Last year I blogged about some of the Victorian government’s ridiculous claims relating to carbon pricing. I was upset that the Victorian government had made sensational claims without releasing their modelling. I was reminded to look back into this by the The Age today, claiming:
ENERGY Minister Michael O’Brien ignored his own department’s economic modelling on the impact of the federal carbon tax, instead relying on his own calculations to claim Victoria would be hit ”first and hardest”.
It’s a little confusing who said what based on what, so here is my clarification of events….
In July last year, amongst the excitement of the carbon pricing legislation, Minister O’Brien put out this release, claiming that the Feds were about to take “$450 from the pocket of each Victorian” and other exciting claims. We still don’t know what this was based on, as the Department of Primary Industry won’t release the advice it gave to the minister, but claim that it’s figures were “different from those ultimately published” in the minister’s release. The Age has interpreted this to mean that the minister relied on his own calculations and he doesn’t seem to be saying anything different.
In August, the government made other claims based on commissioned modelling from Deloitte Access Economics (DAE). Initially they made their claims without releasing their modelling, prompting my blogpost. The federal response to the state claims was that the modelling, which they hadn’t seen, didn’t include the compensation package. See the now updated version of the Herald Sun story here. I wondered how reasonably smart economists like DAE would have missed the entire compensation package. Soon the crushing pressure of the Economists at Large blog forced the Vic government to release their modelling and all was revealed.
DAE hadn’t missed the compensation, that was just a guess from the feds. The DAE modelling is actually pretty similar to Treasury’s, though it assumes much less international carbon trading, making life more difficult for Australian emitters and increasing the impact of carbon pricing. What happened was that the state government, the Herald Sun and DAE all took a page out of the Institute of Public Affair’s playbook, presenting the difference between two positive growth rates as a negative impact.
The Sun claimed “the tax will result in 23,000 fewer jobs being created in the state in 2015”, though actually if you read the DAE report, the number is 35,000 (piii). Regardless, what they mean to say is that employment in Victoria is forecast to grow strongly from the current levels of around 2,000,000 people employed to either 2,976,000 with carbon pricing or 3,011,000 without carbon pricing, a difference of 1.16%.
It’s the same old spin. What it comes down to is this: If you’ve used similar modelling to Treasury, you’ve got similar conclusions to Treasury. That is that most Australians are better off under a carbon tax and that we still grow strongly under a carbon tax, albeit at a slightly slower rate. I’ve blogged about this here and here.
As for where Minister O’Brian got his figures, I imagine we’ll have to keep reading the papers.
