The IPA has just released a new poll covering household attitudes to prices. The IPA’s Policy Director, Tim Wilson, concludes:
- “Australians are most concerned about electricity costs of all the major household expenses”.
Mr Wilson goes on:
- “The poll clearly shows energy (electricity and petrol) prices continue to make Australian families nervous with 58% raising it as their biggest concern.”
The poll is hopelessly flawed based on the evidence included in the Press Release and the comments made by Mr Wilson. It is a useless guide given its very narrow coverage.
Consider this: there were only five items in the IPA sponsored poll of prices “you are concerned about”. There were food, electricity, mortgage payments, petrol and public transport.
The Consumer Price Index, which measures changes in prices, is based on the household expenditure survey and covers 87 expenditure classes and thousands of separate items including all major goods and services purchased by an average household.
While mortgage payments are not in the Consumer Price Index basket of goods and services, the other four items polled for the IPA cover 22.8% of average household expenditure. The other 77.2% covers household spending on things like alcohol, tobacco, clothing, footwear, rent, furniture, household equipment, health, cars, communication, housing, electronic goods, holidays and education, to name just a few of the other items.
If you take food from the IPA result, the remaining three items (electricity, petrol and public transport) make up a puny 6.4% of the CPI basket. In other words, for every $100 that an average household spends, only $6.40 is spend in total on electricity, petrol and public transport.
The headline grabbing distortion from the IPA Press Release (and many others for that matter) focusing on electricity prices should be viewed in the context of the fact that electricity makes up just 2.1%, yes 2.1%, of the average household expenditure.
- Consumers spend 255% more on meals out and take away food than they do on electricity.
- Consumers spend 3% more on beer than they do on electricity.
- Consumers spend 10% more on tobacco that they do on electricity.
- Consumers spend almost 20% more on wine and spirits than they do on electricity.
- Consumers spend 42% more on communications than they do on electricity.
This is just a small sample of the mass exaggeration of the impact of electricity price changes on the household budget and today’s distortion from the IPA.
To have any credibility, the poll should have covered a wider range of items. The IPA have been very cheeky twisting and spinning the survey to get a result that will obviously grab a few headlines today and tomorrow by highlighting electricity prices as an issue.
Presumably with a straight face, Mr Wilson suggests:
- “there’s no relief in sight with electricity prices set to increase further as a result of the July 1 start of the carbon tax”.
It’s a pity that its narrow focus means that the results of the survey are almost meaningless and the IPA has wasted its money on such a meaningless poll.