Millions worse off under carbon tax

Three million households will be worse off under the carbon tax despite Julia Gillard showering $15 billion on pensioners, families and low-income earners.

While nine out of 10 households will receive some form of government assistance, Treasury modelling shows only two-thirds of all households will be given enough to fully offset a forecast 0.7 per cent increase in the cost of living.

From July 1 next year, every taxpayer earning less than $80,000 will receive a tax cut of at least $300 when the tax-free threshold more than triples to $18,200 from $6000.

On average, households will be hit by increased weekly costs of $9.90.

This includes $3.30 a week from a 10 per cent jump in electricity costs and a 9 per cent increase in gas prices, or $1.50 a week.

By comparison, household assistance will average $10.10 a week, leaving just a 20¢-a-week buffer in a compensation package heavily skewed towards low and middle-income earners.

To allow the least well-off to start preparing for increased costs of living, $1.5 billion of the compensation will be paid even before the carbon tax starts.

In May next year, pensioners and self-funded retirees will start receiving lump sum payments of up to $250 each before the carbon tax begins as part of a so-called clean energy supplement worth $338 for singles and $510 for couples over the full year.

More than four million households will get assistance exceeding the cost of living increases.

As revealed in _The West Australian _last week, the starting price for carbon will be $23 a tonne, rising in real terms by 2.5 per cent for three years before the market sets the carbon price through an emissions trading scheme in 2015.

Taxpayers earning under $80,000 will then get even more tax cuts.

The carbon tax and ETS aim to cut Australia's emissions by 5 per cent on 2000 levels, or by 160 million tonnes a year - the equivalent of taking 45 million cars off the road.

But up to 50 per cent of the emission cuts between 2015 and 2020 will come from carbon abatement schemes overseas, such as carbon markets in Europe and the US.

Over the next four years, the carbon tax will raise $24.5 billion from Australia's 500 biggest polluters, of which $15.4 billion will go to households and $9.2 billion to emissions-intensive, trade-exposed industries in grants and free permits.

Steel, zinc and aluminium producers will get 94.5 per cent of their permits free while WA's liquefied natural gas producers will get 66 per cent free.

The coal industry will get a $1.3 billion jobs adjustment package and the steel industry an extra $300 million payment to lessen their emissions.

In an address to the nation last night, the Prime Minister said economists and experts agreed that pricing carbon was the best and most efficient way to reduce greenhouse gas emissions.

Ms Gillard said some costs paid by polluters would be passed on to the prices of goods, leaving a "modest" impact on family budgets.

"Not everyone will be financially better off - there is no money tree," she said.

"The Budget has to add up. But I want people who need help most to get the help they need."

The carbon tax package is supported by the Greens and the crossbench independents, meaning its passage through Parliament is already secure.

But Opposition Leader Tony Abbott vowed to devote his energy to stopping the tax becoming law, saying millions of Australians would be worse off, including a single-income family with one child and taking home the average weekly wage.

"The Prime Minister says that most families will be compensated but you can't compensate people who lose their jobs and the compensation won't keep pace as the tax goes up and up and up," he said.