KEY POINTS:
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.
Altogether the bank expects the cost of living to be about 0.25 per cent higher in 2009 and 0.35 per cent higher in 2010 than it would have been without the scheme.
Applying the expected price increases for fuel and living costs to household spending on energy and transport fuels shows New Zealanders would be spending an extra $6 a week on energy and transport fuels - almost a third of the foreshadowed tax cut.
That bottom-up calculation is roughly in line with the top-down figures in the Treasury's half-year economic and fiscal update, released this week.
It estimates that in the 2010/11 fiscal year, which is the first full year with carbon prices included in both transport fuels and electricity, the Government would receive $860 million worth of carbon credits from emitters. That equates to just over half of the revenue it expects to lose that year from income tax cuts.
Not all of the $860 million would come from households, but the lion's share will.
The Treasury and the Reserve Bank figures all assume a price for "carbon" of $21 a tonne up from $15 a tonne at Budget time.
The carbon price is set on an international market which, although large - it turns over tens of billions of dollars a year - and growing fast, is still immature. The price New Zealand consumers face will also depend on how much risk oil companies and power companies are prepared to carry.
WIN SOME, LOSE SOME
* Tax cuts: Average $18.40 a week per household (Treasury estimate)
* Power and petrol price increases: About $6 a week (Reserve Bank estimate)
* Money left over: About $12 a week
