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Last night the Treasurer gave a half-hour Budget speech.\u00a0 I listened in because lately, there hasn’t been enough boredom in my life.\u00a0 There is a lot I could say about this year’s budget —\u00a0 but I won’t.\u00a0 I’ll stick to discussing energy.\u00a0 Mostly, the Government’s plan for providing cost-of-energy relief to low-income households and how they’re doing it wrong. <\/p>\n
I won’t say how weird it was for someone my age to see a grown man worry about 6% inflation.\u00a0 When I was a kid, we didn’t even know it could go that low1<\/a><\/sup>.\u00a0 I’ll just stick to discussing the economics of energy because this is an area I’ve had a lot of experience pretending to understand.\u00a0<\/p>\n Thanks to the Treasurer leaking like a Swiss cheese balloon, we already knew<\/a> low-income households would receive some help with energy costs. But instead of getting energy rebates in the form of direct payments to help cover higher electricity and gas prices, they will get “energy bill relief” in the form of direct cuts to their power bills. \u00a0There are several reasons why this is worse than just giving people cash, but before I go into that, I’ll quote Treasurer Jim Chalmer’s exact words on the Government plan:<\/p>\n “We are delivering up to $3 billion in direct electricity bill relief for eligible households and small businesses, co-funded with the states and territories.\u00a0 More than 5 million households will have up to $500 deducted from their power bills in the next financial year.\u00a0 Real relief, right off your power bill, right when you need it.”<\/p>\n<\/blockquote>\n Pulling out my calculator and dividing “up to $3 billion<\/strong>” by “more than 5 million households<\/strong>” it comes to under $600 per household.\u00a0 It’s unclear how much will go to small businesses, but it is mathematically possible for most eligible households to get up to $500 off power bills over the next financial year.\u00a0<\/p>\n On page 10 of the Statement One Budget Overview<\/a>, it says:<\/p>\n “Support to households will be targeted at those most in need, including concession card holders, those who receive family and carers payments and recipients of electricity concessions under existing state and territory schemes.”<\/p>\n<\/blockquote>\n So it will mainly go to pensioners and those receiving Centrelink payments.<\/p>\n Directly decreasing electricity bills will help low-income households.\u00a0 But it’s not the best way to go about it.\u00a0 Overall, just giving a payment people can spend as they like is a better option.\u00a0 After all, who doesn’t like being given money?\u00a0 But besides natural human preferences, there’s a good reason why cash is better.\u00a0\u00a0<\/p>\n Spending money to directly lower people’s electricity bills reduces their incentive to save electricity.\u00a0 If electricity bills rise by $500, but you then lower them by $500 people have no reason to change their consumption.\u00a0 They’re likely to use just as much as before.<\/p>\n But if you instead let electricity prices rise by $500 but give households a $500 payment to spend as they wish, you spend the same amount helping them. However, they still have an incentive to reduce electricity consumption because they’re paying a high price for it. \u00a0They will immediately economize on consumption and be motivated to permanently reduce their need for grid energy by investing in solar panels<\/a> or energy efficiency measures.\u00a0 If they want, they can put the cash payment towards those panels and look forward to lower bills for decades.\u00a0<\/p>\n Giving money will provide the immediate benefits of reducing electricity consumption and financial hardship, while also reducing grid electricity consumption in the future.<\/p>\n If the cash payment is the same for each household, then those that don’t use much electricity because they have solar or are frugal can come out ahead.\u00a0 This is a good thing because it rewards people for taking steps to reduce their grid electricity consumption and can encourage others to do the same. \u00a0<\/p>\n Put simply, the direct electricity bill relief method the Government has chosen does not encourage energy efficiency.\u00a0<\/p>\n The budget documents say…<\/p>\n “Rebates will be delivered through reductions to electricity bills to minimise any potential inflationary impacts.”<\/p>\n<\/blockquote>\n But that’s bullshit.\u00a0<\/p>\nDirect Electricity Bill Relief<\/h2>\n
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Who Gets It?<\/h2>\n
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Not The Best Way To Help<\/h2>\n
An Unbelievable Explanation<\/h2>\n
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