Smoke, Mirrors and Hot Air

Shadow Treasurer Joe Hockey on the Carbon Tax

Shadow Treasurer Joe Hockey (also Liberal Party representative for North Sydney) reiterated recently that the Carbon Tax would go if he and his colleagues were voted in at the next election. He told Australian Construction Focus late July that “the Coalition is definite… it will happen, starting on day one if a coalition Government is elected.

“It would be the first legislation before the new Parliament when it sits,” he told us via his press secretary, who cited pressure of parliamentary time for not going into more detail about the latest aspects of opposition policy on the contentious new tax.

However, Mr Hockey has been a strident opponent of the measure, for which there has been a curiously muted reception since its inception on July 1 with the exception of a few isolated and well-publicised transgressions and anomalies (such as the spike in pokies intake in Queensland, attributed to carbon-tax rebates being received in households in cash rather than credits). In March he told a business forum in Sydney, “The carbon tax is a bad tax. It will severely hamper the competitiveness of Australian industry on the world stage because no other country is introducing an economy wide carbon tax.”

Prime Minister Julia Gillard says this is simply not true. “Over the next few years the Climate Institute expects Britain will have a carbon price of $24 to $30 a tonne; Sweden will have a price of $130 a tonne; Switzerland, $30 to $60 a tonne; Norway, $53 a tonne; Ireland, $24 to $37 a tonne—and the list goes on,” she told Mr Hockey in parliament just days before the tax took effect.*

The Prime Minister continued, “… We are seeing moves to emissions trading schemes in our region, including the recent decision by the Republic of Korea to move to an emissions trading scheme, the trialling of emissions trading schemes in provinces in China, and the list goes on. I say to the Shadow Treasurer: he ought not to risk his own reputation by joining the Leader of the Opposition in this stupid, cynical, negative fear campaign. He has in the past stood up for carbon pricing; he should have the integrity to do it now.”

Hockey said: “A number of private sector commentators now believe the inflationary impacts of the carbon tax will be higher than the government has said. This will continue to hurt the manufacturing industry in particular. The carbon tax will put greater upward pressure on business costs and there is a danger the increased welfare payments and tax cuts for households will not fully compensate for the increased costs. The resultant transformation of the Australian economy will reduce economic growth. It must therefore also reduce growth in jobs.

“On this point I note that Treasury modelling assumed full employment over the long term. In other words, Treasury assume all workers displaced by the tax will magically find new ‘green’ jobs. If this is to happen in a slower growing economy it can only occur through slower growth in real wages. So every business and every household will pay for this new tax either directly or through income foregone. The Coalition will make it a first priority to rid Australia of this poorly designed and economically destructive tax.”

Assistant Treasurer David Bradbury told parliament (26 June) that opposition leader Tony Abbott “is out there giving the green light to businesses to jack up their prices and to falsely blame the carbon price.”

Many external commentators suggest Australia does not enjoy the politics (or politicians) it deserves. Despite its status on the world stage, its politics is overwhelmingly of the dismissive, dismal “yah-boo” variety. So what does Big Business say?

Speaking to ABC1 in June on the general topic of climate change, Peter Voser, the global CEO of Shell, perhaps surprisingly welcomed the government’s move to introduce a $23 per tonne price on carbon, although he added that Shell would prefer to see a full market mechanism. “Australia needs to work on that in the long term rather than have a fixed tax,” he told 7.30. He stopped short of criticising the Opposition’s plan although it is incompatible with Shell’s own policies, but suggested Shell could act as a sort of mentor. If the Opposition took office, “We would offer our advice, our insights, on how we see the long-term energy market developing.” (Mr Hockey declined to answer our question as to whether he would care to accept such advice.) Adding a sort of indirect threat, Mr Voser told ABC that countries that do not price carbon “will not attract the right investments in the longer term.”

That’s all very well for a global major player, you might say, ‘but what about us?’ The construction industry has been suffering through the economy and now comes a further whammy. According to Ken Phillips, chairman of the Council of Small Business Australia, the problem is not confined to carbon emissions or to a particular party – it’s a general unfairness. “All political parties and most bureaucrats acknowledge the role played by small business in the economy but over the last twenty years they have not shown that they understand that a small business is different from big business and must have different policy responses and different processes and rules.”

According to the Master Builders Association, “while not directly liable under the carbon price, and despite not being directly emissions intensive, the building and construction industry will be one of the activities most affected by a carbon price. This effect comes about on both the supply and demand sides of building and construction. On the supply side, there will be increases in costs. On the demand side there is likely to be reduced investment activity.

“These effects are likely to increase over time as the carbon price steadily increases. It is the long term adjustment implications of the carbon price that will be a major concern for the building and construction industry.”

On a related topic, in a recent submission on the draft framework, the MBA’s Chief Executive Wilhelm Harnisch renewed the call to government and the Council of Australian Governments to shift its focus further toward existing buildings to improve energy efficiency. “Increased stringency for the thermal shell of residential buildings introduced over the past few years is close to an optimum level and supports the argument not to increase energy efficiency stringencies beyond the current six star rating. Policy to ensure existing buildings become more energy efficient is the most effective way of achieving carbon abatement and was identified in the COAG National Strategy on Energy Efficiency Blueprint. There is $6 trillion in existing stock of buildings to be retrofitted to be more energy efficient and less carbon intensive.”

Mr Harnisch called on the Department not to recommend an increase to mandatory energy efficiency requirements beyond six stars. “Mandatory energy efficiency requirements have been a moving goal post for builders for several years. It has created a major compliance headache and has added up to $10,000 on the cost of a new home. It can be a big barrier for new home buyers. People are welcome to go beyond the six stars, but the mandatory level imposed on new home buyers should not increase beyond that. Master Builders welcomes the framework findings that mandatory energy efficiency requirements were at the peak of the cost benefit benchmark.”

Is it possible the ‘will it or won’t it?’ debate over the tax has had a serious negative impact on new orders with home buyers “delaying their decisions as they assess the impact of the carbon tax,” according to Mr Harnisch and the MBA? “This confirms other surveys that show consumers are already exercising even greater caution over fears of increased cost of living. The increased cost of home ownership and of living flowing from the carbon tax will only make matters worse.”

Indeed, does the promise (or threat, depending on your personal politics) of a Liberal-led government scrapping the tax – and replacing it with what, exactly? – increase that delaying tendency? If – and it’s a big if – the federal government is correct in its claims that household spending will not be affected by the tax, will house buyers be tempted back into the market, prompting a long-overdue boom in building?

One expert (the Centre for International Economics) recently estimated building and construction costs will increase by 1.42 per cent as a result of the policy now in place. So are buyers who might spend some $100,000 or more put off by that extra 1,420 bucks? Or afraid of something bigger and altogether nastier?

*It is worth noting here that the European Union expects that by 2050, some 97 per cent of power generation will come from renewable sources (The Economist, July 2012).

Home Automation

Call it ‘domotics,’ and you are likely to receive a blank stare, but refer to it as ‘smart home’ or ‘home automation,’ and you will get a nod of acknowledgement. For the past few years, consumers have heard the word ‘smart’ attached to countless products and services, from food and drink to snacks like popcorn and mobile phones, which no one seems to refer to as a ‘cellphone’ anymore. Yet what, exactly, constitutes ‘smart’?

January 17, 2019, 6:24 AM AEDT