Monday, 19 March 2012

The IPA's Tim Wilson and his useless poll

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.


  1. I am shocked that a man who has publicly stated "I identify as an individual" will use a (gasp) collectivist term like "Australian families".

    So its okay to collectivise the public into the unit of "families" (whatever such a general term means in Mr. Wilson's mind) for his own ends? Philosophical inconsistency to the max.

    He's either all about individuals as he claims to be or only when it suits him, and will talk in the collective when it does suit it seems.

  2. Ta Stephen.

    Sadly, I think the ABC will uncritically retransmit the IPA (going on past behaviour as predictor of future behaviour)

  3. But you didn't acknowledge (as the govnuts have conveniently forgotten to acknowledge with the carbon tax) that electricity and fuel prices flow right through the entire cost chain hence pushing up prices accross the board.

    So consumers are right to be concerned as to the costs of electricity and fuel as these items especially when carbon taxed are going to cause cost increases in all items you mentioned above.

    And no I don't believe that the compensation package will cover this cost because small business won't be able to claim back their carbon tax imputs as they do with GST hence the cost will need to be passed on by each member of any supply chain you wish to analyse.

    So the consumer will need to wear those increased costs as they also where the increased costts of the fuel and electricity that they use.

  4. I see. So are you claiming that prices are NOT set to increase further as a result of the July 1 start of the carbon tax?

  5. It's the significant rises in the past two years that grab people's attention, regardless of the actual proportion of spending. Think about the hysteria surrounding banana prices.

    Also that the bill is typically quarterly doesn't help.

    Stephen, I think the argument here is best fought against those who blame the rises solely on carbon pricing and omit infrastructure costs.

  6. And what you're conveniently forgetting Dan is that it is not just the consumer that will receive compensation for the carbon dioxide tax impost, but the biggest polluters also receive the biggest amounts of compensation from the tax. So an electricity company actually only has to pay about $1.50 per tonne of carbon dioxide it emits out of the $23 per tonne levy. Yes, this will get passed down the supply chain, but the average consumer will be compensated most, if not all of this impost.

    If electricity prices are you're real concern then consider this - for every air conditioner installed $7000 is added to the cost of maintenance of our electricity supply. Think about that in terms of high density living where in a small space you can have dozens, even hundreds of air conditioners supported by a triple A, double platinum plated energy infrastructure and the cost you're talking about will make the CO2 tax look like useless shrapnel. I recommend you read this article -

  7. Hi Stephen. Interesting comments. It's not practical to list 87 different expenditure classes in a poll. The poll focused on non-discretionary items. Seems quite sensible to me. Tim

  8. Tim, you've missed the point. Mortgage repayments are discretionary if you rent (which is not included). Clothing, footwear, furniture and household appliances, communication and education (for children) are all non-discretionary (but not included). Some items are more non-discretionary than others, it's a matter of degree.

    But the point is that the IPA has carefully selected its polling 'basket' of spending concerns and deliberately left out others to suit a political agenda i.e. play on fears of the "big bad tax".

  9. If people are worried that the carbon tax will push up electricity prices, it seems justified to me. See link:

  10. Here's same chart from a longer time perspective: