Slapped by a five-fingered carbon tax

In theory the carbon tax won't hit Australian employment but there are four related measures which, together, will have scathing effect.

According to the Treasury models the carbon tax will not have a major impact on Australian employment. In theory they are probably right but in fact Australia is introducing around five carbon taxes at once and together they will have a profound effect on non-mining employment.

I suspect that in the minds of manufacturing, residential and office electricity consumers the effects of the five carbon taxes will roll into one, and the reaction to the experience will not be pleasant for Julia Gillard and Greg Combet.

So what are the five carbon taxes? First we have the Gillard-Combet tax, which was originally planned to be low and of little consequence but was boosted by the deal with the Greens.

Second, we have the array of other green carbon measures, which are designed to increase the use of solar and wind electricity consumption, which costs far more than coal or gas – they have the same impact as conventional carbon taxes.

According to Keith Orchison these first two carbon taxes will lift the cost of electricity in Australia by 14 per cent between 2010-11 and 2013-14 (Spinning while power prices surge, December 29, 2011).

This is a very hefty set of direct carbon taxes and I suspect they will be matched by few other countries in the world.

Then we have the indirect carbon taxes, which will boost electricity prices even further. Our third carbon tax is the enormous distribution infrastructure investment required because we have run down our investment. The cost of that infrastructure boosts power charges substantially, so it acts like a carbon tax.

Our fourth carbon tax is the fact that the domestic price of coal and gas raw materials is rising as the price we pay moves closer to world parity. This will become more important as we start to shut down old brown coal and black coal power stations and replace them with much higher cost raw materials. This is set to become a major carbon tax.

In all those four taxes are expected to lift the cost of electricity around the country by around 37 per cent between 2010-11 and 2013-14.

The simple fact is that we did not need the Gillard-Combet tax because the others were even more potent.

The final tax may be disputed as a carbon tax but it has the same effect – the rising Australian dollar. Some 70 per cent of our power usage is by business and over half that business usage is manufacturing. The high Australian dollar is pushing both manufacturing and services overseas, with the industrial relations legislation giving the overseas push an extra kick.

Julia Gillard used the money raised by the first carbon tax to hit the middle class, who will pay the full tax. By contrast the government will reimburse lower income people more than the first carbon tax – it’s a form of income redistribution away from middle Australia. But lower income people will not be helped to pay the next three carbon taxes so will think they have been short changed.

The middle classes not only cop the full blow but have been given a private health cost boost as well. And while the higher dollar will increase their purchasing power it will lessen job security in services and manufacturing.

So you can understand why voters are sceptical of government politicians – they are told that the highly publicised conventional carbon taxes will not hurt them, and while in theory that might be right the total carbon taxes will certainly hit them hard.

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