By Stephen Koukoulas
The carbon price has been a dud. A dud that has supposedly been fuelling an inflation blowout and is wrecking the economy.
News on Wednesday that the annual inflation rate has been a miserly 2.4 per cent in the 12 months since the carbon price was introduced puts paid, once and for all, to the claims that it was going to be an oppressive addition to cost of living pressures.
Furthermore, since the price on carbon came into effect, more than half a trillion dollars has been added to the combined value of housing and stocks listed on the Australian Securities Exchange. That is $500,000,000,000.00, or the equivalent of $22,000 for every man, woman and child, all of which has accrued in just over a year.
And this half a trillion dollar does not include dividends, in the case of stocks, or actual and imputed rent on dwellings. Dividend payments on stocks over that time are around an additional $65 billion or so.
This has been a period of stunning wealth creation in Australia, and more notable given many of the high-profile predictions that the introduction of a price on carbon would have on the economy.
Indeed, most of the high-profile doomsayers were in the leadership group of the Liberal and National Parties.
Opposition Leader Tony Abbott was forecasting that the carbon price would “act as a wrecking ball across the economy” or be an “absolutely catastrophic”, and would “wipe out jobs big time” with towns like Whyalla “wiped off the map” because of it. Not only that, but it would create “ghost towns” and “discourage investment” in mining.
Shadow treasurer Joe Hockey was similarly alarmist, suggesting, “It’s going to rip the heart and soul out of small business and families.”
The half a trillion dollar lift in the stock market and house prices reflects a 23 per cent lift in the ASX since 1 July 2012 which had added approximately $275 billion to the value of stocks, while a 5.1 per cent rise in house prices has added approximately $235 billion to the value of housing over the same timeframe.
This is hardly the stuff of an economic wrecking ball or outcomes that are ripping the heart out of businesses and families. On the contrary, it is a stunning boost.
Mr Abbott also noted that “every time you buy an apple, buy a banana, you pay under Julia Gillard’s carbon tax”. The recently released inflation data shows fruit prices rose 0.2 per cent in the year to the June quarter 2013, which means that the price of a kilo of apples or bananas has risen by around 1 cent over the past year.
In terms of the jobs results, total employment has risen by 160,400 since the carbon price commenced, which again stands in contrast to the claims from the fear mongers.
Mr Abbott noted that “the truth about this carbon tax is that it’s bad for business, it’s bad for jobs”.
The bottom line of all of this is that the economy is still growing, creating jobs and registering a quite stunning lift in wealth in the period since carbon was priced.
Also important is the recent policy decision of the government to move to an emissions trading scheme a year earlier than scheduled. Treasurer Bowen has estimated that this will cut the inflation rate by 0.5 per cent in 2014-15.
Carbon pricing has had almost no impact on the macroeconomy and inflation remains very low. If it were a “wrecking ball”, none of these outcomes would have been recorded.
And it is also worth noting that because of carbon pricing, emissions are falling and renewable energy generation is growing, which is exactly what the policy was meant to do!
It is a near perfect policy for a substantial problem.
Which begs the question: Why change it?