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Tuesday, 29 May 2012
Page: 6072


Mr FLETCHER (Bradfield) (20:28): I am pleased to rise to speak on the Clean Energy Legislation Amendment Bill 2012, the Clean Energy Finance Corporation Bill 2012 and the related bills. The Rudd-Gillard government has had a lot of bad ideas. It has had a lot of ill-thought-through ideas. It has had a lot of politically motivated ideas. It has had a lot of ideas which have been very hastily put together to meet short-term political objectives without thinking through carefully whether they make good long-term economic or policy sense. The Clean Energy Finance Corporation ranks right up there with some of the very worst ideas the Rudd-Gillard government has brought forward in its deeply undistinguished nearly five-year tenure. The essence of the policy package that this House is considering this evening is that the Commonwealth government should take $10 billion of taxpayers' money, together with some running costs, and put that money into projects that the private sector would not touch. Supposedly this is going to be a commercially successful venture, yet this investment fund is constrained to invest in projects that the private sector would not touch. It is extraordinarily difficult to understand how anybody could imagine that this is going to be anything other than a spectacular financial disaster.

In the brief time available to me, I want to make three points. The first is that the rationale for this measure—the reason the House is considering it—has nothing to do with policy; it is pure politics. It is because of a promise that a desperate Prime Minister Gillard made to the Greens. The second point I want to make is that, to fund this promise, the Gillard government is spending $10 billion that it does not have. All of this is borrowed money, and they have resorted to dodgy accounting to try to hide that fact. The third point I want to make is that this is going to be a dud investment for the Australian taxpayer. Any taxpayer who thinks that we are likely to get back all or even some of the $10 billion is, I fear, going to be facing a very disappointing outcome indeed.

Let me turn to the first proposition. The reason that the House is debating the Clean Energy Finance Corporation proposal this evening is that the Gillard government was desperate to secure the political support of the Greens to cling onto government and, in turn, committed to introduce a carbon tax despite having gone to the 2010 election promising there would be 'no carbon tax under the government I lead'—the famous words of Prime Minister Gillard. In addition, the Gillard government was forced to do something that the Greens insisted on as a political price for supporting the package: the Gillard government was forced to agree to tip $10 billion of taxpayers' money into this ill-considered Clean Energy Finance Corporation. We first heard of it in July 2011 after the package negotiated between the government, the Greens and the Independents was finally announced.

Let me remind the House of the euphoric, giddy words of Greens Senator Milne, who was the co-deputy chair of the Multi-Party Climate Change Committee. Charged with the euphoria of victory, she said on 10 July 2011:

The Greens welcome the leap forward towards powering Australia with 100% renewable energy secured as part of the agreement to put a price on pollution announced today with the government and the independent MPs.

The Australian community is crying out for renewable energy and I am delighted that we have been able to deliver Australia's biggest ever public investment in renewable energy …

Those were the words of Greens Senator Christine Milne in July 2011 as she ecstatically claimed victory in securing this $10 billion commitment of borrowed taxpayers' money to go into this ill-conceived venture. It is noteworthy that key policy elements of what is coming before the House this evening are elements that were specifically insisted upon by the Greens. Again I go to the statement issued by Senator Milne:

Securing a guarantee of 50% of the Clean Energy Finance Corporation fund for renewable energy … is the biggest single investment in renewable energy Australia has ever made.

In other words, a key design feature of the Clean Energy Finance Corporation—an insistence that 50 per cent of the money go into renewable energy as opposed to other forms of green energy—is something that was specifically required by the Greens party, and the Labor Party and Prime Minister Gillard had no choice but to accede to that. That is the sorry history of the grubby political deal which underpins the $10 billion taxpayers' cheque that this people's House is being asked to write this evening—because that is what we are being asked to do. We are being asked to write a cheque for $10 billion of taxpayers' money with very little comfort and very little reason to believe that we are ever going to see that money again.

I need hardly remind the House that no part of this policy was taken to the last election. The Australian people were never given the opportunity to decide whether they wanted to put $10 billion of their money at risk investing in ventures which the private sector had declined to invest in. That option was never given to them, but the Labor government, in cahoots with the Greens, has decided on their behalf that apparently that is a good idea.

That brings me to the second point I wanted to make this evening. It is curious that on the one hand the government thinks this is a good idea but on the other hand it is desperate to find a way to disguise the true accounting and financial impact of this measure. To achieve the disguising of the true financial impact of this measure, the Treasurer and the Minister for Finance and Deregulation have resorted to an accounting trick which they have resorted to several times already in the life of the Rudd-Gillard government. That accounting trick is to pretend that the money which is being spent is an equity investment in a vehicle which is going to generate a commercial return. That is the accounting trick which has been used for the National Broadband Network company, which is going to see some $20 billion, $30 billion or $40 billion—it could be $50 billion or more—of taxpayers' money squandered on an ill-conceived venture. That is the same accounting trick which this government is now using in relation to the Clean Energy Finance Corporation, which is again going to squander billions of dollars of taxpayers' money.

The consequence of the accounting trick—as I am sure you would be aware, Mr Deputy Speaker Symon—is that, by treating the money as an equity investment, it is not included in what is called the underlying cash balance. The underlying cash balance is the number which is colloquially referred to as the budget bottom line. The Treasurer proudly produced a budget bottom line this year that was, for the year 2012-13, a promised surplus of a bare $1.5 billion—a derisory amount, it might be pointed out, in the context of total Commonwealth expenditure of $364 billion. But he proudly claimed that he was delivering a surplus. The point I make to you, Mr Deputy Speaker—and I am sure that, to you, being the aficionado of government accounting standards that you are, it is not a point I need to underline—is that that number is the underlying cash balance, and the $2 billion a year which is appropriated by the bill before the House this evening into the Clean Energy Finance Corporation does not appear in the underlying cash balance. If those moneys were included then it would make the forward estimates look $10 billion worse than they actually look in the numbers the Treasurer presented to this House just a few weeks ago.

Let me turn to the third point I want to make. I predict that this investment of $10 billion of taxpayers' money is going to turn out very, very badly. I predict that taxpayers are not going to see a good return on the $10 billion which this government has presumed to invest on their behalf in a range of speculative and unproven technologies—technologies so speculative and unproven that they are ones that the private sector has declined to invest in.

Let us be clear here, because there were some points made earlier by the member for Eden-Monaro which seemed designed to give a misleading impression. The coalition has no objection to a venture capital industry. The coalition has no objection to people putting money at risk in innovation, green energy or any other area of new technology. We say good luck to people who do that, and, if you make money out of it, we congratulate you. But what we also say is: that is not a proper function of governments, to put taxpayers' money at risk doing it. That is something which private business people are free to do if they want to put at risk their capital or their shareholders' capital. But the idea that taxpayers' money, collected painstakingly from millions of Australians, many of them of modest means, should be put at risk in speculative ventures where there is very little confidence that the money will ever come back is the height of irresponsibility. And for this government to be doing that in pursuit of a political objective is disgraceful.

Mr Deputy Speaker, you would have noticed, when you read the expert report prepared by Jillian Broadbent and her two eminent colleagues, that there was some very careful wording. I am looking at page 9. After describing the objective that the expert panel recommends for the CEFC, the experts go on to say:

The CEFC will be challenged in achieving this objective as there is a tension between funding the clean energy sector, applying a commercial filter, and maintaining the financial self-sufficiency of the corporation.

That is the understatement of the century. That is code for saying, 'It is extremely unlikely this organisation is ever going to make a buck.'

When officials of the Treasury department appeared before the House Standing Committee on Economics yesterday, I had the opportunity to ask them if they thought this was going to turn out to be a good investment for taxpayers. I took that opportunity to ask the question, but they declined to answer. They said it was a policy decision. And I can understand why an official facing that question would duck it, because anybody who has had any experience in this area and who has seen the sorry track record of governments marching in to invest money in areas where private sector investors have trodden more warily would know that it almost invariably ends in tears.

When we asked some further detailed questions yesterday of Treasury officials about why it was that the government is expected to be able to make money out of these kinds of investments when the private sector has not been able to, the answer that I got from Mr Waslin of the Treasury was as follows:

As I said, the government is prepared to provide funds at a target rate of return which is less than the private sector's but it does also recognise the positive externalities.

Let us put aside 'positive externalities', which is a nice bureaucratic way of saying, 'The fairies at the bottom of the garden—if we hope very, very hard, and close our eyes and hum a bit, then maybe we'll get a nice positive financial return.' Let us focus on what this particular official was really saying to the committee. What he was really saying was, 'The only reason that the government might be able to do this is because the government can live with a lower rate of return than the private sector.'

Let us just understand that point because, if you look through the expert committee report, it refers to a financial target of achieving a return equal to the government bond rate. In other words, the grand financial scheme here is: the government can borrow money at the government bond rate and therefore it can accept a commercial return which is only equal to the government bond rate and no higher. Given that the government bond rate is, by definition, lower than the cost of finance which the private sector has to pay, then, if you took that logic to its extreme, government would carry out every activity in our economy because it has a lower cost of financing. That is essentially what is being proposed in the economic logic of the Clean Energy Finance Corporation: because the government does not need such a high rate of return then it is okay for it to take a risk on investing in risky and speculative technologies in green energy where the private sector has chosen not to take that risk.

There are examples around the world of governments losing a huge amount of taxpayers' money in doing this kind of thing. If I had more time I could speak about Solyndra, a US company which received a US$535 million loan guarantee from the Obama administration in 2009; the money was all lost. I do not have time.

I will conclude by saying this. This is a really bad idea. It is going to lose a bucket of taxpayers' money. And we should reject it.