The chorus has been building for months from Coalition figures across the country: “now is not the time to introduce a carbon tax”. And it’s now swelling to a crescendo.
“This is the worst possible time to be introducing the world’s biggest carbon tax tax,’’ said Tony Abbott yesterday. “I cannot think of a worse time to be introducing the biggest economy wide carbon tax in the world,” tweeted Joe Hockey on Sunday. “Now is not the time to introduce the world’s largest carbon tax,” piped up Bruce Billson this morning.
Backbenchers had got the memo. Now “was the worst possible time to introduce a carbon tax,” Natasha Griggs said on Friday, the same day that Josh Frydenberg opined “there could not be a worse time for the Gillard government to introduce a punishing new carbon tax.”
Even the government’s critics in the commentariat were getting in on the act. “Has there ever been worse timing for the introduction of a great big new tax?” inquired Stephen Bartholomeusz at Business Spectator yesterday.
With unemployment below 5%, the RBA cash rate at 3.75%, CPI at 1.6% and about a quarter of a trillion dollars in investment commitments pouring into the resources sector, you might wonder exactly what economic indicators need to look like for there to be a good time to introduce a carbon tax.
When is a good time to introduce any economic reform? When times are crook and the need for reform is urgent? The Hawke government launched a round of major tariff reform in March 1991. Unemployment was over 9% (and proceeded to rise to 11%), the RBA cash rate was 12% (the days when monetary policy really did do the heavy lifting) and inflation was 5%. Hawke, Keating and Button never flinched, as tens of thousands of manufacturing workers who lost their jobs can attest. Imagine the hysterical reaction to that sort of reform today.
Or what about when “the economic sun is shining”? The Howard government had a whole term of booming revenues, falling unemployment control of the Senate and did nothing with it except attack unions via WorkChoices and give handouts.
But then the Coalition would argue this isn’t a major economic reform, it’s just a great big new tax. So when is the right time to introduce a great big new tax? The Coalition would know, because that’s what it did in 2000 with the GST, which in CPI terms was more than three times bigger than the estimated impact of the carbon price.
When the GST was introduced, the Australian economy looked very different. Unemployment was over 6%, on a participation rate nearly two points lower. The RBA cash rate was 6%. CPI (before a year-long spike caused by the GST) was 3.2%. The Westpac Melbourne Institute Index of Consumer Sentiment had gone deep into negative territory, hitting -6.8 in March and -4.2 and -3.7 in May and June (in comparison, it hit -5 in March this year and most recently was 0.8). And if we’ve got a stockmarket jittery about Europe and the US, in June 2000 we were three months into the Tech Wreck (and on the eve of a Federal Reserve-induced US recession).
In short, if now’s a bad time to introduce a carbon price estimated to have ~0.7% impact on CPI, mid-2000 was an absolute shocker of a time to introduce a GST that caused a 2.5% CPI impact. The only unalloyed positive was the dollar, which was around US$0.58, much to the chagrin of those who think the currency is a kind of national phallic symbol, but to the delight of exporters.
Of course, the Howard government didn’t flinch. And correctly. Its implementation of the GST was a model of reform, from taking it to an election (in which Labor out-polled it, and that almost cost it government) to resisting the endless demands of rent seekers and special interests calling for exemptions and differential treatment. Only when it was forced to deal with Meg Lees did it compromise on the quality of the policy (Lees, it’s now forgotten, bolted to London in July 2000, leaving Natasha Stott Despoja to have to deal with the political fallout of any implementation issues).
And throughout, Labor was every bit as negative and opportunistic as Abbott has been on the carbon price — but with the crucial exception that Howard had secured re-election on a GST commitment and had a clear mandate for the GST. Indeed, Abbott is now closely following the Beazley template and shifting his rhetoric as the commencement date approaches and it becomes clear that his claims about the impact of the carbon price are wildly overblown.
Beazley began referring to the “slow burn” of the GST (a phrase he’d later, and more accurately, use about WorkChoices). Abbott has gone for the more colourful metaphor of the python squeeze versus the cobra strike but, snakes or fires, the same logic applies.
However, a key difference, apart from the democratic legitimacy of Howard’s GST and News Limited cheerleading for the government, is that Beazley never wedded himself to repealing the GST in the way Abbott has with his pinky promise about repealing the carbon price. That may yet have ramifications between now and August 2013, which in political terms remains a very long way off.
It is true that the next federal election is ‘a long way off’, whether it is in August 2013 as Keane expects or October 2013 as MacKerras predicts (Crikey, 20 July 2011 ). Nonetheless 63% opposed to the carbon tax is a big turnaround in sentiment needed in 14 to 18 months.
Balanced article, thanks.
This is the right time to introduce a carbon price for all the reasons previously stated.
It is good to know that the Australian economy is in safe hands.
There are destabilising influences however:
Global events beyond our control, persistent attacks by vested interests as well as mediocre media reporting that left the community completely bewildered, befuddled, perplexed!
I despair at times for the mentality of people in this country.
We saw them at work last night on Q&A and they were representative of at least half of the voters.
Guffawing when Crean said “you don’t get anything for nothing..” as he made quite a genuine remark about investing.
A huge swathe of the audience that are in lock step with Abbott and his party of dills who didn’t utter a peep about the neutered mining tax but demanded a shiny new road for themselves-indeed wanted all the tax spent of them and their state- even though they object to the tax.
They looked stern faced at the concept that the Chinese will invest billions in Australia (because a Laborite said it) and probably adore the Rineharts, Forrests and Palmers of the world yet seem oblivious to the billion dollar deals these miners have done with the Chinese.
The big difference between this government and the last is advertising dressed as government information . Labor for some reason has been very modest but may be adhering to its attacks on Howards extravagance when it was in opposition . In regard to the GST , its worst aspect was the introduction of the first home buyers grant to invigorate the building industry which slumped dramatically . Not only was the grant of little value in making a home cheaper to buy it was open to a buyer of a million dollar home . A bit like the health insurance subsidy that was used to pay off golf shoes and fitness club membership while elective surgery waiting lists remained too long . Every year health premiums go up above the CPI and like private schools they defend their take of taxpayer money as providing value . Take away some of that government largesse and they would still raise their fees but maybe run a tighter ship with less secondary expenditure .
There would be balance in this article if it did not join all other commentary in ignoring the carbon
credits implicit in an emissions trading maarket. So we see in the “Great Big New Tax” the propagadists’
classic “Big Lie” and “Half-Truth” combined. Why do you various assorted fake intellects keep falling
for these ploys, even joining the self deception? If the big polluters can acquire carbon credits at the existing (YES there is a voluntary emissions trading scheme in place already) of about $7-8 per tonne
then how much of the $23/tonne on their total emissions will they actual be paying? There may not be very much Great Big Taxpaying going on at all. Since these difficulties in understanding seem to be caused by defficiencies in education let me quote Adam Smith on the subject, ” A man without the proper use of the intellectual faculties of a man, is if possible, more contemptible than even a coward, and seems to be mutilated and deformed in a still more essential part of the character of human nature”. Perhaps what Lewis Caroll was alluding to in his “Mad Hatter’s Tea Party”.
So what part of Carbon Credits don’t you mutilated morons understand?
The spavined political progeny of Loki and Caligula has you twisted to his will on this issue.