An inflation fighting green fund

Harold Lubansky has suggested a radical way to control inflation in Australia and at the same time fund green projects.

From The Age:

Mr Lubansky proposes the creation of a National Climate Change Savings Scheme into which Australians earning a net income of $38,000 a year or more would contribute.

Instead of the Reserve Bank needing to lift interest rates in a bid to control inflation, the central bank would be given powers to order a payment into the climate change fund.

“What it does is work to soak up excess liquidity. Raising interest rates limits the amount we have to spend, spending less elsewhere decreases the pressure on supply and that decreases the upward pressure to raise prices. This would act similarly,” Mr Lubansky said.

Under the Lubansky proposal, those earning $38,000 a year would be charged $250, or 0.66% of net disposable income, instead of paying 0.25% more on their mortgage. It rises to $2500, or 1%, for those earning $250,000 a year.

Unlike mortgage repayments which are never seen again, the money paid into the fund would be returned to individuals to spend on legislated carbon abatement measures such as solar panels, the differential cost on hybrid cars and infrastructure for green power.

I am not qualified enough to comment on this but it does sound an innovative way. Any comments?

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