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Wednesday, 10 October 2012
Page: 7848

Senator SINODINOS (New South Wales) (15:28): I rise to take note of the answer given by Senator Ludwig to a question asked by Senator Macdonald today. Well, what a debate it has been. We have gone right round the world, particularly Western Sydney. We have talked about Work Choices and we have talked about Brisbane. We have talked about all sorts of things but, if we come back to where Senator Macdonald began this whole issue, it was around what the carbon price would be in 2015-16, because the Treasury modelling was estimating it would be $29 per tonne, based on assumptions about what many countries around the world allegedly would be doing or had pledged to do.

As we know, there is quite a gap between what governments pledge to do or promise to do and what they actually do. In this particular case, none of the speakers from the other side have addressed this very simple point: is there one serious economist in Australia who is backing up what the Treasury is saying about what the price will be for carbon in 2015-16?

Yes, under direction from the government, the Treasury has used the modelling, because the modelling is a machine—you put assumptions in, you get certain results out. They have pumped out this result of $29 a tonne based on the parameters they have been given by the government, and they have probably been directed to make assumptions about what other countries would do. So they have gone around to find any piece of information that justifies them being able to say that country X or Y is planning or pledged to do this or that, and they used that as a basis to say, 'On that basis we think it will be $29 a tonne as a world price.' But no serious economist in Australia, as far as I am aware—and I am happy to be corrected on this—has said that the Treasury modelling is appropriate in the circumstances, is appropriate in terms of pumping out that $29 a tonne figure.

We are talking about a situation where we are going from, at the moment, a European price of $8 a tonne. Make no mistake, the Europeans will continue to dominate this market over time because of the extent of credits that they have got on issue. They are at $8 a tonne. So are we saying that the biggest carbon market in the world, the one that will dictate prices come 2015-16, will be at $29 a tonne? What are we assuming about what European governments will do to get to $29 a tonne—at a time when the European economy continues to be mired in recession? We are saying, unilaterally, that they will take action that will lift their prices to $29 a tonne by 2015-16. It is possible that there is some miraculous recovery in the European economy that means that they feel more confident about putting additional burdens on themselves, such as a much higher carbon price, but the fact of the matter is that that is not looking likely at this stage. It is an unreasonable approximation or estimation to be making at this time. If you look at the IMF report that was issued recently, the World economic outlook, all the downside risks in Europe mean that growth is likely to be pretty anaemic across the European zone and not supportive of a strategy of raising carbon prices to $29 a tonne by 2015-16.

Senator Thorp, in particular, raised this issue of dire predictions about the carbon price and its impact on electricity. The fact of the matter is that the electricity price rises that were initiated by the introduction of the carbon price are wending their way through the production system as we speak. Across the economy there have been price rises of varying magnitudes. Some have been around the 10 per cent mark, some have been higher. But what the government consistently misses in this debate is that the carbon tax is being imposed on top of quite large electricity price rises which have been induced by, in some cases, electricity regulators seeking to promote investment in the sector to meet rising electricity demand. Consumers have now been faced with this double or triple whammy of rising electricity prices from a variety of sources: the Renewable Energy Target, the carbon price and also network investment. What the government has missed on the way through, or does not want to acknowledge, is that they are also in part in the gun because they have done something directly to raise electricity prices at a time when people are dissatisfied with the level of electricity prices because of all the other actions that have been undertaken, including by regulators. They seem to be unwilling to acknowledge that that is going to lead to them paying the price for not listening to Australians who are saying, 'We are fed up with the rising cost of living, particularly in utilities. We are fed up with what we are having to pay.' (Time expired)

Question agreed to.