It may be a new year but anyone hoping for a change of tune in federal politics would have been sadly disappointed.
Last week Parliament debated Alcoa’s announcement that it was reviewing the future of its aluminium smelter in Victoria, putting 600 manufacturing jobs at risk. Alcoa Australia’s managing director Alan Cransberg cited high metal prices, increased input costs and the high Australia dollar as the deciding factors.
When you look at these three elements the announcement was not hugely surprising. Firstly, the global price of refined aluminium is kept low because China – with its lower labour costs – is the world’s largest producer.
With respect to input expenses, 30 per cent of refinery costs come from electricity use. Producers in countries like Canada can use low-cost hydroelectric power but Australian refineries have no choice but to use more costly coal-powered electricity, leaving them with little room to move on costs.
Finally, the highest Australian dollar in 29 years makes our exports even more expensive and uncompetitive. The high dollar is driven by steady demand for our resource commodities from growing economies like China and India, and from investors attracted by our low inflation rate.
Clearly it’s a complex, multi-faceted issue that cannot be explained away in simplistic soundbites.
So what was the Leader of the Opposition’s measured response to Alcoa’s announcement when parliament met this week?
“CARBON TAX! CARBON TAX! It’s all because of that pesky CARBON TAX!”
Seriously Mr Abbott? Are you still banging on about that? Were you referring to the carbon legislation that won’t be implemented until July 2012? The same legislation that will cause a 0.7 per cent increase in the cost of living compared to the 2.5 per cent the GST caused? Is that the one that is causing Alcoa to go bust?
If I might once again quote managing director Alan Cransberg in The Australian, “the looming tax was not the reason for the review.” High metal prices, increased costs and the high Australian dollar were.
So what can a government do to reduce some of these pressures on the manufacturing sector? Well, the high dollar can be lowered by “cooling off’ the resources sector to limit its distortion of the economy. The imposition of a mining tax would do just that, whilst having the added bonus of redistributing their huge profits to pay for Australian infrastructure. That way, when the minerals have all been dug up, the Australian people will have something to show for it, apart from the size of Gina Rinehart’s wallet that is.
Unfortunately, this is the same mining tax that Mr Abbott has pledged to scrap if the Coalition wins power, supposedly because it contains the word “tax.’ More excellent long-term planning from the Leader of the Opposition.
If last week is anything to go by, we can expect another two years of Mr Abbott blaming the carbon tax for all our woes. I look forward to the headlines “Carbon Tax causes Airbus cracks,” “Carbon Tax supplies arms to Assad Regime” and “Betrayed by the Carbon Tax: Horror Midnight Holdup for Suburban Mother.” It’s going to be a fun 2012.
Hadley White,
Armidale
