Monday, 11 July 2011

ALP-Green values triumph in Julia's finest political fix

Bill Leak
This is Julia Gillard's finest achievement as a political fixer.

She has become a carbon pricer, a tax reformer and a renewable energy champion rolled into one. Gillard is carrying the parliament but faces the unlikely task of persuading the nation at an election.

This package is a triumph for Labor-Green shared values. That is its tactical strength and its core defect. The parliament is saying "yes"; the business community is saying "not this package"; the Greens say the nation has "turned its back on the fossil-fuel age"; and the public will be sceptical of this carbon tax/tax cut churn.

On Labor's figures two out of three households (about six million) will be the same or better off. This includes four million low-income householders with benefits at 20 per cent above the carbon price impact. But one out of three householders (about three million) emerge in negative territory, a rhetorical wedge for Tony Abbott to leverage a fierce campaign.

Once the package is legislated, the investment incentives change and their dismantling generates an "uncertainty" problem. Gillard has succeeded where Kevin Rudd failed, boasting last night that she had "knocked down the brick wall" of parliamentary resistance that had thwarted Rudd.

Labor will sacrifice $4.4 billion across the forward estimates to cushion the carbon price impact and produce the magic yet narrow equation: average household price rises of $9.90 a week with average assistance at $10.10 a week. Mr and Mrs Average are winners.

The package is a win for tax reform with the tax-free threshold boosted to $18,200, one million people removed from filing a tax return and new incentives to workforce participation.

Treasury estimates the carbon price impact for 2012-13 is a modest 0.7 per cent CPI increase with a 10 per cent hike in electricity and 9 per cent in gas prices. Gillard can compensate for the carbon price impact, but she cannot compensate for the strong surge overall in household power prices that is coming and that Abbott will attribute to her pricing carbon.

The weight in this complex policy is undisguised - it favours ambitious carbon price governance over protests of industry groups, which argue the $23 price is too high, that competitiveness will be damaged and that Labor shirked its obligation to dismantle costly green schemes.

The polarisation in politics will deepen with Abbott pledged to oppose the package in totality. Gillard's belief is that once the price is implemented the actual household "lived experience" will undercut Abbott's scare.

This package assumes the rest of the world will move promptly to limit greenhouse gases emissions - yet it is inconceivable that any US administration in the near future would produce a policy along these lines.

It is a strange Labor-Green synthesis. Its values are faith in the science, belief in carbon pricing, tax reform and huge investment in renewables. It locates Australia among European nations as a climate change policy pacesetter. But is the Australian community ready to buy such values?

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