I thought this was a particularly interesting sentence in today’s mini-Budget, in light of the anti-carbon pricing campaign over the past couple of years:
The removal of the carbon tax is expected to lower headline and underlying inflation by less than 1/4 of a percentage point in 2014-15, relative to the 2013 PEFO, which had factored in the previous Government’s policy of moving to a carbon trading system.
Recall that the Coalition had promised that:
Your cost of living is unnecessarily higher because of the carbon tax. Average families will be more than $550 better off next year alone under the Coalition’s plan than under Labor’s carbon tax.
The median gross household income (in 2011-12) is about $75 000. Holding nominal income constant, a 0.25ppt reduction in the price level (relative to where it otherwise would’ve been) would be worth about $187 a year to a family with this income, or $3.60 per week. That’s with a 0.25ppt reduction in inflation – remember that the removal of the carbon price reduces inflation by less than this amount (somewhere between 0 and 0.25ppts).
You would need a household income of around $220 000 in order for a 0.25ppt reduction in inflation to be worth $550 a year to you. An income this high would put your household well inside the top 10%.
UPDATE: I just realised that I overstated the gain to households from a 0.25ppt fall in inflation. This is because I was referring to households’ gross income. The gain to a typical household would actually be a fair bit lower than $187/year.