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Tuesday, 11 October 2011
Page: 11374

Mr HOCKEY (North Sydney) (12:54): I oppose the Clean Energy Bill 2011 and related legislation introducing a carbon tax, because it is not the right plan for Australia. It is not the right plan for Australian households and it is not the right plan for Australian businesses. In the absence of agreed international action, we are placing enormous pressure on the Australian economy, for little gain. Without agreed, consistent and measurable international action, this legislation takes Australia out on a limb.

To oppose this legislation is not to oppose the science of climate change; that is just the Labor Party spin. I do not and have never denied the science in support of recognition of climate change. I am not a scientist nor am I an expert on climate change but I must make my decisions based on the best interests of the community. As a legislator I aim to make decisions based on the best available evidence and advice. I believe, on the evidence available, that our climate is changing. I believe, on the evidence available, that human behaviour does contribute to climate change. I believe, on the evidence available, that reducing carbon dioxide emissions will slow down the pace at which the climate is changing. I have held these views consistently for more than 10 years now on the public record.

The coalition is committed to the same carbon reduction goals as the government is. We are committed to reducing Australia's greenhouse gas emissions by five per cent below 2000 levels by the end of 2020. Where we differ from the government is in the mechanism for achieving those goals. As a Liberal, I believe that markets are the best pricing mechanisms for commodities. I was a strong supporter of an emissions trading scheme up to the disaster at Copenhagen in December 2009. At that conference, despite the predictions of the government, there was no binding global agreement for climate change action; and, with no global scheme in place, it no longer made sense for Australia to unilaterally commit to an emissions trading scheme. There is no global market for carbon trading. There is not transparent liquid or accountable market for carbon dioxide trading. In this light, I do not believe that a new tax which will increase the price of everyday goods in Australia is the right solution for our country.

There is a better way. The coalition's direct action plan tackles the challenge of human generated carbon dioxide emissions at its source. It provides incentives for emitters to do the right thing and to find less carbon-intensive ways of doing business. I note at this point that a large part of the government's own package is in fact direct action, so it rankles somewhat when they suggest that direct action will not work while they are literally committing more than $10 billion to direct action. Our solution does not impose additional costs on households, because we have identified the savings to pay for our capped plan. Our solution does not penalise Australian industries or drive investment and jobs overseas.

The government's plan is a very expensive tax churn. New taxes over the forward estimates rake in $27.3 billion. All of this money and more is spent with the budget bottom line worse off by $4.1 billion over the current estimates. The Treasurer has not explained how this carbon hole in the budget will be financed, but it is a safe bet that he will put it on the national credit card and increase the deficit.

The hole of course is already getting bigger. Where carbon tax costs are not borne by the federal government, other governments will have to pay; and it is of course the same taxpayers, whether they are federal taxpayers or state taxpayers. For example, New South Wales has now announced it will be looking to offset the expected cost to their budget to the introduction of the carbon tax, which will be around $900 million or more over the forward estimates. This will be done by increasing mining royalties paid by companies subject to the proposed rent minerals resource rent tax. This will capitalise on the Commonwealth's commitment to reimburse companies for the state royalty liabilities. That is before the federal government, in addition to its original commitment of over $31 billion, pours another $10 billion of debt into the clean energy finance corporation, dubbed the 'Gillard bank'.

The government's carbon tax scheme creates a structural hole in the budget. Revenues beyond the forward estimates are highly uncertain and volatile as they rely on an international price for carbon. There is no way of predicting what that will be or whether it will occur. However, the costs of compensation will rise steadily through time. That will compound the structural fragility stemming from the mining tax. The coalition's direct action policy will be just as effective in achieving Australia's carbon reduction goals, and it will do so at a much lower cost. Its cost is known—$3.2 billion over the forward estimates—and it is fully funded through budget savings, not more taxes on more debt. There is no structural hole because there is no tax churn with escalating compensation funded by uncertain and volatile revenues. The coalition policy provides business and the community with the financial certainty and stability that they need with the added assurance that the government budget will remain in the black.

The modelling of the impacts on the macroeconomy was originally based on a carbon price of $20 per tonne, not the starting price of $23 per tonne. Revised modelling, which most members have not been able to comment on because it was released well after this debate occurred, has now been released by the government using the correct starting price. The big surprise in the modelling is that there is no change in the key economic forecasts. Apparently, a 15 percent increase in the starting carbon price will have no effect on the economy. I find that very hard to believe, but there is an even stranger finding. The government wants us to believe that introducing a carbon tax will have no impact on jobs. There is a statement in the modelling that reads:

Employment continues to grow strongly, with national employment increasing by 1.6 million jobs by 2020, with or without carbon pricing.

Apparently, all the workers in those trade exposed and carbon intensive industries will magically and immediately find new, green jobs. Obviously the final modelling is still not complete. It does not include the Clean Energy Finance Corporation because the government is yet to finalise consultation with key stakeholders about how the corporation will operate. So the effect of the debt-financed $10 billion Gillard carbon bank is left out of the modelling. The modelling does not include policies that provide investment and innovation grants, such as the $3.2 billion Australian Renewable Energy Agency or the $1.2 billion clean energy technology program or the $300 million Steel Transformation Plan. The Carbon Farming Future Fund and the Biodiversity Fund are also not modelled.

These programs are omitted from the modelling because their 'investment and behaviour is difficult to predict'. That is just great! These are expensive programs and the government does not know whether they will achieve their objectives, but they are ploughing ahead regardless and spending taxpayers' money, which is typical of Labor. The modelling also does not include the planned closure of 2,000 megawatts of electricity generation capacity at the most emissions intensive power plants. The modelling still assumes that other countries will also act to mitigate climate change. This is in marked contrast to the real situation. For example, the United States, as well as many other countries, is moving away from economy-wide schemes. Overall there remain significant holes in the modelling of the carbon tax package and significant doubt about the veracity of the findings. The coalition is not convinced, and, more importantly, the Australian people are not convinced.

The imposition of a carbon price will not occur without economic costs. The modelling concedes that GDP and real average incomes will grow less with a carbon tax. There will be significant impacts on the mix of industries. Mining will be smaller with big hits on coal, gas and nonferrous ore. Manufacturing of aluminium, alumina and iron and steel will also be significantly impacted. The new modelling confirms that consumer prices will rise by 0.7 percent in 2012-13 and that there will be a second increase of 0.2 percent the following year until 2015-16. The new modelling also confirms that electricity prices will rise by 10 percent in the first year of the tax. But that is not the end of the story. There will be a further increase in electricity costs of eight percent by 2022 with another 35 percent out to 2050. So the carbon tax will lift electricity prices by at least a cumulative 50 percent. This will occur on top of the already inflated impact of renewable energy costs on electricity prices. The Productivity Commission in June 2011 estimated that Australians were paying a subsidy equivalent of up to $694 a tonne for existing emission reduction policies. In the case of large-scale renewable energy initiatives, the implicit abatement subsidies are up to $111 a tonne. This is an enormous amount of money that is already being spent, and it flows through to electricity bills.

The coalition does not believe that it makes any sense to introduce a carbon tax which will add to the burden of household budgets, which are already under some pressure. Headline inflation was up 3.6 percent over the past year, which is the highest rate in 2½ years. Interest rates have increased on seven occasions over the past two years. The government has increased or introduced 19 taxes—for example, the flood levy commenced on 1 July this year, and the mining tax and the carbon tax are both scheduled to hit from 1 July next year. Consumer confidence is weak: growth in retail spending is soft, dwelling construction approvals are comparatively low, house prices are down—established house prices have fallen in three out of the last four quarters—demand for credit is weak, household borrowing for housing is rising at the slowest pace in a generation and the household savings ratio is close to generational highs as Australians cocoon, concerned about the uncertain outlook.

The government has taken a very inconsistent approach and had a range of different views on emissions trading schemes, despite their rhetoric. This was never more obvious than when the Prime Minister and the Treasurer emphatically stated before the last election that there would be no carbon tax; the Treasurer stated that it was a fanciful suggestion. This reflects their inconsistent policy across a range of areas—the mining tax, live cattle exports, budget surpluses and so on. It is no wonder that ACCI business conditions in the June quarter were down to levels not seen since the survey began in 1998. Every business in the Australian supply chain will be affected by the carbon tax. The more manufactured a product is, the larger the energy component will be and the larger the impact of the carbon tax will be on the end price of the product. Some industries will receive partial compensation. This is a short term fix. Businesses across a range of sectors must now be reconsidering future investment.

The Treasurer has claimed that a feature of the compensation measures accompanying the carbon tax will be an increase in the tax-free threshold from $6,000 to $18,200. This claim is an exaggeration, as is so much else from the Treasurer. The tax changes will be accompanied by a phasing-down of the low-income tax offset. The effective tax-free threshold this financial year is in fact $16,000 when the income of the LITO is taken into account. Another issue is that the legislative design of the tax makes carbon units a form of personal property. Any future action to repeal the legislation may well amount to forced acquisition of the units. The government of the day may be liable to compensate the holder for the value of the units. This is an attempt by the government to put in place a poison pill should there be any attempt by this parliament to repeal the legislation. I warn the government that this is a bad idea. If the government thinks that it can continue to defy public opinion for all time in relation to this matter then the Labor Party will suffer a generational fall in its support base.

Both the Treasurer and the Prime Minister, together with the whole Labor Party, are responsible for this tax. They refused to announce a carbon tax before the election; they denied it was in place. Now they refuse to seek a mandate for a carbon tax at the next election. And they are making it more difficult to repeal the legislation, which, as I said, defies the will of the Australian people.

The coalition will not be deterred. We remain committed to rescinding the tax when we are returned to government. The curse of the modern Labor Party is that it chooses to govern for Balmain rather than Bankstown. Given that this tax will leave Australians worse off without making any discernable difference to climate change, the tax is the most compelling evidence of a party and a government that has lost its way.