Sunday is the big day for the release of carbon tax details, though there is little doubt that most of the salient points have been leaked by the government over the past few days.
Softening up is the name of this exercise in public relations spin through which we are passing, with the objective being that by the time the formal announcement is made no one in Australia will actually be listening.
And this leads to one of the few humorous points about the new tax – it might actually turn out to be a money-maker for astute investors.
More on making money later, though as a sneak preview have a look at coal company share prices over the past few weeks as the carbon tax debate has gained heat – they have been rising, not falling.
Right now, however, it is time to consider what has been leaked about the carbon tax, with the first point being that it is a tax designed by a committee, and like everything ever designed by a committee it will not work.
Over the past few days the Australian government’s “leak machine” has hinted that the tax will:
- Not hurt the coal industry;
- Will hurt the coal industry;
- Be priced at $23 a tonne (should be good for calculator sales!);
- Offer $250 million a year in coal industry compensation;
- Not cost coal industry jobs;
- Cost 3000 coal industry jobs;
- Not tax petrol; and
- Only hit the top 500 polluters.
If that leak list is confusing there are two reasons why this is so: either it is (a) meant to confuse, or (b) it truly reflects the turmoil inside Australia’s minority government which is trying to balance the demands of its close friends in the Greens party and the demands of working class Australians who traditionally support Labor governments.
There are in fact so many conflicting forces at work in the carbon tax debate that The Hog cannot imagine why any government would attempt to introduce it while also trying to whack the overall mining industry with a super-tax on profits.
The end result will be a never-ending stream of complaints from special interest groups which have not got what they want, creating an image of a government which is out of control – which might not be too far from the truth.
Whatever is contained in Sunday’s great carbon tax revelation there are three certainties obvious to The Hog. They are:
- Confusion will be the name of the political game for the rest of the Gillard government’s tenure;
- No one will be happy with the new carbon or mining taxes – hardly a rocket science prediction as no one is ever happy with tax; and
- Coal companies remain a terrific investment.
Consigning those first two points to the rubbish bin marked “political nonsense” let’s have a look at exhibit three – why investors should load up on coal shares, and how some savvy punters have already been doing that.
Metrocoal, for example, is up from 59c a few days ago to around 70c. Aston Resources has rebounded from $8.18 to $8.88. Stanmore is up from 94c to $1.02.
Apart from really annoying the coal-hating Greens, those share price movements expose the great opportunity that coal still represents, because it is the only viable, baseload, fuel source that most of the world can rely on for at least the next 10-20 years, and perhaps a lot longer.
Nuclear has shot its bolt and been sent back to its radioactive sin bin. Natural gas is a premium fuel and too good for simple electricity generation.
Renewables are not yet commercially viable, and might never be, until power prices double or quadruple – in which case consumers will scream out for more coal – and damn the carbon tax.
It’s for all these reasons that Sunday’s carbon tax revelation will probably rate as the biggest single non-event in Australia’s economic history, while also serve as another nail in Gillard’s political coffin.
