Friday, February 12, 2010

Insulation, pressure cookers and Minister Garrett

Australian Environment Minister Peter Garrett has been facing a real political firestorm over the national insulation plan announced in early February as part of the Government's economic stimulus package. This provided for the installation of ceiling insulation in 2.7 million Australian homes at a projected cost of $A2.7 billion over three years. The insulation plan combined environmental with economic stimulus objectives.

In analysing the stimulus package I put this one in the medium term stimulus class, three plus months before it would start to have an effect. I thought that there would be administrative delays. More importantly, I simply didn't  know how long it would take existing suppliers to gear up. One installer interviewed on radio at the time commented that this would take time. 

I didn't look at this one in any detail. However, it is clear from my comment that I didn't properly understand the market impact of making up to $A1,600 cash subsidy available. My thinking was set within the frame of existing suppliers, ignoring new entrants.

The attraction of the cash subsidy was such that an entire sub-industry was created over night as people rushed to sell the service to home owners. Faced with an explosion in spend, the Government was forced to cut the maximum subsidy to $A1,200. This led to a rush of claims. In November, 235,869 properties were allegedly insulated, 75,000 more than in October.

  The rapid expansion of activity meant that roof insulation was now being provided by people with no or limited skills. Further, shortage of pink batts meant that suppliers turned to foil insulation. While this had been in use especially in Queensland for a long time, its potential electrical conductivity limited its use and  required that it be installed particular ways in circumstances where electrical wring was present.

The end result of all this were deaths from electrocution, the electrification of some ceilings and the creation of fire risks in an unknown number of houses. The issue now is when the Minister and his Department became aware of the problems and the adequacy of their responses. There has clearly been a failure in public administration of the type that I have talked about before, one that may yet cost Minister Garrett his job.

In this case, I actually have a degree of sympathy for Minister and officials. To understand why, you need to think back to what now in the light of subsequent events seems a remarkably remote past.

The initiative was announced on 3 February 2009 and seems to have been conceived quite quickly as part of the overall response to the global financial crisis.

There was a feeling among many at the time that Australia faced a potential economic Armageddon. Weeks before the announcement Access Economics, Australia's most respected economic forecaster, stated that the Australian economy was buggered, something that made me very angry at the time. So we have a an initiative conceived and rolled-out in a pressure cooker. The focus was on getting something done and done quickly at a time when administrative systems across the nation were already stretched.

Now I argued at the time that there needed to be more reflection on actions. That's fine. The reality is that the particular circumstances of Canberra at the time allowed for very little of this. Ministers and officials were under pressure to make things happen.

I haven't checked back through posts to check at what point it really became clear beyond all debate that Australia had dodged the GFC economic bullet. By then, the insulation train had well and truly left the station.

Obviously we need to understand what went wrong, how it might be corrected, what we have learned for the future. However, I feel in this case we need to cut some slack for Minister Garrett and his officials, recognising the circumstances of the time and the pressures they were under.


Listening to the radio discussion this morning, I know that I am not going to win this one. To fully support my argument I would have to take a multiplicity of issues and show how they fitted together. Ah well! 

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