10 July 2011 –Address by Prime minister Julia Gillard, climate minister Greg Combet and treasurer Wayne Swan.
First, the avalanche of science that tells us our climate is changing. The science is in. We know that our planet is warming. We know that that warming is changing our climate: causing sea levels to rise; meaning that there will be more days of extreme heat; meaning that we are at risk of more bushfires and droughts; meaning that great icons like the Great Barrier Reef are at risk.
So we are here today because the science is in. The science is clear – our planet is warming. That warming is caused by carbon pollution, by human activity, and we need to cut carbon pollution.
The second thing that’s brought us to this moment has been more than a decade of debate. Another female leader, Margaret Thatcher, warned the planet about the effects of climate change. John Howard, when he was Prime Minister, determined to put a price on carbon pollution.
This has been a difficult debate that has brought us to this moment and there have been false starts and there have been missteps, but we are here now and now is the time to get this done. As a nation we need to put a price on carbon and create a clean energy future.
So, how will this all work? I know that there are many Australians who think to themselves ‘This is really complicated. Will I ever understand how carbon pricing works?’ Well, in its essence it’s incredibly simple: we will require around 500 big polluters to pay a price for every tonne of carbon pollution they put into our atmosphere.
At the moment, those big polluters can release that pollution into our atmosphere for free. We will require them to pay a price per tonne. The price will be $23 at the start of the scheme.
Because something they used to do for free now costs them money, they will innovate, they will change, they will find a way of reducing that bill and in doing so they will reduce their carbon pollution.
This all adds up to a reduction in carbon pollution of 160 million tonnes by 2020. That’s the equivalent of taking 45 million cars off the road. It’s a big difference in carbon pollution, achieved by requiring polluters to pay the price.
The mechanism will be a fixed-price mechanism for three years. That works effectively like a tax; it means the government set the price. At the end of the three year fixed price period, the period that works effectively like a tax, we will move to an emissions trading scheme, where the amount of pollution our economy can create will be capped and a market mechanism will set the price.
Now, that’s the essence of pricing carbon. Of course there are other effects that we need to deal with in this scheme. First and foremost some of the costs that will be incurred by the businesses as they pay their price for carbon will be passed through to households. So, we will use more than 50 per cent of the money paid by big polluters to provide assistance to households on the form of tax cuts and payment increases.
Nine out of 10 households will get a tax cut, or a benefit increase, or a combination of the both. What that means is around six million households will receive enough through a tax cut or payment increase to enable them to meet the average cost of carbon pricing on them and their family. That is, to fully meet the expected impact of carbon pricing on them and their family, as big polluters pass through some of the costs for things that families use every day.
Four million Australian households will get a buffer, a 20 per cent buffer. This is pitched at lower-income Australians and that’s because we understand that for low-income Australians their budgets are tight and we want to provide them with the benefit of that buffer as we move to pricing carbon and they see some flow-through price impacts.
All in all, the price impact is the equivalent of 0.7 per cent of CPI – that is, less than 1 per cent of CPI. The modelling to give us that figure has been done by the same people who did the modelling for the GST. They were right when they modelled then and they have provided the modelling for this package.
We have determined, in providing tax cuts to Australian families, that we will also reform the tax system. As I believe is well known, as Prime Minister I have put a strong emphasis on increasing workforce participation. I believe in the benefits and dignity of work. I believe in creating jobs. I believe in getting more people into our workforce so that they can enjoy the benefits that come from working – not just the financial benefits, but the sense of purpose that comes from having a job.
That’s why the mechanism we have used to provide tax cuts is through increasing the tax-free threshold. It will go from $6000 per year to $18,200 a year. By using that mechanism, what we are doing is creating better incentives for people to participate in work, particularly people who are making a journey from welfare to work, and particularly second-income earners in households who may be returning to work on a casual or part-time basis.
This is an important tax reform. I want us to have a clean energy future. I want us, as a nation, to have higher workforce participation. We, in this package, are achieving both.
Then, of course, as a result of this package, we also have to work to support Australian jobs. We want to work with businesses and industries as they make the transition that carbon pricing will bring, to a clean energy economy.
That’s why in this package you are seeing support for important industries, like the coal industry, like the steel industry, like manufacturing, like many of our businesses that generate high levels of carbon pollution but trade internationally and effectively take the world price for what they produce.
In this package, clearly today we are focussing on explaining the way that carbon pricing works. Carbon pricing is the foundation stone of this package, but this package has three important additional elements.
It’s got a focus on energy efficiency. It’s got a focus on renewable energy. These are also important ways of us tackling climate change. And it’s got an important focus on the land sector.
Out of all of those, today I want to particularly highlight the huge investments in renewable energy that this package brings – billions of dollars of new resources to help build that clean energy future for Australia.
Now, I understand, standing here as Prime Minister, this is a big day in Canberra. A lot of people in the room – it’s a bit day in Canberra. It’s a big day as we transition our nation to a clean energy future.
But I also understand it’s Sunday and right around the country Australian families are doing what families do on Sunday – hopefully getting the benefit of a little bit of rest and respite and some family time, and for many of them, they will be sitting there thinking “what does this mean for me?”
Well, I want Australian families to understand what it will mean for them. Information is available to them through our cleanenergyfuture.gov.au website. I want them to understand we are seizing a clean energy future: we will cut carbon pollution; we will be tackling climate change; we will be putting a price on carbon pollution that our biggest polluters pay.
Standing here, as prime minster, I understand that this has been a long, complicated and at sometimes a very difficult debate for Australians to follow and to listen to. My message to Australians today is: we are now moving from the days of words to deeds.
We have the right package. It will be in the Parliament and legislated later this year. We are going to get this done. We are going to create a clean energy future.
I’ll turn now to Minister Combet for some comments, to be followed by the Treasurer.
Climate minister Greg Combet
Thank you very much Prime Minister. And as the Prime Minister was pointing out there are four key elements to our plan for a clean energy future that we are announcing today. Firstly, the carbon pricing mechanism, secondly the support for renewable energy and clean energy in the future, and thirdly the support for energy efficiency, and finally the support that the package offers for the storage of carbon in the landscape. All of these are important elements of the plan released today that will cut pollution in our economy. It will drive investment in clean energy in the future whilst at the same time providing important assistance for households and supporting jobs.
I’d like to spend a little bit of time explaining a bit further how the carbon price mechanism itself would work. We all know that the world is releasing too much pollution into the atmosphere and it is contributing to climate change. The problem now, as the Prime Minister indicated, is that it is free of charge for large industrial facilities to put carbon pollution into the atmosphere.
There is no incentive effectively to cut pollution and to innovate to produce things more efficiently.
That means at the end of the day that the whole of society bears the economic and environmental cost of climate change. So the Government will put a price tag on the pollution produced by around 500 of the largest polluters in our economy.
A carbon price then means that those businesses will pay a price for each tonne of pollution that they release into the atmosphere and it will create an incentive to cut pollution and to innovate. If a business reduces their pollution they won’t pay as much and that’s how the carbon price drives innovation. It does encourage businesses to adopt new technologies which will allow them to produce the same goods and services while generating less pollution.
It’s important to emphasise as we have been in recent months that this must be done at the cheapest cost to our economy and that’s what a market-based approach achieves. Letting the market provide the price signal to cut pollution, through a carbon price, means that the Government does not prescribe to individual businesses or industries how they are going to reduce pollution. A market-based approach is the cheapest in our economy, it is the most effective and it is the most efficient way to deal with this issue.
The carbon price will start next year on 1 July. Around 60 per cent of Australia’s pollution will be covered by the carbon price. It will include pollution from electricity generation, stationary energy, some business transport, waste, industrial processes and fugitive emissions.
As the Prime Minister has indicated, the price will be fixed during the first three years and then transition to a fully flexible emissions trading scheme. Businesses covered by the scheme will need to buy and surrender to the Government a permit for each tonne of pollution they produce. As the Prime Minister indicated, the price will start at $23 per tonne and rise slightly over the fixed-price period.
From 1 July 2015 when we move to an emissions trading scheme, the price will be set by the market and the number of permits issued by the Government each year will be capped – and that means there will be a cap on pollution each year.
All revenue, as we have committed, will be used to assist households, to support jobs and competitiveness and build our new clean energy future. In fact, we’re expecting that this will drive 100 billion dollars’ worth of investment in renewable energy to 2050, and as a result we will be able to reduce our net national emissions to 80 per cent below their year 2000 levels by 2050.
The carbon price mechanism will also be accompanied by the establishment of a new body, the Climate Change Authority. The Authority will provide expert advice on key aspects of the Carbon Price Mechanism and the Government’s other climate change policies. However the Government and the Parliament will still retain the final authority for setting the pollution caps and these decisions will of course be informed by the advice of the Climate Change Authority.
Importantly, this package contains strong support for jobs. For a Labor Government, this is always an important priority. To support jobs and industries that face international competition and yet produce a lot of pollution, the Government will establish a Jobs and Competitiveness Program. It will be a program of $9.2 billion of support over the first three years of the scheme and be specifically designed to support the jobs in those important industries like steel and aluminium smelting and many others that are both emissions-intensive and trade-exposed industries.
The package announced today also announces some additional measures to support the steel industry which is feeling some severe pressures at this time due to the high value of the dollar, high commodity prices and patchy local demand for steel. Recognising this, the Government is announcing a four-year Steel Transformation Plan worth $300 million over that period.
The Government has also been very concerned to ensure that the jobs in the most effective coal mines will also receive strong support and there is in the package today $1.3 billion worth of support for the most affected coal mines and the people who work within them.
The electricity sector of course is also fundamental when considering the pricing of carbon. The Government will help transform the electricity generating sector while securing the energy supplies for Australian households and businesses.
We will seek to negotiate the closure of up to 2000 megawatts of highly-polluting coal-fired electricity generating capacity. This will make room for investment in new cleaner electricity generation capacity.
The Government will also provide assistance to some electricity generators to underpin energy security in our market.
Most of the manufacturing sector will see small cost impacts due to the carbon price. Many of the manufacturers in this country will be in a position to receive support under the Jobs and Competitiveness Program.
For those that aren’t, there are additional measures that have been announced today including a new Clean Technology Program that will provide over $1 billion to help manufacturers and with co-contributions from the manufacturers themselves we’re expecting that that will result in up to $4 billion in new investment in saving energy and reducing pollution in the manufacturing sector
In summary, this is a package that will create the right incentives to clean up the pollution in our economy over time. Households will be looked after especially low- to middle-income households.
The Government will support jobs and competitiveness in Australian industry and the electricity generation sector will be assisted in a long-term transition to cleaner energy. It’s an important economic reform in the Labor tradition.
Treasurer Wayne Swan:
Thank you very much, Greg. It’s great to be here with my colleagues today to talk about what is a very important environmental reform but also a fundamental economic reform. We simply cannot allow our country to become a technological backwater. We’ve got to price carbon pollution to drive the investment in innovation, and to provide the incentive for energy efficiency, and to develop renewable energy – failing to do so means that we would be passing on lower living standards to our children and to our grandchildren. So this is one of those fundamental reforms that we require to our economy to ensure that we pass on a better world and a stronger economy to our children and to our grandchildren.
Australia can’t power ahead without clean energy. To be a first rate economy in the 21st century you must be driven by clean energy.
I do want to say a few things about the Treasury modelling, and I certainly look forward to all of your questions about that. But essentially the Treasury modelling shows that the economic cost of pricing carbon is small and it’s small if we act now. The longer we delay the greater the cost and the more difficult the transition. So under a carbon price we can see strong growth in the economy. We can see strong jobs growth. We can see strong growth in incomes. And we can do all of that while making deep cuts in carbon pollution.
Now what the modelling shows is that the economy will continue to grow with average growth in gross national income per capita of 1.1 per cent a year, only one tenth of a percentage point less than what it would be without carbon pricing.
Average incomes will grow rising by around $9000 per person by 2020 and of course jobs will continue to grow strongly with 1.6 million more jobs created by 2020. At the same time, we cut domestic emissions in half compared to what they would have otherwise been in 2050 and as Greg said before we will drive $100 billion of investment in renewable energy.
The introduction of a $23 carbon price will also lead to a small increase in the price level of 0.7 per cent in 2012-13. Now that’s a modest price increase from a scheme that applies to the 500 largest polluters. And of course in coming weeks, we’ll see all sorts of claims made about price impacts, about jobs impacts.
What we have published here today is comprehensive modelling done by the most professional people in the business – the most professional people in the business who have been through these exercises before and have worked with the previous government to put in place modelling of this type.
This Treasury modelling is important and I do urge you to spend some time looking at their conclusions because what it shows is that we can make the transition to a clean energy economy whilst we maintain strong growth, create jobs and look to the industries for the future. And of course in this regard the assistance packages are quite important.
As the Prime Minister said before 9 out of 10 households will get assistance through tax cuts or extra payments or both. Almost $6 million households will get assistance that covers the average price impact from the carbon price.
And over 4 million households will get assistance that is 20 per cent more than the average price impact, and of course there will be an increase in family payments and other payments of 1.7 per cent.
For pensioners this will mean an extra $338 for single pensioners, up to $510 for pensioner couples combined and it means $110 per year for Family Tax Benefit Part A per the child. And of course it does mean tax cuts for everyone below $80,000 with most getting a tax cut of at least $300.
So these are not just tax cuts, they are also tax reform. Over 1 million extra people will be removed from the tax system.
Over 1 million extra people will no longer have tax withheld from their pay packet and therefore they will not have to lodge a tax return. That is tax reform, fundamental tax reform and the tax cuts will be permanent. The extra payments will be permanent. And of course assistance will grow over time. Now the Government has been able to deliver substantial reforms and we remain on track to bring the Budget to surplus.
The reforms have a net cost of $4.3 billion over the next four years but the bulk of this $2.9 billion is in the first year as you would expect with a reform of this magnitude. Now once the scheme is up and running, the impacts are broadly budget neutral and have only a modest impact on Budget surpluses. So this is a very big economic reform for Australia. The type of reform we require so we can have a clean energy future, create jobs and lift living standards.
JOURNALIST: The overall economic modelling (inaudible) is for continued growth, but it doesn’t necessarily tell us about the short and medium term after you’ve (inaudible) some industries. What’s your analysis of where that will occur and to what extent?
PM: I think the design of the scheme means that industries will be able to plan for it and they will be able to adapt. We’re announcing the package today, including the price. People will start thinking about what they need to do from the 1 July next year. The assistance package for businesses that Minister Combet has just outlined is a comprehensive one.
And now I think we’ve just got to be a bit clear here – this is a big reform, leading to a clean energy future, but it is not the only wind of change in our economy. Our economy is seeing change coming because of the resources boom; because of the high Australian dollar; because of the pressure that that is putting on some sectors of the economy – manufacturing, international education, tourism, amongst others.
So there will continue to be those economic forces driving change in conditions for businesses across the country, but in terms of the impacts of pricing carbon, they are laid out in modelling and of course we want to get a start on 1 July next year so that we can deal with those impacts in a measured way, rather than delaying action and having more costs and more dislocation down the track.
JOURNALIST: Prime Minister, what public inquiry do you (inaudible). Bob Brown said he would like some sort of inquiry before the legislation goes forward. Have you got an inquiry in mind or (inaudible)?
PM: Well, let’s be clear – we’re going to get this done. So this will be the package that comes to Parliament and this will be the package that goes through the Parliament.
Of course we’ll have proper parliamentary processes for people to make submissions and make comments on the details of legislation. I’ve got an open mind about how that should occur between the House of Representatives and the Senate. It may well be by joint committee between the two, but this is the package that will start on 1 July next year.
JOURNALIST: Prime Minister, Tony Abbot has been, as you know, running very hard on this and you’ve been somewhat constrained in responding to his claims, which you’ve described as a scare campaign, because of the lack of detail. Now that we have the detail, how confident are you that you will be able to explain this change to Australians and work through the scare campaign positively?
PM: Motivation here is to do what’s right by the nation and create a clean energy future. It will take a lot of explanation. That will happen, not just in the weeks ahead, when I’ve talked about wearing out my shoe leather – that will happen over many, many months ahead. We will keep explaining this to Australians.
But this is the right package for the country’s future. We’re standing here, having seen a difficult divisive debate in our nation. There have been false starts, there have been missteps, there’s no doubt about that, but it’s time to get on with this.
We are going to get this done.
JOURNALIST: Prime Minister, you’re introducing a new tax, yet the documents show that some families and households types will be up to $1,000 a year better off. What do you say to people who say this is too good to be true, when they look at those numbers for them, and your advertising campaign, when does that start and what’s the message?
PM: The essence of pricing carbon, the absolute essence of it, is the price paid by the big polluters. So, in terms of getting a transition that cuts carbon pollution, that moves us to a clean energy future, the thing that works is putting a price on carbon pollution per tonne, for the big polluters to pay, around 500 of them. That’s the core of this package.
Yes, we brought our Labor values to assisting families and households in relation to the price impacts that will flow through on some things that people buy and consume, and so we’ve deliberately pitched that in a Labor way, 9 out of 10 households seeing some assistance, but taking particular care for people in lower income ranges, for whom the budget is always tight, which is why they’ve got the benefits of the 20 per cent buffer.
On the question of advertising, in the weeks ahead people will see advertising to assist them to digest this big change to the Australian economy, and of course they can also access information through the clean energy future website.
JOURNALIST: Prime Minister, can you explain why there was some (inaudible) on steel and coal assistance and also (inaudible)?
PM: Well, the funding is laid out in the budget tables that’s in the material supplied to you. There are three measures which are Government measures, Government-only measures that we are determined to deliver because they’re the right thing to do with this package.
One is special assistance for the coal industry. Overwhelmingly coal mines are not big generators of carbon pollution, but there are some mines, referred to as gassy mines, that do generate carbon pollution and we want to be working with those gassy mines. That’s what the coal package is for.
The steel industry is in a pressurised situation in any event. In relation to Lenore’s question, I talked about the other winds of change in our economy – commodities boom, strong resource sector, big investment pipeline, high Australian dollar, going to be sustained over a long period of time, putting pressure on manufacturing, putting pressure on steel. Given that, we are working with the steel industry through the steel package that you see here.
And then thirdly, we will deliver a change to heavy vehicles and their treatment under carbon pricing two years after the scheme starts. Scheme starts 1 July next year, that change will be delivered on 1 July 2014.
So, the Government will deliver those measures. In terms of the assistance for coal, that will be delivered through cash grants. The assistance for steel we do want to legislate, we’ll bring that to the Parliament and the heavy vehicle change will be delivered by regulation change in time for a start on 1 July 2014.
JOURNALIST: The graphs that you’ve got the modelling that you’ve been presented, which show that the heaviest lifting will not be done by what we do as Australians, but by the purchasing of international credits. Is that a bit concerning, that we will be relying on the veracity of places like Equatorial Guinea and when it’s the Australian money that actually buys these permits?
PM: In designing this package we’ve brought our economically responsible tradition, the great Labor tradition of economic reform – what led us to float the dollar, what led us to reduce tariffs – and that is how do you change and modernise your economy at the least cost. It’s what’s driven us every step of the way, and if you’re going to modernise your economy at the least cost and get a clean energy future, then you accept the advice of economists: the best way to do that is to put a price on carbon, to be paid the big polluters.
But you also accept the advice of economists that an internationally linked scheme, we will get to an internationally linked scheme, which will mean that businesses here in this country have the ability to buy abatement from other nations. That means that the Australian price transforming our economy to a clean energy future will be the same as the international price.
Now, you will see in the documents provided to you that we will ensure that we are only acknowledging the buying of credits where they have met quality tests. We understand that we will have to have particular rules to make sure that the abatement that is being purchased is the abatement of a tonne of carbon pollution and that will be done so it’s quality abatement that’s being purchased.
JOURNALIST: Prime Minister, almost all the effort in energy innovation in this package is toward renewables. Has the Government given up on carbon capture and clean coal?
PM: No, we haven’t and Minister Ferguson will continue to oversight and implement carbon capture and storage programs, including the global institute that we sponsored and including working with proponents of carbon capture and storage schemes to get them off the ground.
PM: We’re here on Sunday. I stand for hard work and I thank you for joining me for another hardworking day. Our Press Gallery putting in some hard yards – it’s a good thing to see.
In terms of the market sensitivity of the information, this is a scheme that comes into effect on the 1 July next year, so markets and businesses will have plenty of time to digest and react and work out what their reaction should be.
So, I’m not going to be engaged in any speculation about share prices or anything like that, but comprehensive information is available for people here today, that’s appropriate businesses have all the way to the 1 July next year to digest that information, as do investors and people who engage in markets.
I did say, we’ll go here, here and then go to Mega at the back and then we’ll come over this side.
JOURNALIST: Prime Minister, when will we know whether or not this has all been worthwhile? How soon before we see a substantial fall in greenhouse gas emissions?
PM: We’ll 160 million tonnes of carbon pollution reduced by 2020 at least-
JOURNALIST: -So we’ll have to wait til 2020 before we can –
PM: -This is a big change and like all big changes, of course, you’ve got to bring it into affect and then it starts to do its work, and let’s remember we come to this big change in an Australian economy where we generate more carbon pollution per head than any other people in the developed world.
Now, if you want to use an analogy about a running race, we’re about to run a marathon and we’re starting a few kilometres behind the start line. We’ve got a lot of work to do to hold our place in the race that the world is running.
That’s why we’re starting on 1 July 2012. You’ll see at least 160 million tonnes of carbon pollution out of our atmosphere, and 2020 we’ll have reduced the amount of carbon pollution by that amount. That’s the equivalent of 45 million vehicles. I don’t know if you can get a picture of 45 million vehicles in your head?
JOURNALIST: I’ve only got one.
PM: Well, imagine it times 45 million. That’s a lot.
Well go here, then go across.
JOURNALIST: The carbon (inaudible). Firstly congratulations, thank you for the biodiversity stuff, thank you for the low-income stuff, thank you for the offsets on transport. Now the carbon captured in a tree – have you put a price on that?
PM: The carbon?
JOURNALIST: Captured in a tree.
PM: Carbon captured in a tree, sorry I didn’t hear you.
JOURNALIST: Yeah for forest, and are we going to protect biodiversity by reducing native forest logging?
PM: Right, look I’ll turn to Minister Combet for some specifics. Thank you for setting a new standard of feedback at Press Gallery conferences. Something tells me it won’t catch on, but thank you for that game endeavour. The land sector measures here, there’s the Carbon Farming Initiative where the details are already known, which give farmers the opportunity to benefit through new and changed practices to store carbon in their land. This package has the best part of a billion dollars allocated to a biodiversity fund which can work with landholders to support biodiversity, creating wildlife corridors and the like. I’ll turn to Minister Combet for some more details of that.
COMBET: The Prime Minister has already mentioned the Carbon Farming Initiative, which is an important complementary measure to the carbon price mechanism we’re announcing today. The Carbon Farming Initiative provides the incentive for foresters and land holders, farmers and others in the land management area to store carbon in one way or another.
Those credits that are generated will be supported through the carbon price mechanism in two ways.
Firstly, for those of you who are aficionados about the Kyoto Protocol, those that are not Kyoto compliant, that are offsets, will be supported with the disposition of some of the funding revenue from the carbon price mechanism, and also entities amongst the 500 that will have a responsibility under the carbon price mechanism will also be able to purchase Kyoto compliant credits for their compliance under the emissions trading scheme arrangements including during the fixed price period. That’s very strong support for carbon storage activity on the land.
JOURNALIST: Minister Combet, given the (inaudible) and the access to the $800 million capital investment contribution fund. I mean would you agree that BlueScope Steel for instance would be paying virtually zero of the carbon tax for at least the next three years and would you agree that they’re going to be left in pretty much a better position as a result of this package?
COMBET: Well, you can ask them as to their assessment of their liability under the carbon price mechanism of course because there are a number of elements to it. What the Government has been concerned about are the combination of issues that are impacting the steel industry at the moment and they are predominantly the high value of the dollar, iron ore prices are very high, and coking coal prices are very high and that is impacting on OneSteel and BlueScope’s performance in their publicly reported results.
We’ve been very conscious of the importance of those companies in the regions in which they employ a lot of people and not solely but particularly in Port Kembla and Whyalla where they’ve got their steel making operations, and the Government has had a lot of engagement with the steel companies to try and put together a plan which we have announced today that will support innovation in their operations, research and development, assist them make changes, assist them in relation to capital investments to upgrade their facilities and we’ve been mindful certainly of the carbon price issue in those discussions.
I imagine those companies will be making some observations about what we’ve put forward but we believe that it’s strong but adequate and appropriate support for the jobs in that industry.
JOURNALIST: (Inaudible) Was it what companies needed to avoid losing money under the carbon price?
COMBET: Well, we’ve been through a process of negotiation with the companies and given consideration to all of the issues that are impacting upon them, carbon pricing is obviously one of those that’s been discussed.
PM: We’ll take some questions here and then we’ll go back to Mega because I did promise him a question before. Yes?
JOURNALIST: What do you say to people who say this is all about income redistribution? how many Australians actually will be worse off financially and what’s your message to them? (inaudible)
PM: OK, well the advertising is going to start in the weeks and days ahead, so yes, there’s going to be advertising. Yes, I think it’s appropriate to advertise such a big change and to enable people to get details about their own particular circumstances, for example there is a household estimator on the website which will enable people to interrogate for their own particular circumstances.
On the way the scheme works, you’ve got to remember the centre of it is the price paid by big polluters. That’s what drives the change and cuts carbon pollution, that’s why it works.
PM: We’re using the terminology 9 out of 10 households are getting some assistance. Yes, that means there are households who don’t get assistance. There’s no money tree. The budget’s got to add up and we’ve made choices about who needs assistance the most and we’ll obviously stand by those choices. I understand many Australians right up the income scale feel cost of living pressures but we have directed assistance here to those families and Australians we believe need it the most.
Yes, we’ll go Dennis here, Michelle and over to Mega, and then we’ll have to start making a move.
JOURNALIST: Just two questions, first of all you talk about net growth in jobs over time. What are the estimates of job losses in the hardest hit sectors? I assume the modelling’s done that as well. And secondly on the question of buying back the 2000 megawatts, closing down power plants, the figure for that’s not in these papers, not disclosed. Can you give us an idea of that, when that will take effect and where is the money coming from?
PM: Dennis I can’t and won’t give you that figure because it’s a tender process and if I disclose the Government’s budget envelope then guess what – every tender that came in would come in for the maximum that’s available under the envelope, so we’re not going to do that to the Government’s budget and to the Australian taxpayers so we will have the tender process. I’ll just see if Minister Combet wants to say some more about that.
COMBET: Oh well what the process that will be followed is that in the not too distant future we’ll initiate an expression of interest process so that this is a decision for electricity generator operators themselves as to whether they wish to participate.
We’re indicating that we’re prepared to negotiate the closure of up to 2000 megawatts of some of the high emissions electricity generation capacity and I anticipate that it will take some time before we reach a concluded process, however the important thing – and this is something I think a message for the Latrobe Valley in particular where I know that people are apprehensive about carbon pricing coming in. These will be carefully discussed.
We are not anticipating any significant changes for some considerable period of time, and it is important that if we do successfully negotiate the closure of some capacity that that will occur at some point before 2020. It will allow sufficient time for additional investment to be made in electricity generating capacity, including potentially in regions such as the Latrobe Valley, and the Government has also announced to a structural adjustment package of support for regions that may be affected in the future. And in the Latrobe Valley and some other areas of the economy where people are considering these issues, we’ll be very careful to consult with local communities, the employers and the workforces in the region as well as regional development authorities and local government. And we’ve already commenced that process in the La Trobe Valley in particular.
JOURNALIST: How bad is (inaudible) job losses (inaudible)?
TREASURER: I’m happy to do that. Look, there is a lot in the modelling and what the modelling looks at is the changes in the Australian economy with or without a carbon price. So what you will find in the modelling is estimates of output through to 2020, through to 2050, by industry sector, and estimates of employment share by sector 2020, 2050. So all of those figures are there but there is no detailed information by individual components of each sector. It’s simply not possible to do that but what you can say here is that the impact on output and the impact on employment of a carbon price is very, very small compared to the impacts that are going on more generally in our economy.
And as you will have seen, Dennis, in the Budget where we talked extensively about this, we outlined the future structural pressures impacting on the Australian economy and their consequences for the shape of our economy in 20 and 30 years. And what we are seeing is an economy where employment is growing strongly in services. What we are seeing is an economy where employment and output is also growing very strongly in mining. And what we are seeing in other sectors is that they are not growing as fast and some are slipping back slightly.
But what you do see absolutely in the modelling is that the impact of a price on carbon is not the predominant factor influencing those changes. Greg spoke about this before. The Prime Minister spoke about this before. We are all acutely aware that the level of the currency is imposing upon our economy a very substantial structural change and that is something the Government is acutely aware of. It explains in part what Greg was talking about before in terms of the steel industry. We are a Labor Party. We’re a Labor Government and our first priority is jobs but our first priority is jobs that are sustainable for the future and jobs that grow, and jobs that create the wealth so that we become a more prosperous country.
So what we have to do is respond to all of these changes and what we’ve seen through these modelling exercises is that we can grow strongly with a carbon price but other factors are much more important when you look at changes in the output share and the employment share.
PM: OK, we’ll go to Michelle.
JOURNALIST: Could I ask again one of the three of you tell us how many, numerically, households will be worse off and if you prefer not to do this why you (inaudible)
PM: Well, it’s not a question of prefer not to.
When you see the tax cuts and assistance have been pitched at families earning less than $150,000 a year, around 1 in 10 households earn more than $150,000 a year, so Michelle, you can do that maths, I’m sure.
What that means is that there’s no money tree. There’s no endeavour here to try and pretend that everybody’s better off or everybody’s in the same position. There are some Australians who are not getting tax cuts and family assistance sufficient to compensate them for the likely impact of carbon pricing on them, and we have structured this package deliberately so that we are assisting lower-income families and middle-income families taking the approach that we would put assistance where it’s needed the most.
JOURNALIST: You say there’s no money tree and the budget has to add up. Can I ask the Treasurer, the scheme will cost, what, $4 billion more over the forward estimates than it will raise – where is that money coming from and will it threaten or at least reduce the surplus substantially?
TREASURER: (Inaudible) and the Budget has to add up. Can I ask the Treasurer, I mean the scheme will cost what – $4 billion more over the forward estimates than it will raise. Where is that money coming from and will it threaten or at least reduce the surpluses going forward?
TREASURER: No it doesn’t in any way threaten our surplus. So as you can see $2.9 billion is upfront and that’s entirely appropriate for a change of this magnitude. It’s entirely appropriate that we give households the assistance early so they can have confidence that they will make this transition and they can do that with some degree of confidence, and certainty and the same goes for industry.
So when you take out the advance payment that we’re putting in now at the beginning, the impacts on our surpluses over the surplus years are quite modest. And that’s why we say the scheme is broadly Budget neutral. Modest impacts across the surplus years, higher upfront costs because this is a very big structural change for our economy.
TREASURER: What we will do is meet all of our fiscal rules and we will be presenting a MYEFO later in the year as we usually do but these are modest costs when you look at them against our surpluses. I think, from memory, a charge on the surplus in the last year of only $109 million. What we will do is meet our fiscal rules, which is to bring our Budget back to surplus in 2012-13 – absolutely critical. We’ll meet our tax to GDP target and we will continue to follow those fiscal rules.
The fact is there are lots of things happening in a budget at any one time. I have just spoken at length about some of the structural forces impacting on our economy as a whole and they are all budget related as well. We can’t at any one point in time take a static view. So we update our budget as we are required to do under the Charter of Budget Honesty in MYEFO. We’ll take into account all of those things that are going on but I think you would see from the record that we’ve had in recent years, we have applied fiscal discipline in accordance with our budget rules.
PM: OK, we’ll take the last two questions. I’m going to go Karen and SBS because I think I should and I’m going to go Mega because perseverance pays. Karen?
JOURNALIST: Prime Minister, several compensatory measures weren’t supported by the Multi Party Committee. How big of an obstacle is that going to be (inaudible) and also the diesel fuel temporary exemption, I understand, wasn’t supported. Do you have to legislate any of those? Do you still face an obstacle in getting this up and running?
PM: There are three things which are Government-only measures: coal, steel and the changes for heavy vehicles. The changes for heavy vehicles are a change to regulation. They will be dealt with in the next Parliament. Coal is the provision of cash grants and can be done by the Government. Steel is something that we will bring to the Parliament to legislate so there is security for the steel industry. I believe we will be able to secure that through the Parliament, but there is a question here clearly for the Opposition. Are they going to stand up for the jobs of steel workers or not?
JOURNALIST: Prime Minister comparing this package to 2009, (inaudible) 1.7 per cent with the CPRS, 0.7 per cent for this one, so with that (inaudible) package superior or inferior to 2009, and you mention of missteps, what’s the big takeout lesson of the 2009 period?
PM: Well firstly you’re a man who loves the difference between a base and a percentage, so you and I could have a nice convoluted discussion here and lose the rest of the audience, but you can’t do a comparison here of the percentage figures because the base has changed in the meantime. You’ll be able to regress that against pi and some ABS data runs and give us a story tomorrow I’m sure. But you can’t just compare the two figures. They’re off a difference base.
In terms of the impact on pollution, got to remember the impact is on the polluters who are paying – 1 July next year, $23 a tonne, that’s what drives change. 30 June next year, $0, putting pollution into the atmosphere by those big polluters. 1 July, $23 a tonne, smart business people think, ‘gee, I want to bring that price down. What am I going to do? How am I going to innovate? How am I going to change my processes so that I reduce the carbon pollution I’m generating?’, and they will and that’s what gives us the reduction in carbon pollution that we’ve talked about.
In terms of differences between the two schemes, first and foremost the CPRS ran into a brick wall. I’ve knocked the brick wall down. This is going through, this done – full stop.
Second in terms of differences between the schemes, this has got a greater level of ambition, 80 per cent at 2050. It’s got a greater commitment to clean energy, $1.3 billion. It’s got a greater commitment to our land sector, $1.7 billion, and it has this mechanism that Minister Combet has spoken about to retire the dirtiest energy producers out of our electricity system. That’s a big difference.
In terms of supporting jobs, this has got new initiatives in it for steel, for metal forging and the foundry industries, and of course this has got a tax reform associated with it.
We believe in work, we value work, this package values work. I want to see a nation with a clean energy future and higher workforce participation. This is the package that is going to drive both of those things – cleaner energy, more people in work. That’s the Labor way.
Thank you very much.