Tuesday 19 July 2011

Determination not enough to revive Gillard

carbon tax
Julia Gillard announces the carbon tax Source: The Courier-Mail

Julia Gillard's favourite new word is determined. She is determined to press on with the carbon tax, determined to hold off an election until 2013, determined to ignore polls so damning of her government in general and the carbon tax in particular.

Business may not like it, but that means the carbon tax will become law no matter how politically effective Tony Abbott's assault is. Labor may be daunted by the relentless hostility but its leader can't afford to retreat. Yet the Opposition Leader is favoured to win the next election on a pledge to get rid of the same tax.

So much for business certainty. The carbon tax is certainly not the only reason that the mistrust between government and business is greater than it has been in decades. But it is one more oxygen-sucking complication just as Australia's supposedly supercharged economy is at risk of faltering. The gathering gloom about what is happening in Europe and the US has been compounded by a crisis of confidence in Canberra's policies.
Business investment in all sectors bar mining and energy is falling compared with last year. That sense of unease is contagious, further battering consumer confidence even while the government boasts about the strength of the national economy. How did we get to this? Comparisons with the hapless Keneally government in NSW booted out of office by irate voters are misleading. NSW had a lousy, long-term government and voters didn't believe a friendly new Premier could change that.

They didn't dislike Kristina Keneally so much as despise the government she had the misfortune to lead. In contrast, much of the antagonism towards a still newish government is also personal to the Prime Minister, while sentiment against her is hardening. Even those who wish her well are dismayed by the constant miscues and mistakes.

Peter Costello is making mischief by suggesting that the problem is not that the carbon tax is damaging Gillard but the reverse - that dislike of the Prime Minister is damaging the carbon tax.That is an exaggeration, but it demonstrates the dilemma as Gillard struggles to justify long-term benefits while claiming negligible short-term costs.

Even those business leaders who still support a carbon tax are perplexed by the complexity and scale of the government's proposal as well as the timing. The strength of the Australian dollar means much of business is already doing it tough. Although consumers can more easily afford imports and overseas holidays, their utilities bills are soaring and the aversion to debt remains.

Add in lack of faith in the government's ability to execute its promises, suspicion of the Greens' influence and confusion about what Canberra is really trying to achieve. Gillard said yesterday that the government's decision would attract billions of dollars of international investment from firms looking to produce in economies that had "certain, efficient policies to tackle the carbon challenge".

"In years to come, carbon productivity will be as important to luring investment from multinationals as labour costs, tax rates, human capital and levels of technological sophistication have been in past decades," she insisted. Not by 2013, or even 2020, it won't. And unless the government wreaks havoc on business by even higher carbon taxes, Australia will remain a carbon-intensive economy heavily reliant on relatively cheap coal for power well beyond that. Even if no one wants to say so out loud.

Author | Source | Jennifer Hewett, National affairs correspondent |The Australian

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