Business unimpressed as Productivity Commission set to review carbon tax assistance

Business has spoken out against a new Productivity Commission consultation paper which suggests assistance for industries affected by the carbon tax may not be increased, and that aid could even be reduced in certain markets.

Greg Evans, director of economics for the Australian Chamber of Commerce and Industry, says the paper demonstrates why “industry so strongly resisted the carbon tax regime from the outset”.

“It represents another layer of compliance and regulatory hurdles that business will have to jump through in order to prove the detrimental impact on its competitiveness,” Evans says.

The Productivity Commission has been charged with assessing the industry assistance programs started as a result of the carbon tax. The consultation paper outlines the reviews that are to take place with relation to assistance.

But there are some statements in the paper that give pause. It says the commission faces a hard task distinguishing the impact a carbon price has on individual markets, rather than outside factors such as economic concerns.

“Even with good data, establishing a causal link between the carbon pricing mechanism and competitiveness, separate to other forces influencing competitiveness, will be a challenging exercise,” it says.

“Although quantitative analysis would be undertaken where it would clearly add value, it would not obviate the need for judgement.”

It also says it will need to determine whether businesses have been unfairly disadvantaged, but businesses must show they have been “significantly adversely impacted”.

The Commission has the power to recommend adjusting assistance in any direction, and said that if it determines an industry was conferring a “windfall gain…then a recommendation to adjust assistance downward might be made”.

However, it also warned the Commission would only consider upward adjustments where it has found carbon pricing “is having a materially adverse and unexpected impact on an industry’s competitiveness that is likely to persist”.

But Evans says the entire consultation paper adds more hurdles for businesses affected by the tax – even though it has been confirmed assistance won’t be cut before 2017.

“The onerous process will add to investment uncertainty as affected industries try and work out the implications of worst case scenarios where adjustment support is not provided or reduced.”

“Rather than focusing on their core business and normal competitive pressures, management will be distracted by constantly changing government policy and guidelines and this will inevitably affect productivity performance.”