Lack of carnage Abbott's inconvenient fiscal truth
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Lack of carnage Abbott's inconvenient fiscal truth

Perhaps Tony Abbott needs to send out a search party or post a reward because, bafflingly, his carbon tax wrecking ball appears to have gone missing.

It's now almost two months since the tax that he predicted would work like a ''wrecking ball'', with ''unimaginable'' and devastating consequences for the economy, came into effect. To date there has been, from the Coalition's point of view, a very inconvenient absence of devastation.

The carbon tax has a "devastating" impact ... Opposition Leader Tony Abbott and Senator Michaelia Cash.

The carbon tax has a "devastating" impact ... Opposition Leader Tony Abbott and Senator Michaelia Cash.Credit:Penny Bradfield

In fact, almost every economic statistic continues to look pretty good. Indicators of business and consumer confidence have improved. Unemployment has fallen slightly. Investment is strong and inflation remains low, although the one-off impact of the new tax will flow through in coming months.

Undeterred in his quest for carbon tax-induced wreckage, the Coalition leader appears now to be claiming as evidence any unrelated piece of economic bad news.

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Hence he appeared in mournful procession with his South Australian MPs to declare that the carbon and mining taxes were, in fact, responsible for BHP Billiton's decision to shelve expansion plans for its Olympic Dam uranium and copper mine.

No matter that the mining tax applies to neither uranium nor copper and that the company had said the decision was entirely due to ''current market conditions including subdued commodity prices and higher capital costs'' and that the ''tax environment for this particular project has not changed at all since we started working on it six or seven years ago''.

Earlier the same day, he and the Liberal senator Michaelia Cash hauled the media pack to a Canberra suburban home to highlight the carbon tax's ''devastating'' impact on a regular family.

The Newman family, Abbott declared, had a household power bill of $4000 a year, which would increase by about $600 due to the direct impact of the tax in the ACT, an amount that ''more than outweighed any compensation they are going to get''.

Depending on their joint income, the Newmans (she a part-time public servant, he a builder) will receive at least half and probably more in tax cuts and benefit increases announced as direct carbon tax compensation or added sweeteners in the budget.

In the worst-case scenario, they are $300 a year, or $6 a week, worse off - which is obviously money the Newmans would rather have in their pockets but is hard to paint as family budget devastation.

Senator Cash also declared that Mr Newman could not pass on any extra costs borne by his building business. But building is hardly a trade-exposed industry. Canberra tradesmen are not in competition with carbon tax-free builders from China. The impact of the carbon tax would fall equally on Mr Newman and his competitors, who, incidentally, are working in a market where building approvals increased by 9.1 per cent in June, bucking the national trend.

What about the electricity sector, hit harder by the tax than any other - surely the signs of the wrecking ball's devastation must be evident there by now.

But Origin, Australia's largest energy utility, this week posted a 33 per cent increase in underlying profit and AGL, the second-largest retailer, posted an 11 per cent increase in underlying profit after stripping out the costs of a major acquisition. Its managing director, Michael Fraser, said the carbon tax introduction had been ''smooth''.

In fact, some of the biggest problems the government is facing stem from the fact that the impact of the carbon and mining taxes is not nearly big or ''devastating'' enough.

As Joe Hockey pointed out in a matter of public importance debate on Thursday, as commodity prices fall, doubts increase about whether the government will get as much revenue as expected from its mining profits tax.

Even the government appears a bit unsure about how much its Minerals Resource Rent Tax will raise and what its impact will be. Briefing notes for the Treasurer, Wayne Swan, before a May 23 meeting with the chief executive of BHP, Marius Kloppers, released under freedom of information, suggest as a potential talking point for the Treasurer the following:

''I note that BHP has publicly stated they are in the process of determining the potential impact of the MRRT. Can you provide further details of the likely impact of the MRRT?'' Given that the MRRT revenue is already legislated and its revenue included in his budget, you'd hope the Treasurer already knew that.

And the first big emission reductions from the carbon tax - the government's plan to retire 2000 megawatts of the highest-polluting brown coal power - are under a cloud because the long-term forecasts for the tax, once it is allowed to rise and fall in line with international carbon markets, are too low.

The government's negotiations with five generators have been stalled in part by the need for Parliament to ratify changes to how the ''floor price'' will be determined once the carbon tax is set by the market.

As previously reported in the Herald, the original plan for a $15 floor price will be changed in favour of restrictions on the type and ''quality'' of international permits that can be bought, with the intention of achieving the same effect with less complication.

Understandably, generators need to see the detail in order to determine the longer-term value of the assets they are getting paid to close down and they will finally get that information when the new floor price arrangements are revealed this week.

But given the lower than expected carbon price, the value of the generators will stay higher for longer and industry sources say this means the government will be lucky to retire even 1000 megawatts, half its original target.

Perhaps, instead of searching for signs of carbon tax devastation, the Coalition leader could explain how he would deal with a slowing mining boom, or how he would reform the regulation of the electricity industry, or how his own ''Direct Action'' policy - in its present form regarded with incredulity in the business community - could be made to work. It would be better than insulting our collective intelligence with his wrecking ball mantra.

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