Today I caught the end of a press conference where Julia Gillard claimed that the opposition's "fear campaign" (read: "politics as usual") is wrong because the ACCC has only received 600-odd complaints about price increases relating to the carbon tax. She claims that if the opposition was correct, Australians would be calling the ACCC in the millions.
But her argument (and the opposition's chicken little argument) misses the point entirely. In economics, the margin matters. Just because there are only small price increases (so far) that do not hurt the vast majority of businesses or consumers, at the margin the carbon tax by definition must be having an impact. People make decisions by comparing aternatives and various trade-offs at the margin and that is where this tax will be felt. The question should not be how many complaints the ACCC receives over price increases but:
- How much investment is never undertaken because of the tax?
- How many employees (or potential entrants) will now face unemployment because their marginal productivity is now below the minimum wage an employer can offer them?
- How many goods and services are now not produced/purchased resulting in everyone being less well off because of the prices increases? Or do people simply increase consumption as a percent of income at the expense of savings resulting in higher capital costs and less investment?
All of these questions are virtually impossible to empirically quantify but basic economics tells us that they must be occuring. These are the unseen costs that the tax is causing. The fact that the majority of existing firms are fine is beside the point; the sky was never going to fall in because of this tax. But to me the worst thing about the tax is that we could be losing billions of dollars of investment that will never see the light of day because of it. And all of this ignores the fact that the tax will likely do nothing for the environment while no markets exist in energy-generation in this country.
So no, the sky is not falling. But all Australians just got a little bit poorer for a tax that despite its noble intentions fails in its economics.