Household Assistance under Carbon Pollution Reduction Scheme

The Government is determined to act in the national interest to help protect families from the worst effects of dangerous climate change.

Action on climate change is in the national interest because the cost of inaction on climate change is higher than the cost of action.

The cost to Australian families of lost jobs, less rain, more heatwaves, more days of extreme fire danger and more extreme weather events associated with dangerous climate change will be higher than the cost of acting.

The Carbon Pollution Reduction Scheme (CPRS) is the cheapest and most efficient means of reducing carbon pollution.

The average cost of living for households will be $624 more in 2012-13 than it otherwise would have been, without a CPRS.

To help deal with this increased cost, the CPRS contains a substantial package of financial assistance for low and middle income families.

This household assistance package – worth $49 billion over ten years – will ensure all low and middle income families are assisted with the cost of acting on climate change.

There is no cost free way to tackle climate change and that is why the Government is providing household assistance to ensure low and middle income Australian households do not foot the bill for action on climate change.

The Rudd Government’s household assistance package provides:

Assistance For Low Income Households

• All low income households will be fully compensated for the overall cost increase they face.
• Around 90 per cent of all low income households – or 2.6 million households – will receive assistance equal to around 120 per cent of the overall cost increases they face.
• Pensioners, seniors, carers and people with disability will be fully compensated for the overall cost increase they face.

Assistance For Middle Income Households

• Around 97 per cent of middle income households will receive some form of direct cash assistance under the Scheme.
• Around 50 per cent of middle income households – that will be 1.7 million households – will be fully compensated for overall cost increases flowing from the CPRS.

Once the scheme commences, household assistance will continue in perpetuity. Because these assistance payments are indexed to CPI, upfront assistance will automatically increase in line with the increasing carbon price as it affects household costs.

Background Examples

A family earning $100,000 (with a 50:50 income split) with two children (aged 10 and 13) would be more than fully compensated. In 2012-13, this family will receive $1014 in assistance from the Government even though the cost impact of the CPRS would be $976 for the year.

A family earning $120,000 (with a 50:50 income split) with three children (aged 4, 6 and 8) will also receive full assistance. The cost impact of the CPRS for this family in 2012-13 will be $1088, and they will receive $1240 in assistance for the year.

See Households (www.climatechange.gov.au)

Impact On Household Prices

The Treasury modelling found that the CPRS would increases household costs by 1.1 per cent – as measured by the consumer price index (CPI).

This occurs over two years:

• 0.4 per cent in 2011-12 – based on a $10 per tonne fixed carbon price in 2011-12
• 0.7percent in 2012-13 – based on a flexible carbon price in 2012-13, which is estimated to be $26 per tonne.

Household food prices are expected to rise by less than 1 per cent over these two years.

Price increases will be greatest for emission intensive goods.

Household electricity prices could rise by 7 per cent in 2011-12 and 12 per cent in 2012-13. Gas prices could rise by 4 per cent in 2011-12 and 7 per cent in 2012-13.

The overall price impact to households is estimated to be $12 a week or $624 a year by 2012-13.

Source: Treasury, ABS.