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EYE-BALL’s Herman on – The Carbon Tax – Post Election …

March 10, 2013
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Title:
The Carbon Tax – Post Election …
| Author: EYE-BALL’s Herman O’Hermitage | 10th Mar 2013 |
The Australia Industry Group (AIG) now favours converting our Carbon Tax to an Emissions Trading System (ETS). That means to allow the electricity producers to buy carbon credits on the world market to satisfy their tax liability and thereby offset.

Carbon Credits sell for 20% of Australia’s existing tax in Europe.This is several things. Tony Abbott has promised to get rid of the tax. What does that mean? Would adopting the AIG recommendation represent a broken promise, to keep the tax but allow ETS offset?

The way things are going the coalition will have such a large majority in the lower house, it will not matter much, and Christine Milne’s promise “over my dead body” may well be her epitaph. The state results in WA overnight simply highlights how the ALP will struggle to realistically expect to win a single seat from the opposition, and their losses will be massive. The electorate wants to expunge the last 3 years as fast as possible

For me, it is only about the micro economic reform that is required to attract manufacturing sector back to Australia. In a perfect world industry should expect to pay closer to 20c a kilowatt hour for energy, rather than closer to 30c. The wage structure is a secondary problem. And as for the currency, that stays in the too hard basket. It should not stay in the too hard basket, but we are a function of free markets and that means Quantitative Easing in both Europe, USA and don’t forget good old Japan. China are currency manipulators (but for that matter what is Quantitative Easing)? Maybe Quantitative Easing is a nice way to call Currency Manipulation by our NATO allies.

From the ALP perspective, they just need revenues to fund their wanton spending program. There truly is a “Goddess of Size” or “Recklessness of Large Numbers” about this government. The Minister for Health is simply incapable of quoting any programme as a per annum cost. The politician requires her to talk about a 10 or 5 year programme costing essentially 5 times or 10 times as much.

The Treasurer too loves to talk in “over the Forward estimates”. The treasury project forward estimates over 4 years. Forward estimates can be very confusing, it means several assumptions like constant GDP or inflation or unemployment. Shift one by a modicum, and what is the outcome? A 1% fall in Government revenues has led to a $22 billion change in deficit this year, so far. Extrapolate that over 4 years.

This is the very essence of what most current debate misses. What does any spending programme really mean to tax take, and will it further erode incentive? The Business Council of Australia (and their fraternal twin Deloitte Access) are all about the road to fiscal repair. I too think that is truly great. I tend to think of it as the Scottish Rite. Waste not! want not!

This comes to the nonsense of costing of programmes. To say that wiping out Carbon Tax and MRRT will leave a hole in the revenue side is fair enough, but when it comes to finding savings that is a work in progress, and simply can’t be costed until it is fully project scoped. What will 20,000 jobs in Canberra save? In the first year not much after paying for redundancy costs. Moreover it does not happen overnight. The way it rationally might occur is finding recurring savings of 10% per annum until efficiency is truly obvious.

This is where NSW State is currently at. In the first 12 months, there was a bit of crumbling at the edges, selling surplus assets (like surplus Roads and Traffic Authority land), attacking volunteer fire fighters Workers Comp, draconian tightening in health budgets, so more beds were closed, but now larger strides are occurring in bureaucracy. Flatter command structures, wholesale layoffs.

Queensland are a year behind NSW. We await details on Costello’s audit where so far predictably all we know is sale of assets to cut the interest cost fiscal drag of accumulated deficit is the way forward to regaining their AAA rating.

Despite what occurred in Victoria this week, should Geoff Shaw cross the floor and bring down the government would a resultant poll see a change of government. It is hard to imagine, but he has already guaranteed to support both supply and confidence. Enough said.

Reverting back to my original posit, if the Carbon tax stays with ETS offset would that be a breach of Tony Abbott’s promise? It is a flawed question! It is only about integrity. Therefore Mr Opposition leader you might think to address this before going to the polls. What do you mean?

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