Daylesford, 1 May 2015
As I cast my jaundiced eyes over my diaries and yellowed
newspaper cuttings from the turn of the millennium, I wonder whether I should
have called this scenario “The Myopic Country”. But “unlucky” fits better with the “she’ll be
right” complacency that has been the hallmark of Australia’s lack of
anticipation.
The driving forces of our current predicament were well
known about in the year 2000 and before. Unfortunately,
our governments were never able, or motivated, to look beyond the next election.
With only a few exceptions, our citizens (both companies and individuals)
were unable to see the looming consequences of their unthinking consumption.
A combination of demographic and environmental driving
forces led to the “unexpected” and prolonged recession of 2012 onwards.
Between 1946 and 1955 inclusive, 1.92 million babies were
born in Australia, 43% more than were born in the previous 10 years.
This was the biggest population growth discontinuity in Australia’s
recorded history. Of course, it is
not only size that matters. This “baby boomer” generation enjoyed affluence like no
other generation, entering the workforce when unemployment was less than 2%.
This was the last generation born before the introduction of television
in Australia but their consumption patterns brought joy to television
advertisers. This generation was so
different to earlier generations that the term “generation gap” was coined
for them.
By the turn of the millennium, this generation was reaching
the peak of their spending power. With
mortgages paid off, child support waning, and at the peak of their earning power
the discretionary spending of this generation buoyed consumer spending beyond
the expectations of most economic forecasters.
They belatedly allocated some of their discretionary income
to saving for retirement. This
lifted the household saving ratio to respectable levels during the 2000’s
after 25 years of decline.
This simultaneous boom in consumer spending and saving led
many economists and politicians to claim a new “golden age” for
Australia’s economy.
There were some Cassandras, such as Barrie Dunstan of the
Australian Financial Review, who frequently warned that the baby boomers would
cause an unpleasant discontinuity when the passed the age of 65 and started
drawing massively on savings, pensions, and the health budget.
But while the economy boomed, there was no need to worry
about the future, was there?
Apparently not. On
3 May 2001, the Australian Financial Review reported that the Howard Government
had postponed releasing a high-level Treasury report into the cost of
Australia’s ageing population until well after the election, indicating the
government is hoping to minimize speculation about the need for tough reforms in
its next term of office. Professor
Bob Officer, who first proposed the Intergenerational Report as Chair of the
Government’s Commission of Audit, criticised the Government’s failure to
respond to Australia’s demographic time bomb, particularly its lack of reform
in health and superannuation. He
said the health system was unsustainable, with the old being cross-subsidised by
the young, while superannuation was so complex that it discouraged savings.
Australia has suffered considerable land degradation since
European settlement, including spreading salinity and declining soil fertility.
In 2000, research commissioned by the Australian Conservation Foundation
and the National Farmers’ Federation estimated that $6.5 billion in investment
will be required each year over the next decade to repair the damage. This was equivalent to 1% of GDP each year for 10 years.
The repair bill was expected to grow exponentially the longer this
investment was delayed.
In 2001, less than one-thirtieth of the amount needed had
been committed and successive governments procrastinated.
Land clearing is the primary cause of dryland salinity.
According to the National Land and Water Audit of November 2000, the area
affected by dryland salinity was expected to rise from 2.5 million hectares to
over 17 million hectares by 2050.
The damage was not limited to agriculture.
Some towns were also affected through damage to buildings, roads, and
pipes. Some national highways were
also being damaged.
Australia is a very dry continent and by 2000, as in some
other countries, disputes were flaring about access to water.
Adelaide faced the prospect of undrinkable water because farmers drained
water upstream. Melbourne was in
the grip of a record five year drought and faced water restrictions.
Everybody wanted more fresh water:
There are more voters in cities, and ultimately their needs
prevailed.
There was little doubt about the existence of problems with
water and salinity at the turn of the millennium (although action was not
commensurate), but the perceived evidence for the greenhouse effect was more
ambiguous.
In 2001, President George W Bush declared that the USA
would not ratify the Kyoto protocol for reducing greenhouse emissions.
He decided that the economic cost could not be justified, especially
without any similar commitment from developing countries.
Australia, despite having achieved a concessional target (108% of 1990
emissions, rather than a reduction), agreed and said they would not ratify if
the USA did not.
Bush, with the full support of Congress and the Australian
government in 2001, committed $60 billion dollars plus to an anti-missile
defence shield against the uncertain threat of attack from rogue states, while
spending not one cent against the uncertain threat of global warming, 25% of
which was caused by the USA.
In 2001, the CSIRO released a report that predicted the
greenhouse effect would make Australia hotter and drier – exacerbating both
water scarcity and dry-land salinity.
Looking through my files, I can see that there were at
least five segments of people based on their attitude towards human contribution
to global warming.
Believers
According to surveys by the Australian Bureau of Statistics
at the turn of the millennium, about 10% of people were concerned about global
warming. They believed the evidence
that human activity was contributing towards global warming and that some action
should be taken – and some were prepared to modify their lifestyles to
minimize carbon dioxide emissions.
Sceptics
Many people were sceptical of the evidence for human
activity contributing towards global warming – or they seized on negative or
ambiguous data to support their case for not incurring any economic cost until
it was proven that global warming was real and that human activity was a
contributing factor.
For example:
Embracers
Some people, mostly from cooler climates welcomed the
prospect of global warming since it would make life more comfortable for them,
or their agriculture industry more profitable.
The prospect of low-lying countries being destroyed by rising sea levels
was someone else’s problem
Precautionaries
There were adherents to the precautionary principle –
they were not sure whether global warming was real, or that human activity was a
contributing factor, but advocated taking action as a precaution.
In other words, action to prevent global warming, while potentially
costly, is sensible risk management. For
example, Richard Denniss of the Australia Institute, writing in The Canberra
Times of August 29 2000 pointed out that:
Adapters
Some people believed that action to abate greenhouse would
be futile and that we needed to develop adaptation strategies.
Australia’s Environment Minister, Senator Robert Hill, said on ABC
radio in 2001 that as Australia generated “only” 3% of global greenhouse
gasses, it made no difference to the world what we did.
If the rest of the world would not cut greenhouse emissions, then we
should adapt to new conditions. His
statement made no mention of what those adaptive strategies may be.
Ignorants
Naturally, many people remained ignorant of the threat of
global warming – or perhaps they simply focused on day to day issues and did
not consider future issues.
The Evidence at the Turn of the Millennium
An international panel of scientists had, in 2001, declared increasing confidence in the proposition that the biosphere was warming and that human activity was a causal factor. Despite strong evidence of rising earth-based measures of temperature, skeptics claimed that satellite measures and weather balloon measures showed no discernible rise in temperature over the previous 30 to 50 years.
I thought that the lack of temperature rise in the upper atmosphere was evidence in support of global warming. The greenhouse effect is based on carbon dioxide and other greenhouse gasses such as methane letting heat from the sun through the atmosphere but trapping heat radiated from the earth (which is at a different wavelength). So, less heat should be passing out through the atmosphere and it should be getting cooler, at least above a certain altitude.
In any case, I preferred to consider a wide range of signs
and these included:
There had also been record cold weather in parts of Britain and Australia in recent years, but this happened less often than record hot weather.
Separating trends from random variation over a few years or decades can be difficult. That is why it is important to examine as many different and independent data sources as possible and draw out any corroborating features.
The weight of evidence, both reported and personally observed, left no doubt in my mind that the weather was changing rapidly. I could not be sure that human activity was a cause, but no other causal factor seemed as plausible.
I remained a rare believer until just after 2010.
By then, the evidence was unmistakable but still some governments
procrastinated.
Unfortunately for Australia, the demographic and environmental time bombs exploded at the same time.
By 2015, it was clear that Australia’s household saving ratio was deteriorating rapidly, as Baby Boomers ran down their savings in retirement, paid less income tax and started making calls on the public purse for retirement income and health care. Australia’s budget slumped into deficit and taxes were raised.
Australia’s exports had been slowing for some time, as a
result of consumer boycotts on Australian food, particularly in Europe, because
of our recalcitrant attitude to reducing greenhouse emissions.
This was exacerbated by Australia’s falling agricultural productivity
due to water shortages; worsening salinity, and declining fertility.
But, in 2012, governments in Europe, Japan, and China joined the boycott
until Australia’s greenhouse emissions fell below 80% of 1990 levels, and this
affected coal, mineral, manufactures, and services.
Australia’s current account deficit ballooned.
Australia was crippled economically, needing to spend 2% of GDP on salinity and soil fertility, 3% on reduction of greenhouse emissions, and much more than that on supporting the aged and retired population. Insufficient savings meant borrowing from overseas for investment. Inflation, taxation, interest rates, federal budget deficit, and current account deficit went up. The dollar went down to record lows.
The cost of this scenario has been partially calculated by the OECD. They estimate that the ageing population will add $23 billion a year (in today’s dollars) to federal spending in 30 years time. This is equivalent to the amount of money raised by the recently introduced GST. Access Economics has added to this the fact that health care costs tend to rise at double the rate of other costs plus an estimate for lower tax collections as baby boomers retire. This comes in at an extra $46 billion per year. The total is equivalent to a tripling of the GST rate (Business Review Weekly June 22, 2001).
Then add to that the cost of environmental repairs, perhaps another $30 billion per year.