November 12th 2011

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Articles from this issue:

CANBERRA OBSERVED: What really lies behind the Qantas dispute

EDITORIAL: The carbon tax: Gillard's last stand?

THE ECONOMY: Australia must change to maintain its prosperity

MURRAY-DARLING BASIN: Next Basin plan faces further community rebuff

COVER STORY: Why families struggle to afford a home

ABORTION: Global initiative to protect the unborn

FOREIGN AFFAIRS: Russia enacts new law to restrict abortion

MIDDLE EAST: How the West misreads Middle East dictatorships

MEDICAL SCIENCE: Deaths from AIDS omitted from inquiry

OPINION: Housing regulations killing the Australian dream


BOOK REVIEW Visionary premier who transformed a state

BOOK REVIEW The history we neglect at our peril

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The carbon tax: Gillard's last stand?

by Peter Westmore

News Weekly, November 12, 2011

In theory, the passage of the Gillard Government’s 19 carbon tax bills through the House of Representatives, where it has a wafer-thin majority, should mark the end of the debate on the carbon tax.

Labor was able to get its legislation through the lower house with the support of three independents, Andrew Wilkie (Tasmania), Tony Windsor (NSW) and Rob Oakeshott (NSW), and the sole Green, Adam Bandt (Victoria).

In the Senate the Labor-Greens alliance has a clear majority, and in a test vote moved by the leader of the Opposition, Senator Eric Abetz, to defer the legislation until after the next election, the Labor-Greens alliance won 35 to 31.

However, appearances are deceptive.

The Gillard Government is facing a massive voter backlash as a result of the new tax, which its members admit will do nothing to address the issue of rising CO2 levels in the atmosphere, or global warming.

The Prime Minister herself has made the carbon tax a test of her leadership, and seems to have no other issue to define Labor’s agenda for the future.

Coming on top of the multi-billion-dollar home-insulation fiasco and the waste surrounding the so-called “education revolution”, the imposition of a carbon tax will undoubtedly rip billions of dollars out of the productive economy, push up the price of electricity for all, and seriously damage the Australia’s manufacturing industries, which are major users of coal and face savage import competition.

One problem for the Gillard Government is that the new tax will be imposed on some 500 Australian companies which the government calls “large polluters”, but which apparently include universities and public hospitals, as well as all Australia’s electricity generators.

The collateral damage to the iron and steel industries, which are the foundation of what remains of heavy industry in Australia, has not even begun to be felt, with likely flow-on effects on employment and manufacturing.

Additionally, the promised offsets to low and medium income earners will not diminish voter hostility to a tax which will flow through to all parts of the economy, push up the price of goods and services and increase the inflation rate, with adverse effects on interest rates, home-buyers and business.

The new tax will come into play from mid-2012, a little more than a year out from the next federal election, giving the Opposition a dream run up to the election.

The Federal Government has structured the carbon tax to make it as difficult as possible to unwind. For businesses, the acquisition of carbon credits creates potential liabilities for any future government which seeks to unwind the new tax, while taxpayers will have benefits which will be unpopular to dismantle.

The Opposition’s spokesman on the environment, Greg Hunt, has already foreshadowed how a future Coalition government will unwind the tax.

He wrote recently: “Repealing the carbon tax is not difficult and a Coalition government will do so in three stages. First, we will seek a mandate to repeal the tax.

“Second, if elected, we will begin drafting legislation on day one and it will be our first order of business in the Parliament.

“Third, we will consult with business and the community both before and after the election on this process and the replacement Direct Action Plan. The certainty in this process comes from key principles already discussed with business.

“We do not have to cancel or abolish any permits — they simply remain the property of the business in question. In real terms, firms simply stop having to pay additional tax. There is therefore no need for, or let alone risk of, compensation.” (Financial Review, October 24, 2011).

Barack Obama, despite standing for U.S. President with a commitment to deal with global warming, did not introduce any legislation during the two years in which he controlled both houses of Congress. He lost control of the House of Representatives in 2010, and has no chance of getting legislation through Congress in the foreseeable future.

Canada’s government has also made clear that it will not introduce either a carbon tax or an emissions trading scheme (ETS). Its foreign minister recently told The Australian there was no credible international system for carbon trading. “There’s nothing to participate in. Where is it going on today?”

Having invested so much political capital in its carbon tax, it is unlikely that Labor will lightly abandon the policy, even if it costs it the next election. With the Greens having the balance of power in the Senate, it is likely that Labor and the Greens will attempt to prevent the Coalition reversing the legislation after the next election.

It may well be that a future Coalition Government will need to seek a double dissolution in an attempt to break the deadlock, making the carbon tax the defining issue in Australian politics for years to come.

For Tony Abbott, this is a welcome prospect, particularly as most other developed countries have either explicitly or implicitly abandoned both a carbon tax and an ETS.

Peter Westmore is national president of the National Civic Council.

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