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Thursday, 1 March 2012
Page: 2535

Mr HUNT (Flinders) (15:38): This matter is urgent because this week the very people who are proposing to implement in four months time the world's biggest carbon tax blew up the solar sector. The people who want to implement the world's biggest carbon tax could not even protect the solar sector; they blew it up. They also blew up their own house, but, more importantly, they blew up the solar sector. But don't take out word for this. Let's listen to what the Clean Energy Council said:

The clean energy industry says the unexpected cut of a key government solar hot water program late yesterday will put jobs under threat …

The CEO of the council said that the:

… decision will immediately affect sales and will put more than 1200 manufacturing jobs and 6000 installation, sales and back office jobs in jeopardy.

… … …

Cutting this program without warning in the middle of a financial year is yet another example of stop-start policy making that continues to plague the entire clean energy sector.

That is what they do to their friends. This is a government that seeks to implement in four months time the most complex, most far-reaching, heaviest and widest carbon tax in the world, and they cannot even run a solar hot water program. It is important to note this program was the successor to—wait for it—the Pink Batts program. So they replaced the Home Insulation Program on 19 February 2010 and they blew up its successor this week, on 28 February 2012. That is what they do to their friends.

Let's look at the carbon tax and how in their hands this measure is going to be destructive to the Australian economy and damaging to families and, above all else, it is going to fail to achieve its purpose. Very simply, we have had matters of great urgency this week, when the most senior people in the industry have made it clear that we are facing a real and significant threat to jobs, to competition, to viability and to electricity prices.

Let me start with what the CEO of Australia's largest power producer, Macquarie Generation, said. Sir Russell Skelton made it absolutely clear on the front of the Australian Financial Review yesterday. The article reads:

The head of Australia’s largest power generator has warned that electricity prices will rise more than the federal government predicts under an option to ration output in order to stay profitable under the carbon tax.

There are two fundamental things in what the head of Macquarie Generation has said. Firstly, power prices will rise more than the government has said. The government has already said it will be a 10 per cent price rise. That is what the government has said, and the Electricity Supply Association of Australia has said it will be 20 per cent. And here we have the head of the largest power generator in Australia belling the cat, calling the government to account and making it absolutely clear that power prices will rise by more than the already high 10 per cent—on top of the 50 per cent price rise across Australia over the last five years.

But there is something even more concerning than the price rises which will have a huge impact on industry, whether it is on aluminium, cement, steel, other forms of heavy industrial production, small businesses or families. The question is: what could have more of an impact? That is the issue of energy security. And it is not us that say that. It is the government itself and the key generators. In recent days we have seen that InterGen, one of Australia's most significant power providers has been reported as facing huge refinancing issues directly as a consequence of the carbon tax. We have seen that Loy Yang is having enormous trouble refinancing, directly as a consequence of the carbon tax. And Macquarie Generation has warned of rationing power.

Let's understand this. In the 21st century, in a developed economy, in a country with extraordinary resources, the consequence of the carbon tax on power supply is, according to the CEO of the largest generator, that we are looking at facing rationing of power supplies. That is the sign of a government that could not manage a home insulation program, could not manage a Green Loans Program, could not manage a solar hot water rebate program and certainly could not manage the world's largest and widest carbon tax. There is real and present danger to the supply of energy in Australia.

If the government doubts what we say, why did they have to create an Energy Supply Council? Why did they have to create a fund which will give a billion dollars directly to the largest Victorian brown coal power producers between 31 May and 30 June this year—cash, no strings attached? Because their balance sheets are at such a risk that this government is giving not $100 million, $200 million or $300 million of cash to the largest companies in the power generation sector just so as they can keep the lights on.

We have a situation where prices will go up, by more than the 10 per cent that the government has argued, and there is a reason for that. Because of the system that they have set in place, companies will have to make forward purchases because they have to make long-term contracts to deal with the carbon tax that is being imposed on them, and therefore there price rises will be higher than the government has said. Again, not us. That is what the Electricity Supply Association of Australia said. So power prices are going to skyrocket. If energy security is being put at risk, something is deeply, profoundly wrong. The history, the practice, the reality of the way this government has managed—green loans, pink batts, solar hot water, solar panels, cash for clunkers and citizens assembly—gives you a sense that all of these pale into insignificance when compared with what will be a $27 billion tax over three years with profound impacts on industry right across the country.

The next thing, though, is that it is not just this detail from the CEO of Macquarie Generation, but also something far more significant than that. We have Professor Warwick McKibbin, a former Reserve Bank board member, an ANU professor, and what did he say this week? He predicted the carbon tax would push up prices more than Treasury forecast. That is what a former Reserve Bank board member said. But he is not the only Reserve Bank board member: Graham Kraehe in the last week has given deep warnings about the impact of the carbon tax. Graham Kraehe and Warwick McKibbin together have made it absolutely clear that the design, the construction and the intent of this tax is deeply and profoundly flawed.

Don Argus, one of Australia's most senior business people, just today said this:

The carbon tax was the result of political expediency. I am concerned that we have a badly designed, hurriedly implemented tax that imposes significant costs on the economy but that may not achieve its core aim.

That is absolutely right. It will not achieve its core aim because what happens to Australian emissions between now and 2020? They go up from 578 million tonnes to 621 million tonnes—a 43 million tonne increase in domestic emissions, almost two tonnes per person. How do we meet the government's objective? We have to go offshore and buy 94 million tonnes of foreign carbon credits by 2020 but at a carbon price which by their own reckoning will be $37 in actual dollars at that time. That makes $3½ billion of expenditure on top of the carbon tax.

Let us be clear here. The likely carbon tax liability to the Australian economy will be about $14½ billion by 2020 but on top of that they then have to go and purchase 94 million tonnes or $3½ billion worth of foreign carbon credits, which are paid for by Australian companies. So that money is in addition because the carbon tax does not achieve its purpose. Why does it not work? Because Australians have historically shown that if you increase electricity prices they do not change their consumption significantly; they substitute out of other things. The pensioner substitutes out of the once-a-month meal at a restaurant; the parent substitutes out of the swimming lessons; the self-funded retiree might not be able to give the present they want to their grandchildren at the end of the year. It is a reality that there is that substitution.

On every observation, electricity is an inelastic good in Australia. The fact that electricity prices have risen 50 per cent with barely any significant change in demand over the last five years ought to say to the government, 'This is not the right mechanism to reduce emissions.' All it does is increase the cost of living, destroys jobs in companies such as Alcoa, in places such as the Kurri Kurri smelter, in places such as Tomago, in places such as Gladstone where the QAL smelter is at risk in the alumina area precisely because of the carbon tax. That is what others have made absolutely clear.

Again, do not take our word or industry's word. Let us hear what the Minister for Resources and Energy, Martin Ferguson, says. This is what he said this week, reported in the Age on 27 February:

I think there's a lot of concern in industry at the moment about the price we've locked in given where Europe is at the moment in terms of price of carbon—whether we've locked in a price that's to our disadvantage as a nation.

That was the Minister for Resources and Energy, the minister in charge of Australia's power sector, sending a message to the Prime Minister: 'This system is bunk; this system is broke; this system will not work; it won't achieve our emissions reduction outcome, but it will drive up our prices. It will not work in comparison with our competitors and therefore it is a dud, it's a fix, it's a fraud, it's a failure and it will not achieve the outcomes. But it will hurt Australian families and it will hurt Australian workers.'

That is the problem. It will send jobs to India, China and Indonesia but it will not reduce global emissions. Just today we have seen reports that council rates will also be forced up. Councils right across my home state of Victoria are talking about an increase in council rates of three per cent in the first year alone, because of the carbon tax. So every time you take out the rubbish bin, every time you seek additional work on a drain, you are going to pay more because council rates will be up. That will happen in the first year.

What we see is a tax that is profoundly flawed because it does not achieve its core outcome and is not in line with what the rest of the world is doing. Only this week, Japan has made it clear there will be no carbon tax under any government that the current Japanese Prime Minister leads. So Japan has walked away from a carbon tax. Canada held an election and ditched the carbon tax. The US President said while he was here in Australia that heading forwards there would be no carbon tax or equivalent scheme in the United States. So the rest of the world is running away from this proposal at 1,000 miles an hour. Even in Europe, you find that the European scheme averaged out at $1 per head across the continent while the Australian scheme will average out at $400 per head. We are almost 400 times heavier in our first five years than the experience under the European scheme in its first five years. There is no comparison.

I return to where I began—on the issue of competency. The structure, the nature, the purpose, the intent and the effect of the carbon tax are all deeply and profoundly flawed because of the impact on electricity prices and electricity security. The competency of those who seek to implement it is fundamentally broken. This week they could not even run a solar hot-water scheme. That scheme, which was the successor to something announced by the coalition, was announced on 19 February 2010 by, guess who, the former minister for the environment and current Minister for School Education, Early Childhood and Youth, as the successor to the Home Insulation Program. It was terminated 48 hours ago, without notice, without warning, by the man sitting next to the government dispatch box, the Parliamentary Secretary for Climate Change and Energy Efficiency.

The Clean Energy Council have denounced the termination. Numerous people within the industry have denounced it. The government has tried to make it clear that the money ran out. Two weeks ago, the portfolio budget statement showed there was $24½ million in the forward estimates for next year—so this program was extended a year ago with an additional $24½ million. That was done in the budget papers in 2011. It was reconfirmed by Treasury two weeks ago, and now that money has mysteriously gone. The government has ripped the solar sector off. It cannot manage the carbon tax, and this tax should be abolished immediately. (Time expired)