What do NSW solar panel owners have in common with mining investors?

‘So you think I am a cranky old fool, do you?’ I knew it was Jim before I turned around to see who was talking. I referred to Jim as a cranky old fool on this blog a couple of weeks ago. At this point I should make sure readers are aware that this Jim is unlike any other Jim I have ever met. He is a royalist. He thinks incentives to put solar panels on roofs of houses are an abomination because the high costs of this method of generating electricity are borne by taxpayers and other users of electricity. And he asks difficult questions. A lot of the people I know avoid Jim when they see him coming. Perhaps that is why he sneaks up on people and just starts talking.


Anyhow, Jim isn’t such a bad old coot. He wasn’t even particularly upset with me for calling him a cranky old fool. After he had my attention, he said: ‘You know that photo of Sydney you have on your blog – the one with the cloud over most of it?’ I replied: ‘Yes, I’ve been thinking about replacing it with a photo I took on a sunny day, now that the dreadful Labor government has been swept out of office’. Jim said: ‘Don’t do that. Find a photo with a darker cloud!’

I was surprised to hear this from Jim. I had never thought of him as a Labor supporter. So, I asked him to explain. As I did so I couldn’t help looking at my watch. I knew I was about to be sucked in to a discussion that might take some time.

Jim asked: ‘What do you think of the decision of the New South Wales government to reduce the feed-in tariff that they will pay people who have installed solar panels?’ I said I didn’t have an opinion. I added that I thought the decision would make him happy because I remembered that he thought solar panels were an abomination.

Jim scowled and just asked another question: ‘What do you think of the proposed mining rent tax?’ I explained that I thought the latest proposal wasn’t quite as bad as the tax first proposed last year. I mentioned something I wrote last year explaining that the main problem was sovereign risk. I argued that when governments enter into agreements with mining companies they should honour those agreements whatever happens, rather than insisting on a higher share of profits because the price of minerals has gone up. I concluded my little speech by suggesting that if this tax is introduced investors will become more wary about signing any kind of agreement with any government in Australia.

Jim said: ‘That is precisely my point about the solar panels. The feed-in tariff specified in those agreements must be one of the worst deals that any government has ever made. But for a new government to just tear up the agreement is one of the lowest acts of bastardry that has ever been perpetrated on investors anywhere in the world’.

I agreed that the decision was dodgy but I said I didn’t think the rating agencies would downgrade the NSW government because of it. It might actually improve the finances of NSW. Jim said: ‘Look, you aren’t going to try to tell me that any investors should take any notice of the rating agencies after the global financial crisis. The real issue is whether anyone can be confident that the people running the NSW government at present are any more trustworthy than Jack Lang. Do you really think these people are more trustworthy than Jack Lang?’

Jim asks difficult questions. Jack Lang was the premier of NSW during the depression in the 1930s. One of the things he is remembered for is his efforts to stop payment of interest to overseas creditors until the financial situation improved in NSW. If he had succeeded this would have done enormous damage to Australia’s reputation as a destination for foreign investment. On the basis of recent performance I think the politicians running NSW at present and those currently running the Commonwealth government might default on interest payments if they had to deal with the kind of economic crisis confronting Australian politicians in the 1930s.

I told Jim that people would like him a lot more if he didn’t ask difficult questions.

Postsript: 7 June 2011

When I saw Jim this morning I asked him what he thought of the decision of the NSW government to honour their contractual obligation to people who had installed solar panels. Jim said he would have been more impressed if the Premier had made the decisions to back down because his conscience was troubling him rather than because he didn't have the numbers in the upper house to pass the legislation.

I suggested that in any case the cloud had lifted over Sydney and that I would find a better photo to put on my blog. Jim said: 'Don't do that! There is a new cloud over Sydney. They have decided to award the Sydney Peace Price to Noam Chomsky'.

I don't know who 'they' are, but if 'they' are interested in promoting peace 'they' should try to avoid provoking people like Jim.