Resolving Climate Change

In June 2017, it will be 25 years since the first Rio Earth Summit.  Planning for that event started in 1989 and it was attended by representatives of 172 nations, 108 of whom were heads of state.  Amongst the many resolutions was a United Nations Framework on Climate Change which set out plans for avoiding dangerous climate change.

The Intergovernmental Panel on Climate Change (IPCC) was established in 1988 and has produced five detailed climate assessments (1990, 1995, 2001, 2007, 2014) each of them containing increasingly certain conclusions that human activity is affecting the climate and that the consequences for future decades are dire.  Thousands of scientists have contributed to these assessments.

Despite all this, not everybody believes that the climate is changing, or if it is, that human activity is responsible.  Not everyone believes the scientists.  In fact, not all scientists believe the majority of scientists.

Accordingly, politicians have not acted with sufficient resolve to implement effective measures to reduce greenhouse gas emissions.  The result is that the amount of the main greenhouse gas in the atmosphere, carbon dioxide, continues to rise and the rate of increase is not decreasing.

International agreements have been too weak and have not been universally supported.  US President Donald Trump has threatened to pull out of the 2015 Paris agreement, which came into effect in November 2016.

Federal governments in Australia (under Prime Minister Kevin Rudd) and the USA (under President Barak Obama) failed in their efforts to legislate the implementation of emissions trading schemes in 2009.

The trends in measured temperatures globally and the predictions of climate models suggest that we could pass the target of not exceeding 1.5 degrees Celsius increase on pre-industrial temperatures within 25 years.

If that is to be avoided, a very different approach to reducing atmospheric greenhouse gasses is urgently needed.

The book I am writing on this problem, Resolving Climate Change, develops a new strategy to address climate change.  I am seeking funding to assist in bringing the book to market.

More information at OzCrowd

The planned chapters of the book include:

·         A review of the empirical and theoretical evidence that human activity is causing climate change.  This includes analysis of trends in temperatures and the amount of carbon dioxide in the atmosphere.  Global and Australian data is analysed.

·         A breakdown of the contributing sources of carbon dioxide emissions in Australia and trends over time.

·         Analysis of changes in the levels of belief in climate change and support for action.  This identifies and quantifies the factors driving changing levels of belief and support for action.  Several time series data sets are analysed, from both Australia and the USA, as there are strong parallel trends in these countries.

·         Analysis of the levels of support for several specific types of action to reduce greenhouse gasses.  This is mostly Australian data.

·         Development of strategies to mitigate climate change which are less dependent on the level of belief in climate change amongst the general public and politicians.

As well as seeking donations to cover the costs of additional research, writing, producing, and marketing the book, I will seek the inputs of donors in the form of opinions and assessments of strategic options.  This is optional and opinions will be analysed in total only to guarantee anonymity.  It does not matter whether you believe in climate change or not – your opinions are an important contribution to the resolution of climate change.  Contributors will receive a summary of this survey and first drafts of chapters.

Progress towards the writing and publication of the book can be monitored at www.climatefuture.com.au.  The book will be published anyway if my target level of funding is not achieved, but it will take longer.

I have been monitoring climate change and related opinions of the general public for over a decade.  I am a member of the Australian Meteorological and Oceanographic Society and attend their conferences.  I subscribe to Nature Climate Change.  I understand the science and the drivers of belief.

My company, foreseechange (www.foreseechange.com) has been tracking the level of belief in imminent global warming since 2005 – the longest continuous annual survey in Australia.  Analysis of this data, along with data from the Lowy Institute, the Climate Institute, IPSOS, and others in Australia, plus Gallup data from the USA appears in the book.  This data analysis identifies and quantifies the drivers of the level of belief in climate change and support for action.

Prudent risk management requires that we take action to avoid dangerous climate change, whatever our beliefs about its existence and causes.  Fortunately, many actions to minimise the risk bring with them co-benefits and so are worth doing in their own right.  I seek your help to highlight the risks and co-benefits of action.  We cannot afford another 25 years of procrastination.

You can support this project at OzCrowd

 

Consumer spending slowdown in Australia

Consumer spending growth is clearly slowing.  This was predicted by me in September 2016 and reported in The Australian by Robert Gottliebsen on September 14 2016 (the following day in the print edition).

In this article, I analyze the recent evidence for the slowdown, identify the causes, discuss the changes in consumer behaviour, and present scenarios for future growth.

This issue is important for retailers and their suppliers, marketers of consumer goods and services, and for the federal government because GST paid by consumers affects government revenue.

The evidence

The broadest measure of consumer spending volume is household consumption expenditure published by the ABS (Chart 1).  Spending growth has been slow since the GFC and clearly slowed in the second half of 2016.  Growth in 2015 was 2.9% and dropped to 2.6% in 2016.  This measure includes both discretionary and non-discretionary spending and the evidence is worse for discretionary spending.  For example, sales of new vehicles to private buyers increased by 3.7% in 2015 but fell by 5.8% in 2016.

Chart 1

Retail sales dollar growth also slumped during 2016 and early 2017.  In the year to June 2016, total retail sales growth was 3.0%, down from 5.2% in the year to June 2015.  Sales growth has dropped further since: in the year to February 2017, sales growth was 2.7% and in the four months to February 2017, sales grew at an annualised rate of only 1.2% (based on seasonally adjusted data).

The evidence is clear: consumer spending growth is slowing.

The causes

There are several causes of this slowdown.  Most obvious is weak income growth.

Employment growth was only 0.9% in the year to February 2017, compared with 2.1% in the year to 2016.  Hourly wage growth was only 1.9% in the year to December 2016 (a record low) and the rate has slowed progressively from mid-2012 when the growth rate was 3.8%.

The income growth slowdown was offset for some time by the fall in interest rates (since 2011) a fall in the price of motor fuel (since 2014) and a fall in the price of electricity (since 2014 following the repeal of the carbon tax).

These offsets have now been exhausted and are now, or soon will be, subtracting from discretionary spending power.  See Chart 2 for interest payments, which will rise as some mortgage interest rates are now increasing, and Chart 3 for motor fuel and electricity price inflation.

Other factors which have moderated the slowdown are the rise in household wealth (Chart 4) and an increase in consumer willingness to spend (Chart 5).

The household assets to income ratio has hit a record high in the December 2016 quarter and, given house price inflation, seems set to break the record again in early 2017.  This is a boom that cannot continue for much longer, especially as interest rates are rising and prudential standards for lending to investors are tightening.

Willingness to spend has lifted since late 2014 and was quite high in late 2016.  Without this rise, consumer spending growth would be even weaker.

Chart 2

Chart 3

Chart 4

Chart 5

Changed consumer behaviour

We can get some clues on how consumer behaviour has changed by analyzing retail sales by industry (Chart 6).

Food retail sales increased by 3.7% in the year to February 2017 and growth accelerated slightly over the four months to February 2017 (based on annualised growth of seasonally adjusted data).

Household goods growth went into recession over the past four months, clothing has been weak throughout, department stores recovered from recession to very slow growth, while growth slowed significantly in other retail (including pharmacy and newsagents) and especially in cafes, restaurants, and take away food.

Over the past four months, total retail dollars increased by $97 million.  Food added $140 million, household goods subtracted $53 million, and the combined total of the other categories added just $11 million

Chart 6

This is all suggestive of an increase in the proportion of households hunkering down – spending more time at home and limiting non-essential spending.

Scenarios for the future

Clearly, without a significant increase in household income growth, consumer spending growth will remain anaemic.  Could growth weaken?  Yes, because it is being propped up by house price inflation, which must weaken soon, and higher willingness to spend which may not continue.

A reduction of house price inflation from 5% to zero would reduce retail sales growth by 1%, all other factors being equal.  A fall in house prices could send retail sales into recession.

A fall in willingness to spend, from the recent level of $263 per discretionary $1,000, of $50 would reduce retail sales growth by 1%.  This could happen if interest rates were to rise, or if the price of non-discretionary items rose significantly.

Interest rates loom as a problem because they are rising for standard variable mortgages but not for savings.  While household debt is at a record high relative to household disposable income, deposits have also risen very significantly to $1 trillion and now more people prefer higher interest rates than prefer lower interest rates (Chart 7).

Chart 7

A fall in employment growth would also be a serious problem and this can’t be ruled out later this year, given the imminent closure of automotive manufacturing and the peaking of the housing construction boom.  We really do need the federal government to deliver on its “jobs and growth” promise asap.

Implications

The slowdown in consumer spending growth will be painful for consumer marketers and for the federal government struggling with a budget deficit.   There seems to be little prospect of improvement and a high likelihood of growth slowing even further.

The federal government needs to find a way to engender business willingness to invest in future growth and to employ more people in well paid jobs.  Blaming the opposition and a recalcitrant Senate will not achieve the needed outcome.

Consumer marketers are going to have to get better at finding those consumers who are both willing and able to spend.  Some 20% + of consumers fit this bill and are increasingly to be found amongst the over 45’s who hold most of the household wealth and are less exposed to the negative impact of rising interest rates.

Robert Gottliebsen drew extensively on this article in his column in The Australian on 7 April 2017 (it appeared a day earlier online).

Orangutans and their habitat

Gail and I have visited forests on the islands of Borneo and Sumatra several times to observe orangutans and their habitat.  The continued existence of orangutans and the forests are in doubt.

We have also visited Uganda and Rwanda to observe Gorillas and Chimpanzees in the wild.  These too are threatened.  Our observations have led us to the conclusion that orangutans are our closest cousins. Not just in terms of DNA but also in the way they think and behave.

Orangutans are, in our minds, a test of our humanity.  Will we wipe out our closest cousins in order to satisfy our most selfish desires?

For Gail, most heartfelt are the animals themselves.  She sees wisdom in their eyes and has experienced social connections with them.  For Charlie, the forests are his passion – without them, many animals would not be able to survive.  Indeed, humans may not be able to survive without the forests.  Forests provide homes for insects needed for pollination of our crops; they contain medicines which are yet to be discovered, and they are our only proven technology for absorbing the carbon dioxide emissions our industrial lifestyles cause.

Our visits to forests, as tourists, has sent a message to governments and human inhabitants that the forests and their creatures are valued in both moral and monetary dimensions.  We have also donated to organisations which protect and improve habitats and care for creatures such as orangutans.  But now we wish to do more.

We are making a visit to Sumatra, in May, to go into the forest with the rangers and researchers of The Orangutan Project to observe and participate in their activities.  The Orangutan Project is a not-for-profit organisation which has been working in the field for many years and we will be travelling with its founder and chief, Leif Cocks.

We have paid our own fares and accommodation and we are raising a further $5,000 to donate to the works of The Orangutan Project.

If you would like to donate to this worthy cause, please do so at  www.justgiving.com/Gail-Thomson6.
Donations are tax deductible and information about The Orangutan Project is available at this page.

Fundraising closes on 28 April.