An amusing take on carbon pricing today from Gotti:
Take a bow Tony Abbott. It looks like that the abolition of the carbon tax has finally reversed Australians’ obsession with higher saving and cutting back spending.
Although the carbon money is not yet in consumers’ pockets, the energy companies have written to their customers so they know the money is coming.
…Now suddenly there is real change and Nelson has put out an alert to retailers — prepare for a good Christmas. And investors in retail shares need to be aware of the sentiment change
Jeez, it’s no wonder the policy failed. The carbon “tax” was a carbon price, not a tax. It came with tax cuts offsetting the price rises so didn’t effect the level of spending, unless the population is led by Gotti-style ignorance, and thus felt worse off.
In Gotti’s terms, by removing the price, there is no net gain to the economy, either. Electricity consumption is part of household consumption expenditure so the growth rate will remain the same, only the spending pattern will change, which is the whole point of the carbon price to begin with.
In reality, however, Gotti may be still be right by complete luck. Despite his partial analysis, the removal of the carbon price has not been accompanied by a reversal of the tax cuts so Tony Abbott has effectively delivered a stimulus package.
Whether or not that results in higher spending or saving is an open question.
