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.