The drop in the European carbon price to around A$3.25 per tonne just demonstrates again what folly the Australian Federal government has visited on the businesses and people of this country with an Australian carbon tax at A$23 per tonne (rising shortly) and a tax payer funded compensation arrangement (for some) of A$56. The compensation is already paid but the tax revenue isn't there to support it.
Every business, every utility, every business, every employer, every household and every individual will pay. Not only in increased living costs, but much more importantly, in reduced employment opportunities.
Incitec Pivot have substituted fertiliser manufacturing in Australia for manufacturing in the United States. Why? Lower energy costs (reportedly by two thirds) and lower unit labour costs (reportedly by half). This is just the tip of the unemployment iceberg. Add in repeated job losses in other manufacturing operations, and in resources developments.
The real killer though is in small and medium sized businesses. Empty shops, empty commercial premises, fewer opening hours at the local Foodworks is where the real impacts of lower employment opportunities will start to bite. And they will bite the most vulnerable. The youngsters, students, renters who need these extra work hours just to live. Equally, men and women over 50: if you are retrenched, or lose paid hours, there is not a lot of hope of recovery any time soon.
These people will not be counted as unemployed, so they won't show up in the statistics, but there are lots of them, and the social impacts of government induced underemployment will be felt by all of us in the future.
Make no mistake, as I have long predicted in these blogs, there is a slowdown coming. What economists term a "Growth Recession" is already here. The "growth" comes from aggregate GDP data. The "recession" you can see in the streets.
This should mean a reduction in Australian interest rates. If people are worried about employment, they are not going to borrow, no matter how low the interest rate. The circulation of money will also slow. This is a deflationary cycle notwithstanding the money printing in the US, UK, Europe, and Japan.
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