Gillard's perfect power storm

The combination of energy price hikes, mining tax revenue doubts and business retrenchments are building into gale force challenges for the Labor Party, and its electoral prospects are looking increasingly grim.

The backroom people in the Labor Party must now realise that a series of almost irreversible forces are combining to increase the danger of an Anna Bligh style disaster if a federal election is held around the scheduled date late in 2013.

The first is, of course, the government’s carbon tax position. Most businesses I talk to say the government underestimated the effect of the tax but its impact is really academic – Australia wide retail power prices are set to rise a massive 37 per cent between 2010-11 and 2012-13, including a 41.7 per cent rise in New South Wales.

These are not my figures. They are official government estimates prepared for the Council of Australian Governments energy ministers last year. Carbon taxing is a relatively small proportion of the rise, as set out by Keith Orchison (Abbott's power bill jolt, March 27).

But that will not stop the power of Tony Abbott’s carbon blame game in an environment of severe power price anger in the community. The 2013 Coalition election advertisements that are set to show Julia Gillard "lying” will become very powerful for the Liberal and National parties.

Then we will have the mining tax. On the basis of current iron ore and coal prices the mining tax will yield nothing like current Treasury estimates. I believe that a big iron ore and coal price rise is a most unlikely scenario over the next two years but by 2013 the level of mining tax revenue will be there for all to see. I was one of the first commentators to point out that the tax will not raise anything near current Treasury estimates on the basis of current prices (Mulling a mining tax shortfall, March 15).

Now many others have joined in so the cloud over the government estimates is well documented in advance.

By 2013 we will know whether the government was right or wrong. If it’s wrong the government will look very silly because it spent revenue that was not there.

As I move around the business community I get the clear impression that we are going to see some very large retrenchments, particularly in the service sector and back offices.

One of the reasons for launching Productivity Spectator is to start companies thinking how they can use simple techniques to improve the efficiency of the current workforce (A productivity initiative Australia needs, March 27).

It may save many jobs going overseas.

By 2013 those retrenchment programs will be in full swing, made much worse by the high Australian dollar, the rise in power prices and the industrial relations legislation.

At the same time, it is not going to be easy to reduce interest rates substantially because overseas banks are frightened about Australian banks' exposure to housing.

If the storms now building up turns out the way that looks most likely then simply changing leaders will not make a great difference – because the new leader will not be able to change the carbon outcome, the mining tax shortfall (if it happens), and the retrenchment programs.

The most obvious new leader, Bill Shorten, might question whether he wanted to go in to bat given the hostility of the bowling. Meanwhile, the chances of a carbon tax lasting much longer than the first half of 2014 are becoming remote. The mining tax actually does not matter because unless we have a boom it does not raise worthwhile money.

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