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Australian Politicians Undermine the Country’s Future Prosperity

Is Australia about to rain on its own parade in the natural resource sector? Australia’s proposed A$23/t tax on carbon emissions will undermine business confidence and the country’s international competitiveness but might well lessen skills shortages through Australia being less competitive in the global market place, as politician’s undermine the countries future.

Australia’s carbon tax was designed to price carbon production, with targets based on total emissions, in keeping with the international approach embedded in the Kyoto Protocol. But that this approach will only be appropriate where emissions mainly relate to domestic consumption, rather than total production. As a huge net exporter of coal for instance the scheme would punish Australian exporters and favour their competitors that do not have the burden of the intended taxes.

Australia exports about 40% of total carbon dioxide emissions. For Australia, more than for other developed country, a tax on carbon production is a tax on a trade sector. The carbon tax would also cause higher overheads, and uncertainty around committing capital, as well as a competitive disadvantage for Australia’s iron-ore, aluminium and coal producers, relative to competitors in China, Brazil, Indonesia and Colombia.

The Politicians should not overlook that the major miners will shift investment focus to the lowest cost areas and through this tax Australia is well and truly shooting itself in the foot at the very time when the economy as a whole needs the boost from the mining sector as much of the developed world faces a real prospect of a double dip recession.

Even the outlook for China, Australia’s biggest export market does not look as rosy as it will face a downturn if overseas markets stagnate.

The government’s proposed carbon tax plan, together with the renewable energy target obligations will inevitably reduce investment and jobs growth in Australia, without necessarily reducing global emissions. It may give politicians the moral high ground but at what price to the country?

Turkeys don’t usually vote for Christmas but it looks like Australia’s politicians are about to stuff the country.


Author – Chris Slay

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