Don’t look now, but there’s another hole in the Coalition’s numbers. But don’t worry, it’s only $4 billion. “Finding savings is a big task but we’re up for it and will release all our costings in good time for the next election,” Tony Abbott declared at the Press Club on Tuesday. He went on to say:

    “Not proceeding with the carbon tax would deliver $31 billion in savings over the forward estimates period with a net improvement of $4 billion in the budget bottom line.”

The $31 billion figure, of course, is what will be spent by way of free permits and compensation under the scheme; Abbott failed to note that not proceeding with the carbon tax would also lose about $27 billion in revenue, but no matter.

But his numbers are now wrong. The net cost of $4 billion was revised back to $3.3 billion in MYEFO, which adjusted the costs of household compensation and, crucially, shifted even more expenditure associated with the package into this financial year as part of Wayne Swan’s pea-and-thimble trick to shore up next year’s surplus.

As a result, there’s a net $3.3 billion in savings only from the carbon pricing package over the forward estimates, not $4 billion. And $3.1 billion of that is being spent this year. So Abbott’s $4 billion in savings is actually $3.3 billion and only available if somehow he gets into office before June 30 and halts compensation payments.

In fact even if the Coalition wins an election held in the second half of 2013, it won’t be able to save a single cent, because the net spending associated with the carbon pricing package will have been completed by the time the Coalition could repeal it — assuming they could do so without a double dissolution election, before July 2014. And that’s actually the point where the carbon pricing package starts returning money to the budget, rather than costing money.

The funny thing is, Abbott continues to call the carbon pricing package a tax but in the same sentence says that repealing it would save the government money — unlike any other tax in history.

Of course, if he’d picked up the excellent point made by South Australian senator Simon Birmingham about why the government continues to refuse to reveal the fiscal implications of the package beyond the forward estimates, when it did the same for the CPRS out to 2020, he’d have been on much safer ground.

buzzanddidj wrote on Feb 2^nd, 2012 at 1:56pm:


Yes it does.

[b]It is a large future income tax increase.

Labor borrow so that they don't have to increase taxes to fund their pork barrelling policies.

All Labor Governments in States and Territories and Federally do this.  They spend at every opportunity until things are ultimately stuffed.

Less than 5% hey?

Best you tell dfat they have it wrong and their figure is a furphy.

www.dfat.gov.au/facts/resources_sector.html
Block all www.dfat.gov.au results
During that period, the minerals and petroleum industries produced over eight per cent of Australia's GDP

www.isf.uts.edu.au/.../giurcoetal2010peakmineralsreview.pdf
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Civil Engineering (Monash University), March 2010. ..... Mining represented approximately 7.7% of Australia's GDP in 2008-09 and combined mineral and ...

chicken_lipsforme wrote on Feb 2^nd, 2012 at 1:08pm:

Does the term "GFC stimulus" ring a bell ?

You want to talk GFC debt - talk UK and USA

The DIFFERENCE with Australia's situation is that it WORKED - due to RAPID ACTION

It is around the LOWEST debt - in relation to GDP

Australia was the ONLY OECD member NEVER to have gone into recession

It gave the LOWEST rate of unemployment in the developed world

( ... around HALF that of the UK and US - and around a quarter of the "basket case" that is the EU)

Australia's economy is the ENVY of the world

Show us a similar model of economy that is in better shape than Australia's

i

Show us a similar model of economy that is in better shape than Australia's