Australia's cotton-wool wrecking ball
It's been eight months since the introduction of the carbon price. Instead of 'wiping out jobs', employment is up by 50,000, the stock market is worth hundreds of billions more and inflation is in check.
Some people in positions of power and influence were expecting the carbon tax, as it has colloquially become known, to either "act as a wrecking ball across the economy” or be "absolutely catastrophic", "wipe out jobs big-time" while towns like Whyalla would be "wiped off the map" because of it.
Further, it would create "ghost towns” and "discourage investment” in mining.
Get the drift? There were forecasts that the carbon tax would completely undermine economic growth and market conditions.
How accurate have these projections been?
With economic data flowing in and financial markets trading over those eight months, it is possible to test the validity of forecasts of "wrecking balls” and catastrophe.
The facts below are all based on the latest Australian Bureau of Statistics or Reserve Bank data, unless otherwise indicated.
Since the carbon price was introduced:
– Real GDP has risen by 1.2 per cent (annualised growth rate of 2.5 per cent).
– Employment has risen by 53,400 people, made up of 30,000 new full-time jobs and 23,400 part-time jobs. The annualised rate of job creation is around 95,000.
– The unemployment rate has edged up to 5.4 per cent in January 2013 from 5.3 per cent in June 2012, just before carbon was priced.
– The stock market (All Ordinaries Index) has risen 25 per cent, adding approximately $296 billion to the value of Australian shares. A further $30 billion or so of dividends have been paid to shareholders since June 30, 2012.
– According to RP Data, house prices have risen 2.8 per cent since June 30, 2012, adding approximately $110 billion to the wealth of owners of houses.
At this point I might pause. Have a think about those last two points: the gains in stock market values and house prices alone have been nearly $410 billion in just over eight months. That is just under $50,000 per Australian household, on average.
– In terms of inflation, the CPI has risen by 1.6 per cent in six months, a figure which includes the boost to prices from the carbon price driven lift in electricity and gas prices. Underlying inflation has risen 1.3 per cent in the six months (annualised pace of 2.7 per cent) and this figure has also been inflated by the carbon price.
– The wages price index has risen by 1.5 per cent in six months (annualised pace of 3.1 per cent), locking in a period of moderate wage increases.
– Average weekly earnings have risen by $39.10 a week (from May 2012 to November 2012) with an annualised increase of $2035.
– The value of retail sales has risen by just 0.1 per cent (annualised rate 0.3 per cent).
– The number of new motor vehicle registrations has risen by 4.7 per cent with the six largest monthly number of new car sales ever recorded being registered in the last six months.
– The number of dwelling building approvals has fallen 10.1 per cent since June and the number of new housing loans for owner occupation has fallen 0.1 per cent over the same period.
– The NAB measure of business conditions has fallen from -1 points in June to -2 points in January, but business confidence has risen from -3 points to 3 points over the same timeframe.
– The Westpac measure of consumer sentiment has risen by 13.3 per cent since June to be at a 38-month high.
– The RBA index of commodity prices has fallen 5.4 per cent in Australian dollar terms since June and has fallen 2.1 per cent in US dollar terms.
– The RBA has cut the official cash rate from 3.5 per cent to 3 per cent.
– The 10-year government bond yield has risen a net 35 basis points to 3.40 per cent as of yesterday’s close.
– The Australian dollar has risen around 0.9 per cent as strong foreign inflows into Australia continue.
At the same time, Australia’s triple-A credit rating from all three ratings agencies remains unchallenged.
So a wrecking ball? Catastrophic? Wiped off the map?
The disconcerting thing is that all of those dire predictions from above were made by Tony Abbott, the man who studied economics at university and the man likely to be prime minister in a little over six months.
Stephen Koukoulas was senior economic policy advisor to Prime Minister Julia Gillard between September 2010 and July 2011.