Household compensation linked to the introduction of a carbon price could boost consumer spending and stimulate the economy in the first half of 2012, a major bank says.
Westpac backs a carbon price as necessary to reduce "the price gap between cheap and dirty technologies and clean but usually more expensive processes".
In its submission to the parliamentary inquiry into 19 carbon price bills, the bank also said the household compensation - delivered through changes to income tax rates and welfare payments - could mildly expand stressed parts of the economy.
Compensation payments to be made in the second quarter next year, before the start of the carbon price scheme on July 1, total $1.5 billion - about 0.5 per cent of gross domestic product. "If it is mostly spent, it will provide a boost to consumer spending in that quarter," said the submission by Westpac emissions and environment director Emma Herd.
The rushed parliamentary inquiry, which heard evidence in three cities this week and reports back next Friday, received wildly divergent evidence on the merits of laws the government says will transform the economy.
In evidence before the inquiry this week:
■The Business Council of Australia said the government had assumed all countries would meet their United Nations greenhouse targets, and had not included provisions if others failed to deliver.
■The Australian Coal Association said the scheme would cost the coalmining industry $16.9 billion over a decade. It said job growth would continue, but at a 27 per cent slower rate than without a carbon price.
■GE Energy Australia and New Zealand submitted research that found Australia badly trailed other major countries in "carbon productivity" - the level of economic output per tonne of carbon dioxide emissions. Its report said improvements in carbon productivity were likely to make it easier to develop the economy while cutting emissions.
The scheme before Parliament would start with a fixed price of $23 a tonne of carbon dioxide emissions before moving to a market-based emissions trading scheme in 2015.
It aims to cut at least 160 million tonnes of carbon dioxide from the atmosphere by 2020.
It overcompensates lower-income households, which Westpac said generally spend more. About one in three households would be worse off, with average weekly bills estimated to increase by $9.90.
Westpac said the carbon price would raise only one-third of the revenue of the GST, and have a significantly smaller impact on living costs.
It suggested that not introducing a carbon price could lead to investment in carbon-intensive infrastructure, potentially creating "stranded assets" as the world moved to cut emissions. "Without a clear policy framework that matches investment horizons, Australian business has little incentive to invest now in newer, cleaner technologies.''
The Age and the Committee for Melbourne are hosting a debate on carbon pricing on Thursday, examining the question: what's really best for our nation's future? Speakers are Greens member for Melbourne Adam Bandt, parliamentary secretary for climate change and energy efficiency Mark Dreyfus and shadow minister for climate action, environment and heritage Greg Hunt. It will be streamed online from 12.45pm.