Pittwater Life April 2017 Issue
Arrested Development. Straight Shooter. Help To "Shape 2028". ANZAC Day. Avalon Surf Swap. Easter Activities. Arrested Development. Straight Shooter. Help To "Shape 2028". ANZAC Day. Avalon Surf Swap. Easter Activities.
Business Life: Money Business Life ‘I’m alright, Jack’ drives self-interest and denial This month we look at how recent failures in national energy policy continue to grow the negative feedback loop driving mistrust in government. I had an entirely predictable experience at a local government audit committee meeting earlier in March involving an adverse internal audit report into outstanding debt collections. Given that the management of this particular council had recently been ‘turned over’ the executive around the table to a man chimed in with a version of the “not our fault” chorus. Be that as it may, they took the jobs when offered with all of the various problems in place so it’s now their collective problem to fix – and in the process it may teach them to spend some time on due diligence and less time worrying about the terms of their contracts or remuneration. Unfortunately, the “not our fault” chorus is well a wellpractised tune played at all levels of government. State governments do it particularly well in relation to missing infrastructure such as schools and transport, while the Federal Government started tuning up most recently in relation to energy policy. It is true that threeor four-year electoral cycles are not conducive to developing long-term policies or forecasts unless of course a politician is talking about how much they are going to spend on a program, that seems to always be expressed over a 10-year time horizon to give it maximum gravitas. Go back a generation and we had a permanent bureaucracy to provide policy consistency and offer (frank and fearless) advice to politicians. These days the policy branch of government changes with the politicians. But back to energy policy. In mid-March, Brian Robins reported in The Sydney Morning Herald findings from Energy Consumers Australia (ECA) research to the Finkel Review into energy security, that households have “lost faith” in energy suppliers as they move to install greater numbers of solar systems. According to ECA: “Our research indicates that the primary reasons consumers with Brian Hrnjak are investing in this technology is to manage consumption and gain control of costs. The desire for independence from the grid is a particularly strong driver for early interest in battery storage,” it says. “We see this as a clear indication that consumers have lost faith in the traditional market’s capacity to deliver value for money, and are taking matters into their own hands.” ECA research quoted in the article indicated: “1.5 million households in Australia have already invested in solar rooftop systems. A further third of households are considering installing solar systems over the next five years with as many as 27% considering battery storage systems.” And it’s this last point about battery storage that I think is the game-changer in the evolving relationship between consumers, the 50 APRIL 2017 Celebrating 25 Years
government and generators. I have wanted to install a solar system for years but the thought of entering a market with as many complex variables and where the main players are new to it themselves always reminds me of that saying: “If you don’t know who the fool at the table is it’s likely to be you.” The advances in battery systems, particularly the consumer-oriented Tesla battery, means that investing in a system can now largely exclude the effect of the government feed-in tariff, eliminating a particular element of sovereign risk. The economics of it come down to simply what a system costs and what it can save you. These things will eventually do to energy what self-managed superannuation did to compulsory super – and that is to provide a technically feasible means of households wrestling back control over an important aspect of their lives. This ‘I’m alright, Jack’ approach to household energy is just another part of the wider trend of consumers taking back control from what is perceived to be dysfunctional government policy and decision making. But what’s happening in the gas market? We know that things in the national electricity market must be bad – so bad in fact that in mid-March, Malcolm Turnbull had to invoke the mighty and holy name of the Snowy Mountains scheme to reset the narrative. Anyone who watched the news on that day could have been excused for thinking they were watching an episode of the ABC’s ‘Utopia’ and PR lady Rhonda had written the script. To help understand what’s happened in the gas market I turned to another branch of the ABC, this time an article published on March 20 by business editor Ian Verrender. He describes the situation as follows: “Within the next four years, Australia will overtake Qatar as the world’s biggest supplier of gas. We are sitting on vast gas reserves. In fact, we’re swimming in the stuff. And yet, we face critical shortages at home which could starve manufacturers of fuel, see power outages across the eastern states and force energy prices through the roof while any profits that are made will be shipped offshore. This is a public policy fail of epic proportions.” Verrender argues a failure in markets so bad (for the Australian gas consumer) that AGL is considering a proposal to buy Australian gas in Japan and ship it back home! Successive governments inability to raise adequate royalties and reserve for local use leaves us with a problem that is even above the pay grade of Utopia’s Rhonda to make disappear in spin. Energy security and energy policy are part of that function of government that most of the population would simply assume to be under control… you know, governed. Once failures become apparent at the petrol pump or quarterly utility bills, the genie of failure is out of the bottle for all to see and a round of the “not our fault chorus” won’t fix it. These failures in policy and planning by established political parties are no doubt grist to the mill for any populist politician or party that is going to promise to fix this along with road congestion and train timetables so long as it all involves lower immigration. Business Life Brian Hrnjak B Bus CPA (FPS) is a Director of GHR Accounting Group Pty Ltd, Certified Practising Accountants. Offices at: Suite 12, Ground Floor, 20 Bungan Street Mona Vale NSW 2103 and Shop 8, 9 – 15 Central Ave Manly NSW 2095, Telephone: 02 9979-4300, Webs: www.ghr.com.au and www.altre.com.au Email: brian@ghr.com.au These comments are of a general nature only and are not intended as a substitute for professional advice. Celebrating 25 Years APRIL 2017 51
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Business <strong>Life</strong>: Money<br />
Business <strong>Life</strong><br />
‘I’m alright, Jack’ drives<br />
self-interest and denial<br />
This month we look at<br />
how recent failures in<br />
national energy policy<br />
continue to grow the negative<br />
feedback loop driving<br />
mistrust in government.<br />
I had an entirely predictable<br />
experience at a local<br />
government audit committee<br />
meeting earlier in March<br />
involving an adverse internal<br />
audit report into outstanding<br />
debt collections. Given<br />
that the management of<br />
this particular council had<br />
recently been ‘turned over’<br />
the executive around the<br />
table to a man chimed in<br />
with a version of the “not our<br />
fault” chorus. Be that as it<br />
may, they took the jobs when<br />
offered with all of the various<br />
problems in place so it’s now<br />
their collective problem to<br />
fix – and in the process it may<br />
teach them to spend some<br />
time on due diligence and<br />
less time worrying about the<br />
terms of their contracts or<br />
remuneration.<br />
Unfortunately, the “not our<br />
fault” chorus is well a wellpractised<br />
tune played at all<br />
levels of government. State<br />
governments do it particularly<br />
well in relation to missing<br />
infrastructure such as<br />
schools and transport,<br />
while the Federal<br />
Government started<br />
tuning up most recently<br />
in relation to energy<br />
policy.<br />
It is true that threeor<br />
four-year electoral<br />
cycles are not conducive<br />
to developing long-term<br />
policies or forecasts<br />
unless of course a<br />
politician is talking<br />
about how much they<br />
are going to spend on<br />
a program, that seems<br />
to always be expressed<br />
over a 10-year time<br />
horizon to give it<br />
maximum gravitas. Go<br />
back a generation and<br />
we had a permanent<br />
bureaucracy to provide<br />
policy consistency<br />
and offer (frank and<br />
fearless) advice to<br />
politicians. These days the<br />
policy branch of government<br />
changes with the politicians.<br />
But back to energy<br />
policy. In mid-March, Brian<br />
Robins reported in The<br />
Sydney Morning Herald<br />
findings from Energy<br />
Consumers Australia (ECA)<br />
research to the Finkel Review<br />
into energy security, that<br />
households have “lost faith” in<br />
energy suppliers as they move<br />
to install greater numbers of<br />
solar systems.<br />
According to ECA: “Our<br />
research indicates that the<br />
primary reasons consumers<br />
with Brian Hrnjak<br />
are investing in this<br />
technology is to manage<br />
consumption and gain<br />
control of costs. The<br />
desire for independence<br />
from the grid is a<br />
particularly strong<br />
driver for early interest<br />
in battery storage,” it<br />
says.<br />
“We see this as a<br />
clear indication that<br />
consumers have lost<br />
faith in the traditional<br />
market’s capacity to<br />
deliver value for money,<br />
and are taking matters<br />
into their own hands.”<br />
ECA research<br />
quoted in the article<br />
indicated: “1.5 million<br />
households in Australia<br />
have already invested<br />
in solar rooftop<br />
systems. A further<br />
third of households are<br />
considering installing<br />
solar systems over the next<br />
five years with as many as 27%<br />
considering battery storage<br />
systems.”<br />
And it’s this last point<br />
about battery storage that<br />
I think is the game-changer<br />
in the evolving relationship<br />
between consumers, the<br />
50 APRIL <strong>2017</strong><br />
Celebrating 25 Years
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