Carbon tax: the “Insulation Scheme” mess on a grand scale

Australia's Carbon Tax

It’s what almost every Australian business person fears – that incompetence in Canberra while drafting up the rules of this Carbon tax means Australians will not enjoy the full benefits of the greatest boom Australia has ever seen. And when it’s over – and no boom lasts for ever – we will be left with a massive quarry, having hollowed out vast areas of the country. Business Spectator, Robert Gottliebsen, reports.

We know that the proposed carbon tax is going to be an absolute shambles. Why? Because there is little or no industry consultation, and policy is being dreamed up by political forces and departments that have no knowledge of how industry works. It’s the insulation mess on a grand scale.

But if that was all that was happening, the sheer size of the looming boom – and it is massive – might swamp our incompetence. But BlueScope chairman, Grahem Kraehe, reminds us that the boom itself has lifted the Australian dollar from 80 to 108 US cents over two years and that’s putting a whole series of Australian employing industries including agriculture, food manufacturing, tourism, education, aluminium, cement, and, of course, steel, under pressure.

Then we lump on top of that pressure a carbon tax that will force a number of those industries to shift their production offshore. It will have no effect whatsoever on world carbon and merely transfer production.

How silly is that? When a country does something really stupid, the share market adjusts the values. Since the election, our resource shares have boomed… but if we take them out of the equation, the Australian market has been one of the worst performing in the Western world. We have a boom of unprecedented proportions and the share market is telling us big segments of the population are not going to enjoy it.

Although Kraehe explains why, I fear that he may end up by being part of the problem. The government will shower BlueScope with compensation to shut him up. Others who speak up will get similar rewards. Silence is bought. Remember this is a political game.

But what happens is that the Canberra handouts keep the plant operating but investment is stopped. And once a manufacturing operation stops investing its plant is doomed. Port Kembla will undergo a slow death. Better to announce its closure now and transfer the production offshore.

Strip out the rhetoric and what Canberra wants. It would be better to close our aluminium, cement and other plants than let them suffer slow deaths. Canberra can then announce how we have cut carbon emissions. Again, that’s exactly what Canberra wants and Julia Gillard should tell it as it is.

As I have written before (Gillard’s caught in Rudd’s carbon trap, March 8) we can have a carbon tax, but it must not be imposed on exports and must apply to imports. That’s logical and it’s not hard to do, particularly if we link it to the GST mechanism. But that would require consultation and we can’t have that.

Original Commentary Piece: A dangerous Australian dollar-carbon combo | Robert Gottliebsen | Business Spectator.

Tags: , , , , , , ,

Categories: Business, Politics, Law

Author:Andrew Beato

CEO, Chief Editor and founder of Intentious. Passionate comment enthusiast, amateur philosopher, Quora contributor, audiobook and general knowledge addict.

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One Comment on “Carbon tax: the “Insulation Scheme” mess on a grand scale”

  1. James Hill
    May 5, 2011 at 8:22 pm #

    Big businesses will either threaten to oust Gillard and get an exemption from the tax, or they will use the tax to justify an increase in costs and pass it along to consumers. The carbon tax will cause electricity and other essentials to skyrocket and not do much else.
    Dont forget: we’re reliant on cheaper foreign imports: everything from clothing to ipods to plastic drinking straws. And while everything we use is made in factories in China we’re still polluting. The carbon tax won’t even affect Australia’s carbon footprint, let alone the world’s.
    Even if you agree with the principle of the carbon tax, it is absolutely useless without more research and funding into non carbon emitting energy sources, which labour are oddly silent on.

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