From the carbon price Treasury modelling:
Carbon pricing will change the relative prices of goods and services and there will be an initial increase in the level of consumer prices. An initial impact will occur in 2012-13 with the introduction of the price, with a smaller step up in 2015-16, when the scheme moves to the international carbon price. For the core policy scenario, carbon pricing is estimated to raise the overall consumer price level by 0.7 per cent in 2012-13 and by a further 0.2 per cent in 2015-16, for a total of 0.9 per cent in 2015-16. Beyond 2015-16 there will be minimal implications for ongoing inflation.
The consumer price index (CPI), a key measure of inflation, rose 1.4 per cent in the September quarter, after rising by 0.5 per cent in the June quarter, the Australian Bureau of Statistics said.
It is the first set of inflation data released since the introduction of the federal government’s carbon tax on July 1.
The CPI was expected to rise by 1.1 per cent in the September quarter for an annual rate of 1.7 per cent, according to an AAP survey of 15 economists.
According to The Age:
One economist said the larger-than-expected jump in consumer prices was in part due to the introduction of the carbon tax.
RBC Capital Markets senior economist Su-Lin Ong said the carbon tax had moved inflation up faster than anticipated, but that it was still comfortably within the RBA’s target.
“There is clearly some impact from the carbon tax there, but the core measures, which strip out a bit of that, are also firmer,” she said.
What does the ABS say? Well the single largest contributor in the quarter was the Housing Group and …
The main contributors to the rise were electricity (+15.3%), gas and other household fuels (+14.2%), property rates and charges (+5.8%) and new dwelling purchase by owner-occupiers (+0.9%).
15.3 percent increase in electricity prices? In one quarter? What did Treasury modelling say about that? Oh, yes:
The carbon price leads to an average increase in household electricity prices of 10 per cent over the first five years of the scheme.
The real (additional?) scandal, however, is this:
The ABS will not be able to quantify the impact of carbon pricing, compensation or other government incentives and will not be producing estimates of price change exclusive of the carbon price or measuring the impact of the carbon price.
This came up in Senate Estimates (HT: Noodle)
Senator CORMANN: … Who made the decision not to quantify the impact of the carbon price or price changes exclusive of the carbon price? Was it the ABS or the government?
Mr Sutton: I might just pass this question to Mr Hockman. He has expertise in this area. I will ask him to address that question.
Mr Hockman: The Statistician made that decision on the advice of the staff of the prices branch. It was based very much on our experience with the introduction of the GST, where we did attempt to measure that and separate out those effects. The complication is that you never fully know the counterfactual situation of what underlying movements in prices were actually occurring. The real complication comes in measuring what you might call the second-round or downstream effects of such a change. The indexes are designed to measure overall movements in prices. We are confident that we will get the full impact into the measures of all of our price indexes, both the CPI
and the producer price indexes, but we do not believe that we can meaningfully separate out the various factors that in any particular quarter or any particular period impact upon those price movements. The job is to measure the movement, not the reasons for the movement.
Senator CORMANN: I refer you to a statement in February 2009 by the Governor of the Reserve Bank. In relation to the carbon tax, he said that the Reserve Bank ‘should be able to look through the initial increase in inflation’ when assessing the consequences for monetary policy. If the ABS cannot or will not measure what the RBA is supposed to be looking through, how will the RBA actually be able to look through what has not been measured and focus on the carbon price exclusive change in the consumer price index?
Mr Hockman: They face a different issue. They are not looking at, perhaps, the precision that we need when we are producing an index. We would need to be able to measure it at each and every component. They know directionally what is going on. We believe that, at least if people are interested in those things, they should be free to try to model those movements, and then the RBA can focus on the things they think matter to them, in terms of trying to predict where inflation will be heading post-carbon tax.
Senator CORMANN: But it is too hard for the ABS?
Mr Hockman: With the resources we have, certainly, Senator.
Quite astonishing. Treasury can ‘estimate’ the price impact, the RBA can see through the prime impact and the ABS cannot or will not. Cormann was too nice – he should have advised the ABS to try harder or even offered more money to them to actually produce the figures. I would do the former but the Liberals are soft.
Update: Electricity prices graphed here.