Treasury is currently modeling a 10 percent rise in electricity prices as a result of the carbon tax coming into effect on 1 July.
The feedback I am getting from participants in the electricity industry is that the Treasury modeling is wrong and that they will be putting up their prices by 30 percent on 1 July. I think our household electricity bill is about $3k per annum so we face an increase of about $900 per annum.
You guys will be aware that introduction of the GST had a clear impact on inflation. I expect a significant impact on CPI with the carbon tax however this aspect does not seem to be getting any press coverage.
Given the current decline in the Aussie dollar (down to 98 cents) we face a short term double whammy of imported inflation due to the rising cost of imports coupled with the carbon tax impost.
As a result we can expect a significant spike in CPI for the July quarter. Further the structural adjustment to the carbon tax can be expected to take longer to flow through the economy than the GST as everyone starts trying to force their customers to take on the additional cost burden and it flows down the chain.
I think this means a continued weak economy coupled with inflation that rapidly climbs out of the RBA's target range. We could be seeing rate hikes in the face of growing unemployment which would really scupper things. On the upside this would lift the dollar which would relieve some of the inflationary pressure like it has the past two years.
All of this is only some quick thoughts I have had and would be interested in other peoples opinions.
The feedback I am getting from participants in the electricity industry is that the Treasury modeling is wrong and that they will be putting up their prices by 30 percent on 1 July. I think our household electricity bill is about $3k per annum so we face an increase of about $900 per annum.
You guys will be aware that introduction of the GST had a clear impact on inflation. I expect a significant impact on CPI with the carbon tax however this aspect does not seem to be getting any press coverage.
Given the current decline in the Aussie dollar (down to 98 cents) we face a short term double whammy of imported inflation due to the rising cost of imports coupled with the carbon tax impost.
As a result we can expect a significant spike in CPI for the July quarter. Further the structural adjustment to the carbon tax can be expected to take longer to flow through the economy than the GST as everyone starts trying to force their customers to take on the additional cost burden and it flows down the chain.
I think this means a continued weak economy coupled with inflation that rapidly climbs out of the RBA's target range. We could be seeing rate hikes in the face of growing unemployment which would really scupper things. On the upside this would lift the dollar which would relieve some of the inflationary pressure like it has the past two years.
All of this is only some quick thoughts I have had and would be interested in other peoples opinions.