The cost of Kevin Kong's carbon con

We now face the extraordinary political situation in which both major parties have vowed to retain all of Labor’s carbon price ‘compensation’, made up of tax breaks, pensions and benefit increases, while reducing or removing altogether the ‘cost of living increase’ for which we are being compensated.

On the Coalition side, Tony Abbott knows that taking money from pensioners or hiking taxes (the 1.5 per cent parental leave levy on big businesses notwithstanding) would be electoral suicide.

Moreover, his own carbon tax, the Direct Action plan, which will cost around $3.2 billion over forward estimates, is also a ‘cost of living’ pressure on taxpayers. So that would appear to be another reason for Abbott to leave all the goodies on the table.

But now Prime Minister Rudd, and his faithful policy-rejig henchman, Treasurer Chris Bowen, are doing the same – talking up the decrease in the carbon price from around $24 a tonne to supposedly $6 a tonne, but reassuring voters they won’t scale back the generous compo for the Gillard carbon ‘tax’.

This is all grossly disingenuous politicking.

Labor’s line, which, in purely logical terms they should have stuck with – though logic seems irrelevant to the political fantasy series ‘Rudd 2.0’ that has replaced the evening news – is that the carbon tax is a very minor component of ‘cost of living pressures’.

Treasury modelling has revealed that a couple living on a single income of $75,000 would save about $380 per year if Rudd makes the switch to an ETS a year early.

So let’s break that down. That’s approximately $32 a month, $7.30 a week, or $1.04 per day.

Yes, I have a calculator here.

Now let’s look at the impact of the next 25 basis point increase in the RBA’s cash rate. On an average mortgage of $250,000, if passed through directly by the banks to homeowners (5.6 per cent rising to 5.85 per cent), that is worth an extra $37 per month – more than the Rudd reform.

If interest rates rise by 100 basis points, the household budget is hit by four times the ‘cost of living’ amount of the Rudd reform – $153 per month. And these are the swings in household budgets that Australians routinely take in their stride.

A couple with two kids living on the average weekly pay packet of just $1080 (this ABS figure is averaged across full and part-time workers), take home a measly $875 a week and would be doing it very tough indeed. But is there really a material difference if that take-home pay was $7 different, once Rudd has shifted to an ETS?

The point is that cost of living pressures in Australia don’t really get much of a look-in while the nation is transfixed by a ‘giant new tax on everything’ that really doesn’t cost families very much at all.

There are plenty of things that do.

Infrastructure is probably the biggest one. To return to the family of battlers trying to survive on $875 a week, how many hours a day does the sole bread-winner sit in traffic jams on the way to work? How much petrol does that waste? Or how many hours per week are wasted on inefficient public transport?

ABS figures show that normal-hours full time earnings in Australia are $1393, but when overtime is factored in, that rises to $1453.

If Mr or Mrs Battler wasn’t wasting hours driving across cities of crumbling infrastructure, or wasting time on public transport systems that, in comparison with the systems in cities like Hong Kong or Bangkok look positively backward, they might consider taking a few more hours over overtime at work.

That’s worth more than $7 to their household budget, and worth a fair bit to Australian productivity to boot.

Media attention has been captured by the ‘carbon’ and ‘boats’ issues, thanks to a prime minister who is rampaging through his own party’s policies in a cynical ploy to return to power at any cost.

Like a latter day Kevin Kong, the spectacle of the prime minister climbing Labor’s policy edifices and ripping them down is breathtaking. But look back down at street level and there are real cost of living pressures that real policy makers could do something about.