There are few who will suffer immediate losses from the removal of a price on carbon as much as the Tasmanian government.
Last year’s budget brought down in May 2013 occurred before Tony Abbott’s election in September. Accordingly payments out of profits from Hydro Tasmania (HT) assumed a status quo situation with the carbon pricing mechanism in place.
The government’s mid year report issued in February 2014 updated expected returns from HT with carbon pricing removed.
The following graph lists the downward revisions in expected returns:
The downward revisions are the red bits. The blue bits are what’s still expected.
The returns, being the income tax equivalent payments that are paid to government rather than to the ATO and dividends from after tax income, lag income by a year. The amount of $145 million expected in 2015 is based on 2014 income when carbon pricing enabled HT to make a nice profit.
The 2016 remittance from HT will only be $15 million (based on 2015 income) and the 2017 amount will be nil. As tax and dividends represent about 80% of net profit this imply profits in 2016 will be about $20 million and in 2017 will be nil.
In the 3 years from 2015 to 2017 the reductions total $204 million.
It may be recalled that the Liberals went to the recent State election with a manifesto for a brighter future. Notwithstanding the projected deficits for the 2014 year and the 3 years of forward estimate totalled $1 billion the Liberal’s plan, presented as a fix to the much heralded Labor Green budget mess proposed only token changes.
The token improvement to the bottom line resulted after a little creative accounting and turning a blind eye to other matters, among them the effects on government revenue of changes to carbon pricing.
The following is an extract from the plan for a brighter future:
As can be seen there was no provision for reduced revenue from HT, altho’ the carbon price removal was taken as a given.
The meagre improvement to the bottom line has now gone in one fell swoop. With a commitment to keep all promises the 28th August budget will indeed be interesting.