THE pain of rising interest rates on home owners could be curtailed and Australia's carbon emissions reduced while fighting inflation under a new economic policy now before the Federal Government. The policy by Harold Lubansky, a former managing director of the Stafford Group, has been viewed by members of the Government and the Opposition and has garnered interest from economists. 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. "The Government would prescribe a time period for these funds to be frozen, perhaps a year to begin with," Mr Lubansky said. "You may ask why use this money for climate change? Every day we see constant debate about the burden that has to be borne by the economy to deal with climate change and meet our committed targets. This takes the burden that you would use to slow the economy from interest rates and transfers it to do something positive. "Of course like any policy there are winners and losers. Someone who has no borrowings and has a high income who feels they don't want to contribute to climate change will consider themselves a loser. Low income households would be one of the winners," he said. The policy also allows for a matching scheme, similar to superannuation contributions, where the government equals or betters the money of those on lower incomes to accelerate their savings. Any profits derived from the fund, which would be managed alongside the Future Fund, would go into carbon reduction measures. An analysis of the policy by Neville Norman, former president of the Economics Society of Australia, concluded that the idea had merit and "deserves good exposure in the public policy debate." "Harry Lubansky