One year with no carbon price wrecking ball

Today marks the one-year anniversary that Australia has had a price on carbon and the economy is still cooking with gas.

There is no sign of a wrecking ball, a jobs wipe-out, ghost towns or an economic catastrophe if one looks at the hard data and facts that have been available since July 1, 2012.

The price on carbon appears to have had the impact on the economy that most sober analysis suggested – a moderate, one-off lift in prices and an infinitesimal impact on economic growth and job creation.

Clearly developments in the global economy and China in particular, the Australian dollar and commodity prices have been driving growth, rather than any macroeconomic impact from carbon pricing. Lower interest rates and fiscal policy are also influencing the growth momentum of the economy with the carbon price all but a non-event.

Of course, we do not have the full run of annual economic data for the one-year anniversary of the carbon price, but there are at least three quarters of news that can be analysed to see just how the economy has performed in the period since July 1, 2012.

The facts below are all based on the latest data from the Australian Bureau of Statistics, the Reserve Bank, Bloomberg and RP Data, unless otherwise indicated.

Since the carbon price was introduced: 

– Real GDP has risen by 1.9 per cent in the three quarters of available data (annualised growth rate of 2.5 per cent).

– Employment has risen by 157,400 people in 11 months, made up of 76,300 new full-time jobs and 81,000 part-time jobs.

– The unemployment rate has edged up to 5.5 per cent in May 2013 from 5.3 per cent in June 2012, just before carbon was priced.

– The stock market (ASX200) has risen by more than 17 per cent, adding approximately $205 billion to the value of Australian shares. A further $50 billion or so of dividends have been paid to shareholders since June 30, 2012.

– According to RP Data, house prices have risen 3.9 per cent since June 30, 2012, adding approximately $160 billion to the wealth of owners of houses.

– In terms of inflation, the CPI has risen by 2 per cent in three quarters (annualised pace of 2.6 per cent), a figure which includes the boost to prices from the carbon price driven lift in electricity and gas prices. Underlying inflation has risen 1.7 per cent in the nine months (annualised pace of 2.2 per cent) and this figure has also been inflated by the carbon price. 

– The wages price index has risen by 2.2 per cent in nine months (annualised pace of 3 per cent), locking in a period of moderate wage increases.

– The value of retail sales has risen by 1.6 per cent in the 10 months to April.

– The number of new motor vehicle sales has risen by 1.6 per cent in 11 months, with a new monthly record high for car sales registered in December 2012.

– The number of dwelling building approvals has fallen 3.1 per cent since June but the number of new housing loans for owner occupation has risen 7 per cent over the same period. 

– The NAB measure of business conditions has fallen from -1 points in June to -4 points in May, but business confidence has risen from -3 points to -1 point over the same timeframe.

– The Westpac measure of consumer sentiment has risen by 6.9 per cent since June 2012.

– The Reserve Bank index of commodity prices has fallen 7.5 per cent in Australian dollar terms since June and has fallen 8.1 per cent in US dollar terms.

– The Reserve has cut the official cash rate from 3.5 per cent to 2.75 per cent.

– The 10-year government bond yield has risen a net 70 basis points to 3.75 per cent as of Monday’s close.

– The Australian dollar has fallen around 10 per cent as the market has adjusted to the global influence of lower commodity prices and interest rate cuts.

At the same time, Australia’s triple-A credit rating from all three ratings agencies remains unchallenged.

So there you go. Decent economic growth, job creation at a steady pace, a strong stock market, moderate house price gains, rising wealth and real wages for the household sector, low inflation, falling interest rates, steady business conditions and strengthening consumer sentiment.

And all of this with China weaker than expected a year ago, the eurozone in a deep and protracted recession, an overvalued Australian dollar and unexpected budget tightening from the State government sector.

With the facts and runs on the board very different to the extreme forecasts a year ago, what has happened is a major win for treasury, its projections and modeling of the carbon price effect on the economy.

It is, or at least should be, a humiliating kick in the tail for those suggesting a wrecking ball and other economic catastrophes.

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But Stephen when are you going to make an actual prediction on what will happen to the cost of living when the carbon tax as it now stands is applied to diesel on heavy transport.

You continue to conveniently ignore that when it applies to diesel it will virtually effect every commodity that we buy and will not only be levied on the consumer by one entity in the chain but all entities that have to pay the tax.

NO business will have the ability to claim it back as they do with GST.

Dan Marks,

Further to your comment, what will happen to the economy as the price ramps up as projected by Treasury and as would be required to meet the emissions reduction targets?

What would happen to the economy ans our manufacturing industries have to move to other countries? (Aluminium smelters and Ford has already pulled out. Holden is about to do so and Toyota will have to pull out also since there will not be a critical mass to support the car parts supply industries).

What will happen to the compliance cost of measuring, monitoring, reporting emissions and disputation as smaller and smaller emissions sources have to be included, as is inevitable over time to achieve the high participation rate that is essential for global carbon pricing to work? The inevitable result, eventually, is that emissions from every cow sheep and goat will have to be measured and reported. What will be the ultimate compliance cost?

Treasury's modelling reveals that the ETS wsill cost $10 for every $1 of projected savings, assuming there is a global agreement. If there is no agreement (as seems highly likely) there will be no benefit. Therefore, we can expect to pay $10 for $0 benefit.

Tony Abbott's attack on the carbon levy was focused and unrelenting. Julia010's carbon levy became Abbott's Great Big New (Carbon) Tax, which would "act as a wrecking ball across the economy", be "absolutely catastrophic", "wipe out jobs big-time", create "ghost towns", "discourage investment" in mining, and cause towns like Whyalla to be "wiped off the map".

Carbon levy politics became a national obsession, as the Noalition desired. But all that fear and loathing avoided elementary facts and lost all sense of reality and perspective – not only is there a reason for the carbon levy, but also trying to do nothing guarantees - guarantees - exponentially increasing damage to our economy and society through refusal to adapt. It is politics, of course, for which truth and the future are always expendable.

That it was – note the past tense – very effective should have been a big problem for him, because the dividend it delivered was conditional on his claims being true. That reality has demonstrated the insignificance of the carbon tax requires that he be either a liar or incompetent. Yet while anger with the carbon levy has largely faded, it has not rebounded onto the rabble-rouser. Gillard Labor did little to pillory him for his systematic, aggressive and persistent divisiveness. Yet the mainstream media has done even less, once again protecting Abbott the Hun with a blanket of silence in striking contrast to its earlier enthusiasm for promoting his most extreme comments.

Vicious and recurring threats against climate change scientists for an honesty seldom shown by politicians should be condemned. Similarly, the spectacle of a denialist thug intimidating a solitary Greens advocate during and after a public meeting with Tony Abbott was entirely to be expected from a group with such contempt for the views of others, driven by the politics of fear and hate, often fanned by the shock-jocks.

Dan, I understand that from 2014 the diesel subsidy will drop by about half to reflect the carbon pricing impact. This will mean a small increase in the cost of diesel to operators of around 7 cents a litre. Hardly dramatic and why shouldn't there be an incentive for more sustainable fuel sources such as bio-ethanol.

Being caught in an octopus embrace meant the python was unable to squeeze which allowed the cobra to strike the octopus. The hopelessly entangled trio were last seen sinking to the bottom of the harbour where all three promptly died of heat exhaustion.

one-off lift in prices?

The CleanEnergyFuture Act mentions a 2.5% rise in REAL terms (ie 2.5% + inflation) carbon prices every year during the fixed period. Can you point to where this has been changed?


Unfortunately, your efforts in relation to today's article are in vain.

Sighting (or perhaps 'regurgitating') general economic statistics, and then claiming that the carbon tax has had no impact on such statistics is bordering on negligent.

You economic speculators lean on this type of 'analysis' all too often.

The only version of history, is the one you can 'see' in the numbers...

If one removes the carbon tax, what would those indicators have read?

What capital investment would have occurred now, and into the future?

No one can say... predictions, particularly about events that will happen in the future, are particularly difficult, but in this context, predicting history is also problematic.

Stephen, enjoy your success and your 'I told you so' moment...

Sophisticated readers, probably won't bother with your article, but if they have the stamina to endure, will see straight through your claims of victory.

Before the influx of the Murdoch Morons into the comments section at least we got intelligent, robust debate. Now it's just the old men who have come here from the links from The Australian.
They have time to post crap all day, to every column. Their responses are always about the unions, evil Labor, carbon tax and deficits. It's fact free but opinion heavy, only oriented one way.

An article like SK's above, which uses actual data showing that the economy is somehow not destined for disaster, is not what they want to read.
The fact-free responses are typical of what passes for comment. Nearly all are just mindless cheerleaders for the LNP. Disappointing.

Mr. Oath...

In spite of you posting your comment, in reply to my posting, I assume that your comment is general in nature, and not specifically in response to mine.

A moron, I am not, neither am I retired, posting crap all day etc.

As per my initial post, SK has not established cause an effect - because it doesn't exist.

He has simply rattled off any number of economic statistics, and used this as some sort of 'evidence'.

For an economist, this would seem a little juvenile.

I am certainly not wishing for 'the world to end'.. or for the 'wrecking ball' or 'python squeeze' or other emotive marketing crap from Abbott.. to eventuate...

But this kind of shallow article is at the other end of the spectrum (i.e. presents a false positive picture), and is at minimum, poor 'journalism'.

Keyser please don't take seriously the gentlemen who has adopted an Australian colloquial expletive as his nom de plume.
He never comes along with anything that makes any sense.
He is just here to provoke,and to introduce hate.

Ken. It's not that Steve's analysis commences at a time when Australians are starting to crawl out of their GFC bomb shelters in larger numbers that helps skew the statistics? As for small businesses recovering, they must be going straight to the top because the basement and street levels tenancies are looking like more broken teeth in an embarrassed smile. I'm not sure if I'm a Murdoch Moron or a Fairfax Fool, but I look for incisive journalism prompting active debate, not scathing reprimand of no substance.

And if CEOs and Boards did not raid the bank accounts of companies then what other investments could have occurred? It is a circular argument which people like you use so as not to confront the truth.

The reality is that Tony Abbott has LIED to the electorate for the past few years. His intentions: to discredit Labor. His tool of choice: lie through his teeth...make unsubstantiated claims, claim victimisation whilst using gutter attacks to bring down a government. It was not unlike a pack of wolves working together to bring down a deer.

So please spare the rhetoric. The facts are the facts and the statistics, as unwelcome as they may be, are what they are. Whilst Labor has made mistakes what it has not done is to sell its soul to the devil and attain government for the purpose of transferring the national wealth to big business and ultimately to those who already possess enormous wealth. This is the real obscenity.

"...a pack of wolves to bring down a deer"? Isn't that just nature's way if the deer strays too far from the herd?

@Rambotrader Jj,

If, when referring to 'people like me', you are meaning, people who like to see in depth thinking, analysis, reasoning, thoughtful discussion and considered conclusions, then you are on the right track.

I am not making reference to any political positioning in my posts.

The issue here is Mr. Koukoulas, and the extent to which he can demonstrate that ANY of the economic statistics he quotes, are directly related to the existence of the carbon price.

He can't, because they're not.

The same argument could be put, if there weren't a carbon price, and these statistics were quoted.

Lets face it.. Given the rigging, compromises, handouts, credits, compensation and other manipulations.. WHO is REALLY paying for carbon?

Well from memory, Mr. Swan used the forecast tax revenue from the mining tax, to pay for the 'households assistance package'.. With such revenue not ever materialising.. So the Australian taxpayer, is actually paying for carbon, to compensate the 'working families' for the cost of carbon... The money go round is in full swing, and the primary motive for pricing a previously unpriced economic 'externality'.. Is fatally undermined.. Behaviours remain unchanged, because (direct) pain is not felt.

You may rant all you wish about Abbott. But he is in opposition. He only has alternatives.

How about you consider the horribly compromised mess, which is actually law, and which has made no direct impact to emissions or people's behaviour - whatsoever.

OK let's forget about the carbon price.
The rest of the article says that if you sacrifice the thrifty savers with unbelievably low interest rates and if the government keeps borrowing $40,000,000,000 per year,we can party on.

Unfortunately this formula has failed everywhere it's been tried in the world.

What has the price of CO2 got to do with climate? Germany is expecting its coldest summer for several hundred years. Economics is a hobby. Try building something. Your CO2 tax is destroying the economy. Its is a wrecking ball. It just moves slowly. Unlike economic analysis, more regulation and tax does bend spending. The un-hockey stick.

Blah, blah,blah. Another mind dead business person living in his factory and not caring about what is happening to the planet. Lets get what business wants straight:

1. no regulation - so that it can do whatever it wants to whoever it wants with no restrictions or accountability.
2. no tax - oh yes.....let the poor pay for business infrastructure (ports, roads, communications. assistance, subsidies and the rest). No tax for business because business provides jobs.
3. political influence - well we already have a party called the Coalition which is the business party and which cares about little else other than doing the will of its political masters.

If I sound cynical it is because the last 4 years of politics have been a disgrace. Not only has it been a one sided affair with the media running its unrelenting anti Labor propaganda campaign worthy of a communist state but Liberal Party ministers have behave like absolote animals which nobody with any character or decency would vote for.

So please spare me the rhetoric. I'm all out of patience and understanding.

1. I work with the design and construction of green building almost every day of every week; buildings being the biggest consumers of energy on the planet. These buildings are developed under corporate conscience for the planet and government cooperation, not by regulation and taxes.
2. I'm guessing I'm middle-class and help pay for the infrastructure and for the poor and work to ensure the business survives to support the rich owner and poor labourers alike. The bank to a business is like a pack of wolves circling a deer.
3. The alternative to political masters is anarchy (maybe not a bad option for a trial period, money back guarantee if not completely satisfied).
What constitutes rhetoric?

You're basing your opinion of the non-existence of climate change on one cold German summer? I am sure you have no education on climate science Geoff, other than a few articles and 'research' backed by BHP, Exxon Mobil, or the like. This, against the models and opinions of thousands of scientists? Most things don't go up in a predictable, linear fashion; nature being the biggest culprit of all. BUT if one were to be open minded enough to actually stand back, and look at the big picture.........

Well there you go then Stephen. Take a conclusion and justify it.

That's fine unless you actually want to look at the components that, quantify the conclusion.

Lets talk about the carbon tax. Does it increases your electricity bill, or reduce your electricity bill?. A lot of people find that very challenging, so they choose to accept it as being irrelevant.

Now lets look at the inflation rate, does your electricity bill, add to the inflation rate. No it does not, because utility costs have been removed from the inflation formula. That's why we have an inflation number of 2.5% and not 4% (as it would be, if electric. costs were added to the inflation formula).

Ok lets look at the cash rate of 2.75%. Pretty low! now take away the 2 quarter percent rate reductions, that are effected by, the AUD falling 12.5%. That gives us a true cash rate of 2.25%.

Lets look at te RBA's bias towards, monetary loosening and it becomes apparent that Australia has it's own QE in action.

Why? because when the economy cannot create capital, it feeds capital into the housing industry and that results in the destruction of capital.

Stephen, you can fool some of the people, some of the time but I'll remind you what reality is, when it is required.

How would you achieve the bipartisan goal of a 5% reduction in emissions?

Obviously Koukoulas has been on holidays and hasn't noticed the number of manufacturing and other businesses closing up shop and or reducing the number of employees as a direct result of the carbon tax. Another leftie holed up in wonderland.

How would you achieve the bipartisan goal of a 5% reduction in emissions?

Not on holidays but just like most economists he is holed up in an office looking at streams of meaningless data. He needs to get out in the real world and then he might see the business' closings their doors and the real unemployment line. Not some fudged number from the ABS

Steve the ABS does have an official number for the unemployed to include the underemployed and those who have given up looking.
That number is 12.8%.
Economists like Stephen Koukoulas prefer to forget the extra 7.2% in the name of optimism.

This stuff about the economy is all well and good but, according to a newspaper article yesterday, the carbon tax is directly responisible for a reduction in the quality of chocolate. You can threaten my job but when it comes to chocolate, things just got serious!

Something is not adding up with the carbon tax.
The "one off" 0.7% increase in the CPI that Combet said would be the only impact on the economy strangely hasn't happened yet Labor are still insist on paying out compensation to "the battlers".
At the same time, over $4 billion has been collected in carbon tax revenue and this hasn't impacted on the CPI?
Someone please explain this.

Oh Dear,
Electricity prices modest? water prices modest, fares going up ,no jobs wipe out ? ha FORD,
HOLDEN wages cuts, Target lost jobs c'mon the list goes on .
The problem is some people just say anything and others that know no different take it on board repeat it and believe it.
Unfortunately it isn't what we get told it's what we don't get told,, Sorry mate this carbon tax is all wrong, all they wanted to do was grab more money from the voters.

How would you achieve the bipartisan goal of a 5% reduction in emissions?

I love it how any positive economic data is casually dismissed as irrelevant by the "CARBON TAX WRECKING BALL!" alarmists. AAA credit ratings? Irrelevant! A manufacturer closed down or cut staff? Definitely wouldn't have happened without the carbon tax! I feel kind of sorry for them, being so committed in their opposition to carbon pricing that they'll insist that black is white and up is down if they have to. If the economic turmoil they predicted was actually occurring we wouldn't see softening opposition to carbon pricing, we'd see the opposite. People have discovered that their Sunday roast coasts pretty much the same as it did before instead of Barnaby Joyce's $100. No towns have been wiped off the map. And would these doomsayers like to speak to the fact that most Australians would prefer that we stick with what we have rather than dismantle the scheme to install the Coalition's "Direct Action" policy?

Woolworths, Metcash & Coles are facing deflating prices and no increase in spending. Even as the $A falls against the USD. The RBA are trying to maintain housing inflation by lowering the cost of money to the banks. The banks have had cheap carry trade money for a very long time and so new house starts are very low. The future has already been robbed.

The carbon tax is merely a tax. It does not affect our climate. It makes costs higher in order to buy votes.

The AAA credit rating will be affected if our borrowing continues to climb and rates fall lower than the USD bond rate.

As the dollar falls we are going to see inflation for manufactured goods & energy. Most prices were hedged at parity. As stock runs down, prices will change to US$0.90.

However, the biggest impediment to our economy is the election campaign. No-one is going to decide on anything big until the election is over.

Ask all the manufacturers who are really feeling the pain of increased costs. Then go and ask the employees whose jobs are on the line such as those at Ford. Sure the Carbon Tax is only one of many increases in costs, but given the state of the world at present and no climate temperature increases for the last 10 or is it 15 yrs, you really do have to say it is a waste of time and a shot in the foot for Australia.

So, has it made any impact on our CO2 emissions reduction?

If it has "little effect" on the economy, how is it going to have any effect on CO2 emissions? If it has minimal effect on CO2 emissions, then we've just saddled ourselves with a whole bunch of inefficient bureaucracy for no no apparent reason.

Actually, you could well argue that the added bureaucracy emits CO2 to implement, so we might actually be worse off!

Thanks Stephen, electricity up 13% this year in NSW (official figure). Utilities removed from the inflation formula.

Electricity costs hurt the most vulnerable in our society, yet they are dismissed as an irrelevant annoyance by the RBA.

I will stick up for the battlers, especially when they are, being used as, a political tool.

Watched Samson and Delilah, on Sunday, it hit me very hard, it's about 2 young Aborigines and shows how our great nation has just dismissed Aborigines. The economy for them is irrelevant, many have absolutely nothing too lose.

Which planet are you living on?? Go and talk to the small businesses that have closed up shop on a/c of this carbon tax. It's worse than a payroll tax and devastes small enterprises. if you like I will point you in the right direction to some of these small business owners but my caveat is as follows:I will not be responsible for what their reactions might be.

name one small business that has closed up shop because of the carbon tax.

Samson & Delilah is a great movie Ken - Hope everyone else in the comments sections of these columns has a look at the movie to put their complaints into perspective.

For all the people who are getting angry and personal with Stephen K's optimism, it is far more productive to just provide facts in return to Stephen K eg. Unemployment has been low but in terms of total hours worked, the economy has been going nowhere.

I have 2 things to add.
I work in the steel industy. It is a great barometer for the economy as it is used in so many aspects of every day life. If you don't think anything is wrong with the economy, spend a day with me.
Secondly, if the Carbon tax is so great, why does Rudd want to reduce it to "some sort of floating rate speculated to be $6 per tonne?" It blows a hole in budget revenue for a start, although based on his history, that won't mean much to him.

There are plenty of "ways and means" for reducing CO2 emissions without a carbon tax.

The point of this article, which so many choose to ignore, is that the horror scenario propagated by Abbott, and which even today he continues to support in a order to maintain his 'credibility', has not occurred. Abbotts hysteria was wrong, and his alternative policy to reduce emissions is generally accepted as a total lemon.
Meanwhile Australia continues to have some of the highest per capita carbon emissions in the world.

The horror scenario promoted by the LNP is actually happening. Its a slow wrecking ball. It takes several years to accelerate. If you get in its way you get crushed.

Gotta love how we can have this entire discussion about the Carbon Tax with no mention of global warming.

It's not about the economy; it's about rescuing the planet.

That is where you are slightly incorrect. In a politicians eyes it is about collecting more taxes. If it was about rescueing the planet a tax would not be required.

What's this? Some candid, refreshing perspective? Surely not! Well done Anthony for breaking the mould!

Julie G would probably have a different view as will the Labor Party after the next election unless they reduce it significantly as now appears likely. In any case, the impact of the carbon tax was never going to be in one year; just ask those companies who now have only 2 years to run until the rebate is withdrawn along with their bank funding. I also note that somehow the tax hasn't saved the planet this year either, according to the climate scientists.

Hi Dan Marks. What do you mean by ignore? The carbon tax is much smaller than petrol/diesel price fluctuations and MUCH small that fuel subsidies that cannot be justified from a market perspective especially as we need alternatives that are not linked to pollution and global warming

Our most profitable well in Australia, drilled by Esso in 1964 and still running today, only produces CO2. CO2 is valuable. People buy it.

Not true, Geoff. I worked for Esso for over 15 years, and they sold only hydrocarbons and electricity, never CO2. None of their pipelines from their processing plants carried CO2.

Let's scrap the Carbon tax as it does not correctly represent the real damaging costs to our society, our kids future and to the natural eco-resources we currently get for free. We need an environment levy charged to people or business that reflects the costs in repairing the environmental damage. You pollute, you pay to fix it, you degrade natural eco-systems, you pay to restore them. The environment is a resource owned by all, allowing it to be wrecked with no cost or consequence can no longer be accepted. Carbon emissions changing our atmosphere, land degradation destroying natural environments, nitrogen pollution into our water systems, chemicals and plastics in our soils and oceans, depletion of natural resources, loss of biodiversity, this damage must be paid for by all.

Looks like the coalitian is paying close attention to this site. All the naysayers are out in force. Nice to see them running scared.

Dear Practico , this is a business site, so ip so facto there are more LNP voters on it and people running businesses that pay carbon tax and get no credits . Also if the fixed price on Carbon or income redistribution tax as I call it is so marvelous at $25.00 a ton why does no other country have it within cooee of this level? Also why is Kevin 2.0 (now without megalomaniac tendencies and any policies) also about drop teh fixed price and go to a floating one that could be anything?

Wasting your time arguing over pointless politics reflects the brainless, do nothing, policy void, negative mentality of all Liberal voters and their media support team The Murdoch's.

Policies? Who needs polices. The greedy rich does not what government and 'polices for all people' interfering with their wealth schemes. Vote for greed, vote for your rights to be unethical and vote for the freedom to lie and misrepresent, vote for Tony Abbott and the Liberals.

Good article Stephen. You could have added international comparisons on growth during the ongoing downturn, on debts and deficits, on unemployment rates, on living standards (we’re second to Norway – UN’s human development index), and more.

Don’t worry about those on the right. They just don’t like facts and figures. They prefer opinion, or to cite some example of a company or business friends apparently or allegedly doing it tough as their preferred economic barometer rather than the overall situation, or to highlight dust-ups in the Labor Party (I seem to recall the Coalition has had a few). I think many of them still don’t have much idea about the environment.

I think what they are really worried about is that Rudd is now PM and that the Coalition will now actually have to put some viable policies in place if they are to have much chance of winning, rather than just cruise through the election and into power. I'm sure they wish Gillard was still PM.

The economy has staggered forward in spite of a carbon tax. A tax is a hindrance on the economy after all.
Tapering of QE and half a percent interest rate cut leading to a lower dollar were the real reasons why our figures are SLIGHTLY positive.