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Wednesday, June 22, 2016

The Liberal Party "Jobs and Growth" Plan according to Treasury

Appearing on the Q & A program on ABCTV on 21 June 2016, PM Malcolm Turnbull gave the answer below to this question -

JAQUELINE: Mr Turnbull, your jobs and growth mantra is based on the trickle-down economics theory. Your former employer Goldman Sachs and many other trusted sources have raised serious concerns about this tax cuts and confirmed that a significant proportion of the windfall will benefit overseas investors, shareholders and not trickle down at all. Over 10 years the plan will cost the Australian taxpayer in the vicinity of $50 billion. Why should ordinary Australians support cuts to our services to give companies a tax cut that according to so many experts probably won't create jobs or contribute to growth significantly and elsewhere has been shown to increase inequality in society?
Malcolm Turnbull with Terry Jones on Q and A

Malcolm Turnbull: Well Jaqueline thank you. Firstly let me say that cutting company tax does not increase inequality in society. There has been a long trend towards reducing company tax right around the world. The biggest cutter of company tax in our lifetimes is in fact Paul Keating, who cut company tax twice and he cut it because he knew that if you reduced company tax, if you reduced business tax, you increase the return on investment. If you increased the return on investment, you get more investment. If you get more investment, you get more employment and you get more growth. That's why the Treasury found last year that for every dollar cut in company tax, you got $4 of benefit of growth into the economy, into GDP of which between two-thirds and three quarters went to labour, went to workers
Treasury produced a report on 3 May this year "Analysis of the long term effects of a company tax cut" that models the two options for funding the planned company tax cut.

While Malcolm Turnbull said "Firstly let me say that cutting company tax does not increase inequality in society", the Treasury modelling of his "jobs and growth" plan says the exact opposite -


In this section a reduction in company tax rate from 30 to 25 per cent is financed by an increase in the average rate of personal income tax.

Theory and key assumptions

The personal income tax system includes the taxation of both labour and capital income. It is difficult to incorporate progressivity in a model with a single representative household, so the modelling reported here assumes a single effective tax rate (hereafter average personal income tax) that is applied to labour income and capital income after franking credits. Progressivity potentially raises the excess burden of a tax, which implies the modelled average personal income tax increase may understate the welfare cost of raising revenue via the actual personal income tax system. As noted in Section 3, the perfect capital market and fixed domestic saving rate assumptions imply the capital income component of the personal income is largely invariant to changes in personal tax rates.  Therefore, the distortionary part of the modelled personal income tax is effectively the labour income tax component.


In this section a reduction in the company tax rate from 30 to 25 per cent is financed by a cut to government spending.

Theory and key assumptions

Government spending is assumed not to affect directly the welfare of households. In the previous two scenarios real government spending was held constant so adding it to the household utility function would not have made any difference to the welfare calculations reported there. In the current scenario, the implicit assumption is that all government spending that is cut is wasteful. While this is a common modelling assumption it ignores the fact that: government spending provides goods and services [Medicare bulk-billing for instance] that would otherwise not be provided by the market sector; households derive direct utility from government spending; and infrastructure spending can improve market sector productivity. This suggests the model will overstate the benefits of this funding alternative. This scenario is expected to yield significantly higher welfare gains than the previous two scenarios because an additional assumed distortion is removed from the economy.
The way to fund its company tax cut that the Coalition selected, as shown in its 2016/17 Budget Overview
The Coalition Plan - Higher and Higher Personal Income Taxes
The Coalition Plan - Higher and Higher Personal Income Taxes

Monday, June 20, 2016

Taxpayer dollars create state-owned bank to build coal-fired power stations

The Coalition Government has used taxpayer funds to create a state-owned bank that is to finance new coal-fired power plants in developing countries.

This will help to increase demand for coal for new mines for decades.

Media Release by Treasurer Joe Hockey, 24 June 2015

Australia to join the Asian Infrastructure Investment Bank

"Joining the AIIB presents Australia with great opportunities to work with our neighbours and largest trading partner to drive economic growth and jobs [or JOBS and GROWTH].
Australia will contribute around A$930 million as paid-in capital to the AIIB over five years and will be the sixth largest shareholder."

Sunday, June 19, 2016

LNP 'fix' for a revenue problem it says doesn't exist

Scott Morrison delivered his first and perhaps final budget as Australian Treasurer in the last days of the Abbott/Turnbull Government.
  • The 2016-17 Budget was presented by the Treasurer, Scott Morrison in the House of Representatives on Tuesday, 3 May 2016.
  • The 44th Parliament was dissolved a few days later on Monday, 9 May 2016 at the request of PM Malcolm Turnbull.
Australian Treasurer, Scott Morrison
Australian Treasurer, Scott Morrison

Scott Morrison consistently says the Government doesn't have a revenue problem.
"Mr Morrison rejected suggestions there was a problem with money coming in, saying revenue as a share of the economy would be higher than the long-run average next financial year." (SBS News, 8 April 2016)
The budget summary in his budget does in fact show revenue as a share of the economy being higher than the long-run average next financial year.

The same summary however shows tax revenue as a share of the economy being higher than the long-run average not just next financial year but in every following financial year. The share actually increases in every financial year to 2019-20, remaining well above the long-run average.

Australian Government Tax Revenue as a percent of GDP

Monday, June 6, 2016

Converting coal fired power stations to solar thermal chemical fuel

The Yallourn Power Station and the Hazelwood Power Station in Victoria are two of the most inefficient and CO2-intensive power stations in the world.

Hybrid solar-fossil systems for large-­scale solar energy storage

Michael Dolan & Daniel Roberts, University of Adelaide, February 7, 2013

Highly endothermic gasification and reforming processes offer a significant opportunity for the penetration of Concentrated Solar Power into the chemical and fossil energy industries. The upgraded products incorporate solar energy in chemical form which enables the ready storage, distribution and use of concentrated solar thermal energy.


The Yallourn Power Station produces about 22 percent of the electricity used in Victoria. Every hour 2,400 tonnes of brown coal are needed to produce super-heated steam for 4 turbines. These turbines have a combined capacity of  1,480 megawatts of electricity. In 2015 annual generated electricity output was 10,256 GWh, up from 9,806 GWh the year before.

In 2015 Yallourn Power Station installed a new High Pressure- Intermediate Pressure (HIP) turbine in Unit 2. This resulted in an efficiency improvement for Unit 2 of around 2.7%. This marked the completion of a 5 year program of new HIPs on all four Yallourn Units.


The Hazelwood Power Station produces up to 25 percent of the electricity used in Victoria. Up to 15.3 million tonnes of brown coal are needed each year for an annual generated electricity output of approximately 12,000 GWh. Steam from 8 water tube boilers drives 4 turbine stages. These turbine stages have a combined capacity of  1,542 megawatts of electricity, just 62 megawatts more than the Yallourn Power Station.

Since 1996 more than $1 billion has been invested at Hazelwood to improve efficiency and reliability.

Lignite or brown coal from the Hazelwood mine is about 62 percent moisture at extraction.

Efficiency and CO2 Intensity

The brown coal used as fuel supplies about 9 gigajoules of thermal energy per tonne. The coal-fired power stations convert about 24 percent of this energy into electricity. The other 76 percent is output as waste heat.

Each tonne of brown coal contains about 250 kilograms of carbon and the balance, 750 kilograms, is mostly hydrogen and oxygen.

When burned the hydrogen and oxygen is converted to water vapour, while the 250 kilograms of carbon combines with oxyygen from the air to form 920 kilograms of carbon dioxide.

To generate 1 megawatt-hour of electricity at 24 percent efficiency, 1.667 tonnes of coal must be burned. This contains 417 kilograms of carbon that is converted to 1,528 kilograms of carbon dioxide when burned.

Solar Thermal Fuel in a Converted Coal Power Station

Brown coal can be converted into a mixture of gases using concentrated solar thermal energy.

One such process could convert each tonne of brown coal into 920 kilograms of carbon dioxide and 80 kilograms of hydrogen.
Solar thermal gasification of brown coal
Solar thermal gasification of brown coal

The 80 kilograms of hydrogen gas from each tonne of coal supplies 9.67 gigajoules of thermal energy when burned.

This hydrogen fuel could be burned in one or more gas turbines added to an existing coal fired power station.

The hot exhaust gas from these gas turbines would be used to create superheated steam in the coal fired power station's existing boilers and drive some or all of its existing steam turbines.

The addition of the gas turbines fueled by hydrogen can raise the efficiency of the power station from just 24 percent to 60 percent.

The thermal energy available from the 80 kilograms of hydrogen fuel consists of the 9 gigajoules present in each tonne of pulverised coal together with 0.67 gigajoules of solar thermal energy.

At 60 percent efficiency this 9.67 gigajoules of thermal energy is converted into 5.8 gigajoules of electricity.

To generate 1 megawatt-hour of electricity at 60 percent efficiency, only 0.62 tonnes of coal must be converted to hydrogen that is burned.

This amount of brown coal contains 155 kilograms of carbon that is converted to 570 kilograms of carbon dioxide when it is gasified using concentrated solar thermal energy.

The hydrogen, 50 kilograms, from the 0.62 tonnes of brown coal is all that is required to generate 1 megawatt-hour of electricity.

There is a saving in mining operations because much less coal needs to be processed for each megawatt-hour of electricity generated: a reduction from 1.667 tonnes to just 0.62 tonnes of coal.

Available technology boosts efficiency of thermal power plants to 60 per cent