Labor needs a policy ‘circuit breaker’ now

This author has argued in the past that there will likely be a rate of $20/tonne, a position that seems to be popular with Labor. But in the past the Greens have argued for a rate as high as $40/tonne.

Also notable, is Garnaut's argument that pensioners ought not be 'overcompensated' because of previous improvements to pensions. Garnaut had also argued for compensation to be phased out only for incomes "well north" of $80,000/year.

It's important to note here that even before carbon tax implementation, electricity prices have risen in Australia by about 30% in recent years, and already this has hit pensioners hard.

Melbourne University Researcher, Roger Darville blames this situation on the troika of renewable quotas, the need for new infrastructure, and increased demand. But privatisation is the real 'elephant in the room' with increased finance costs and profit margins for the private sector, and reduced market power for small consumers.

And in any case increased demand should not simply translate into higher charges pocketed by private companies in the form of profit.Pensioners are already absorbing these and other costs (eg: water), and so should not be 'left out of the equation.'

From this it's possible to draw a number of conclusions:

Firstly, a higher carbon tax rate could provide more scope for overcompensation for pensioners, as well as low and middle income working families.

As this author has argued elsewhere, Newstart recipients are 'doing it tough,' to put it mildly. Indeed, Newstart was $237/week as of April 2011, and has not kept up with a rising basic cost of living.

In light of existing punitive active labour market policies, there are no decent or valid arguments not to reform Newstart. Real increases to Austudy are also crucial to provide conditions where students can apply themselves fully to study, rather than risk failure or underperformance as a consequence of the pressures of part-time work.

Here a 'loans scheme' is neither equitable nor fair. If reform is not implemented here in the context of carbon tax overcompensation, then it needs to be achieved separately.

But progressive Labor figures on a cross-factional basis, and the Greens, need to demand reform one way or another during the current term of the Labor government. Ultimately carbon tax overcompensation may prove the easiest path to reform regardless.

But to achieve robust overcompensation for low and middle income groups, difficult decisions need to be made about 'cut off' thresholds.