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Most shielded from carbon tax, say analysts

The flow-on effect of the carbon tax would see householders pay more for petrol, gas and electricity.

The flow-on effect of the carbon tax would see householders pay more for petrol, gas and electricity. Photo: Pat Scala

The federal government has "more than compensated" low and middle Australia for the carbon tax in this year's budget, according to an academic body that last year found average households would be better off under the system.

While large businesses rather than individuals would directly pay the carbon tax, the flow-on effect would see householders pay through the tax's impact on petrol, gas and electricity prices.

Last October, the University of Canberra's National Centre for Social and Economic Modelling found Australian households will be an average $2.50 per week better off under the federal government's carbon package, which added $8.50 per week to costs.

NATSEM used 2009 Australian Bureau of Statistics expenditure data, rather than Treasury's 2004 data, which showed the carbon tax added $9.90 a week to household bills.

The federal government estimated food would go up by about $1 per week, the average household electricity bill up by $3.30 per week and the average gas bill up by $1.50 per week, all within the $9.90 weekly increase.

Last night, NATSEM principal researcher Ben Phillips said the additional announcements in Tuesday night's federal budget made the package "very generous" for low income earners.

The "cash splash" included a $600 boost to family tax payments, a one-off school children cash bonus up to $820 and up to $210 for the unemployed, single parents and young people.

"Not only will they be covered for the carbon price, but they will be covered well in excess of that carbon price," Mr Phillips said.

He said the government was reacting to the perception in the community that the cost of living was increasing very strongly.

"It is not necessarily borne out in the numbers, but most people are feeling the very strong pressure from higher electricity prices, and petrol prices," he said.

Mr Phillips said while the NATSEM had not yet "crunched the numbers" for the impact of Tuesday night's budget announcement, he said the budget helped low and middle income families.

"I think they have done very well out of it, and they will be very, very much compensated for the carbon price," he said.

"I think you will find that when the carbon price comes in it will hardly be noticed.

"There will no doubt be plenty of political talk around that carbon price, but it is only going to add a very small amount to most items."

Commonwealth Bank economist James McIntyre said the CBA estimated about 80 per cent of Australian families were shielded from the impact of the carbon tax.

The crucial point was the tax cuts for people with a taxable income of $80,000, he said.

Mr McIntyre said in the 2009-10 tax year, 83 per cent of the population had taxable income below $80,000.

People earning between $30,000 and $65,000 will get a tax cut of $303 – equivalent to about $6 a week – and smaller tax deductions remain up to $80,000.

Mr McIntyre said that was why the government targeted that income level for tax cuts.

He said the federal government payments "over-compensated" many families and adequately compensated most.

"I think it over-compensates around 33 per cent of households, 40 per cent of households get about two-thirds of the compensation," he said.

"And for the remaining households – above $80,000 – there is small compensation - but it covers around 15 to 20 per cent of the cost."

Mr McIntyre said this smaller compensation was because higher income earners received less in family tax payments and because the tax cuts were targeted towards low and middle Australia.

"Look 90 per cent of households receive something, but it's only about 80 per cent of households where most of their carbon tax costs are covered.

"The other 20 per cent pay."

Last year, the federal government estimated the carbon tax would add about 0.7 per cent to inflation about one-third of the impact on inflation of the goods and services tax.

However by February this year, retiring Reserve Bank board governor and BlueScope Steel chairman Graham Kraehe estimated the impact would be higher.

"My personal view is that is almost certainly understated. The impact of the carbon tax on inflation will be higher than forecast," Mr Kraehe said.

Details about payments to various recipients can be found in the fact sheets here.

16 comments so far

  • According to Trasher Abbott people earning $83,000 to $115,000 " are not rich" ..... makes this comparison of people earning between $30,000 and $65,000 ...... a definite "class war".

    Check the number of people earning the latter and then have a look at Lord Mayor Clive "Billions" Palmer or even Queensland's Premier Clive "Billions" Palmer ...... I do seem to recall Brisbane ratepayers voted for a Lord Mayor who was seen and heard everywhere for the 3 months before the election but now appears to have fallen down a suburban hole ..... Queenslanders also voted for a new Premier but so far all they have gotten is "Jack the ripper".

    How's that for "class warfare" Trasher Abbott ?

    J. Fraser
    Date and time
    May 11, 2012, 6:26AM
    • So why bother? Oh I know, to feather bed the new "carbon-trading" industry and fund a new ATO division. Job-creation at its finest..........

      Money go round
      Date and time
      May 11, 2012, 9:08AM
    • Dear Mr Fraser,

      We would like to work with you on our next election campaign. We're sure the recent Qld result was just an abberation and the public will fall hook, line and sinker for another round of mudslinging that insults the intelligence of even the most mentally challenged individuals.

      Join us,
      (Not) the ALP HQ

      PS Maybe your friend 'Tunnels' can help drag us to the gutter even faster!

      Date and time
      May 11, 2012, 10:42AM
    • J.Fraser, you really have joined the ranks of the simpletons in casting the political landscape as billionaires vs "working families". Unfortunately Labor values have become confused amid the tawdry Thomson/HSU scandal (note that Thomson was quick to point out that he is still a "Labor person with Labor values"). Why grow the pie - just redistribute it. Anyone with aspirations should be crushed! Interesting you talk of people falling down holes. Where's Greg Combet? He must be disappointed that his Carbon Tax only rated a single mention in Swan's Budget speech? Such good, "progressive" policy & the perfect time to sell it to the masses yet he's been anonymous.

      Date and time
      May 11, 2012, 11:57AM
  • Did anyone mention the pensioners? or are they the forgotten old?

    Dieter Greulich
    Varsity Lakes
    Date and time
    May 11, 2012, 7:08AM
    • So, because I've raised my family, without all the govt handouts, and worked hard to earn a reasonable living, I am now expected to pay for the families that are getting compensated. And Gillard wonders why the majority of people know this carbon tax is simply another labour attempt at wealth redistribution.

      gold coast
      Date and time
      May 11, 2012, 7:34AM
      • I did likewise, worked long hours in 3 different countries, always prepared to move to where the work was. However, I've never whinged about taxes or people who couldn't for some reason follow my lifestyle. We're not all the same. People in some of the most essentia jobs are generally the lowest payed and should be compensated if only to keep them in their jobs. Perhaps with a "handout" their children will be better educated and move to higher payed positions. l

        Date and time
        May 11, 2012, 8:13AM
      • Which part of Australia , since Federation (1901), have you been living in, that you did not receive any government help ?

        From either main political party.

        J. Fraser
        Date and time
        May 11, 2012, 8:21AM
    • Perhaps I have missed something... but if so many people are better off, or no worse off under the new tax, how is it raising billions of dollars for here, and to send overseas? Am I supposed to believe that when the PM says "only big business will be paying", that the likes of Boral, BHP, Palmer, Rinehardt, QGC, Linfox, etc etc will say, "O Dear, looks like profits will never be as good again"? Sorry, I do not believe that anymore than I believe that there will be no Carbon Tax under a government Julia leads. They are now equally implausible.
      Can we have realistic assesments of the impact of the Carbon Tax? By perhaps, an independant panel? My feeling is power will double for those who do not have the cash to put in overpriced wind or solar alternatives etc. The environmental bling of solar and wind is not sufficient to carry out power needs.
      There is no way people will be better off when governments get involved with new and bigger taxes. If taxes fixed warming, Australia, under the current government, oould look a lot like a fridge.

      Date and time
      May 11, 2012, 8:22AM
      • @Tony ... Do you feel a little embarrassed that your comments display such a lack of intelligence and an overdose of ignorance? You want an independent panel to access the impact of the carbon tax. Did you read the article? The analysts from NATSEM and the CBA using the available facts and figures as well as their expertise say the impact of the carbon tax will be adequately compensated while you and the guy from Bluescope Steel, using nothing more than a ‘personal view’ and a ‘feeling’ say otherwise. The concept of TRUTHINESS flourishes amongst the ignorant.
        Also you might also want to consider that a major reason why fossil fuels are ‘cheaper’ than renewables is that the cost of their environmental damage has never been factored in and that the statement that ‘people are never better off when governments get involved’ has no basis in reality. It is just more TRUTHINESS.

        Date and time
        May 11, 2012, 9:49AM

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