Car­bon tax fall­out

Townsville Bulletin - - Investor -

IT’S not of­ten that wor­ries over in­ter­est rates are up­staged by an­other fac­tor in con­sumers’ think­ing, but the fu­ri­ous de­bate over a car­bon price ap­pears to be too much to bear.

While the nasty row over pric­ing car­bon has at times dropped to far­ci­cal lev­els as our politi­cians ap­pear to say any­thing to win their side of the ar­gu­ment, it’s been enough for shop­pers to drag out their worry beads.

The lat­est read­ing of con­sumer con­fi­dence re­leased this week showed sen­ti­ment has dropped to its low­est level since June 2010.

Oddly enough, this was a time when con­sumers were fret­ting over an­other levy – the min­ing tax.

The an­nounce­ment of a car­bon tax comes hot on the heels of the flood levy, which looks set to pass in the Se­nate, al­though the gov­ern­ment has re­peat­edly em­pha­sised it will be no more than the price of a cup of cof­fee for many peo­ple who have to pay it. You can imag­ine cof­fee shop own­ers cringed ev­ery time that com­par­i­son was made.

One un­in­ten­tional ben­e­fit from this war of words on what is still a hy­po­thet­i­cal car­bon tax – we have no de­tail other than its start date of July 1, 2012 – is it is keep­ing the Re­serve Bank on the side­lines re­gard­ing in­ter­est rates.

Not whether there is a car­bon price or not, but the fact that the con­sumers’ mood is sour­ing.

The fall in con­fi­dence

COF­FEE FIX: The gov­ern­ment has re­peat­edly em­pha­sised the car­bon tax will cost no more than the price of a cup of cof­fee sug­gests that peo­ple won’t be rush­ing out to the shops and chang­ing their be­hav­iour from big savers to big spenders any time soon.

In its quar­terly anal­y­sis on re­tail­ing, Deloitte Ac­cess Eco­nom­ics ex­pects sales w i l l c o n t i n u e s l o w l y through the first half of 2011, al­though bet­ter news is likely in the sec­ond half of the year and be­yond.

‘‘ One can’t ig­nore the re­cent surge in Aus­tralia’s in­come and we suspect that, over time, very low rates of un­em­ploy­ment should help to loosen the purse strings of con­sumers,’’ Deloitte Acc e s s p a r t n e r D a v i d Rum­bens said.

His re­port showed that re­tail­ers have suf­fered their worst per­for­mance since the late 1980s dur­ing the past year.

The rapid turn­around in in­ter­est rates since hit­ting near record lows dur­ing the depths of the global fi­nan­cial cri­sis has been a jolt to c o n s u m e r s , b u t M r Rum­bens also said the ad­vent of the GFC it­self has scared peo­ple into pay­ing off their debts or build­ing a nest egg.

So when their TV screens are full of red-faced politi­cians scream­ing blue mur­der over bro­ken elec­tion prom­ises, cost of liv­ing pres­sures and the need to t a ke a c t i o n o n c l i mate change, said purse strings may re­main firmly tied.

And lit­tle won­der that the 2.4 per cent fall in the March West­pac-Mel­bourne In­sti­tute sen­ti­ment in­dex this week fea­tured a spike in news re­called on ‘‘ bud­get and tax­a­tion’’, out­pac­ing rec­ol­lec­tions on in­ter­est rate news.

The news on ‘‘ bud­get and tax­a­tion’’ was also re­garded less favourably than that on rates.

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