The Canberra Feedback Loop

She would call four to five times a day. Maybe more. At times, pleading and begging. At other times, rude and bullying.

Then there were the emails - shorn of formal niceties and full of demands and threats.

Sure, it is never easy dealing with press gallery journalists when working in Government. But this particular journo took the cake for sheer rudeness and front.

Every day was a new demand to be spoon-fed an "exclusive" or "drop" or a rather transparent attempt to flush us out by claiming she had "government sources" on a story.

On one such occasion, in relation to a budget measure, she had her facts completely wrong but in the early days of the Rudd Government in 2008, it was worth more than our jobs were worth to deny it and in so doing give her the real story. However, as best he could the media advisor tried to steer her away from writing the story warning her she would look silly by writing it. But she was not to be swayed and swore she had a high-level source saying the Government had broken an election pledge to introduce the measure. 

Next morning,  she had her "exclusive", even though it was completely fictional. So when time came to make the announcement a week before the budget, it was decided there was no point giving the journo the story as she had already reported it was not going to happen. As a result, the brown stuff hit the fan - the journo in question rang first thing in the morning and then emailed making all sorts of dark threats. Soon after her paper started writing stories about Government "spin" and "media management".

I am not going to name the journalist. It serves no purpose. The reason I tell this story is to give some insight into the rather extreme tactics of some journos to get a story out of a new government. But also to give colour to a broader point about various government strategies to handle the media.

This incident was in the early days of the Rudd Government when few had any idea that things would end so badly. At that time, the strategy driven from Rudd's office was very much based on feeding the media beast and trying to control the agenda. In those days - unlike later in the life of the Government - control was tight. Stories didn't get out unless we wanted them to get out. In the first year of the Rudd Government there was only one real "leak" - details of Cabinet discussions on Fuelwatch - and that came from Godwin Grech, not from within Labor ranks.

However, while the media strategy seemed to have worked for Bob Carr and Tony Blair, journalists had become wise to it. Journos - particularly from News Ltd - who had become fat and lazy from the Howard Government culture of exclusive "drops" could be overheard down at Aussies Cafe whingeing about how hard it was to get stories out of ministers' offices. They quickly rebelled within months of Rudd coming to power. 

Quickly, the claim of the spin machine of Kevin Rudd's office became a widely accepted fact in the media and it worked against the Government. (From my point of view, if Rudd's media office had been proper spin doctors, they would have been a whole lot better than they actually were). 

Watching the Abbott Government recently has reminded me of those early days of the Rudd Government. Like the Coalition, Labor too was wary of the media and was convinced it could control it. But unlike the Coalition, Labor believed it could do this through regular announceables.

Abbott and his senior advisors clearly watched closely Rudd and Gillard's failed strategy to deal with the press gallery and the mayhem created by the ever-quickening catherine wheel of the 24-hour media cycle. To their credit, they have tried to lower the frenetic white noise of politics, realising that most people are thoroughly sick of politicians on their TV and radio every moment of the day.

However, it is clear there is more behind the Abbott Government strategy. From the recent weeks it is clear it is also driven by deeply ingrained disdain towards the Canberra press gallery.

The Coalition's disdain for the Canberra press gallery is by no means unique in Australian public life in recent times. However, it becomes dangerous when the barely concealed belief they can ignore the Canberra gallery and talk over their heads starts manifesting itself as belligerent arrogance and conceit at press conferences.

Prime Exhibit was Christopher Pyne on ABC Radio this week: ''It's not my fault if some people in the press gallery don't understand the complicated nature of the school funding model."

There can be no other explanation for the public performances of ministers like Christopher Pyne and Scott Morrison other than basic arrogance and conceit. Tony Abbott's ham-fisted initial response to revelations of spying on Indonesia's president seems similarly driven by  a belief that what matters is not the perspective of political journos but those of listeners to talkback radio. In so doing he completely missed the serious diplomatic implications of his actions. 

While many voters may dislike the Canberra press gallery, I reckon they hate even more the recent displays of belligerence by Pyne and Morrison. Not a great deal that fascinates the press gallery tends to filter through to average voters. But I bet they would have concluded two things this week - the Coalition has broken its promise on school funding and Pyne is an arrogant pillock. For a government elected on the promise of no surprises and a pledge to keep its election commitments, Pyne's efforts this week were just breathtaking, especially on an issue of such high importance to so many voters.

And what happens when you starve a pack of hungry wolves ? They gorged themselves on the piece of red meat, finding angry school teachers and state education ministers to fill the airwaves and column inches. While its influence is no longer what it used to be, the press gallery still has a large impact on the way many Australians understand and interpret federal politics. 

In some cases, like a bad circus mirror, the press gallery reflects back to politicians a distorted version of themselves that soon becomes reality. This feedback loop has a major influence on the way the political actors see themselves and act. In competing versions of reality, it is the press gallery's narrative normally - not always - becomes the accepted narrative. By the time it has been picked up by the ABC in the morning, repeated on talk back radio and again in the commercial nightly news, fiction often becomes reality.

The Abbott Government might think that in the end results will speak louder than words but they take the press gallery for granted at their peril. If a tree falls in the forest and no-one is there is to see it happen, did it really happen ? In contrast, those ministers who  assiduously court gallery journalists and do to the talk show show circuit of Sky News and Q&A will always be the ones feted as the strong performers, despite meagre policy records.

However, the more important lesson for the Coalition this week was that it takes Coalition state colleagues for granted at their peril. Pyne committed an A Grade newbie error this week in expecting Liberal education ministers in NSW and Victoria to meekly fall in behind him on education funding. This faux pas was made even worse by the fact he didn't even do state counterparts the courtesy of letting them know beforehand before dropping the story out in the media. Again, a sign of disregard of elementary political and diplomatic due process, something that seems to be an emerging hallmark of the Abbott Government

The Greens, Labor and a pack of matches

You really have to hand it to the Greens. They are just as capable of devious acts of political bastardry on Labor as ALP's best faceless men. If not more.

Now in writing this, I am fully aware of the Twitter shitstorm this may bring down on me and as a result nearly didn't post this item. But hell, someone has to say it. There needs to be a proper public discussion about how it all went so wrong over the last six years.

Let's just rewind the clock six years and trace back most major problems Labor now face.

Sure. Labor's sheer ham fistedness on most major policy issues has a lot do with their problems. But you'll probably also find the Greens sowed the seeds.

Watching the Greens deal with Labor over the last six years is like a watching someone giving a pack of matches to a pack of delinquent kids and then feigning horror when the house goes up in flames.

The most obvious example is the Greens refusal to pass the Carbon Pollution Reduction Scheme. Now I hear Greens supporters cry: "But the CPRS was crap and would have locked in failure. The carbon price scheme is a much better scheme."

There is a certain amount of truth in that:- even though the essential design features of the CPRS and carbonnprice are the same, the latter achieved an important independent governance framework through the Climate Change Authority; set aside a $10 billion fund for renewable energy; and put in place a review of industry assistance through the Productivity Commission.

But won't perfect policy look dandy by the middle of next year when the Coalition succeeds in gutting it ?

Let's take the sliding door moment in 2009 and imagine what would have happened if the Greens had supported the CPRS.

By now, there would have been in place a price on carbon for nearly four years; making it much harder to repeal. Yes, it would have been a very, very low price - around $1. However, it would have laid a foundation for much stronger action down the track, instead of the smouldering ruins of the carbon scheme that will soon come to pass.

Contrast the approach taken by the Greens in dealing with the GFC stimulus package to the CPRS. I'm not arguing the stimulus package was not an important factor in helping Australia ride out the GFC but it could have done so at a much lower cost.

If the Greens had taken a responsible balance of power party in the Senate they would have taken a bit more critical look at some of the stimulus package components.

The cost of the School Halls program alone - nearly $16 billion and well exceeding any benefit to the community - was around half the budget deficit when Labor left office, and it was delivered long after needed to respond to the GFC.

But what did the Greens do ? They waved it through after tacking on additional money for bike paths which as the Australian National Audit Office subsequently commented was not stimulus related and did not "seek to focus funding consideration on those projects that would maximise job creation and retention outcomes for the funding  awarded  in  the  areas  of  identified  greatest  need."

However, the much bigger consequence of the Greens action in the Senate, was to start the creation of a deeply divisive political environment in which it has become nearly impossible to get anything done in climate change policy. It sewed the seeds of Tony Abbott's rise to power and of Prime Minister's Kevin Rudd downfall and that of his predecessor Julia Gillard.

Faced with the rejection of the CPRS in the Senate, Rudd took a downward spiral - panicked, rejected the option of double dissolution, dumped the CPRS, and botched the introduction of the mining tax. It worked to the benefit of the Greens at the 2010 election with scores of disillusioned Labor voters flocking to the party.  However, in the long run it has been to their detriment. 

But that's the thing about the Greens; regardless of their claims to be different from the traditional parties, they too are focused on the short-term politics rather than the long-term. It looks great on a wrist band but isn't often doesn't work so well in practice.

But I digress. Back to 2010.

After the election, buoyed by their success at Labor's expense, the Greens drove a hard bargain and demanded a coalition agreement with Gillard. As usual, it seemed like a great idea at the time but has had serious negative long-term consequences for both Labor and the Greens.

But the problems really began when they negotiated the carbon scheme. The problem was not so much the Greens demanded in return for supporting Labor - even though they should have supported the CPRS in 2009 - but rather the scheme's design features.

Unable to secure agreement from the Greens on a national emissions target, Labor had to agree to a compromise - a three-year fixed price. The Greens also set their sights on a high price - up to $40. With the talks set to collapse, Labor eventually agreed to $23. In hindsight, that high price along with the three year fixed price period made it much more difficult to sell publicly.

Now I hear the objections.

"But we need a high price on carbon, if we are to bring on more renewable energy, replace fossil fuels and urgently tackle climate change".

However, it is not the price today or next year or the year after  that which will determine investment in renewables in the long term. Rather, it is the long-term price trajectory and guess what ? We don't have one now.

A far smarter approach politically would have been to start with a much lower price and then leave it to the Climate Change Authority to set targets and a long-term emission trajectory.

But as usual, the Greens went for the policy perfect rather than make compromises that may have seen a more durable scheme. 

However, more importantly,  the Greens went for the short-term political win in order to wave around a high starting price for the gratification of ill-informed supporters.

As a result, we now have a scheme that goes from $24.15 to zero next July and a Coalition Government in power for the foreseeable future. Good job.

But not content with lumbering Labor with a carbon scheme that was electoral poison, the Greens then waited for the most politically opportune movement to shaft Gillard.

Sensing the political tsunami awaiting in September - that they helped create - the Greens then pulled then pin on the coalition agreement and sunk the boot into Labor, which was already lying in a battered foetal position on the floor.

Milne portrayed the decision as one of principle but her speech to the National Press Club couldn't disguise what was a deeply political strategy of brand differentiation to again win support from disaffected left Labor voters.

But it counted for little.  Voters didn't buy it - the Greens fell to their lowest vote since 2004. They achieved 342,000 fewer first preference votes in the lower house, a swing against it of 3.2 per cent. In the Senate, the national swing against it was 4.5 per cent – in the party’s homeland state, Tasmania, the Green vote fell by more than 8.5 per cent.

By a stroke of luck and a smelly preference deal with the very man who epitomises everything they profess to stand against, the Greens managed to scrape back with the loss of at most only one Senate seat. However, if the vote is replicated at the next election, they are likely to face a rout in the Senate.

In the wash up from the election, former Greens campaign manager Vincent McMahon put the Greens problem best.

"At issue is whether to be a party of protest or to have broader appeal. The former consigns the Greens to minor-party status," McMahon said.

"If the Greens broaden their appeal and display a maturity to move beyond being a party of protest, they can rebuild voter trust and become a third force."

On cue, McMahon's analysis met with howls of protest. But McMahon is spot on: every time the Greens define themselves by who they are not - Labor - they lose the opportunity to define their own agenda.

However, the Greens have not learned their lesson and they are back to their old tricks in parliament; playing the short-term political game and eschewing a smarter long-term agenda.

Last week, the Greens voted in the Senate with the Coalition to prevent an inquiry into the repeal of the carbon bills and force a vote much sooner on the legislation. Given the complex transitional issues for business associated with the repeal of the carbon price, an inquiry makes sense. But Milne is unmoved.

"The reason the Greens will not be supporting an inquiry into the current legislation is that we do not want to avoid a vote on this. It is time to take it straight up to the coalition government. It is time to say: this legislation is working. We are not going to cast doubt; there is going to be no equivocation on this."

To the barricades comrades and damn the logic ! Bringing the vote forward achieves nothing; even if Labor and the Greens block the legislation, it will still probably pass after June.

But the short-term political logic of the move is obvious - Labor is internally divided over whether to block the carbon repeal legislation and the Greens stategy is designed to embarrass Bill Shorten. If Shorten can prevent a vote being taken until after July 1, Labor's vote in the Senate will no longer be needed. However, Milne won't let the opportunity pass to score points and wedge Labor.

"Now is not the time to delay or equivocate," Milne said.

"Labor have back-flipped on global warming so many times already, and now they want a delay so they're not forced to vote down Mr Abbott's bad policy."

However, there is considerable risk in the Greens strategy. Labor could block the repeal legislation on the first occasion and then buckle under extreme pressure from business to pass the Bill before 1 July.  Alternatively, Labor could block the repeal bills twice and hand Abbott a Double Dissolution trigger. In the ensuing election, Labor and the Greens could then be wiped out and even more right-wing minor party senators elected

Either way, another classic Greens rat...k.

Labor's lot on carbon

One of the hardest things about going from the Government benches to the Opposition is losing all the resources that go with them.

Labor has probably already worked that out but the first week of parliament will really bring that fact home. 

The Coalition will this week introduce legislation to repeal the carbon scheme and Labor has signalled its intention to try to amend it to introduce an emissions trading scheme.

Now that is easier said than done. The Government has all the resources of the Office of Parliamentary Counsel to work on its legislation; the word on the street is that the poor schmuck who drafted all the CPRS and Clean Energy Future bills was locked in the same dark room to draft the repealing legislation. 

With no such drafting resources it will be interesting to see how Labor goes about amending a Bill, which is pretty much one line; Schedule 1, Item reads - "Clean Energy Act 2011: The whole of the Act: Repeal the Act." 

The rest of the amendments are basically transitional arrangements for the phase out of the carbon scheme and consequential amendments to other pieces of legislation.

One option for Labor would be to cut and paste the amendments hurriedly drawn up before the caretaker period earlier this year. But that will face some procedural hurdles.

Despite these difficulties, it's a bit different from the course of events one ill-informed scribe was over-confidently predicting in his recent "Labor backflip" yarn. Word of advice: heed the lesson of the last three years- if you're going to rely on an unnamed Labor Right factional hack, make very sure you're not being used to fly a kite in caucus.

Not to be dissuaded the same scribe was ruminating this week that Abbott's achilles heel on his plan to repeal the carbon scheme was the weather. 

Well yes its true, public support for taking action to tackle climate change was highest during the Millennium drought. But as I argue here the recent bush fires in NSW don't mean there will be a resurgence of support. The argument that public support will return for putting a price on carbon when the weather turns foul conveniently overlooks that it didn't in 2009 after the Victorian bushfires nor did it in 2010 after the Queensland floods.

Nice idea. But I fear it's a bit of a pipe dream.

However, the prize for the most widely optimistic claims goes to the chair of the Australian Competition and Consumer Commission Rod Sims, who reckons that it will be a fairly easy task to strip carbon out of electricity prices.

"It's not a massively complicated process,'' Mr Sims said this week. ''Electricity prices went up fairly quickly on the way up and they will go down fairly immediately on the way down.''

That claim would have had a few energy market experts scratching their heads. Anyone who has taken any time looking at Australian energy markets knows one thing for sure and that is that they are "massively complicated".

And as is becoming increasingly clear, it is not a simple matter of going back to old energy prices come 1 July next year.

The biggest problem confronting energy companies is what happens if the carbon scheme is not repealed by 1 July next year. The Abbott Government has made clear even if the repeal bills are not passed until after 1 July they will take effect retrospectively.

But again, easier than it sounds. For a start, state energy regulators can't make pricing determinations for 2014-15 just on the basis of an "expectation" the carbon scheme will be repealed. As a result, they will  need to wait until after repeal to redo retail energy pricing and that will take at best 2-3 months.

During this time, the law is the law and generators will most likely still be passing through the cost of carbon to customers through the retailers. 

At the same time, customers will expect to be getting cheaper power and newspapers will be crying blue murder running story after story of pensioners doing it tough.

But it won't be a simple case of refunding retailers and customers 10 percent when the changes come through.

As explained by the Energy Supply Association of Australia, unlike the impact on goods and services of the introduction of the GST in 2001, there is no easy way to calculate what the carbon component is of energy prices.

"It is impossible to precisely quantify the extent to which the carbon price has increased wholesale energy prices, as they vary based on the changing mix of generation output. In a competitive market, price discovery is dynamic, and participants’ ability to recover carbon costs will vary. Renewable generators (wind, hydro) also benefit from those higher prices, even though their costs are not increased by a carbon price.

Further complicating this scenario is the inability to attribute to the carbon price a specific value at the time of trade."

Then there are all the forward contracts that have been entered into by retailers to hedge against the volatility of the wholesale market that have carbon factored in. Says ESAA:

"Forward contracts are based on expectations of wholesale spot prices over the period of the contract and can be bought and sold several years in advance.....

Where a carbon “pass-through” clause has been used in a bilateral contract, the arrangements differ. There is a standard form contract approved by the Australian Financial Markets Association (AFMA) that has a price ex-carbon and a formula for calculating a carbon component based on the prevailing price."

So it isn't as straight forward as Sims would have people believe. Nevertheless, the ACCC from 1 July will be running the fine tooth comb over energy prices to determine whether they are "unreasonably high"  using the new powers being conferred by the Abbott Government. These new powers go much further than the ACCC's powers when the carbon scheme was introduced, which merely addressed whether companies were making false or misleading claims about the price impact of carbon tax.

So that brings us back to Labor's lot. With the ACCC breathing down energy companies necks, you can bet they will start bringing pressure to bear on Labor to pass the repeal Bills before 1 July rather than roll the dice with Clive Palmer.