THE DISTILLERY: Climate clean sweep

While the jottery is engrossed in the carbon tax – the details, politics, who gets what and who doesn't – there are a few other issues on the agenda this morning. News Corp and its London arm, for instance, with Rupert Murdoch flying in to try to save the day. But for Australia there were none bigger than the latest economic data from our biggest trading partner over the weekend: the release of China's June inflation data, out Saturday, which were not good, while June's trade figures were issued yesterday and showed an economy slowing a bit faster than expected with imports of iron ore, oil and other commodities down.
 
The Financial Times covered both in its Asian edition this morning: "Chinese trade figures for June provided fresh evidence that the world's second-largest economy was slowing even as inflation hit a three-year high, according to data released over the weekend. The contradictory readings will further complicate Beijing's attempts to maintain rapid economic growth while tackling price increases that have stoked discontent in the country. Beijing released inflation figures for June on Saturday, almost a week earlier than scheduled, that showed consumer prices rose 6.4 per cent from the same month a year earlier, the fastest increase since June 2008. Food prices were the main driver of inflation, rising 14.4 per cent from a year earlier in June, propelled by a 57.1 per cent increase in the price of pork, the most widely used meat in China." And the other big story from the weekend was the appalling US June jobs report: just 18,000 net jobs created last month (smaller Australia did better, creating 23,000). The US economy is softening, just as the debt brawl broke down again.
 
The concentration on the carbon tax here is understandable, with Sydney Morning Herald economics editor Ross Gittins writing this morning: "There is much distrust of Julia Gillard and her assurances, particularly since she has broken her election promise not to introduce such a tax in this term. But how much trust can we place in her critics? Since the Coalition, in its day, has supported putting a price on carbon emissions, can we be sure Tony Abbott's change of heart isn't motivated primarily by desire to win back government? We will be assailed by business people telling us how devastating the tax would be for jobs in their industry. Can we be sure they aren't exaggerating as they jockey for concessions? If we doubt the word of politicians, can we trust the predictions of business people? This scheme is hellishly complex, so it contains much scope for apprehension, justified or otherwise. It is designed to change our behaviour without penalising most households – itself a puzzle to many people – so this will in time change the shape of the economy."
 
The Australian's economics editor, Michael Stutchbury said: "One way or another, Australia is getting out in front of the rest of the world. We're brilliantly using our reform-era lessons to cheaply reduce our greenhouse gases by imposing a market-based carbon price across most of the economy. Or we're recklessly shooting our wealth-creating industries in the foot to the advantage of their foreign competitors. Julia Gillard's carbon price will lock Australia into some mix of the two. The transformation or dislocation will be huge. The new Climate Change Authority's annual cuts to our emissions quota will be scoured like Reserve Bank interest rate decisions."
 
The Australian's John Durie said this morning: "The steel industry cried loudest and it received the biggest handouts as the Gillard government attempted to minimise the fallout from its move to impose a carbon tax. The $300 million subsidy will help an industry whose pain is created more by the combination of low demand, high costs and appreciating Australian dollar than a carbon tax, but BlueScope's Paul O'Malley and OneSteel's Geoff Plummer will take it from where they can." 
 
The Financial Review reported this morning: "The federal government's carbon scheme will take a $4 billion toll on the budget over the next four years as the government increases industry assistance to $10 billion." And the paper's political correspondent, Laura Tingle wrote: "The politics are simple: prove Tony Abbott's big scare campaign about the cost of living has been wrong and deprive him of the chance to offer his own tax cuts." And the paper also pointed out: 'Another round of spending cuts may be needed in the mid-year budget update as the carbon tax is forecast to cost almost $4 billion in the next four years." And the paper's Chanticleer columnist wrote this morning: "Julia Gillard's carbon tax will transform the way Australia's biggest companies manage their businesses." 
 
The Australian's Jennifer Hewitt wrote: "Canberra's grand carbon tax reform package will only raise the growing alarm in the business community that the Gillard government just doesn't understand the meaning of the bottom line or the pressures facing industry and the economy. It will be hard enough to convince highly sceptical voters that the carbon tax is an important economic and environmental reform that won't leave most of their budgets worse off. But most of the business community, already coping with massive structural changes, will be even less persuaded that this scheme has merit, let alone that it deserves the title of major reform. The $23 a tonne tax is high enough to increase costs on business but not sufficiently high to do what the government promises it will – drive substantial change in energy use, provide investment certainty or reduce global warming."
 
Fairfax's Adele Ferguson also wrote: "It seems Julia Gillard is positioning herself as the Mary Poppins of politics. In her latest carbon tax reform package, she has given two spoons of sugar to the majority of the electorate to boost her standing in the polls, and dropped the medicine on the top tax bracket and the businesses that won't come back to bite her. In a nutshell, this carbon tax reform package – the most transformational since the GST – is more about lifting the polls and keeping this minority government's life-support machine on by pacifying the Greens and the independents. For business, its introduction will be complicated, with numerous schemes, bureaucracies and programs that they will need to work through. To gauge what parts of the business will be eligible for assistance, and what won't, will involve varying degrees of difficulty."
 
The Herald Sun reported that the sky would fall in, or rather, that was big businesses' view: "The nation's leading business groups have slammed the $23 carbon price as too high, declaring it will damage – and even destroy – competitiveness across a range of industries. And compensation offered by the government was inadequate and would penalise the engine room of the economy, they said. Job losses were anticipated in mining, retail, resources, building and manufacturing, as the government rolled out its package intended to boost investment in renewable energy sources like wind power." 
 
Clancy Yeates wrote in the Fairfax broadsheets this morning: "Steelmakers OneSteel and BlueScope have been thrown a $300 million lifeline from taxpayers to help offset the pain caused by pricing carbon and the soaring Australian dollar. The two were forecast to be among the worst affected by pricing carbon, analysts predicting a hit to profits of almost 10 per cent for BlueScope and nearly 5 per cent for OneSteel in the first year, 2012-13. On top of this, both companies are battling a high Australian dollar and soaring prices of their key raw materials. But a $300 million assistance package, announced yesterday, means steelmakers will effectively be exempt during the scheme's first four years."
 
The Australian said this morning: "Australia's $50 billion coal industry has slammed the Gillard government's carbon tax, arguing the details announced yesterday would see the sector pay $18 billion over the next nine years, with minimal assistance compared with other industries."
 
And the Herald Sun reported: "A host of the nation's biggest polluters have won major carbon tax concessions with the federal government caving in to business concerns over the cost of the reform. OneSteel, Bluescope, Incitec Pivot and a string of other companies have been singled out for special assistance under the carbon pricing regimen. Others such as Qantas and Woodside will be punished by the tax, analysts say, with industry groups warning that many questions remain unanswered."
 
And Fairfax pointed out claims that: "Australia's coal mining axis will shift to the north and west on the back of the Gillard government's carbon tax, according to coal industry leaders left frustrated by the plan revealed yesterday. Despite unveiling a $1.264 billion assistance package for what it believes will be the worst-affected coal mines, the government was accused by the Australian Coal Association of wrongly anticipating where the tax pain would be felt. Market analysts have long predicted that small, pure-play coal miners, such as Whitehaven Coal, New Hope and Gujarat NRE, would be the most affected by the tax and could see their profits fall by close to 4 per cent."
  
Elsewhere, Fairfax's economics editor, Ross Gittins, wrote on Saturday: "Most of the interest in this week's figures for the labour force in June was in what they told us about the strength of the demand for labour. But what's happening to the supply of labour is just as interesting. With the trend figures showing total employment grew by 188,000 over the six months to December, but by only 38,000 over the past six months, it's clear the demand for labour is slowing. This suggests the economy itself is growing less quickly, reducing concerns about gathering inflation pressure – for the time being, anyway."
 
Fairfax writer Stuart Washington this morning gave us an unique view of his start in journalism at News Ltd: "One of my first jobs in journalism was to go to the art department and have a prominent frown-line spray painted out of the middle of Rupert Murdoch's forehead. As copy kids at News Ltd's Holt Street offices, one of our jobs was to take photographs to the art department for any necessary retouching. It was an unwritten rule that photographs of Murdoch be subject to retouching. Specifically, a rather deep vertical crease at the centre of Murdoch's forehead had to be spray painted away. There was never any tangible direction from Murdoch that anyone could ever point to that ordered such artistic reimagings of News Ltd's chief executive." 
 
Meanwhile, Fairfax's Ian Verrender wrote: "Murdoch is an extraordinary character; brilliant, tenacious and with an unswerving determination to succeed. But that ruthless streak, which has helped him expand his business empire from a newspaper in Adelaide to dominate global media, has fostered an internal culture that has replicated his personal mantra as a recipe for success and venerated him as a modern-day messiah. That he and his family have maintained their grip over the company, with less than 15 per cent, is testament to his finely honed strategic skills. Even before this latest scandal, however, Murdoch and his family have been the target of a festering discontent among some News Corp shareholders after several years of hugely expensive deals that have not delivered." 
 
And, finally, John Durie wrote in The Australian on Saturday: "The Australian Stockbrokers Association will meet federal Treasury on Monday to iron out some perceived issues with the Future of Financial Advice legislation. The fear campaign whipped up in sections of the media about the death of retail stockbrokers has some in financial planner land bemused. For starters, the reforms have been on the table for over a year and it seems the industry has just woken up to some impacts. The line between retail stockbroking and financial planning is already blurred and the latter have actually run rings around the brokers in terms of capturing income flows." Given the other news around, moaning stockbrokers doesn't exactly set the front page on fire, does it?