Economy

Business backs carbon trading; says no to WorkChoices campaign… Tax breaks on export income… Queensland water woes… Sour grapes on rates… Electricity prices up… Economic roundup…

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Business backs carbon trading over carbon tax

Businesses could benefit if the Federal Government’s initial response to global warming is a carbon tax rather than a carbon trading system, a new Productivity Commission report says.

Such a move would be at odds with the almost universal preference of business groups for some form of market-based carbon trading regime.

The commission says the lack of data available on how businesses would respond to a trading scheme – which would require businesses to bid for permits to emit carbon above a certain level – means it could have unanticipated consequences for the economy and fail to guarantee meaningful reductions in greenhouse gas emissions.

On the other hand, a carbon tax would avoid some of these problems because the level of the tax can be set to avoid wreaking havoc on affected businesses, the commission says.

The Australian Industry Group argues for a market-based approach – such as emissions trading – in preference to direct regulation, in its submission to the Prime Minister’s Task Group on Emissions Trading. But chief executive Heather Ridout says further research on targets and effects on industry is needed before any trading scheme is introduced.

A New South Wales Business Chamber spokesman says that although the group has previously argued that a carbon trading scheme is the best way to go, it would “be prepared to look” at a carbon tax proposal. It seeks a revenue-neutral scheme offering incentives to business to adjust. “Whether it is a tax or a trading scheme is a secondary consideration.”

The Australian Chamber of Commerce and Industry also says in its submission to the Task Group that it supports a trading system over a carbon tax, but wants significant further research is required before any system is introduced.

– Mike Preston

No to WorkChoices campaign

Business has refused to do John Howard’s work for him and pay for a pre-election advertising campaign to promote the virtues of WorkChoices. Key employer groups yesterday ruled out funding a campaign, saying it would escalate the “unhelpful and unproductive” debate between the Howard Government and unions, reports The Australian newspaper.

Howard has admitted that despite spending more than $30 million promoting the new laws before their introduction last year, it would be unethical to use taxpayers’ funds to make political attacks on Labor and the unions on this issue.

– Jacqui Walker

Tax breaks on export income

Business and industry groups have repeatedly called for a tax break on income earned overseas, saying it would encourage exports and innovation.

Now it appears Treasury could be listening. Rumors are growing that an announcement about a tax break may be made in the industry statement, expected to be released in the next few weeks. The break could be as high as a 20% tax credit on income earned overseas.

Any change would be welcome by business. Some companies have become so annoyed by dividends on income being effectively taxed twice that they have moved operations offshore.

– Amanda Gome

Heavy water restrictions to hit Queensland businesses

Queensland businesses could have their water turned off if they fail to comply with draconian new restrictions to take effect after Easter.

The tight restrictions will send shivers down the spine of businesses around the country as state governments’ search for ways conserve their water supply.

From Tuesday, the Level 5 water restrictions mean businesses that use more than 10 million litres of water a year must submit a water efficiency management plan to the Queensland Water Commission or face disconnection.

A senior business source says much of Queensland’s industry will be affected by the 10 million litre measure. Businesses that use just one million litres a year will not be able to use town water in kitchens, laundries, bathrooms and ablution blocks unless they have certified water-efficient fittings or have submitted a water management plan. Car dealerships will only be able to wash vehicles between 8am and 10am on Tuesdays and/or immediately prior to delivery.

The Queensland Water Commission’s chairwoman, Elizabeth Nosworthy, says: “Under Level 5, further demands will be placed on business for even greater water savings and efficiencies.”

– Mike Preston

Sour grapes on interest rates

Not everyone was pleased yesterday by the Reserve Bank’s decision yesterday to keep interest rates steady. Some analysts and bank bill investors, who had punted on a rise, are now complaining that the bank should improve its “communication” with the market.

Earlier in the week, one newspaper reported it was an omen of a rate rise that when Reserve Bank chief economist Malcolm Edey gave a speech last week, his minders were at pains to ensure it was reported correctly.

As it turns out, everyone who believed that was wrong. Are they trying too hard to read minds?

– Jacqui Walker

NSW electricity prices to rise

Electricity prices in New South Wales could rise by up to 8% over the next three years under a draft determination on electricity pricing released by the state’s electricity regulator yesterday.

The first stage of the price increase takes effect on July 1 this year. The Independent Pricing and Regulatory Tribunal hopes the price increase will promote competition in the industry as small energy retailers move to undercut the regulated price.

– Mike Preston

Economic roundup

The Australian dollar hit a 10-year high of US82.10¢ at 11.10 this morning before easing slightly to US81.90¢ at 12.15pm. At 12.15 the S&P/ASX 200 was 6086.6 points, down 0.5% on yesterday’s close.

But the surging Australian dollar doesn’t seem to have had much effect on international visitor numbers, according the Australian Bureau of Statistics figures released today. Close to 473,000 people visited Australia in February, marginally up on January, after increases of 0.5% for December 2006 and 0.3% for January 2007.

– Mike Preston

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