Not climate models this time (for a change), but Treasury modelling of the effects of a carbon price on the Australian economy. And according to Wayne Swan, we won’t even notice it! Brilliant! It’s almost as if the model was tweaked to produce the desired result… where have we heard that before? Tiny little question, if the economy doesn’t notice it, how is it supposed to reduce emissions?
But Swan has been caught out:
A prominent economist who sits on the Reserve Bank board has criticised the Government’s assessment of the economic impact of the carbon tax.
Yesterday Treasurer Wayne Swan said that based on Treasury estimates, a $20 per tonne carbon tax would not have a long-term impact on jobs and the economy.
He said employment will increase by 1.6 million jobs by 2020 under a carbon price.
But economist Warwick McKibbin, from the Australian National University, says the Government’s modelling is flawed.
He told Lateline Business a carbon tax could affect the cost of living.
“That’s the adjustment process in these models; if you raise carbon taxes and people lose their jobs, real wages will fall and therefore you’ll go back to full employment,” he said.
“So the critical question in that sort of model is not what happens to jobs: it’s what happens to real standard of living.”
Professor McKibbin runs his own software company which develops modelling for policy analysis, including a carbon pricing model.
He says he has submitted different modelling to Treasury and says the Government should use his model in its estimates.
“It would be very unfortunate if the leaked announcement that came out yesterday about the employment effects of carbon taxes was used in a model that wasn’t mine, because mine is the only model that has unemployment,” he said.
“The other models that people have for carbon pricing actually assumes full employment, so by definition, no matter what you do to the economy, employment cannot change.
“What should happen if you put on a carbon tax in those models is real wages should fall. Now, from the selective leaking, I think that that question hasn’t fully been understood.” (source)
Indeed.









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