A long interesting article, here's asnipet...."...........The...

A long interesting article, here's a
snipet....

"...........The week saw a repeat of the lesson from the last year: the North Atlantic zone remains locked in the consequences from the GFC. Excess liquidity has saved the world from a deeper recession but the collective private, public and sovereign debt crisis is the No 1 issue today within industrialised nations. But not Australia.

Australia under Gillard is either being brilliantly clever in exploiting its escape from the GFC or engaged in an act of strategic folly by putting lead in the saddle bags of its comparative advantage of cheap energy.

The first question, therefore, is whether Labor has misread the global trend. It is whether the Gillard government is locked into an insulated political fantasy as the rest of the world sinks into the financial mire.

The second question, however, is whether Labor has misread the domestic economy and is pricing carbon at the exact time when much of the non-resources sector is alarmed at stagnant conditions. Labor should be alerted by the reaction last Sunday of the three main industry groups, the Business Council of Australia, the Australian Industry Group and the Chamber of Commerce and Industry, expressing deep worry at carbon pricing now. It is no good just dismissing them as rent-seekers.

Westpac chief economist Bill Evans, in a report issued yesterday, predicts a dramatic change of sentiment and a new cycle of interest rate cuts triggered by the renewed global crisis, subdued domestic conditions and, wait for it, rising unemployment through 2012, the year the carbon price begins.

Evans says, "The turning point in the labour market may have already been reached." If true, this means a new set of horrors for Gillard Labor -- rising unemployment as well as rising cost-of-living pressures in tandem with carbon pricing.

Admitting his forecasts are on the pessimistic side, Evans says "fear within the financial system in Europe" looks set to "intensify". He forecasts unemployment heading next year towards 5.5 per cent to 5.7 per cent. He believes the economic cycle for the rest of this year and next year will be set by "falling consumer confidence and global financial turmoil spilling over to business confidence". The weakest sectors are expected to be retail, manufacturing and non-mining construction, and carbon tax concerns "have contributed to the recent slide in consumer confidence".

There is now a critical rift between the views of the official forecasters and sections of the private sector. Gillard and Wayne Swan have expressed their confidence about the strength of the economy. If unemployment does rise the carbon price scheme is not to blame. But it will be invested with blame by Tony Abbott.

This raises a pivotal issue for Gillard's future: has Labor misread the domestic currents into which it will launch the great carbon event?

Rarely has any prime minister aimed higher than Gillard this week. Yet there is a profound egoism in Gillard's policy and rhetoric given the narrowness of her political base, the polarisation within the nation, the precarious condition of the global economy and the longevity of the policy's cycle running out to 2050.

Memories are short. This was not Gillard's plan in the 2010 campaign (and this is not a reference to the carbon tax). In the campaign Gillard backed the principle of carbon pricing but she said wanted a political consensus before acting. How wise, in retrospect. Indeed, this was the advice Gillard gave Kevin Rudd earlier in the year asking him to back off his own scheme. She was consistent in the campaign but changed her mind post-election.

Why?

The answer lies in the September 1, 2010, formal alliance between Labor and the Greens, with paragraph 6.1 (a) saying Australia must price carbon and that a multi-party committee be established and resourced as a cabinet committee to pursue this goal.

That is, the price for Gillard being a minority PM with a working majority was to press ahead with her carbon scheme. Once the multi-party committee got cracking (the agreement required that its structure, membership and work plan be finalised by the end of September) it became obvious this committee and not the so-called consensus-seeking Citizens Assembly would drive the process.

This led directly to Gillard's policy last Sunday with its joint ownership of Labor, Greens and independents.

The answer, therefore, is that Australia has this policy because it was essential to meet Labor's political needs to form a viable minority government. The irony is that the policy that gave life to Gillard's government might be the policy that extinguishes it.

This complex but elemental motivation for Gillard's position is now a crucial factor in its own right. Despite her invoking idealism, too much of this policy arises from Gillard's own needs rather than the nation's immediate needs. Her change of mind (symbolised by the carbon tax) has been recruited by Abbott to destroy public trust in the PM. Once lost, it is hard to recover.

No leader has ever tried to mount such a reform with a primary vote at 27 per cent, with an opposition so strong in the parliament and so hostile to the idea and with public opinion so alienated. The fact this is a joint Labor-Greens policy, while essential to win the votes in parliament, will become a further negative for Labor in the nation.

The mood this week was ominous. Gillard is the architect of her own problems yet some of the attack she faced was personal, nasty and ignorant. It came from sections of the media that prefer to play the woman rather than the issue. Yet Gillard's effort to inject emotion into her persona and presentation at the National Press Club was not a success -- she was too defensive in trying to explain herself and suddenly looked too vulnerable......"

Read more: http://www.theaustralian.com.au/national-affairs/carbon-plan/carbon-fiddling-as-world-economy-burns/story-fn99tjf2-1226095570562