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Ken Henry, the former head of the Treasury, is perplexed by Australia’s decision to remove the carbon tax, and he is urging the Albanese government to bring it back.
Henry served as Australia’s Treasury secretary from 2001 to 2011, during which time he would have been involved in preparing the advice for the tax scheme introduced by Julia Gillard in 2012.
Speaking at the National Press Club as chair of the Australian Climate and Biodiversity Foundation, he emphasized that enhancing environmental protection laws is crucial for boosting Australia’s productivity and meeting environmental goals.
The newly appointed Environment Minister, Murray Watt, is now tasked with updating Australia’s nature laws, as reforms were postponed during Labor’s initial government term.
When questioned if the Albanese government should leverage its majority and clear mandate to revisit the carbon tax, Henry responded emphatically, stating: “Indeed, we need a carbon tax.”
“What do we mean reconsider? Why the hell did we ever drop it? That’s the question,” Henry said.
“It still boggles the mind that we had the world’s best carbon policy. And then, for purely political reasons, decided that we can afford to do without it.”
The carbon tax, repealed by the Abbott government in July 2014, put a price on every tonne of pollution produced.
The aim was to motivate businesses to embrace cleaner technologies and practices, otherwise compelling exporters and manufacturers to purchase permits for their emissions.
Henry supports raising taxes following leaked Treasury advice
Earlier this week, the ABC reported leaked documents show Treasury has advised the government to raise taxes and cut spending after the election.
Treasurer Jim Chalmers attempted to downplay the advice, saying the heavily redacted document had not adequately captured the government’s brief, which was already being focused on.
“I’m pretty relaxed about it, to be honest, because, of course, Treasury provides advice for incoming governments and no government typically goes into the detail of that,” Chalmers said on Tuesday.
This suggestion echoes the advice from a 2010 Treasury report, which examined Australian tax reform over a 10 to 20-year period, commonly known as the Henry review.
“If the budget is to meet these growing spending pressures, then we’ve got two options. We either increase taxes, as a share of GDP, or we grow the economy faster,” Henry told reporters.
He explained average productivity growth has slowed down from 2.31 per cent a year during the 1990s to an average of 0.98 per cent a year.
“That’s a pretty fundamental difference, right. If we continue on that trajectory, as we said … we will have no option but to raise taxes.”
