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Will Julia be carbon crunched?

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by Peter Switzer

I know the PM and her spin doctors made it seem like this carbon tax was simple — it was great politics – but when the SMH’s Ross Gittins says that it’s “hellishly complex” you know we were taken for a Sunday ride yesterday.

The simple summary is six million households will be better off (or not worse off) but three million will be losers.

And there’s some stranger ones. For example:

Single-income families with one child under five years of age — you are down $62, which seems a bit harsh.
But think this one out — a dual-income family with no kids on $110,000 pays $223, while the same family with a kid thrown in forks out $246.
Even worse, the couple who saved their whole life — responsible Aussies who have done the right thing to not be a drain on the public purse — and now are retired on $90,000 a year get slugged $502 a year!
And I reckon single-income couples have been hit for a six with an income of $80,000 bringing a $428 tax hit.

It’s too early to see the overall economic hit to our competitiveness but the Government has taken union boss Paul Howes’ warning seriously when he said there better not be one job loss out of this carbon tax. There will be but the Gillard team have gone out of their way to give support to trade-sensitive businesses, big emitters and massive users of fossil fuels such as coal-fired power generators.

Consumer impact

Philosophically, I can see why a political party might think about leading the world on an aggressive policy on carbon, as we’re one of the biggest polluters per head in the world but we’re one of the smallest in absolute terms. That means what we do will have little impact and given the fact that China and India are ramping up their emissions of CO2, this exercise introduces the competitive negatives in the short-run for various industries.

It will also hurt consumers and will not be good for retailers and other income-sensitive businesses. The timing is not great for these businesses as high interest rates and the online threat is already making life harder. These two challenges will still be there when the tax comes in on 1 July 2012.

Small biz effects

And what about small business? Well there could be some tax relief for unsuccessful business operators but I can only see tax rises and higher costs coming out of this policy. Nothing, really, for small business — why am I unsurprised?

On the good side, this tax will encourage some industries to respond to the tax stick and the renewable energies package, worth around $10 billion. This could give us a headstart on other countries but I reckon the gain will be short-lived and there will be a cost for starting off on this marathon run towards a cleaner and greener industrial world.

The important polluting countries — China, India and the US — won’t get serious about climate change for years, with the Yanks battling post-GFC debt and the other two countries refusing to surrender their growth potential to an excessive commitment to cleaner energy demands.

The reality

The reality of this carbon tax is that Julia Gillard only broke her promise to us about not introducing a carbon tax because the Greens made her. She exists as PM because of them and so Labor has come up with a package that could win back traditional Labor voters.

We won’t see a measurable change in climate because of these measures but Labor is hoping to see the polls bounce higher. If they don’t, Julia and her colleagues could end up being carbon crunched!

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Monday, July 11, 2011

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