Giving with one hand and taking with the other

[MotherBear]

Government gives with one hand, takes with the other
5:00AM Friday December 21, 2007
By Brian Fallow

Households can expect to see about a third of their tax cuts clawed back by the Government's planned emissions trading scheme, which will push up petrol prices and power bills.

The Treasury has pencilled in $1.5 billion worth of income tax cuts from 2009, which works out at an average $18.40 a week per household.

The average household spends $31.50 a week on electricity, $3.60 on gas and $42 a week on transport fuels, according to Statistics New Zealand's 2007 household economic survey. Together they represent 8 per cent of the average household's spending.

The emissions trading scheme, which is the cornerstone of the Government's policy to curb climate change, works like a tax for most consumers. The Reserve Bank estimates it will push up petrol prices by 4 per cent from 2009 and electricity prices by 7 per cent from 2010.

Those are just the direct effects. The indirect effects - when the extra cost of trucking goods around, retailers' electricity costs and so on are passed on - could be roughly half as large as the direct impact.

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