A big part of getting economic life back to normal involves restoring people’s faith that the future will be full of opportunity for progress. But that ain’t easy because the gloom of recession kills our belief that things could ever get better. And the longer we think like that, the truer it becomes.
So Scott Morrison needs to accept the paradox that returning the economy to normal demands that we don’t return to squabbling politics as usual, nor to governing primarily in the interests of the Liberal Party base and its corporate donors.
Why not? Because it wasn’t working well even before the virus arrived. The economy’s growth was weak and, that being so, business was reluctant to invest. Morrison is right to say we must grow our way out of debt and deficit, and that – ultimately, at least – we need a private sector-led recovery.
But with the recession leaving business with even more idle production capacity than it had last December, it’s delusional to expect that some tax incentive could prompt a surge in business investment.
So what can the government do that would get business investing? It can fix the dysfunctional attitudes to energy policy that are blocking much-needed investment in next-generation electricity production.
And the plain truth is that no government refusing to face the reality of climate change stands any hope of convincing us that our economic future is bright. What’s so stupid is that if the government weren’t so committed to helping losers fend off inevitable change in the economy’s structure, it would see more clearly the huge potential for Australia to be a big winner in the post-carbon world.
Only drawback: exploiting that potential would require huge private sector investment. Oh, that’s right, it’s the present lack of need for more investment that will slow any recovery.
Climate change has already started to bring much damage to our personal health, agriculture and tourism, but our hesitation to get on with helping to combat it is partly explained by our long-standing and lucrative comparative advantage as a major exporter of fossil fuels.
But a report by Tony Wood and colleagues at the Grattan Institute, to be published today, confirms Professor Ross Garnaut’s assessment that our abundant resources of wind and sun give us a potential comparative advantage in renewable energy – particularly if we get in early.
Wood also confirms Garnaut’s view that our money-making potential lies not so much in exporting renewable energy directly but indirectly, by using wind and solar to make energy-intensive "green" commodities for export.
Get it? If we play our cards right – if Morrison displays his newfound ability to provide the nation with genuine leadership – we could begin a whole new era of manufacturing industry in Australia, only this time one built on comparative advantage rather than protection.
Wood says the list of potential energy-intensive manufactures includes aluminium, aviation fuel, ammonia and steel. Tens of thousands of jobs could be created, comparable to the existing 55,000 geographically-concentrated carbon-intensive jobs.
How does a revived green manufacturing industry sound as a plan that could convince climate-change worriers (that is, everyone with a brain), business people and workers that there is a future for our economy?
And here’s the best bit: Wood says the economics favour establishing the new green manufacturing industries where a large industrial workforce is already established - such as those in central Queensland and the Hunter Valley.
"It is cheaper to make green steel in those places, where labour is available and affordable, than in the Pilbara – despite the cost of shipping iron ore to the east coast," he finds.
Notice the political attraction of this idea? You don’t leave the workers in these regions to their fate as the world’s inevitable move away from fossil fuels turns their mines into stranded assets, you set them up to work in a new carbon-free industry.
Wood’s investigations see most potential in moving to "green steel". At present, most steel is made by using coking coal and a blast furnace to reduce iron ore to iron metal. Trouble is, burning the coal produces much carbon dioxide. Green steel, by contrast, involves using renewables electricity to produce hydrogen for “direct reduction”, turning the ore to metal, with water as the byproduct.
Ultimately, the massive investment needed for new green industries would have to come from the private sector. But the government would need to get the ball rolling by helping to fund a steel flagship project – maybe one that starts by using natural gas, before progressing to hydrogen.
The happy notion that governments can sit back while the private sector pioneers new, radically different industries works well in textbooks, but not the real world.
