Palmer's everything Shorten could wish for

With the Coalition wedded to a hard-line stance on the budget, Clive Palmer's push for carbon tax compensation could handball significant political leverage to Labor.

Prices, as coal baron Clive Palmer knows all too well, are set at the margin. It doesn’t matter what stockpiles and known mineral reserves are ‘worth’ in theoretical terms. To create billions in personal wealth you watch, buy and sell at the margin.

So too in politics. Mr Palmer, and homologous groups in the US, are discovering that the great stockpiles or known reserves of popular votes aren’t important, so long as the vast majority of them are at loggerheads. When a nation is divided, the political speculators move into the narrow space between them and make political hay.

Thus, the deal overnight to avert a US default has buoyed markets by around a full percentage point, based on the short-term joy that there will be no Lehman-style financial Armageddon.

But the Democratic President is still at loggerheads with the Republican-controlled Congress, allowing Tea Party Activists to hold the nation, and the global political-economy, to ransom. The new date for Armageddon is February 7 – the date on which the temporary raising of the debt ceiling expires and a permanent deal on the overturning of Obamacare will be demanded by those parochial Tea Party nuts.

Now, nobody is suggesting Mr Palmer is a nut. He’s played the marginal price game in coal and other commodities with real acumen. And by parlaying those skills into parliament (that is, if he actually wins the Fairfax recount) he is wresting unprecedented power from both major parties.

Celebrations over a Palmer-supported repeal of the carbon tax were, it turns out, premature. Palmer wants back-dated compensation for carbon emitters, such as some of his own business units, before agreeing post-July 1 to vote for the repeal legislation.

The Abbott government is hamstrung, because having made debt a major election issue, it can’t just borrow the billions required and accede to this wish. Nor does Palmer really expect them to. But this is a ‘reasonable’ demand that he will maintain while he pursues other agenda items with the Abbott team behind closed doors.

Abbott is seen by the left as a hard-right ideologue, but the almost gross pragmatism of his $5.5 billion paid parental leave scheme, used to shore up support among women, shows what a moderate he really intends to be. He sees the long game, the way his mentor John Howard did. To pass a major reform such as Howard’s GST, at least a term must be spent building political capital. And Abbott would love to do this – if Palmer would only let him.

That doesn’t look likely.

Conservative commentators are today suggesting that it’s Bill Shorten who’s utterly snookered by the current carbon price limbo. Abbott is going to ‘force’ Bill to oppose the repeal legislation while the current Labor-Greens-dominated Senate is still sitting, so as to inflict as much damage as possible on Shorten. Well, that’s the theory.

However, in this instance Shorten has much on his side. He is being asked to support the dismantling of an a floating-price emissions trading scheme, widely acknowledged to produce the best per-tonne carbon abatement price, in favour of Direct Action – a policy that is now being dressed up as a ‘market-based scheme’.

He is being asked to vote against a policy that has seen the rate of home energy demand fall by much more than the level expected by the carbon price’s architects – energy analysts Pitt & Sherry have released a study showing a 3 per cent drop in home energy demand since the carbon price came into effect, following five years of 0.3 per cent falls.

And Shorten is being asked to vote to ‘reduce the cost of living’ on families, when all credible energy forecasters know that the carbon price is only a small part of the domestic energy bill. The passing on of the costs of over-investment in transmission networks, plus the rapidly rising cost of gas, mean that even if Abbott repeals the carbon tax there will be no cost-of-living reduction for consumers.

Shorten’s big test as incoming Labor leader will be to stay at loggerheads with Abbott on this issue. He can do that if he argues the above points clearly and forcefully enough. But even more importantly, Shorten, for all his political deviousness, is the kind of politician who can shore up support within the parliamentary party to agree to maintain him as leader whether or not he loses a double-dissolution election.

Why would they do that? Because Shorten is the most capable leader they have. He has policy wins on his scorecard – DisabiltyCare and super reform being the biggest – and he would undoubtedly increase the Labor headcount in parliament if a double-dissolution election were called.

If the caucus starts splintering on carbon pricing, as some now expect, there will be no stand-off on the issue. Shorten will suffer a loss of support as Kevin Rudd did for abandoning carbon pricing, and Labor will go back to bickering over what, exactly, it stands for.

However, if Shorten holds the line – and argues with enough skill that Labor is ‘on the right side of history’ on this issue – he puts the ball back into Abbott’s court.

More importantly, he leaves Palmer on the court to return the Abbott serve.

That would give Palmer unprecedented power, but would also make the fledgling Palmer Unity Party one of the easiest targets Shorten could hope to have in his early term as opposition.

What exactly Palmer wants is unclear. However while he pursues an idiosyncratic agenda that sends Coalition blood pressure through the roof, he would also become the new Gina Rinehart for Labor – 'a billionaire surrounded by yes-men, working for big capital at the expense of the workers', or words to that effect.

The tail would be wagging the conservative dog. The marginal trades of politics would be where all the action took place. And mainstream voters – the known reserves of political opinion – would be shut out, at least until the 2016 election.

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