Carbon Tax Dominating Discussion

The carbon tax led to heated discussions, after Julia Gillard announced it in an address to the nation on Sunday 10 July. The tax is expected to be introduced on 1 July 2012.

Here is economics commentator Peter Lavelle's take of the most important events this week ending on 15.07.2011.

It seems there's one thing dominating discussion in the Australian economy this week, and that's the proposed carbon tax.

On July 10th Prime Minister Julia Gillard unveiled plans to tax carbon emissions, and cut Australia's CO2 contributions 5% by 2020, and 80% by 2050. Her proposal involves charging $23 for every tonne of CO2 produced, before moving to a market-dictated price in 3 years.

Perhaps understandably, this has economists and journalists in something of a tizzie. Should the tax pass, Australia would become the only developed economy in the world taking major action toward cutting carbon emissions, at a time when output in countries like China and India is set to rise dramatically.

Furthermore, some economists argue that the tax makes little sense. Given that Australia's sole ace card as an economy is its abundance of fossil fuels, the tax belies an intention to cut global dependence on such fuels.

This strikes economists a little bit like shooting yourself in the foot.

Looking elsewhere in the world, the debt crisis in the Eurozone continues to panic the markets. This week it emerged that Italy has done nothing to tackle its debt, in spite of huge financial problems in Ireland, Portugal and Greece.

To ease concerns that Italy could be the next nation to flirt with default then, Premier Silvio Berlusconi has unveiled plans to cut spending Euros 48bn.

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