ALS Topic 48 -  Is Australia For Sale?

Adelaide Lunchtime Seminar, ALS 48
Saturday, November 23, 2019 11 am to 1:30 PM (end time flexible)

Venue: The Rose - 31 East Terrace, Adelaide SA 5000 (Upstairs. Please buy a drink or something))

About Focus Questions: a) Please read them before you come to the meetup. Think about them so you have more than "instant opinions" to offer. b) Feel free to add more focus questions. c) THE FOCUS QUESTIONS ARE JUST A MENU TO CHOOSE FROM. From this menu we can discuss whatever seems interesting. d) Focus questions are not intended to push one viewpoint! You can adopt any position you wish. We actually like friendly disagreement - it can lead to deeper understanding.

Focus Questions

1. What is Australia worth anyway? What measure do you prefer?

2. Under what circumstances can you imagine that Australia might sell part of its territory to a foreign power, or purchase territory from a foreign power? ( Imperial Russia in the 19th Century sold Alaska to the USA. In 1803 the Louisiana Purchase of land from France for $15 million nearly doubled the size of USA - 15 present American states).

3. Adelaide was sold in subdivided blocks to British real estate investors, mostly wannabe emigrants, in the 19th Century. Few of them had visited Australia before they bought the land. And of course, the natural owners, local Aboriginal peoples, were not consulted. How has this worked out, and how have attitudes changed since then?

4. What does it really mean to 'own' land? Note that in many countries (e.g. the UK) only buildings can be owned, not land. Even in New Zealand, many apparently cheap buildings are only on Maori owned, leased land. And when you buy an apartment in a multi-story building, your proportion of land ownership is minuscule. Generally, land values appreciate, building values depreciate. By default of course, Australia's government owns Australia's land. What does this mean?

5. What proportion of Australian industry - primary, secondary and tertiary - is owned or controlled by foreign interests? Who are these owners? What are the upsides and downsides of such foreign control?

6. How much money should the Australian general population and the government be making from oil, gas and other mining exports? It is known that small countries like Qatar and Norway charge much higher prices than Australia for similar products. Recent economic reviews have shown Australia to be less economically complex then Uganda or Kazakhstan. That is, the big money in Australian economic statistics has always come from primary industry - agriculture, mining extraction etc. Only a rather minor proportion of this money flows back to the Australian population, and even employment in these so-called big money industries is fairly minor.

7. An Iraqi prime minister once said (thinking of American influence), that 'you can rent an Arab but you can never buy him'. Can you think of how that comment might be applied to Australians?.

8. Has Australia's university and technical education system been 'bought' - meaning has its status as an educational undertaking been overwhelmed by its financial status as an export industry? If so, what could the consequences be?

9. Quite a few countries have special residence or citizenship visas available to immigrants who are high net worth individuals. [note: Australia had a net-inflow of 10,000 millionaires in 2017]. What conditions attach to this kind of immigration in Australia? What are the long term upsides and downsides of such purchased immigration?

10. How might we think about the metaphor, "Australia is being sold for a handful of silver" ** ? For example, is there evidence of a financial or cultural betrayal by Australian political and or/financial elites for some crumbs of privilege from global power holders? [ I'm not presuming one answer to this query, just posing it]. Explain your view. The 'handful of silver' is a Christian biblical reference of course to the disciple, Judas Iscariot, betraying his prophet, Jesus Christ.[ **This discussion topic was first proposed by George Kruszewski with the 'handful of silver' title]

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Extra links, comments and reading

Samantha Hepburn (October 22, 2019) "Australia has plenty of gas, but our bills are ridiculous. The market is broken" The Conversation @ http://theconversation.com/australia-has-plenty-of-gas-but-our-bills-are-ridiculous-the-market-is-broken-125130

[Quote from the article: "In the US, the export of LNG is regulated by laws that require exports to be in the public interest. Strong protections also exist in Canada. In Norway, Qatar, Russia, Malaysia and Algeria many LNG producers are controlled by the state to ensure a balanced approach to resource growth". [Dave Bradley commenting on this article: ] "Australia, worlds largest LNG exporter, got less than one billion dollars in royalties and virtually no tax from the resource robber barons who use transfer pricing rorting and tax havens to avoid tax. Our domestic LNG is outrageously expensive even un-affordable for industry and domestic use. Qatar worlds second largest LNG exporter, got seventy five billion dollars in royalties and has cheap domestic LNG."]

=> Bryn Williams - I've always found this quite a difficult area to research as there is LNG ( processed natural gas) and "natural gas" as per the gas transferred across Russia, Europe etc in pipelines. Consequently Aus rates highly in LNG because we have to literally ship it but is quite small compared to the volumes of Russia etc in natural form. I appreciate this doesn't answer the relative royalty issue, but interesting that Canada not only exports but processes it's gas into downstream chemical products ( polymers etc ) which would seem economically logical. Oh Hang On, that's how we handle our iron ore too isn't it!!

=> Thor May - Yes, After cooling to liquefy it, LNG has 600 times less volume than natural gas. But we are the ones exporting LNG so the volume estimates are unlikely to understate our role as the largest gas exporter, or alter the reality that Australians are being massively short-changed even at a primary industry level, let alone thinking about conversion to higher value products. ... uh, and our petroleum imports - refined in Singapore, a brilliant bit of strategic thinking ... not.

=> Bryn Williams - Always fascinated me when I worked in the plastics industry where the feedstock is oil based, that the pricing was set by the Singapore index even when we had at least 3 Aust refineries processing Bass Straight oil. The justification from the producers was that if their prices didn't match the overseas markets they would simply sell offshore and so global parity was applied. Not a bad bit of commercial blackmail! Of course it is impossible to determine the cost of a barrel of oil( extensive exploration and infrastructure costs but once established the operating costs don't vary much over anything upto 50year life span) so there is no relativity between cost and selling price, it is purely market driven.

Thor May (2014) "Property and Life Choices - How does owning (or not owning) real estate, and mortgage debt, influence the behaviour of individuals in their wider lives? What are the consequences of these patterns for whole nations?". The Passionate Skeptic website @ http://thormay.net/unwiseideas/Property_LifeChoices.htm

Ross Garnaut (6 November 2019) "Three policies will set Australia on a path to 100% renewable energy - The economist’s new book, Superpower, sets out how the government can embrace low-carbon opportunities in this term". The Guardian @ https://www.theguardian.com/australia-news/2019/nov/06/ross-garnaut-three-policies-will-set-australia-on-a-path-to-100-renewable-energy

Thor May (2011) "If a market is not a market". The Passionate Skeptic website @ http://thormay.net/unwiseideas/marketnotamarket.html

Huyen Nguyen => Hi Thor, a few weeks ago I had GT watch and discuss this talk, maybe it's relevant to your discussion too
https://youtu.be/GvDpYHyBlgc  : Michael Sandel: "What Money Can't Buy: The Moral Limits of Markets" [[Huyen Ngugen runs a sister meetup to ALS in Brisbane called Gentle Thinkers]]

= >Thor May - Thanks Huyen. Nice to hear from you. Yes, it's spot on. What did they think? On the political canvas, there has been the same drift of course. Pay to play. Decades ago I would sometimes receive detailed responses from politicians or their minders on policy ideas. A couple of years ago I sent a pretty practical suggestion on facilitating foreign language learning ( a disaster area in monolingual Australia). A tart response came back from an office secretary in the NSW government that correspondence from the public was only read after payment of a (substantial) 'reading fee'. 'Market' democracy in action.

=> Huyen Nguyen - The general consensus we reached was that there are areas of public life that should be sacred and not privatised for profit such as healthcare, prison, the justice system and the army.

Ben Butler (10 November 2019) "Firm involved in $80m water deal now funding Huang Xiangmo-linked development - A Hong Kong private equity group that manages billions of dollars, Pacific Alliance Group, is financing the troubled One Circular Quay luxury apartment building spearheaded by exiled businessman Huang Xiangmo". The Guardian @ https://www.theguardian.com/australia-news/2019/nov/10/firm-involved-in-80m-water-deal-now-funding-huang-xiangmo-linked-development

[Thor, comment: Hey, this is a tangled tale with many strands. You won't pick it all up from this article, just hints if you know stuff from elsewhere. The water deal referenced is about the destruction of Australia's main inland river system, the Murray-Darling, a scary, continuing saga of corruption with at least one cabinet minister in it up to his neck. With characters like this, everything is for sale. Huang Xiangmo was thrown out of Australia for buying political influence on behalf of the Chinese government (... well he denies that ...) ]

Warwick Long (10 November 2019) "Murray-Darling water and farmland is being bought up big by corporate business goFARM". ABC @ https://www.abc.net.au/news/rural/2019-11-08/corporate-murray-investor/11671916

Ross Gittins - Economics Editor (November 10, 2019) "Confessions of a pet shop galah: a lot of reform backfired". Brisbane Times @ https://www.brisbanetimes.com.au/business/the-economy/confessions-of-a-pet-shop-galah-a-lot-of-reform-backfired-20191107-p538gr.html

[Quote: "As someone who, back in the day, did his share of being one of Paul Keating’s pet shop galahs – screeching "more micro reform!" every time they saw a pollie – I don’t cease to be embarrassed by the many supposed reforms that turned into stuff-ups. My defence is that at least I’ve learnt from those mistakes. One thing I’ve learnt is that too many economists are heavily into confirmation bias – they memorise all the happenings that affirm the wisdom of their theory, but quickly cast from their minds the events that cast doubt on that wisdom. We’ve learnt that “markets” artificially created by governments and managed by bureaucrats are – you wouldn’t guess – hugely bureaucratic, with the managers susceptible to “capture” by market players. The gas market has also been an enormous stuff-up, threatening the survival of what remains of Australian manufacturing. The ill-considered attempt to treat schools and TAFEs and universities as being in some kind of market, where fostering competition between them and paying teachers performance bonuses would spur them to lift their performance, proved an utter dud."]

Paul Karp (November 11 2019) "Norway set to gain more from drilling in Great Australian Bight than Australia - Australians to shoulder the risk of oil and gas exploration while Norway enjoys the financial gain, Australia Institute warns". The Guardian @ https://www.theguardian.com/australia-news/2019/nov/11/norway-set-to-gain-more-from-drilling-in-great-australian-bight-than-australia

[Quote: "A report by the Australia Institute, to be released on Monday, finds that through its sovereign wealth fund’s two-thirds ownership of Equinor the Norwegian government stands to make $8.1bn from oil and gas exploration in the Bight. That compares with the equivalent of $7.4bn of revenue for the federal government from company tax and petroleum resource rent tax and $300m in payroll tax for the South Australian government over a 40-year period. The modelling appears to suggest that no royalties will be paid, which would mean that oil and gas lies in commonwealth waters and that “the commonwealth will give away Australia’s oil for free”. “As a result of the Australian government’s decision to raise little revenue from the exploitation of its oil and gas resources, drilling in the Bight is effectively a no-win proposition for Australia and the communities along its south coast,” the report said."]

Adam Morton (November 11 2019) "Inside Market Forces, the small climate group Scott Morrison wants to put out of business - From humble beginnings, Market Forces is now in the crosshairs of the Coalition’s war on environmental boycotts". The Guardian @ https://www.theguardian.com/environment/2019/nov/11/inside-market-forces-the-small-climate-group-scott-morrison-wants-to-put-out-of-business

[Quote: "As the Guardian revealed, global funds management giant Aberdeen Standard Investments, which controls assets worth more than £550bn, is among those that does not see a problem that needs addressing. It backed the role that groups such as Market Forces play. Bank bosses told a parliamentary inquiry they did not feel bullied by environment groups. In the case of the Commonwealth Bank, it believed engaging with activists had been to the institution’s benefit, helping to shape its thinking on environmental and social issues. All are considering the risk the climate crisis poses to financial security. While the Morrison government says little about climate risk, the country’s major financial institutions, including the Reserve Bank, the Australian Securities and Investment Commission and the Australian Prudential Regulation Authority, have identified it as a clear and present threat"].

Katharine Murphy (14 Nov 2019) "Australia told to prepare for 'completely new' two-sided energy market - Consumers should be rewarded for buying and selling energy in real time, Australian Energy Market Commission says". The Guardian @ https://www.theguardian.com/australia-news/2019/nov/14/australia-told-to-prepare-for-completely-new-two-sided-energy-market

[Thor, comment: This will be interesting if it becomes established as a large, new market mechanism: Australians selling power to each other through a centralized mechanism. In some ways there is an analogy here with the Internet. It also decreases the need for huge power stations (which are also strategically vulnerable). Of course, the whole thing could only work if transparency were built in and corruption locked out (.. the paradox plaguing all modern nation states).

Martin Farrer (17 Nov 2019) "Power to the people: how suburban solar could become the Uber of the energy grid
Australians are embracing the ‘virtual power plant’, which advocates say can protect the grid, save money and combat the climate crisis". The Guardian @ https://www.theguardian.com/australia-news/2019/nov/16/power-to-the-people-how-suburban-solar-could-become-the-uber-of-the-energy-grid

Annabel Crabb (22 Oct 2019) "What makes an Australian? Probably not what you think?" ABC @ https://www.abc.net.au/news/2019-10-22/annabel-crabb-national-identity-what-makes-an-australian/11623566

[Thor, comment: The two highest rating factors for identifying as an Australian, from a survey of 54,000 people were, in order: 1) Respecting Australia's laws and institutions; 2) Respecting the environment. The two least important factors were, in order: 1) Being white; 2) Being born in Australia. hmm. These were propositions answered publicly in a survey. I have some doubts. Actions speak louder than words (although it is true that actions outside of what is accepted as normal attract news reports, while the normal is not newsworthy). How interested is this law abiding, environment loving, uh, majority in whether 'Australia is for sale' or 'Australia is on the way to being foreign owned if not there already' - both of which have been partly true for the last century? My perception (do you agree?) is that the majority of people are not very interested unless it is something which seems to affect them directly and personally - such as some rich PRC Chinese buying up residential real estate].

David Crowe and Shane Wright (November 15, 2019) "'We roll over like a dog': Jacqui Lambie slams approval of Bellamy's sale". Brisbane Times @ https://www.brisbanetimes.com.au/politics/federal/we-roll-over-like-a-dog-jacqui-lambie-slams-approval-of-bellamy-s-sale-20191115-p53az0.html

[Quote: "Tasmanian Senator Jacqui Lambie has slammed the Morrison government for approving a $1.5 billion Chinese bid for infant formula maker Bellamy's Organic in a political storm over foreign investment. Senator Lambie called for more disclosure about the deal and warned against a "Communist Chinese takeover" of too many companies that should stay in Australian hands... Senator Whish-Wilson warned of potential market manipulation in the Bellamy's transaction. "In the 18 months ahead of the takeover offer, Bellamy's share price fell 60 per cent while Chinese authorities withheld market access," he said. "On the face of it, it looks like the Chinese government suppressed the share price ahead of a takeover bid and some Australian investors have lost millions as a result. "There are allegations of this occurring in other takeovers both here and overseas and this needs to be thoroughly investigated."]

Australian Government (Dept. of Foreign Affairs & Trade) (2019) "About Foreign Investment". DFAT @ https://dfat.gov.au/trade/investment/Pages/frequently-asked-questions.aspx

[Quote: "At end of 2018, 91 per cent ($414 billion) of Australia’s capital flow was sourced from domestic savings while 9 per cent ($43 billion) was sourced from overseas (ABS catalogue 5206.0)....

For 2016-17 the Australian Bureau of Statistics reported that around one in four businesses in Australia with 200 or more employees has greater than 50 per cent foreign ownership (ABS catalogue 8167.0, 2016-17). ...

In 2017, Australia was the 13th largest recipient of foreign direct investment (FDI) stock in the world according to the World Investment Report prepared by the United Nations Conference on Trade and Development (UNCTAD). The same report also ranked Australia as the 17thth largest source of direct outwards investment stock. ...

Around 59 per cent of the income from foreign direct investment equity over the past five years has been re-invested in Australia."

Australian Government (Dept. of Foreign Affairs & Trade) (2019b) : "Australia invests trillions of dollars in overseas businesses, and other economies invest trillions in Australia. DFAT helps Australians invest money overseas while ensuring any foreign investment in Australia is in our national interest." ....

Statistics on where Australia invests :

https://dfat.gov.au/trade/resources/investment-statistics/Pages/statistics-on-where-australia-invests.aspx

Statistics on who invests in Australia :

https://dfat.gov.au/trade/resources/investment-statistics/Pages/statistics-on-who-invests-in-australia.aspx

Statistics on Australian industries and foreign investment :

https://dfat.gov.au/trade/resources/investment-statistics/Pages/australian-industries-and-foreign-investment.aspx

=> Thor, comment: It is worth looking at these statistics. e.g. Australian outward bound investment is dominantly to USA (28,3%) and UK (16.1%). Other destinations are rather minor; e.g. Japan 4.5%; China 3%. Over 5 years there has been a 19.4% increase in "investment" going to the Cayman Islands (tax haven), which at 3.1% is more than Australia's investment in China.

=> Thor, comment (2): Investment INTO Australia, like outward investment, is again dominated by USA (26.7%) and UK (16.4%). 9% comes from Belgium (i.e. European Union) and 6% from Japan. Only 1.8% (and falling) comes from China, although the 3.4% from Hong Kong is really Chinese. Be aware that many sources and destinations are deceptive when it comes to multinational companies who shift their tax liabilities continuously.

=> Thor, comment (3): In 2018 total direct foreign investment in Australia was worth $967.5 billion. Mining & quarrying was 37.8% of that; manufacturing 11.1%; financial & insurance 11.1%; real estate 10.6%; wholesale & retail trade 5.9%; information & communication 2.8%; construction 2.3%; electricity, gas & water 2.2%; transportation & storage 2%; accommodation & food services 0.9%; other 13.2%

DFAT (2019) AUSTRALIA'S TOP 10 GOODS & SERVICES EXPORTS, 2018 @ https://dfat.gov.au/trade/resources/trade-at-a-glance/Pages/top-goods-services.aspx

Total $b438,127; 1. Coal $b66,860, 15.3%; 2. Iron ores & concentrates $b63,277, 14.4%; 3. Natural gas $b43,298, 9.9%; 4. Education-related travel services $b35,234, 8.0%; 5. Personal travel (excl education) services $b22,240, 5.1%; 6. Gold $b19,137, 4.4%; 7. Aluminium ores & conc (incl alumina) $b11,341, 2.6%; 8. Beef, f.c.f. $b8,661, 2.0%; 9. Crude petroleum $b8,097. 1.8%; 10. Copper ores & concentrates $b5,996, 1.4%

[Thor, comment: note that from these exports, only Education and Travel employ significant numbers of people. That's why most of this money stuff is 'under the radar' in daily life]

DFAT (2019) Australia's goods exports to CHINA (A$ million) https://dfat.gov.au/trade/resources/trade-at-a-glance/Pages/goods-by-country.aspx

2018 All goods - A$118,379 million - [$billions] Iron ores & concentrates 51,367; Coal 14,320; Natural gas 13,699; Gold 5,789; Confidential items of trade 3,340 [Thor: what the hell is this confidential thing?? Casinos?]; Wool & other animal hair (incl tops) 2,892; Copper ores & concentrates 2,663; Edible products & preparations, nes 1,507; Other ores & concentrates; 1,488 Crude minerals, nes 1,465 ]

DFAT (2019) Australia's goods exports to the UNITED STATES (A$ million) https://dfat.gov.au/trade/resources/trade-at-a-glance/Pages/goods-by-country.aspx

2018 All goods - A$13,440 million; Beef, f.c.f. 1,756; Aircraft, spacecraft & parts 1,074; Confidential items of trade 1,067; Pharm products (excl medicaments) 1,059; Meat (excl beef), f.c.f. 993; Aluminium 519; Alcoholic beverages 448; Misc manufactured articles, nes 391; Medical instruments (incl veterinary) 335; Measuring & analysing instruments 291

DFAT (2019) Australia's top 10 trading partners https://dfat.gov.au/trade/resources/trade-at-a-glance/Pages/default.aspx 

Australia's goods & services trade with CHINA (A$ million)
Year Exports Imports Total trade
2018 136,287 78,321 214,608

Australia's goods & services trade with the JAPAN (A$ million)
Year Exports Imports Total trade
2018 58,796 26,967 85,762

Australia's goods & services trade with the UNITED STATES (A$ million)
Year Exports Imports Total trade
2018 23,098 50,779 73,877

Australia's goods & services trade with the REPUBLIC OF KOREA (A$ million)
Year Exports Imports Total trade
2018 26,646 14,302 40,948

Australia's goods & services trade with INDIA (A$ million)
Year Exports Imports Total trade
2018 22,316 8,093 30,409

Australia's goods & services trade with the NEW ZEALAND (A$ million)
Year Exports Imports Total trade
2018 15,039 14,224 29,262

Australia's goods & services trade with UNITED KINGDOM (A$ million)
Year Exports Imports Total trade
2018 10,521 16,426 26,947

Australia's goods & services trade with THAILAND (A$ million)
Year Exports Imports Total trade
2018 7,827 17,900 25,727

Australia's goods & services trade with MALAYSIA (A$ million)
Year Exports Imports Total trade
2018 10,127 14,054 24,180



Thor's own websites:

1. articles at http://independent.academia.edu/ThorMay ;

2. legacy site: http://thormay.net .

 


Is Australia For Sale? (c) Thor May 2019 return to Ddiscussion