Peter Smith

Fevered Thoughts of a Woke Banker

Reserve Bank Deputy Governor Guy Debelle made a good start to his recent speech on Climate Change and the Economy by quoting Dorothea Mackellar: “I love a sunburnt country, a land of sweeping plains, of ragged mountain ranges, of droughts and flooding rains.” I think we owe Ms Mackellar a continuing debt of gratitude. She provides perspective for those still capable of rational thought in this woke age.

I’d like to think that Reserve Bankers are capable of thinking rationally. I have known many Reserve Bankers in my time and I can attest that indeed they are. In the case in question Dr Debelle is mostly rational. He makes a good case for the Bank to take into account government action on climate change in the way it models the economy. This is sensible.

For example, if windmills and solar farms are to increasingly replace fossil fuels for power generation it will undoubtedly impact the international competitiveness and the growth of the economy – for the worse. And as another example, mentioned specifically by Debelle, if China switches to some extent away from coal, it would affect our export revenue and the development of mining. It would be remiss for the Bank not to take these things into account.

Unfortunately, however, Debelle doesn’t stop with climate policies. He brings in the climate itself: “We need to reassess the frequency of climate events. In addition, we need to reassess our assumptions about the severity and longevity of the climatic events.” Oh, and by the way, he reports that “last year the RBA joined the Network for Greening the Financial System (NGFS), a group of central banks that are examining climate issues.” I can only presume that not too much fossil fuel travel is involved in this green gabfest.

I appreciate that Debelle is woke to climate change and that this will affect his economic thinking. He references the IPCC as an authority; though I believe he misreports them. He reports them as saying that “one degree of warming has already occurred from pre-industrial levels as a result of human activities.” I am not going to trawl through IPCCC reports but I believe they say that the majority of warming is down to human activities, not all. The Bank should get it right to avoid generating unhelpful alarmism. But back to economics.

How in the world is the Bank to model climate change? According to Debelle, “We need to think in terms of trend rather than cycles in the weather. Droughts have generally been regarded (at least economically) as cyclical events that recur every so often. In contrast, climate change is a trend change. The impact of a trend is ongoing, whereas a cycle is temporary.” They must have some very clever people at the Bank, is all I can say.

What assumptions do they use about the future severity and longevity of climate events? Do they assume significant erosion of foreshores? Will there be more or fewer cyclones in the next five years compared with the last? How long will the current drought in south-eastern Queensland last? What areas will be most drought affected in two years’ time? Will northern Queensland suffer floods again next year? How much damage will bush fires do in 2020?

Don’t worry, the Bank is “talking with climate modellers,” to sort these things out. You know, the same people who have an unblemished record of seriously over-estimating warming and inventing upticks in untoward weather events. “We share a common understanding with them about looking at these issues in general equilibrium and the importance and challenges in modelling non-linearities. We are working through the challenge of taking this information and translating it to the economic models and frameworks that inform our monetary policy decision-making.” Good luck!

As it is, economic models are close to useless when it comes to forecasting large changes; in other words, changes that we need to know about. Not one forecast the GFC. How could they? They would have needed to have within them a predictor that US mortgage-backed securities were worthless. Bear in mind even had that been known the models would also have been hopeless in predicting the effects beyond what you next-door neighbour might have guessed. Macroeconomic models have their most use in keeping Treasury and Bank econometricians employed.

Now start finessing the models to take account of climate change. The mind boggles. Quite simply it is ridiculous. Maybe it’s a spoof? But I have never known a Reserve Banker to engage in spoofing. I have to leave it at that and turn from the ridiculous to the beyond ridiculous.

The Australian Conservation Foundation (AFC) recently released a report of some climate modelling which it commissioned the ANU to undertake and which purports to identify “the twenty federal electorates most at risk from climate change.” For instance, Barnaby Joyce’s electorate of New England is forecast to see its average maximum temperature rise by 4.51 degrees in 2050 from a baseline of 1960 to 1990. Don’t you just love the faux exactitude of the second decimal place?

It is all complete and tenuous rubbish of course. Attach to it no more reliability than you would your chances of winning big in the lottery. But it is not the AFC report that I think is beyond ridiculous. That kind of hysterical alarmism is now par for the course among the environmentally woke. What struck me as being particularly ridiculous came out of an article on the AFC report by Andrew Tillett in the AFR on March 11.

Apparently eight of the twenty electorates identified in the Report are represented by Nationals MPs. The implication is that they, above others, should be keen on doing something about climate change. Yes, that would be right, if they and their constituents were completely stupid. But suppose, hopefully, they are not. Supposing they know that nothing they could do would alter the climate by one iota. Supposing they know that affordable and reliable power would be sorely needed if temperatures soared. Then, as rational people, they would elect MPs who want to build coal power stations not windmills.

This climate-change business has made monkeys out of men. Reserve Bankers seriously contemplating inserting the unknowable (climate change) into economic modelling. Commentators seriously expecting (urging) people to combat hot weather by giving up affordable and reliable power. The plot has well and truly been lost.

If you think it’s going to get hotter. If you think we are responsible. Then at least do something effective: to wit, efficient coal, gas, nuclear and hydro. Throw in some wind and solar if you feel good about it. But a religious affinity to so-called renewable energy is a death wish if in fact it gets hot or an extremely costly and futile gesture if it doesn’t.

5 comments
  • en passant

    Peter,
    You would think that someone appointed to the RBA would have undertaken some personal and independent due diligence to find out if the Klimate Kon was factual or not. About 5-minutes would have sufficed.
    How much easier is it to go with the flow, just chant the mantra, reap the accolades and rewards and be invited to the woke dinner parties?
    After all, Oz is too big to fail as we are the Lucky Country!
    I have not heard much from Philip Adams recently heaping praise on Venezuela, as he did.
    Oz is in terminal decline, but I no longer care as the recently upgraded coal-fired power station nearby provides me with endless cheap energy.
    Please correct your typo as you have swapped the “B” & the “W” in the title …

  • Alice Thermopolis

    Dr Debelle: “We are talking with climate climate modellers. One thing that is useful about economic modellers talking to climate modellers is that we have a common understanding about looking at things in general equilibrium and the challenges of modelling non-linearities. So at least we have some sort of commonality in our language. It is important, however, not to understate that the challenge of embarking down this path is only in its infancy.”

    The IPCC had something to say about “non-linearities” too, before junk science and in silico experimentation took over:.

    “In climate research and modelling, we should recognize that we are dealing with a coupled non-linear chaotic system, and therefore that long-term prediction of future climate states is not possible”. (IPCC 3rd Assessment Report; Section 14.2.2.2, p. 774, 2001).

    Naughty “data gaps” and “non-linearities” should ensure the wheels come off this “ambitious” project quite soon, despite the “commonality of language”. But it could be a while before you read an epitaph in the MSM or an RBA Quarterly.

    For some reason, the title of a 1568 painting by Pieter Brueghel the Elder just came to mind – not The Hunters in the Snow – and these lines from a poem:

    ” … one
    follows the other, stick in
    hand, triumphant to disaster”

    William Carlos Williams:”Parable of the Blind”

  • canhippi

    Two things are really frightening. They are the lack of knowledge and experience within the Weather Bureau’s and other climate science fringe dwellers.

    Firstly the lack of knowledge exhibited about the basic operation and effects of the world’s thermostat and the worlds radiators.

    Secondly no account is taken of the earth’s tilt or the move of the magnetic north and south poles.
    The North Pole (magnetic) now sits on the middle of Siberia.
    The Artic has moved west and the Antarctic east.

    It is these things that are driving climate change and it is these things that are cooling the earth.

    Nothing else.

    Who told me?

    Books on weather and currents written by Royal Navy Officers.

    What would they know?

    Oh .. they only have about 400 years of experience and emperical records of the oceans temperatures, their currents and … Yoo-hoo.. hand wave … over here for knowledge … THE WEATHER.

    Some believe their knowledge originally came from the Portuguese who have a history of ocean exploration that stretched further back than 400 years.

    It’s what mariners do. They watch the environment around them … and keep logs.

    I may write an article about this subject, including the lessening of cyclones and the increasing wets in north and north west Western Australia as well as the wetter central Australia.

    Now that the hysterical catastrafarians are sneaking away and sitting quietly in the face of the overwhelming evidence of a cooling climate, a lecture on why and how might just be appropriate.

    At the very least I’d have a few laughs, even though the hysterical Scott has fled.

  • Ian Matthews

    It’s settled! Lock the door and ring Debelle the banker has spoken.

  • Bushranger71

    I concur with en passant; Australia’s national integrity is shot.

    A dysfunctional federation model with States and Territories governing randomly and poorly, allowing Local Governments to career out of control, wiping out the natural heritage of the nation in absurd pursuit of immigration-driven growth and other ‘progressive’ politically correct bents.

    There are now virtual legions of Public Servants at all 3 levels of government with tens of thousands paid upwards of $200K and the top federal mandarins reaping $800K or so, about double what the Prime Minister is paid. Councillors at a local level in Queensland now have annual pay rises assured, regardless of the financial status of their parent Council. Greed is good and service to the nation just token.

    Many of these hugely overpaid people assume they have a right to express opinions on controversial
    issues having absolutely nought to do with their roles, seemingly believing that they are a respected entity. Once upon a time, it was of course very frowned upon for Public Servants to comment at all regarding political issues. If there was any leadership at all in Canberra, the Reserve Bank would be told to shut-up.

    Commentary regarding so-called Climate Change is perhaps exceeded by the huge push to have Australia maintain virtually unfettered immigration. The number of immigrants involved with immigration administration and influential agencies is abnormally high and the media is vigorously defending expansion of the multicultural mish-mash, which is proving a failure elsewhere in the world.

    Recently; a prominence-seeking femme made the common claim of the high immigration lobby that ‘Australia is a wealthy country’. Really! According to the latest UN statistics, Australia has just 0.33% of world population and has about 1.7% of the global economy. National debt has doubled since election of the LNP Government in 2013.

    An ill-titled Productivity Commission is largely focused on social engineering and the nation no longer has a sound industrial base. Obsession with service ‘industries’, financial services and the property industry is creating a house of cards that cannot endure as other regional nations become more skilled.

    The bulk of immigrants are economic parasites who will inevitably also suck in their extended families
    with all of the attendant social welfare consequences. Anybody who holds dual (or more) passports will obviously have dubious loyalty to this nation.

    Although Australia has incompetently created a very parlous energy situation largely influenced by
    misinformation regarding climate, the realities of how our planet functions will at some stage override the hype.

    The more pressing problem in my view is stabilizing the nation through curbing unfettered immigration.

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