Australian Govt In A $7 Billion Black Hole As Carbon Price Collapses
A COLLAPSE in the European carbon price will burn a hole in [the Australian government's] budget, with the government scrambling to remodel and downgrade its forecasted price in 2015.
News of the writedown came as the European price sank below $4 after measures to prop it up failed in the European Parliament.
A new round of tax cuts due in 2015 that were to help Australians cope with what had been expected to be a world carbon price of $29 a tonne will still be paid despite the federal government revising its forecast.
The compensation will cost $14.9 billion over the first four years of the tax which started on July 1 last year at $23 a tonne.
Treasury officials had predicted in 2011 that, when the carbon tax moves to a floating price in 2015, the world carbon price would be at least $29 a tonne and as high as $61 a tonne. A floor price of $15, described by the government in 2011 as a “safety valve” that was to apply for three years from 2015, was scrapped in August last year so the Australian scheme could be linked to the European scheme.
Blaming the GFC, Climate Change Minister Greg Combet confirmed the government had abandoned its earlier forecasts.
Opposition treasury spokesman Joe Hockey claimed the hit to the budget could be as high as $7 billion a year. Australian Chamber of Commerce and Industry Chief economist Greg Evans said the collapse in the European price showed the scale of the “economic recklessness of imposing a carbon tax of $23 per tonne on Australian industry and consumers”