Grattan on Friday: Turnbull turns to water as power debate fires up

Malcolm Turnbull had the media troop to Talbingo in the Snowy Mountains for Thursday’s big Hydro announcement. But then his press conference couldn’t be beamed direct because there was no way of transmitting the signal.

Meanwhile the news cycle was taken up with the pictures of the extraordinary biffo between South Australian Premier Jay Weatherill and federal Energy Minister Josh Frydenberg when they appeared together in Adelaide.

It was all a metaphor for the shambolic national energy debate, in which the process is chaotic and politics trumps policy.

Remember the report the government commissioned last year from Chief Scientist Alan Finkel on the future security of the electricity market? Finkel continues to work away methodically, amid the madness.

His final report is not due until mid-year. But the government in December dismissed his interim report’s apparent positive nod towards an emissions intensity scheme, and it is putting down various markers ahead of the final one.

In February it signalled it saw merit in giving some help to build new “clean coal” power stations. Now has come a $2 billion plan to increase the capacity of the Snowy Hydro by 50%, with Turnbull declaring himself a “nation building prime minister”. The plan has been languishing in Snowy Hydro’s bottom drawer for years. Its unveiling came a day after Turnbull extracted a promise from LNG exporters to provide more local supply, with the threat the government would use its power over exports if they don’t deliver.

Despite a cabinet committee being set up on energy, ad hocery and special interests abound as the government struggles with the issue that Turnbull declared in February would be “a defining debate in this parliament”.

Turnbull is throwing out ideas and initiatives as he goes, rather than producing an integrated blueprint.

This week’s South Australian $550 million energy plan, including a new state-owned gas-fired power station, might have been a response to a problem the state should not have allowed to happen, and may be open to criticism, but at least it had an overall coherence.

Turnbull knows that putting a price on carbon is needed. But he can’t embrace that because it’s anathema to the conservative Liberals and the Nationals.

Equally, as a man with a good eye to what happens in the business world, he is aware that investors won’t be going down the coal route. But the Nationals, especially those from Queensland, are heavily committed to coal.

So whatever the final federal government energy policy looks like, it will be distorted to a greater or lesser extent by the political constraints the Prime Minister is under.

The process has also eschewed any attempt to pursue constructive federal-state relations. Ever since the seismic SA blackout last year, the federal government has unrelentingly attacked the state Labor government over its heavy commitment to renewable energy.

Weatherill gave it back in spades when he was standing beside Fydenberg on Thursday. Turnbull said Weatherill’s behaviour “spoke volumes about the Premier’s state of mind at the moment”. That’s no doubt true.

It is not surprising that Weatherill, facing an election next year, has found the constant federal campaign against him over the top. It has gone well beyond what could be considered reasonable policy criticism and politicking, and is unlikely to do the Turnbull government much good when the public would likely prefer a co-operative approach on a crucial issue.

Alongside the energy debate the government is grappling with what will be a centrepiece of the May budget – ways to make housing more affordable. Like energy security, it is one of those “back to basics” issues.

At the moment the housing debate is sounding a bit like the tax debate of the Turnbull government’s earlier days - the table is laden with options.

One option in the chattersphere is to allow young people to use their superannuation to help them get into the market.

When then-treasurer Joe Hockey flirted with this proposition Turnbull said it would be “a thoroughly bad idea” - which is as true now as it was then, and is a view taken by some senior ministers.

Michael Sukkar, Assistant Minister to the Treasurer, who is working on the budget’s housing affordability plan, has been pushing the super proposal. Reportedly Treasurer Scott Morrison is open-minded, Finance Minister Mathias Cormann is dubious, and Revenue Minister Kelly O'Dwyer, who has day-to-day ministerial responsibility for superannuation, is against. Apart from super being for retirement, critics argue that using it for housing would just drive up prices.

Turnbull was still focused on supply when pressed this week. “The key to having more affordable housing is to build more housing,” he said.

“And so the argument against demand-side measures in isolation is that if all you do is pump up demand without increasing supply, what you end up doing is pushing up the price of housing and there is no net benefit.

"It is a complicated issue but the one fundamentally substantial point is that if you want to have more affordable housing you’ve got to build more housing and that requires changes to zoning and planning, it requires governments, and that’s mostly state and local governments, to make it easier for new dwellings to be built.”

Morrison has flagged extensive changes to arrangements for social housing as part of the housing package.

In raising expectations of what it can do to make house buying more affordable, the government is walking on dangerous ground.

As with energy policy, it is hemmed in by its own political constraints.

Action to curb negative gearing and the capital gains tax discount would be desirable. But the government has trashed Labor’s proposals on these for a year. When there was recent speculation about a possible capital gains tax change for property investors, the government seemed to rule it out. Some sources maintain it is not dead, but others say it would pose a problem with the “base”.

While it continues to refuse to consider action in these areas the government ties its hands.

Especially with the constraints, the room to make a real difference on housing affordability is limited. But with this budget vital for Turnbull’s political fortunes, one thing the government must avoid is its affordability package failing to meet the spruiking that precedes it.