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To manufacture fortunes we need contentious ‘taxes’

James Arvanitakis

by James Arvanitakis

13 Apr 05:40am

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Filed under: Federal Government, Germany, Green Jobs, Manufacturing, Polution, Senator Abetz, Sustainability

56 comments

It is not often that you wake up on a Saturday in Sydney and have a choice of rallies to attend – but this is exactly what happened last week.

All the action at an Altona manufacturing plant

In case you missed it, the two rallies were organised in support and opposition to the proposed “price on carbon” strategy put forward by the Federal Government.

Being excited by a bit of political expressionism in a city where Saturday morning priorities are usually shopping and cappuccinos, I decided to attend not just one but both.

My interest was twofold: to see whether the claims of extremism where evident in either camp; and to hear the pitch of the speakers.

Milling around the “no carbon tax” rally, it was interesting to hear Senator Eric Abetz go to great lengths to stress that this was not an “anti-climate change” rally.

His position was that you may or may not accept the vast scientific evidence that climate change is real and happening, but pricing carbon is a bad idea. 

Abetz went on to list the many reasons this is the case, but the one that is really worth interrogating is that pricing pollution will harm the manufacturing sector.

Undoubtedly, the manufacturing sector plays an important role in the Australian economy as it accounts for just over 10 per cent of employment and almost 20 per cent of exports. 

In so doing, manufacturing employs 1.1 million people – with almost half of these working for firms employing fewer than 100 people.

What is important to note is that Australian manufacturing has increasingly moved away from low-end production and is moving up the value chain in area such as high-end fashion or specialist wear (such as fire-resistant clothing).

Interestingly, manufacturing’s fortunes are the inverse of those of the current resource boom.

There are a number of reasons for this, but key is the rise of China as a boom economy. It has been hungry for resources (meaning it is a great place to export for our miners) and as it has been growing, it has been flooding the world with manufactured goods (often squeezing out our manufacturers in the process).

This demand for our resources has put additional pressure on our manufacturing industry. The record high exchange rates we are currently seen make our manufacturing industry increasingly uncompetitive.

This is a process of a resource boom leading to an uncompetitive manufacturing sector is known as Dutch Disease, as it was first raised in the context in the Netherlands when a boom in natural gas throughout the 1960s-70s almost killed off the manufacturing sector.

The effect of this is crystallising before us in the form of a two-speed economy – which has become most prevalent in the resource rich states but is a trend across the whole country.

Last week, it was reported that Western Australia’s economy technically went backwards: Both its retail and manufacturing sectors struggle while its mines continue the boom.

So while some Australian manufacturing does not compete merely on price, but also on quality and sophistication, when it is priced this far out of the market, it has really begun to struggle.

This returns us to Senator Abetz’s concerns about the manufacturing industry. The decline he is concerned about is part of a longer-term trend and if he really cared about manufacturing rather than a few cheers at a rally he would support two fundamental strategies.

The first is to bring down Australia’s exchange rate to a more sustainable level.

This could be done by imposing a super-profit tax on miners and directing the funds to a sovereign fund held overseas – a proposal that the government has unfortunately rejected. This is the model employed by Norway who transfers profits from its oil and gas revenues into an international fund that is now estimated to be worth US$500 billion. This eases pressure on the exchange rate and keeps its manufacturing sector competitive.

The second strategy to follow would be to support a price on carbon that would signal to the market that it should invest in advanced and clean technologies. This is because a price on carbon is actually not a tax, but a removal of a subsidy that has allowed high polluting industries to pollute for free. This is a subsidy that low polluting industries do not receive.

The price signals have focussed smart players on low carbon and high value goods. Germany, which responded to the introduction of a carbon price in 2005 with just such a strategy, has seen its have its biggest year since reunification. 

This has seen Germany economy boom and jobs grow. And where have the jobs come from?

Well, over the past decade Germany has seen a massive jump in so-called “green jobs”.

In the renewable sector, for example, more than 340,000 new jobs have been created. In contrast, Germany’s only domestic high carbon energy source employs 50,000 people across its entire supply chain.

Interestingly, Senator Abetz and the federal opposition are opposed to both a super-profits tax and a price on carbon.

You have to ask then, are they really interested in Australia’s manufacturing industry or simply some political opportunism?

The evidence indicates the later.

Most commented

56 comments

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    • John C says:

      05:22am | 13/04/11

      So this article is a pretext. It starts out under the guise of a pretend visit to two opposing rallies on the carbon tax, gives them a brief moment and then transposes into an argument in favor of the mining tax and the carbon tax.

      Be fair dinkum. If you want to write pieces in favour of a particular political position, which you have every right to do, have the honesty to label it as such.

      Reply

    • ZSRenn says:

      07:56am | 13/04/11

      @John C we have a human rights activist posing as an economist in this story. What’s worse he is not even doing that he is just repeating Bob Browns words. He could have written this story month ago without the long winded intro regarding the supposed fairness of his decision.

      This story is nothing but green rhetoric repeated sans that introduction.

      The comment that this is not a tax but a removal of a subsidy is laughable at best and a blatant lie at worst.

      Supporters of renewable energies often regard the requirement for more workers to produce a given amount of energy as a benefit, failing to recognize that this lowers the output potential of the economy and is hence counterproductive to net job creation.

      He fails to mention that each job created is subsidized at $240,000 / job in Germany and that if these subsidies ever were removed the job would no longer exist.

      The global fund he mentions Norway is involved recently gave managers of that fund cause to create measures to counteract corruption within its maintenance after AP detailed fraud. Norway is trying to move its investment from Europe to Asia and other developing nations restrained by its commitment to the fund. It has handed over sovereignty of its tax payers money.

      So before you are too disappointed by an articles lack of credibility again make sure you slip down to the bottom of the Punch page and check out who is writing the story. It helps you sort out the crap.

      http://www.instituteforenergyresearch.org/germany/Germany_Study_-_FINAL.pdf

    • Tom says:

      08:59am | 13/04/11

      Great point ZSRenn. The author is your classic “comfortable human rights activist”. Their tedious smug monologs, delivered from their keyboards, financed by government grants are so predictable.

      JohnC is right. The whole thing is propaganda for a new Labor tax.

      This author, like so many of his ilk are always finding ways that other people pay for their pious heavenly indulgences. Not for them, the mother Teresa path. That might be hard work.

    • tim b says:

      10:28am | 13/04/11

      I couldn’t agree more John c,when i started reading,  i thought this might be an interesting non biased article about the two rallies.  i couldn’t even bring myself to finish reading it.

    • TimB says:

      06:23pm | 13/04/11

      Ok, despite the fact that I agree with the sentiment behind this paticular comment , “tim b” is not me.

      We’ve had problems with dopplegangers before. Apparently Chongy fell victim a few months ago and I’ve seen others be impersonated too. Is there ANYTHING the Punch Mods can do to stop it?

    • Phil says:

      07:48am | 13/04/11

      Super D you are correct.

      Fantastic article by the way. Whilst the author points out green jobs in Germany, he fails to state at what price, which you nicely covered. The funny part of this is that even Peter Garrett, Wayne Swan, Julia Gillard and Bob Brown could create 320000 green jobs if we gave subsidies over say 2 years of $ 240,000 per person. Like hello thats like saving the jobs during the GFC which each cost a bit less but not much than that figure.

      The amount of jobs that will be lost due to a carbon dioxide tax will be massive, whether they be in mining, energy production, manufacturing, retail etc. Why retail, well if you his everyone with $ 500 each family as a minimum thats $ 500 less to spend at the shops.

      As for a mining tax, that issue has been canvassed. Personally I think we need uni students paying full fees (not government subsidised ones) if we are going to bring in super profits tax, and why stop at Mining, go to banks, manufacturing, retail, construction etc.

      He also fails to show just how that great European super power Spain is going with their green future.

      See your lefty green lot wont be happy till the economy is rooted, we have very little jobs and go back to the pre industrialised relovution.

    • Knemon says:

      08:38am | 13/04/11

      Super D -  “totally erroneous German Green jobs claim” - You base that claim on an opinion piece written for the CIS. The CIS are well known for their hatred towards any government type of intervention, like subsidies Etc. This would be similar to reading an opinion piece by Eric Abetz on what he thinks about the Greens. 

      For too long now, we have been reaping and pillaging the planets resources with absolute disregard for the future, it is now time we start paying for this abuse, if that means a price on carbon leading to an ETS then so be it, don’t think of it as a tax, it is a long overdue debt that we can’t hide from any more, the collector is finally knocking on our door.

      We all agree that something must be done regarding greenhouse emissions and pollution in general, so what is wrong in providing support for the renewable energy sector?  If that means subsidies in some form then so be it, we can not keep going the way we currently are, big polluters could not give a damn, they are not going to act on their own accord, the only way they will react is hitting them in the hip pocket so to speak, if that means a slight rise in costs for the consumer (most of which will be compensated), then as I said, it is part of the cost of repaying the debt to the environment that we have all abused and taken for granted over the decades. 

      Future generations will thank us if we act now, if we don’t, then the environmental debt will keep ballooning and the cost will be so prohibitive that no one will be thankful, let alone healthy. No one wants to see a situation where it becomes irreversible

      BTW - What does “jumped the shark” actually mean, I‘ve only recently heard the term used?  Cheers

    • martinX says:

      09:10am | 13/04/11

      He is using the term “jumped the shark” incorrectly. It refers to the tendency of popular, long-running TV shows to reach a point where they begin to decline, storylines get crazier, new characters introduced randomly, etc until the show is axed. Often a single episode can be pinpointed as the time this decline began.

      The phrase is derived from the Happy Days episode when Fonzie (to prove his coolness or something) did a waterski jump over a shark in a sea cage. When did the Milwaukee bikie learn water skiing? Why was the shark in a cage? Why did he still wear his leather jacket? No-one knows, but Happy Days was over and that was the point at which it happened.

    • Adam says:

      09:34am | 13/04/11

      @ Super D - Right on mate. I feel sick every time I hear Bob Brown talk about “green” jobs. Jobs aren’t colour coded. There are just jobs and employment. To claim to have created “green” jobs while the overall economy suffers a loss of jobs is nothing more than a failure to look at the big picture.

    • Neo Liberal Trashman says:

      11:16am | 13/04/11

      CIS trash written at the behest of conservative masters for political expediency. Where do the figures come from?
      I’ll tell you where, he pulled them out of his arse.
      Please try to do better D, you’re only fooling yourself.

    • A Bob says:

      11:55am | 13/04/11

      Our ‘non-green’ power generation is also subsidised. We could remove all such interentions and just let the market decide. Watch the political fallout from that when prices soar to their ‘natural’ levels.

      Of course, we could see a reduction in taxation implemented to match the reduction in government spending that would result from such a move. That might compensate for the price hikes.

      This could have a number of benefits; people would be encouraged to reduce their energy needs as it would then be up to them to decide where the money went. They can choose to direct their spending into another part of the economy where the dollar spent vs jobs generated ratio is better.

      Can’t imagine either of the majors having the guts to do this, it would require them to believe the individual can make their own choices, and we haven’t had a politcal force advocating this for a long time.

    • Richard says:

      12:06pm | 13/04/11

      Hey Neo Liberal Trashman, the numbers come from the “respected economic research institute RWI”, and if you have some evidence to refute them, or even just a reasonable argument to counter with, then by all means fire away.

      But if not, then you’re just exposing a baseless ideological bias in your attitude and therefore your opinions should be totally disregarded in the context of rational, reasonable debate.

    • Neo Liberal Trashman says:

      01:27pm | 13/04/11

      Hey Richard
      “The RWI-report has not been commissioned by a German organization

      The RWI report was ultimately paid for by Koch Industries. When first published in German, no sponsor was mentioned. It was only the English version that listed the Washington-based Institute for Energy Research (IER) as a sponsor. The IER gets most of its funds from Koch Industries. The authors of RWI were trying to hide this information, because even in Germany it is well known that Koch Industries finances work for the sole purpose of delaying action for clean energies and climate protection. After this became public, the RWI-report lost its last bit of credibility.”

      So Dickie - in the context of rational, reasonable debate. Let’s get some independent facts into the debate, not the paid comments of those that seek to delay action. OK?

    • Richard says:

      03:00pm | 13/04/11

      Well Neo-Liberal Trashcan, if I may be allowed to reply to you, then I would say that I don’t buy your premise that the actual facts don’t matter, the only thing that matters is who discovered those facts or who promotes those facts.

      For example, when you have an infection and you go to the Doctor, the anti-biotics he prescribes you, guess what? He gets paid a commission by the pharmaceutical company for doing that. So he’s getting paid by big vested interests to prescribe anti-biotics to you.

      But that doesn’t mean that its the wrong thing to do. Rather, the fact is that its exactly the right thing to do: anti-biotics are exactly what you need. So it doesn’t matter who is paying the person who is promoting the facts, all that matters is the fact itself, and its validity thereof.

      If you are to dispute the validity of the facts that Super D presented, you need some actual credible evidence to back you up, not just anguished howling at the moon about those evil Koch brothers and how its all a big conspiracy. Because I’ve got a few conspiracy theories of my own pal, but without evidence all they can really be are speculations.

    • Neo Liberal Trashman says:

      03:55pm | 13/04/11

      Richard
      You are quite the disingenuous bastard aren’t you?
      The numbers used assume a worst case scenario. Leading think tanks such as the Deutsches Institut für Wirtschaftsforschung (DIW) and the Wuppertal Institut have identified implausible assumptions in the RWI report. It ignores the economic benefits that come with renewable energies.
      Keep pushing your bullshit, You do understand that the people behind the report have pre-determined the outcome.
      You aren’t fooling anyone by propagating lies and deceit. You just make a fool out of yourself.
      What part of no credibility don’t you understand? Your own or the RWI report or both?
      Go away liar

    • Richard says:

      04:47pm | 13/04/11

      Actually Neo-Lib~ you are the one losing credibility with your uncalled for ad hominem attacks on me, and your unwillingness to have a reasonable debate with me. Apparently you think I should just “go away” if I’m going to ask you a few thorny questions and I’m a “liar” if I raise a few pertinent issues.

      I mean two can play this game: both of the organisations you named are left-wing (group) think tanks that have a vested interest in pushing their own particular tax-and-spend/re-distribute the wealth narrative, so they can hardly be called impartial arbiters of all truth either you know.

      Pray tell me what actually were the “implausible assumptions in the RWI report” that your two left-wing ideology-pushing group-think tanks “identified” please?

      Pray tell me what actually are the “economic benefits that come with renewable energies” that are so speculatively supposed to exist?

      Without real evidence, you’re just a foul-tempered ideologue who doesn’t like real debate dude.

    • GB says:

      08:56am | 13/04/11

      I think we have a contender for this week’s “I Call Bullsh*t” thread. Nice attempt at appearing impartial though James.

      Reply

    • The Original Oz says:

      09:02am | 13/04/11

      Another Labor party love-in, this article. The signals are already there for business to switch to low emissions activities without having to impose this tax which will penalise every Australian. The ensuing increase on prices of manufactured goods will reduce the competitivness of Australian manufacturing on the International market. An business owner with any savvy will very rapidly draw the conclusion that either become non-competitive and die a slow death of a thousand cuts or they can move their activities offshore, where this tax will not affect their bottom line, and continue to manufacture their goods and become an importer of their own products. Either way the Australian manufacturing industry is being put at risk, as are all the Australian jobs associated with it.

      BTW: Aren’t party political statements supposed to be footnoted with Authorised by:

      Reply

    • Tubesteak says:

      09:12am | 13/04/11

      What we don’t need to do is use the taxation system as some sort of social engineering project.

      Taxation should be simplified. One small rate of PAYG tax and a larger broad consumption tax. No more taxes. Allow eligible deductions as they are but for passive income producing assets limit deductions to the amount of income the asset generates (ie no negative gearing).

      Using the tax system as social engineering tool is just ineffective. The best tool for social engineering is a broad and deep education. People can vote with their wallets (which will be fatter from not having to pay so much tax!).

      Reply

    • Dash says:

      09:38am | 13/04/11

      Tubesteak, I agree 100%! At least someone out there gets it. The tax base with an aging population needs to be broadened and their needs to be some equity brought into the system for PAYG taxpayers. Unfortunately this ALP government has not the balls to deliver real tax reform.

      They are following a socialist policy of wealth redistribution under this carbon tax encouraged and supported by the Greens. They promised “root and branch” tax reform in ‘07. Yet they have delivered nothing but 3 new taxes. And with the compensation scheme (not really an acurate description) they are just adding further complication to the tax system. Not to mention punishing middle Australian families.

      Next we’ll have taxpayer funded propaganda to explain to us all why a tax that will not change average temperatures by a singke degree, is good for us whilst we sell coal in increasing quantities to China. This whole thing’s a Fraud.

    • Tubesteak says:

      12:10pm | 13/04/11

      To be fair, Dash, no government will give us the tax reform we really need. It’s simply not popular.

    • Super D says:

      09:16am | 13/04/11

      @ Knemon

      Re the fallacy of green jobs its generally better to attack the content rather than simply note that you have preconceived notions regarding the publisher.  So far there is no one disputing the costs of green job creation, the pro green jobs crowd simply downplay the significance.

      You can read about jumping the shark here:


      http://en.wikipedia.org/wiki/Jumping_the_shark

      Reply

    • Richard says:

      12:34pm | 13/04/11

      Knemon, our own Prime Minister has described the Greens as extreme. Are you suggesting their is no room for them in this debate either?

      And btw, California is the Greece of America. You cannot be suggesting that we emulate their particular path towards economic oblivion can you?

    • Extremist says:

      06:05pm | 13/04/11

      @Knemon - Your opinion about the CIS is extreme, and this thread should therefore have no room for your views.

      I think there is a global left-wing mailing list where the narrative of the day is distributed. A US senator let slip that he was told to label his opponents and the Tea Party as extreme. Curiously, our journos are all doing the same to anyone who disagrees with them. How does one get on this mailing list?

      http://thecaucus.blogs.nytimes.com/2011/03/29/on-a-senate-call-a-glimpse-of-marching-orders/

    • Elphaba says:

      09:34am | 13/04/11

      It sounds like you only attended one rally, and the reason was to poo-poo it.

      There’s 3 minutes I’m not getting back…

      Reply

    • AdamC says:

      09:57am | 13/04/11

      Elphaba, I think our James probably had his story pretty much written (at least in his mind) before he got out of bed and put his trousers on.

      The whole tax ourselves to success argument is absurd. As I am wont to observe, we didn’t replace our stage coaches with motor vehicles because the government started to levy a tax on horse shit. Likewise, if clean, green energy alternatives existed, and were viable, they would be adopted without the need for carbon pricing. Nobody enjoys smog and air pollution, after all.

    • fairsfair says:

      10:09am | 13/04/11

      yes… I preferred the one about Erick.

    • NicoleG says:

      10:11am | 13/04/11

      Oh come on Elphaba, It’s a useful piece. I’m printing out a few copies. It lines the bottom of the kitty litter box perfectly smile

    • Elphaba says:

      10:38am | 13/04/11

      @AdamC, true.  And as for taxing ourselves to become successful - WTF?

      My problem is where he says that a price on carbon is not a tax.  Call it what you want, but when it’s the average person footing the bill from the big polluters, it’s a tax.  And if the article last week was anything to go by, it’s going to be a whopper.

      @NicoleG, true.  My windows need a good cleaning…

    • AdamC says:

      11:26am | 13/04/11

      Elphaba, tax, price, it is all mere semantics. Maybe it is of interest to Labor politicians, but not to thinking voters. And my assumption is that this mendacious claim about carbon taxes/prices creating jobs was developed in response to the (valid) argument that unilateral actions on carbon won’t actually reduce emissions globally.

      BTW, I am wondering why, in my original comment, I mentioned James putting his trousers on. That feels like a strange detail to include, doesn’t it? Oh well, I am sure that James didn’t attend any rallies trouserless, or for that matter shirtless or shoeless. (After all, he was attending the anti-carbon tax rally as well!)

    • Elphaba says:

      11:44am | 13/04/11

      @AdamC, surely some people are going to lose their jobs as well.  Costs rise to produce coal etc, and firms need to downsize?  It’s already happening at the Shell refineries - they can’t compete with the cheaper Asian market.  What will happen to those people? Does the government have a re-employment plan in a fuzzy, cuddly, green job for them?

      The emissions thing still bugs me beyong belief.  We do not live in an environmental bubble.  Stopping all our emissions tomorrow will not have an affect on other countries and their emissions.  And we’re not going to set some trend - what country will listen to us?  So… why exactly are we doing this again?

      Your trousers comment could be in relation to the carbon tax being ‘all talk and no trousers’, perhaps…

    • Adam says:

      12:03pm | 13/04/11

      @ Adam C - “And my assumption is that this mendacious claim about carbon taxes/prices creating jobs was developed in response to the (valid) argument that unilateral actions on carbon won’t actually reduce emissions globally.”

      Yep, right on there mate. The tripe about jobs is almost as bad as watching Bob Brown try to present his systemically flawed news poll survey to parliament, claiming it showed the majority of people support a polluters tax. Fail.

    • M says:

      09:48am | 13/04/11

      Say what you will about his politics, I’d be careful to question James’ economic credentials.  His years of analysing international money markets and making some serious coin (in another life) would almost certainly trump anything the sad litany of pseudo economic hacks here have ever done.

      Reply

    • The Truth says:

      10:48am | 13/04/11

      Yes Mark from Sydney, who are we to question the motivations of the Bolshevik intellegentsia, even if they once upon a time did something useful with their time with an investment firm. Perhaps we can allow the chardonnay socialist economics professors who plague our Marxist universities to nationalize our personal property in the name of freedom, too

    • Matt says:

      09:50am | 13/04/11

      What are your economic credentials for making such claims, James? Researching areas like trust and hope are a bit of a stretch buddy.

      Reply

    • NicoleG says:

      09:56am | 13/04/11

      I don’t know why I read your tripe James. A laugh? A little giggle? Well I got neither. You’re full of it. Lets put a tax on stupidity. You’ll be broke.

      Reply

    • Dash says:

      11:10am | 13/04/11

      NicoleG, ha ha, imagine the amount of tax that would be paid by the front bench of the ALP. I think your stupidity tax has legs. Infact, it would do more for global temperatures than Gillards Carbon tax.

    • Shane From Melbourne says:

      10:24am | 13/04/11

      You can have a carbon tax as long as you have carbon tariffs. Anything else is just offshoring your manufacturing industry. Oh, and human population stabilization is an absolute must, otherwise any carbon emission cuts are wiped out by a population increase.

      Reply

    • Richard says:

      10:47am | 13/04/11

      Well firstly James, thank you for ditching the snarky superiority complex and attempting outline a reasoned argument for once. However your reasoning is flawed in places and I feel compelled to point out the holes in your position.

      Like I said, there are good points in this article, and I agree that “the manufacturing sector plays an important role in the Australian economy”, indeed I believe this to be an understatement, because one must understand how an economy grows and how wealth is generated and how living standards are raised.

      Currently, economists use the metric of GDP to calculate economic activity: i.e. how an economy grows and how wealth is generated etc. The problem with this is that its comprised of over 70% consumption, which actually doesn’t help to produce anything. I mean, when you consider it, our levels of consumption in the western world are already unsustainable, especially when you take into account that its been financed for a large part by consumer/credit card debt and home equity extractions for the last 30 years (with that equity itself based on phony asset price inflation built on a credit bubble).

      So to be real about it, we have to discount GDP as an accurate measure of economic growth. No, the only way to grow an economy, to generate wealth and thus improve living standards is to produce and sell things. Indeed the only way this can be achieved is for consumption to be reduced so that savings can be built up and invested in goods producing manufacturing projects. Manufacturing is the life-blood of any economy, and it is no coincidence that the rise of China and the decline of America as a world superpowers has coincided with the rise and decline of their respective manufacturing sectors, such is the vital nature of manufacturing in an economy.

      But the error in your position James is that your continual assertion that, for every problem, no matter what that problem may be, there is but one solution: to raise taxes. You truly believe that the State, with all its associated bureaucratic inefficiency and moral hazard, has a responsibility to stick its nose into every aspect of economic life and snuff out all dynamism with increasingly heavy tax burdens.

      You are wrong to suggest that the government should try to manipulate our currency exchange rate. High currency exchange rate = high purchasing power for Australians. If our dollar was lower than it is now, we would be getting absolutely hammered by petrol prices right now. It would be $2L and consumers would not be able to bear that cost on top of relentlessly rising electricity and utility bills.

      The Japanese miracle of the 60’s, 70’s and 80’s proved that an export economy can remain competitive despite a rising currency exchange rates, and the lost decades of the 90’s and 00’s in Japan proves that an economy can stagnate and recess despite government efforts to create inflation and devalue the currency.

      It is a good thing that our currency is valuable, but I mean, even then, that’s only when you compare it to the US$. Pauline Hanson and roundly lampooned when she proposed that the government just print up money, but that’s exactly what Ben Bernanke is doing in the US (with his QE and QE2 and then undoubtedly QE3 and so on) , and the result will end up being akin to Weimar 2.0. It is inappropriate to measure the strength of the AU$ against the greenback nowadays. Infact when measured against real money: silver, the AU$ has lost more than 50% of its value in the last 12 months! Its also just a matter of time before the RMB is forced to depeg from the US$ (in light of the massive inflation China is importing from the US at the moment), and that will send the Yuan sky-rocketing vis-a-vie the AU$ as well.

      A sound economy must be based on sound money, low taxes, competitive exports and strong manufacturing. I fail to see how ramping up massive taxes and putting artificial prices on inert gases is going to help achieve any of these aims.

      Reply

    • LeonT says:

      11:54am | 13/04/11

      Richard, several of the suggestions that you make here are contradictory. On the one hand you say we need to reduce consumption and increase savings/investment so that companies can make more things… for us to consume. Your national accounts might hold GDP constant, but a decrease in consumption will cause a decrease in GDP which means that investment will not rise as much as you think it would. You then go on to say that a strong dollar is good because it gives consumers more purchasing power when you are advocating a decrease in consumption.

      I think that it is not that we need to invest more so much that we need to invest better: so much investment that would otherwise go to projects that would make real stuff is instead trapped in the unproductive housing stock due to extreme subsidies. But the political reality is that these subsidies affect too large a voting base so they’re not going anywhere. What to do given these sorts of constraints is the problem goverments here face and simplifying that with ideology isn’t helpful.

    • Jim says:

      12:18pm | 13/04/11

      “Well firstly James, thank you for ditching the snarky superiority complex “...he ditched his snarky superiority complex? Where? I must have missed that bit raspberry

    • Richard says:

      12:29pm | 13/04/11

      Hi LeonT, it may have sounded ambiguous when you read it, but my meaning was slightly different to what you have inferred: I believe we need to save more and invest in goods-producing infrastructure/organisations, not for us to consume the products of… but for us to sell the products overseas in other countries! (i.e. export them, in exchange for transferable wealth imported into our country and distributed throughout the economy)

      But the whole point of being wealthy is to be therefore able to consume. My argument was that our levels of consumption over the last 30 years have been unsustainable, but not because consumption is inherently bad, but because it has been financed debt, not by real wealth. Having a valuable dollar is a sign of being wealthy, why would we want our dollar (i.e. the money in our pockets) to be worth less? Why would we want our purchasing power to be reduced? A lower dollar directly means that Australians are poorer, which is the opposite of what I would like to see effected (i.e. Australians growing wealthier).

      As for the GDP, well as I said, I fundamentally disagree with using it as a measurement at all. I do not care whether it rises or falls, as in my opinion it is completely bunk (not to mention massaged into irrelevance anyway).

      On a different note, I do agree entirely with your point about mal-investments in housing and real estate, and that is a serious serious problem in our economy. Actually I think its a ticking time-bomb, and when it explodes, our currency will drop like a stone and we will enter a prolonged recession. However that correction is necessary, because its the only way to flush out all the bad debt from the economy and redirect all the mal-investment from the non-productive real estate sector into other sectors such as manufacturing.

      Therefore I say lets forgo all those stimulus measures etc. and lets just get this recession started already. The sooner we deal with the problem the easier and less painful it will be to correct.

    • Adam says:

      11:07am | 13/04/11

      If the greenies ever figure out a way of stopping other countries pollution drifting into Australia, let me know. Otherwise this is just an exercise in futility, used as the basis to justify a tax hike.

      But it’ll create green jobs you say. Bullsh*t I reply, jobs are not colour coded. You must look at Australian jobs as a whole, not isolated pockets, and basic economics tells us that any increase in tax is always bad for economic growth and job creation.

      But other countries will follow if we lead you persist. Bullsh*t I reply, if that were true you’d have provisions to roll back your policies within a few years if the USA and China did not follow.

      But the investment in green technology will pay off and we’ll become world leaders you whine. Bullsh*t I reply again, if there was profit to be made then private business (or individuals such a yourself) would be willing to make the initial investment of capital because you would *know* it will pay off in the future. Otherwise you’re just asking the taxpayers to subsidise your ideas because you’re not sure if they’ll succeed and are unwilling to risk your own capital. And when I saw taxpayers; I mean people like me. People who will want to know why you intend to risk my money instead of you own.

      And as for the Gillard/Brown garbage this morning. What a joke. They proposed to charge Australia X dollars under the carbon tax, then give half back, and tell us we will be better off. Riiiiiiigghhttt. Even if they gave it all back, we’d be no better off. They must either really hate the Australian public or think we are imbeciles.

      Reply

    • LeonT says:

      12:06pm | 13/04/11

      “basic economics tells us that any increase in tax is always bad for economic growth and job creation”

      My basic economics education included the word “externality”. A tax on pollution interalises that externality and allows those revered market forces to reach a better outcome than without the tax.

      While we’re on the topic of externalities. There are positive ones too, like research and development. Companies don’t account for the societal benefit when making these sort of investment decisions so a subsidy here is appropriate to improve everyone’s lot.

      It sounds like you’re just bitter because you might have to pay for things you’ve always gotten for free.

    • Adam says:

      02:39pm | 13/04/11

      I was hoping someone would bring up the subject of externality associated with this policy.

      In the case of the carbon tax, the resultant effect on producers is the same as any other tax; a deadweight loss in productivity for producers and increased cost of goods for consumers, thus reducing the consumers overall standard of living. The government is also not intending to perpetually return 100% of the money taxed to consumers; therefore, consumers will be effectively paying more than is economically fair for the corresponding drop in the negative externality you mentioned.

      I’m also a big fan of R&D, though I will be the first to point out you can’t neatly plot the cost of positive externalities on a graph. Mainly because you never know when a breakthrough may occur, so you might be throwing money into a loser for years and get no return. This is reason I say, if you believe in it, commit your capital. If you are unprepared to do so, then why should I, as a taxpayer, front my money instead?

      “It sounds like you’re just bitter because you might have to pay for things you’ve always gotten for free”

      Quite the contrary. According to you I pay for these things everyday via a negative externality (pollution in this case). I’m just bitter that I am now being forced to pay an above market rate to reduce the negative externality primarily because the govt wants to keep half the money that should be compensating me. In essence, they are reducing the overall standard of living for Australians via this carbon tax and then failing to fully compensate us.

    • Adam says:

      03:27pm | 13/04/11

      @ LeonT - I’m also a little confused by one of your comments. You quote me as saying “basic economics tells us that any increase in tax is always bad for economic growth and job creation”.

      Then you go on to say “My basic economics education included the word “externality”. A tax on pollution interalises that externality and allows those revered market forces to reach a better outcome than without the tax.”

      We both know that the “better outcome” you mention regarding taxes on negative externalities is simply a shifting of the supply curve to a point where the cost of goods will be higher, thereby reducing demand and production. Ergo, bad for the economy and bad for jobs. Were you trying to refute this or to agree with me? Because it seems you did better at the latter.

    • LeonT says:

      04:36pm | 13/04/11

      “In the case of the carbon tax, the resultant effect on producers is the same as any other tax; a deadweight loss in productivity for producers and increased cost of goods for consumers”

      Incorrect, a deadweight loss is formed by the malalignment of private and social costs. The tax’s aim is to eliminate this deadweight loss by raising private costs to match social costs. We have treasury to make sure that the tax is at the right level.

      “The government is also not intending to perpetually return 100% of the money taxed to consumers; therefore, consumers will be effectively paying more than is economically fair for the corresponding drop in the negative externality you mentioned.”

      It must be the case that the government either provides services with this money or returns it to taxpayers. Presumably if the tax is not to be returned in the future; the revenue will be towards the provision of services.

      “This is reason I say, if you believe in it, commit your capital. If you are unprepared to do so, then why should I, as a taxpayer, front my money instead?”

      Because of the Free Rider Problem.

      “We both know that the “better outcome” you mention regarding taxes on negative externalities is simply a shifting of the supply curve to a point where the cost of goods will be higher thereby reducing demand and production. Ergo, bad for the economy and bad for jobs”

      This would result in an increase in the supply curve so that it will reflect the true social cost of the activity. Without the tax, the product would be produced more than is socially optimal. Reducing production to the socially optimal level is… optimal. Ergo it is good for the economy and good for jobs as it frees capacity to other ventures. Opportunity cost and all that.

    • Adam says:

      05:55pm | 13/04/11

      @ LeonT - Wow, I just might walk away from this debate having learnt a thing or two.

      Assuming I agree your economic argument is sound (and it appears to be), how can I be confident the negative externality would actually be moved to the socially optimal position for all Australians with this tax? As it so happens I am happy with things as they are. And feel I’m being forced to accept someone else’s socially optimal position that is far lower than my own. Furthermore, it appears I am far from being alone in this respect.

      As for the free rider comment, I don’t quite follow because as a private entity you can patent things and then make your money back, just as pharmaceutical companies do. No free riders there (not legal ones anyone). The green technology research industry should be no different. Or are you more concerned your IP rights would be infringed even if you did patent whatever you developed? Please don’t tell me it was one of those hypocritically benevolent type comments (You know, when someone is all generous when it comes to spending everyone else’s money, but their own, in order to meet their own ideals/goals). I’d hate to think someone was advocating spending taxpayer money to give free technology to the masses, when they themselves were unwilling to use their own money to do the same thing.

    • Ryan says:

      12:27pm | 13/04/11

      I would be looking to be competitive by off-shoring my operations, the carbon tax would be a perfect time to do it, you would have all the justification in the world.
      Shell has already started, they have plans to close the Sydney oil refinery that has stood there for over 100 years, as it so happens this plan will come into play at almost exactly the same time as the carbon tax is implemented. 300 jobs gone in just one case.

      Coincidence in the timing? I think not!

      Reply

    • neil says:

      12:43pm | 13/04/11

      “We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle”

      Winston Churchill

      I don’t imagine many people will be citing any of Julia Gillards quotes in the future.

      Reply

    • Cate P says:

      02:48am | 14/04/11

      People in long queues.  “We’re moving forward, we’re moving forward”.

    • Steve says:

      02:33pm | 13/04/11

      James

      the reason that Germany is the best and strongest economy in Europe at the moment is not that it growing Green jobs, it is because Germany has a very strong export orientation (second biggest exporter in the world from memory) and is benefiting hugely from the low Euro caused by the GFC and other countries’ dire situation.

      Also, Germany underwent a partial liberalisation of its labour laws to in the mid to late 2000’s because it was losing jobs to the East Europeans.  So it reduced some regulations and eased the non-wage labour costs.
      Just so you know.

      Reply

    • Cate P says:

      04:44pm | 13/04/11

      So, tell us about the other rally??

      Reply

    • eye4aneye says:

      07:18pm | 13/04/11

      James I wish I could say your a tool - then at least you would have a use.

      Reply
 
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