Millions ‘better off’ with carbon tax

MILLIONS of Australian households will end up with more money in their pockets when they are financially compensated for the effects of a carbon tax on their electricity bills and other expenses, the federal government will pledge today.

As Labor battles to reassure people about the impact of a carbon tax on the cost of living, Climate Change Minister Greg Combet will promise that more than half of the revenue raised by the tax will be used to assist households – and that the assistance will be permanent.

Mr Combet, in an address to the National Press Club, will acknowledge that the most pressing point in the current public debate on the carbon price ”is undoubtedly the price impacts that may be faced by households”. He will say that, with the government’s assistance, ”millions of households will be better off”.

Advertisement: Story continues below A Treasury analysis recently released after a freedom of information request by the opposition estimated that households could pay $863 annually in higher food, power and petrol prices under a $30 a tonne carbon price.

The modelling found that electricity bills for the average household would rise $4.20 a week, gas bills $2.20 a week, petrol $3.60 and food $1.70. But if petrol is completely offset, the total annual rise goes down to $608 a year. The Treasury said the modelling was early-stage and based on the Rudd emission trading scheme’s design.

The government has not yet set the level of its carbon tax. It has indicated petrol is likely to be offset.

Mr Combet will again stress that ”assistance for pensioners and low and middle-income households will be a priority”.

”There will be generous assistance for households to meet costs that may be passed on by the companies that are paying for their pollution,” he said

”The Prime Minister has made it clear that we will put households first. The government has already committed that every cent raised from the carbon price will be used to assist households, support jobs in the most affected industries and to encourage the transition to a clean energy future.”

Under its previous emissions trading scheme, the government proposed to over-compensate many households. There has been speculation this scheme could leave up to 2.6 million low-income households better off and another 1.7 million middle-income households no worse off.

Over-compensation makes things harder for the Coalition, which has said that in government it would remove the benefits when it repealed the tax. The compensation will be delivered via the welfare and tax system. The opposition claims – but the government disputes – that the carbon tax was a factor in reinforcing the concern of New South Wales state election voters about rising prices. Opposition Leader Tony Abbott said yesterday the carbon levy was a toxic tax on the cost of living.

Apart from voter nervousness, the government is locked in argument with polluters and trade-exposed industries over their compensation.

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