Paul Fletcher (Bradfield, Liberal Party) Share this | Link to this | Hansard source

I refer the Prime Minister to her claims that a carbon tax will act as a price signal by increasing the price of goods with a high proportion of carbon relative to goods with a lower proportion of carbon. Given the Prime Minister's threat that businesses face fines from the ACCC if they increase prices in response to higher cost inputs due to the carbon tax, and an increase of more than 0.7 per cent is gouging, can she explain how the price signal is going to work to achieve its supposed objective?

Julia Gillard (Lalor, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

I thank the member for his question. I think the member had missed something absolutely pivotal and central to the scheme, which is that the entities paying the carbon price are the biggest polluters. So where the price signal is working, it is working as a price signal to the biggest polluters to innovate and to change the way that they conduct business.

This is exactly the same mechanism that the John Howard emissions trading scheme had at its heart, which was supported by the Leader of the Opposition and all of the members of the front bench who were ministers at the time. So at the moment these businesses that generate carbon pollution can put any amount of carbon pollution into the atmosphere for no cost. It does not matter if next year you put more up into the atmosphere than this year because it is at no cost. Why would you bother innovating to reduce the amount of carbon pollution? You do not face any costs. So the way in which carbon pricing will work—

Christopher Pyne (Sturt, Liberal Party, Shadow Minister for Education, Apprenticeships and Training) Share this | Link to this | Hansard source

Mr Speaker, on a point of order of direct relevance: the Prime Minister was simply asked how a price signal is allowed to work if in fact a business is fined for increasing its prices.

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

The Prime Minister is responding to the question.

Julia Gillard (Lalor, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

Thank you very much, Mr Speaker, and I am responding directly to the question. I was asked about price signals and the Carbon Pollution Reduction Scheme and we are now seeing something that perhaps explains the grand confusion about these questions amongst some members of the opposition. The price is paid by the biggest polluters. Of course, as rational business people, they will seek to reduce that price and as they seek to reduce that price they will innovate and change the way that they do business and cut the amount of carbon pollution they generate. If you move amongst the Australian business community, and I know the member who asked the question does that, you will meet and be able to have discussions with business people who can talk to you about their innovation plans to reduce carbon pollution because they know that carbon pricing is coming and will start on 1 July next year.

What the member is also referring to is that there is some flowthrough from carbon pricing into the prices of things that people buy and that impact—the Leader of the Opposition in his scare campaign has said that impact is 'astronomical'—is 0.7 per cent of CPI and households are being assisted so that around four million households will come out better off and around six million households will be fully compensated.

As prices change in shops, yes, you will see an effect where goods that have less carbon pollution imbedded in them will be relatively cheaper, but we want those price signals to be true price signals not the results of price gouging, which is why, yes, we will have very strong fines and penalties for anybody who goes through and price gouges—that is, they adjust a price in a way that is disproportionate and not as a result of carbon pricing and then claim to the consumer that the price has only been changed because of carbon pricing.

To come back to the reasons behind this question, if the member has fundamentally misunderstood the scheme I would suggest to him that he look at it again. I know he is on the public record as saying:

When it comes to economic issues, my instinct is for open markets, free competition …

If that is right, he should be endorsing an emissions trading scheme and not the red tape regulation and burdens that the Leader of the Opposition would use to smash Australian businesses and to smash Australian jobs. The other thing I would suggest is that he endorse the government's plan to make sure there that there is no price gouging.

Christopher Pyne (Sturt, Liberal Party, Shadow Minister for Education, Apprenticeships and Training) Share this | Link to this | Hansard source

Mr Speaker, I rise on a point of order: I move that the Prime Minister's time be extended by no more than two minutes to give her the opportunity to answer the question on how a business can increase its prices at the same time as it is being fined for increasing its prices and therefore operate a price signal that she has tried to describe in the last four minutes but has failed to do so. I would give her the opportunity in the next two minutes to answer the question.

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

Order! The Prime Minister has five seconds, then an extension. At that stage it would be out of order because it is not allowed under standing order 1, which deals with times of speeches not questions.

Julia Gillard (Lalor, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

I am happy to keep explaining. What I would like to see is some point where the Leader of the Opposition explains his plan, given no economist in the nation endorses it. (Time expired)