MATTERS OF PUBLIC IMPORTANCE Carbon Pricing

Mr HUSIC (Chifley—Government Whip) (16:21): I see in the galleries, proudly, a number of representatives of Sikh Australians, drawn here from all over the country Waheguru ji ka Khalsa, Waheguru ji ki Fateh. It is very good to see you all here. We reached a milestone this week. for a while I have been grateful to receive bulletins from the Minister for Climate Change and Energy Efficiency helpfully correcting a number of inaccuracies that are being peddled in reference to the introduction of the carbon price.

Last Sunday, the 40th edition of this appropriately named bulletin, Abbott's absurdities exposed, was issues by the Minister for Climate Change and Energy Efficiency. It is not hard to see how we could reach 40 bulletins in such a short time. We have had all sorts of claims made about the impact of the carbon price: that it would lead to job losses; that it would lead to the absolute wiping out of towns; that assistance for small business would be impacted; that the strength of the economy would be crippled; and that the future cost of lamb roasts would skyrocket to $100. I love a lamb roast on a Sunday night but here we have those opposite suggesting that it is going to cost over $100 for a lamb roast. Unimaginable increases and impacts were being proposed by those opposite and more of the same have come from them during this debate.

The 40th bulletin was a special because the mover of this MPI occupied a special place in the Abbott's absurdities exposed bulletin. He had come up with a pearler. He had said, 'Every time you turn on the kettle, open the fridge, turn on the light, switch on the TV, you will be paying the carbon tax.' As usual he was going way over the top about what the impact would actually be. We have been upfront about the impact of the carbon price on electricity prices. Treasury modelling actually found that the carbon price would increase household electricity prices by 10 per cent. We have said that that would equate to about $3.30 a week, on average. The fact of the matter is that the determinations of the electricity regulators have exactly confirmed this. In some cases the carbon impact has been less than the Treasury forecast. So bear in mind that there has been an average increase of $3.30, and to meet the impact we provided $10.10 a week to average households.

Not content with that, the opposition claimed that the carbon price is driving up CPI—wrong again. In fact, higher electricity prices only contributed 0.3 percentage points of the 1.4 per cent CPI increase that was recently recorded: less than one quarter of the CPI rise. The fact of the matter is that rising network prices contributed to the increased electricity price rise so that not all of the 0.3 percentage points is due to the carbon price rise. There was a 1.4 per cent CPI increase in the September quarter figures and that compares to 3.8 per cent when the coalition's GST came into effect in the September quarter of 2000. The CPI figures basically confirm what Treasury said would happen. So we need to bear in mind that despite all the scaremongering it is always useful to go back to see what is happening in reality.

I have spoken broadly about what happened in relation to price impacts and inflationary impacts. What happened to larger and smaller business energy users? The Treasury said, as I have said, that electricity prices would go up by 10 per cent. That has been confirmed. Recent analysis by Big Switch Projects of larger business users demonstrated an average of 11 per cent due to the carbon price and they found that the impact of the carbon price for most businesses is at, or just over, 2c per kilowatt hour—again, smack in line with what Treasury was saying would happen.

What has also been happening with larger businesses is that many of the network companies have been increasing demand charges—by as much as 75 per cent—resulting in an overall bill increase of up to 53 per cent. Not one bit of these increases are caused by the carbon price. It is time those opposite recognise that the big thing that is driving price rises is the network prices. The network costs underneath—the way that has been structured—is what is driving those increases. We have been upfront about the impact. Those opposite have tried to turn a blind eye to the real driver of those increases.

People have talked a lot in this debate about the investment that is being made by transmission companies and distributors. This investment went way back into the last decade, where transmission agencies' distributors were saying that they had a 1960s and 1970s network that was trying to deal with modern power demand from households and businesses. If you compare most households now to households when the networks were rolled out, you would see that households now have air conditioners, plasma TVs, heat pumps for pools and hot water systems. Those things have transformed the way that energy is used in homes.

As much as they have had to update their network, the reality is that in greenfield sites those costs are instantly paid for by households and new homeowners when they move in. This is really about brownfields investment. That investment has occurred for ages, and the continued demand by distributors and transmission agencies to keep investing is rightly being called into question, because it is having a big impact on prices.

The other thing that has happened is that we have needed to address peak demand. There are a number of times in the year when electricity demand skyrockets because temperatures are over 40 degrees and households have air conditioners running for extending periods. That is driving demand through the roof. So we need to invest in alternative supply measures like gas fired power stations that can be brought on line quickly and then shut off, which costs money. Again, we need to find a way to change the nature of supply and find better ways to manage demand. And that is what our price on carbon is designed to encourage; it is not designed—as is the claim made by those opposite—just to drive down demand through increases in power prices. That is simply not the case.

To way to stop increases in power prices, if people opposite are concerned about it, is to turn to the state owned corporations managed by governments in New South Wales and Queensland and stop in their tracks any claims for increased power prices. If those opposite are concerned about power price increases they can do just that. Barry O'Farrell was elected in New South Wales off a promise to rein in cost of living rises. We have seen power price increases, water price increases and he has done nothing to stop those in their tracks.

To put all this into perspective, whereas network costs make up about $51 of every $100 you pay, the carbon price only equates to $9. I draw the House's attention to the Sydney Morning Herald back on 22 October. Saul Eslake, chief economist on Australia and New Zealand for Bank of America Merrill Lynch had cut his forecast for the headline CPI to 1.1 per cent for the September quarter with an annual rate of 1.6 per cent. He said:

I think the economy has absorbed the introduction of a carbon tax relatively easily, with less disruptive than the introduction of the GST.

The latter—the GST—truly was the great big new tax and he is absolutely right. If you compare the two, it is comparing apples with oranges. Stephen Walters, the chief economist with JP Morgan, expects the carbon price will exceed Treasury's percentage point increase but he reckons the worst has already passed. He points to the fact that electricity prices increased but the increase included network and other charges unrelated to the carbon tax.
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Ed Husic MP
Federal Labor Member for Chifley


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