Labor must help axe carbon tax
AUSTRALIAN businesses and households should not have to wait another nine months for the next Senate to consider the abolition of the carbon tax.
With the election of a new Labor leader and a meeting of its caucus, an early order of business should be to sensibly decide to join the government and jettison the carbon tax.
There are no plausible economic or environmental reasons to maintain this unilateral cost penalty on Australian industry. The Australian Chamber of Commerce and Industry has held this position from the outset and the speedy demise of the tax can only be good for confidence and business viability.
The remaining defenders of carbon pricing consider that the proposal to bring forward an emissions trading scheme by one year has somehow addressed the objections the community and business may have.
Clearly that's not the case. An ETS still involves a multi-billion-dollar tax not paid by our competitors and there is no certainty about future price levels as we have linked our scheme to the highly manipulated European model. We have merely set ourselves on a pathway to at least a $40 per tonne carbon price by the end of this decade.
Despite early signs of renewed confidence levels after the federal election, Australia is still facing stiff economic headwinds and the policy indulgence represented by the carbon tax is not sustainable. Economic growth is now entrenched well below trend level and unemployment is rising to an expected rate of above 6 per cent in 2013-14. Against this backdrop surely the priority for the new parliament must be to reject policies that will harm the economy.
Treasury's own modelling demonstrates unambiguously that the carbon tax is detrimental to productivity, will cost jobs, damage the international competitiveness of industry and curtail investment. Specifically it shows that economic growth will be permanently slower as a result of the carbon tax, and this will reduce real wages growth over time while adversely affecting our emission-intensive manufacturing industries.
It was always difficult to fathom how an apparent centrepiece of economic reform, as described by the former treasurer and the industry minister, could proceed after receiving such a dismal report card by their own analysis. The independent Parliamentary Budget Office, in costing the abolition of the carbon tax for the Coalition, also concluded it would deliver a growth dividend in excess of $1 billion over the forward estimates period.
Regrettably we are already seeing a negative impact on jobs and investment in industries reliant on energy. To witness this we need look no further than the annual financial results being reported by our largest companies and their significant carbon tax liabilities.
Contrary to what the promoters of the carbon tax say, there is no evidence that other countries will soon have a carbon price.
Of the large emitters, the US remains opposed to such measures and is relying on a combination of lower emitting fuels, technology and regulation. China has moved as far as limited trials in some provinces but remains a long way from a fully-fledged ETS, while Japan has steered away from a national ETS and limited its scheme to Tokyo.
That leaves Europe as the only model, but again it is much more limited in coverage than the world's biggest carbon tax Australia has adopted.
Half a decade or more ago a national carbon price may have had some theoretical attraction when a binding international agreement was more likely. Clearly that possibility has evaporated so members of the Labor Party need to recalibrate their thinking to less costly and intrusive policy responses.
It's understandable to some extent that the defenders of the approach want to cling to a policy legacy because so much political capital was invested in it, but it is now time to abandon the carbon tax, support energy efficiency and technology responses and the plans for much more modest government programs designed to mitigate emissions.
Greg Evans is chief economist of the Australian Chamber of Commerce and Industry.
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