Ideas@TheCentre
The Coalition’s carbon tax compensation nightmare
The big winners from the carbon tax are Australia’s 3.5 million pensioners. In May this year, they received their Clean Energy Advance – a lump sum payment worth $250 for singles and $190 per person for couples – to cover the additional costs of the carbon tax until March 2013 when the Clean Energy Supplement comes into effect.
The Clean Energy Supplement will provide financial assistance equivalent to 1.7% increase in the maximum rate of the pension, or about $336 for a single pensioner and $255 for each member of a couple every year.
The supplement will provide up to $1.66 in compensation for every dollar in the additional costs that pensioners are expected to bear under the carbon tax; over the course of a year, single pensioners will receive $134 and couples $226 per year more than the their additional expenses under the carbon tax. Add the twice-yearly indexation of pensions, and pensioners are not just compensated but substantially overcompensated.
No doubt pensioners are elated as the government gravy train throws money at them. But it causes a significant problem for the Coalition, which has committed to repealing the carbon tax and the compensation with it. After all, as Tony Abbott said, ‘once the carbon tax has gone, there’s no need for compensation.’
This is a commitment that guarantees that 3.5 million pensioners who are better off under a carbon tax will see the recent increases in their Centrelink cheques stop and potentially go backwards if a Coalition government honours its commitment to scrap the carbon tax and the compensation that came with it. This is an issue ripe for a massive scare campaign similar to that of WorkChoices.
However, if the Coalition is prepared to face the wrath of pensioners, this could be an opportunity to kickstart the next generation of reforms to Australia’s ever growing welfare state. The Coalition could take inspiration from the welfare reforms in the United Kingdom, which are designed simplify the welfare system and improve incentives for people to move from welfare to work. It’s not a silver bullet but it is a step in the right direction.
Andrew Baker is a Policy Analyst at The Centre for Independent Studies.
