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Modelling the impact of a carbon price on household expenditure

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This note sets out a more detailed breakdown of Treasury’s modelling of the impact of a carbon price on household expenditure for the Clean Energy Future package announced on 10 July 2011.

Additional information can be found on the "Strong growth, low pollution: modelling a carbon price" website.


The impact of a carbon price on household expenditure as modelled by Treasury for the Clean Energy Future Package announced on 10 July 2011 by the Government

This note sets out a more detailed breakdown of Treasury's modelling of the impact of a carbon price on household expenditure for the Clean Energy Future package announced on 10 July 2011.

Table 1 below shows the estimated average price impacts across all households following the introduction of a $23 carbon price in 2012-13 by CPI subgroup. The modelling estimates average price changes across household expenditure categories. The modelling takes account of the different inputs involved in generating the goods and services that make up each CPI subgroup, such as energy use and transportation. While the modelling is intended to provide the best possible indication of how the price of different categories of goods will change on average, it is important to recognise that price impacts for specific items will depend on aspects particular to the product, such as degree of price pass through, the location, and the extent to which production processes and transportation required differ from the average across the CPI subgroup.

Table 1: Price impacts for a $23 carbon price in 2012-13*

CPI subgroup Contains Average price impact
($ per week)
Price Impact (Per cent)
Dairy and related products Milk <0.10 0.4
Cheese
Ice cream and other dairy products
Bread and cereal products Bread <0.10 0.4
Cakes and biscuits
Breakfast cereals
Other cereal products
Meat and seafoods Beef and veal 0.10 0.4
Lamb and mutton
Pork
Poultry
Bacon and ham
Other fresh and processed meat
Fish and other seafood
Fruit and vegetables Fruit 0.10 0.4
Vegetables
Non-alcoholic drinks and snack food Soft drinks waters and juices 0.10 0.4
Snacks and confectionery
Meals out and takeaway foods Restaurant meals 0.20 0.4
Takeaway and fast foods
Other food Eggs <0.10 0.4
Jams, honey and sandwich spreads
Tea, coffee and food drinks
Food additives and condiments
Fats and oils
Food  — not elsewhere classified
Alcoholic drinks Beer 0.10 0.2
Wine
Spirits
Tobacco Tobacco <0.10 0.2
Men's clothing Men's outerwear <0.10 0.2
Men's underwear, nightwear and socks
Women's clothing Women's outerwear <0.10 0.2
Women's underwear nightwear and hosiery
Children's and infants' clothing Children's and infants' clothing <0.10 0.2
Footwear Men's footwear <0.10 0.2
Women's footwear
Children's footwear
Accessories and clothing services Accessories <0.10 0.4
Clothing services and shoe repair
Rents Rents 0.40 0.6
Utilities Electricity 4.60 7.9
Gas and other household fuels
Water and sewerage
Other housing House purchase 0.90 0.6
Property rates and charges
House repairs and maintenance
Furniture and furnishings Furniture 0.10 0.4
Floor and window coverings
Towels and linen
Household appliances utensils and tools Major household appliances  0.20 0.8
Small electric household appliances 
Glassware, tableware and household utensils
Tools
Household Supplies Household cleaning agents <0.10 0.3
Toiletries and personal care products
Other household supplies
Household Services Childcare  <0.10 0.3
Hairdressing and personal care services
Other household services
Health services Hospital and medical services 0.10 0.3
Optical services
Dental services
Pharmaceuticals Pharmaceuticals <0.10 0.3
Private motoring Motor vehicles 0.40 0.3
Automotive fuel
Motor vehicle repair and servicing
Motor vehicle parts and accessories
Other motoring charges
Urban transport fares Urban transport fares <0.10 0.5
Communication Postal 0.20 0.5
Telecommunication
Audio, visual and computing Audio, visual and computing equipment <0.10 0.4
Audio, visual and computing media and services
Books, newspapers and magazines Books <0.10 0.3
Newspapers and magazines
Sport and other recreation Sports and recreational equipment 0.20 0.3
Toys, games and hobbies
Sports participation
Pets, pet food and supplies
Pet services including veterinary
Other recreational activities
Holiday travel and accommodation Domestic holiday travel and accommodation 0.30 0.5
Overseas holiday travel and accommodation
Education Preschool and primary education <0.10 0.3
Secondary education
Tertiary education
Insurance services Insurance services <0.10 0.3
Other ** 0.90 **
Total Expenditure   9.90 0.7

*Note: estimating the impact on household goods and services has been undertaken across broad product categories and the estimates represent the average price impact across each category. Within each category there will be a range of goods with different levels of direct and indirect emission intensity, for instance due to the source of the electricity used in the production of a particular company or for a particular type of good.
** The 'other' category is comprised of a range of household expenditures expected to increase in price by around a quarter of a per cent, which represents an average increase in prices for services across the general economy. Analysis of these products is difficult due to data limitations — many of these products are not included in the CPI basket of goods and services, for example — such that specific price increases cannot be determined. Examples of these products include life insurance premiums, fees for some financial services, gambling and outright purchases of dwellings.
Source:  Treasury