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THE LATEST FROM THE KOUK

The carbon tax worked: Household consumption of electricity down then up

Sat, 28 Mar 2015

This article first appeared in the Adelaide Review on 25 March 2015. It can see seen here: http://www.adelaidereview.com.au/commentary/article/when-prices-go-up 

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The abolition of the price on carbon, or the carbon tax as it was colloquially known, has seen consumers turn up their heater, power up their lights and ramp up their consumption of electricity.

One of the rarely reported aspects of the quarterly national accounts is the breakdown of household consumption expenditure. When the Australian Bureau of Statistics releases the national accounts every three months, buried away in the data set is information on the volume of electricity consumed by the household sector.

The Gillard Government introduced a price on carbon in July 2012, a policy that was repealed by the Abbott Government two years later (July 2014).

During the two years that there was a price on carbon, the price of electricity rose as a result and the volume of electricity consumed by households fell by 7.6 percent. During this time, Australia's population rose by a little over three percent, meaning that per capita electricity consumption was down by close to 11 percent. This is a quite massive decline that shows that one of the motivations of pricing carbon, to moderate the growth of energy and electricity consumption, was working very well.

Rose coloured glasses half full

Wed, 25 Mar 2015

There are a few snippets of news suggesting that the economy will be a little stronger by the second half of 2015.

Personal wealth is booming with house prices and the share market both rising strongly. Household wealth has risen by around $2 trillion in the 3 years and when people have rising wealth, they tend to have a positive view about their financial future and as a result, they are more inclined to spend. Recent retail sales data suggest reasonable growth in consumer spending and this is before the full effect of the most recent lift has had a chance to impact on spending.

In addition to that, the number of new dwellings being built is at a record high. This is adding to the economy via the construction process, obviously, but there will also be a spill over to spending in the form of fittings, furniture and the like as the houses are completed.