What’s in tatters?

Greg Combet has just released a presser saying the Coalition’s economic credentials are in tatters. Debt and deficits anyone? Anyway this is what he said.

Opposition climate action spokesperson Greg Hunt is trying to frighten workers by claiming that a carbon price will cut real wages.

he facts are that Treasury modelling of the Gillard Government’s clean energy future package shows that under a carbon price:
Real wages will increase by 20 per cent by 2020 and almost 50 per cent by 2050;

Mr Abbott and Mr Hunt consistently misrepresent Treasury modelling.

That is a lot of words. Why doesn’t Combet show people a picture – like this one from the 2008 modelling exercise.

How did Treasury describe that?

In the short run, real wages are assumed to be sticky, taking up to 10 years to
adjust, resulting in some temporary unemployment. However over time, real wage growth slows,
demand for labour increases, returning employment to reference case levels (Chart 6.12).

Wage growth will decline and unemployment will grow. But only for ten years or so – after that you’ll be able to get a job at lower wages. What’s the problem?

A bit too scary? In the second modelling exercise the Treasury showed the levels and the relative decline.

This how Treasury explained what would happen.

Pricing carbon affects the demand for labour, as a result of slower output and capital growth. Real wages grow slightly more slowly than in the global action scenario. The level of employment is largely unaffected. Around 1.6 million jobs are added to 2020 in both the core policy and global action scenario, with a further 4.4 million jobs added by 2050 with or without carbon pricing.

Given that unemployment is now higher than when it came to office, it is good to see that they’ll be pursuing policies that create 1.6 million jobs.

Nonetheless Combet is very careful to talk about the levels and not the decline in growth and not the increase in unemployment (carefully whitewashed out of the second Treasury modelling report).

Combet also says

This puts them at odds with economists and policy experts who advise that a carbon price is the lowest cost and most efficient way to transform the economy for a clean energy future.

Makes you wonder if he’s read the AFR today. Tony Wood of the ALP government funded Grattan Institute tells us

It is increasingly clear that a carbon pricing scheme alone will not do enough to enable low-emission technologies to generate enough of our electricity at sufficiently low cost.

Locking into a future dependent on gas would be expensive.

He concludes with

Otherwise, the low carbon future will be too expensive.

We knew that and said it all along.

(HT: New Gold Dream)

Update: The Coalition presser is here (emphasis added).

Real wages are expected to fall by almost one per cent than otherwise by 2020.
This means for an average worker a cut in salary of $600 a year.
By 2050, the cut in real wages is six per cent, which is equivalent to an annual pay cut of $6,000 a year.

Exactly consistent with the Treasury modelling.

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17 Responses to What’s in tatters?

  1. Token

    Labor Party left candidate for leadership stays true to ALP values and produces a document which promises the following to the nation from the fundemental “reform” from the Rudd / Gillard years:

    Wage growth will decline and unemployment will grow. But only for ten years or so – after that you’ll be able to get a job at lower wages. What’s the problem?

    This is one for the true believers of the ALP!

  2. If this was shamlessness on the part of Combet and his advisers you could vaguely understand, but still disprove of it. I’m convinced they just don’t get it, which is a much more frightening prospect.

    I had to go for a long walk at lunch after this one.

  3. Biota

    Indefensible deceipt. They are either thick or amoral, or both.

    Also, why is there not a model for no global action?

  4. Sleetmute

    Combet – how does the former union chief sleep at night not only knowing he is making workers worse off, but knowingly lying about it? Beggars belief.

  5. Alan Moran

    Perhaps the economy is heading for the precipice. But those whose superannuation is in Vic super are likely to beat it over the abbys.

    According to AAP, Australian superannuation funds could shift their investments away from carbon-intensive industries under a push towards more socially responsible investment.

    Under new guidelines released on Wednesday by the industry, fund managers in the $1.3 trillion sector will be expected to consider environmental, social and governance (ESG) principles when designing their investment strategy.

    The guidelines are based on the United Nations Principles for Responsible Investment.

    Chief executive of VicSuper Michael Dundon, who has been instrumental in designing the local guidelines, told AAP that his $8.5 billion fund would focus on investing in the renewable energy sector.

    “We are avoiding funds or stocks where substantial exposure to carbon,” he said.

    “For example, you’d have to think carefully about understanding the impact on economic returns on brown coal producers with carbon pricing.

    “We see opportunities in wind and solar and other forms of technology that will deliver long-term returns.”

    Your money is in good hands with investments in Solyandra, Pacific Hydro, Infragen and all other such busiensses – that is as long as they continue to get taxpayer support

  6. Biota

    Sleetmute- Unions are for the benefit of workers is one of the big hoaxes.

  7. Biota

    Alan, the conspiracy theorist in me suggest the reason for this is to lock in “investment” in renewables. Once entire retirement savings are tied in, who is going to be so unpopular as to sink those industries.

  8. ar

    how does the former union chief sleep at night not only knowing he is making workers worse off, but knowingly lying about it?

    I’m still trying to understand the correlation here…

    Unionist, workers worse off, troubled sleep. Nup. Can’t see it…

  9. Tom

    I haven’t seen a post on the Cat about another set of numbers referenced elsewhere about the true state of unemployment and underemployment in Australia, which alarmed me. http://www.roymorgan.com/news/polls/2012/4742/
    I made a mental note years ago that ABS stats may have been doctored early in the Howard Govt’s tenure (or late in Keating’s) to increase the reflected positive glow of high employment on the incumbents. Anything known, Sinc? What of the fidelity of Aust stats compared with Euro/USA? Morgan seems to have a feisty contempt for the official data. http://www.roymorgan.com/news/papers/2003/20030801/

  10. cohenite

    Combet is a liar and should be asked the question: will Australia experience electricity shortages and power rationing in the next year.

    The answer to that question is yes because of this and this.

  11. Johno

    It has to be said.

    If Tony Abbott or Joe Hockey had told porkies like this, the love media would be all over them like a rash.

    But the Left’s Golden Boy can get away with it.

    It doesn’t take much to figure out why Fairfax is going down the gurgler.

  12. Sleetmute

    Biota and ar, I totally get that unionists don’t care about workers per se (certainly non-unionised workers) or the unemployed. But I can’t even see how the carbon tax helps the position of unions.

  13. Jazza

    What makes Combet think we would believe anything from any single member of the most deceitful ,incompetent wasteful,spendthrift government this country had been unfortunate enough to have to suffer?

  14. brc

    Sleetmute – I’m with you. While there was a bit of chest-puffing and grandstanding when the Carbon tax was announced, in reality the unions all rolled over for tickled bellies, despite not one single union being better off from the tax.

    It really does beggar belief that they are still trying to push the tax. I thought we were at the point where they were just trying to get it behind them as fast as possible and ‘move forwards’.

  15. On your Marx

    I am grateful on reading this.

    I went to the Treasury website and had a read of the material. My eldest son is always on to me about getting interested in this topic.

    Real wages rise over the period. The average rise up to 1.9% up to 2020 and not quite as fast after that depending on the scenario involved.

    You actually haven’t shown Mr Combet to be wrong.
    I would be grateful if you did.

    Unemployment is higher than when the government came to office because a certain GFC occurred.
    Without that it would be perhaps lower perhaps the same.

    No you wouldn’t get a job at lower wages at all.
    The wages would be higher. You are afterall paid in nominal terms. The real increase or decrease comes after taking into account inflation.

    An increase in carbon prices will ipsofacto lead to higher prices. To make a comparison It will lead to about 5 times less revenue than the GST.

    Perhaps it would help to show the dollar amounts to see the actual difference over the time period involved.

  16. JC

    I am grateful on reading this.

    No you’re not. Stop lying Marx.

    I went to the Treasury website and had a read of the material. My eldest son is always on to me about getting interested in this topic.

    Dinner conversations at your place must be a treat.

    ” Honey, did you read page 49 of the 1978 mid year Treasury bulletin? It was one of the most exciting things I’ve ever read”

    Real wages rise over the period. The average rise up to 1.9% up to 2020 and not quite as fast after that depending on the scenario involved.

    This is from the same treasury that was out by a factor of 100% on it’s forward year receipts estimates and you think people should take stock of the bullshit they project about real wages out to 2020. What a laugh.

    You actually haven’t shown Mr Combet to be wrong.
    I would be grateful if you did.

    Here’s one:

    This puts them at odds with economists and policy experts who advise that a carbon price is the lowest cost and most efficient way to transform the economy for a clean energy future.

    There’s no such thing as a clean energy future with the suite of technology they are implementing. The cost will choke the economy.

    Furthermore our carbon intensity is extremely efficient in relative terms. Combet is a lying douchebag…expected from a senior member of the union clerks party.

    It’s not outrite emissions we should he looking at. It’s carbon intensity.

    Unemployment is higher than when the government came to office because a certain GFC occurred.
    Without that it would be perhaps lower perhaps the same.

    Oh and what long term long lasting impact has the GFC had on our economy seeing we’re tied at the hip to the developing world for our fortunes?

    Terms of trade? Highest in 150 years.

    So list the impact of the GFC other than the disastrous impact of the stimulus that is still with us.

    No you wouldn’t get a job at lower wages at all.
    The wages would be higher. You are afterall paid in nominal terms. The real increase or decrease comes after taking into account inflation.

    And?

    An increase in carbon prices will ipsofacto lead to higher prices. To make a comparison It will lead to about 5 times less revenue than the GST.

    It’s the impact on those industries we mostly rely on that export that is important.

    Perhaps it would help to show the dollar amounts to see the actual difference over the time period involved.

    It’s a choke hold on the most important factor to run an industrial civilization. Energy. This is what they are fucking up by taking away our comparative advantage.

    Marx, you’re an imbecile and I feel sorry for your dinner companions.

  17. wreckage

    It’s a choke hold on the most important factor to run an industrial civilization. Energy.

    Everything, from food to information to art, relies on energy. Some people can’t grasp that.

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