Carbon tax misfires

I imagined there would be riots when the average Australian family faced a 10% cut in income as a result of the carbon tax. But for some reason, nobody seems to be making a big deal about it.

I suspect it’s pretty quiet because although mine is a very average family (two kids and a dog), we’re not on the political radar.

The carbon tax is expected to slug us around $5000 per year – a whopping 10% of the average dairy farm family’s income. As reported in The Land and the Australian Financial Review:

The three majors that will pay the new tax from July 1 are already investing in low-carbon technologies but Murray Goulburn Co-operative estimates rising electricity prices will cut the annual income of the average farmer by $5000 a year, The Australian Financial Review reports.

“Profit in the average dairy business in recent years has averaged $50,000,” one MGC general manager, Robert Poole, said. “So that represents a 10 per cent cut. For the average dairy farmer, the tax is going to cut hard into their profits.”

How can this be? Well, because even though I plant 1000 trees or more on the farm every year and have built some of the most carbon-rich soils in the country (up to 22% organic matter content), I cannot participate in the poorly framed Carbon Farming Initiative.

The milk processor we supply, Murray Goulburn, will face increased costs of $10 million per annum and will pass those costs onto farmers – guaranteed. It is guaranteed to do so because MG is 100% farmer-owned so the buck quite literally stops with us. Our fertiliser, fuel and electricity prices will also rise.

Ironically, if MG was spewing out far more greenhouse gases, we might not face this crippling tax because “emission intensive” businesses that export just 10% of their products are considered “trade exposed” and given special concessions. MG exports around half of our milk but because it’s not that “emission intensive” (aka dirty), it misses out on concessions.

Please, can somebody explain the logic behind this?

4 thoughts on “Carbon tax misfires

  1. Hi Marion, I don’t think that most ‘average’ families will be slugged 10% but modeling by the dairy industry does show that your mob will get slugged. I guess we have to wait and see whether that modelling is correct, I hope not. as for the logic there is some, though I agree there is not much in the CFI for Gippsland dairy farmers. I would recommend @Corey Watts from the independent think tank The Climate Institute. I will get your blog to him and see if he has any comment.

    • I think the fact that it’s the minorty of families who will be slugged 10% is the most outrageous part of the deal. Why should farmers carry a burden that would be totally unpalatable to other families?

  2. Hi Marian. While I accept that dairy producers are in a more difficult situation than most, not least in the wake of a bad drought, but I’m not so sure that the carbon price is entirely or even mostly to blame. (And the average cost-of-living impact of the price is definitely far lower than 10 per cent, by the way.) The companies appearing in the AFR article seem to admit as much but the way the article is framed makes it sound as if the carbon ‘tax’ is *the* major source of pain when this is simply not so. Estimates by CSIRO and AECOM, from work commissioned by The Climate Institute, Choice and the Australian Council of Social Service (ACOSS) show that about a tenth of the price rise in electricity bills will come down to the carbon pricing legislation. Obviously this varies depending upon the arrangement in each state, but there are other forces at play here. Rising coal and oil prices for one. Fertilizer prices have also been on the rise long before the carbon price. Over the last few years network fees have risen by thirty per cent on average as utilities replace poles and wires to keep with rising demand and ageing electricity networks. Prices are also set to rise in the wake of the recent bushfire inquiry. My point is that prices are rising anyway. An irresponsible approach would be to wrap industries in cotton wool, exposing them to a harsher reality at a later stage. I understand that companies like Fonterra and even MG are working to help their producers assess their energy usage and find ways of lifting efficiency. In Fonterra’s case, they estimate the average impact of the carbon price is under $3,000 and that this can largely be offset with efficiency improvements. Dairy Australia were recently granted $1 million in federal money to conduct 900 energy assessments on dairy farms—a bid supported by processors. This money—like the $1.7 billion for the rural sector—is available because of revenue raised by the carbon price. I would also point out that, unlike other sectors of the economy, farming is exempt from any direct liability for emissions from livestock, fertilizers, etc. (I accept that there will be some cost impact indirectly.) I’m not suggesting this all amounts to the perfect solution, but change is coming, ready or not. The task now is to help people get ready. Yes, it won’t all be rosy, but articles like the one in the AFR are pretty scaremongering, and just downright unhelpful.

    • Thanks Corey.

      I am not suggesting the carbon price is to blame for our slim margins at all. I am commenting on reports that the carbon tax will reduce our family incomes by another 10 per cent and that this would not be acceptable to other average Australians. They have demanded (and received) compensation for far lesser impacts.

      We have done an energy audit on our farm and, unfortunately, there is little that we can implement to make any efficiencies without large capital expenditure (far beyond the reach of a family income of $50K!). I hope that other farmers who have audits done under the plan announced in the last few days are more successful.

      It’s a combination of the increasing costs of fertiliser, fuel, electricity, coupled with the impact of MG’s extra $10 million costs on the price we are paid for our milk that is the killer.

Leave a Reply