The people of NSW have been treated to alternative descriptions of
the impact of the Gillard government's proposed carbon price package.
The first, prepared by the Commonwealth Treasury, showed
very modest impacts on prices, wages and employment, most of which would
be fully offset by the various compensation and adjustment mechanisms
included in the package.
The second, attributed to the NSW Treasury, showed a very
different picture. According to Premier Barry O'Farrell and Treasurer
Mike Baird the carbon price would be a ''disaster'', which would ''tear
the heart out of many industries'' and ''savagely hit'' regions such as
the Hunter and Illawarra. Households would face electricity prices being
''forced up'' by ''up to'' $498 a year.
On the face of it, the Commonwealth and NSW Treasuries
seem to have very different economic models, producing sharply different
results. But a closer look reveals a different, and more surprising,
story. The NSW Treasury report was based on work by a consulting firm,
Frontier Economics, who say they used the same model as the
Commonwealth, with almost identical inputs. As a result Frontier
concludes, ''At an aggregate level, the modelling results in this report
are broadly consistent with the Commonwealth Treasury modelling.''
How can this be? The answer is that the NSW government
engaged in an exercise in misleading advertising that would make even
the most shonky of infomercial vendors blush.
Let's start with that old favourite of dodgy advertisers:
''up to'', as in ''households will pay up to $498 a year''. The
Commonwealth Treasury modelling, endorsed by Frontier, suggests that the
average household will probably pay much less, about $170 a year, and
that this will be more than offset, for most households, by a higher
income tax threshold.
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