The Carbon Tax and Regional Australia – Sophie Mirabella

On Wednesday the 8 June 2011, Sophie Mirabella MP, Opposition Shadow Minister for Industry, Innovation and Science, joined the Hon. Richard Marles, Parliamentary Secretary for Pacific Island Affairs, to discuss the impact on regional Australia of a carbon tax. Both from Victoria, Richard Marles (Corio) and Sophie Mirabella (Indi) are well placed to evaluate how local businesses and investors outside large metropolitan areas view the economic and industrial change the tax will establish.

THE CARBON TAX AND REGIONAL AUSTRALIA

SOPHIE MIRABELLA

Thank you, thank you very much Gerard and it’s good of Richard to be here, a fellow Victorian and a former sparring partner from our university days of course.

I’m grateful for the opportunity to have this debate as I believe MPs should be subjected to scrutiny. It’s not sufficient to just give opinions and policy, but to be questioned by the electorate, whether their own or the Australian electorate in general. I don’t think there’s enough of that. This issue is close to my heart – and the rural and regional Australia I represent. Sadly, the carbon tax in fact will increase emissions worldwide while destroying the Australian economy.

This isn’t a debate about the science of global warming. The Coalition has a very clear position, a bipartisan position, that there should be a five per cent reduction in Australian emissions on 2000 levels. But we do not believe that the best way of doing that is through a tax. The Opposition believes in direct action. Contrary to what Richard has just said, there are economists who do believe ours is a better way to go, including three Nobel laureates. We are committed to investments in trees, better soils and smarter technology. Through that we will be able to reduce our emissions to the agreed five per cent level.

For many Australians, including those in regional areas, this is a particularly challenging time. It’s important to paint the landscape against which rural and regional communities are now looking to the future. And to try to answer some of their questions. The cost of living is on an upward trajectory. Many people are still not only recovering from devastating floods, cycles and bushfires, but also from one of the worst droughts in Australia’s history. This era of drought has been estimated to have reduced farmers’ equivalent household incomes by something in the order of $20,000 annually. It also had a significant impact on the mental and physical health of many rural and regional people, affected family relationships and been a significant factor in the increase in suicide rates.

Since 2007, Australia has plunged back into a public debt and deficit spiral that has just seen our second largest budget deficit since the Second World War. That deficit has now soared to $49.9 billion which is $8.6 billion worse than forecast in last year’s budget. Our government is borrowing $135 million a day. The recent national accounts, the last quarter, revealed the worst slump in economic growth in Australia since the days of “the recession we had to have” in the 1990s.

There’s also now a lack of national leadership and direction from the Gillard Government. In addition, mismanagement of their economies by state Labor governments, especially here in NSW, has generated a series of problems with public infrastructure. This has placed an enormous burden on local government in the delivery of basic services. Not surprisingly, amid this difficult combination of circumstances, I believe many people are anxious about the future, including about their capacity to make ends meet, to invest in their businesses, or their farms.

Some figures are illuminating in all this. Over the past three and a half years, we’ve seen power prices go up by 44 per cent, gas prices go up 29 per cent, water prices go up 46 per cent, education costs 17 per cent, health costs 15 per cent, rent up by 19 per cent. For those who are paying mortgages, average repayments have escalated by $500 a month. Those figures, I have to stress, are national figures. Regionally, the figures are worse because many costs tend to be higher in non-metropolitan areas. But I am unable to give you the equivalent regional figures as this data stopped being collected in late 2007, after the Labor Party took over the federal government. It would be helpful for us to ask Richard to take back the message back to the Cabinet to see what can be done to restore the collection of statistics from non-metropolitan areas. Because that information is very important in developing evidence based policy for our regions.

We know of course that petrol and diesel prices are almost always more expensive in rural and regional areas. In turn that feeds its way through into higher prices for other items. If you live in non-metropolitan areas, you tend to travel further, whether to work or to take your kids to play competition sport on the weekend, or to access health facilities. Rural and regional councils, particularly those who have a relatively small rate base as opposed to a large geographic area of responsibility, have a significantly lower capacity to raise revenue than their city counterparts. The increased energy costs these councils, will face are impossible for them to absorb. Increased rates, as a result, will be a further burden for rural ratepayers.

Australians who have lived off the land have faced multiple pressures over the last few years – from increased regulations in areas like transport infrastructure and food security, and changes to rules surrounding livestock traceability, business structure adjustments and bio-security requirements. A series of weather events across the country have also had a crushing impact.

It’s worth bearing in mind that there is ever increasing competition from foreign interests. This is a problem that was perhaps best encapsulated last year when, for the first time in living memory, Australia became a net importer of food and groceries. This issue is a burning issue in the community, particularly in rural and regional Australia. Food and grocery manufacturing is the largest single component of Australia’s manufacturing sector. But its international trade has been reduced from a $4.5 billion surplus in 2004-05 to a $1.8 billion deficit in 2009-10. It’s comprised of around 31,000 businesses that in 2009, 10 spent about $3.5 billion a year in capital investment. It’s also employs more than 3 per cent of all employed people in Australia.

As the Food and Grocery Council points out, food producers currently face a series of pressing challenges, including the increased cost of energy, availability of water, rising imports and the rising Australian dollar’s impact on exports. Food production and food processing is linked to food security and these issues are of critical importance, not only to those who think nationally about what’s in Australia’s best interests and what sort of country we want to live in by 2050, but to those communities who produce the nation’s food and often provide the employment in food processing plants.

The current concerns about what a carbon tax would do to increased production costs, means that a lot of investment is not happening now. Investment is needed to ensure that employment is secure for the next five to ten years. But this is not happening. With a carbon tax you will not see manufacturing disappear overnight. But you will see a drop in investment to upgrade plant facilities. Investment decisions are not being made now out of a fear of what a carbon tax will do to the competitiveness of particular manufacturing and processing plants.

I’m sure all of you will recall a recent story about the reduction of Australian jobs at Heinz. There have also been reports from the food sector and unions about the enormous challenges that face Australian food processing at the moment. I share those concerns. On the one hand, there are growing concerns about food security and our ability to feed ourselves; on the other hand, the government is sending significant signals that it will act to discourage production and reduce profitability in the sector.

In manufacturing, more generally, employee numbers have recently dwindled to just under the one million level for the first time since statistics were collected. Since the start of 2008, there’ve been almost 90,000 jobs lost in manufacturing in Australia. To put it more simply, 555 jobs lost every week over that period. If the picture I’ve just painted across manufacturing isn’t bad enough, then the problems that are going to be confronted with the carbon tax will only exacerbate these challenges.

One of the problems with a carbon tax is the additional cost to manufacturing. Ask most manufacturers, from one end of the country to the other, and they will tell you they are already operating on very thin margins, on very narrow profit margins. They will tell they cannot absorb yet another cost and remain competitive. That is a very simple story. The government doesn’t need to listen to the Opposition; it doesn’t need to listen to Tony Abbott or me. All they need to do, all they need to do is speak to manufacturing businesses. It’s not hard.

Let’s assume for a moment, in the continued absence of any certainty from the government about a carbon tax, that the carbon tax will start at $26 a tonne. That’s a reasonable baseline figure, given that’s what is advocated under a CPRS. From this is a starting point, of course, it is expected to increase. It’s worth remembering that the Greens rejected the CPRS specifically because the carbon price wasn’t high enough. So even if the rate of the tax does start at a relatively low level, compared to what the Greens want, I’m sure it will increase.

Business has been, of late, rather reluctant to come out and criticise Labor governments. A particular corporate culture has developed, shall we say, of co-operation. So we’ve seen corporate compliance with certain government policies. But suddenly that has changed. To have so many in the corporate sector speak against the carbon tax is quite significant. They’re not doing it as a favour to the Coalition, they’re not doing it because they don’t have anything better to do. They are doing it because they’re really going to hurt.

The Food and Grocery Council, for example, has estimated that food and grocery prices would rise from between 3 and 5 per cent. Access Economics says a carbon tax would close 16 coal mines and cost at least 10,000 jobs in coal mining, it would cost 24,000 jobs in mining overall according to the ACIL, the Mineral Council fears the carbon tax scheme’s design could cost the industry $30 billion to 2020 and threaten an investment pipeline of $140 billion.

Needless to say, mining is concentrated in rural and remote areas. The carbon tax will cost 45,000 jobs in emissions intensive industries according to frontier economics. The sort of emissions intensive industries like steel at Port Kembla and the aluminium industry at Portland. At a time when Australians are being told to embrace an increasingly open and globalised world, here is a reverse tariff that’s intended to be imposed on Australian manufacturing. Let me tell you, country people think about these issues because they’ve always had to fight to retain services, always had to fight to be recognised as an important part of the Australian economy. What rural Australia does not like to see is their government making decisions that penalises them to the advantage of foreign companies. The carbon tax is a reverse tariff because it will mean that import competition will not have an increased cost applied to its products because our competitors do not impose a carbon tax. It’s good to think that we are still a positive nation that believes our government makes decisions in our interest. That is why there is so much anger and lack of understanding at why the government isn’t listening to the concerns that people have, particularly in rural and regional Australia, about a carbon tax.

The National Farmers Federation has some modelling on the impact of a carbon tax on the rice, sugar, cotton, pork and dairy industries. They have released an analysis showing that at $36 a tonne, farmers would be hit with an additional $36,000 a year in operating costs under the carbon tax. If you look at just one local example in the rural and regional electorate in Victoria, in McEwen, and take one municipality, Murrundindi, which is covered in that report: for grain farming alone, annual business costs will increase between 2.4 and 5.7 per cent with a reduction in net farming between 8.6 and 29.7 per cent, relative to a business-as-usual scenario.

What have we seen from those few Labor members who represent rural and regional electorates? Absolute silence. The Prime Minister was asked in Question Time about what representations she had had from Labor MPs who represent rural and regional concerns. And those electorates that have significant manufacturing in their electorates. The Prime Minister did everything but answer the question. The truth is that it appears that not one local member has taken the concerns of their workforce to the Prime Minister. Not a peep. Not a peep out of them. And they are doing their own electorates a disservice. All this must end in tears. I would recommend to my colleagues who sit on the government benches to stop being what Dougie Cameron called the ‘lobotomised zombies’. It’s time to call out that the emperor’s got no clothes.

The carbon tax is a dud. It’s killing our base. It’s going to kill our manufacturing and alter the Australian economy. We can’t just crash or crash through, we’ve got to stop this in its tracks. I’m asking Labor MPs to stand up and speak on behalf of their members. Just as the workers at Port Kembla forced Paul Howes into a corner so that he would say he wouldn’t support a carbon tax if a single job was lost in the steel industry. I call on those Labor MPs, many of them who were put in there by blue collar workers of various unions from around the nation, to stand up for them.

My electorate also has significant cattle interests and I’ve looked at some of the figures. The Sheepmeat Council of Australia has found that the impact of a carbon tax (at $35 a tonne) on that industry would be that a 16 per cent loss in revenue. These impacts will be very widespread. Whether in agriculture, in food processing or manufacturing based in rural and regional areas, or the cities, there are going to be significant end costs on business. It’s not just about electricity costs in business, it’s electricity costs in schools, aged care homes, the cool rooms on cherry farms, abattoirs and the like. Not only the extra logistical and food costs typically associated with transporting livestock and machinery over long distances. What we’re talking about are much wider ramifications than that.

We’re talking about significant falls in business revenue and profitability and, as a result, the number of jobs that would be shed. We’re also talking about a cumulative tax – a tax that will be a tax on a tax on a tax. When you look at a particular manufactured components, there’ll be tax on each of one of those components and it’s very difficult, impossible, for the government to provide compensation for that. Already Graham Kraehe from BlueScope Steel has said that for an emissions intensive industry any form of compensation would be akin to putting a band-aid over a bullet wound. You can imagine for businesses that will get no compensation, like the local dry-cleaning business and the local abattoir, the impact would be just as severe.

Access Economics and Frontier Economics say that for every job lost in cities under a carbon tax, 1.3 will be lost in the regions. And there will be more than a 4 per cent fall in employment in non-urban areas. In turn, that means we’re talking about some very serious implications for rural and regional communities. It’s heartbreaking losing a job wherever you are, but in a city you have a smaller area and a much larger catchment of potential employers from whom to seek employment. When you live in the regions, the alternative employment is scarce, the distance and the cost of travel is more significant and may involve significant geographic shifts. This causes much displacement in many communities.

More broadly, the repercussions of job losses in regions are generally more widely spread. For this reason, there’s a lot of concern in rural and regional areas and anxiety about the carbon tax. Linkages between businesses and workers are often much more direct and interdependent, and difficulties that are experienced in one business can very quickly spread to many supporting businesses and very quickly affect a whole town. Where the worst effects of a closure of a major employer can often be absorbed in urban areas, there’s a ripple effect in rural and regional areas that causes extraordinary distress.

Labor Party politics has always been a numbers game, about getting the numbers within the union, within the faction, within the sub-faction, the culture of looking after your own. This overrides a binding responsibility that parties gain office to govern for all Australians. It’s time to do this on the carbon tax.