed for the first time to get more than 100 per cent of its electricity needs for a working day between 9.30am to 6pm, from a combination of wind and solar energy.
Overall it gets more than 40 per cent of its power from renewables, and has a target of 50 per cent to be achieved within 10 years.
Deputy Prime Minister Barnaby Joyce has said he thinks SA is too reliant on renewables and independent SA Senator Nick Xenophon has called for an inquiry into what happened.
Mr Xenophon said South Australia had become the “laughing stock of the nation” because it didn’t have power on Wednesday. He wants to know whether the blackout could have been avoided.
Wind turbines in Snowtown located in South Australia's mid north. Picture: Kelly Barnes/The Australian
Wind turbines in Snowtown located in South Australia's mid north. Picture: Kelly Barnes/The AustralianSource:News Corp Australia
But Mr Weatherill has blamed people’s “political agendas” for the “ignorant remarks”, noting that Mr Joyce hated wind farms.
When asked whether SA could still have had power if it still had its own coal-fired baseload power, Mr Weatherill said no.
“It’s a misunderstanding that there’s no baseload power,” Mr Weatherill said.
“The baseload power was operating in SA at the time this event occurred.
“If this had happened 20 years ago when there was no renewable energy, the same thing would have happened, that’s the advice we’ve received from the Australian Energy Market Operator.
“I mean this is a weather event, not a renewable energy event, and the truth is this, when
there’s a crisis people pull out their agendas.”
While Mr Xenophon wants the Australian Energy Market Commission to carry out an independent analysis, Mr Weatherill said the government would already look into the circumstances of the blackout and how it responded.
He said the Australian Energy Market Operator would also analyse the technical issues and it’s likely the Energy Council of energy ministers would have an inquiry in due course.
Energy expert Andrew Stock, a member of the Climate Council, dismissed attempts to blame renewables for the blackout as opportunistic and irresponsible.
“Storms can knock out electricity networks no matter where the power supply is coming from,” he said.
At the time of the blackout, 1000MW of wind power was being fed into the South Australian system.
The council also warned the SA storm event is a sign of weather to come.
“The atmosphere is packing much more energy than 70 years ago, which contributes to the increasing intensity of such storms, ” council member Professor Will Steffen said.
Intense rainfall was projected to increase in Australia and had already increased at a global level.
“This is a prelude to a disturbing future, and it’s only going to get worse if we don’t address climate change.”
— With AAP

Despair as Hazelwood power station’s end looms

French energy giant Engie is set to walk away from the Hazelwood power station at the end of March next year, triggering 1000 job losses in one of Australia’s most econo­mically depressed regions, along with power price increases of up to 25 per cent.
While the company is refusing to confirm a decision has been made to shutter the 1600MW plant in the Latrobe Valley, it is understood that without a last-minute buyer emerging it will stop operations completely by April.
The move is expected to drive up the wholesale price of power by between 10 and 25 per cent but is not expected to trigger blackouts or shortfalls in the near term as it will remain operating during the summer demand peaks and ­demand in Victoria is predicted to fall with manufacturing closures.
“I don’t think we will see the lights going out as a result of ­Hazelwood closing,’’ said the head of the Grattan Institute’s energy program, Tony Wood.
In the short term, it will drive up Victoria’s imports of black-coal-fired power from NSW through the interconnector joining the two states, Mr Wood said.
French Environment and Energ­y Minister Segolene Royal has been strongly pressuring Engie, which is one-third owned by the French government, to close Hazelwood as part of its total exit from coal power.
She is understood to have brought it up in meetings with her Australian counterpart Josh Frydenberg in Paris this week. Mr Frydenberg, whose visit to Paris comes shortly after Victorian Treasurer Tim Pallas was there for talks, also met with Engie chief executive Isabelle Kocher.
He would not divulge the detail of the discussions in Paris when contacted there yesterday. “The government is very conscious of the heightened specul­ation and will respond in the event there is a formal announcement by the two companies (Engie and co-owner Mitsui),” he said.
Geoff Dyke, the state secretary of the Construction Forestry Mining and Energy Union’s mining division, said the chances of a buyer appearing were hampered by the backlog of maintenance, the site’s eventual rehabilitation requirements and the fact that banks would no longer lend to brown-coal-generation projects.
“Let’s say it is worth $100 million: well, the liabilities for rehabilitating the site might be $300m. Another problem is the American, English and Australian banks have policies preventing them from lending to coal projects, so you need finance from a Japanese, Chinese or Indian bank,” he said.
Mr Dyke said while a shutdown next year would provide some time for adjustment for the 500 direct employees and 300 contractors at the plant, the company should look at a staged shutdown if it made the decision to close the plant.
One theoretical reprieve would be if Mitsui took over the plant, but it is understood that continuing to operate a plant regularly dubbed Australia’s “dirtiest” for its emissions-intens­ity and targeted by environmental groups might be politically unpalatable for the Japanese trading house. Like Engie, Mitsui has continued to say that no decision has been made on the plant’s future.
But the nearby towns of Morwell and Moe — ranked in the top 10 per cent of disadvantaged munic­ipalities in Australia, are bracing for more hardship following a shutdown of Hazelwood.
“You take the coalmine away from Morwell and the power stations away from Morwell and there’s nothing else to bring people down here,” Salvation Army Lieutenant Ashley Proctor said.
Mr Proctor, who runs the army’s welfare office in Morwell, said there were huge issues in the Latrobe Valley that went ­beyond unemployment and which would only get worse should Hazelwood close. “Morwell already has the highest level of domestic violence and drug use in Victoria — that’s only going to increase,” he said.
Committee for Gippsland chief executive Mary Aldred said the closure of any power station in the Latrobe Valley would have a big impact on direct employees and contractors, but also on local retail and other businesses.
The Grattan Institute’s Mr Wood said the looming closure of Holden and Toyota, on top of the recent Ford shutdown, would ­reduce demand in Melbourne, while any closure of the Portland aluminium smelter, which has been the subject of speculation, would have a similar effect.
Latrobe City Council’s community services general manager Sara Rhodes-Ward said the community felt inequity when it saw better rail and healthcare infrastructure in Bendigo and Ballarat. “I think there is some balancing of the scales that needs to occur for a community that is fiercely proud that it’s kept the lights on for over 90 years and has been the engine room of the state,” she said.

Oct 19, 2016

Tough Tory Theresa May buries Margaret Thatcher’s legacy

The transformation in Western politics gains more momentum with the historic speech of British Prime Minister Theresa May to the Conservative Party conference — it is the burying of the Thatcher-Reagan pro-market revolution and the resurrection of state power in the hands of a tough, revisionist Tory leader.

May declared the vote by the people for Brexit was not just about Britain leaving the European Union — it was a vote “for a change in the way” Britain works. Calling this movement a “quiet revolution”, May declared “this is a turning point for our country”.

She has come to bury Margaret Thatcher’s legacy. And David Cameron’s legacy, despite her praise for him. She is dumping the free-market economic liberalism of the past generation and a half. May stands for faith in government, curbing the abuses of free markets and a new polity based on fairness and decency.

A formidable woman fully aware she governs at a pivotal moment, May seeks to inaugurate a new political age. An angry Britain has voted for change and May declared with relish: “A change has got to come — and we are going to deliver it.” It is her central organising principle.

She presides not just over the separation of Britain and the EU but a re-conception of Tory relations between the state and the people. Whether her vision endures and what it ultimately means defy prediction. The task now is to document the risky, revisionist path on which she has embarked knowing her recasting of conservatism will resonate from Britain to Australia.

May seeks to construct a new political centre. She assaults the “socialist Left and the libertarian Right” and says it is time to embrace “a new centre ground in which government steps up — and not back — to act on behalf of all of us”. The key to successful change, May says, lies in “the good that government can do”.

Rhetoric that Thatcher dismissed as 1970s failed paternalism has now become a compassionate necessity. May has read the mood and gone big and bold. She says the view of the British people that “the world works for a privileged few but not for them” is largely justified. She says her revolution is deep rooted and rests on her pledge to make the economy “work for everyone.”

She is speaking to the disadvantaged, the aggravated middle class and the alienated. She is with them. Her purpose is “to deliver the change people want” because without action “resentments will grow, divisions will become entrenched”.

May declares the Tories must become the party of the workers, of worker rights, the party of the National Health Service, the party of total immigration control, hunting down tax dodgers from the big end of town, and the party that repudiates the idea of a cosmopolitan citizenship with little loyalty to Britain.

She speaks as a patriot and for community. She admits the failures of globalisation. She targets the elites. She blames them for the chasm in Britain where “too many people in positions of power behave as though they have more in common with international elites than with the people down the road, the people they employ, the people they pass in the street”.

Her political strategy is obvious. Facing a crippled Labour Party, she intends to raid its disillusioned supporters while appealing to the populist Right, notably the UK Independence Party backers. Her methods are patriotism, state power, border control, economic justice and social fairness.

Her most famous line was her denunciation of the winners from the Thatcher-Reagan revolution: “If you believe you’re a citizen of the world, you’re a citizen of nowhere. You don’t understand what the very word ‘citizenship’ means” — a message that provoked the accusation of xenophobia from the pro-EU globalised liberals. On the way through she put the human rights lawyers on notice — Britain won’t be their playpen any longer.

Just to bend your mind, consider her comments on Britain’s NHS in the light of Bill Shorten’s stunning 2016 campaign attacking the Coalition for privatising Medicare. In an aggressive assault, May slammed British Labour’s claim to a “monopoly on compassion” and punctured what she called its “sanctimonious pretence of moral superiority”.

“At every election, they say we want to privatise the NHS,” May said of Labour. “And every time we have protected it.” She said it was the Tories, not Labour, that put more money into the NHS. And it was Labour, not the Tories, that had put more private sector resources in the NHS. May said the Tories loved and respected the NHS because it “reflects our values, our belief in fairness” and our support “for the thousands of doctors and nurses that work around the clock to care for their patients”.

Warming to her theme, May said Labour’s ideological fixations meant it had “given up the right to call themselves the party of the NHS, the party of the workers, the party of public servants”.

In an evocative declaration May aspired to the moral high ground: “We succeed or fail together,” she said. “And when one among us falters, our most basic human instinct is to put our own self-interest aside, to reach out our hand and help them over the line. That’s why the central tenet of my belief is that there is more to life than individualism and self-interest. We form families, communities, towns, cities, counties and nations. My mission and the mission of this party is to build a country that truly works for everyone, not just the privileged few.”

As Martin Wolf wrote in The Financial Times, this can only be seen as May’s rejection of Thatcher’s philosophy embodied in her immortal remarks: “I think we’ve been through a period where too many people have been given to understand that if they have a problem, it’s the government’s job to cope with it ... There is no such thing as society. There are individual men and women and there are families.”

From Thatcher to May, the wheel has turned nearly full circle.

May attacked bosses who earned a fortune but failed to look after their staff and directors who behaved improperly, saying “this can’t go on any more”. She would fight the “division and unfairness all around” on display today. While government would support free markets it would demand everyone live by the same rules. That meant shifting the balance “decisively in favour of ordinary working-class people”.

Fairness would be at the heart of the Tory agenda. Britain, she said, would not repudiate globalisation, but ensure its benefits “are shared by all”. She backed free trade but would ensure its benefits were properly spread and this didn’t happen “by itself”.

That’s why she championed an interventionist industry policy to promote those industries — finance, tech, aerospace, car manufacturing, life science — of special value. Backing strategic industries would be tied to backing regional cities. Government would intervene to provide more land to tackle the high price of houses.

What is May’s overall plan for Britain? “A plan that will mean government stepping up,” she said. “Righting wrongs. Challenging vested interests … To stand up for the weak and stand up to the strong.” So sweeping is May’s language, so specific are her claims, so determined is she to redefine the Tory government that only one conclusion is permitted: free markets, deregulation and economic liberalism are in rampant retreat post-Brexit. The same applies in the US in the Trump-Clinton contest.

The key to politics is listening. May follows the popular mood. Yet there is logic in her tactics — if globalisation, free markets and economic liberalism are to be saved, the unqualified condition must become more protection for losers, new policy to spread the benefits and admission of past mistakes. This is what she is doing. May assumes the luggage should be ditched to keep the ship afloat.

Yet May has made a second, specific declaration of her purpose as PM — she has decided, in effect, on a “hard Brexit”, another proof her core motivation is pure politics. She has chosen to fast-track Britain’s separation from the EU by signalling her intention to trigger article 50 — the negotiation process — which means that after two years Britain, by early 2019, will be out of the EU.

May wants to show she is acting decisively as the Brexit champion. She is playing to a majority of the Tory party, proving she will take control of immigration and reclaim British sovereignty. These goals are given priority over the economy. The cost will be frightful.

The people never voted for a hard Brexit. They never voted for the certain economic damage and hardship the markets will inflict. Britain is exposed in a weak negotiating position with the EU, hostage to the currency markets and facing an inevitable economic slowdown. The wild dreams of that small section of the Brexit lobby that quitting Europe meant a glorious pro-market liberated future for Britain will become one of the greatest and saddest jokes of the new century

Oct 14, 2016

The Frightening New Risk in Heart Surgery | CDC Report - Consumer Reports

The Frightening New Risk in Heart Surgery | CDC Report - Consumer Reports

China's bond market 'too big to ignore', says Insight CIO - Citywire

The Chinese government bond market is opening up and soon it will be too large to ignore, according to Adrian Grey, chief investment officer at BNY Mellon company Insight Investment.

The Chinese bond market is the third largest in the world behind the US and Japan. Over the last year it has opened its debt market to international investors to buy onshore bonds and joined the IMF’s reserve currency basket, the Special Drawing Rights (SDR).

Speaking at a media briefing in New York on Wednesday, Grey said: ‘The Chinese have made it much more straightforward for people like ourselves to access their domestic bond market. They are actively encouraging large foreign players, [like] asset managers, to come and buy in their bond market.’

Investors were unlikely to consider Chinese bonds as they could only be accessed from an offshore perspective. Now its currency has joined an international standard like SDR, investors are much more interested, said Grey. He added that yields in China are much higher than Japan or Europe.  

Despite eyeing the investment the Grey said his team has hesitated to jump with both feet just yet.

‘We are active in that market. It’s not yet at the stage where you can go in and buy however much you want and sell however much you want or anything like that.

‘You need to be a little circumspect about just charging in. We’re not huge bulls on China but we’ll be keeping tabs to how we take advantage of it going forward. It is literally too big to ignore going forward,’ said Grey.

Bubble territory

Concerns over a bond bubble and the future of liquidity in the market has Grey and the Insight Investment portfolio manager team looking to securitized debt and customized credit solutions.

‘Yes, there is a bubble. How inflated is that bubble? Can it get more inflated? Can it pop? It’s difficult to put a timeline on it… we’re in world where, as a consequence of policy, in any historic context valuations are extreme.’

He added that there will be a rush to the door, so the best an investor can do is ensure their affairs are in order so they can ride it out.

‘The fact of the matter is that if you want to exit fixed income markets in a hurry, that door is going to be pretty small and there’s going to be a lot of people trying to get through it at the same time.’

Oct 6, 2016

Renewable energy faces stormy weather | Nikki Savva

Could Australian politics sink to a more juvenile level than it did last week after an entire state was hurled back into the dark ages by a freak storm?
Malcolm Turnbull, quite rightly, seized the opportunity to tell the states they had to sharpen up on energy security and consider an achievable single renewable energy target.
It wasn’t simply a case of a politician not wasting a crisis, it was a case of a leader reacting immediately to an unprecedented crisis with the potential to recur with even more devastating consequences rather than simply emoting in front of the media.
Instead of addressing the issue at hand, state and federal Labor leaders, clutching hymn sheets from central command, fell over each other to get to the cameras to express their outrage that the Prime Minister dared suggest their policies were inappropriate or unworkable.
It was as predictable as it was pathetic. Turnbull had, according to everyone from Bill Shorten down, turned into Tony Abbott — who, it has to be said, deserves 10 out of 10 for consistency since he lost the leadership by saying one thing publicly on the leadership and something else privately. But I digress.
Neither Turnbull nor federal Environment and Energy Minister Josh Frydenberg questioned that the blackout was caused by the weather. What they questioned was the reliability of the state’s power sources in the face of such an event.
Yesterday’s interim report by the Australian Energy Market Operator suggesting wind power was the root cause of the blackout showed they were spot-on to do so. Rule one, as Turnbull put it yesterday, was to keep the lights on, and again urged South Australian Premier Jay Weatherill to own up to his responsibilities.
The South Australian experience has highlighted the possible disastrous consequences of the political one-upmanship on renewable energy targets (which peaks in the ACT, where it has been set at 100 per cent by 2020) yet the response of premiers and their energy ministers has been to accuse Turnbull of “politicking” or morphing into a climate change denier a la Abbott.
Even if he has morphed (and he hasn’t) they, as climate change believers, are the ones preaching catastrophic weather events will become more frequent. If they are right, we can expect more freakish storms more often, wreaking the kind of havoc witnessed in South Australia.
Surely, then, their immediate duty is to ensure they have the capacity to protect their citizens instead of responding with mantra or ideology or insult.
At the meeting of energy ministers in August, Frydenberg had already proposed they should look at the impact on the stability of the system and energy prices of state-based renewable targets. Unsurprisingly, the two most ideolog­ically driven states, Victoria and the ACT, opposed the idea. Queensland was sceptical and NSW strongly supportive.
To his credit, South Australian Energy Minister Tom Koutsantonis was constructive. Koutsantonis could not be anything else given only weeks earlier he had written to the chairman of the Energy Market Commission, John Pierce, conceding the high uptake of wind and solar had made electricity security a “complex matter”.
Eventually, after a tense stand-off, ministers agreed the review should proceed and it was announced in the post-meeting communique.
Victoria’s opposition to the review is consistent with its ostrich-like approach to the possible closure of the Hazelwood power plant in the Latrobe Valley, which supplies 20 per cent of the state’s energy needs.
Victorian Energy Minister Lily D’Ambrosio responded to the news of a possible closure by saying the state had the lowest prices in Australia and there was an oversupply of electricity. She insists the state would be able to cope, and does not expect it to affect the state’s energy supply.
D’Ambrosio continued her tedious recital from the hymn sheet on Tuesday, saying Turnbull was being hypocritical and clearly hadn’t done enough hand-wringing over the plight of South Australians. As if that would help.
While condemning the Prime Minister for playing politics rather than showing more empathy, D’Ambrosio showed herself to be a dab hand at politics: “At least with Tony Abbott, the people of Australia knew where they stood on climate policy, we don’t have that when it comes to Malcolm Turnbull.”
Because of the complexity of the issue, the review commissioned at the August meeting will not be ready until the end of the year, so Frydenberg tells me his primary goal at tomorrow’s meeting is to actually get the states to confront the issue. First they have to acknowledge a problem exists.
“What is the goal?” Frydenberg asks. “It is to reduce emissions, but the renewable energy target is a means to an end. If you haven’t got the best systems in place, you increase the costs to consumers or you undermine energy security. Then we are all stuffed.”
Meanwhile Labor glides over its policy of 50 per cent renewables by 2030, with not one detail about how to get there. We were told we had to wait until October next year for an answer to that (pending an election win by Labor), although Frydenberg helpfully has suggested that installing 10,000 wind turbines at a cost of $48 billion may be one option.
When opposition environment spokesman Mark Butler was asked on Sunday on Sky News when we could expect to see the modelling or consequences of its target, Butler confessed it couldn’t be done from opposition, only from government, so an answer could be a long time coming.
In the meantime, Shorten continues to make hay while the sun refuses to shine. As fast as some of those lightning strikes that hit South Australia, the Opposition Leader was back on to another issue where he thinks Turnbull is aping Abbott and which therefore makes him vulnerable: same-sex marriage and the proposed plebiscite. On Tuesday Shorten said his “instinct” told him that a plebiscite was an abdication of leadership. Except in 2013 when that same instinct made him tell the Australian Christian Lobby he had no problem with a plebiscite.
Attorney-General George Brandis has made clear to colleagues that if the plebiscite is voted down, there is no plan B, and a vote against a plebiscite, in effect, is a vote against same-sex marriage. Brandis and other solid Coalition supporters including Warren Entsch have vowed that if it is defeated they will not revisit the issue. They have had enough and you can’t blame them.
Abbott’s handling of the same-sex marriage issue contributed mightily to his downfall.
Turnbull is fully cognisant of that so, despite the provocations, whether they emanate from this continent or Britain, courtesy of a reputable journalist such as Latika Bourke reporting Abbott has told Tories he can be prime minister again, Turnbull is avoiding becoming Abbott because being Abbott didn’t turn out so well for Abbott.

Oct 5, 2016

Tear down protectionist fences around our superannuation

Our $2 trillion superannuation system is too important for consumers and the economy for it to continue to be enmeshed in the industrial system.
Consumers who have free choice in every other facet of their financial lives should be allowed to choose a super fund on merit, not based on whether a trade union, and the industry fund it owns, has coverage over an industrial award.
The fact Australians are good at creating level playing fields means that, inevitably, protective barriers to competition that shape our mandatory savings system will be dismantled.
We removed agriculture’s protective tariff barriers long ago and now can boast the most competitive, adaptable and efficient farming sector in the world.
We’ve bitten the bullet across much of the manufacturing sector, removing tariffs on shoe and textiles industries in the 1980s, then finally cutting the flow of taxpayer subsidies to our uncompetitive car manufacturing industry. It was painful, and more must be done to make our industries truly competitive. But no one — except for a few New Age protectionists — argues coherently that we should return to the days when agrarian socialists and trade union closed shops ruled our economy.
Surprisingly for a nation that likes lecturing the rest of world about the benefits of free trade and open markets, our superannuation sector — the fourth largest pool of funds in the world — remains largely untouched by the cleansing light of competition.
The biggest barriers to a level playing field are the industrial laws that set the rules in 1992 when 3 per cent of workers’ wages were channelled into a new, compulsory super system as a wage trade-off between the unions and the Keating government.
Our super system, 24 years on, is a commendable policy that is slowly delivering better self-funded retirement outcomes for most Australians. But it has cemented in some impenetrable barriers to competition for managing a huge chunk of super savings.
Industrial laws, enforced by the Fair Work Commission, effectively prevent half the superannuation funds from competing for the “default” savings of Australians. A default fund is where your super goes if you don’t bother to choose a fund when you sign up for a job — astonishingly, up to 80 per cent of employees may fall into this camp. The only funds that can access this $9 billion pool are chosen by the FWC. And the only parties entitled to appear before the FWC are unions and employer organisations, the owners of industry super funds.
Financial Services Council member super funds offer some of the highest performing and lowest cost MySuper products, all of which have been approved by the Australian Prudential Regulation Authority. Millions of consumers miss out on the benefits of competition and choice because these products cannot get past the FWC gate. The funds allowed through the gate, selected by an industrial relations arbiter with no experience in financial services, are a dog’s breakfast of varying quality and price. Some are excellent. Some are poor quality, underperforming and expensive. The gap in performance between the best and worst MySuper products with award listing is an astounding 4 per cent a year.
Australians shouldn’t be forced into superannuation roulette, particularly when we’re already forced to save for our retirement.
Some industry funds admit openly that their privileged protected position affords them great advantages. Steve Bracks, the chairman of Cbus, told The Australian that the $32bn fund received guaranteed inflows of $100 million every month from default funds, giving Cbus an advantage in investment strategy. Without this “secure funding model”, he said, it would be difficult for industry funds to invest the way they do.
We could not have put this better ourselves. Protectionist industrial frameworks deliver a “secure funding model” to the privileged few, but they also suppress efficiency and innovation. When you don’t have to compete for business, why would you improve products and services?
Super funds’ first responsibility is to their members. The government’s responsibility is to implement policy that delivers better outcomes for consumers.
Old-fashioned protectionist fences around super savings — the unions’ “secure funding model” — have no place in a country that rightly takes pride in creating one of the most competitive modern market economies. The tide must finally turn in favour of competition in the superannuation market. The status quo cannot remain if we want a retirement savings system that will get more Australians off the age pension and more able to fund their own futures. We’ve talked about this issue for almost a decade. It’s time for the government to act.

'Hated' banks are new commodities, says French boutique founder - Citywire

Experienced investor Marc Renaud has become the latest manager to pile into European banks despite the current crisis in the sector.
Speaking to Citywire Selector’s sister website Citywire Deutschland,Renaud said he had 18.42% of the Mandarine Valeur fund in banks. This is overweight compared to the benchmark allocation of 11%.
'There is no fundamental reason why quality banks with a strong balance sheet are so favourably valued. But everyone hates banks. They are like the new commodities,' Renaud said.
In terms of holdings, French bank BNP Paribas is currently the second largest holding in the fund at 4.42%. He has smaller allocations to other banks including Spanish group Santander and Vienna-based Erste Bank.
'These banks will be the winners of the present banking crisis, because their business models are stable and they have not gone into investment banking too much,' he said.
The founder of Mandarine Gestion said he may have overweighted banks too early, but believes the turnaround of European banking names is imminent.
'Janet Yellen is a catalyst, as if the US raises rates in December as expected, it would be good for the banking sector,' Renaud said.
Around 45% of European fund managers are underweight in banks. 'As happened with commodities, if the turnaround comes these fund managers will go back to the banking sector.'
Renaud’s attitude towards banks is similar to Nicolas Walewski’s, who has started to buy up European banks for his Alken Fund - European Opportunities.
The Mandarine Valeur R fund returned 6.4% in euro terms over the three years to the end of August 2016. This compares with a 27.6% rise by its Citywire-assigned benchmark the STOXX Europe 600 TREUR over the same period.

Oct 2, 2016

Deutsche Bank’s decline reflects European weakness

Asking whether Deutsche Bank is the next Lehman Brothers is asking precisely the wrong question. Just as Lehman was not the next Long-Term Capital Management. And in turn LTCM was not the next S&Ls, or it the preceding Continental Illinois, and so on back along meandering byzantine pathways past Tulip Manias and South Sea Bubbles all the way to real Byzantine times.
Trying to find the next Lehman is the proverbial search for the key under the street light, rather than where the key might actually be. That key is the understanding that financial collapses are like Tolstoy’s happy and his unhappy families rolled into one: they are all exactly the same at core but always completely different in structure, in the triggering and in the consequences.
A far more interesting question to me, with challenging sub-questions that ripple out in so many directions and on so many layers, is why Deutsche? Why is the biggest bank in what is undoubtedly Europe’s and arguably the world’s strongest major economy the epicentre of global fear and loathing?
Is it something about Germany? About Europe? The European project? The European Central Bank? The cabal of globally significant central banks and what they have wrought? The GFC as lingering, suppurating wound, patched over but never properly dealt with? And perhaps a dozen more.
Yes, I suggest, to all of the above, not that there’s the slightest prospect of any of the architects, managers and manipulators of policy ever engaging in even the most minimal self-assessment. They will all go doggedly on, confident in their blinkered lack of any self-awareness, comfortable in their directly taxpayer-funded or consumer-levied sinecures.
I do think it is particularly delicious and instructive that Deutsche Bank’s decline and possibly inevitable fall has come in the wake of the abandonment of the currency that bore its name.
The old, post-war, pre-unified Germany of the European Community was built on the twin foundations of a strong currency and a strong banking system. At the very pillar of that financial system and at the absolute foundation of that economy was Deutsche Bank.
Today’s Deutsche, capitalised at a figure not much higher than its looming US malpractice fine, would have been beyond unthinkable two decades or more ago, capturing how far it has declined.
The new Germany of the European Union traded a strong currency and bank for easy money for both the economy and the institution, which came from a weak transnational currency, but seemingly also unavoidably, as part of the dynamics of the trade, a weak banking system.
Bluntly, if politically incorrectly, would a German Bundesbanker have overseen monetary policy like a French and even more an Italian ECBanker have done? Would that proverbial Bundesbanker have embraced the ECB’s (and Fed’s and BoJ’s) financial alchemy of seeming to turn copper into gold, an alchemy which merely postponed and amplified the disastrous inevitable?
Similar sets of bank-specific questions can be posed in relation to former and more contemporary Deutsche bankers.
There are of course two big questions about Deutsche Bank which provide some parallel to Lehman. Just how bad are its assets: is it a zombie bank? And how significant and how vulnerable are its investment banking-type linkages — derivatives and cross-party exposure and the like?
There is also one very specific question: what happens if it pays the $US14 billion ambit claim from the US Department of Justice? How does it finance it? What does the payment and/or the financing specifically trigger, both narrowly in relation to Deutsche and across the European banking system? What would the German government do? What would the ECB do?
That could trigger a broader implosion. In that sense, Deutsche could prove to be the next Lehman.
There are two linked reasons why I am wary of this too-specific focus.
First, the history of financial implosions makes it clear that this history never repeats itself.
Yes, as I noted, the core is always the same: broadly, greed and seeming easy money — some variation of the alchemy we all seek: borrowing at, say, 3 per cent and risklessly investing at 6 per cent, with more and more in geometric expansion joining the free lunch.
But politically incorrectly again, the fat lady never sings the same aria. Apart from anything else, like generals fighting the last war, we have probably barred the regulatory gates against a replay.
The second reason is broader. We need to pull our gaze back from searching for the next Lehman — even more so, when we think we’ve identified it — to look more broadly at exactly what has developed in not just the global financial system overall but indeed the world’s real economy.
Rather simply, we need to try to pre-empt the next disaster, not guarantee we can avert the last one again.
It gets worse when you look at what the troika of major central banks have done. I would argue the combination of zero interest rates and QE has actually been a recipe for creating the next implosion.
There’s wide concern that the combination has led to very obvious bad behaviour — the bubble in debt-financed asset values.
Just how exactly you address the problem of too-much leverage by deliberately encouraging even more leverage defies the most uneducated common sense.
Janet Yellen and Mario Draghi have clearly never been to an AA meeting; as virtual reality teetotallers, they are utterly incapable of understanding the disastrous consequences of their pouring 100 proof hooch into the global monetary punch bowl. One of yesteryear’s Bundesbankers would have been snatching the bowl away.