Australia's business and other industry groups are now on the quandary as to the passage of the carbon tax legislation in Congress now waiting for the final stamp of approval in the Senate.

With what seems to be a win for the Labor and Greens Party and a defeat for the Liberals, has left a big question mark for business.

According to CMC markets chief market strategist Michael McCarthy, Liberal Party's Tony Abbott's vow of repealing the carbon tax measure by all means would be damaging to the planning and investment of business and industries alike.

"We now enter a period of uncertainty on an up to two-year time horizon, the tax will be in place but could well be repealed after that period," said Mr McCarthy in an interview with Sydney Morning Herald.

He added: "Given the finely balanced nature of the parliament, if we do see an election before its schedule, repealing the tax could come earlier. It's now a very difficult choice for Australian business leaders as to which path they take."

Tony Abbott's "pledge in blood" to repeal the carbon tax legislation if the Coalition wins office has been scoffed at by Finance Minister Penny Wong.

"It's a bit dramatic isn't it really, it's like something out of a Boy's Own manual," Senator Wong told ABC television. She said Labor's legislation, which passed the House of Representatives, would provide business certainty.

"I think Mr Abbott is going to have a great deal of trouble if he were to become the leader of the country (in) repealing this," she said. Mr Abbott made the pledge on ABC radio ahead of the vote on the government's bills.

What Industries Want

Australia's Industry business groups are not exactly pushing for a total disregard of the carbon tax. However, industry groups are proposing some amendments.

"Given economic circumstances, lack of global and domestic consensus, and the structural pressures already on manufacturing, the timing of the Clean Energy Bill couldn't be worse and it should be amended," Ai Group Chief Executive, Heather Ridout said on Tuesday.

"The carbon prices proposed for the three-year fixed price regime are too high and Ai Group continues to urge members of both houses of the Parliament to amend the proposed Bill in line with Ai Group's constructive suggestions.

In its present form, the Government's legislation proposes the carbon tax will take effect from next July, when a price of $23 will be imposed per tonne of covered greenhouse gas emissions. This is prescribed to rise to $25.40 per tonne in 2014-15.

At these prices, Australian manufacturers are facing prices around 50% higher than those in the European Union for the same years. This will place Australian manufacturers at a competitive disadvantage even relative to their European counterparts.

"Together with the implicit carbon price - which the Productivity Commission has identified Australians are already paying by virtue of the existing array of greenhouse gas policies both at the federal and state levels - the high fixed prices proposed by the Government will mean that Australia will have a very high effective carbon price by this time next year.

"In light of these concerns, Ai Group continues to argue that:

  • The fixed carbon prices are too high and the initial price should be no more than $10 a tonne in 2012-13;
  • The manufacturing adjustment programs need to be fast-tracked to permit Australian manufacturers to get ahead of the game and reduce their exposure to the carbon tax; and
  • The Federal Government should, as a matter of urgency, articulate a clear strategy that will see all levels of government cut back the tangle of inefficient emissions reduction measures that has proliferated across Australia."