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Sunday Agenda -

View in ParlView


10 June 2012



Van Onselen: Minister, the starting price, there's a lot of debate about whether it's too high. Why
isn't it too high?

Combet: Well we need to bring about change in our economy, change that brings in a greater
contribution from renewable energy sources like solar and wind power and change that sees us also
improve energy efficiency and bring low emissions technologies in. And we think the starting price
is around the right level to achieve that change over time in the economy. But importantly when
this debate goes on about the $23 a tonne starting price, it does it as if there is no assistance
to the trade exposed sectors. And when you are talking about international prices you have to take
that into account and the effective carbon price in the trade exposed emissions intensive parts of
the economy is only an average of $1.30 a tonne.

Van Onselen: So when the Opposition says it is the highest carbon tax price in the world, when you
factor in the assistance, you're saying that that is inaccurate?

Combet: Well certainly it is if you're in the steel or aluminium or cement manufacturing sectors in
the economy. They're receiving about 95 percent of their carbon permits for free in the first year
of the scheme and that means their average carbon price is only around a $1.30 per tonne.

Van Onselen: Experts accept or expect that the price will drop when it becomes a floating price. Do
you accept that?

Combet: Well it is possible but it is three years away and when you go to a market price, the price
could fall, the price can rise. People are looking at international prices at the moment, but
looking at it in the context of the European debt crisis. And it is true that that has affected
carbon markets in the European Union system and so the price has fallen over the last 12 months.
But one would certainly hope that over the next three years the Europeans can address that debt
crisis and that carbon markets recover. And I know in the European Union itself, they are looking
at ways at the moment of how they can support the carbon price so that it can continue to drive
change in their own economies towards lower emissions.

Van Onselen: If the carbon price does fall, as has been predicted, what does that then mean for the
other side of this scheme, which I guess is the compensation packages? What does that mean for the

Combet: Well it means the assistance is even more generous for Australian households. And we are
already in the position of course...

Van Onselen: So it will stay generous even if the price drops because that will affect revenue take
for the government?

Combet: We've legislated the tax increases course and the pension rises and the increased
assistance in family tax benefits. But the price is fixed for three years and certainly covers
households during that period of time. You've got to remember that's an average of $10.10 per week
in assistance versus the principal cost impact which will be electricity prices, which will rise by
an average of $3.30 per week across households. So $10.10 versus $3.30 and that $10.10 is locked

Van Onselen: How do you deal with the Opposition claiming that they are going to hit the 2020 five
per cent reduction target, at the same time they say they are not going to spend any more money
than is already in the pot for their direct action scheme? People know that this is probably
inconsistent but they get away with it, how do you combat that?

Combet: Well we have just got to keep arguing our case. But once the carbon price starts Tony
Abbott's credibility is going to start to fall away very rapidly.

Van Onselen: Why is that?

Combet: Because he has gone around the country terrifying people about unimaginable cost increases,
you know unimaginable electricity price rises, the loss of entire industries. The whole coal
industry is going to shut down from 1 July - that's his forecast. Towns wiped off the map, regions
destroyed. I mean it has been the most ridiculous, deceitful campaign in politics that I can
remember. And can you think of anything more gutless, frankly, than running around terrifying
working people and trying to terrify pensioners when it's not supported by the facts. We are
increasing the pension, cutting taxes from 1 July, increasing family tax benefits. We have added
further assistance to households in the budget. The economy is performing very strongly, hundreds
of billions of dollars are coming into the economy in private investment, unemployment is at 5 per
cent, the economy is growing at 4.3 per cent, interest rates are falling. We are in a very strong
economic position and it is entirely manageable to make this reform.

Van Onselen: But there is a difference between the macro economy, where the economic figures are
undeniably show that things are going pretty well, Joe Hockey admitted that himself during the
week, and the micro reality of individuals feeling the pinch. Now Tony Abbott is already and is
going to continue to be able to exploit any price rise in the economy, he is going to ping it on
the carbon tax. How do you deal with that?

Combet: Well that is what they will try and do but we just have to argue the facts and the truth.
But of course you have got to bear in mind that from the first of July Tony Abbott has forecast
doom and destruction, the death of industries. You know tens of thousands of jobs are going to
disappear he says, unimaginable price increases. He will be held to account for that. He is trying
to crab walk away from it now but once this starts and people are able to assess real experience
and the fact that it is really a very, very modest cost impact and the Government's forecasts are
accurate and we are delivering assistance that means that millions of household will be better, I
don't think they will judge Tony Abbott's performance very well indeed.

Van Onselen: It sounds like you are hoping for the same phenomenon that happened when John Howard
introduced the GST, where in the aftermath of that he was able counter arguments that it was going
to increase prices in a way that at that stage the Labor Opposition was claiming. It sounds like
that is what you are hoping for?

Combet: Yeah, I think there is a bit of a similar dynamic at work here. Of course the forecast
impact on prices of the GST was around 2.5 per cent and it came in around there. The forecast
impact on prices of the carbon price coming in is only 0.7 per cent, less than a cent in the
dollar. And the key price impact is on electricity and all around the States now the pricing
regulators are coming bang on that or a bit underneath. And just this week in Western Australia it
has been confirmed that the average impact on household is around $2.50 a week whereas the Treasury
has allowed $3.30. That means people in Western Australia are going to be better off by even a bit
more margin than we had forecast.

Van Onselen: Before the last election, the Prime Minister said that there will be a carbon price
and she also said that there will be no carbon tax. Do you regret conceding early on in this debate
that what you are introducing is a carbon tax rather than simply a price on carbon because, let's
face it, it has got the Government into a lot of trouble with the argument that it has broken its
election promise?

Combet: Well it is keenly contested. I certainly readily recognise that and I know that there is a
lot of frustration in the community about it, but the Prime Minister had to form government after
the last election. It's long been the Labor Party's policy, I think that is well known, that we
would establish a price on carbon and, without going into the technicalities of it, what we are
implementing of course is an emissions trading scheme. It starts with a fixed-price period just as
we had proposed to do in the last term of Parliament, an emissions trading scheme that started with
a fixed-price period. Tony Abbott's beat up this carbon tax thing - fair enough, that is national
politics. At the end of the day, the greatest deceit that has been conducted through this whole
argument has been by Tony Abbott because he has run around trying to play the whole issue up,
terrify people in an incredibly gutless performance, I reckon. And his objective, assumedly, has
been to try and disrupt a minority government and get rid of it before the carbon price comes in.

Van Onselen: You've got a lot of work to do...

Combet: I know we've got a lot of work to do, but so has he, because the risk for him after the
first of July is that he has talked up such doom and gloom and it is not going to transpire and his
credibility will be severely damaged.

Van Onselen: But you do have a lot of work to do because I think it is fair to say that at the
moment most voters see the situation as this as a Government that broke its promise on the carbon

Combet: Yes but let's get it in, let's get the thing implemented and see what the real experience
is, let's see what the real price impacts are and the real experience in the economy. I'm working
very hard to implement it and I know, and so do my colleagues, that we have got a big case to
continue to argue. But really it's now got to be tested against lived experience. And I have been,
personally, in very difficult positions in the past in campaigns that I've run but I'm looking
forward to post 1 July, I can tell you, because we are going to take it right up to Tony Abbott and
hold him to account for every lie and every piece of deceit and every bit of misrepresentation he
has engaged in. He is not going to be able to duck out of this.

Van Onselen: Well let's step forward three months then, what can we expect to see when we're nearly
three months into the introduction of the carbon price?

Combet: We are going to see massive private investment coming into the economy still, particularly
into the resources sector, specifically into the coal sector, the industry that Tony Abbott
forecast would die when carbon pricing came in. We are going to see millions of households better
off because of the tax cuts, the pension increases, the family tax assistance and other increases
in benefits that we are providing. We are going to see modest price impacts in the economy, I think
pretty much as the Government forecast. And the world is going to go on. It is a manageable
economic reform. TThe economy will continue to grow, jobs will continue to grow, real incomes will
continue to grow and we'll start the difficult task of cutting our greenhouse gas emissions.

Van Onselen: Are there any circumstances under which you might consider minimising further the
impact the carbon tax is going to have? I'm particularly thinking in the context of the shock to
the global economy that looks imminent.

Combet: Look we are confident of the settings that we have put in place. We need to get about the
task of cutting our greenhouse gas emissions. We can't sit in the Asia-Pacific region and have
China as our number one trading partner with them tackling climate change and not us. There is a
mutual responsibility that we share with others, our trading partners and others internationally to
tackle this difficult issue.

Van Onselen: But they're not pricing carbon in the way we are

Combet: They're proposing to put in emissions trading schemes, very similar. I met with the head of
Guangdong province just this week and we discussed this specific issue. Guangdong province in China
is actually our sixth largest trading partner. They're putting in an emissions trading scheme.
They've got a group of officials out here in the next few weeks to have a look over how we have
constructed it, seeking our assistance and advice to put in place a carbon pricing scheme in
Guangdong province itself. Other countries are doing this. By next year, I think every OECD country
is going to have carbon pricing except for one country - by 2015 I should say - have in place
carbon pricing through emissions trading. You know this is happening around the world. We've got to
play our part in it.

Van Onselen: Does Labor need to make pricing carbon the number one issue in the next election? I
ask this in the context of the debate I suppose that is going on about whether you need to fight
for it in the same robust way that John Howard fought for his GST or whether you need to treat it
as just one of many issues in the mix of things that this Government has done, and is doing?

Combet: Oh well, my instinct in particular, given I am the responsible minister, is to fight the
issue out. I think when you are making big public policy changes it is very important to keep
explaining them to the community and endeavour to take people along with you. And I know we have
got a hard road ahead of us with this particular issue, given the history of the debate. But I
think that once it is in place, people have the lived experience, the household assistance is
delivered, we've got a very significant package of support for jobs in the trade exposed industry -
I plan on just getting around with my colleagues, continuing to discuss the issue and trying to
ensure that people do understand and that we win their support. What never works, I think, is
campaigns of deceit. And that is what Tony Abbott's done and he is going to be found out for what
he has done.

Van Onselen: Former Labor leader Mark Latham had a crack at you, saying that you were hiding from
media, in particular commercial radio. How do you respond to that?

Combet: It's all rubbish. I don't have much time for his commentary to be frank.

Van Onselen: Were his figures wrong though, he was saying I think six months that you didn't do
commercial radio. Is that accurate?

Combet: I'm not sure that that is what he alleged but whatever he alleged is not accurate. We
simply don't transcribe and put on my website every interview that I do, it's as simple as that.
I've been working extremely hard at developing the policy, at going around the country and
explaining it to people and I won't be listening too much to Mark Latham, I'm afraid.

Van Onselen: So you don't agree with Paul Howes that Latham should be brought back into the Labor

Combet: I will leave it to others to judge that. Mark Latham is not special on my list.

Van Onselen: What is the carbon tax all about? Is it a form of wealth redistribution courtesy of
the compensation package or is it more about the environment and the assistance that is part of it
is just simply a way of making it happen in a less painful way?

Combet: It's about several things, I genuinely have had in mind, the government has had in mind in
designing it. One is we do need to of course tackle climate change by reducing greenhouse gas
emissions. The most efficient and cost-effective way of doing it is by having a price signal in the
economy for greenhouse gases as they are emitted by the largest emitters. That creates an incentive
for them to reduce their emissions and that will start to happen.

The second thing is that it is an economically responsible policy position because particularly
with our trading relationships in the Asia-Pacific region, our partners expect us to tackle this
just as they are tackling it - Korea legislated an emissions trading scheme just recently as well.
Our trading relationships will have an integrity to them if we are tackling this along with our
trading partners. But it will also drive productivity changes in our economy as companies invest in
energy efficiency, reduced energy consumption, applying information communications technology more
to their manufacturing process. It will help be a driver of productivity improvements in our
economy and improve our competitiveness.

But thirdly, at the end of the day too, this is a Labor Government and what we are doing here is
putting a price tag on pollution, taking that revenue and providing most of that revenue in the
form of assistance to the community through pension increases, tax cuts particularly for low and
middle income households and increases in family tax benefits. Just consider one reform at the core
of this that is funded by the carbon price - the trebling of the tax-free threshold for individual
taxpayers. That will mean that one million people will no longer have to file a tax return. That is
being funded by the carbon price. It's a very important benefit for low income earners and Joe
Hockey and Tony Abbott, they're saying they are going to drag a million people back into the

Van Onselen: Equally though, that is why I wonder how sustainable all of this is. The carbon tax
funds so much. Is that realistic because if the price falls then the Budget is in a real hole isn't

Combet: Well they are sustainable across the forward estimates. We've got three years of a
fixed-price period. I'm pretty confident actually at the end of three years that the price is going
to be there or thereabouts that we have been forecasting. I think and certainly we would all have
to hope that the European debt crisis will be resolved and that carbon markets will recover. The
biggest carbon market in the world is in the European Union and we are currently in the process of
negotiating with the European Union the linkage between our scheme and theirs, so we certainly do
watch the European carbon price pretty carefully. We have got a fairly detailed knowledge of what
the Europeans have got in mind to support the carbon price in their economy because they want it to
drive effective change as well. I think at the end of our three-year period we will find that we
are there or thereabouts.

Van Onselen: Just finally Minister before we let you go, you have been quoted talking about what
the Government if it falls into Opposition might do vis a vis the carbon tax. Is it absolutely the
case that if you lose the next election you would refuse to repeal the carbon tax if that is what
the new government sought to do?

Combet: This is a question of belief and standing up for what is right at the end of the day and
that is ...

Van Onselen: But we saw John Howard do it, well not John Howard personally, but we saw the Liberal
Party do it on WorkChoices and they were pretty committed to industrial relations reform over a
decade in government but then they relented from that when the public sent them a message. Labor
wouldn't do the same?

Combet: Well they made mistakes on WorkChoices, let's face it. This year, lived experience is
important as I said. But it is also an important question of principle and belief that the Labor
Party has adhered to for a long time. I think you run into problems when you walk away from what
you stand for. We've got to argue our case, I accept that, and we've got a lot of work to do, I
accept that, before the next election. But we will argue our case and do that work. But at the end
of the day this has been the Labor Party's policy for a long period of time, we have to play a
part, a fair part in international efforts to tackle climate change.

And just consider this, this reality. By 2020 we are going to have legally binding obligations
internationally to cut our greenhouse gas emissions and cut them significantly. We can't happily
wander on as Tony Abbott would have you believe over the next eight years just letting our
emissions go up like this and then come to 2020 and cut them like this. It will hit the economy
with the back of an axe. The responsibility of government is to bring about ...

Van Onselen: But that is a pre-election argument...

Combet: ... is to bring about a gradual change. And I think as we keep making our argument people
will recognise that.

Van Onselen: But that's pre-election argument. If at the end of the day you lose the next election,
listening to the electorate demands doesn't it that you let Abbott have his way and the carbon tax

Combet: I'm just not that pessimistic. We plan on winning the election. It looks pretty tough I
accept from where we are but as I said before just at a personal level I've been in some really
tough positions in the past on big campaigns, the maritime, waterfront disputes, James Hardie
campaign, collapses of Ansett and in some of those community opinion has been strongly against the
labour movement. What you've got to do, and what my experience tells me, is argue to the community,
tell them the facts, argue what you're standing for and bring them along, explain the values that
underpin it, why you're doing it and you can win support. That's what politics is about at end of
the day.

Tony Abbott has had the luxury of running a fear campaign about something that hasn't yet been
introduced and he has had that luxury for 15 months. That's about to come to an end. We are at a
pivotal point in this debate from July the first where lived experience will be important and Tony
Abbott can be held to account and where the Government carries the responsibility to explain
exactly how the policy is working in light of lived experience and why it is necessary. And that is
what we will do.

Van Onselen: We'll watch with interest. Minister Greg Combet thanks for your company.

Combet: A pleasure.




SUNDAY, 10 JUNE 2012



PETER VAN ONSELEN: Welcome back, you're watching Australian Agenda. We're joined out of Melbourne
now by the Small Business Minister Brendan O'Connor. Minister, thank-you for your company.

BRENDAN O'CONNOR: Good morning Peter.

PETER VAN ONSELEN: I wanted to start by asking you about your reaction to some research by Dun and
Bradstreet. Now, their research shows, apparently shows, that small business bankruptcies have
jumped by 48 per cent and start-ups fallen by 95 per cent in the last 12 months. That sounds pretty
extraordinary - how do you respond to that?

BRENDAN O'CONNOR: Well, that's contrary to the advice I have had. I have to say that we are well
aware that consumer confidence has been down and in turn business confidence has been down. That's
why in the Budget we announced specific measures to provide tax relief to small business - the loss
carry-back scheme and the instant asset tax write-off - both well received by small business. And
indeed increasing the tax-free threshold from $6,000 to $18,200 provides some relief for
unincorporated small businesses.

So we're looking to respond to those concerns in what is a very important sector - it employs
almost five million Australians and is indeed the engine room of our economy.

PAUL KELLY: But Minister, if we look at that sector, what happened in the Budget was that the
corporate tax cut was cancelled and became instead cash payments to households. Presumably that was
a defeat for you? I assume that you wanted that corporate tax cut to go ahead?

BRENDAN O'CONNOR: I certainly wanted to see a reduction in the company tax cut for small business
taking effect from the 1st of July. Unfortunately the Greens Party and the Liberal Party joined up
to oppose company tax cuts for this and next year, and we wanted to ensure that we were able to
provide some relief by providing benefits to families and people generally, which we believed would
enhance consumer confidence and in turn enhance consumer confidence.

And I think it's also important to add that those two initiatives I referred to - the instant asset
tax write-off for small business, and the loss carry-back for incorporated businesses - provides
$1.7 billion of revenue, a lot of which is being provided because of the implementation of the
Minerals Resources Rent Tax, something of course that Tony Abbott opposes.

But here we have a Liberal Party leader for the first time that I'm aware, opposing tax cuts for

PAUL KELLY: Sure, I'm aware of that, but I'd like to come back to small business. Now a lot of
small business is not incorporated and therefore won't get a lot of the benefits that you're
talking about. What's your response to small business that is not incorporated?

BRENDAN O'CONNOR: Well, they wouldn't have got the tax cut that you refer to Paul, because they're
not incorporated. That's why the instant asset tax write-off allows small businesses, incorporated
or otherwise, to purchase assets of up to $6,500 each and the amount of assets are limitless. That
allows them to get the instant depreciation after one financial year, so that's a very good benefit
as far as cash flow is concerned.

It also reduces the amount of depreciation schedules that have to be filled out - again, a
reduction in paperwork. And indeed for those unincorporated businesses, which indeed are the
majority of small businesses, they receive the benefit through the increase of the tax-free

So there are two initiatives, both designed to help unincorporated businesses. They've been well
received and they were recommended by the business tax working group and by COSBOA and other bodies
representing small business.


BRENDAN O'CONNOR: We've got more to do.

MATTHEW FRANKLIN: Minister, may I just ask -


MATTHEW FRANKLIN: Obviously Tony Abbott will say this until the cows come home, in the
circumstances that small business face at the moment, this is the worst time to be introducing a
carbon tax? Isn't it the case that small businesses, many of them, are at the end of very long
supply chains and the suppliers will all have the effect of the carbon price in their inputs and
they will pass that down the line. So why shouldn't small business people believe that they're
about to be smashed?

BRENDAN O'CONNOR: Well using the term smashed, you must have got that out of the lexicon of Tony

MATTHEW FRANKLIN: No, my own lexicon.

BRENDAN O'CONNOR: Well, that's good to see. But Matthew, I disagree with your contention that
businesses will be smashed. It's the sort of language that we've heard from the Opposition, and
they've said that we're going to have towns wiped off the face of the earth, that the coal
industry's going to disappear. We've seen such ridiculous claims being made and I think they'll be
found to be untrue from the 1st of July.

What we made sure of in relation to the impact upon small business is that they did not have any
obligations to account or report on carbon emissions, there is no paperwork at all. The actual
impact, the cost impact on small businesses is modest to negligible. There is of course a cost to
energy. Treasury has calculated the energy costs of an average small business to be two per cent of
their overall costs. We believe that there will be just under 10 per cent increase to that two per
cent, so that's a 0.2 per cent to overall cost for small business.

MATTHEW FRANKLIN: So you're not too worried that they will face a big increase in the costs passed
down the supply chains?

BRENDAN O'CONNOR: Look, the costs have been factored in and the costs are modest. As you know
Matthew, Treasury has modelled the costs to CPI to be 0.7 per cent. And it's not only the
Commonwealth Treasury, we've had the West Australian Budget recently rely upon the same figure. And
indeed we are now seeing our calculations confirmed by other bodies, government and non government.
I think that cost is manageable. I mean, let's be clear here. This is a Government that has created
over 800,000 jobs, we have $500 billion investment in the pipeline, we have the lowest official
cash rate, lower than at any time under the Howard Government, we have contained inflation, we have
low debt, we are in very good shape. And if this is not the time to introduce important reform,
when is it a good time to introduce good reform?

PAUL KELLY: I'd like to take you up on that point Minister. You've painted quite a rosy picture in
terms of the Government's initiatives for small business and the overall economic environment, so
I'd like to ask you do you concede at all that there are genuine difficulties facing small business
and that in fact, a lot of the small business sector is struggling. I mean what's your actual
assessment of where small business is?

BRENDAN O'CONNOR: I think there are significant challenges for small businesses and businesses
alike. What we know is that there are some sectors going very well, but we also know that the high
Australian dollar is causing some sectors to struggle with a number of things. And for that reason
we've sought to spread the benefits of the mining boom through some of these initiatives for small
businesses. We could not return the budget to surplus and create these initiatives for small
business without finding the revenue from the mining sector. It's the right decision and we've done
that because we are conscious of the fact that small business have indeed been confronting some
significant challenges.

There's been low consumer confidence. Consumers have instinctively sought to hold on to some
discretionary expenditure so that they can pay down household debt. I think that's as a result of
them viewing what's happening in Europe and even of course to a lesser extent the United States.
That causes them concern and that in turn reduces the expenditure of households.

But the national accounts that came out this week - I think it's fair to say that the household
consumption was higher than most people expected, and I think one of the reasons for that, Paul,
was the things people are now spending money on has changed. And therefore whilst there are some
areas that are concerned that their goods are not being purchased at the same level that might have
been the case some years ago, there are other areas, services in particular, where the consumption
is high. So we're seeing changes in patterns of consumption and I think people have to properly
analyse the figures, therefore to properly calculate the consumption by households.

PAUL KELLY: I'd like to move to another area of your portfolio which relates to the homeless.
You've had quite a bit to say about this over the course of the past week. The Government has an
objective of halving the number of homeless by 2020. Will you get to that target?

BRENDAN O'CONNOR: That's our intention-

PAUL KELLY: Will you get to that target?

BRENDAN O'CONNOR: That is our intention. It's 2020, it's a goal. I can tell you this Paul, it's
something that is an important goal for this government. We wouldn't have foreshadowed it if we
didn't want to reach it.

PAUL KELLY: But isn't it a fact that the number of homeless has increased since you announced the

BRENDAN O'CONNOR: Well we're talking about the rate, of course, of reducing homelessness in
proportional terms, and can I say that the ABS data on the last census has not been released yet.
That will provide us the most accurate picture on the progress we've made.

PAUL KELLY: But aren't you actually going backwards so far to making this target?

BRENDAN O'CONNOR: No, I don't accept that all. I don't accept that all. I know that because of the
investment we've made, $5 billion on homelessness, and the fact that we have provided more services
working with state and territory governments and not-for-profit organisation we have relieved many
who have been either homeless or at the risk of being homeless. But there's a lot more to do, and
what we need to get, of course, is the ABS data that is based on the last census to get a true
picture of the progress of those goals. And we'll continue to work with state and territory
governments to bring about the reduction. I think it's a blight on this country, which we've
ignored for too long, when you have up to 100,000 Australians homeless. That's not acceptable and
that's why we'll continue the work to those goals.

PETER VAN ONSELEN: All right Minister, we are right out of time, we appreciate you joining us on
this long weekend. Thanks very much for your company

BRENDAN O'CONNOR: Thank you very much.