RBA governor: Green energy? Workers should pay

Issue 

Glenn Stevens, the governor of the Reserve Bank of Australia, has argued that working people should be forced to absorb the cost of higher power bills when a carbon emissions trading scheme is introduced in 2010. Speaking to the April 5 Sydney Morning Herald, Stevens argued that "the policy would need to be well explained to consumers to head off calls for higher wages".

The federal government plans to introduce a carbon-trading scheme to curb CO2 emissions. While the details have not yet been released, one possible variant is that energy producers would be sold emission permits (the right to release a certain amount of CO2 into the atmosphere), forcing up the costs of producing energy.

The theory goes that, in an open market for energy, producers would then pass the extra costs on to consumers (at least household consumers) who would be forced to reduce their consumption, thus reducing overall emissions.

"One of the things the community will have to accept is that this is a reduction in living standards insofar as our purchasing power over energy-intensive things is concerned. We have got to accept that. If we were to try to collectively push up our wages to get that back, that actually would defeat the intention of the policy", Stevens told the SMH.

Calling for wage restraint in the face of higher costs of living is all very well for Glenn Stevens, whose massive remuneration package has increased by 4% a year over the last few years. There is no evidence that the Stevens' family is threatened with foreclosure on a mortgage that it can no longer afford.

Should workers successfully seek wage increases to cover the extra cost it would "present a second round problem for us if that occurred", Stevens said. In other words, whatever gains workers could achieve in demanding a wage rise in fair compensation for higher costs would be taken away by the Reserve Bank in the form of higher interest rates, pushing up mortgages and housing costs more generally.

Price mechanisms are a crude means to reduce CO2 emissions. Government regulation requiring a transition to more sustainable forms of power generation, through such mechanisms as a mandatory renewable energy target and a government plan for the transition to sustainable energy generation at a quick pace, would be more effective. Of course this would also necessitate keeping power generation and supply in public hands — not selling it to the private sector as the Victorian and South Australian governments have done and as the NSW government is planning to do.

Stevens's "solution" simply forces the burden of climate change on to working people and threatens them with ever greater financial penalties if they try to resist. His comments dovetail with those of economic ministers in the Rudd government who are attempting to discourage unions from seeking wage rises for their members that cover increases in the cost of living, claiming that any increase in wages will just push up inflation.

The fact is that there is no "iron law" linking higher wages to inflation. Stevens's comments are part of the ideological war being waged against working people, demanding that they accept falling real wages and living standards in the interest of "the economy".

Stevens's prescription should be rejected. While the transition to a sustainable energy economy is urgent, it should not be done at the expense of working people. If "the market" is unwilling to pay the cost, industries should be taken into public hands and run in the interest of the community, rather than the need to turn a profit.

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